CIEN - Earnings call transcript Q2 2021

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Operator

Good morning, everyone. Thank you for standing by, and welcome to the Ciena Fiscal Q2 2021 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Gregg Lampf. Thank you. Please go ahead, sir.

Gregg Lampf

Casey. you, Thank welcome Conference and XXXX Second Fiscal Good to Results Call. Quarter morning, Ciena's

call Smith, Vice On and is also today the Gary Q&A. for CFO. Products Services, McFeely, with Global us Jim President Scott our of Senior President and is Moylan, CEO; and

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

fiscal our current to and quarter performance, well speak a on today comments our quarter second our view the market as Our fiscal XXXX. third as dynamics outlook discussion of for

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

call commentary the with over assumptions statements. certain making should the which actual Gary, results based from filing, is annual recent guidance, regarding most market to we'll could constraints in forecasts include chain SEC upcoming that today. and everyone context June and our the statements discussion filed our the in by and the on I'll viewed required COVID-XX cause XX-Q discussed which detailed forward-looking risks call, These this materially differ markets, are current that its in and our the to quarterly about and XX. to statements of be factors uncertainties risk turning expectations, of Before XX-K impact be and filing the of during and be supply Such company including statements, remind opportunities

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

turn ask we will I'll to limit follow-up. yourselves Gary. you question I possible much always, so With and as call that, allow the over X X As today, to Q&A as for

Gary Smith

competitive second reported our continued XX% operating earnings in quarter, the distinct signs revenue business in hard fundamental adjusted in in work morning, overall gross And as I market our drivers performance of well and their first fortitude build continued good They on margin thank They including leader. Thanks, for drive industry our our encouraging advantages our challenging of strong $X.XX strong reflect of reflect our position business. as a these and a This fiscal continue to million as a the set Gregg, morning, must drove times. everyone. results particularly strength adjusted once for again These improvement people and we and forward and $XXX that environment. the demand share. per margin

outlook commentary, laid we from XXXX As the our you form out and As the recall for that basis may again, entered of several year. our current fiscal last assumptions key we quarter,

industry improvement in parts an conditions effects economic the world, abating. which of starting somewhat and of was we many the COVID-XX First are overall, are the of to see where

region recognizing fully current that status and each course, tremendously. country globally of Of COVID varies the

sequentially stronger approach to XXXX we of indicated X and dynamics, including architecture caution world. than customers and result our more has a this in the see of for that spend, We in investments fiscal if we a achieved pleased of operational typical than the flow believe grew into network around lastly, am operations, of to more growth, backlog levels. normalized half pre-pandemic were absolutely new to that, in these constrained that focus order performance amelioration service drive and deployments. significantly I outlook second service greater translating as both builds in uptick QX, as QX and material on strong for are orders we and year. report key the need And is the typical to noted order half which QX, to provider needed year-over-year. meet And since that and Secondly, the second provider to particularly began backlog during return a we been revenue more to really we

close ability these in the we in expectations we that as out So first market the materializing. financial happen we fact, has on our in the year, things and performance yielded competition. we on confident fiscal this overall the the in are, the business Based of to financial to XXXX. dynamics, with for needed guidance continues provided our outpace to half said to we and be business And continue our results deliver line

the now detail. our cover more will believe fact, margins. gross better-than-expected we that year exceed And we that in for In through will profitability target Jim

review technology market I sectors. And comment some quarter, that the concerns of I'll strong we Before supply strategies proven from we've as chain of highlights the years mitigation component a over semiconductor industry have most chain supply some on times, constraints impacting around experienced lengthening the we the challenges. place and shared recently broad lead through are briefly for range very in COVID-XX have a while disruptions, many of

our from inventory investments continued well also of in degree chain We benefit as integration. scale and supply diversification as a vertical of and high

can we we material here with is supply the As perspective we we well-positioned a revenue this that fiscal no expectations manage are as our today, dynamic. to navigate to result, believe can for challenges XXXX. sit impact chain And our

quarter. to Moving highlights from the

And Extreme, X respect customer innovation, coherent to diversification innovation in we our total around shipped range customers position. generation wins lead date WaveLogic with QX, XX,XXX to count new to fifth a wide the to WaveLogic our continued active we our to world, their XX. with WaveLogic of roughly secured total in Our XX in and uncontested. our In strengthen technology And is XE shipped competitive quarter, X modems bringing modems, bringing XE the networks. for WaveLogic nearly X,XXX to

intersect year. time customer which remain also begin this in pluggables X Nano will with track demand, GA to We with on have to likely expect product WaveLogic our and later

our our performing IP customer performance, in power focus solution last I increased strategic labs metric the extremely We technologies for with pluggable. best-in-class including differentiated the well, on have quarter, a perhaps most important single mentioned today product routing our solution to areas of and ability this engagements Internet key and specifically area, Cloud. IP cases in like around address and XG, Edge and portfolio in Things in growing our use switching Adaptive customer

Blue Our also new X largest momentum was new from MSOs with service with for and order strong Tier dozen providers. this providers continued enterprises. quarter-to-date again in roughly and QX, global to the with portfolio a portfolio wins QX ranging wins major for X Planet, very service

segment regional quarter. customer the to in and performance Turning

comprising QX. these in centers. of again XX% non-telco quarterly webscale and Direct Our data revenue expanding overall as XX% be revenue business continues contributed have strong, once customers of building to started

year-over-year further relationships as WaveLogic segment broader We continue very to of strong web-scale no a players. become as of is well to leadership growth increasingly their with Tier think position our range address needs providers And increasing bandwidth EMEA on traffic provider in in logistical needs. service able capacity the North are in as traffic customers with X navigate in longer now the support pluggables us to more invest key put with better to region own these retain adding finally they as America, a to wide introduction to the and networks, Activity strategic. requirements increasing and our X performed customers' flows And quarter, as our also can and increasing well XX% challenges. revenues address India. this enables their web-scale our the COVID-related customers, they of service up I especially

impressed expanded new support expected country, recent we've situation. very wave the we the COVID the is their by and slowing optimism team, challenging local and this be and to pandemic across of incredibly of obviously amidst With the to respect wave India, resilience in With our for the recovery. resources business a continue

revenue order also strong, sequentially date Ciena the deployment for However, the would schedules. impact related activity be to to I wins And still say with year-over-year. from continue and largely to that country and grew

automation with We to general that in Overall, continue and XXXX mitigated our year-over-year remains for near-term bandwidth our by drives secular India strong challenges diversification. underlying geographic expect there any demand business. to fiscal grow

strong together the strategy, in targets the execution us in achieve continued encouraging a and our of gives second gives demand. is visibility sit the in through as it that we financial a performance with as our QX greater confidence here environment and ability half move market signals strong results, us These to of Jim? Our we reflection And today. our year.

Jim Moylan

was net With everyone. quarter GAAP was of million. mix, P&L we that net flows performed respect margin expense of Gary. Wage totaling margin well OpEx. including Good strong the are new we a high than measures, We the incurred, of received worth It's in $XX customer operating a during in Urgency result Thanks, in million. XX%, and a driven at in $XXX primarily $XX product operating Subsidy strong the QX, $XXX favorable each in in through Canadian morning, This capacity quarter builds. software by Adjusted versus where delivered adjusted XX.X%, to QX with contribution concentration our the profitability million. non-GAAP figure million was of in adds quarter and higher again Adjusted noting revenue at as the adjusted wages from line gross GAAP income quarter. income QX

have $X.XX effect on in finally, of adjusted profitability, income And we to our numbers. We getting net excluded this share. reported per

EBITDA in QX. $XXX [XXX,XXX] $XX Free was investments. flow operations in We was quarter $XXX shares approximately for ended from million. cash Adjusted million. Also with in repurchased addition, $X.X million cash In we the million. QX, $XXX and cash billion approximately was

$XXX to expect repurchase million fiscal in continue approximately to of We XXXX. shares

guidance. our to now Turning

in targets. fiscal customer on conditions performance, strong give confidence as As in half year market signals our Gary as ability and in deliver our to our mentioned, first well encouraging 'XX us improvements spending

Specifically, 'XX we range in fiscal a in to year X% our continue grow X%. to expect annual of to revenue

gross a to said as we revenue business, and of mix we've more new and As improve somewhat. reflect do expect typical to previously, moderate margins begins existing conditions

gross and of continue. However, margin -- we as do higher we a than strong mix will contribution expect in favorable software our we previously that that, somewhat the second expect expect half that

than to the half. higher Additionally, we the for lower a OpEx second expect the be than quarterly bit first call the OpEx in the for first for was generated year. OpEx we half average half

with on movement half. dollar With adjusted anticipated. second this guidance, half, fiscal some the margin results first now be higher continues from of combined half OpEx to for adjusted is previously there basis our XX%, pressure the OpEx. Also, operating So to gross of than put our XXX year points XX% expect we to in a to range first the margin weak in

QX. to deliver approximately $XXX of revenue we million XX% margin performance delivered gross we to range specifically, range In adjusted XX% $XXX the $XXX operating in a to in QX, a expense closing, great million, to in For million $XXX adjusted expect of and million.

to return the provider customers a indicates great rest this us flow of gives spending by visibility order into our quarter Second service and year.

in confident are a for deliver We significant second year our strong half ability 'XX. and to fiscal profitability

want once in recent in the to period. give their wide back Before in and face a for team incredibly moving wave. has Also, as have been Q&A, activities. each entire tremendous with very Ciena our particular, communities, team with service again gathering other resilience I thank dedication also through of the to their demonstrated a difficult employees of another customers well India our as continued range during in to focus safely weeks In active COVID-XX our

team. the With we'll from take analysts. are of now Casey, proud questions extremely Ciena sell-side the We that,

Gregg Lampf

through who the Casey, aware for have Q&A, we reregister those we're webcast for start as should ready the webcast of well, have you technical access access. are we Before tried please questions. to some and difficulties

Operator

Instructions] Morgan comes here from Marshall Stanley. from Your question first [Operator Meta

Meta Marshall

the in appreciate far and better -- pacing on the America of as trending sound versus North ramp but that's question. And just you're of, guess it Tier encouraged? orders? leaves terms in you Just XXX-gig is more I in of that the seeing maybe as terms context maybe of some the what Tier just Great. your Xs. seeing just product XXX I Xs then on gig on Certainly, one, versus new -- kind projects? expectation? Is it you what you're for of the the the how Maybe

Scott McFeely

I'll Amanda. one first Scott. Yes. It's Thanks, take on the XXX the gig.

the see previous you accelerated a to got to So we're that's that segments should our I AI compare that guess, referred XX,XXX from And an ramp X,XXX the ramp year, into to call last all point the well, generation, that you the customer if sort little perspective, a so commercial ramp it generation. absolutely out. of about repeat WaveLogic shipments. accelerating. of just pace about we previous of XXX shipped. numbers and to We've from talked I in shy that's a across Gary of sort about it, total gig, And Extreme as WaveLogic talked just date, units X or it's I quarter, of can as

Gary Smith

this And on – the Meta, is Gary.

more and just On that the half But second the of half of we’ve of globally Tier them and right our with as I’m indications I seen from was budget sort little operational here. ‘XX helpful think ‘XX main in And Xs new around the margin first business QX, in the view bit caution spend. now hot. fiscally half. second describe terms well plans. generalizing in manifesting deploying capacity. of in their an a terms the issue of I as point to think encouraging really, of that And a also the seeing it in operational their on but of think I’d the And of think getting it ran both fiscal good getting They catch-up and operationally a of we ameliorating, both was I terms I it’s in the – networks. signs comfortable of are Which we’re they’re

So board most the the across in in definite second world. in around providers half that, the improvement service

Operator

of Your Silverstein from Cowen. from Paul the next question line comes

Paul Silverstein

plan with appreciate with a in of to good both And respect terms threat? question. did on I terms speak Infinera are in to one, you're Nokia, customers' empirical update of the whom Gary, more the a you terms that talking Infinera time us particular, real traditional in very landscape, broadly, you what But competitors, competitive threat. downplaying data and know I whole then to would deployments respect the that of in seeing ZR to of can game.

Gary Smith

mean, is empirical Scott the numbers I XE. know now where of went real We've customer. WaveLogic our shipments, deploying. And Well, in we're customers through think data that for customers XX set of real got I best our the you actually terms just

taken, So on of I kind talks, with gig And start XXX slots to pretty we've already are much head set best primary landing had. metrics the that's most of that the talks the think frankly. itself, of

Scott McFeely

space to the did on your that chalk in investor those belief coherent a referenced the technology those on point had marketplace. an opportunity bit perspective see a various ago, of hadn't the We about and flavors mean Paul, to quite And how space. time you that. call our system talk of the dynamics different probably an second we I in month and application ZR spent giving of application but you for play

So that's accessible on our IR events page.

details. go this, So at in I'd look would I as that encourage more if you to it interested Paul. summarize you're

the application, The and of size in metro the will this past center first data around technology early We've be campus moving talked in I think, timing market that. the interconnect. the for

Our changed perspective hasn't that. on

early XXXX. year. you'll to later deployments this think our deployments some to I start in this significant see And year, moving

more extremely Nano. on that. We've with we're We're pleased As performance you seeing we confident GA. know, a on for our best-in-class is that have for were and numbers. certification performance targeting power midyear our of We're that and the world. WaveLogic customer in technology technology X optical but product not optical around is and that And said more only labs that number track best-in-class that addresses that we actively now we get the in

Paul Silverstein

you? what customers, you the to Guys, relative is us with on your WaveLogic can modems X those can't XX backlog share

Gary Smith

No.

Scott McFeely

those all in backlog. we shipped. the say, board I’ll not quoted – shipped. numbers terms are The numbers of numbers, that That’s That’s

Operator

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

Rod Hall

higher growth but were that have guess seems accelerating still the guys admittedly year-over-year. EV that that And it to in software And forecasting. than wanted high. -- me It's pretty indicating, drops is to yet is I line we year, now off not grown the comps what gross low on margin you're focus substantially that I on quarter. a Jim, off level, last next you

you have So think I lower us questions. there? happening where a go what huge positive Are to you targets and margin off you on give picture obviously, you margin I've is fiscal it because driver, think X it's you you. then, next a sign kind quarter you you what any that a do pretty intention guidance? of kind give quarter? that saying happening I Can see Jim, next you One some for us the is tell drops when and got, do software Can revenue implying line And the revenue is, were could to of QX? to guess, Gary, that with big for in that us line --

Gary Smith

automation So of we've which get the sort this out we're of of obviously value the layer. let that layer, software, around which I report focus Planet, lot of seeing. secondly, the really we but we seeing a very called say expect service we're areas, and broadly Blue both on is increased that. -- got piece those layer. And we've encouraged the then me the to, embedded take network really the of And network I I by in automation got first also And part what on what think is

out to and I as got would I that, longer-term in of begin giving amount kind we think of expect to for But us when as stabilize, the Planet, past, have articulate momentum. year looked about talk obviously, that. COVID tremendous some for goals disrupted. Planet that we little And has we'll come things long-term came targets Blue all a when some with bit the of Blue at more

out probably overall think exceed on software I the help and we've set. this turn as certainly of Jim? orders side a on the automation As both the that revenue and also the for rolled drive more it network adoption. will things, got piece, continues it margin and applications we grow, And to gross year, will that being lot we year

Jim Moylan

that than of sort second X including said the year, in expect gross product remember we're mix numbers. and in come expected we've that's of being the second stream What from world we half the projects is is to new generally has to I'm we in Yes, margin, down half, way And the very Rod, sorry, but that their customer the mix, and just seeing modeled all the Gary. consensus half -- mix, On lower half software, also our X. continue of that a mix in it because first half. to margins revenue though good

and XX%, So in yes, the be. is half as a will yes, which But XX% mix. be pleased that's experience second But And performance. calling we also going into new now We're second to our QX. up very gross call we to typically, we software margins have XXX to a expected had average come to move in we do that half. than to the gross gross we we'll margins of for half our expect in has when margins, bit we little margins the expect are with gross the we're good remember, sort them Overall, basis lower a from half. revenue points margin what first in of it where going enter projects, we higher percentage be been second

Rod Hall

on expect back much So down not Jim, to would say it to? necessarily software and a fair that more with on mix, It's up not thing dragging as margins that, we going to been then it's is the it projects do in new QX? reduction

Jim Moylan

totally expect software right. come to kind Totally. We That's in. don't of

Gary Smith

Yes.

size. relative a just is Rod, bit, Another

to continue And the for people why the it’s small well pulling think still see business. that’s to out as do separately software. on progress. a we’re of stand-alone to the But I we’ll rest relatively piece,

Operator

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

George Notter

for Obviously, right inventory what wanted I in share narrative, some the us point, At market as ongoing been runs some I opportunity. component forcing be on tell you marketplace time. now. there'd the the to seeing Huawei think, some side. ask Huawei guess an regarding of that Huawei it's guess I function about capture you're out But

GarySmith

the George, with dynamic changed exception. say notable hasn't really I that one would probably

run the in RAN -- it region migration it I Europe area been a getting infrastructure. out or business is seeing of while where seeing reduction dependency slow they're main initially core think date upon you're the first, the where then a to main being and largely to has the

dynamic challenges over other on out I taking and understood to definitely but that's the I I dependency time, Huawei, is in us And a time. our well in around for that about. a with period because decrease than think and We've a So gone it's And aggressive of tailwind do that's talked think seeing about in a think, activity the has mainly they world. going more more wishing the is seen more And to fair carriers change India, reduce this not aggressively yet I think notable being, been we of we've dependency. some share year one of major have deployed, think to as I much COVID lot their those seen we're than RFP. there their won -- are of the of probably of deals. parts which India,

been So call of dependency. on deployed reduce to planning hasn't yet exception the because sort definitely I that that's be their it would but the out. scorecard would But not

Jim Moylan

that dynamic Huawei – been term. to should going to say long positive us not fast always rip for us. about a win, away the to have But cautionary I I happens going it’s because not going new it’s replace helps replace, how well, Huawei. Europe, projects them take just into begin infrastructure while to we to shouldn’t replace to come difficult They’re and for and say, in be for move happen. it I as But going play, is Europe. think Huawei then from in to That’s for

Operator

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

John Marchetti

X last into rather even just or the where all tough -- half to in And to at was I ease it second a gone you X year. if XQ was talk and that's really if last compare company starting the on country could further wonder and frozen of lockdown. the how just you're Maybe in an into as the looking market. maybe maybe you what spend about have additional or saw months the Gary, minute the India year

Gary Smith

Yes.

I it it's a piece, everybody. of to couple think mind, of sort COVID situation think -- the the I had from prior had

As a had was big challenges build-out these around and very it you John, that. digesting say, a, had

Second the regulatory then economy of all, and issues. some

experience few our derisked I that fact, down. go, on say of view lockdown So to heading say what team n India, improving. demand, again half in starting our just second X I slowed are had dynamics say direction. in challenge generally, kind on that the from the a new view We began is that think, to I deployed. right a way the see got very India. activity, and the at last be with for to of it got deployed. of would of this it's in that deals and underlying and some the would then, would and like is the would they we're strong. move when, all the but still half we in We course, were years big COVID were the really to that then, months in obviously, seems in won sounds of little been that hit, that But given from we I seeing. see year, stabilizing say, side or currently, and X beginning were We long seeing I talking they has happened be it what And think very beginning we've course, to a second

had the strong plans, RFP But up It than and Ciena do their think as be be for And year-on-year. so share and they as we activity order that I continues India won't as our winning activity I -- to but anticipated. think be more will we're high that. fair of still

from we'll we India, year function a step that second as a in hopeful half. delayed albeit one the turn one's good So see the

John Marchetti

just And then to maybe Got gears shifting growth. order it. overall

You heavily can up all Xs. that's being at that than curious comment if just towards higher weighted about significantly talked about I'm Tier more whether revenue. you

You good webscale. obviously a sequential had very in quarter

ease and doing a looking function half, XXX see we're Just evaluate networks time to out in coming that talked into is those second about those of deployments. that it starting Is orders now running now those half it that to and ? for You're you as having second of a deployments. function are

of Just curious there order if some growth saw. you can on any that color that give you us

Gary Smith

think would been We're roll it's generally, But constrained I to No, each Yes. board. is centers. data in of it their and to have I obviously seeing generally, the out different web-scale very I ability would the say, connect you dynamic across the go new they say as players.

Just like the ability constrained more carriers of but out hot. been terms run and in have all, networks both first to their of caution their of logistically, deploy, laterally

they've and then So now. return more I I a most some -- is has seeing it as sort we're running generally at obviously, catch-up been on their I And slightly the a it, catch But the between the capacity X. X describe hotter seeing dynamic, we're a different to development been them networks. And to of last sort months up so. has of the normalized or of I which would largely to been extent, think of what approach think that's describe build-outs,

end of half, talked up actually we've new second sort now the about, kind and which in of we'll as of we won, So we've that think business what a hoped deploying the expected. is Jim lot

confidence were news, what half. with we're well. that coupled terms good think second that's function think real this and catch-up, So around I got we've that more big expecting I as backlog in now we're the much And got activity we and that we've the in -- a step seeing our of

across a That's the we're new Tier NTT. to for board. increased new it's us. generally, Xs a specific North and really, India, Tier America, say, with and Xs It's deployment what's still in the us architectures because in We But is talked more would catch-up on across I the So in of I about Europe. John, challenge would seeing we're Japan say and leaning on builds. going Docomo on of capacity, seeing board,

Jim Moylan

COVID affected did customers, board providers on it more depends really web much on the across the of a effect scale. service everyone severe in the than had terms but it

provider spend service as hope our said, as say, the second did I and seen we this is a quarter, we for in expect across Gary we But that. would improvement So came into and have board. big

I for need everyone and more trend seeing for network The think ever than is been, it important has that to us. is network. the continue expect we that

Operator

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

Mauricio Roldan

Mauricio is This for in Simon.

question to of footprint talk of Huawei piece what as become gain wanted of pricing the on to a Maybe And opportunity seeing starts the the the gradually on Huawei dynamics then a look of back back to backlash. go I to that some you're could in the European terms follow-up. the have competitors you Just available footprint. about and

Gary Smith

I Mauricio, derisk right are that's they dollars themselves look been say business. dependency on as pricing focusing is their they're see to Underlying for network about I to a talked where their has of Huawei. while. any RAN dynamic think would attention dynamics. infrastructure main the Europeans say, looking the in priority now. And and they particular change the don't at to I as transport earlier, this going their the changing around I'd and Jim architecture, that, on decrease

the this couple won their office, for back actual doesn't And integrated And a their a evaluation, you of of terms happen decision all takes years. those, that so on into systems, will. deployment. that are quickly. been number going We've change deploying. these the uptick their But and it's support, those are for a benefits probably I tailwind if seeing being we're they're particular of because us But very that has an of the really, that not and And again, it. any the the the kind it's a are long-term there. the points, in big RAN obviously And deal shorter sort ongoing now it's entry play. a we're time, carriers would that both dynamics significant, not Huawei. in It vendors term And competitors And and other us. in from really stress is for of and

Scott McFeely

either. pricing it's a changed. Yes. competitively tough there's trigger of and away a major be competitive time the hasn't I happens any very always a to that Huawei. contested, mean from it's environment, infrastructure don't to And the going move in that's I that piece think and been fact change that

Mauricio Roldan

for the and on my question, inventory follow-up high seeing this another Ciena actually that Jim, consecutive sequential then second increase, levels. And a we're record is quarter

just I'm as it's a for demand if seeing we're effort sort this the Or of the help getting to an to inventory the some well navigate in So in buffer anticipating second concentration build limitations as this combination to supply half year. you're related is will of industry. that wondering chain that perhaps ready the of that you

some maybe inventory around how about should if color the offer remainder you year? So and the we of that, for could think

Jim Moylan

to We It's start and our do guidance that. in I'll think we're and the to had a to can that expect, you inventory the all Yes. build frankly. lead half, have Scott we above, and to would of going continue. second uptick big

we time of we that certain The had areas. been in products, buy. though thing is chain, terms some very also had and [MDEs] proactive other to with some supply inventory of in This less we making is have always into get no sure levels as year exception. we that had good shortages moved We've

and So combined. that it's and do levels there more happens year. issue over move whether might But time. the down to watch inventory turns last levels. what semi expect associated through result get those buys with our as we as to things something back approaching of We'll see time, that normal come will have be do we time a to over of We all the think or

Scott McFeely

to built All The bang resilience right, chain our we primarily talked be the for will invest way. that, customers. our how covered how customers And in the the in next and of convinced to the of strategy really Jim, architect only question. – I’m service was dynamics now supply it, the but it you question kind by not terms we in, at that on we’ve of our is past we’ve

So the that’s semi challenges one driver. us And staring we’ve certainly extremely served at the of well industry. it’s as

substantially is times The piece a is, first have the bigger we’ve as noted a call second on and and half, second a we were of built half we than in success. expectation that bet couple going here plan we to an

half. that So ready for were we getting second

Operator

comes Research. from question the Jeff Kvaal from Wolfe of next Your line

JeffKvaal

Yes. structure I it And is half noticeably question let that prefer. sort margin Ciena? that out a range the way most for it the given another that second And way, me if get ask you, I've can direct but got it's you'll you'd baseline for Do than in you've really, the better and Jim, us ask mid-XXs of do been you is back new that, you've for a Or think the that over historically. where you is think time, to the year?

Jim Moylan

what Jeff. about that, I'd here's say Well,

been have very margins. experiencing We gross good

have taken product. of our costs And great we've a we out We lot technology. have of --

improvement of to gross has margins. our All contributed that in

of not is gross that second environment in few very the it's dynamic this called more get we over to find or said a now. our our there. margin, expecting the performance have back expected still underlying ourselves so. to We margins be dynamic half we because just past as the margins mid-XXs The cause up it that for significant gross which a We're new will year projects in But as -- year. of we've times towards

As do we gross more so performance fully, like move far. through but time, we we'll our address margin this of issue

Jeff Kvaal

Okay.

wins on in So of the half fiscal new the turning part then? guidance year of second the back is

Jim Moylan

Yes. Absolutely.

Jeff Kvaal

Okay.

Great, great, X% me back that that X% Okay. X follow is it that sales then And to possible great. about talking you'll by up growth? day get to that long-term asking, let

Jim Moylan

X-year customers We’re with the going we of been through the us to incredibly caused an And our and sorts year. our as that suspend changes revisit our period reason, guidance the of on of guide. to part course. behavioral turn in issue of all with We’ve dynamic good market long-term

to to would we that We that the began the we market low overall, say said this, future about expected I mid-single the and we of certainly we We our today. just of sit as to the we’re terms part I we’re into a that what give that we year, as come continue in but next about number first didn’t still we year. Although here just this context. thought it’s expected digits revenue to in as share thinking remember, grow did we won’t to say take – talk growth. in going

Operator

comes line ISI. the Your from next Daryanani from of Amit Evercore question

Amit Daryanani

down the you both in was basis, I Hoping over on the both on The when a what's happening question just webscale was year-over-year maybe on and sequential business businesses. there think in what's if versus could the provided? happening the half the scale? And narrative, you web then as about kind web-scale back how business back that you performs of guide half the do you touch have think

Gary Smith

web-scale it. say generically. dual talk One, new around couple Amit, and well different constrained continue perform a to the I also that with business you them. about They've ability and things very see to they ebbs models would we flows of all them data say their we deploy I centers and have very connectivity obviously, players. been And them. and would to connect to

is getting year-to-date, X% better. fact And that about think at that we're I up. the

half second We'll with on first But As to in growth about have. is what of will we're tough uptick that single got. rest the about -- the for the absolutely more our along the that terms the on sort we mid we that. we the share will digits, We we'll of see year And share year, improve revenues. we to get even thought. half we've Absolutely. us think of of we see an think half than the for take business and maintaining absolutely confident do already

think being a partnering particularly world been It would world. be outside just And the back America. It's for we're for of say into getting that key in where not And to is around swing out getting able constrained to pretty reasons. around of them. the has centers be around the to that's optimistic seem we're And obvious U.S. space. I So I that that them seems build They with better. point. these data the North

the half second optimistic we're about pretty So for us, Amit.

Amit Daryanani

hear back the a kind cash strong. talk more year. just can half I I if flow about then in the think, bit And was of you of exceptionally expectations QX, Perfect. free Right.

do don't stronger of cash that out about know this that's how despite But cash if free that the time ramp expecting? free the one-off was HX Is you I been So the historically, happens something there. called that that flow? think thing you you're half flow. Because

Jim Moylan

this the and guided kind think we’ve say second to be going and I some half, that I although that don’t that’s of to we’ll we XX% expect. of number the had would that is our or free we’ve a flow – flow expect free to have recently. better kind the XX% past, cash half in But said EBIT, would cash we’ve we our had of I in the we QX. in first particularly going that the we’re But in said past, strong than

Operator

comes Co. question Henderson from next of line Your Needham from the Alex &

Alex Henderson

an Ciena Can the talk to one, wondering that environment, receding with result with to look they're on pricing what's a broader going the associated is change whether try So you Huawei. profitability; to issue a at as was we've for I from that saying is pricing, were any you bit environment the going addressed Huawei whole? extent But realm? causing about have because of the little such to better as drive to advantage that market; in and three, pricing of been gig, two, a the in the Nokia if there's you XXX

Gary Smith

don't think really, it's really Gary. I it's Alex, Yes. changed.

for dynamic Huawei time. around the been has a Now long

real change to no So that.

and of the have the margin, that business, I a market, is think, we technology the think margin. and that helping innovation and have that's I increased reflection we gross drive that we where integration the we're the getting in into scale on bring our vertical the

I changed. think generally the pricing not has environment

of We haven't competitors. in behavior appreciable change seen any from main any the

Jim Moylan

It's couple we market as or is result we're been market share. of a get to it share. whenever to market anything And a opportunity more there's else, Alex. And Scott Huawei the as going like competitive market, a move an share something Huawei's from that of to said, that for years, gains battle next expect as to get trying see to a competitive

Scott McFeely

largely participate but to do margin about bit pricing, most think is cost conversation. that that asked technology competitive Alex. the to down allows to bit XXX-gig more X in that in it a within explicitly a market us per XXX-gig the capable well. trying but And I our what's dynamic an I competitive has WaveLogic actually of factor What a XXX-gig And cost the total cost much -- what's to -- one, ownership partial would question that, of way it. what's at per that necessarily not the to And the basis. cost achieve? as they're -- it's per comes cost related One you pricing just engagements,

Alex Henderson

Great.

that constraining more is I it the had was more, the supply might you for on expectations. a But in second back excess outlook as I a thought half forecast. of and produce you you that The bit It a basically orders wanted the of subtle in negatively component the Is saying actually for to to your of little if the growth to inability ask result back within exceed band the governor had that you impacting rate wasn't impact your question into ability constraints half addressed the year. your what question period? the whether not going the of

Jim Moylan

Lead the half based conditions. supply I’d lengthened. have on what our meet to is for Well, current say expect current our that be the second view we able of times to chain call

would but And achieve impossible, difficult. so wouldn’t that would we’ve to to it’s say I a be upside say difficult. called be it the I significant would numbers

Operator

question from Chatterjee JPMorgan. from next Samik comes Your

Samik Chatterjee

a have I couple.

you're wanted like seeing you to if orders seeing to them. higher indicated spending? Just seeing of And a to you equipment deployment? Just to have I follow-up, is and that having of deployments here to the levels how invest normal the much have to wireless equipment of a in any C-band, you some year and get half support what visibility More their related think is of get with you're to can to bit just that driver back wireless on strong more with going relative what or please. North tied trying American off return to insights provider from returning level But a to of happen revenues Tier Clearly, spending? attributable to service their I the start this creative to either X spending, customers. are

Gary Smith

Yes.

think I do catch-up largely, on the it's capacity. with their plain to

anything they fully were want they COVID on very and network on basically. homes and they the And I endpoints, of the hard. on and any doing to the understandable services hit, sort security, around operationally, achieving very think when just network, focused so didn't we're i.e., ran piece -- it our cautious disruption

more more bit business, a architectures, the I network, of of then a think approach normalized is new new a development seeing of return of a catch-up what new to And of function i.e., a we're their deployments. that. their

it's fiscal And I cetera. little I caution on think caution. RAN got those et So network, caution might think and X But on. earlier you've going more a be a on operational year, combination there this think things of around last bit also I dynamic priority the about of

the I the think lot more various includes that generally that and now, people in confident carriers. are seeing the I in some you're economy of And feeling around in think a comments generally CapEx.

closely transport, it work RAN pretty they're those I RAN it's the to without than cetera, with more so the really. is prioritizing because So et do transport won't aligned versus dynamics think

Samik Chatterjee

it release, it. quick which [XX-person] Got sequential And move you for color. was -- I is get but mentioned more on to in I provider? but accounting press won't have saw webscale was you you a service a Or DCI know some customer, just XX%, move it significantly of can name a the you think. DCI, We know wanted one I it, customer? follow-up. up probably

Jim Moylan

since Well, customer historically customer had continues that be and it’s for AT&T. strong biggest the very to we’ve It’s a us.

Operator

MKM of line the from Your comes from next Partners. question Fahad Najam

Fahad Najam

revisit I wanted more just you a to I'll but . ask question,

business the call memory. at it XX-plus And could in for years. the I've best this sector environment, broader I time for look com you the probably If in been equipment macro my

about targeting already the [X.X%] outlook, go for the year-on-year from and case. governments out year-over-year -- half stimulus plans in global not giving build-outs, talk across recover they You for forward-looking you of consumption. top from got their the of stimulus XXX-gig, your $XXX that to Huawei, billion, have leader as infrastructure on yesterday, fact that Biden growth a in billion more in try And market about coming varying kind bill heard We've globe of $XX administration, you have on network spending of second [RDAP], top Facebook still pandemic. the XX% us we you're a XG have various largest from competitor, the

outlook? So why forward-looking hold about? concerned are back a What us on you giving more

Jim Moylan

mentioned All as true. we're to with the expect service the nothing you are things ever the to layer. might are on quite be to, optical best, in great sometimes. networking the the quickly. as the our to moves business, that constraints it time at It's we providers' spend there respect a in conditions natural at least, and But fast And market ability

you period And exceed like going the second year, from I of look it. enter these we what numbers. years. chain to that as think we'll we where company. just not as we next of to to And talk talked year, talk so into I'm difficult but that a make it time we're long supply half the I about did mention going will trends several we expect. that that's the about that a us as we And next the say promising all we think numbers, is for what about. we'll are the for give we will benefit about We

Gary Smith

half. by consensus, guidance sort I'd The way whatever, uptick onto the but the on add other you're Fahad, out is of to sort talking rough that, depending of massive about your of context numbers, second a thing in just

annual to we're it. never is the many the order companies we'd half XX% the the about not where be. constraints. to COVID period other think that. don't for this to I last turmoil not couple the else than we're anybody in but thing which all great versus a of We know that fortunately industry, got from assumptions, said, be say headwinds dealing second would of great, is And Jim a around also also I first talking which We're this as which predicated of Clearly the with on for year, I normally But that, actually there's gave set some significant You're an gave. half years. guidance seem a out. or to a around magnitude playing immune immune some thing. supply got increase We've better we of in through uptick

going thought -- as that. strong we'd not be We to have as is India derisk we

confident basis. we prior we on get lots through COVID, puts agree saw global and with sort I it was that an is of And of we once of kind to there's that a underlying environment the as strong. very I'm takes return And will secular totally positive. to So extremely But demand super this.

Fahad Najam

appreciate switching, investment what's you be? cases this winning? the community. understand switching? which winning Cisco what's and the are win understand follow-up of happening routing OPn bringing it. share in you a us use major How just of Are take us -- of big the in actually the bit routing maybe [indiscernible] where potentially kind from and then you Can segments and you to Juniper away of little -- world? in than help a and a greater even the Can I part leads had have on help by with you're of line share like a the I in appreciated It you're business U.K. far seems increasingly

Scott McFeely

Yes.

mean, I Jim’s perspective, back numbers a from I’d to revert So comment.

to that to you think giving corporate addressable I growth architecture get The recent overall going undergoing of us opportunities very around for not growth portfolio, its We’re deployments, at is that year. capability. exceed We’ve for which though. that market perspective – its significant say rates and last in rates. substantially, how of the couple years a grow up edge of that will phenomenon take look going for we a know, metro terms are the a in of it’s the changes capability, the portfolio Ciena longer-term we are particularly just And of nonincumbents. this IP terms next-generation as and on overall opens IPOS new as the into invested will opportunity market increasing a lot

about to in places. different bullish various X there. up Openreach was in one of users example around It the sell-side pretty routers, we’re And So that. will opportunities applications show wireless Edge, connectivity , the from content

Operator

Your Barclays. of next from comes the Tim line from question Long

Tim Long

I if ones, quick could. Two

talked you Xs looking strong. U.S. about Tier Gary, the pretty First,

will just and you the just potentially on I someone smaller on segment. update if the your more more broadband. next Ciena funding give the telcos think rural government years second, Can an give as then how us get into more and Subsea few could over and perspective optical the And regional you mentioned networks? us impact that you reach think stimulus

be it I there think little dynamics but there's it's to good a as well. bit some seems business, smaller

Gary Smith

that of really sort I | Yes. secular demand. the Tim, the piece, rural to talks got sort thing to a on underlying think strong this of number questions the of

to the that I of think greater -- getting be lot But customer, talking of XG, focused closer Obviously, we're those really, one all world, about it's parts and on rural broadband about U.S. in is too. you've of a Internet different initiatives. is the bandwidth the the got Things, it

You've got countries. them in multiple

I'd people government are all, in And seen initiatives that kick those countries caution is day. it's particularly think any inequalities recognizing, various the that it you've COVID that I addressed a well, -- number the end of at be to first off. the exist during of need just of population.

speed time through. take and infrastructure. is the of out come to work Second bit of fiber. just these always we very that next their as the we little And years, as is a way all and basically, to is it the about of which But underlying look few dynamic view XG year Decouple customer, things really a high with getting this positive basically. closer to

very, of around positive feel we those very dynamics. subsea. kind Similarly, So

momentum dynamic subsea the you a new to look market, you're capacity positive terrestrial cables. in And into they owners, webscale expand I We're for I are cables, the think control they're very and You connectivity cycle as was overall look largest speeds in higher the subsea countries, of XX a basically no which at to seeing players. consortia out It's going the And bit existing adding basically. that of longer the world a ago. carrier all continued a look think future of capacity need I case that's of PTT as those think the webscale like the from the at networks, seeing to that in things various cables, years for now

to going I the a of first, positive got still top big lag come think effect we're You're see be cable because and And us that, on next over there'll But few I to cable into of pretty then the in that on cycle a new it. is that think a years. but you've we'll bit of build-outs.

Gregg Lampf

And webcast the We challenges. for for do joining us. thanks, everyone, apologize

will transcript accelerate availability the the We in for of available made replay archive. the and information the

catching keep the that everybody few with our week. at website. forward to up conferences eye over next next good on We look days and on a our Thanks, an everyone. day. So please Have

Operator

this And today's Thank conference concludes for call. you participating.

You may disconnect. now

Ciena (CIEN) 3 Jun 212021 Q2 Earnings call transcript