CIEN - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Ciena Fiscal Q1 2020 Financial Results Call. At this time, all participations are in a listen-only mode. And after the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

to President conference Lampf. of like presenters to now Vice today, Investor would hand over the your I Relations, Gregg go ahead. Please

Gregg Lampf

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

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

well speak business, as developments to today QX fiscal in comments our XXXX current our on performance, as our Our view outlook. our dynamics market

non-GAAP release. certain results of A measures includes of operations. these or press reconciliation GAAP to our discussion today's results adjusted detailed in Ciena's of non-GAAP included measures is Today's

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

filed XX-K XX. be These recent to in and filing filing, statements should in be is viewed upcoming required in the our SEC context detailed our the of the most by which risk XX-Q with factors March

a new future no in conference the discussed otherwise. to file this of obligation Ciena by information, as to whether expect that update or assumes We date. events call, information result

Gary. will I that, over to turn With it

Gary Smith

diversification WaveLogic apart quarter business Today outstanding technology first us across with gig that technology XXX available our fifth in morning, we Thanks, our to modem the Gregg, continue set results, good including everyone. leadership, our is today and generation combined delivered the market.

And profitability measures. our guidance Both year-over-year performed the higher X% customer was well expected strong. quarter in margin EPS range. we by revenue was also of were with quarter. the than $XXX QX driven very million, and performance mix very and importantly, and QX operating and high-end reported we product the reflecting cash strong, gross in margin of respect growth Specifically, favorable a to

Finally, greater revenue. our the in orders than quarter were

As is industry across growing to we've segments continues This balance uncertainty as of regions, particular, provide our a in surrounding financial performance. mentioned, previously relevant our resiliency in unique faced and degree with plays and diversification of is customer business significant particularly broader the economy in spread role strong the a and coronavirus.

our by Thus China far, have situation challenges chain the market, presented industry, supply to been and for logistics. the the largely contained currently this

we the chain. among the the For supply Ciena, have by lowest Chinese market in industry our design, China and to exposure

As a believe to through sit result, better set we are coronavirus. of as the the positioned that we here than industry most of players manage today, presented we by challenges current the

give and potential implications is you it situation guidance. evolves. additional fluid obviously uncertain to we time the will immune when are at business that this However, Jim broader and provides as he color not very

impacts back turn are Japan. coronavirus QX comments in for QX, And our regarding performance and In regional make things in situation, the to opportunity XXXX. I'll performed Now any growth about continue forward I'm highlights performance. are see Asia-Pacific but to rather today. Again, see without how the our we where APJ to from we we further the of view of particularly well,

their infrastructure many very to the the we we experienced we opportunity see second market we as as much In to started we but their region the opportunity India, generation half and EMEA, continued carriers a growth share In softness anticipated, and year. of modest in QX, for partners continue there's expand reevaluate to next had solid service from contribution year, in in provider builds. as customers the believe

quarter had in in region We excellent our QX. Americas an

Our AT&T. And North U.S. from Charter, provider American two MSO revenue like was QX. verticals, other government year-over-year XX% the including and customers and about service Verizon business Comcast including customers quarter, in X% and in was the up strong,

service contributor quarter, expect expect customer perform Americas well XXXX, this contribution providers we and later by vertical growth as other be a continues in We expected. And material from as the verticals. as was year. these also well to in in growth CenturyLink the driven this solid also to as from Web-scale continued

We also anticipate web-scale. in strong a QX

to web-scale roughly in revenue our leadership we this year, anticipate can we roughly at that X% reminder, this to a and market we market market share believe position. this As rate maintain XX% our grow grow and

also continued every our new confidence leadership of in no customers segment. There that to add customer performance and strong We doubt technology quarter this significant is a continue our is engagement. in driver

that WaveLogic technology X optical coherent I of available. next pleased and am the As I mentioned is at Extreme confirm the start to generation call, now

we've In you announcements seen as Cross, field should as with Verizon fact, InternetX now by initial well deployments. Southern begun where Comcast our and have numerous

on across As fully applications. the of better to be competitive Extreme WaveLogicX well networks, with than first of and promise evidenced these offerings. anticipated in a market customer an featured any XXX multitude solution, is ahead we our have delivered gig to performing

material year. revenue to the expect of more with second in QX half the continue revenue We initial in

In several network that achievement, to XG in addition new capabilities solutions. also our we products [indiscernible] announced and recently

backhaul from three designed and migrate the transport. of XG enable First, demands to we to optimized platforms, XG operators low midhaul latency, high-performance added network meet XG to routing fronthaul, and

two with end-to-end Enhancements Blue in and Planet, Blue we Planet this capabilities with And introduced Tier comprised respect international QX, of providers outside And in new major secured we service U.S. wins solution. slicing of to network dynamic planning the Automation X Software also both

acquisition. analysis Centina four the analytics for our added strong software we heels logos of assurance and We unified route our for and new took the orders also optimization products, closing and on

global uncertainty, vendors who leadership technology, concerns needs strategic with seeking very to positioned innovation, opportunity. they so long-term we very financial on are this financial pursuing quality their And now stability. and offer are macroeconomic well And rising are where scale meet customers and flight and of future. ever and the strength, now are the than diversification advantage we clearly focused to taking more With into leadership, a expanding

With turn that, I'll it Jim. over to

Jim Moylan

you, Thank fiscal a everyone. to Gary. Good QX strong marked start morning, XXXX.

$XX in product As measures, Gary and adjusted operating was respect operating XX%, $XXX of $X.XX. driven quarter QX in was million. of delivered With was customer of and the Adjusted EPS adjusted by to million adjusted margin mentioned, gross XX.X%, mix. total and net profitability revenue expense adjusted we $XXX QX margin million favorable income

planning allowing use models, used adjusted exports. We'll XX.X% QX us XX.X%, this tax we a make your rate expect better than tax the of rate remainder lower for expected. for is was and the using of For EPS the XXXX. we lower rate our in net Tax use to effective to income U.S. on bit tax

In what generated the seasonally addition, cash $XX strong in in typically million Adjusted lower generating was free of a at and quarter. a million EBITDA in QX, cash very from cash QX generation. quarter. is operations we and cash sign flow Again, $XXX strong was

approximately $XXX million investments. with quarter in the ended and We cash

sheet our particularly and balance is long-term As current environment. viability, the Gary in our strength yet differentiator speaks mentioned, that another to

quarter. million continue using shares, approximately cash we our share the execute $XX Finally, buyback during million on to plans, X.X of repurchasing

turn to our now QX I'll outlook.

reiterate respect said what the into I detail, Gary Before go with coronavirus I'll to situation.

that Specifically, through navigate most better we positioned the challenges we chain believe supply are by the than coronavirus. to presented current

to million, of today, $XXX our know specifically expect we resulting into we we $XXX coronavirus. are to million QX including given to in due and predominantly fiscal challenges what impacts, we million. be from supply approximately in expect However, $XX not QX, execute range in business revenue will certain immune deliver account, by logistical to that to revenue a constraints Taking countries the that reduced

of of expected be in operating coronavirus, of approximately Also revenue million. would gross million. without To giving point QX, best $XXX company, been this our other margin have XX% midpoint XX% view expense every in we're we the the to at $XXX clear, and approximately time. range Like expect guide our the in impact you the

In are closing, our of the business sound. fundamentals

verticals gain best we We and a strength, have across and diversified scale the to we geographies and share. our competitive technology, market continue is are

will mentioned, Its to business it remainder in not be would XXXX As for fiscal impact speculate. is of the impact our QX. on uncertain a appropriate time, to and certain extent us the coronavirus I this at

operating do margin we we respect of include long-term not beyond adjusted and fiscal our cash includes financial This expectations for If any QX, unchanged. XX%, potential in XXXX and targets. flow to our confident remain revenue, impact with are

will take analysts. James, the side sell now from we questions

Operator

Instructions] ahead, from George of please. our Notter comes first line [Operator question the with Go Jefferies. And

Your line is open.

George Notter

talking about you're in at in China of positioning situation. kind both I demand supply on than much. that's Hi, side Can the discussion. in start and better coronavirus elsewhere, talk Gary, coronavirus looking were maybe guess of, the guys. I'd the you what affected? the terms about side very and of others being wake the you there Thanks Ciena's

Gary Smith

China date have fourth countries long well. spread into been, to somewhat does manufacturing do. Obviously, Ciena or some China has the exposure ago, to supply time into and of chain to as contained chain. supply of and obviously Largely manufacturers a not contract order APJ Sure. some this From point directly direct view, third

demand supply a the in don't have immune then China. most to directly based competitors, our and But on major it. China we in of sell on the So And we're decision we part. know, as carriers very side, conscious you do many unlike not secondly, from our direct of significant chain not that's

said, it's present are have get in some sites the to installation, of And being for for the exposure challenges, have sort difficult lock of in side countries But don't we APJ are from which many we to had some down. to their that China. example. So of demand of that other

an having guidance. which change us, QX impact our reflected a is it in So, in is on

George Notter

it. Got

gears second. Okay. And for switching just then a

customer what more for And certainly I what that looking lower. You this in bit you performance quarter. I of quarter, quite talk surprised think gross mix, there? guys mix, certainly were coming product you a were you gross margin margin numbers saw said, really a Thanks. you terms I can bit about guess, the heard but into strong

Jim Moylan

said the range in still Thanks, which for be the year we expect We George. for XX% Yes. that's to and quarter the XX% operating. we'll and

by it we had QX totally a However, quarter driven great and in mix. was

upon to early have depends We we're it It's margins. to particularly to have before, Later on, of a well. hard a various good part we're typically that If higher said it so projects. lower in call. going margins. stages the had as project, us order, of a we've for we're gross was software As going

in year. the we're of the we today, to I rest but QX. think did XX% We'll great XX% what happens see

George Notter

Okay.

Gary Smith

George. you, Thank

Operator

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

Your open. line is

Paul Silverstein

the countries. impact to that fact not you're access not all in in to the Can commentary. back your was Hey, it face constrained value in on it certain about? an sounds of take terms your of I issue time? just talking sure the shortfall that the at coronavirus a -- site many if like want I that? we from is there can't could components actual But ability fact it's a you us to demand, How countries accommodate guys. significant components. telling customers it's inability the If And but elaborate I get just your this are to through to just take make your your to deliver,

Gary Smith

ability a it, rather logistics. part call installations an the do me to can't that working Okay. how Korea, South some get we that's get to of the like even do submarine Yes, let of to number on impact sites in guess, of folks access Singapore, And that, of both I also having places Paul, to than and terms take are side we from logistics there home. our sort of in installation. and the in sites

want of some it. you to chain talk about So that of the certainly some …? is do Scott,

Scott McFeely

Yes. Paul a so chain, on supply to the bit. clarify it just

China, directly many do do have -- we that We obviously, So second new suppliers in product don't do contract any don't don't of we manufacturing for. source which R&D, we sources any we’ve any some China. we introduction, from don't do

exposed not Some that. we're to and suppliers are to China they that secondary immune

We their that's quarter, have back we and into manufacturers close very in with rest material are and terms that those comes have and of suppliers how for of communications that the what plans online are the factored contract expectations the numbers here. their their

Paul Silverstein

in Jim, when you there's taking account from reiterated the QX, that's year? corona throughout guidance, impact no when -- said the you into assuming but shortfall additional

Jim Moylan

Correct. Paul. correct. Yes, That's

Paul Silverstein

All other pass right. on. I'll guys. it Thanks, questions the Take offline.

Operator

please. Leopold Our comes next Go line Raymond the ahead, James. of question from Simon with

open. line Your is

Simon Leopold

reference on have made maybe to question. want Great. to AT&T, Thank you, Verizon, number taking Gary, maybe non a you ones you drill down of of needle drill the see on part for I of move hyperscale could which sort the business. biggest the and the to down for wanted I non potential the you opportunities to non specifically, if

Japan, you Deutsche remarks. mentioned the you don't think your mentioned I You prepared mentioned cable Telekom guys. in

you help understand the could to group's So about think particular on XXXX outlook? us that how effect

Gary Smith

a Simon, around little some of bit the the sectors. MSO we talked Yes, commentary absolutely. in

etcetera. wins So of we if had we where share we're I already space. MSO good going addition I space strength MSO that large the a look have. where in activity in in the in think think at the space, Charter, a number to XXXX, that I of see We lot to it's see market Comcast, And

that. bullish quite So, on

well. North America, second half [indiscernible], it's strong. think going the for year be of to I as year, the the some certainly in highlight at Central Looking other would in Xs Tier the We big of

As wins to have two a there, much some the you out and think second now, It's know, years I roll -- out. we but strong we're to in had roll beginning pretty half. will significant we'll begin last that

highlight the in Also, North of America, would verticals, be the government. I would some other

being after space. I plenty sort beginning few think of in government I we're really is the a somewhat see of years to of activity think underinvested,

we and primary there. overall, around So just large big been that feel carriers have North our good the not of customers couple America

Deutsche think, the do beginning that's that EMEA. of to to in benefits feel an America. like to So and made we're were around take there's some into opportunity good I space Europe, roll think decisions numbers. Telekom, North of effect out share seeing I our in the continue carrier

the around year. the feel do I rest good for So that of

So those are two areas.

the had so We'll good. think some the but the to goes I around had corona Japan etcetera, challenges see very far, how of it a good that year. virus, with so start

So the business. those in that the around are strength I areas would highlight

Simon Leopold

you good. take the from follow-up And segment just last and you Could for just year, that about It get if out perspective, it update as packet just I term as in Thanks. business it like talk it step and us strong quarter to would, Thanks. are an if to off longer see suggested prospects a and particular did. not networking, or a like had you on have a maybe the fall sequentially could quarter path? product back very would it but you sounds you growth that. this

Scott McFeely

It's Scott.

in specifically in for aggregate had we as year. we the the still the rate normal than said So think looking to great that to to this plan. we're is came that. well. as at we're on go packet to forward of the run shape more working the IP router in expanded around piece, XXXX. we basically we X-year said generically over packet good our application packet the in a last X% quarter our quarterly new portfolio faster of be other we we QX sort a business bullish generic spaces quarter, focused expect not more over launch And expected, but period expect XG, X-year -- grow optimized with in, do the range plan the We're XX% the sets and application terms on for as What it of to through portfolio,

early So track kind periods, for X% years to expectation is XX% but over of that. the on next the X in we're

Gregg Lampf

you, Thank Simon.

Simon Leopold

Thank much. very you

Operator

from Hall And please. next Goldman Go with our line of comes question the Sachs. ahead, Rod

open. is Your line

Rod Hall

through how point? then changed about to further I whether number color guys' in than wondering question. is you evidence I’m color the of asking there trends Hi. on talk that you shape maybe, what on bit networking. expected. maybe for a software that What I are just and we fronthaul, And seen could just Italian side slowing? rollout you by on that's just really backhaul little about up network exposure And Thanks and wonder Yes. packet you you? Scott, And -- coronavirus the you've then any number at positive on opportunity expect the more. things, comment how to better quarter Thanks. wanted Could was into this start that year? for if the digging last there. drove more the

Jim Moylan

do don't [indiscernible] the We in take deal. first Scott, have I'll deals. packet anything you the of significance could really Italy.

out So do as will good from new a that getting be good year With We're us Planet take-up well. anything software, roll did we continuing respect from We happens there platform unlikely to affect to expect customers. Blue and software have that to MCP this a year. our good quarter. we're

we So for we'll the think to what continue year. software do with respect to

Scott McFeely

it's And is we’ve form lot We spent software from the multilayer on piece, that actually just marketplace a saw time for domain, what you the of adoption believe generation that talking our base. packet to cloud first in that management breadth Yes. us, And the accelerated that domain the QX in design capability. on pick it a next installed this multi our has controller up up. networking, MCP in from has in the about as is native ground of

backhaul, of us puts your that position a packet that product industry around that in the product so on we some on the did to network a question new on weeks of great of we've about. So saw Back the the promises talking portfolio. been adaptive deliver ago hopefully announcements couple our fronthaul in you and

what's a take from little that. the Now bit about back that talk and a of step basis

a this a network product next of the that's like architecture is the adaptive protocols. all sort foundational for on first of an that portfolio native a right the cloud the the white IP right us, environment optimized for based is IP dimensions announcement Ciena the capabilities generation is of in and different come disaggregated solution this in And talked capable IP. talked integrated marketplace release -- we've press and about built bunch solution running So we've OS on have about sorry, on in of together boxes, in coherent cloud on integrated forward go that,

service So the Ciena instantiate the opposed coherent right play level controller able I routing on mega When hardware, optics, suite with protocols the going ago. support, to and that can from we our in deploy marketplace haven't stuff marry we distributed allows as the XX us think from also in adaptive mentioned done in protocols to a to MCP, forward that that scale. market to deploy be plants able of -- comes opportunity outside we've proposition bring Blue it the to of software we leading integrate value around in IETF spaces have domain that from bunch world's a Planet. legacy years networks, And portfolio for We these service automation in to that differentiating very the deploy which agreement of we terms leading delivers but a service had the in provider sort then compelling played how with this be at And history product before. to announcements. we've we in both that toolset bear and our

in deployed instantiation optimized all environment, value that first XG a [ph] XG as of that evolved well. routers these but to The in was XG is

compete are that's is This Layer RFPs you by around us access at providing the after generation we're looking to going the And opportunities market packet MNOs. basically IP optimized down back us. the sell for well, we're next to X wholesale their opportunity networks that side to all in beyond to If the significant been business, with this. as which expansion that historically now And that starting allows through and infrastructure. look basically right to have operators step XG very backhaul we a router our services dominated

long long, color. short answer you So that gives a to question. Hopefully some

Rod Hall

No, that’s Thank you, Thanks, great. Scott. guys.

Gregg Lampf

Okay. Thank you, Rod.

Operator

Go comes from Michael please. Genovese of with And MKM next question our the line ahead, Partners.

open. Your line is

Michael Genovese

that's the trying G to are going product. think competitive one to environment? G think product you're guys, Hey, competitor thinking with the I how much. in XXX you the How the out do have only XXX coming cycle very long be about a another is market? also with Thanks you

So thinking just might how are this catch the year? you sort market about on? when competition And of

Scott McFeely

take It's Mike. will -- Yes. I that one. Thanks,

Gary see those that of in out a all, key the some networks. hopefully just first that maybe announcements So haven't, deployments live WaveLogic everybody of chance customer public got that X things point referenced those the to really to And on highlighted. references for

be across a first of X,XXX a gig deployed gig also single application. mixed deployment performance in saw kilometers. fiber data XXX single with than environment all, to So center interconnect announcements greater carrier XXX first you that those But carrier happened

in You delivers the to And X,XXX kilometers, demonstrating saw a transmission to XXX carry XXX our than promise control we and gig XXX, variable us able promise gig XXX. services transmitted anywhere be rates on on of generated. sort over software XXX the of from world you delivering the saw that XXX,

those platforms. number, of platforms, product half and about the process And expected this, types. these a That that the up two and fiber had X,XXX you that the hardware demonstrations second gig, highlight coexist across of product combination production revenue have real lab server. announcements existing and in real opposed announcements. has And coupled to as -- to they expect are So asked in said ramp of the you for customer we And year. quarter of first this wave to production of in actually that question but XXX in I This that deal of market lot as the along last complexities that through controlled environment. the the ramping over real a to need on and wavelengths. talking all recognize we network was means those means do to a and with all on introduce this been want we're are And mix product it in with complexity networks the in there both course we to were context we've those

groups of real-world this environment. year all I want multiple actually, contributions get say on the that, announcements this to in would and well. not spare, normally on a well the think to the to the this take customer in gave I a in but have I Ciena long continue engine want environments. I opportunity envelope guy was the many, we've an the All a And gig will of to thank you be first to to with and XXX in many really great optical thank performance multiple optical call, I’m they to And So that I and able to us kind our delivering marketplace. performance to to reputation they seen the but our continue showed going customers promise labs team done deploy the journey to it's and today, see deliver. what on push of highest it real I of to were across delivering recognize over I we on was that answer with functional also journey as us confirming performing opportunity, this market have to to want from do be ahead anybody else disciplines. with many this timing, and that to for to having apologize build to gig, promise generations. done incredible only market engine the XXX that this be that. that

Michael Genovese

are I Those answer, follow-up. question you Jim, And want Scott. a And to hypothetical. ask as great Thanks. it's a

X no to to have do the end this year? were X the to the you coronavirus, for X middle there bottom from range raised today think of hypothetically would of guidance speaking, X you if So

Jim Moylan

very things today to us question. there. strength about hypothetical just We're doing the the about, business, a that's talked our and think future. We're Mike, model our told year. we're good we've you we're financial to what All and great have speculate have and business I we confident very right -- don't I our for going remain, a year, expect well. a it's still

Gregg Lampf

Thank you, Mike.

Michael Genovese

Thank you. it. Appreciate

Operator

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

open. is line Your

Jeffrey Kvaal

into all happening sounds some amount quarters. the the what's dynamics permutations about What about you of feel if was much. of like Thank the tell you delve good of the last mix you us in a down for quarters. numbers you decent the has inside upcoming It there? couple very The in us, wondering I please. web-scale can pretty come could

Gary Smith

their feel networks very is larger those play there's looking QX our what as an confident satisfying two on QX, optimize I overall. dimensions: we'll one, to focused new is I customer think particularly we saying. we is, around on we based in about What lot was a that in we're think be space position of to base. that folks, understandably, as customers space in there, players of are taking than expected. datacenter broadening this up And set more increasingly beginning but our the share be broader web-scale build are names. own and their fair connectivity. of And

is pleasing. So that

that we've the them rollouts roadmap encouraging. on it. of their is been large got, X, We've very worked on around software their to WaveLogic the things with future some the on existing engagement like has customers thing second with incredibly pieces The closely

is would get connectivity them, like markets Europe, highlight, Middle strong. And helping with very now, it, So, particularly about in them also we're third large them I where we that. to the integration into -- That we're where the collaboration big have is U.S. is add outside India, now Pacific, would global been dimension which very networks I the for we're very market strong enthusiastic what growth Asia, internationally, of is has East. that collaboration very the Places

in connectivity confident lot And we're that continues that know we're that we've gives that seeing relationship would center I confidence. in a but thing to there, their dynamics maintaining market view the point a from of we us got add, share, build very globally. see other I So data the U.S., given almost expand. demand demand just of in of insatiable in for terms no that share and very large space. the space, not of but an out, those overall And market letup just

Jeffrey Kvaal

wireless that national the we as of been Gary. -- in deal I is neither closes. become if you, perhaps play, also, -- play having those not they It's Ciena, Thank side I'm have then of been wondering And that 'XX, customers for are guess yours. typically bigger potential not on large opportunity third verge of is a as T-Mobile fiscal big Okay. the the down road? a a but

Gary Smith

recent the large a that answer been Ciena very, very, large to yes. more got installed would base. Whilst, I they've customer not very a is has Sprint think in years,

ever they were fact, our In first commercially. customer

and a great long we So relationship with them. have

think that is do So we to going good opportunity. be a

think builds as resolving. probably of I there does thinking think North for and XXXX out we there's into think opportunity XG, to for American the And this other 'XX, our Jeff, opportunity, in why some get positive us. we're don't around the a that I I so market. build it's good pervade infrastructure like Now looks the but

Jeffrey Kvaal

Okay.

Gregg Lampf

you, Thank Jeff.

Jeffrey Kvaal

much. Thank very you all

Operator

next from Our with of comes ahead, JP Morgan. question please. the line Go Chatterjee Samik

Your line open. is

Samik Chatterjee

Hey, if on mentioned for Scott, be the you you WaveLogic or share, first Scott's guys. you that? any if the [indiscernible] products product. kind of this maybe XXX the just expect X Thanks thinking quarter. of to you follow-up I relative wanted the can to taking Are question. to gig like revenues previous in thoughts XXX on you generation revenues share gig, the ramp can about some of

Scott McFeely

a just comments. couple Yes, of

those that the half themselves look think the And bigger the the of we second second to play in out I the The due we second ramp of dynamics year, the expect WaveLogic it this and than the of expect the first year. you half partially going first of year. to quarter. at expected year, was if year be all, on half won't X, So this timing the in revenue the fact but to half this model that of we material for is be do quarter,

of we our sort year. So say, into into plan I'd our modeled for that -- the

the of Much the its of WaveLogic say hurdle as our in transition. of of say has and accounts WaveLogic a particular. that is be in and deal rate technology. terms we to say That the be In transition to way with generations. customers There timing, longer I'd moving terms many systems, in baud higher to to particular these been generation no transmission in now of capabilities. in previous X need of able infrastructure enabled will from the of got AI, in a line of the I'd terms next generations pace this sorry, moved dependency -- they -- infrastructure previous

So in I in our transition would applications But moves. our the growth right numbers, go terms from of cases of perspective in terms -- faster from second the into to than some baked the some the in expect half we now, in that's see plan. what generation business previous in

Samik Chatterjee

certain you to of market capping opportunities more in opportunities no mentioned regulation of certain it. a partners, share looking U.K there's than that's countries you. kind vendors, general for like away overall of or a of if seeing help biggest region markets follow-up. Got kind going of of a opportunities where are that's kind at you move the in you from thinking of And couple kind Are think now. the the those which outline Gary, are can EMEA you times of just you kind you

Gary Smith

a see it. we those Tier I One, we with well-placed web-scale would [technical is obviously do out extremely generally Europe, a see to is to given it's with share I opportunity really dimensions But difficulty]. have opportunity, carriers there's say in more carriers. it. the market we're When aspects smaller going One historical it's dynamics there, also, build got being attention around obviously just two two with and X folks. those big the and speaking,

a beginning with about carriers it's the you've large just very Tier where number players as market And got, think, of I of concentration I much a share. these are to on realignment X reflect couple a we're that, are think in that there won well. the we've seeing out, it rolling other X vendor. Deutsche Tier we in, strong at and just bringing carriers but Obviously, with Telekom. that seen We've new as

do I there's and So it's multi-year. think opportunity

I are Point I migrate think everybody for these which to takes would the Number award. remind infrastructure, big decisions both number and strategic one, very time. time it's carriers. to two, the is, thing takes

in is we're us, terrific and the beginning front this decisions into see of for but it Deutsche And frankly. some years of of more I to like benefits a these couple plenty opportunity. of a Telekom. multiyear we're But think us, it opportunity is there's so, And a

we'll some this and see next we south, some year. and think the of year in I see will

Samik Chatterjee

Thank Great. you.

Gregg Lampf

you, Thank Samik.

Operator

Barclays. Long with ahead, Go next Our of the Tim line from question comes please.

is line Your open.

Tim Long

you. Thank

if two, Just I both could. to related web-scale. Actually

about what of talked the players, growth lot Gary slower lot you Yet is new about other other one, talked a than a opportunities, year. first European, expansions. -- -- So rate last saw we

could just because it you you've share of lack So any that gained so touch year. incremental on last that? Is Is much digestion?

the some think look are? update that on web-scale the next and there, rate we or Thank out as could the on you. you could on What this kind impact positives. related then where's vertical have despite us all to just what the growth Ciena, us give of you guys lower do And two? second ZR color technology that, just year So

Gary Smith

let about sort me of web-scale. Yes, talk

I And the space. amounts question, and Tim obviously we've quick that market an last incredible took XX% in we had massive over to that we around got think answer year well of is, share. year your

I very out on much went road and been with the customers They've [indiscernible] a the rates being map of And than overall into realistic, than that: X% XX%, got so, more and the think the that there more normalized about I XX%. year. to got that, we b, of growth think those it's developments base I to this market have it's But it's say now last think X% broader do relationships; year. we design market given we've had have with the will have double-digit think grow and do them. of about to helping there, a for expect embedded share them. kind there we grow in going going delivering we probably that, the We roadmap into rate to will integral to market. -- lot the best that we I lose line think a, in of will visibility those nature not a relationships, dynamics that we've we much of we would get the market, do can't

confidence the us gives it around So, some diversification of it.

On to on? comment the ZR side, Scott, do want you

Scott McFeely

metro Yes, that the opportunity first market advantage of able we interconnect center to a our on that to would do of capability. just that so take reiterate of be based will it the ZR what of is, market data ZR, see subset be all, perspective

perspective believe $XXX numbers all. We our market XXXX that don't size will think timing be What has do continues on total. the to We sort is like think, market opportunity. that that I our on of the right. a million in market bit a of past changed, push perspective have it put to the I opportunity opportunity at been in of the of has changed

Extreme a product We the are you've We ago, announced seen the will product announced off building of from X couple WaveLogic towards last WaveLogic a end of to seasons product, we the nano week. that, announced nano we X the which is basis That WaveLogic X family. the X the be product announcements WaveLogic -- all line line. available XXXX. us of And at of

we're think decent that in we to intercept market. So shape

many, to suppliers up it thing a can have Commodity you I other a not market". is easy "this deliver. is an them is perception The I'd say about there's at can This pick commodity Wal-Mart. technology many that, you think [indiscernible]

and people there think goods be well. I fewer will as the imagine deliver suppliers So that

Tim. it, some are there thoughts So on

Gregg Lampf

Thank you, Tim.

Tim Long

you much. Thank very

Operator

ahead, with question line please. Our of Go Suva Investments. Jim comes the next from Citigroup

is open. line Your

Jim Suva

much. you Thank very

you Or there having of like other mix impact things do us, the mentioned good second or the several and is we second and year such, the and in from revenue what so are factors, with more Can more rollout remind forth. hyperscale of margins as forward phase the like, from rollout You so benefited then and you're of you. is of your for it the mix example, in perspective to of year, may the you things. a Thank And this on in look quarter on gross ones CenturyLink of doing? half is mentioned, were view some pretty looking global prepared the that half the margins with any or less comments profitable?

Jim Moylan

Yes. Thanks, Jim.

say tremendous against We're in are margin. amount of choices look every and competing pretty there's would you group competitive in big. difference that same our same The much. customer customers, same I all customers the the gross the is the across of They companies. First, if have environment a not

not in So a big across difference customers.

it been has in the difference later between most model difference. thing, the or typically real big line time that out been for a continue the projects when sort commons, we're margin photonics, is a that's of significant been going will system, And we're stages there in that's filling the chassis the that's the which on with the and a for think rolling of capacity. a However, And we part. long project and in early

Blue in such that, be we The relationship, we mature with profiles is does margin able content products complexity And transport. new too tend margin those packet in hopefully than to other tend that by as compete as we nature software their sell products of difference, to particular, to And higher customers, have Planet. transport. higher and

of are the project and of lifecycle about we the where customer. where So in are totally that a we a in lifecycle its

Gregg Lampf

you, Jim. Thank

Jim Suva

Thank appreciated. very you It's for the you. details. much greatly Thank

Operator

Go And our next please. question comes of Evercore. ahead, from from the Daryanani line Amit

is open. line Your

Amit Daryanani

one, in understand and you impact margin to cash to coronavirus taking there up. and quarter too well, question, Is it's first free early million issue? half that? to revenue the from logistical supply guess just as demand back I in would Thanks April how my given the impact for the recover expect it's a lot guys. $XX a a the flow this of year, call fact the And the or

Jim Moylan

lost million that gross to significant the gross a on impact $XX there the will Well, an have will so a have percent. think gross I be it, margin on margin will dollars. margin revenue the attached impact don't

flow. the free an so definition could And by cash it on have effect

that flow cash happened revenue, we the Now, later earlier, is there's in quarter. events get affected money the free on We right? this always by the collect

margin maybe occurs late answer it have gross of these quarter, question? So it yes, the in on Does effect impact an if, free significant on we'll quarter. for occur flow will in revenue if cash that then a losses the your in now, example, sort have right

Amit Daryanani

It does. And I then … guess

Jim Moylan

right. All

Amit Daryanani

do expect the at point … back the this to in you year? recover some half

Jim Moylan

further of for that not assuming we've in due countries. by save stands. effects to demand, want and the said would given million answer revenue because we that is we recognized logistics we're demand the What really point the that we're We get definition, think orders, certain that we've to carefully. out, $XX guidance just is no this said the from too, coronavirus, have could we sites. effect is, coronavirus the expect situation, and our that for per se, year is that passing what Well, the I fact yes, the had seeing And had I we not

issue. It's a really not a So logistics issue. supply chain also also it's we a said demand it's issue. that And

Gregg Lampf

you, Thank Amit.

Operator

comes question with line ahead, Go Meta next Marshall Our please. Morgan Stanley. from of the

open. is Your line

Meta Marshall

Great. lot have been of questions answered. Thanks. my A

kind maybe reports will examining on, of large strategic focus there's of just European competitor a So I options.

if And wanted And to outcomes there's Thanks. so see of dislocation? you? that take of concern I that would whether seeing any you're ability any strategic kind advantage that

Gary Smith

taking of direction two I sort to with that, structure, advantage an think Ciena interesting the of industry one. over you've three Meta, is seen, is what sort last moving that's really been the many of I And think in years. years

want the focused I to application. that's number And think, to higher at user think us obviously, generalists of the as you've because end in the on some as incredibly is share, more we're the we're player folks that what best we take more And enabled challenges. do. world had a that I capacity, focused, and have closer a increasingly got valued

operate all to And share you have is last So, in do market frankly, China. we've largest which in players world, of in look the taken, directly the now three largest we years, the the in much market, two the and that we not pretty space. of at anybody existing the this share

continuing we So that our roadmap around had. to portfolio and feel gains tells and take we've very that you, But think the good share. I

Meta Marshall

Got it. Thanks.

Gregg Lampf

Meta. Thanks,

Gary Smith

Thanks, Meta.

Operator

line the please. comes question Go ahead, from next of Capital. Tim with Savageaux Northland Our

Your line is open.

Tim Savageaux

visibility the pretty to in quarter, the the in weak Hi if for solutions share? wanted kind your which There of of of waiting grow focus the I space, then -- really any get have you where any run to there related. does or to and to are targets. what gig changes wonder like morning. like push that to -- And growth customers looks if of kind in your cloud you on sort Because have you wonder pardon a to of rate could seeing that? double follow-up, from very seem read margins. you encouraging XXX the side to be was given to a in it you gross into it be relationship, have into dynamic might good too right, kind you're some looks challenging I But you grow market second would Thanks. and me, Jim, cloud start for not strong be year. if back between that and drop off I us to I heard much half, it right,

Jim Moylan

XXX the expect be just service the the flows we going with and so capacity gig. not Yes, web-scale put that and And gig, we're There a must web-scale. say good that such really ebbs are read capacity project place at like not for not saying companies they in demand in spend, to With a to to XXX you is if that this, encouraging there. that even all we're wait correlation provider to it's respect are the companies year are. for oriented, I'd very a their pause

we mean, have I back with you'll going a quarter think we're did group have we're to well the if that do year, to get this this to we'll going get in expect Anyway and I We that can of year. we we think numbers believe. a we're we've to you we've the suggested well-placed posted. last look nice year, quarters at QX. some Yes, doubt I don't

Gary Smith

Tim, on very -- we say visibility, would your point it with thing around good them. have we other is, to I the visibility

said. relationships very roadmap stuff, both them sharing that, of have and the collaborating we're We I've with And the all with their nationally plans, internationally. of on strategic as

So we into have very their plans. good insights

from first and And other year. a the of pretty last And market the had as to the least I of few largest good visibility the the have there We maintaining we we share is, say X% rate in thing years. are flow the confident absolutely XX% order part that market well. the at this for would in quarter growth that we've QX share in over grown

but do So, see got want there good place gives that's and and prepared providing be and -- well. to is that's some center point, some they that Jim's And able ebbs their diversified of That's out important. as able about what massive collectively, to well. datacenters. that. us to connect we've drive data optimize them, for Not market to do you the that's to on us that. increasingly, players a coming collectively business and talked a as why with comments, broadening smaller the individually, confidence through And in individually that flows opportunity There's in the

Gregg Lampf

Tim. Thank,

Tim Savageaux

Thanks.

Operator

Our with Bank question Tal the Liani comes of ahead, from Go America. line please. next of

Your line is open.

Tal Liani

because is questions. supply, in there's your some you're involved. Two to or are to your is get wait that no with ones behavior of vendors Europe, at more I three and want products customers such look time. displace guys. Is Hi, the the product tried from to to deliver don't of is is corona, in Huawei just one them later opportunity later, if they'll for have an they'll the wait start because quick just but can provide, they -- product they right it way. the a there I positive just kind of that selling

all, support not time, it's if start for is just networking be routers, we which but will The at -- will I scenario of that's connectivity? positive gear a because in pause and that an a all you have not know there type a question period this or that thing demand or to from here. is if of second that issue think a work I home for is another are don't to Is on potential a something you need different positive, different. driver? potential completely I

Gary Smith

Okay.

take exposure. question me first competitive the the on Let

I think this -- listen, it out. plays depends how

do bringing but will in this of terms out not it's plays one, two short-term, things. think the home European the with I to think their just a And us, for see Number degree because think diversified think term the partners. I supply how of carriers actually these I think in existing I is chain. of got many the concentration it longer an in we supply chain, but we've opportunity. I

short-term So think sort I don't don't it's Tal. opportunity. I -- bit I subtle, think think much, I a of be important. one, it's think little might there but a it's

I those about regards With strategic to part the folks the Jim, their next think the it's around you decision part going more months. of of reflecting talk … question, XX second over to as making to want be do

Jim Moylan

Sure.

Gary Smith

[indiscernible]? … how

Jim Moylan

our think employees lot it's with And to very I a other interesting that respect we've like I question, of taken coronavirus. to Tal. will say the just steps many companies, a protect

We from talked some work some home. countries. countries travel in about cases to some are bans people encouraging into We've in

Ciena, of collaboration from we've what looking a cases, at accelerate done toward lot movement expanding been, we in we And toolset. will a that certainly, already our has So working things home. many are at

that home, situation has is not occurred thing. for this this combination you I of in from a over people other think places. yes, I going yes, and technologies of if us. mean good near-term here It the will lot companies doing me that around are a work different see but would and think same collaboration more bandwidth surprise needed to new more time, not is direction It's effect, the that's

Tal Liani

Got it. My XXXX you next more the question routing, launched. that is the about

offering the see So saying, your router on you you develop semiconductor. one to cloud, semiconductors into going we also making with my optical develop semiconductor, my with Cisco optical acquisition, hand, by your

single you a routing. believe going why up a or to are to the understand or routing? I'm if others defensive the grow and into into layer see an trying you want I you're because they that Cisco will I offensive into to going that hand, to layers, or now. this opportunity you Is strategy. or is in responding you're other the Do it's On understand into from -- that optical something just can And to opportunity networks strategy? different collapse routing. application, thinner router, see it Meaning optical their you an different incorporate

Gary Smith

question. great a it's -- great a That's

relationships, defensive answer side years both actually, move and a up it's an it's decision it short our was In something and market woke It and a expands that look in of forward in yes, share, ago. do believe play. hand product if Great We the in the both equation, combine going wanted multi we offensive morning set, And many decided sense, at combination, not the our be optics. we opportunities. took like with on domain service the all access service the of grade automation also infrastructure infrastructure the we IP, here. we side best And to the to strategic class things but carrier those provider play will software. it side yesterday you equation. question, a on So our winning our provider multi-layer,

Tal Liani

any addressing And is [multiple there speakers] …

Gregg Lampf

you, Thank Liani.

Tal Liani

Okay.

it fine. take will offline. We Thank That’s you.

Gregg Lampf

today to everyone Thanks. time several weeks. We I this day. for appreciate interest. Have appreciate the question. and morning. We over good the up thanks And everybody following a your Thank look you. the next forward with

Operator

call. today's concludes This conference

may now disconnect. You

Ciena (CIEN) 5 Mar 202020 Q1 Earnings call transcript