CIEN - Earnings call transcript Q2 2022

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Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ciena Fiscal Second 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator President Relations. Vice of Lampf, Investor Gregg

You your conference. may begin

Gregg Lampf

Good Thank call. to morning. Ciena’s Rob. XXXX conference welcome results And you, quarter fiscal second

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

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

of environment in Our financial QX these of comments as today’s today performance, includes of included our speak to operations. measures our results supply non-GAAP results is or to Today’s outlook. our press views A GAAP recent on chain adjusted detailed current and of measures certain well reconciliation as conditions, release. our discussion a discussion non-GAAP dynamics Ciena’s

you be as statements, result Before I’ll otherwise. opportunities the conference Gary, turning XX-K our this remind is chain assumes uncertainties with recent of discussion and events future be about quarterly the actual which context in be most statements. to we filed viewed date. and and information Such assumptions and of constraints of XX-Q during no regarding call differ markets, forward-looking company update statements should market new expect factors commentary to we’ll the by the statements over to the from including a risk and information, annual guidance, whether detailed file Ciena These the certain to impact materially in that call, and today. discussed this SEC our our to discussed required call, the in that June filing, filing our upcoming obligation risks results Xth are business supply cause based or forecasts on the COVID-XX of its include which and that and could current and expectations, on results making by

limit we one we always, and as over I’ll follow-up for as one today, yourself it to will Q&A possible that, though much you question turn With Gary. to allow As that ask do please.

Gary Smith

and strong we historic those the Gregg, an environment. share good against financial continue everyone. backdrop take morning a growth increasingly considering of first as really quarter faster order the than flows. results. market. year-over-year line This an we reported to When achievements challenging $XXX Thanks, of Building largely revenue morning, of included million, off reflecting and grow This XX%, overall supply in

ratio remained very in Our order excess well second book-to-bill of a strong, X.X. the flow quarter with in

to As a grow result, we continue our backlog.

continued periods, In since QX. $X.X billion fact, seen have orders fiscal backlog the to $X recent strength of our billion significant XXXX with from end in expansion than in exiting about in more we

mitigation most put availability of fact supply of and we is supply demand in strategies. in through this time. continue factor and in we level set this positive demand growth we our innovation, supply very number conditions has fact, Ironically, and of relationships of chain continue seeing exceed believe this challenges navigate to-date, revenue context, supply chain it in clearly significantly are growth at presented And execute well our worsened quarter. the rate scale, on ongoing a capture demand technology And at of We challenges which with over global these the to QX share. market our durable for are as a chain through performance Within and that move leading impact secular will to and capacity, trends we investment impactful our volatile continues To supply business. the exacerbated most customer the long-term. to really QX simply, the significant

QX including year, start we our To we did products leadership included Waveserver direct year-over-year. up platform. quarter or an XX% result, web-scale some notable This our and more for the illustrate a with, revenue X% XX% than in we’ve business was QX in increase approximately diversified the non-telco that primarily that delivered highlights of As last revenue year-over-year, in innovation built. of same XX%,

we’ve more PON more was X, this including shipped providers, up XX customers Our the our customers that global scalars Vyatta contribution Tier WaveLogic modems top stages have first XXX. to for expanded QX U.S. To-date, companies maturity bringing Tier different In switching, than and routing XX,XXX services recently of from in our And WaveLogic than year-over-year XE, our X quarter, customers last and total growing, was last customer XX% of Quarterly and a customers our web-scale new new the product driven WaveLogic and we top from there quarter. made a added XX included We software shipments Overall, year-over-year, is year. XX% globally. the XE, platform. X was record with finally, in and WaveLogic deployment. Extreme XX% now quarter a in up to platform routing by the up time service capabilities. for web-scale strong business as large XX% as more of XE than shipments we sequentially double of as to customers well for the X added and web in revenue six revenue quarter and

long-term connected continues for will services that In broadband. the the continue cloud we the new edge solutions and as adoption, lifecycle are for address we cloud Blue for the environment, in positive associated optical, dynamic environment closer wins continued cases, wireless our are specifically, through and switching, routing services the displace OSS a present requirements. book of differentiated secure this opportunity Planet, as market fueled the the these with growth of continued greater focus of in order dynamics as network creating base to today expand technologies These second far we backlog new underlying incremental design believe In that demand enables will installed demand automation and accelerated demand the going in we large residential and fully experiencing industry, reflects continue drivers we These for to XG half Europe, in investments incredible move innovative to demand. in automation. to which an Huawei a shifts business a forward. And primarily capacity Adding again year. require address and strong significant our to demand edge, in use automation. requirements increased at need in we In exploding particularly by really our to including additional addressable is for bandwidth customer, fuel in invest and our level as the the business, outpaces, course demand positive digital at on network. need the continue countries, durable the for frankly, such our experience. as is this customers growing space, we strong for infrastructure. are new globe, trends in expect many expectations modernization, increasing This to secular in public growth Looking driving year, world, business of network secular and accelerated the consumer well end-to-end adoption, orders as have a the greater of network our around overall result service demand around to behavior backlog in for

tremendous our growth As a result, forward in we opportunities. have confidence

mitigation to that are relevant exacerbate particular others, electronics of these supply availability. very course, constrained which that, discussed, that automotive of supply, times be industries, In extended supply. think it’s short And supply range matter our purchase function respect alternatives and of know, previously employ a brings And in to to for challenge. with environment, supply demand chain, components not engineering in supply only with particularly Now all to as to capacity important remember course, advanced integrated supply that multiple expand semiconductors a this of And environment purely and that or remain me strategies large this critical we including, we want a revenue from is I to commitments said, a to circuits. sources global component, with to we I to our and parts continue placement of production to qualifying and telecom clear. of It for of is even consumer extremely serves lead matter. we’ve

However, chain mentioned conditions supply earlier, through moved as appreciably I QX. worsened as we

both areas increase saw and our of decommits, we in that a weren’t are that able volume two significant we magnitude to in Specifically, supplier fully mitigate business. critical to

noted, semiconductors. number they have have been access constrained subcomponents suppliers, key themselves due to supply fulfill publicly to unable to commitments their a Firstly, of optical as

value our to a on supply additional seen circuit the parts really we’ve centered Second, of decommits commoditized number suppliers products. of finished low that are essential integrated operation for

China, And many low is the China. low of been while supply a have has our segments. being commoditized and overall around and of related largely IC exposure given dynamic the demand chain effectively simply On a affected essential issues, source COVID second value that number parts of to both the to revenue by production these China go are to SMIC. enough that and industries in lockdowns satisfy aren’t of parts these there to across is market of design, very we primary The

best demand. overall when in to current growth. the challenge severity of and in expect sheet our Just dynamics, rates, growth the industry that, spend, and industry to will investments, our And the discuss reiterate, QX and supply supply industry-wide strong course, network on our With not possible more to puts these impact rather see I’ll to global Jim? That detail scale, improvement industry guidance. do is operators this that Ciena specific to to turn willingness own for position both service despite dynamics represent conditions and balance over said, the an relationships challenge. of of Jim our we revenue begins us length customer

Jim Moylan

XX%, in costs consistent in Gary. also Thank equipment. the revenue larger margin in common gross includes guidance. and logistics everyone. our line revenue expense. of you, a that margin QX delivered with higher lower It $XXX our quarter with and a with our proportion guidance mix significantly reflects was million morning, Good line also of for higher also Adjusted expectation We component

task these to and out Adjusted point million. significant expect important the number that as remainder across was is we functions We of environment required to continue while this Ciena. this in results a year. the through dynamics of in It achievement in outstanding were expense guidance, our current was a with inside QX move execution line $XXX operating

adjusted million $X.XX. we $XX measures, delivered operating profitability adjusted margin income net XX.X%, of to of and EPS adjusted of Moving

million repurchase In in share addition We XXX,XXX earlier program, cash which EBITDA for was to was flow million, million $XX in the approximately QX, and cash billion and shares stock, adjusted and $X.X was the $XXX from settlement free quarter common $XXX the Also million in approximately we $XX pursuant with ended X.X repurchased operations million. QX, cash year. received accelerated implemented final the we shares in of of investments.

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

Gary the greater of said, Overall, number robust, been of function a state our to but in wider outcomes decommits both time. the Conditions a make quarters supply matter challenging in Turning the previous industry revenue in supply resulting a China mainly of at availability a case. as is quarters, it difficult because our environment, has in base, supply potential more is the by availability. this lockdowns. guidance. than is components chain there and supply extremely the providing conditions demand, QX coming and Demand range Also, guidance of of drivers with purely caused this than very were from semiconductor chain higher of uncertainty, not current are

are always, today our providing in best expected QX performance year. our As for perspective and fiscal the about we

that our to in decommits revenue that, expected range on don’t million view recent assumes supply we deliver a of this for expect substantial QX, entirely is in suppliers that their commitments we successfully that any in mitigate. $XXX million. range component conditions chain. Importantly, new revenue to and $XXX cannot by our lower we most encounter This With deliver driven

quarter, low-double we from saw and in reflects greater revenue continuation QX line the $XXX the for our of same expect reasons the percentage XXs the expected same with our in operating range, and for the second higher perhaps margin million. million an in fiscal mid-single dynamics bit assumptions. roughly costs average mostly We XXXX to at percentages, systems a expect in normalized margin QX, OpEx per respect due equipment, supply to year will percentage the to fiscal speaking, of component for than a With full expense we’re that little chain several exactly in in expense, gross digits. again, We revenue state. more the fiscal operating the to for least we that and year, of which industry growth be margin common finally, to digits, of the expense. return consistent quarter XXs will gross coupled conditions low higher with expect be adjusting to $XXX deliver logistics And low higher expect we the quarters year, and view the in same annual expectations Generally finally, to is the $XXX compensation with the now consensus full growing a in take a million

of light that believe this incredibly time meaningful not and when summary, of a moment, possible and of moment But timeline single begins the continue in will will critical but dynamic situation. over supply at occur that normalize occurs. gradual switch sustained in a Given we’re unpredictability we it levels. the it is assumption to recovery, mindful of a a that recovery are challenges this we when benefit, It improve persistence it returns when supply conditions Furthermore, variability dynamics will the and to is be to reasonable remember Any present an is near-term, in time. supply outcomes time. is prepared be entirely there to the these challenges the that will to-date, flow is and change. In

environment, customers well-positioned Rob? about we with and that suppliers, very analysts. our drivers, will steps With also to Importantly, the success. strong now questions positive relationships a backlog leadership. durability challenges, which extremely mitigation from growing the continued that, Combined are not our and underlying to current significant we for only market secular address long-term taking we’re a drive growth are and demand the reflects and continue the take sell-side with of we but

Operator

a from line question from Paul Silverstein Cowen. Instructions] [Operator Your comes first of

line open. is Your

Paul Silverstein

been got, chain can Thanks bookings you What I’ve what the over what impact? for the impacted? for discuss much more like fiscal look weeks Gary, was Jim, like look also was -- that, in then and, for even taking leading guidance importantly, the the to quarter, has perhaps, questions. a Jim, to linearity for And year, and four past what impacts, be October margin the and Thanks. today? how but related what revenue July the would supply up gross

Jim Moylan

to back because always But contract has as the timing been we case, end it’s has of of loaded. components our the this do linearity, to delivery Typically, respect case, orders. are in with With Yeah. of to the our it manufacturer.

of and the So the year month in we’ve it’s They’ve had strong orders. entire a strong been the very but in last necessarily last has non-linear of been as has back the though not of flow month even therefore, the really the loaded, quarter, on loaded end loaded. the end end quarter, not back order revenue side, it our side, on back been it’s and supply

Gary Smith

in So, Paul, of would terms other linearity add of I orders. thing the the

we the and ratio As well. for revenue half second to build of the to been year was pretty it’s as QX consistent. Jim expect to X.X backlog over said, continue

is the seeing which are the of and increase consistent just a we very and on enterprise driven cloud really So consumer traffic basis. level at global by adoption the in both demand,

got $XXX there we’ve initially catch a million. few that it’s forward up -- then requested, there’s would was only a little we’ve In of folks got. We ordering, right only So, bit everything in XXXX, we’ve much. got but take fact and some not Most now.

So to sustainable very flow talked that’s demand. we why order this

Jim Moylan

is XXXX question for said, because it is of over the true the of of few only number would million And been, the $X All got a that in we’ve billion, to as -- almost by beyond have rest your our demand. $XXX that is Gary pale, this what specific asked customers about Paul, it’s guide a backlog year.

able revenue have components this been were get it. to year high our for would extremely So we the if to manufacture

their our catch it we figure ahead revenue think rate. that out you But our Now, speak doable strength demand. take they’re to the else there as and get just very fact of orders. and run demand with what the this to think take that -- of a should This I don’t does year, all people you up. everybody as is is be It’s that what numbers if the trying could the shouldn’t run

Paul Silverstein

be I all, order $X.XX to think last about was speak What just be events, indicators you’re other a macro goes been my concern, it quarter linearity And of clear, included. leading about obviously, There’s into widespread provided and you slowdown respect looking forward no economic future billion yourself the the April? you Jim, increase this that for all out demand. and the don’t at, slower recent with number, I perfectly concern October. of to backlog the clear mean, strength, order everybody, question growth the to the backlog coming was activity virtually in translating just indicators attenuation to

what’s driven. trends, any that’s not forward is the seeing different purely arguing you demand indicators, looking You’re all at attenuation But question you’re my at looking on, to is, again, going supply this strength? not

Jim Moylan

No.

grow And We’re the other not, billion. of out us We out year customers last backlog going in now letting the the not works of forecast is from around that, seeing billion. be this at that incredibly at getting that over Paul. seeing economic has opposite. signs might at think the and world fundamental say flow. $X in And we all, not fact, with pace, quarter it’s our to We billion. everything and the that closer rough continue the of order came of with no greater $X with quarter about to we’re downs and to mean over with I that, but to any And do think I’d resilient up tells ups we’re moves. we’re various industry came continue $X rounded sort that thing to came adoption over immune the proven I of customer whilst how macroeconomics, numbers the cloud out bandwidth I that

again the they’re and If centers their them about obviously, long-term look the planning. world build with partnership more to customers more around to we at data you web-scale, planning closer are, and in

that not Paul. We’re Thanks, on slowdown any whatsoever. seeing

Paul Silverstein

geographically and follow but you. because the situation, chain across up, clear, you you’re be That’s product based them was can’t markets my that numbers Thank in to of supply broad a referencing strength see the across class? just

Jim Moylan

Absolutely. Yes.

Gary Smith

Yes.

Jim Moylan

Verticals, as a focus business, our routing Absolutely. us. that’s for strength which you in products, and know, particular switching regions,

Paul Silverstein

Thanks, it. Appreciate guys.

Gregg Lampf

Thanks, Paul.

Operator

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

is line Your open.

Amit Daryanani

a It’s Yes. think Good I about, due of won’t how going morning. placing think backlog you’ve two I they because just last backlog natural longer is four supplies? is think issues extended the by to ramped we So in well. to how the worried guess, maybe year, about up maybe, chain all customers about to duration versus of billion buildup has is simplistic, Thanks for over have question. How has are yes, is my the the gone they’re way supply taking duration I of stronger? backlog billion a much to first quarters about? that from $X.X think get should as much up? customers that last versus demand the due $X orders I talked one, other this your

Gary Smith

a Yeah. No. question, good Amit. That’s

will I a of help give sort think that point data here Let me with. you

XXXX. got are that’s a little a an customers you’ve case playing of confluence bit certain up, bit got visibility looking to the of carriers real or around, perspective Then address of from cons ago, that both going the in certainly it just more on, data bit is billion operational plus, few COVID, for trying probably were fiscal of, supply for chain. were that’s at is they -- a But we’ve it security sort it I catch and rest perspective, flowed All requested months for of a where from of they’re was buy things traffic the a of the up, seeing you’ve that interesting and a hardware, conservative longer is largely out. an little sort security very absolutely and we think cycle, only million of us XXXX. XX Of giving is $XXX into during catch $X of both three that supply requested happening. point got

just clearly a which insight that’s all demand happen great it going into that Now, to about. forward there’s reasons in fact I talked not give But that for you, real we’ve ordering backlog, folks the the much does that that think, that want. is not

Jim Moylan

them a have here, orders here. to our And of clarifying But points It’s definitely just are great backlog of as on as the have that another be the us the we’d a our demand. reason part compared competitors. great It’s is delighted sword to times our like we’re our double-edged customers not to such longer couple we and backlog placed we big to that making are do. is lead because like than

of And Most so ton latter new in are year. get the out the some this fact is orders, that, of XXXX. scheduled part when into a had year, we’ve being of cases which in this we them

As Gary can demand, but that’s we really XXXX it’s it. when deliver not said,

So we say, a it’s -- double-edged sword. it’s as

our orders, glad delight have we to like We’re customers. but we’d the

Amit Daryanani

guess, typically existing challenge new or in been when ones. up had margins are be, revenue Fair mix a gross enough versus helpful. follow it’s a the done we’ve and headwind really well. products my It’s past just I would of really

about, to on, we that Just why revenue historically, headwind, better the tailwind? gross but maybe a just So low the we aren’t or because margins talk company. for aren’t revenue gross everyone headwind, seeing run seen seeing offset has that margin meant imagine

time So happening that not this around? why is

Gary Smith

increase of the first I’ll cost. what talk of -- part the can Scott that or actual then to Amit, in maybe and take sort Jim

mix. of really The first it is part

remember, of so web-scale be commons that build And tends and we’re think really lot lot lower strategic a won of is, to a seeing we’re is what global deploying, line which now so, outs new and we’ve that Amit, systems, margins. carriers

routing mix well given the It of part even on and well. doing the software though So the right is is the and of size it, switching those large now. is general really business doing just around systems line the mix

extremely bodes we and future, because modems, tend margin. for it be gross which in higher to then the Now cards well can put

So both a of folks. lot with customers really on we’re that mix you’ve new and based its a new-builds and that existing the seeing got different demand were with

Jim Moylan

on last to talked XX% Amit. just about rate time, said our margin Remember, numbers mid-XXs. be to run should some we’ve what is And believe put say, it, we or XX%. gross margin, to Yes. gross around We I long-term

XX%. So, percentage I’m higher went and higher people of we supplies it to in new-builds getting going to of and shorthand We are at into a COVID, had because of out there smaller margin. locations gross was a which the difficulty capacity so percentage as, of

as our So this did going coming commons was enjoyed was But to we year we lower XX% of our thought expect a higher new-builds and that to year, entered into That are gross proportion overall, year. XX% which expectation be said, margin we that. photonics, that margin. inherently we we because this this and

we’re Now, happened are but premiums also paying that significantly seeing higher get seeing what’s parts. is, to that, we we’re

XXX trying best logistics for ladder basis roughly is it this our year’s think us effect two to that our costs. We’re margin points, the costs The of way. margin, money is, which and can costs gross customers higher it points, rough you and math gross of premium if and even supply on meaning also logistics those it

our be margin these. think gross So might math to where without can you do get you and

those we out as reasonably back give chain of you going come at confident to can’t we’re as going we get this to least are when to situation, prediction a mid-XXs occur. to it’s We but that supply

Gary Smith

Thanks, Amit. Appreciate your for question.

Amit Daryanani

you. Thank

Operator

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

open. Your is line

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

is open. line Your

George Notter

I about guess, Hi, commitments. guys. much. Thanks purchase I ask to very wanted

you to you was, think, think what recall and I was monologue us XX-K, mitigating the that $XXX said about commitments. correctly, million. number tell printed I one we was number initiatives the purchase if that of your commitment up in I purchase that, ramp Can

if curious just number up? that So is

Gary Smith

about demand. laid supply see least We’ve XX quite That’s essentially It’s at to we $X.X significantly, what out today. up billion our George. months to Yeah. of the up is chain next

they well. we’re if So very on going to that, do deliver

George Notter

Got it.

ask to just been other I inflecting. Okay. for chain supply obviously, I inflect environment purchase thing your couple couple started wanted a And quarters ago. of then has so inventories commitments of this to the are think Look, years and about was, around a just

inventories guess I’m two. execution or are anybody do in else? the guys by large well quarter I issue as last more like wondering is you have this an at just as Now, if inflecting executed, or Ciena think and you

Jim Moylan

first we the Let the year. in Listen, shipped performance. I We first I in George, part the we a I in than more than quarter. the at look the extremely second navigated in me inventory in XX% half take -- to half did precisely. up think did the today previous Revenues are more the of that, talk and maybe, mean, can you think the little that, Scott, we’ve first it well.

I think competition. numbers compared the to particularly when themselves, the to So talk

a larger we’re base. installed much So

much we’re be we supply. It’s a market if not shipping more. could where business We’re but where to we larger be larger and had still share, with growing business want the we or

want through navigating it view. not we anybody from a than better isn’t where -- be it’s think, as I we’re satisfaction But customer to said, Jim generally, else. So point of from,

Scott McFeely

really just George, pleased we’re and dynamics And back our with speak customers. relates decisions that to servicing a there in comment couple of Jim’s to bit rooted to the we’re not are way of it all position, the a little conscious inventory

they that can our preparation goods also that for when in the complemented remaining become in manufacturing it capacity last do hands very where into making inventory, so us So can customers items we we quickly in with on expansion. we order component finished our investments for are come and that for available. get that We’ve to turn

So, components our customers. into possible again, as as we for fast can goods finished turn

a So it conscious was decision.

you’ll it the number, level component you to If of level goods the inside versus you more actually that is dynamic finished shifted see that well, look inventory see it happening, as can

Gary Smith

the we to the read it, commitments, if we about commitments. George, describe statement and point of purchase talk Just purchase our how you non-cancelable

certain a was that canceled. essentially even year because are that non-cancelable, we’re higher not, there procedures to and were going -- commitments not purchase go much lot our order the total as have we in cancel given because to perhaps viewed disclosed, the about all, forward through that we actual them, situation, of But Today, need our to we purchase we ago to it all of think $XXX million a you commitments considered If cancel. we’ve essentially the sort we stop. demand of than

would total have see could inside a view -- a purchase you if purchase have can our logic, commitments a you were they been that year So higher. lot our what even different of

Jim Moylan

The George just that, -- that. I everybody, include add no remind doesn’t I’d that. thing that’s cost. that transformation got there’s on That’s on rule component we’ve is inventory the other that, to That

So key of have if supply commitments months. together, to we chain provided basically for you XX that our the elements out lot add all for next

George Notter

back the than think lead year. this, of to were As a for we OFC, of times side lead times I hitting, you lead guys times know customers? of manufacturing about some I more longer do of that going there’s customers. I Where now that to certain kind it’s talking example, you for your know, now were are share and longer lose to again, think and for and frustrating we’re potential -- some

Scott McFeely

function a XXX% Yeah. the availability. function are manufacturing George, Lead a not capacity. component our times, of It’s of

today kind the when back perspective. curve where of show range again, goes that quoted from do on that, point numbers And performance. lead to sitting I’ll out. are we’re to the is better components a in the starts you And the supply industry of So of believe bending sort you time

the durability You demand of want and… to to talk the

Gary Smith

a I all mean, half, look market I data in increased market like first we think here, this. environment, of that, let’s X% competitive think, couple points of at the share in the our share our Yeah. terms of during

Jim Moylan

That’s That’s revenue. not…

Gary Smith

revenue. absolute not excluding I That’s shipped more that. -- it’s shipments. than that’s China. That’s But Yeah. we actually mean,

half. we revenue first the think the So in X%. data points competition than two grew grew more I And our is the other

the don’t from increasing customers. other company a is the backlog. validation anybody lead highly So remember, knowing our optical order seeing we’re folks transparent to We’ve products and But more flow, order times shipping our lot our the been customers, and our differentiated. bigger much we’re very And the what in share. kind are those then are I with a testament it think is we’re than of still of

global to relationships And these what focused technology and with by I those we’re relationships with that’s balance have on. far the think are absolutely and this critical scale hand winning and best sheet We a customers. through and coming

Jim Moylan

we’re importantly, just unlikely able competitors that and looking same provide. are And of conditions to we the different as is at than so supply anybody chain that wildly at all what are looking our it’s

Gregg Lampf

Okay. Thanks, George.

George Notter

you. Thank Great.

Jim Moylan

Thanks, George.

Operator

Your the of Najam next from Capital. question Fahad Loop comes from line

Again, Your comes your question Loop next Najam line open. is from Fahad from Capital.

Your line open. is

Fahad Najam

pandemic quantification provided think Good backlog I the the networking, may this across hasn’t and if changed New your last growing the really your COVID optical morning. have started. since I space says, commentary Yorker networking I and the been much look you the haven’t Gary, in fast, at competitors, cynical broadband the market

demand What to pure coming function ordering, supply? order, incremental do customers all a where forward more to of is from say that? order not but ordering this double just or double you in is secure So it

Gary Smith

bandwidth, years. commodity ago. around and I think about real a customers, but more minimal months pandemic, that carriers began -- say is what’s we this But driving we’re of an think, see about growth. and to relationships to that may not weren’t using during And we’re people not flat be uptick, expected with that was about this dynamic bandwidth And that which With There it, happened some what’s spending kind we XX is that. we two that, the fact the swap I and can’t that. change for you of is when market not given have seeing. stuff, seeing were you the our amounts

and So at seeing global to we’re an at we enterprise more more increase from how bandwidth capacity, the submarine, all that’s a interconnect, of about much out engagements the across the Edge, seeing to to all do And an customer uptick have we of that -- I level. enterprise demand the base. both consumers of What just level all we’re think there. faster, various and continued It’s adoption, from getting a efficiently are uptick it’s in the closer the consumers cloud why get forms. sectors, Metro, the their this, personal about customers both the has is in datacenter

some think is lives. So traffic supply and daily reasons that false security this of all of all absolutely we embedded demand piece, demand the I This and in about in not is understand not. real for we our can see

Jim Moylan

has expect grown at for and sort overall. single that and historic we X%. continue years the to that a low-to-mid long, X% expect And to X% of grown to is thing we’ve industry at this One we our digits said, three though, long at grow last at guide I’d for rates say, this, do grow to industry time,

been as has changed world view. continues act The of none has in that acting. So, it our to

not be of levels going the think continue flow be this saying seeing we’re good. order the kind It’s we’re at for not that flow long-term. to is going will So to that We higher this that year. order

X% seen to grows X% But of is it’s you the grow what today. think at be to above X%. that number we’re industry I want we’re future past to calling think, a I revenue the term going that’s have That’s think that X% don’t world up to But given their the year what than the that suppliers us, this give say in a X% rate. to the well we’ll on in that. of will So view and growth this, and of going our we good. end be you next commitments would to and long I think we’ve our year, to our can’t deliver our assuming at rate X% backlog on again, we I growth in

Fahad Najam

to the kind George’s to is risk really of there because are a supply plug to up into cetera. the a extent of you you bandwidth? To is have plug lead pluggable, or piggyback faster can new think router, chain a My et Do architectures, what power they and need existing change pivot more question maybe you supply, still extending your on set an follow up system book power the don’t shortages. to times on customers adopting these customers forcing pluggable

Jim Moylan

Not at all. No.

ironically, dynamic switching a is you pluggable the or of your advantage be think, have gig XXX in order may supply is to that opposite, actually take constrained well. the those the entire as by chain routing I because to infrastructure fact, infrastructure to In upgrade

Fahad Najam

the Appreciate effort. Thank you.

Gregg Lampf

Thanks, Fahad.

Operator

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

is open. Your line

Tim Long

Thank I before. you, that questions sir, could. for if Two

Jim that the we And pretty expected, First, and have at sure months Vyatta, something live do let’s digits what no implied supply the could use number the much could into a like talk you sequential year chain just added as the you looks cases. dead the about look that or exactly Gary, delivered over number going that beat if switching/routing means. hasn’t talked TAM a Why Jim last we like of QX big multiple part guidance the two, would the probably, how mid-single get dig you’ve de they to Obviously, everything to we is more just and about not full what the you increase, one. decommits commitments then when XX%. -- the that to and one. just up second here? visibility business. hoping a to expanding helped last and horse gets numbers. was assume have I I’m when That’s for that the year, then the happened And

color the years here? maybe give the next of how Thanks. business that us little could just, you if on trajectory moving Gary, few So potentially you see over a

Jim Moylan

world Tim, like always reasonable of view to or part. we’ve looks our trying today. reflect world, a set do And I’ll is, to continue and first today the give of we’re what that numbers take tried do you to give what we the and are what the

will I built is we handle roughly we were in decommits that say had margin said or roughly half mitigate because half because sort QX, below the about lockdowns. get roughly of Hopefully, we unable line fact and half. that of -- decommits. that the can and yeah, but best million look precisely this, for But revenue. decommits. and to It’s the there came of our enough we that of it’s we be XX%, is if half other the so the past, which it’s $XXX the you year in China view entire year, to and optical parts the expect some will that are we’ve of future, some therefore error at not vendors our with able largely We subcomponent in our what in again,

Gary Smith

the switching bit repeat, combination down that’s that focused about say, that XX% organic little What’s in Primary are driving business, to wireless cases Gary about for about split centered the XG. inorganic that? transport mix, in breaking architectures moving quarter-on-quarter roughly with was Enterprise just at itself infrastructure, as talked and we’re growth the half Vyatta. growing architecture of common are around a growth We of up use say and the our look a a the that, in roughly your say the us and getting portfolio for the see cloud, on I’d going connect, use then that evolution sequentially and question between those business aggregation enterprise half two. all cases on all routing the and access, out switching to I’ll interest And XX% the connect to dynamics year-on-year, network, three Edge. as space backing the into and Metro people new fiber-to-the-tower back bringing routing all build off around and the a into residential there from interest of in this platform. and deeper

the the you see for us think early four having over So as are expansion a and results year-over-year, that significant TAM investing can in. areas represents successor. years some We we’re early good in it the those the really we’re signs,

Gregg Lampf

Thank you.

Tim Long

Yeah. Thank you.

Operator

comes the line Your UBS. from next of David question Vogt from

Your line is open.

David Vogt

ICs. would customers I’m is shortages headwind. know of they’re And commentary how just a that, well guess known They strong, just come fairly come I you are and your ICs. I book-to-bill backlog to Good to thanks the curious, imagine to supply want taking are square sophisticated. incredibly it’s guess that but out I I and for our do cut earlier. back, Great. question. that specifically this my want understanding of line and just lack morning back my I the

so So that XXXX? up didn’t next into year, customers your maybe year, do could then look there next might GDP is bit a then not I and if What slower year. growth what order order raises adjusted would And follow be a into respond risk might numbers an on of but pocket we what your, to? your like already growth move that environment? recession later, like hear backlog, risk maybe out a not the there and cadence pushed for that only this I into little have but more a your that look air their they’ve discussion some any earlier being And

Gary Smith

take take recession for of your first me David, the let one and Scott I’ll part then the first question.

diversity. it I the our think challenges would of obviously, like I in macro go looks through. we’re, that and all mindful But say of is customer of to things, world of a couple our economic sort its the conversations base going with

and mean, year do. overall pretty demands, seeing the visibility of got their plans. the up what forecasts I lead seeing to in any not are good years they’re We around three we’ve dynamics their and one to long-term next into

going industry I more well are network to people there. in And during never -- but invest network traffic it’s generally immune need their the the to I is to getting web-scale network. the performed extremely access in operators because recession, think continue recession, a listen, and so out to And

fall and I I to going as good them will Jim pocket I And do around year, think the we’re we’re through think catch seeing don’t a the just the at the demand pent-up cliff, really what that that very seeing. feel an is the right trying what rate of see we’re we’re got, So, go but to now in durability we now with backlog think fulfilling up think, of flows going don’t terms it’s demand. app we’ve this we’ll to mean, right off either. said, I order I

better our longer time, you’ve to the ordering will think you are business visibility getting will this I think infrastructure get think used that, over a people these term. think change and And customers. in I will you I for greater But out around dynamic see I lead see an times with seen long-term really is sure.

Jim Moylan

that, will the customers in talking they and advertising that about orders said, lead But not we we’re will rate that and to are past, continue that demand services us on sustainable. order for case has to -- place they grow remember And do our longer and we times. service continue because duration need this products not And then we’re we longer It’s as claiming the absolutely strongly our imperative gear. of -- do to take believe intake is our the been market -- we’re than share.

David Vogt

That’s just as follow Maybe a up. quick helpful. Great.

times where next order supply a that visible is your the -- commits to that being you’ll So, likelihood next on difficult not where near-term. at purchase where at not year, but lead shortfall, appear would X% predict, persistently to mentioned year? to commitments, it’s than obviously, if the right? given are you’ve chain capture X% of all book difficult able think of be is and mean, you’ll next obviously So revenue million and and your the to order that capture but I today lead given you expectation based visibility here grow How long and it’s times that year, least your in you to are $XXX you be sort faster able most, tightening this that point would handicap of

Jim Moylan

really a know do you because in backlog have think can year promised we the the this can’t than next XXXX if expect end we that, you say be will year. to higher we’ve year next given And past. our in I dates, number, of XX to to an rate be X% be the about it today -- year, think I just look But a wouldn’t where the don’t the give growth exact going in probably is it’s great significantly I But number. at at year’s. delivery Well, all next I mean, we I

Gary Smith

about got that predictability that of to view supply we’re XXXX. to from of, is right would I have sort supply talking again, committed XXXX chain our chain going we’ve we’ve what’s the think not greater to I And and just got is, happen for add and sort get volumes now. get But

We’re banking from really times not on improved lead suppliers.

Gregg Lampf

you, Thank David.

Operator

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

is line Your open.

Rod Hall

just it. more pick I Thanks, you I on Yeah. could if had questions supply all wondered Appreciate the and five guys. and… five

Gary Smith

Five.

Jim Moylan

you, five We Rod. more have answers for

Rod Hall

usually kind know kind I up of cable supply dig into number bit. wanted April that’s I just that and lined. flat seasonally I’m if in No. don’t at a of it the to oriented. verticals little looking was the

bit if in is that -- maybe dynamic So then a demand you I April. And mean, talk there? lot. the government a big likewise, was could wondered just up about number dynamics little a I

little bit? what’s if curious supply, is into much this How just curious Just by of you demand those much could the happening affected demand, is guys dig a there? Thanks. dynamics how but vertical

Gary Smith

purely it use we’re have to if the S Yeah. Rod, greater I is could I demand would piece lot a that again, say, hate the have word seeing supply. mean, we’d to cable very supply. strong and had, been now

a So I projects Government, that was quarter. in don’t think there’s the couple that. delivered anything it of we to larger

lot the on with just again, a flows sort carriers America, supplying. government robust But function ebbs think the demand, a You North and X it’s cable together very of got space Tier of stuff, project of in and really us I very based.

Rod Hall

April revenue that Gary, kind project a ratchet you was or is down And number, mean, does of again, government the think, I just back pulses oriented that…

Gary Smith

of lot around build we for that’s I few We going network space. and good networks. on the the that years. modernization for depending to of in think it. from probably government that’s by next the for down the ship. I go do forecast step of that kinds network those we investment appreciate likely consistent to But we the think -- in good they it, around But on I all ability seeing the are we’re sort flows, that There’s QX. I ebbs government back to know feel are various so reasons and seeing networks say, I’d Yeah. -- within their highlighting mean, and for feel out you a and going

Jim Moylan

technologies… Our

Gary Smith

Right.

Jim Moylan

their very needs too. …fits well

Rod Hall

Great.

I’ve you Yeah. very all got. Okay. Thank much. That’s

Gregg Lampf

Rod. Thanks,

Operator

of line comes Bank question Liani the from next America. Your Tal of from

Your line is open.

Tal Liani

guys. Hey,

Gary Smith

Hi, Tal.

Jim Moylan

Hi, Tal.

Tal Liani

The things risk year, get next don’t products. the the get canceled customers because

products about is revenues the So a basically? project not they the supply running service the issues? and or don’t I’m associated? about for if chain supply demand any So having thinking of the operation, providers, sensitivity still there’s so to ready side Why the of get the their start operation cloud question if

Jim Moylan

the I driving that’s don’t force. think

or the XX driving we’ve years. continued XX demand force Tal, So I economic think that for here, is had underlying grow bandwidth. And to through for has condition every years

I is to So their of lack don’t constrain going demand. think supply

have I long said, that. as demand customers and to from them, it’s -- they’re demanding the services in their seen I no as think are we’ve as going reduction

Gary Smith

did of the last connect point. you right? no I a can’t I we year. I the there’s shipping data if the web-scale, think But than on of this, We building to specifically, get center, point I it. mean, more are want get context sort

stuff. shipping are we So

providing are to and they’re not we these folks the So just capacity full wanted. connectivity that getting they

mean, So, quarter a sort revenue despite growing. growth, this I posted stuff. are not We a all situation. binary XX% of is we this just of with

there. we’re if not getting it’s as stuff not So out

want. better our we the satiating else demand but is doing no than not of are. we one And that customers, for So some it’s are aren’t there everything they -- it

alternatives I’m to a to technology sure. of wouldn’t want leading the And to that and the people lot we’ve continue get not have way, got out of other and there’s the that. So queue, by

we Tal. those that are see, So, -- that the dynamics

Scott McFeely

if to And common everybody. constraints you the fundamental follow the is chain

Tal Liani

that this a up than can maybe that they’ll rather question what you up response -- a voices as or Gary, white vendors, just manufacture Don’t -- this the is, control solutions, self grow to it bringing current better environment? think you more self And Do think have environment box isn’t about manufacturing? Right. is to buy follow chain? because maybe solutions supply within design, cloud the any anything from over more isn’t self that actually

Gary Smith

opposite the able from we’re actually it, is we’re through navigate true, focused that and think, because mean, I to a we’re I integrated. specialist I think, frankly. player have, I vertically the Tal, conversations personally

that. that. that in think because to point we’re the So and a market to get pushing more I thing infrastructure to go to the the exactly better ZR reason And same difficult do is actually it’s on actually Scott’s support position out pluggable

actually is stuff it before. the So was difficult DIY than more

Tal Liani

it. you. Thank Got

Gregg Lampf

Thanks, question. Tal. take Operator, last we one will

Operator

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

open. is line Your

Simon Leopold

asked Kind Thanks Hey. for this nobody’s of taking actually. the surprised question.

some components? indicating just chain or ZR might, you to it if something you. challenges be of in talked the supply more their to then quick improving get you’re shipments that it’s going case to seem guided June You that’s that. don’t sound basically telecom is a pluggable? this there’s I really just timing of why the about follow we of sure But your up, from somewhat respective understand in contradict update Thank else heard shipments component I to on forming quarters. ending an and not if optical make worsening own I more the your or about the optical And some does I constructive, in and not And commentary they whether just suppliers, want

Gary Smith

timing. is, to Simon the yes, it’s one, Yeah. first summary simple

it that they through says about or June specifically the some gap in gap they them and when get of, when end talk, our quarter. their customers, They to it our had actually of out to the we about chain is see history timing. improvement So though, the talked did supply

you through pointed other was on to effects up one from again to being order there. map supply to out, degree turn to two the So was being you was the that for in also you, impact timing, integrated we that It’s that finished that One China their a just an our to there QX into subcomponents chain open remind though, goods China largely QX circuits said the due us was our and on well. customers. dynamics. way if work takes some able as while second again that has our that our to optical it I’ll

timing So, based. again, XXX%,

Gregg Lampf

ZR.

Gary Smith

think Simon. has our I Oh! side, changed on the ZR, so all. don’t perspective ZR at

number shipped ZR cycles. working of into their globe, evaluation the have around customers We a through

As is next season over dominated players. volume you’re to of so be couple or of going probably a the aware, the the by majority

we engaged But for be those, are those players firmly industry, We largely we be fully going us because the successful event best got from it’s the and to plug and in on materiality. expect we’ve in believe for there market. to a any the XXXX

Gregg Lampf

your it. thank Simon, question. for Appreciate you

Simon Leopold

you. Thank

Gregg Lampf

forward connect days. connecting with with time Thanks balance next the to for today of to And thank very We today us. and you everyone look here taking much. to everyone the the several

Operator

This concludes participation. today’s you your conference call. Thank for

You may now disconnect.

Ciena (CIEN) 2 Jun 222022 Q2 Earnings call transcript