CIEN - Earnings call transcript Q3 2024

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Operator

Good day, and welcome to the Ciena Fiscal Third Quarter 2024 Financial Results Conference Call.

[Operator Instructions]

After today's presentation, there will be an opportunity to ask questions.

[Operator Instructions]

Please note that today's event is being recorded. to of conference Investor like Lampf, to now President Vice Relations. would turn over the Gregg I Please go ahead, sir.

Gregg Lampf

. Thank you, Fiscal Call. XXXX to welcome Chris. Good Third morning, Quarter and Ciena's Conference

President the and Scott On Executive also Q&A. is us Adviser, is today Gary McFeely, CEO; Jim Moylan, call and CFO. for with Smith,

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

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

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

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

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

SEC also in expect our should we today. statements in XX-Q, context detailed and the our file forward-looking Our XX-K factors viewed with to the recent the of be most risk which

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

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

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

Gary Smith

good XX.X%. third and million results, Gregg, margin revenue adjusted of gross Today, fiscal we strong quarter everyone. reported of Thanks, and morning, including $XXX

X% Highlights financial of our our Later adjusted Jim and with additional QX to quarter operating outlook the call, the delivered provide also margin will the performance. in $X.XX. from EPS and for our We quarter. fourth adjusted quarterly portfolio respect of about details

Jim, of morning search will outstanding year leadership of look Ciena. XX an seen to team, years us executive he's decision his process after to him the identify this a continuing while the that Jim next the informed is news we retire more speaking our we And have member you than also commence successor. and forward to with CFO, of obviously

business, never encouraging. overall continue leadership And apparent. has be innovation the state dynamics industry of to our our frankly On been more

finished strong, direction book-to-bill expected, gap inventory the is particularly market see this right the cloud flow is in ultimately, quarter anticipated narrowing. And and As to ratio found with traffic, with providers as by bandwidth absorption sign a and was between demand strong continues and that order rise in and growing, above supply one. AI-driven the we the moving driven network in adoption. positive increased the QX the We largely a with be

And network current machine-to-machine-type and largest most is we two me dedicated initially to and toward lens move for capacity customer to at helpful customers seeing Providers. clearly now Providers really look support that our through believe segments, this next are my AI traffic. is which We the Service of the architectures, point, to brings environment Cloud

in They the the clearly are out with support charge cloud and networks AI-related building traffic. leading starting cloud to growth providers. in So expected their

of subsea long-haul their architectures network with in power. space most routes the center Specifically, capacity to from they investing cables to essentially data use connectivity, are to add efficient and

and combined and getting our business segment providers, with all key customer with addresses best expanding relationships these requirements. strong technology aspects. this cloud leading And with is deep our stronger Our in

provider cloud AI major with pluggable wins new cloud the and secured growth the for terrestrial, traffic. driven customers, submarine spanning expected preparations applications, in by coherent and we majority QX, In

we For market operators a and us players, offer are growing cloud range companies of the infrastructure that and same cloud cloud seeing data opportunity expanding a reason, including for center set amongst of applications the services.

have, in several deals And fact, winning an we of been over customers number the increasing these with past these quarters.

to moving many are to globally pipeline service Now deals, and Overall, our including providers providers. with logos. we significant increase, new continues service winning

ones example, across secured in India, Germany, several and South new we customers QX, North For in Asia, Scandinavia America. new

telecom expand optical and wins activity, enabling major fiber in advanced to related them would MOFN addition, remains quarter, provider bode just lease we reach longer reminder, pairs mentioned incredibly QX. last wins to cloud service our while MOFN, say to which X strong service to networks timing In reflect their challenges these customers. orders. current the build over I results and that with better and providers the well really continue a quickly volume term, with And as service their of the providers,

inventory evidence started prior to the patterns from service more quarters several completely, take this providers a will we more but gradual Obviously, back absolutely they as and America, have to remains North see are of periods. continue through in Specifically deploy buildup come balance, purchasing improvement of into of we seeing here. to normal clear play recovery

related persists industry to well issues. cautious international to particularly spending geopolitical structure in as service macroeconomic, concerns as respect with Europe, Further, and providers,

we order As that the a counterparts. from in lag volumes generally international service providers North our recovery expect American result, of to

as portfolio. from in markets, move technology that leadership. expansion the to I as the of about a innovation market want market our advantages to we that have in discussion our talking the And opportunities specifically, well With our today

modem optical optical modems technology. portfolio automation coherent with WaveLogic industry-leading network technology, stronger systems latest with and our and our coherent been generation software. control our Starting never has line and our summary, X In

demonstration in that can deliver across network terabit performance, first I clear X.X in transmission application telecom and in XXX a WaveLogic Arilion. capacity Last achieved for the a Xtreme X-nanometer benchmark new data technology unprecedented our the kind technology X to we customer, setting that This a week, is of saw with industry. leverage its the world many kilometers world's a think you the wavelength of some first live our

We expect market has solution, a as we beyond we competitor to to X.X revenue we particularly and have that and announced with in from other a XX list lead from X.X given a terabit, terabit orders plans our for begin solution continues X, already considerable even that for grow, will recognize time to shipping. no WaveLogic QX customers benefit

critical and distributed, do II As fiber forward-looking network are maximize demand that most are increase capacity and more line systems power reliable, become importantly, to architectures. minimize on traffic

providers system. of system The result closely of our that is space greater line have we often consuming power. years, leading industry's on reconfigurable applications several course, manage and, next-generation design For as been collaborating the can less system bandwidth-intensive scale, leading to platform, line and that while is with It line density programmability, the open RLS. cloud with all referred

RLS the providers. result, by all As being a as a now number providers of major is deployed service cloud as of growing well

In with to track, quarters, industry's fact, network foundation quite architectures. line of form future literally, quickly RLS has business capacity orders the system which we revenue over the to choice of for And lays coming expect and increase the further over become it time. accordingly, adds for their AI-optimized

control the Control our Navigator the talk Network network Finally, let about advanced most suite, in software industry me today.

its name Some MCP. former remember by of you may this

AI complexity. are obviously bandwidth network meet evolve demand and in by growing architectures cloud-based applications, they also driven As to

As and never a these to been of result, control networks greater. automate need the the management has

micro on Our designed only a currently and Navigator domain Network is performance. is based the And suite control it controller optimize just and to that. services do to scale the first architecture

layers. Optical coordinate It a to basically provides life network system. Ethernet all a and across all network single operations, single cycle view software IP within

respect our Moving inside market growing opportunities, seeing and and incremental from the center. technologies. to expansion are a And we on Optical around data our foundation with opportunity

and address range Specifically, including high-speed of technologies wins. leveraged be technologies, to already our pluggables, several factors, In foundational of optical we in form a variety interconnect models. significant a consumption really have can pluggables

CR center data really ramping for data providers applications. the interconnect. fact, at around In for we're XXX specifically cloud short-reach center revenue

opportunities for the by top major everybody as CR, quarter, are XXX X that cloud recipient award would providers first last I X won any partners mentioned of we mature over and we've inside the we cloud with also data cloud several and the are closely to and now center, at of the in ZR for portfolio XXX this ecosystem area, remind we provider. develop our opportunity interconnect looking time. and customers collaborating In this expect

traction can address is distributed, to is cases. the a solution, gaining in as coherent is open our providing enterprise This competitive flexible mobility with market and also and taking XGS admittedly that are would expected, OLT access grounded we longer have which We more solution. optical is forward advantage we ramping. funding broadband than modular customers opportunities broadband around in In and sustainable and PON a cost-effective, look public and technology use residential, our access, expansion that

routing, scale metro. In for the in coherent to from as optical we increased growing will across drive efficiency to continue the over applications network believe, domains in and to converge new traffic IP support flows need customers time the cost

well a and industry our purpose-built in support in We aggregation to strong coherent summary, positioned are them performance improving we routers, with dynamics. we that the encouraged QX, by delivered remain say I'd -- so

and will of open improving, Clearly time-to-market the providers continue our continue American driven our strength market gradually our to service be among new up drive and leadership opportunities but share time. dynamics to are strong. advantage gains Spending North by over innovation

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

James Moylan

Thank you, everyone. Good morning, Gary.

million. measures we in income strong results. was respect As of one margin adjusted quarter financial With $XXX XX.X%. provider included fiscal profitability adjusted X%, Audio ] This EPS in service gross revenue $XX we as Book-to-bill . [ cloud and million Adjusted was net per of was customers, operating QX margin adjusted one expected. delivered Gary than QX, expense $X.XX provider. Total Gap one stated, of share. adjusted third two we and delivered XX% greater to was QX operating

operations. used In in million addition, $XXX cash for we

including We improve relationships in realignment of activities, as a have our vendor engaged strategic our in supply improvements well chain processes in and changes to systems resilience. as been

made of part of of million next over $XX base, to approximately movement facilitate the one quarters. to a Adjusted million. transition $XXX this cash be As QX advance vendors was our recovered inventory our which vendor and across we in EBITDA will a few

we $X.X the of to 'XX. the the approximately and with in And of shares fiscal continue $XXX the by ended million target approximately $XX repurchase XXX,XXX for shares during million quarter. We billion we cash repurchased end quarter Finally, in year investments.

the close Extreme logos portfolio XX none which shipped Turning from of quarter. highlights and QX for X are new In continues. traction WaveLogic X Ciena. another to optical, to added customers WaveLogic in XX,XXX We some modems

of and the quarter XXX in with to WaveLogic continued pluggables the in X in XX% We number total X was X with sequentially, revenue gain XX XX% customers new We of WaveLogic ZR QX year-over-year also Also for customers Nano, to Plus, WaveServer new date. ZR momentum for a in quarter. revenue. up optical, record Nano shipping a added and

secured more business which new solution, IP being gain routers our customers our and count increasing WaveLogic switching than with X In and the and leverages X also momentum. aggregation continues routing Our control is QX, and across routing our selected to outdated broadband Navigator legacy Europe by global pluggable customer broadband we Network U.S. customers XX coherent increasingly coherent combination access solution. Nano suite in our replace to to

highlights and revenue and Services revenue portfolio X% for another Software include good from Other year-over-year nearly year-over-year. doubled up Platform the quarter quarter Planet Blue with

now Turning guidance. to

put to deliver in for in year fourth in $X.XX billion expect we provided the at to XXXX, in fiscal about us the a line $X quarter, would billion guidance we revenue $X.XX range revenue billion. fiscal with This For June. of

gross combination We to the which in expect system, QX range. to network, capacity for sell to we're Gary gross mid-XXs line effect that margin we will and brands, improve. capacity margins. low our This of our it along. a margin about be spoke ideal modems on But has reconfigurable intelligence high new provide and next-gen has AI-driven on our the adjusted as makes near-term selling the

be operating And to expense we $XXX approximately million. adjusted expect

QX said, expectations XXXX that XXXX. when in indicated year we would that a provide as we years detailed few fiscal report a view be impacted our year in challenges is to fiscal by that and in our of pandemic previously XXXX, to outsized fiscal were supply With snapback, the December. transition results chain resulting we ahead unusual our a of practice, normal subsequent that the a this Looking led growth following amounts will

growth to rate is the X% range, best said We is growth revenue forecast. by our using that our annual representation have of also we This rate of a over growth period way, matches believe long-term faster growth market based years. revenue X% rate, a compound than current on the which long

view in a believe balanced rate the to that growth continue is term be that can X We that of long year's range. and outside any mind keeping for this reasonable

prepared Before retirement. have the are We likes about notice planned company. departure our community providing say great a we that is conclude words I'll my Ciena and to today. a we of executive, notice that few of remarks, advanced the understand investment a senior

competition have best world, the optical the lead the is on We technology and in our growing.

also employees all Ciena and We passionate makes to a over talented globe of a great group have place the work. that

It has has continue be since serve an year. and another honor experience, it at as been been Ciena than learning will for more to it a But to tremendous I CFO. be that, will

transition. and closely I a We will my work to smooth ensure replacement will start search CFO a with next Ciena's for immediately,

our based quarter QX, the and wins the momentum in we're we've in a discussed. delivered seeing our fourth guidance achieving we we're on close, business To confident strong

capture about expanding the the deliver over of and into We growth, profitable opportunities new and available are coming optimistic areas long-term market positioning years.

we'll from Chris, sell-side analysts. that, take questions the With

Operator

[Operator Instructions]

question first with from today's And comes Meta Morgan Stanley. Marshall

Meta Marshall

just had talked kind to you long-term a guide. kind Jim, call, X% being good you mentioned of about of as the on X%

are as Just 'XX as you have and of fiscal they 'XX a there are? comfort within Street you at the that range, fiscal they is as they of that estimates look are kind with estimates

a second maybe then for And Gary. question

that that Just currently? reach. you getting a on pluggables wins of short the guys said the very had additive business pluggables you as were noting those view to that the lot business Do that you have you're

James Moylan

we're on position to that to estimates continue And 'XX our any going We is in today. X% seen out think a to past. long-term year won't feel there take given growth to vary say we great in that the think will I market. in about the share. We rate. from as the I good It's comment we've going X%

time. don't are QX. for things finished point us. at those of But good We to 'XX all this a So in about we make want comment just

Gary Smith

Meta, where of on been much to this. an go the we consistent opportunity incremental at the yes. as Most the into is of answer We question, short second that is So now. have pluggables really part revenues most We've Ciena. reach very the view TAM short all about right going for don't

So seeing high-performance We not that's system very cannibalizing submarine, complex and sit basically requirements. We're long-haul, not it. do where that. they're

the total less metro way. the which than DCI, of the On is XX% optical market, by

We there would DCI. shape be growing opportunities reach not and short for in incremental cannibalization will and the any opportunity metro again, the more of the into any are us incremental the seeing, part marketplace. really and by be than major We're that is overall by gather seeing that pluggable cannibalization

Operator

Simon next question the Raymond from with is Leopold And James.

Simon Leopold

And I thank of you notice. . and giving surprised. a for First Jim, that. you. us Appreciate congratulations, X-year hate being we'll all, miss

dimensions I put So about. if opportunity some wanted on could the first the questions, all, MOFN talked you've of to you around see

somewhat that's my question. of telco, sort indicative of in cloud Given but first it's the it's that buried trends,

your As winning of could wanted X least with yesterday at opportunities if on operator. I to exclusivity your of in a comment broadband exclusivity from one competitors U.S. a or announcement light follow-up, Tier you see claiming

Gary Smith

cloud they'll for Very is specify quickly. particularly to piece. a that Simon, providers like around take to the get let becoming our part globe, market market providers delivered service cloud the cloud often, an providers. Ciena, globe, me gives the with which provider define happening basically larger the it collaboration India, increasingly around in they large obviously the the and they It's architecture a want opportunity will piece the of in MOFN that's target places and and

business would sort total put of of on way sort some of it. both size to of all which, the of get be view difficult XX% of us business those best is XX% cloud, to visibility MOFN on and provider That shed deals, for. probably our with best a business indirect. service it, but sort I to It's provider and to that actually of in perspective it, would business is That's cloud our our getting of XX% direct together total our sort Subsea XX% is in direct really

by And players. often, of cloud countries, be there in will very a the approaches different combination various

fiber, Some dark may they be like themselves.

and the provision increasingly which capacity of a just on will normal be may lean Some deals, we're seeing dedicated on MOFN cloud some towards. be lot the providers

all kind around particularly of of in market share And placed the providers uniquely relationships carriers world, submarine of we are well. the our global the given that cloud major footprint our of and cable the highest piece as around most the deep with

So of we're address together to that all and positioned put you somewhat uniquely market. that

Scott McFeely

network I'd the to to perspective not say excited bringing an that very timing our to this, our on up marketplace individual quarter-by-quarter management we proposition the of hiding business, virtualizing We're XX integrating about intentions then count. now, OLT, customer we to is terms the are we're in resonating the routing, opportunity. capability forward-looking a core it's the to it's suite broadband marketplace, that market access well marketplace into that talked And our on the in customer, we're Navigator, about value wins obviously, with in that adding to the and that broad

And to than much individual play we're not So going comment it's individual on customer by customer. broader anyway. an one obviously,

on swimming in the I'd though, service short The in space. dynamics obviously the it's is the term, say, are right other thing provider into going that

by there's in probably delay So and accentuated funding. of the the bit there, a a a bit headwind

we're about a potential. headwinds, So there's the excited been but quite bit of long-term short-term

Operator

Chatterjee Samik JPMorgan. with from is question next Our

Samik Chatterjee

about you remarks. order I had prepared for you commentary first one, ask if can in that your Maybe the sort the of more

last sort the from of more limited sort slow mentioned be one, the but you're what as think with seeing of which your above service book-to-bill a internationally. or tracking sort I providers, recovery largely also particularly highlighted positive improvement for expectations you the quarter, seen You of would

So I is orders just America you your a -- how can in the the provider I do don't know exposure much a out parse service improvement have we order like provided in service international? below if mean, And terms follow-up. and cloud sort I did of think of much between provide the service you have, bit And expectations. versus that how North should ever of you in is and providers come terms improvement

James Moylan

American Clearly, on international web our service near by the expect year. the some improvement improvement in the current we But are next providers driven in we mostly North providers do service order expect flows scalers. term, and particularly

point about a our at QX. as flow backlog be QX cost. Just We reference, slightly our end of in revenue of billion grew at order below to $X.X think the will our maybe

this it So our of around will is in end improvement providers than will a rates. do we service expect we the think some be backlog, little We expect because $X heavier that billion. it their year at be order today

Samik Chatterjee

the come short investment or And should pluggables portfolio how reach of AI towards web that thinking to from . sort talked really more CapEx for or versus your and think does traditional we follow-up, you for and as have, How my AI that through portfolio being how investment the where on about you're robust directed really about the see cycle benefit from sort much all side. towards you that will preparedness about webscalers be we the of portfolio by preparing driven systems this the continue of well. scalers your

Scott McFeely

Yes.

it plugs system, plays that, end-to-end pluggable think other about DCI. that is been piece, place other separate that in also stick And short-reach we've we the metro whole consistent said to think with the said think a pretty what industry we we of gig a longer through that's than in a you that buying plugs take if I devices terms as see the to pretty And us that ship results application. of starting business. accurately come in to piece we're think or would the and for played that financial out it be that for into we I material XXX

that largely said, have as because of for Gary net been again, the incremental exposed part is to And us web-scale we networks. that

with back you I have. applications core broader applications submarine I In line providers those we systems and that service back those into systems are then large them. through the multi think complex And networks. on cases, on that we with those control winning hand go that exposure on remind the to participate though, optical comes the and the network them spend, their the

And have X think all we we in technology of best dimensions. the those

our So share opportunity fair we're going of to that out there. spend continue to take

Gary Smith

the continue requirements said, systems, performance that, vast optical spend will be complexity vast these traffic. to of to add the Scott space, driving large and in network their the Just spend what's of is on the systems majority exactly of majority cloud because the

Operator

Daryanani from And Evercore. with the next comes question Amit

Amit Daryanani

I as to your low Maybe with have start mid-XX%. the X quarter margins October for well. gross to guide in

more just you're normalize quantify then longer there. to points duration I sell Or that like in seeing and see impact initially you think line normalize XXX you selling you to about just Could some do to fiscal by headwind, talked mix systems start that? that potentially? there 'XX XXX impacted basis you as is a what modems more

James Moylan

selling that I resulting at clearly, margin but that number. about I the won't least exact a can't least that's couple number, of today. of It's of points. gross an we're kind comment systems line weighted, 'XX and basis hundred I give at But very it's mean, heavily in you is a today impact. portion

Amit Daryanani

see APAC but what starting little and side, and comes telco North the weak. can on then a wonder being And recovery seeing it. EMEA talk I India little to spending?. in you you're America a just bit telco talked it just if a more you about specifically Got in when about to macro-driven bit

Gary Smith

seen Indonesia, strength we've Southern wins, a et Vietnam, We're like cetera. seeing in of number places Asia Asia, particularly in Pacific,

we that. And new for So us. logos see then

market We have very low there. share

India. about encouraging. So we're that's very I India, In bullish think

share activity. as investment of of the #X cloud XG growth a it. on the focused there. good is from are we cyclical. but They're recovering pieces, all We It's of see in obviously have bit lot the sort a very MOFN market We little seeing

to It It's in we're sequentially some cycle next strong little as think I bit ebbs remain out bullish. up we next look So years we that to have a was flows. to in going -- But one think three one on years quarter-to-quarter. three the again, we're India. we the and a to India, for over

James Moylan

And want points, basis something just it's basis correct Amit, least I not XXX XXX QX, said, at I to in points.

Amit Daryanani

retirement. the on congrats Jim,

Operator

The question is Tim Barclays. next with from Long

Timothy Long

Gary first we'll Congratulations and normal do think fiscal strong Jim, I And you we after could, you. did Jim, then in year a I business just 'XX. get a at follow-up that. then if next kind Yes, I miss or of after going did for maybe just a at typical too me I don't have in this 'XX look we're a make correction too more you But comments a 'XX When one, some looking as as we well, to follow-up. go-forward about understand into towards here point. want comment? have or linearity little forward, bit the back more

James Moylan

You're referring to seasonal linearity, Tim?

Timothy Long

yes. seasonality, Yes,

James Moylan

providers. our business with mainly to service Our seasonal used because predictable to be as its nature business very

to of to sales company we've the scalers, in make very business our strong the it's become by of predictable activity. is XX% we their in terms With XX% a first quarters. We've had less much that as increase our web said, Gary revenue seasonally, driven

were web And and scalers. third the our fourth quarters. our past, can change biggest that typically the quarter with in

even And completed way, So our really, seasonality plan I we the next year. can't now. by haven't our for right call

what to be. So I it's don't going know

Timothy Long

lines the business big changes of Okay. a kind follow-up Great. Two a And little looked then here. just quarter-to-quarter. of two-part

there jump some -- just in kind in of Blue seasonality? deal the drop Planet or And is and a big there routing for So switching sequentially. similarly, that

either levels of of them? businesses there's like are in onetime anything here? kind . in So more Or those normalized where these

Gary Smith

small last this but Blue year, focusing orchestration. been from around on applications been successful. Planet, that's We've Planet basically doubled a inventory Blue on relatively firstly, specific So basically Tim, time off increasingly very And base.

we're just not Planet encouraged coming quarters. the deal. and big talk more about by Blue it's what We're very we'll during that seeing with one So

of focused saw You seeing recent assurance. Lumin, a engagements we're set that, Blue with Planet, like network good of across things think, broad is, which more I applications evidence including from the but announcement

of On right and more by I the the routing routing really, the to continuing switching, that's And particularly service logos. on switching. think good make now We're think it's think provider held service function internationally. challenges. and overall are I But really we I back a progress provider seeing challenges, new overall

think, is that, North including we've I challenge think, America, We're more I seeing evidence as particularly gradually switching. routing internationally Europe. The than improving. is of talked and in about, clear

Operator

question from next with is the Notter And George Jefferies.

George Notter

I wanted the in sort webscale direct guess of I to ask revenue. about your trend

of really, really a to You've scale of now had a what row of was couple relative couple quarters that quarters in sales. web smaller are bit a strong

whole I've and sort a more trajectory picture relative of got MOFN ago. look step the narrative maybe guys, at better So of wondering the you And that narrative? narrative of that causing do it's Is around versus down of function of to for that. better. I'm and AI, adjust But just sounds the the and the to of from quarters sort run seeing better you I and at not inventory sort your deals explain that what's digestion, think, kind rates you're a couple how .

James Moylan

George. Yes,

I flows including is going scalers and think our of business to there are with going that that in -- be to be project-driven, all web the their ebbs the activity. and

So XX% to any submarine from necessarily as business plus XX%. another webscale trend. XX% an maybe not to Clearly, over we has make time XX%. said, though, and between a given quarter MOFN our you've seen, increase does one nothing as is or virtually And directly decrease XX% a in grown

to X. they on can't over past do the demand work MOFN themselves. on all MOFN So That's that that we're they why of increased up significantly the with things to it say getting do the network the will can't . But turning seeing webscalers I one that are the pretty or XX%. we is they're and are themselves, has year putting, even

something that is that shows and picture you webscalers. adds so good that to getting And the we're with the growth

George Notter

Great. as a it. Got then just And follow-up.

you a inside with I what a talk providers. opportunities, and centers exactly in collaborating . guys about is are comment the Could doing? data monologue about several what there and you made interconnect application think, more the guys You bit content

Scott McFeely

talk coherent third parts us First of virtual of is is there's all, really about selling us we mode you system inside technology there's system selling when our center. X outside There's of George, our that business. our technology to our then interconnect it. the talked that which X to business, plugs opportunity of of data plugs outside reapplying There our that the the business. about, And it and taking alt

That third one is a opportunity. longer-term

power. that for one, is On revenue they level communicate are we cloud of push constraints a see data -- way start to you to The dynamic today. things GPUs at provide because a shifting rates as things lower to first the a higher that the to footprint increased increase lower like switching performing interconnect as at the need as of that to look optics all providers the cost third optical high connect. at and have two distances power as obviously between between the those And

XX when couple of the gig. of space. from to is analogy going at believe firmly time, the question and to last cut, happen. at for dictate just is went an the physics techniques to you're not and decades when, it. gig has preparing going the than bear that the have to greater XX to technology WAN some point the will today's technology something existing WAN that what The bring We is in seen And going to that's

those on high the or it of digital whether electro-optics be So the the to of whether a center interconnect analog GPUs. ESPs that inside interconnecting with and some think assist taking really data applying be we they have capabilities that components, digital just of it at and level

Operator

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

Tal Liani

I Number one ask X want you is questions. to cloud.

not versus InfiniBand strong, of debate was in and participate you cloud did So this Ethernet.

kind that of You were debate. external to

So when going the you. is question and the the look is, at you a cloud view, X-year take view, X-year for opportunity opportunity forward

X the get years X Do going than First, general? is the And. seen deployment going what to we've to in you to higher last be growth think in is stronger? the

before. there the do Second, Meaning, going network bigger? opportunity you parts -- to were you that you are getting is not in the for be of you

see the years. next could growth in better you few So

will because So the to can I question, there. I better start another of valuation, have does stock your your with define and think understand and I it kind it cloud wanted maybe but -- participation that we

James Moylan

number that very grow the business given centers. likely years. that percentage at are business as providers building in of which over several the a are going are Given to seems those pace an that building web-scale data our out are webscalers set of data of the next And the increasing players centers. there cloud and It the data between

true. So yes, that's I think probably

where that we are believe to will. participate won place just of participate Now said don't participate, have Yes, places we metro we we a as in -- don't a really that's business in we the I we We earlier, business. going not short-reach in lot

particular. said, that reach short plugs those. we ZR more with long in think of our in reach and win, we'll -- will And I play will we space be reach as I XXX but a it we have and have think short

inside possibility a there's think the also data center. I

do good inside We have we'll make Now that's a the do to the that occur. there. that's needed a play technology lot of that still will center. we don't going work we further have out, what to believe be and data opportunity the transition know to can provide we sure But to

So in and of yes, submarine And the parts of now. in having haul as long do parts their ultra the scaler vain big going part networks including be web we network. we're to a

Tal Liani

Okay.

a you Second in not is mean sarcastic business? person. -- going question even is to we've that's this what it the Why way, This learned in like few I'm ask about is like I'm commodity why are broadband, a you and but in a to And a companies for the increased doing this participation fiber Commodity it while, last X? been it's are suddenly years, the pricing, why this there you? that about for right? have in attractive

Scott McFeely

Yes.

of I think things. a couple

at all, Capacities coherent space. a broadband world have technologies access in if is you was continuum And different First to to of of hypothesis to yesterday's to sense continue that staring towards That's play that's but valid increase. prevalent that, in continue continue the a out itself we'll network. optics, in playing the strength be are to and -- to the more that in do our future, that the is going of require the world. sort very there you're we're which right just fiber, question a ask,

coherent about you technology. it a going where If XXX-gig on think the with standards take are

the swimming integrated. spot. We're are the sweet own our technologies So to We technology. vertically

a cost we're a side. We bringing OLT the It's base have great will customers the And on to our base demand. that customer future-looking there innovative same architecture very, we very service to have. that also

the towards we that strengthen. swimming base have technology customer to same So

to Those ready own and big there integrate on. marketplace. the in why technology opportunity the reasons spend are it's and We the a -- out

clearly targeting So that it. like why are challenger but we're have. we We're the hand those we reasons the a

Tal Liani

do And margins can earn business? this you you on good think

Scott McFeely

Yes.

today corporate line that our and Our -- margins. in average today on margins XX the on with today margins customers is

Operator

And question comes from Vogt the David with next UBS.

David Vogt

coming Jim, of long-term now. comments, into off 'XX. to is backlog of guy. big a recently. your the model in growth lived through the the aggregate don't How part a a SP spending and by X% a going us against of specifics it before in X% systems just that's to to clear understand that webscale on I start. for either point to we've fiscal that business. revenue to region, think taken should into that to of part bigger congratulations. bigger had help context point the in years. maybe the or Maybe given get that, question Jim, lull Can Gary's And out we Great scale But being number the about of about did picture you want be web and

backlog of can helps kind comparison. 'XX shipped going any maybe of pieces longer you probably margin. forward if or a gross you when But helpful. as of about How know that guardrails lot just moving not history framework around comparison out at an be a transceivers would term, and that kind COVID we impact should think gross look different the necessarily was over unfair the put I margin we of

Gary Smith

supply including of than AI way longer question, the the say think and first COVID all take this that lasted that absorption, of overall sort through me the let part certainly David, for service then would which been provider chain has challenging I they've I us through delivery like all that, providers to service anticipated, and continue if will, you would the around bandwidth, certainly all of seen be the but connectivity for of world. cloud the have of things any the primary of smoggable this dynamics.

mile particularly last and when And side. the about mobile the talk or you so on

service are know It's all that So the going certainly providers been we from away. around challenging dynamics very that. not

time North balance. are expect to America, we that international what good. us, has places as markets they think, it, like which around seeing certain into Europe, structure of we're be some by the a continued well, where we're India, Particularly, resolve. Asia and particular think take look coming I We're South it in places improvement. challenges like to for will I gradual encouraged seeing,

the as got tailwind also there Huawei replacement it's of well. But

So back to I with do a builds forward, which as think underlying more the going going normalized service providers get you you're David, our X%, to to mentioned. do, I growth into X%

James Moylan

significantly the our vary across margins the of base. gross And our on don't -- shape shape just of gross margins, customer there our

selling get gross be our challenger the byproduct But competitive service going time, price whether a to or margins scaler, into a going to to or they a Now in. sometimes range. when -- over a we're provider we'll to in new market, web we're a same pretty are order

have said a service systems, our And capacity. first true cost customers. our a that's in a provider whether or that's it's that or MOFN of just lower webscaler. particular, than Now line have we in And gross to function margins

then and margins. our optical routing to We margins you are at routing believe at margins margins. gross going over And switching switching to be accretive versus time, look

our be gross services and markets to market. will gross to accretive Software is accretive our

to and the with has across customer base of mix really shape So that's our timing the vary project. doesn't all do that much,

David Vogt

ask I heard have Jim, just Great. you of sense year. is I think say you the don't that the . think a question. can us? end up at going to you with mechanical Can a share where you I follow-up, end Do inventory

James Moylan

million. the Yes, at $XXX ended quarter

I of year, think so it or million will $XX by I come guess. the down the another end

Operator

question The Ruben with Roy Stifel. from next is

Ruben Roy

that. I guess, follow up on Jim, just to

to 'XX, pretty through you So get is close as there inventory exiting how the that point assess you Or inventory to at more normal? levels there? fiscal do work would

James Moylan

Yes, Xx Xx 'XX turns. or were get or Xx from now. chain inventory I to our past, don't You're decrease still But the and we something orders put past through still million that like that. terms. talking so of elevated. the is think years. on X.X We In were couple the turns over We're working supply big on QX, about in as a much we it's back at we'll $XXX

likely in through we make that Given of be we will our difficulties what's order these can components the of to components key happening surplus chain, purchase sure get in supply some more components. of in

X.X I to think we'll of not but X next get to by like end year. the be it's Xx, back down X.X something maybe in between going and maybe next maybe year, the down more

Ruben Roy

plans. quick Scott. future for follow-up Gary or your I a on Congrats had

a little wondering, And important, the been around systems around -- bit is, maybe was market. your we But for to you to relative there if cetera. winning. just is you've give commentary. assume you're where it I else the mentioned in momentum Just that's could around just I area historically? seems why products, momentum given competitive of CR that think you maybe like kind me products et us I more your XXX visibility continued wondering of set of guess, seemingly a can you're why a of of few what power the details winning for anything in important and you

Scott McFeely

Yes.

trams reminder, made nano two WaveLogic if introduce back go Extreme based that the we net where intercept technology, second had over first based a share consciously marketplace. just is to a pluggables. in the over not in our you did first on nano early we've on alternative mean it plug the gig ZR the decision So years, X we X few landed marketplace our market XXX-gig and XXX years, And movers gains the of the be turned on right did to decision we the but couple

to people as a gangbusters is the in to realizing definition with course, the ZR performance sort are and be that performance least of denominator forcing happened of data on AI coming again. What's the Now distributed of original important centers XXX-gig therefore, marketplace, perspective. was common be power further starts from

in and a perspective perspective factor the form conversation. performance a is in what from from performance now reach that So wins power

of of in of say win this tremendous in rate we've performance advantage. after terms had have in bids competitive to the forward to And first the that out for awards that I'd couple we're going because being industry of there continue sort going And a this segment, technology.

Gary Smith

plugs equal. think I about there Then are not misconception all there -- plugs generally is a

Gregg Lampf

coming to you. Thank for everyone, the you, joining today folks up later with appreciate We us catching forward Thank over it. today. weeks. look and We

Operator

concluded. Thank you conference presentation, disconnect. now now today's you for and attending has may The

Ciena (CIEN) 4 Sep 242024 Q3 Earnings call transcript