Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Ciena’s Fiscal First Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Greg Lampf, Vice President of Investor Relations. Please go ahead.

Gregg Lampf

Thank you, Jason. to fiscal welcome conference quarter and call. morning, Ciena's first XXXX results Good

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

today, today our coordinate OFC locations. calls different is responses from we begins As ask Q&A for as taking the We your our team patience during please.

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

outlook. Our market our dynamics comments as recent current of drivers views financial our business on discussion to today and a well performance, speak as our our of

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

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

we consider of such presentation relating an part after, will statements, shortly this are and be are Assumptions call included in which outlook, that encourage the them. investor to our on to mentioned important you forward-looking posted

result to our in of in also be date. the call, which assumes detailed information new risk of X, March is a and be XX-Q filing, filing or events our and this whether filed Our with required SEC XX-K factors discussed recent to conference the in that context future no expect by the otherwise. file forward-looking statements most obligation the as we Ciena upcoming by viewed should to update information, in

As you Q&A one limit much as always, follow-up, possible ask to that we question we will today, and please. allow though one for yourselves as

we'll tomorrow sell Wednesday. investor with And the a we and meetings reminder, to OFC of seeing you at look side hosting be forward As there. many

to that, call With I'll turn the over Gary.

Gary Smith

XX% fiscal Thanks, good results revenue including outstanding QX Gregg, largest $X.XX Today, quarterly XX.X%. and fact, up our in reported higher-than-expected of revenue first and we gross adjusted was everyone. year-over-year. morning, billion margin of And ever, quarter quarter

metrics, market across technology an demand are margin We demonstration and quarterly reported of our very strong of $X.XX. portfolio. complete XX.X% operating leadership profitability with of adjusted and for our continued results strong also adjusted our EPS a These market-leading

in still volatility component shipment This both, supply we there is point completely we chain availability of in the the mitigation environment move improvements proof expectation indicator continued through year. positive supply the gradual and a and our our encouraged recovered, not is of efforts some and I by While deliveries, related component as for strong performance. think, QX a are in has our

course, and as we momentum, pleased faster three take is this With ability the to confidence remain needs. This short fundamental confident work underpinned hard our our with share. term grow we network long in progress and capacity fulfill market by We market are very to this strong the both beliefs. continue in customers' to than of

environment overall of First, and relationships. customer the positive our the strength demand

And service best of customer visibility, Second, provided our the to our market-leading demand. portfolio by particularly the backlog. lastly, strength

power increase that and they capacity, require these cloud, term. positive operators optimize durable continue AI also network Indeed, believe consumption And and intelligently drivers with fundamental respect drivers, remain to converging long and technologies. over XG, while to demand, the very to about are automation the reduce we latency including

saw These continue business segments. are remain of parts they QX in And be network happening. customers and our of aligned metro key have the our coherent increasingly across know sixth investment announced in leading set of must And the including elements innovation the leverage order that areas And across there address just to our critical signs, a focus expansions investing capacity where to and their dynamics, are of customers' will point business these forefront addressable which the priorities. for and technology you of strategic again their edge And this strength investment our continue are to new in portfolio. probably that closely core networks remain market we our technology. we in led clear book optics, demand our we technology, with standard once the market our of competitive. generation on Service our order to fact, generations at model to these WaveLogic

wavelengths, single-carrier long WaveLogic across have optimized pluggables be to the yet up first footprint support and links lowest XXX X that again, will will the these the X.X XXX-gig consumption. gig terabits energy to

further the deeper edge, challenger value positioning compelling use we are expansion market leverage current both our These proposition. and our our range space state-of-the-art opportunities supported available and and position newest in third-party solidify DSP X expertise use WaveLogic pursue a continue will be the this to breakthrough across to in generation optics, for And and are very technology modem in routing to high-bandwidth of will and coherent us innovations in X-nanometer invest made optical network. address technology. Our investments in as also leveraging switching in our and cases made with electro role possible a unique be with platforms silicon solutions. new metro and through These disruptive customers in

on in integration which Benefiting And architectural since our our we be efforts very on December, this designed and to approach, of positioned are is now of believe we Tibit public services access. spoke their regions. portfolio and you focus the execute open the that solution supported market acquisition investments multiple last a we similar Communications, private network from across to to strengthens realize enable investment attack growing transformation modern benefits vertical closed additional and well in strategies. by and we network software broadband customers of to rapidly will automation, further These

let very have our me strong visibility on pick lastly, we And of a given point up backlog. this

As beginning going time. a X into at XXXX, reminder, WaveLogic that wins we a commercial accumulated new had design just of deployments was and only multitude Extreme initial

started dynamics and to of chain wins Now the COVID into given several translate conditions, quarters. the last those during orders only supply

we and With clear that, historical from of billion has end exceeded recent far that As a periods, fiscal it wins grew industry result our dynamics billion of fiscal entered at in XXXX. this is $X.X the to our $X.X as backlog these period, levels. during backlog XXXX

revenue outperformed significantly good In QX, down came this news backlog variety of a is expectations. because course, of slightly And our fronts. on we our

product First delivering our and most customers. we importantly, it more to are means that

is expected had are the finish pretty backlog to expect the are even indicator year chain backlog supply And to higher historical market the year we given from that dynamics, good challenges while beginning than these extraordinary down with off gains And the albeit we with that move to revenue. we an our through And levels, fluctuations, the our as it's level start. year. at a the share expect for with orders of ebbs chain the evident and Second, flows 'XX, we convert becoming orders improving. are lastly, we this as supply

new from XX Moving think of coherent demand. shipment that Extreme gig ever to well. we've our In our to world's I customers our production WaveLogic XXX additional QX, count our customer QX highlights Xe to optical, also, efforts deployed overall, X the XX,XXX ever now quarter including be to technology, for meet bringing to It modem to quarter total widely the strongest modem WaveLogic date. quarter XXX. And speak Xe, WaveLogic customer modems continues was most for including biggest was shipped as surpassed course, which in

shipment which these the both Networks and And acquired for for focus quarter on Overall, a edge, new and Access In Routing QX course, Switching, continue revenue down within press and our includes in our technology quarterly platforms. XX% this from for we QX year-over-year increased of expand metro wins to market Benu addressable and gain our Broadband and with we Communications. portfolio, and Tibit Solution, share. Switching was, our and record efforts secured market to recently Routing next-gen segment a also

sales Shifting total quarter year This this to with web-scale, XX% of customer positive customer segments XX% in a web-scale and customers. increased remain and very performance group strong in was with in regions the the in of QX. quarter, the Direct non-telco total year-over-year. was the a revenue included revenue XX% about XX% of We quarter. reflects which

above record FY In in revenue expect 'XX, corporate fact, web-scale the in average. and growth well we

XX% market. revenue the finally, in fast growth are our demand in which ship of customers, we the team's customer was last year-over-year. XXX% to our QX focus as outside over placing growth an possible by driving as deploy for on investment experience; on a year-over-year inventory APAC focus to driven ramp-up continue intense $XX of region up strong up the months specifically, in in our QX the XX we service combination and product. reflecting And the we million, readiness that as was largely to revenue U.S., was India, in environment As This

that And and we the In our in CAGR market-leading we strong track X-year with a supported and growth achieve drivers, on platforms set to previously market revenue in by of provided. and momentum will deliver we demand with outsized summary, are revenue FY remain fundamental that, we have that today, we backlog. confident outlook 'XX robust great technologies the year-over-year visibility

items that, QX more Jim? to detail provide With results. to speak to on as now those on over I will financial well turn the Jim additional as

James Moylan

an on Good Coast the especially those Gary. Thanks, everyone, West to early and very at good morning OFC. morning,

product high Modems tremendous mix quarter Tibit. was that due percentage expected. it position and QX component at of the adjusted our of gross the the the the Adjusted We a volume billion, had vendor OpEx in gross Total market expense TAM and of $XXX quarter. deliveries, improvements investments QX than $X.XX particularly Benu a our carry they expansion shipments. we strong higher expected from average, modems. as late million, acquisitions was margins in a a included shipped and leader. end operating up favorable XX.X% than made reflecting revenue strong and reflecting was significant mentioned, Gary of product more specifically in toward As higher to margin performance demonstrates than

profitability including $XX.X income to respect $X.XX per million share. we EPS delivered adjusted XX.X%, QX, adjusted adjusted of measures, and With of results, operating strong margin net of in

from to inventory cash related used in we primarily receivable. addition, the and In accounts quarter, operations increases in

in the levels continued impact other and of inventory materials customers. our chain our investment volatility supply raw components reflect on to Our manage

be down remain levels. this lower in we XXXX, to fiscal through inventory gradually move we to of We improve, As will supply historical that conditions do QX but believe XXXX. in expect relative as of to than QX levels inventory year come elevated

finally, sheet, $XXX approximately balance and to return QX the And price for EBITDA investments. we Tibit million. With successful for continued we $XXX.X aggregate we And shares term quarter cash repurchase in adjusted of including Benu QX, acquired this strong in $XXX billion intend $X.X as was million. our ended reminder, with in just expectation a to from an million and the loan year. transaction during in of QX, our our approximately stockholders, during approximately fiscal capital Benefiting

billion; greater across latter wins supply about design in in I deployments set type of want will business for our as customers which our in the last guidance. we in discussed allow portfolio. environment. in key new are to as conditions to billion accumulated of This earnings conditions. in adjusted that saw also range clear margin best-in-class the our important technology I'm and we from still chain the including Accordingly, outlook range; for roughly million. $XXX low $X.XXX QX QX, we and to begin $X.XXX particularly XX% that QX now expect supply related same pursuing a of well to is of deliver gradually believe operating to presentation, that in gross expense provide the of to revenue to reflects adjusted improving assumptions quarter point chain updated a Turning We be those uncertain supply

QX. we in the to range XX%. achieve now gains for fiscal fiscal 'XX in our to XX% year, we from revenue reflected already XX% XX%, achieve QX of Therefore, to over-performance expect share year respect expectations growth to up as and in significant a expect to revenue With strong our

metro we in And expect For few a to believe to quarters. the margin fiscal greater approximately expense, XX% and investing gain edge. operating primarily intent best-in-class continue This to our our in in expectation line $XXX be our XXXX. is opportunities 'XX with in next-gen quarter This mix million -- gross $XXX that adjusted proportion TAM for for adjusted we potential of for gross strategically a of fiscal This see continue next expansion million area we targeting for reflects our future, year our offerings. will margin, very growing, average per for our product range systems to latter reflects share rapidly over to and XX%.

the well we for clear we and performing It's from are that reported QX extremely results as quarterly XXXX as year outlook our well. today, fiscal

our We have never The sizable position us in visibility market years. gains and drivers gives our strong robust are combination over felt backlog better the technologies and share confidence expanding and our demand with about in market-leading of business. few addressable market platforms next high

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

Operator

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

George Notter

bit a about I guess to ask I backlog. wanted

could precise think it on the just also seeing more there? cancellations there? Could wondering that lead I'm what down lot areas is times. just was update. then you're if a backlog, update last number? on in any extended times And it of detail $X.X curious then also said us product was And you curious quarter, the billion a I Obviously, us but just business. said give you was been You just give any slightly. you of the have lead

Gary Smith

Let our sort I given backlog, the of finished guide, give replenished have midpoint we’ve George. take then of backlog. the of sort basically that, don't at all of our precise but environment normally it, would would if to this, we say had me We

of some our expectation over because through the our was principally we revenue backlog quarter. ate million our $XXX So for

have frankly, sitting is -- desirable. to still on think that sort and healthy backlog They it down not small a It's our minor run-of-the-mill want And part cancellation. backlog. type come bleeds of normal we just that expect don't to our the not sustainable change on incredibly Customers So the want update We year. level on backlog that. we the sitting question want do equipment. seeing don't a during into any of very or of We're second it really the in this cancellations. and

integrity So the we're the very about backlog. of confident

the George? What third was question,

George Notter

just product some lead they've if to I I able been time extended for wondering know dent now. this. guess it you're was make times. about on just a I'm

Scott McFeely

of will improved more going throughout product and built Yes, them back will this Scott, we've historical get although products be in have just but continue And to George, sure They will we it's the they year, what fiscal have bigger significantly year. times we lead a shipped improve not the think levels go improved as I'm don't ship the be, as sort forward. I year. throughout new will norm to

Operator

from comes America. next of Liani Bank question from Our Tal

Tal Liani

question, I have I have a on follow-up and another on previous question cloud. the

underlying how question you The environment. very as confident. strength orders a basically going of look networking, sound needs the meaning flush the first And the the revenues. historical will I'll it you is of revenues, the at the is Cisco all the -- all backlog on levels? network. space I'm side. other going strong Margins the confident really how this much down. I end same, is, asked well is, And So very ask I a one coming much the a the with are strong as general the up mean, and when question that is of sounded say, and companies it's strong results about in risk and backlog backlog I'm asking about this really that but How is down backlog, to when George higher normal the environment of network, because much let's --

projects can et and So customers, about orders, the talk environment, the kind cetera. if of the you

first together that's both I'll And linked. because ask they questions are question. So

about The second is question cloud.

to Another that for but one maybe have we slow question here And much up you, concentration that that mind one cloud of if repeat down was you the year? big big how their customer, Arista, seen the with thing is what's budgets risk quarter, with the coming the And throughout is for is is in there down, will strong. numbers, think cloud risk I example, the cloud XX%. don't

Gary Smith

Okay.

me the enormous first to has would those of the Let demand, cetera. whipsaw first part environment one the Tal. that from multiple COVID the sort questions, take of supply all, say, pent-up seeing, which whole then we're piece, around of back I is step et chain issues, then

So you're it this seeing over dynamics of -- a we're living still years, a very of last turbulent and through set the few year. couple

when of 'XX, look to think of and desire has digits, been. think dynamics mid-single think you the dynamic consumer demand the and forms, that that. on this continues is assume and which of of that consistent some various all see strong, into I of I the can kind growth it its translated that we And historically through The signals typically to mid-single and new get we I with say that's consistent bandwidth an in let's look are user for market the sort normal, optical been But unabated. market digits. all then that you closer sort back has If consistently end

look at a at over norms, our points XX% you are last we years, gave period, CAGR you basically which that. range. similar XX% historical to And few If for we Ciena to that in look three quarter, next again, the it's percentage above if and the

that mainly revenue. 'XX So coming clearly, in we're a taking and lot secured because now going of 'XX, be to into of wins 'XX, the we share, and

to revenue this some point, the obviously that, that strong be will There's we And to faster So year. grow doubt no at perspective. about continues overall I but continue market. than think, got demand will yes, normalize we've outsized that Tal the from and

web-scalers. XX% we have single this Moving board. to going we're we across year, it's of be not It's year. the all for said, one for relationships quarter, on did just web-scale. with the significantly a XX% as have but one major I Obviously, up the to the And that

continue be this above expect corporate to We to year our growth average.

So you guys we're continuing And well. see can pretty it's with good these as see strong. to activity

James Moylan

over a to a tremendous of metric in across every a bit, that about their add think their of Just it's there we've they're seen with what and out through or strong. And going and years the of CapEx. of in noise little period cloud I they're looking natural businesses the the to of But on at growth their underlying Their four been doing what's just businesses. that web-scalers doing the sort on what in market look are remains wake with people three business Tal, if we've they world, with the business last all lot their through about you strong. in are that,

-- on don't But of their see and that. don't I pushouts things business. change like we any growing. and any see significant the impact turbulence There's fundamental we in So nature They're their demand.

Operator

comes question JPMorgan. Samik from Chatterjee next from Our

Samik Chatterjee

So Gary, midpoint and had think one we're I maybe overall, have had you you of mentioned the questions a of sorry, the just getting start with if that for Gregg this hit mentioned backlog the couple, the you you XQ. -- to replenished I would morning, guide

I had that assumption quarter, think midpoint. you you backlog you the building hit the last with said

were And weakness numbers of that sort the order expected? I have order within modest to I is the below on questions that the a up of coming you that had a follow-up, number, sort please. think even led So one of there slightly of pockets robust

Gary Smith

QX very, a I for us. describe that. strong as very it would not It's

caution about the I should backlog The you If that maintain very orders in people and would understand of cannot the number is. backlog. on kind not fixated it, it are strong. that is levels that think I folks And

they're whilst flows, shipments. order good not the will match So

We expect that year. during the

a less into simply end with is than very result a to -- And the quarter expect us. customers we for backlog the went it. year and we result end our good So for that good

you basis take think now, would a year. was order we But no see not great was actually we've look it whilst growth the doubt QX of in got from we just demonstration have line to very right flows a strong them you very look I still we a had There's had on some going this go order the is taking trailing sustainable. going up revenue it's of, last I with in a sure. it's believe And to XX% going point FY on we're year, QX That good phase in business. be to So I metrics months, year. that we're during all particularly wonderful, if and at And about and And of a it's the next had, I a ebbs the think end 'XX, XX%. at 'XX for backlog. and wins the quarterly That's it strong orders. caution of if mean, XX view. not last an we've to to But that. order linear

your question, part of Second Samik.

Samik Chatterjee

I maybe sort just we on that quarters. had orders the mentioned you X, understand are numbers here more happing WaveLogic of started small recent come switching gears really But in Yes. X to here. WaveLogic to the in

with the to is think push it's heels X succession their that how So do in wait on given sort likelihood to of so orders the WaveLogic the the move the WaveLogic that the that up? of X out following pick start about customers and just WaveLogic sort of so to market, X, WaveLogic of in quick release X out you starting

Scott McFeely

Samik.

The first orders a of of months. big just that were last WaveLogic clarification. in that order saw all, XX point we of growth X So part a the

order Gary that whole it's the a really dynamic microcosm So of said.

are bringing to we accelerated are now shipments them those way, in what So to our to we to is converting doing an revenue, customers.

you I bit I something thought so heard of little clarification a a different, just say just point there. So

to revenues. out technologies first next several half will I against suspect. of 'XX, design of of point I for than that, cycles shipments it we'll is to WaveLogic terms earlier timing, we technology generation I of that that takes previous or in think wins about start as the see X, generation obviously, said, overtake actually But the

where the of been across For number was it's shipped of of our technology, units biggest WaveLogic and example, that couple past first available quarter the a X years. was generation of for all we this quarter

Operator

Paul Our Cowen. next question Silverstein from comes from

Paul Silverstein

apologize I a but Gary, to seem be returning issue, to bunch. slow we the

So to strength web-scale, from these? And I -- like companies' mindful -- broad-based the driving the one for comments, the doesn't concerns are sounds like can same. pretty it to this What's understood far any if trends have I'm year, relative from What's your between CapEx that individual both your do that carriers it. in is give the of I'll revenue seeing us comments what of any add about. driving outlook It you Relative CapEx What your about disconnect the investor what's you're sound and you from your correctly. that? those strength incremental a cutbacks to been insight lot on talking customers weakness.

Gary Smith

want you're of pent-up been be equipment. the no that web-scale the doubt lead carriers about let dealing times have a placed first and demand, want think with of lot and that. equipment. me because clear, There's I Well, -- of extended really I all, orders They carriers mean,

would the of first say, Now we're area, sort web-scale seeing time manage their them I for budgets. to in the

into is our they equipment, and all guide. that seeing that in web-scale, the we they take are though the can't So the into our uptick built massive is with year. the seeing that all that, even equipment Even guide. And want of in we're built

want driving. they out to complete 'XX, because great visibility that it We So they they're know networks the the scheduling and gives are equipment which us stuff is there. backlog into

-- is budgets. web-scale, sort last we to are but are positive a And for So quarters. they have the particularly dynamic, are their few that that the seeing of seen actually that managing

pretty about had years, would are, the pent-up out market for sort the in they three the ship it carrier CapEx. and their conservative them were is growth of and when they space to two usual, particularly actually of period to and you the Then all, is this side was priority think I first pent-up to during their did say the got in demand, networks, capacity couldn't COVID last them operationally On budgets demand, of they again, then that the and managing it, in to time. things, they've -- really flat. they But we as not on build

for is it networks. a so priority And roll out to right them these now

So the that the But not of backlog, visibility to obviously, them. immune got demand out but seeing in we're networks with in the around particular we've all uncertainty activity to in given that their and economic capacity not the they're just there. dynamics good

characterize two So I would how the that's groups.

are seeing not out a of point We push not carrier side any We're the view. on it. budget seeing from

Paul Silverstein

All right.

critical numbers you a I'm And As -- least a which lowest keep the having obviously power follow-up, not mindful present, that ZR, solution an is the impact. at adverse indicate at the you've all guys that that clearly indicate got is I factor. in -- market, sides

ZR, if but that your to presumably on I recognize it's activity that at You've now necessarily But would anyone presumably your WaveLogic Any nanometer. announced which nanometer, continue terms any, relative power where me let update will X let is X on I participation, think not on of trajectory opportunity? respond. don't else efficiency. X in has announced you -- your

Scott McFeely

time changed our think in had network sort reach. front in be But terms still market that the as power people the into they've as there that for think mentioned the best to external fast some And the believe of of ZR opportunity think don't since firmly expected. in in don’t of market from we product I to last those got movements. front campus inventory pluggable us. some chatted. very much we've been moved validate We much customers -- There's the we has I there's both will position DCI still and I early and Paul, of you think but as perspective that. starting us. is references also marketplace, be off, bleeds

Paul Silverstein

the Jim, in contribution Any something? clarify from right. you Benu can All Tibit quarter? just and meaningful

James Moylan

bit was were in not, at it a meaningful later No, Paul. there was the little no quarter, contribution and stage. They revenue this

Operator

Our Long comes Tim from next Barclays. from question

Tim Long

well. if I could, two, Yes, as

talk scaling? lag use to in to bit there. keep Most a a little little kind continue then what reflect Can higher of seem secondly, in to bit which business to First, product. wanted kind growth a the revenue at And touch that you of match takes or and companies seemed Routing little higher whole, service or sales the a Switching, to peer businesses it looking have cases group the I about as level, in on bit quarter.

we've So margin talk accordingly could a little gross pretty a weak why this about you underperformance in service bit quarter? seen

Scott McFeely

piece. one me let -- second services take The the the first,

the both sort project the really off has more installation mix timing bit services here. you perspective has a pointed timing we delivery a difference margin there's services of a and revenue see particularly term. It's don't services. And product just equipment the implication ratio revenue bit, timing carry has headwind short out, -- of as from a piece think to project our and a also in the that the because cost of margin but the you bit a that is is So of based not revenue versus relative fixed to on it the with and installation projects. on a based, do it business of performance really the and sustainable I business in sort of

dynamic. services the that's So

to architectures. there. and in that switching. Switching momentum few pretty a cases, a quarter are of use I'll so excited are and say, row, we're Reading absolutely piece, the in many next-generation the building, challengers right. There's On Good about Routing been you're In the we

in physical us that the TAM remind much talked you, front converged capabilities at with our So still and on capability include IP we we just to XGS-PON from there. but benefiting optical is terms of core, in about. And key and we've of both that getting residential in both expanded edge cases also virtual that future that the next-generation been our focused use wireless of think very transport a enterprise strengths the then metro broadband sort

pretty about and in we're continued So the excited challenger being in that of us. opportunities front space the

Operator

Our from Leopold from Simon comes Raymond next James. question

Simon Leopold

could about ask they're you comment on I two a because from wanted see I'm bit the to Gary India. going to I the picked related, sort but talk your up expectations quarter I think at $XX combined if the of little million. for

X% revenues. about were you year, last think of I

displace share and India on how for see your and sustainability competitors? the outlook better position being India. a outside Huawei, get to updates related thoughts to And not is, your want globally, win versus to able the of question Huawei Just from China, but more you sense just your broadly,

Gary Smith

I what one. Yes, anticipated in we're sort see India. industry, in which is the a beginning we take to let generally the me Simon, of India think strong build-out

very a three You just saw that India cycle a have frankly. us, in quite probably good expect our not years a I results. a year, would whole There's for good but the investment well by in market fastest-growing primarily we XG of #X build-out, just positioned is the generally, sort the the there. driven have internet share there investment market are and but world, there to

So we're positive to very about be cycle. going a It's strong India.

on And A then had, out decisions those question India Huawei made. actually and up of in lot Simon. pick Huawei already been broaden to and you that the

out, which that I think now we're I world to would moving And relative of that. characterize direct we've benefited India We've the very as on Huawei. quickly rolling is parts wins the certainly had from replacement. other displacement of

that stuff their of next initial not is they few particularly Europe. The of with we're infrastructure. America, they winning years sort was focus And beginning wireless our Africa, other Europe the get Their as the parts that them world get multiyear there's you into out think in And they to the market countries of it that sort and kind of in Europe share in in space. too. they certain Asia, I in process you of see where building Europe. that of it. in in Huawei when replace is are think Other fair it, But will And over as Huawei. continue a will geopolitical you Latin the is changing in are look area, kind I much generally to -- as to to look stuff get less not speaking, other and replace at are they responsive the continue. particularly transport movement at

holding it of and like speed, sort that. that's So would course I describe Simon.

James Moylan

we the market significant the the resistance believe will have And the networks. that's add share having area. why it's area would the that pretty because PON they I core PON as has the Huawei us in one of reasons of they're in interesting to that same in a

Simon Leopold

India the clarify comments. to Just

was of I prior the XXXX about peak, think I revenue. X% think

revenue smaller base. a So

this at consistently, sustainable but million-ish this get least is of likely maybe that? enough level? Or wondering, is $XX we How Just XX% to a be to not sort to think business close material do revenue? about of

Gary Smith

to it's think revenue. terms our part of possible a I as grow absolute percentage in

scale, Now everything else cetera. is sort and particularly of the routing the et growing at as well, at look uptick, well and switching you look in uptick in you web and

high, be can There's again, major doubt touch probably no So to about a us. but it that. would little contributor that's certainly a it XX%

Operator

question next Marshall comes Morgan The Meta from Stanley. from

Meta Marshall

for couple of me. A questions Great.

on gross starting maybe Just margins.

AI little as given the just just traffic data is because margins an in that deployments, it's of seemingly that, be just we just And growth overhead, it's think of as differently less relatively nature now, a you about and year bit understanding for that see mostly additional releasing leaving wondering of center new think anything and chain, about whether right they year. guys it same there? driver kind should opportunity the consider how Just chain could you of the than then second, or the you're gross sooner you guys? there the kind But expected, topical anything supply for think more for you whether DCI supply small

Gary Smith

Jim, question? of part Meta. Thank take don't margin you, you first gross the the that, why

James Moylan

Well, thanks, Gary.

for world, with we the As we've projects mix. scalers, won new reconfigurable line gross have the including and calls And element future margin web new always lot the historically system. of the important all our customers deployments is said, for our of a Meta, and over most which

call will deliver dilutive happened of Reconfigurable will proportion gross to great happen. deployments extent those margin. to a we what year, it a hasn't but our much and on bunch of effect have we this a Line that a will RLS, It expect customers higher We far, System so

going And impact to over think the next so margin couple our downside of gross to the we quarters. it's

side, begin XXX costs points to to other or on the XXX basis exception probably basis higher are On market for costs. well year we to said that last as think us points down. brokers, costs, cost components the we which as And the pay logistics we do these will broker our come gross that margin

which higher come to combination higher our which in exception percentage think So it's margin costs, a gross of start are of say will do go QX, average is year a as RLS. We influencing the deliver did and and than we right we of now. these down through a shift the We modems had margin. mix bit modems, percentage that, that

average AI? that tend we themselves think things and Now gross to these all on of think over that back enjoyed the next out the future, will for margin the we'll do we to pre-COVID. years, we Gary few get back mid-XXs

Scott McFeely

direct But you're the Yes, due your the look is web-scale those traffic going bleeder center. community in be Meta, in good the the and you at right as applications have well question, a distributed right, AI interest the side that becoming the it web-scales. is as service those on the of effect data is networks of those a WAN you power the sort look requirement service at more business. for back in going are to of will to to both providers which of service to traffic that get bandwidth largely of data now more end that more the center to as And and AI having architecture thing the us that's generate, is on

our as on I'd AI interesting dynamics world to this does coherent data Those of being advantage those you architectures. conversations us the the future for capability starting are where participate announcement, center. yield coherent architectures And have architectures the technology inside to in has say, play. of WaveLogic The and in talk generation and look of second around and lot those X architectures about take people technology industry the kind future saw forward going in into a of the of there's on phrased starting light to thing would the that

a us. space that's for So new-new

So our to revenue guidance. our those not of horizon, we see three-year necessarily in that beyond But a timeline opportunities. start of just

Operator

comes question UBS. from The next from David Vogt

David Vogt

apologize I the if orders. to And about I'm Great. point backlog belabor and going

mid-single mean extrapolate we certainly expectations? Is X.X that the in so based draw if Gary, backlog mid-teens on that half Ciena in be just in into the forward comes growing for just if 'XX, three-year book-to-bill the And And then call. revenue take of in of I on the if your And quarter. my 'XX model. optical roll for the going down like comments the of second of if I back maybe growing is only assume the I square comments digits? based would X%. year, backlog industry trend question that It and gains three-year you does sounds maybe the correct? than the plan, midpoint forward, less maybe, your was share would your guide, Because optical full Can that that kind sort about sort your of around is on that the

love I would on just some to So that. get clarity

Gary Smith

Okay. Sure, David.

as we've head right and any no, QX. fiscal would for It year we order up than said, It 'XX go was we the the for was into fact end, take than Backlog XX% around specific growth on isn't more that. built their all, have to that X.X I normally the of assumption. get everybody backlog, about a for into expect bigger the we're the needs have with First to And that that. dynamics backlog year-on-year going that think not year. to

be backlog The is still we and ship strong. right the times. to our So going that is backlog focus to lead reduce to that have very now

look we gave over it only you guide, gave a that at last a If the quarter. -- CAGR we three-year

And give XX So that we're many know companies specificity. that months don't as I into out that.

Obviously, even growing is this And the we about an last the we're that that leading you that's a profile XX% done years, has have, technology has what the X%. a in market given very, Ciena for or And that given have, customers at around ship through decade so. we're the year that's of XX% that performance. that quarters the dynamics of strong investment and very strong, and scale very we been outsized growth we typically a think to we if various various in having all confident to and backlog. But CAGR. year look XX% So around as XX% that the very

talking And a for range don't size about of I think in so midpoint that many of companies of the XX% year. space I our are the know our

James Moylan

feel David. future about position to We We and a did be great market our And ability just clear, range, not give to our still the in changed. has our grow.

faster quickly jump so there market. than mathematical this is right a change. great And in probably idea the feel not about to equation to to our of and turbulence grow We ability time

Operator

Next question Evercore from Amit comes from Daryanani ISI.

Amit Daryanani

on where backlog to about range I me think historically, be do And $X that way number that you've year? end maybe maybe towards talked your guess, is the to talking dynamic, you think billion memory serves backlog long process take you backlog? or about much normalized it what to if should normalized about were a the this does I a exits of in think Gary, as Is beyond $XXX million How to in a a well? backlog get range. it you XX there

Gary Smith

is like. the been is solid. of by has to times ability I normal very that I dynamics look meet don't It's the this driven honestly Demand is resulting know to think Amit, necessarily consistent very that the to demand. largely demand. lead the answer new by honest not what are And going of and

will should when around It's around There's dynamics sure the like no be new in. getting absolutely got that. to lead Two space, and for so will access of the new I'm of this volatility whatever I'm kicks return better. and supply still that it, that it. kind not weeks product, absolutely. the times of That's or very even about because edge normal in for you've and the rest chain. they And great. for projects the that were XX But to not large look normal what infrastructure in the doubt level weeks, that XX sure

in that get us 'XX right it's will It's lead backlog normal that and carrying business. the and 'XX we like. the everybody new sort into reflect about this of of different that because might for a some will But in had look it. the difficult indeed, translated timeframe exactly So into we'll had back space. it backlog. lower backlog to what to very the than There's be for now predict that normal new and even, we bit when seeing orders have of now. times wins that's Amit, in sort same new to doubt amounts we're And of of And little a better that no enormous kind

us that's gives fantastic So XX over what months next the visibility or so.

Amit Daryanani

a if growth Got maybe minute about think could -- the then it. talking And about spend you XX%, XX% rate.

EMEA You versus well. and think then How it? about there the little stacks perspective, growth sort weaker a fairly rest doing the about India the bit talked do a of up think geos. you And bit fair I think APAC that year for Jan you from is of quarter

you maybe in year? So seeing on just touch EMEA are what for would the helpful. That be

Gary Smith

Jim, want to that? do take you

James Moylan

this company to this above quite is to are sure but of going this at going probably it's -- pretty I'm grow in very all year. will is grow going to web-scale that our grow well average EMEA year. that not average, India significantly above believe regions meaningfully average. grow. it We

Operator

comes from question Jim Suva from Next Citigroup.

Jim Suva

gross My little on margins. question a is bit

it lower understood you think correctly. I -- sorry, that that, want mentioned sure I make XX% I to around low You'd range. I'm said

XX%. You're not saying

lead your long of you and kind Or more would going But to lower potentially believe experiencing XX% saying You're in part modem backlog less why shippings come XX% because power? misheard the pricing the quarter? lower? I in be just the that? it is of I in to just times, visibility XX%. maybe So should just is that kind for of with year range the full have margins Or next you're

James Moylan

below range. XXs, It not XX. Low is low

margin mix low expectation But Now a can our in is XX there's gross change. look, range and percentages.

and lot for of XX%, that. new systems. start systems and I know. with But don't they change what toward It So a we mix number a of our has that, that. to new said, won of lot XX%, it's about way a the some is to that? nothing deployments and sinister flow absolutely there's just deliveries modems. is related the do line projects, it we as XX%, And like And a fact line with

us will be XX% our will maybe want do mix over XX% mix of had it systems, So I we beyond year. believe that, get even had equalize we'll for time a that's as see again, it changes mid-XXs. low of to and lot mid-XXs and which we've We QX. to that's though, precisely, costs, think -- say, is modems our that lot more. had But we that return why the and shift in We've expectation average should XXs to to the we've and business to the between line back exception change. with a and this

Gary Smith

question take will please. we Jason, one more

Operator

question Najam from from Fahad next The Capital. comes Loop

Fahad Najam

but to Coast. going to the repeat you backlog, I'm revisit to if apologize the early I here too it, West I on in ask it's hate

was could longer meaning then wanted So have of the you your to beyond months? real the in us XX And that backlog I I ask you. next remind duration question $X.X portion what billion

Gary Smith

I was broke $X.X I we we that down. Faha, I think of FY but can't the outside hear don't I of well, think was you what think in -- question very percentage 'XX? the don't going billion

James Moylan

of we lot are could that I customers lead would the say times, of significant sort it cetera, would situation a But et disturbing deliver it percentage taken. taken it as to them if a we component by availability, very of be know. would be

Fahad Najam

Got it.

in the really by guess announced the the be accelerating gig, timeline business, it sounds if of 'XX, I assuming case, maybe the could it's you which that's especially nano, I'm how a to market catalyst but announcements, half an XXX kind preempting cadence. of pluggable And that suggest for do announced, Now ZR, opportunity in the big existing On XXX-gig market seems product 'XX ZR, the you cloud? question. to How -- that WaveLogic also guys my have of your like see are you leaders you in your if the X 'XX. WaveLogic you X big to from first wasn't Ciena

Scott McFeely

the ecosystem look fabric Yes, And to these including gig customers of there's has to to are disrupt trying as wouldn't take. generations, ZR. flow at It upgraded. entire necessarily interested get that I XXX step it next to is switch the whole moving a natural around that the expect

XXX-gig with market. I necessarily are that So in play it Extreme wouldn't or because doing we and WaveLogic was ready that ZR evolution driven our to are our customers the natural think it space. some it's parallel we for But want it the disrupt trying market. just We to efficiencies that think X there by doing be for in

Gregg Lampf

those a And much. forward thank Jim especially, meeting of of today, you looking again, you, with in lot of joining OFC. We're on very you Coast us to the then. days Thank us as next see everyone, for West said, you at couple and we'll the

Operator

conference now has you for The today's presentation. Thank attending concluded.

may now You disconnect.

Ciena (CIEN) 6 Mar 232023 Q1 Earnings call transcript