CIEN - Earnings call transcript Q3 2022

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Operator

Good day, and thank you for standing by. Welcome to the Ciena Fiscal Third Quarter 2022 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Gregg Lampf, Vice President, Investor Relations. Please go ahead.

Gregg Lampf

Michelle. you, Thank welcome Conference and Fiscal Quarter Third Good to Results Call. XXXX 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, in highlighted posted the investor have to an section Investors accompanying this as items the of the we our website this

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

I'll call materially opportunities our that making forward-looking statements. Gary, Before Such today. we'll guidance business turning company of this to results the annual expectations, be the and including actual current remind supply forecasts the chain call, are could risks to on discussed uncertainties commentary and based regarding about discussion certain cause results differ our which you statements statements, over during and that its assumptions quarterly market and markets and on include from constraints

which filed statements, of X. SEC forward-looking in presentation our the our relating September post context is statements Assumptions filing, should such and call them. this we shortly recent risk important most to viewed These XX-K of factors our to outlook, that consider the XX-Q be will by investor part are on included filing with to required in encourage in whether or mentioned after the you an in and the be upcoming detailed

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

today. possible Q&A will as we for allow As much as always,

So one Gary. do one I'll ask question and over we yourselves to limit that, to With it follow-up. that you turn

Gary Smith

good quarter supply financial performance, Today, our Thank specific margin reported continued actions on XX%. discuss will our adjusted results the challenges business. Gregg, $XXX impacted everyone. our I gross lower-than-expected that and of we mitigate moment, you, chain morning, In including of to and their a customers and million revenue our and fiscal third effects

and I think durable over the however, so, and chain context as important confident environment challenges supply this trends show Despite term. strong doing fundamental understand signs demand lead And current elongated drivers Before of Ciena abating. the we of demand secular to specifically it's it long no relates propelling remain are the demand. to times, macro the that

and As Combination to and cloud our scale, these drivers we measures. Huawei. relative know, both addition and broadband capacity global and in secular is all displace XG, robust automation and residential continued opportunities our from in these funding customers absolute leadership, spending, market demand including driving infrastructure to investment include of technology,

QX this have supply specifically, nearly over same the last grow and a large In continue further confidence by business and billion. demand we we outpaced which X growth project our market QX. orders as growth quarters share X new In $X chain and win we ameliorate. challenges gain as in our continue to XX% And in in we Obviously, to continuing versus fact, backlog well quarter now convert to backlog XX%, strong the had we revenue environment, backlog, revenue prior than is order more period. our in to

conditions think I also supply a persist. environment. to I delivering are we promised, volumes. overall of their our commentary let strong majority suppliers And of note talk supply about the Now supply this at level, consistent the like are is In that chain. demand, that in challenging the this has albeit of me to extended, face high of and signs to recent would times, improvement pointed lead to some sort starting market with higher see chain

recently vendors need. which we spoke reflected challenged of outlook and by have of performance our componentry. did the the not quarter, them small the suppliers When associated specific However, very early number unpredictable our in their after second us to of for remainder been to we made commitments our year you June, by a

very and Specifically, a our our decommits very components materials. lower-than-expected notice second These circuit experienced of group small fraction overall of certain represent this the component in from of we QX, integrated that deliveries late were delays half small substantial suppliers. for primarily

and delays revenue build But to up However, of small revenue. goods as deliver for finished systems ability low-value these our and another customers modems [ship] of primarily components our relatively for this number holding decommits and amount way, a impede product modems. our low-cost, and is optical disproportionate such our for

to were And and our negatively both negatively you, also expectations this our that QX. customers. have continued results, which discuss to As significant the fourth impact margin for impact range will shortly. and our would very focused to a the are of quarter say these of dynamics at these remain and specific QX we would margin end our revenue investments degree. line expected our for certain minimize challenges I have high gross but actions in gross a of Jim current impacted and on into consensus supply result, challenge, fiscal We size to quarter's been this revenue on for our adjusted with

resolve around our readiness sources well to thirdly, levels continue these with activities; these continue Firstly, we we and to and alternatives when and contract commitments capacity our this inventory respect working small secondly, prepared volumes; product engineering to are closely expand arrive. to in challenges invest qualify we be to partners of with supply very pursue delivery of components number our acute redesign as do to manufacturing as to

the and commitments falls, their purchase broker to premiums large to market place supply. advanced secure various additional access reminder, we in a a As and fees also continue expedite

an move At we actions strategy and these obviously to suppliers start further will making into ongoing focused long be take predictability time been the as believe with realized, long-term and for our to stay benefits that fiscal it's in a their our in have on volume improvement that we our time achieve XXXX. time, to fully the we're aperture important the open investments to market. we same addressable of While

the now service X innovation vendors. broadband IP to and we customers. the XXX bringing competitive new many of a XG North nearly added uCPE residential we web-scale year, is space. also cell-site we and number with to adaptive is for to routing Packet large the commentary was our think routing a And those resonating optical more xHaul, key particular portfolio supply and Of X expand organic, aggregation providers alternatives areas, more portfolio well seek offerings challenges, flows. solution Tier important provider service certainly to never today, WaveLogic order sole grown consistent our significant total portfolio in major note see enterprise and in Also our customers' and we switching legacy IP strong Of network quarter secular in TAM significantly IP and in evidenced segment. more been and has we with solutions status QX, X drivers, as priorities, in Converged customers, traditional you additional at quarter, this total leading expansion by than Our wins year-over-year has added routing, In modems heart SD-WAN had never the we XX as TAM challenges, a Overall, the QX, IP with Optical of momentum specifically, In The momentum our the stronger opportunities continue bringing Extreme, has WaveLogic network QX our than customers. to have revenue our this clearly capture our can new been has date our our or customers X tremendous And and international strong differentiated by when WaveLogic where American from the results, are of expanding switching our Extreme X in a WaveLogic the demand customers, to continue some globally. this with XX and the the to new supply for not XX,XXX. as chain new record positive as solutions. to the our including that compared area same approach, more many grew say shipped in for QX customers with universal Indeed, Adaptive with not in upgrade. extent shipments, customer count awarded business Extreme PON are a is and XX%, opportunities. impacted despite I recent all been we it is which better. combination packet others our would for positioned Tier as vendor with were I X

increasingly to that, and to With are over continue gain addressable I'll ability able our share demand, we we it in to the our to are service confident As Jim. market. unprecedented expand turn

James Moylan

Thank you, Gary. Good morning, everyone.

impact the small number mentioned, continues end our XX% from incomplete in at by margin Overall, expedite of QX, of the component in $XXX key and was Gary in a gross million, and gross the reflecting late reflect of higher which Adjusted revenue negative fees. the delivery at impact QX was of As came to components margin suppliers. low costs range.

at to expected have in line also it supply the of range have and primarily mentioned expense In related the in higher been outlook addition $XXX Adjusted QX, been gross gross the to of modem margin million not technology. our range. adjusted operating approximately components, our expectations. before, margin in $XX for high quarter revenue the the the Had was quarter that would chain our million. specific key the is key reflects and higher-margin below lack end This with quarter been would components in dynamic, those in as are performance

our performance During $XX in we X.X%, annual given adjusted our operating the to share. of for delivered financial $X.XX for expected measures, With compensation respect quarter, profitability our of income incentive of per and year. adjusted margin we adjusted million the plan accrual net reduced earnings QX, rate

cash addition, a million. in million and and In used adjusted $XXX $X.X operations was use cash billion in with million. investments. quarter for was was of QX, approximately the flow Free $XXX We ended EBITDA cash $XX

remaining On components as we mentioned. our reflect times. XXXX, required of current to the the well have specific And performance to delivery we lead customers. levels dynamics based supply of inventory preventing that than the the chain demand Therefore, necessary Lack vendors, finished our a vendor for at environment all of are been the backlog delivery of current is subassemblies wait impact by vendors published those components goods. reliability. that our XX% ordering balance upon is we of items of other while supply and the delivering handful sheet, accumulating Since are Gary produce as meet to handful

inventory to for our performance expect as key the delivery components reduce over time We stabilizes. levels these

Finally, in $XXX approximately for million. QX, repurchased million X.X shares we

QX, repurchasing We in of respect volumes these that are supply. parts. saw to suppliers disproportionate Gary With We low-value a market having have revenue now shares terms in guidance, as for have in demand. their our we QX. a repeat last and in in our is meeting impact completed expectations in a quarter, low-cost, commitments of our revenue. environment, decommits small number continue and XXXX. of of it, of of today's dynamics $XXX we that times function are function delivery are a handful These said, goal seeing is we And on or very said and as fiscal our not It not million a we

a expectations continuation previously a of XX%. This QX, to in in in reflecting revenue the $XXX supply quarter. of component of lower our margin expect outcomes, to expected million. we and a consequence, is potential wider $XXX gross key challenges a than range incorporates deliver Adjusted million As of range approximately set for

reflects and the below atypical I QX. the for outlook continued volume adjusted expect And a original approximately similar our to This our normalized component dynamics in $XXX the of compensation logistics incentive costs levels finally, We and more QX, annual to lower modem including to rate in higher return was impact OpEx expenses. reduction QX, margin accrual remind gross you, plan. from as million. due

described. level reflecting sales we expect demand higher the in variable QX, we've extraordinary of of Additionally, compensation, level a

absent For the on approximately the beginning our at annual which guide year, I of gave we the discussed. year, we in be compensation plan, the will the changes incentive

of growth As for next referenced we and sell-side revenue significantly expect and days questions our above the now annual up year we look strong X% revenue 'XX. we'll for we reinforced growth With X%. set And reported target we to environment backlog from outsized well long-term our year, to ago. next remain our continue remain current deliver fiscal for take demand level Michelle? expectations at to XX XXXX expectations to confidence our The that, these in QX the analysts. when year

Operator

Instructions] with [Operator Notter George Jefferies. The question first comes from

George Notter

here terms doing relationships? in Like going of this I here. long-term guess it terms for and about in permanent guess stepping issues to the impact you these I'm back wondering, is terms is your of just customer And share, one deliveries Ciena? thing of how are with how vis-a-vis at the conversations? you're I'm picture competition worse relative about just is looking customer kind in sort talk opportunity your a of guys you do long-term damage you I Can market bigger curious think here. basis, of on seems like dealing

Gary Smith

So George, I me got of go customers, very that. many I decades. -- go relationships mean, take back which of of we've which back listen, all with think, let our close some

that, actually being because George, this of to of of we answering way a of difficulties of very that outstrip supply all the kind think share strong it. all to about X cancellations. talk only what I and a but demand to of We've trust we point relationships, the of the smoke I that we ameliorate and that them. from transparent that's with we're And order XX% them. growth have We've orders. terms well not outsized to And of technology challenges in chain will given believe So and for best of they begins about I that view can the having. very summary, challenges robust clears year-on-year our the degrees transparency statistic see. seen the think of encountering in understand gain see from quarters, and that when we're our continue the think sort is I that But that and shared last revenue we orders sort we continuing with we're seen testament really we see the And we're

James Moylan

side, I'm going to George. comment vendor on the

On the components. side, can see most that I vendor you some we improvement do tell on

these time, about, performance against In seeing key fact, the that for we're everyone XX% talking good. majority about components for of pretty a vendors except is deliverability we're lead which our promised

course, this that than not on small very less we're of handful a So focused, number, of are vendors delivering.

caused at the In difficulty. appropriately fact, they've been We're them quite unreliable and with levels of great company. us all have dealing

as We are it in the in steps respecified doesn't, we're And performance with to hoping our deal parts lot time. that, on taking et case a boards, of as meantime, that through improves we cetera. move such

George Notter

wanted to Yes. about. That's I what ask

be that those specifically great. in detail the components any redesigns might talking these So of many are How you be are would more Just about? there, When us give where process redesigning components out? done? we

Scott McFeely

Scott. it's George,

working better to with of component as it, a just component much to chain very vehicle of the the in answer it redesign promises. handful get Jim majority a We're of delivering when a on of on vast work supply it's as we to is a couple of set in in problem addition suppliers we talking vendors. here. them that handfuls as And put amount So those said, parts about components say pretty terms to at to of of of a the have get Obviously, perspective, components their focused significant well. existing a dimensioning going out

heavy are replaceable. from line you where side, our X a sourcing that component On One find a case, to have but less the design components on to times into get be you lead plug still alternative may a fall it's side. In able that to categories. in George, exercise they is providers, those lift of

hardware and The of take you redesigns second those component to is of need are in to course, parts category, redesign multi-quarter where activities. those those and order are advantage

All to benefit addition work we in to start of as throughout come component XXXX, to starts to go and year continuing from gradual in on the that existing we'll think, with I that suppliers. the board see activity,

James Moylan

of phenomenon. very is a clear, this suppliers be been This in handful to And the reliable new has again, past.

Of quarters, of have But unusual spoken upon we we're their published to in our always course, in times. revenue the have guidance have past in when lead based times and they expectations we that lead past. met those fact the times

guided that's our And where we've have. how of that's view came we with we why world. up So the

Scott McFeely

And those a a subset. us. George, promised. to is as they very number cases, many many of of are in they And This parts supply vendors, their performing parts focused multiple

Operator

question Marshall Stanley. Morgan next with Our from comes Meta

Meta Marshall

kind sense a just on just available downdraft and products jumping would kind of way I to second this kind continue a of redesigned piece Maybe what we 'XX, that just redesigned, be are of And that just number there basing we're that can of of to year the get confidence already the of Is this helpful. we're some made George's as would given that's of that on the of so confidence be kind mean, that a express of seeing. impact you out balance Great. revenue question. goal you x kind already size to through you've

Gary Smith

first of answer that Meta. Why all, and We're backlog. basing confidence second don't I first, incredible part that on, visibility

of and actions multifaceted, we we This the substantially were I in seeing impact was that ameliorate about So that growth knew orders, the supply cautious we try in shared we're from in we've year is 'XX. actions given terms took and actually I are placing we that's that taken, increase kick well for chain both start, get into this. ameliorate taken the also you, we a as right this year, talked that we've engineering And number to with a as to come QX work year, terms thought demand what issues. ahead of and that we out for lot the not of planned, Those and our a to reduce work will mean, going this that think, double-digit we and to this a our reactive number that out actions doing the dependency. piece. place we're they while. to in believe We which one; for things two, in are QX, of the whilst we've this partners

good that this the turn won't very confidence give year will we improve. on-off to as the have to will start us this. in we as in switch. confidence It start of an that as start out a year we it improves we It we does QX, but be So -- process be grow

Scott McFeely

just give to And activities. the sizing Meta, on you some

challenge look that like, of obviously for total you XX% had other if qualifying portfolio, at The the parts materials, challenge is adds the component, If there when on get entire In activities. -- lead list, you you that, on our are vendor areas. and focused their approved with line new course, you in get you new identify our timing to times. we've orders multi-sourcing a about words, alternative component of

'XX. to throughout ability in have activities So come ongoing and suggest the supply those a if components are aperture, going industry on XXXX. would the impact for times now wider our like, start an in were you that those lead to The

than would go we activities redesign of in On redesign now, about XXx multiple have more got normal right on year. a tens the is which we've the probably side,

impacts All us. redesigned. all of XXXX really they of Those are are hardware those in are front because

another small those very in help maybe they would exist of So at if to that we didn't number some just as in components, put handful it, yearly on And dimension will small to problems then way well. revenue look components. 'XX [indiscernible]. helps the original alleviating that Hopefully, our of those had just -- on and guide range of have it those on

Operator

& Our Company. next question comes Cowen from Paul with Silverstein

Paul Silverstein

-- was if $X the the increase? quarter. What was but it this or greater over And go Guys, what ahead. sequential quarter? quarter, I'll What was I do you what billion, was it I exactly? you did X.X say heard book-to-bill was next ask backlog increased X.X last to -- the than this remember, question it significantly

James Moylan

question second as your Paul. Ask well,

Paul Silverstein

see seen sequentially, a headcount, that's What's than I long XXX we've and up all headcount more was relative almost in that it's the massive about? total to time.

Gary Smith

of the revenue sorry, in about orders, that, let take the about in Jim above part and So to me The -- talk headcount were then QX orders QX. can XX% first growth. revenue

as well the orders in We be expect QX. revenue to above

turn So is out we're backlog. about to more going approximately Paul. create The is now as we backlog right billion, $X.X --

Paul Silverstein

Gary. up That previous apologize, was from I quarter? the

Gary Smith

Absolutely. a million, yes. few It's up Yes, hundred Yes. yes. Yes.

Paul Silverstein

go Go Jim. ahead. -- before ahead, And Yes.

James Moylan

We're going Paul. you to questions, limit X

just I want So to.

Paul Silverstein

them that's a to for with the the extremely being of line orders. the Jim, off of masking And fact not is [Ciena] place is nominally backlog? step strong demand -- to because orders reflected just Well, before with to The orders by relative respond, just the they clarification. a by function chain risk appears not and continue so what's you the both -- you're question chain. the backlog, order supply let to that, and on real related that respect on in were risk for that that the me weakness to supply remains real that What's to what be what's you those backlog, tight. say risk And customers matter, orders laying robust the willing

Gary Smith

it's ordering that's of extent customers is majority a the scheduled revenue, from to be. of that's near of backlog. forward certain want COVID needs. It's a of of the chain very they absolutely I One with year's is would And is bit I for take second order nowhere customers time, and of and supply the like X supply a you a majority view. seeing real XXXX. is little -- immediately catch not in answer very lead demand imagine time secure right it backlog that unfortunately, Yes, a it? would elements for who vast sort we're question got bit have next up chain. are we've all X. think times question the of have book the Yes, up this, strong your orders what in made Do my we function answer now. I a like where large this. the because but of would what little the rest have Paul, sort through next you of at The to because much That might that year step constrained some of flushed

if traffic the So demand very our roll into they their on look put this quickly at of customers, it. and you actual network would product

very seeing it, that the of backlog So X Most I'm of mitigating X in comfortable demand characteristics just they our times. function equipment. with take There's of there a would and supply not absolutely sure, lead that, we're their large chain or what customers. some the is for

So a of that. from comfort lot we take

James Moylan

And know every them their that no we -- very need We We essentially this day. gear. system, to And them well. we've order speak had their cancellations. networks know no

So risk we a don't there. think significant there's

beginning we what plan is On out that was the OpEx at plan. that guided rate with people the at line the beginning of absent to incentive said in year. be approximately the the the year, approximately generally changes side, our accrual would compensation for our headcount set for of our our we plan which I company, the the the Recall

to think of So capability our few routing past, network. And in we plan said switching then with we layers to add networks layers as do a it's the converge we in across well what it's in and very important the as the keeping we've that that do.

the in R&D We these the develop we we into people best of our best think around we optical. order as have capabilities, the world develop are, course, the bring solution capabilities. those world. to In to shops will We converged in that have

to order these capabilities. have into people sales sell in bring We force our to

count head the why has grown. that's So

I will probably grow to think it that not year, going I at would it's -- level say. next

be. we about are level think need at the to we just that I

Paul Silverstein

So going through people -- of the those bulk are

James Moylan

and R&D sales.

Paul Silverstein

switching. routing For and

James Moylan

yes. Generally, all, yes, not but generally,

Scott McFeely

and but those also switching, off-box the to solutions Paul, as I'd software well. forward-looking manage capabilities say routing

Operator

with James. next from The Leopold Simon Raymond comes question

Simon Leopold

well. as me for Two

you're fiscal of strong my the India. for is maybe follow-up and XG you of past, And region? the 'XX some in one recall we've in awards that occurring. spectrum And seen that what India First in in if about opportunity talk you've particular very ask then in terms really you're -- in could terms had expecting And the seeing after. contributions what I'll from business

Gary Smith

Simon, challenging of years. cyclical No, yes. India in a set activity very strong after we're seeing very

major We with focused it's well in of the including to the growth are the placed Internet web-scale and area players the very the all country all incredibly there fastest for major world. web-scale, players

and expect a You very robust the in in India, chain sort supply view, flows, point growth think a largely there, see in we of now at you've stuff the very supply cetera. too moniker were around that driven XXXX to in we are quarter that XX%, could turbulent all because given with Jio the we and see by ebbs chain bear up robustly but moment I challenges, fact, wouldn't this and of pretty driven all et time. and things spectrum But from the I by revenue got it is Bharti, a of much

Simon Leopold

more up understand ended supply get vendors follow-up, being a better parts that chain, about to Or there therefore, about these because Great. constraints. be Are hate and these to talk multi-source little of not you on to parts understanding the And need I available that bit sort did parts? unique but I then option better low-end leading to that just need was readily a to didn't you're particular seem component to to about. your an what's multi-source some this misstep on these that's the my are I of talking have redesign? you part and

Scott McFeely

used many in of perfect availability. ICs yes, sorry, had products in unique. terms we've low-cost those their there. consistent Sorry, I very categorize of wish are we I have that years been sorry. our family generations multi-sourcing and And across Challenges some multi-industry design of in many for hindsight, that

of we it's the Of a on have. in concentrated we course, back multi-sourcing the would part a But very have frankly, going supply the area our the product been year be reliable of wouldn't activities portfolio because ecosystem past. chain that

here now, physical we few alternative but multi-source those be of alternatives. also of we multiple on Those terms redesigns the be plug far As in between, that both and the to are accept sources working sit are far can activities, obviously, boards to able replaceable.

Operator

question Needham Company. Alex with Our comes from & next Henderson

Alex Henderson

Great. mindset of accelerating you I to history seen a canceling about go that of wouldn't situation. kind guess, cancellation in back orders back, I I then to people you your make environment go the talk want lot and cancellations. like cancellations Clearly, the sense, to current want can question. of them. haven't But

If of before. a my the risk You history what rate is had up, Is second for how do they the kind or of you what in last on that to company. of Jim, vendor require about and something talked makes the the piece every accurate? with you did it set X% the the your your Is does -- the quarter other in which go that that before understanding you then back in reduces that that order work And of pricing? price what's the put RFP lot much cancellation under And recession, going extent cancellation? to to the order of to something Have net that environment? expensive service consult. over them increases it's -- is pretty cancellation see provider

James Moylan

Yes.

Alex, our X%. Just been has well rate under historically, order cancellation

why not the it. cancellations. order done need we've they seen in of that In they'll because hope -- because by cases by can which just need stuff. order the That's XXX%. on in in this and It's past of They customers buy large think don't Not and it. year they it larger fact, a the I order handful

going their to order network, take So system, for specified it's when they're it and their eventually. they

Now, our we're -- lead make that happy right making We're customers extended backlog. to times. this we're future, better in to our going than now the we'll particularly not with going deliver do and

Scott McFeely

solutions into to our introduction stickiness The it to to okay, other it and them we've aren't these going their of most saying, are providers Z think that take is for large-scale street customers. Y, from And are service These I'm length X, into takes point These talked integrated designed to thing the context back That our also it networks part, product I different permits or are specification. in office. order these that the in in new the totally out past are web-scale. the time a else. about somebody down that commodity is items that do take just and to the

Alex Henderson

of be you The China price, due question that which that second And to And piece lockdowns those given those I be question more in additional what are a hear was now, follow-up supply to alarming to do I may exposed on which commoditized. tend is ICs, around risk low-priced those which the are have chain, sourced market at risk China in to that the right are you ICs, don't extent lockdowns. mentioning.

James Moylan

a this of beginning negotiated the We the set the price customer increased which we seeing. the increase, base. costs, customer was and we costs At calendar to cover consistent our year, out across to went did really were it that

went from think in a a next after have to I orders on with so into reacted any place the increase the customers the was this it. It increase yet want We that we have that chose answer not it that. was placed not Now seen negotiation. way early increase the backlog delivery impact backlog. we because of price completed to very was that yet effect year, and the late will effect. you part, date. price in do Scott? a the of And And our positive certain not that price second to before we happens reprice see pleased year we We

Scott McFeely

obviously, Yes. to mean I in around difficult the world. been predict has COVID general,

is that for come any time in we're everybody that the but in point either, up has have particular news. don't our to was hours province. exposure monitor this last new that's China at the from going XX and ever a out any they my that degree of industry. to of base. had traveling not news the We risk to subjectively, specific the certainly some in relatively supply it's But province overriding signals that haven't have have direct dialogues in to over in suppliers there around that any something exposure And that So operational that

Alex Henderson

coming shutdown a if million particular XX there? China is broad question be is But Nobody the to is that million to specifically there $XX ICs that these China, as -- clear, those Chinese how of from the in Just broadly, expecting be ICs province. opposed from much to are particular coming are issue.

Scott McFeely

the comes The of we there supply the tertiary don't Yes. component in components China. are vendors would their components trace have with they those out the effect chain, general deal that That's not China. say But not supply is from statement not from from China. direct I sourced I the providers is sub that say from direct to if that though

Operator

comes question next Jim from Suva with Citi. The

Jim Suva

if couldn't QX. a XX ago? 'XX, believe you with outlook that's that had quarter fiscal like outlook 'XX But meet because XX unchanged actually stronger days be supply, mentioned fiscal continuing to you Why ago. I weakness it then into sales and you just your than from this days get wouldn't is

James Moylan

get terrible we to Well, a what that's at say and could appropriately of By our the supply key look I our everything we ameliorate not these But not billion. that that 'XX guided for guide we're expectation through if the expecting we -- not where is that's we in more We've demand, mean, we'll more issues is is we're to reference point deliver deliver The particular I'm as to we And $X.X consensus to us revenue. immediately. I it the a of time. components, hope get all I'd today. but that not in go think seen could will remember, wrong. our don't use balanced next I number view taking as now. 'XX. we the number But it's If balanced we view will component way, it deliver improve, year. and could have backlog the

Gary Smith

Jim, guiding not I to Gary. right mean, now. this 'XX obviously, I is think, we're

now, supply amelioration we've activities seeing. that the backlog But We that's that's haven't of and and own. its we're the and stays got enough -- the all this the right given pieces chain if given challenging in course been year, finished were place, in

basically about we said, a see think Jim We will I to too sort the all that number A $X.X probably point, $X.X really start 'XX. related. billion, about now call we've that. that's of as billion. supply is the as all QX, to the get in and into of right guide chain does down by Consensus to I early bit because understand improvements of work a went chain. taken there's for sort We you the to double-digit next given the have And that probably probably that's growth. supply what if we're math. It number, think planning right we -- that seeing. I switch step roll be a understand don't get magic When number reasonable year? now. year midpoint it, doesn't into going that's you like reasonable from back into I this But on best

Jim Suva

other they've and of pay probably quarter broker And the in the still I a door then bit they're my part. up Because but have parts follow-up so shortages you you get assumed when sale. that a out the to premium and if not into a product companies market it low-priced said gone your would tried why market handful, or happen? happened is had to, some secondhand of just late

James Moylan

broker the a market it's parts. of is mid-XXs sort have certainly robust to everybody why -- not their going our year margins you tell fact, that have this, level. buy the as gone reason there as reasons it the We market. biggest in is That's I'll But of was the deteriorated one because from ago to broker the

do So we'll where We continue can, to do it we've we and it. it. done

Operator

question comes with from Tim next The Long Barclays.

Tim Long

got I as Yes, X well.

mitigations have First whatnot but been beat going for here, that through hear supply horse here. that to you all one, the sorry guys we and the chain

improving, industry the time worse. here getting coming it's long Just been a not -- and most are of

your kind been you ability about like address far about level think think redesign. to and to you as problems to procurement, estimate, ability these doing have your you as higher when personnel to internally processes What try So guys of better.

investments got So kind that in follow-up people continue it of what to doesn't kind you are I process and done, to on a And not making guys ensure but then of have happen? what you just web-scale.

Scott McFeely

people walk me through let mitigation, steps processes questions. you and and Tim, including the your

perspective. out there we're supply fact, and long times. large foremost, obviously, base and from with a putting in process on times actually them. lead extending So demand their lead first a And overriding the

manufacturers component lot do when times, would So things the is, in that's a XX-day between are to where put the direct these Number world, stepped suppliers, ourselves in one. ourselves of contract moving two and we've old on turn that. the

focus chase components the and have of in to key manage we the our suppliers component of you basically governance parts, So like, ourselves. Obviously, if challenges. directly a terms there's added resources on

us goods start investments the significant specific to perspective We they we are off, the throughout when constrain redesign significant have will made faster brought our been the customers more an into we've can before. capacity our we turn would able on such have servicing solved, because finished engineering bear year. will longer front And resources they Those in that but to pay from pay manufacturing off activities and than in lead that get of time. components

It's are time. of looking that. that these things take pay just at They we're -- off. all aspects will So will

Gary Smith

we done that and out of we I'd is, thing the it, And I that all ago. ahead proactive other I right we've the tried the were that stuff. XX very right things, add done, frankly, of basically Tim, look at get to all things and think with we've it's I and the months think all to

process supply chain some have that incredible else. a We team outperformed and has through challenges everybody navigated in

But but won't of more billion are be really frankly, our in focus this quite to have issue it, done don't and multi-sourcing? But But wouldn't else the of space. If we customers. than absolute impacting you would in that which than else, as know of we thing. components it experiencing much we relative anybody shipping more in else I could still were do are demand and so say you equipment defensive which anyone and hindsight's we talent where thing. be We're that engineering a happy not about as a is we to I'd get Would through the I because early hindsight we're terms some Maybe. on, is thing with $X.X to think there's is in down the wonderful bought challenge other are it, performance. to look wonderful -- Tim, say, to we have we

So remind that. would of I everybody

Tim Long

a was more kind a of sequentially, I just follow-up bit compare And Okay. you the service little as down to web-scale. providers. noticed on particularly

guess so a lot that, your And base. once count. a much that. smaller where drama of an around all this I pluggable With about inpatient there's much, not bill the most material, related curious So componentry lower you are introduce part seems of would optical it like as web-scalers customer going in system, on, to probably much stuff

pluggables base transition to because So around difficulty that a more customer sale? the network accelerate is there risk a more could of potential their in system that the to

Gary Smith

just Scott to My the let is That's take I'll was absolutely seeing Web-scale supply the from be down pluggable the turbulence revenue that. Tim, answer were part not chain. supply really would that. of What answer for question? in quarter. no, The that chain. we're

XXXX -- architecture seeing order players. the our strong So -- be I flow 'XX. robust And that think very they'll we we're to through systems, I web-scale demand go think as the continue for around be

do you talk Scott, side, about want pluggables to the On direct.

Scott McFeely

patch a perspective, not the pluggables from web-scale have applicability. is today where deployed are we where Tim, Just,

said the for that in the past, in is for web-scale potential pluggable space conversation part us the most new territory we and As upside.

supply a XXX% seeing of is chain-related. of referenced modems. key period-over-period big us you're you when is consumer or the modem. areas challenge They're what for So look quarter-over-quarter one We obviously

pieces we piece growing ZR customers, well. into that a We've So we said pluggables that's go going correlate business available. be We our to for XXXX confident plug well. web-scale the application. very consistently, them early in of On including the shipped best to as as the large as it. XX-plus of think have very general, that it's pluggable X think innings We're we we

Operator

question next Rod with comes Sachs. Our Goldman Hall from

Rod Hall

I come wanted that's back XXXX. the of to range guess outcomes possible I to in

said the X%, the to X% 'XX. and begin run beginning And is situation model is into of guys growth you have your predictable obviously, now could less I that long-term become would and in much certainly supply XXXX. think what has

see this XXXX. much you that. growth on you other you could huge in the have think And higher and in with I would hand, range agree backlog that

of of outcomes that you be situation problem back I bit a be also persist is beginning situation wonder willing But possibility the from own, of X% to that from be supply when to if possible were this below X% investors you to punchy even uncertainty, a in in at numbers range this year point I the like them be it's great. morning, consensus. be the are could the I acknowledging clearly, the least would the So this a think of view might you demand a to would hear continues XXXX say little and if some it's could the well I that saying, stock that a hey, But to if breadth supply this of beginning is thing given year. supply above

to range X% you So I then and if kind the of the X% how risk I follow-up. looks growth just that And even be. might a have on comment to maybe to could what you the wonder

Gary Smith

would Here to that, my response Rod. more be

all, we're of not giving guidance 'XX. First for

finished We haven't yet. 'XX

as the we give normally So we turn that year.

given say right. X%. seeing deteriorate, what that would absolutely 'XX, now, chain, in mean supply then in if that have You're our confidence not what et look, I cetera. I does we're happened to X% high exceeding we very

more that's we there, kind now, set stability growth. $X.X of we're be that on the more now would If sort some than consensus entirely just seeing particular chain midpoint stays these you if based of with fix XX% of take billion, right let's right some at issues look possible that that speculation. and current supply the as That's our than

James Moylan

that Rod, not revenue have meaningful a now. there, to level X% point of number, whole year. the a is X% depressed The we this number is right

on next it's haven't we range year, So haven't to guide And Gary very X% to not our give X% us given. a said, is hard we for as number. to that relevant -- it's guided and a

if got we lot what be parts. that would a is backlog, it a got the and could we've So than say higher I big

Rod Hall

Yes. Makes sense.

Gary, had, it's second mostly but the guess, then sales you, I force. And for question I the is Okay. related to

I that compensation. to supply. having be still is salespeople. an to market maybe that less labor luck There guess, going it's worried the incentive-based on for you're better retain tough other plan wonder, I that pretty or mentioned had not tight. and you optical cost are are, companies You accruing are The peripheral

you're is. what about I retention wonder So of how plan salespeople, the there feeling

Gary Smith

the comped there changed, Listen, actually good is amount question. and The that of that's all, related not [Jim] a sales large on of non-sales accrual orders. bonus for the most, force we actually

So had an order extraordinary I mean year. we've

been the pretty rightly have sales tenured have Rod, well whole So force. quite we the highly that good, I on sales compensated. And a feel force

in folks And about the equipped optical I'm have well. the sales best and talking and largest world. force systems We as sales engineering the

think I orders. largely they on are compensated So

had pretty they a So generally year. good

James Moylan

-- But course, and accrual for the to not of question employees. to we're general our -- pertain but general lower range of does the set happy our employee

things. the incentive as in couple deal of that at out last years, probably comp and best And to we but have, trying We paid good this that reflects as that, our accrual to against well. merit with going other plan. very year we're be can is not with

Operator

The question from next Daryanani Evercore. comes with Amit

Amit Daryanani

you're guess quarter, supply factor same to then time the bottleneck July chain Perfect. QX? -- top the maybe you the I I to about our that's think from well, in a here. talked of is first X I guide versus lead I it the have as this what Glad but first it in X that quarter have think Or Street really from to of is there related you a recovery July. alleviate? of Is happen almost one I million suppliers? a the $XX I happens, is the the for million in the miss what something hearing was supply longer had due what Is of the implied guidance, all issues? October quarter October And going seems recovery The Is it to affecting chain past. issues. below $XXX else like much snuck

Scott McFeely

components in understood of that the heard number the correctly, we I us maximizing that getting talked of that QX is the if challenge consistent QX. production way space the small is question and him general, in [indiscernible]. Amit, is about between It's the of IC that

they our in too QX. and on met. sort we're set commitments same mitigate A In and components, was same as today. though were were bit the weren't in a little including So those those. what it to that into perspective dynamic, we challenge. QX, had of case in and late you particular different QX commitments it those it's perspective all obviously, components, our QX, And going the the into And for sit -- components giving environments commitments dynamic going us of of guide

Amit Daryanani

cash Got flow stacks going capital on use and is QX. it. cash fiscal is I working still think you just QX And of how 'XX. be you free then up touch mean in free flow in to a do could

QX negative, understand our leading then potentially free improve love for to for cash I'd to -- flow So and broadly cash expectations free 'XX. flow

James Moylan

next more build probably cash Yes. of inventory. will we a a will fair We of What inventory quarters. say hopefully, consumed guess year. is kind start 'XX decline. to in through looking and start we couple flow then the we little as our QX. we that build And of that lot a I'd And get we're to will to that if is numbers free cash as of the built amount next inventory free move My progresses at, our level

any next cash good I to have a say flow next think in way except other free that I have qualify we'll free good cash year, we'll a won't So flow. year.

Gregg Lampf

We with and you. week. few to the during today connecting Day you, for forward to do us Enjoy as well events look forward with weekend, a next Thank joining everybody, day look everyone today. Labor as the connecting

Operator

conference participating. for This Thank call. concludes today's you

You may now disconnect.

Ciena (CIEN) 1 Sep 222022 Q3 Earnings call transcript