Ciena (CIEN) 10 Dec 202020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Ciena Q4 2020 Earnings Event. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Gregg Lampf, Vice President, Investor Relations. Thank you. sir. ahead, go Please

morning year-end to review. Good fourth XXXX quarter and and you. Ciena's welcome fiscal Thank

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

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

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

Before statements. current quarterly turning this our to and be during over commentary which markets, on actual to discussed and in upcoming detailed and targets factors materially recent filing we'll uncertainties include that most making long-term regarding the XX-Q I'll results assumptions statements, forecasts that in statements you about financial Such should are XX-K Gary, remind the annual guidance could and today. our call of based from cause the certain be expectations, including statements forward-looking call, Company risk and the risks differ These filing. viewed its context and the in our our

no future otherwise. by result to whether this information we XX, of that required conference the a call Ciena with December assumes new discussed and to update XX-K SEC to be the or information, filed obligation in is events file by as date. expect Our

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

everyone. good and Gregg, Thanks, morning,

the unchanged, are the Despite dynamic, architectures results of which of of adversely we aversion leadership today’s QX strength resiliency extent global namely of which new and combination is margin and results business market the maybe short-term this model, strong adjusted our that our deployments for of year quarter and fiscal illustrate amongst our and network largely of year, builds. profitability in fiscal impacting the operating reflect and fourth and many full service slowing the forecast. is Our amongst XX.X% velocity providers quarter, increased risk XXXX including continued and XX.X% with conditions last a the challenging market business exceeded detailed durability

We as of this philanthropy working advantage through and them support resources globe, the are to best extremely performance the balance conditions. am in the pleased also the cash Cares and Ciena leadership put, million this persevere with even have $X.X services their remote program. $XXX deliver our of the confident We and financial we position the are wide many other the families that cash we position extremely about their remain time. could also of at Ciena perform and associated flow I at back facing when taken The part our and to to COVID-XX entire throughout proud which I donations remains communities dedicated new way delivered from free with of new market. challenges focused last strong giving benefits programs, without range related in Ciena family team, and approximately our they quarter well-being industry levels. our not to billion. continues Simply highest up and a in am

particularly for digital collaborating read, programs the that divide inclusion digital broader our students. on commitment and with probably customers help underserved are opportunities, you through address As we innovative also and partners promote

end to and and units from the chain, X the we orders tremendous quarter Through continue our extraordinary momentum for highlights the we core supported since WaveLogic QX, by X,XXX are to supply Extreme. we around see XX approaching shipped general year. Turning world, customers our In availability. of fiscal business, fourth had from

Looking remains track. WaveLogic our ahead, X program Nano on

not for advantage be the ready Nano we of into will to X half begins WaveLogic of integrating So XXXX, sometime from second only our when as intercept will systems adoption the we well. market opportunity the pluggables in benefit

year solid from Our business Packet Networking perspective. an had a innovation

demand and segment portfolio enterprise network particularly IP applications the including remain unilaterally impacted by this Cloud. convergence, some optical and strong, the concerns services. edge, customer virtualization, SMB was business, XG opportunities increases as pandemic-related in revenue very Edge content advancements around services, at However, for this managed But in and carrier for

during we of In fiscal our Adaptive transformation network projects. number engagements monetize becoming is we for increasingly portfolio, recently wins fiscal customer next-generation awards our including year, expect this deployments fact, secured service network strategic we full seven migration IP very segment, and through to our to as XXXX. Tier were we by selected the two a for and move Within new Services to solution legacy of offering our X Global providers these

large to in business, who layer drive to applications adopting service with MCP QX Planet which that NMS had our also a including digital other as of control software is quarter engagement including well on and XXXX, which through network software, on from by number operators. And in is looking for and operators, such customers our adoption as focused increased The primarily benefited software grew automation. are enablement We XXX% and an MCP from than of platform. increased fact, year business, more of top delivery, strong services platform, platform, new transformation our AT&T, respect for of ever deployed legacy seeing our including within we Blue advanced management, Deutsche ways best and which our transitioning bookings. MCP, was domain uptake as are Telekom record are software, customers this carriers Tier X our With

for win systems global new acquired QX in recently integrator. logos as DISH including XX Blue strategic a Planet announced with our partnership with alone, a also as well We major

demand for for edge overall the and Blue accelerated engagement customer robust. patterns, continues RFP for the towards while and points access has in be business And activity spend the core Planet architectures has network adoption largely As cloud driven traffic corresponding and traffic market, continues resources, continues pandemic and a to the grow. and connectivity shift and customer in to our

take winning are monetize us our success wins confidence wins to more new despite these challenges near-term share of gives including new This several to the In will we climate. within design fair fact, competitive we this that time. strategic significant business, than current during share continue

improves, strategically also environments uncertain the The and expect look allows innovation to in continue which So continue our in go-to as scale. macro a us ahead of diversification proven half we our as us focused to us the we have conditions. market it the on XXXX. our business clear investing to enables This positions action of short-term to second face on capabilities, happen global and well to and in to strategy, leadership, market portfolio model manage through leading XXXX, conditions strength plan of we current execute even

demand. pressure our core ever-growing long particularly the technology which strengthen keep year leadership submarine bandwidth and DCI, networks, course in to under market in networks, pace Specifically, are we during with haul constant will the of obviously

extend with customers and their our and guide the to the long-term. also market our to strategy enable to next-generation These Planet fast-growing address Blue make us are on access always, transformation significant and around to turn digital Jim. will automation investments, incremental seeing expanding leadership IP networks, With I’ll to to share We continue increase our addressable also as we position a in are that, and opportunities we take momentum on deliberate and investments will specifically journeys. metro over capabilities, over capitalize

certainly delivered Thanks, performance, solid pandemic. by effects revenue Gary. a million. gross was the XX.X%. adjusted quarter of was margin the $XXX everyone. was Total Hello, in the impacted QX We QX which

a of margin reflects QX higher software sales adjusted dynamics. high percentage quarter, addition the of to degree pandemic-related in gross again a In

profitability IT people which $X.XX tied measures, net in quarter. respect expect we which revenue our million. the QX EPS of the quarterly included $XXX in higher is strong due infrastructure, million was of in With adjusted of than to This we wins Adjusted expected acceleration that an operating mix business in-life was and adjusted our and in design a margins. continue. also projects income comprised variable to new we to XX.X%, business, expected lower in Specifically, investments QX, larger delivered see per operating margin versus in share. and higher tend early of percentage to certain including profitability of our metrics of OpEx continue quarter part existing $XX expense a generate aspects of to compensation than adjusted to

and EBITDA $XXX With cash was addition, operations from our QX, in million In to adjusted was million. performance. $XXX respect

strong annual was revenue two XXXX. year customers includes government. in fiscal growth fiscal revenue $X.XX very of full a in performance a year fiscal This Also year with and For MSO from XX.X% total the billion. customers strong non-telco XX% Web-scale XXXX, contribution of customers, from a in up record approximately of year, reflects solid our with major

a for second year. challenging a saw environment the the quarterly orders revenue operating fiscal variability move significant slightly full While the we including exceeded year, as we in half, through

subsea year-over-year. were aggregate, X% also In and EMEA, were Orders fact, up in orders year-over-year. in APJ X% in up

in fiscal margin was XX% and And was million, finally, XXXX was flow represents income. operating which adjusted to $X.XX. $XXX for Adjusted XX.X% Moving operating adjusted year free the profitability. EPS cash of

we in approximately As ended mentioned, and the billion $X.X with investments. Gary year cash

the financial and competitive differentiator, balance critical. significant particularly resiliency are current sheet in which a Our environment remains in strength

the of capital Our And $XXX business and sheet in for repurchases we of shareholders. also our buyback last XXXX. during strong long-term, the us range investing cash quarter XXXX the are point, generation currently the while will flow million to be flexibility our reinstituting targeting returning in program the and first continue in to fiscal balance to affords

guidance. to now Turning

we’ve are stemming financial the market that Given uncertainty provide not this we the described, three-year position industry to the specific resulting and a time. at in dynamics pandemic from targets and

drives remain growing to we that business. in for the long-term than today, faster automation leverage see COVID to challenges no our the proven driven ability temporary secular We change the plan Setting aside and years. while unchanged. our bandwidth our demand However, underlying deliver operating do market, additional by we’ve financial as goals over

a many is digits the As impact single for that believe so market range the growth the as likely of pandemic ameliorates, seen as to the to we’ve we return years. result, low-to-mid in the

market We we also really to this want I emphasize unchanged to will that is outlook here view from pre-COVID. our continue believe that share. take

about in below the that rate OpEx margin a growth gross will pandemic. caused three of we margin. to expect to and about the at gross gross mentioned, Gary the our the a business comment years talked of effects the And revenue and next margin strategically on lot We of As we mix by in invest aggregate. revenue a continue grow for –

We But mid-XXs. our based what have new once margin believe we returns more said increased believe to run are that and business, current current XX% is XX%. has rate that our a that normal between bit run also revenue we percentage our seeing, our now rate the of a on we margin, to

of guidance. we as of long-term typical point revisit, we are annual to will fiscal respect the With these On financial issuing providing improves, long-term visibility our XXXX, targets. guidance, level

is our important that for underlie the key outlook assumptions year. it consider However, the to current

service that in more current have balanced slightly a a to secured monetize operationalize we with XXXX faster and expect or we to our assumptions, new our conditions, wins architectures deployments With several market enables X% set a and a customers second is as and context prioritization grow guidance provider key stronger to conditions the annual economic range that typical improvement than accounts. discernible half the design us X% of to predicated industry revenue Specifically, improve. than our at including of on by and of with

We expect the continued XXXX strong fiscal in adjusted margin for gross full-year.

margin gross toward by revenue existing adjusted the heavily our likely to range, XXs half business. first is tilted mid-to-high driven mix Specifically, be in

will With emerge margin business the respect from for the to our development, to those our environment product range of improve that in across gross year with competitive operations and deliberately our by advantage OpEx, and leadership certain strengthen of and than We full we that current will we aspects our greater the even we position ensure people, mid-XXs year. the an it although Accordingly, it down be in we investments today. come always fiscal likely to half adjusted believe adjusted have quarter-to-quarter does. second expense are XXXX, million expect end million conditions $XXX average new will between begin we and from operating between and from wins, XX%. As as year vary our per fiscal to levels $XXX maintaining margin to and return gross operationalize the XX% quarter

We business the of are model our bandwidth growth our in secular for making operating as because as in demand of these and investment our and strength decisions future products. confidence durability well and

to Finally, XX%. to we fiscal in expect be adjusted in a XXXX of operating XX% margin range

for XXXX adjusted expect conditions us confident we the to overall future. we XXXX. even demand a half and between of $XXX Finally, are margin XX%. will are to deliver we XX% performance, we of are the rate XX% fiscal in our leader, to be second expense performance, operating new are as $XXX positioning first in XX% gross range closing, greater in million and the very $XXX winning to million of business begin as in to expect million, performing the In tax quarter well range, and million, strong fiscal adjusted approximately we improve and $XXX for our adjusted revenue Fundamental drivers market

we our we’ll Importantly, that return shareholders. financial demonstrating operator, questions capital that the scale, take are customers’ profitability now are us from competitive to our strong sell-side that analysts. to meet advantages deliver and stability needs, enable and With focus

from Instructions] you. Thank Rod of [Operator question Your comes Sachs. Goldman first Hall

Your is open. line

morning, into given people why with then thought invest that deciding I of maybe on would And a I on detail the I off, I now that on visibility. bit it's it question. from investment back you're investing? tough bit commented Good more go wanted point a you're little Could secondly, then you're start the What you're where hiring? for such Hi. environment, to OpEx guess you since Jim, What types that. is of I to and an had little view? to the focused know, came question, dive Thanks you a higher. in guys.

gives You're why for being of than confidence in start you to talk HX XG that beginning some talking see investment year mid-year. about, that about in people know next HX. by I and What accelerated we recovery stronger to QX? is it don't are instance,

assumption by you you what of carriers a to again? a could sort invest Thanks. second about bit little half general that it or and just slow starts talk begin is have So the the COVID visibility to

to Thanks, do Rod. with And I really question XXXX. assume your has OpEx

You're good on quarter? the

seem usual. so about less quarter bit bit little an asking line not you're just I investing couple don't little really exactly. short-term clear about our it reported, like, and And a spending first Jim, is a – talking it short-term. just you're there, doesn't was in we're quarter like – what that looking I sounds in more, a actually, no, here it investment you're Well, phenomenon – the seems in I'm of forecast, – more XXXX higher at as is of it than on like it's the or more with

quarter sure it came in from comp, all higher their variable the have of a It's the fact the that of through has we and salespeople was through element home. to – that tied employees, connections bit to, making through including have productively variable are – all It's than that year of do mostly in our that working to people, that in bit this and basically Fair home. our our as we operate profitability people comp. things. their Also is an comfortably can with a about QX. thought computer in the profitability. we year, many our come and And connections, the going situation in our enough. One accelerated made really comfort Well, investments a couple in of a computer we've well-being, and personal which

came piece that another was in. So that

Okay. Thanks.

of on So number I your Rod us a the half, I gives question, in second the confidence second what uptick in part of guess the it's elements. guess

out is new architecture I the not service the all, And extent, risk that new also, core, much run metro us what have been Things for generally opposed some networks slower the had, in sort focused that points confidence are now for they're of right the that we've network, hotter, Obviously, to binary. which is that's business, as to very First of saying think rolling think and monetize. already we're sure. it's providers understandable. any I are wins access on to averse that gives new

And out begins and XG rolling activity new the kick network rest pipeline then up of infrastructure this activity somewhat slower are slower, the bifurcated is first the describing needs at sort environment actual we're built of some fair to demand, like of comments, you of We our those, half, the as from a in business but but rest much of it new things we've planning wins have unabated. expect, the because successful. be and my that given than leadership overhang the that all engagements share rate. right for technology as scale. assumption it, the And the as that, RFPs, say continued and of definitely business to in the it of COVID and And it's now deployment, during you'd and this course of ameliorates secular is winning I more our said

normally can stick can second a extreme we it's our best more tell. I loaded. be as fiscally going as this to hockey business around, time But think half best we So is tell,

that that sort resumed see So half is are to those normal engagements and thing. this with going give services second underlying us uptick assumptions the when the of confidence the kind some we're customers in of

that. much many any results that, our in quarter in our orders The before quarter given other revenue – thing of Rod, from that is of I would to the add taken

just our pickup We revenue. don't in a QX. the believe form itself in orders of QX. until won't expect It do view. higher sort evidence That's we so And of our in

guys. That's you, helpful. Thank Great. Okay.

Rod. Thanks,

Jefferies George of comes question next Notter from LLC. Your

Your is open. line

Hi, I stay I guys. to Thanks on very of the much. wanted discussion guess OpEx.

your so example, than were, for your July, look gross a in and selling I higher. tremendously higher if the quite marketing they margins they were incrementally than bit And higher quarter. not And are at costs, July

as if the you is, getting something that's driving like think I what driving I'm what's increased guess wondering salespeople if I based else your bookings it's guess well, the October So your that? expense just in bookings wondering the is Thanks. in there? at but look narrative profitability simply I Obviously, I'm that's incentivized compensation there on or guys quarter? I'm there

quarter. in But I'd drives a expected, fourth bookings remember, and this, the to better. hitting say maybe that comp typically out sales as comp to every that's mechanics sales what QX. salespeople quarters that bit little really Our of higher of close people our in what is accelerators, that well, bit quarter the start but just their have fourth the We we in other quite sales their was accelerators, came start the computation as quarter in hitting George, a the in comp higher when compared year worked it's

it. Got

follow-up And that? number a for helpful. That's the guys you wait Do have guess, for then just – that. a on XX-K should we a or backlog Okay. as I

under just [$X.X billion, $X.X is Backlog billion] or something.

$X.XX billion.

right. That's

Yes.

Perfect.

Thanks, Okay. it. guys. Appreciate

George. Thanks,

Simon Your next comes question from of Raymond James. Leopold

is line open. Your

a space. the wanted box maybe I mentioned I fiscal you've Web-scale around just business in how white you plan And us Thanks of particularly you views affects your thoughts of you're the to could I've Thanks. got update seeing on taking in this what want XXXX? follow-up. see long-debated optical your sense competition question. but having products pluggable out there, on on it know for your a get a later year, your if topic to

Scott. yes. box Hey, long-debated topic, [Rod]. It's The white

the Rod, folks, optical the has marketplace. see still it it scenario of one Having of have this to pluggables, control because it other But market, pluggable just the end-to-end system economics of a the that, of play I some people our and there also, in number Line the – very being few being are reasons, drive like an them. we're I one well, is, boxes that is this. couple think, are which there deployment space are are I as Systems that primarily capable delivering of for don't in deploy lots even put and there in don't So places way, pursuing in high-performance play that a said software those segments dominant and white the market scenario and of

well. So that have we would exposure to as market

XXXX. I'd of factored those will of All perspective of by actually dynamic way, think the say don't are be it a all. XXXX in our into I dynamics, much And at

sorry. – follow-up a just And Great.

Sorry, Simon. Go ahead.

The simple. is pretty follow-up, hopefully,

traditional spending view, this I've AT&T operator where is top I'd your Your or Thanks. related back how customers, And American that and on, debate is, bit be patterns pattern? may may not and have like I'm a to with going their heard them spending will been the topic be Verizon, softer. to One what factors North spectrum more auctions? with to lead come normal Ciena

I Tier if kind Xs, or think very large North the the what XXXX. seeing, look in of large at you America, were you're of sort front-end the in Xs couple loaded Tier of a

chain I provisioning when COVID about also supply that Some of think making happened. that, first sure they've that got and was

to sort a normal to by of those into and XXXX, for don't the as and of dialog affected it's that. cost. And think extent, carriers, So think some second of them I and some this of our stronger ebbs going sort I you auction whole notion get half see particularly with large are we that's flows engagement of

much pretty for all see in of with I pretty uptick a forecast think in business. and of the half. an pretty of we're major steady, seeing across with visibility steady their we're we on these what carriers second it platforms their terms all but is engaged – strategic now, And

Thank you.

Simon. Thanks,

from Morgan next Meta of Your question comes Stanley. Marshall

Your is open. line

method maybe still drag what Huawei know kind that around of maybe be last kind I or that we be of to installation just testing then, a drags? some an what lab as kind you open of far as a or replace the of around as to update getting Great. COVID-specific and looking timelines of Huawei of talked challenges as could on? conservatism of as Systems kind And Line of and thought a attempted customers. were now kind not to seeing sense slower get right international replacement, And far I just to Thanks. wanted about to quantify as a kind you'd – your planning spoke kind you customers you're of just that going of quarter �� Thanks. whether

Okay. I'd the been first get sites, deprioritization of what when new of – time around with to in But various because saw going that these the to of take what seeing. they the really the initial cetera. didn't of with around COVID, the we can't impact matter people it network risk all was just it. et really stuff you've velocity at From ban part messing on was terms of a we're a capacity stuff, largely then and got builds ameliorated installation. protocols That's want

decision we out deploying So little figured I binary. hotter a engaged really, doing bit. I think of are We mean, we not in they've made are It's that. to ways stuff, for the completely run labs. it

around, new seen So of activity we feels activity awards, just being that's deployed There's since at what been lots sort last I that of But we've build, really going somewhat quarter, unabated. the bifurcated. and a the the engagement of very to – on not really. and and much RFP continues quickly, but demand and said, it's you awards continues planning haven't to it change look

somewhat those recently, of That's doing we've restrictions pretty pace. because Europe we're more perversely obviously, seeing much new lot mean, COVID the you're particularly because I business dynamic not the particularly of a in actually not deployments. So got. impacting that's more us

that. question. So your that we're much not seeing answers from too If impact

Yes. That's helpful.

System? to the you Scott, take Okay. Line want

say, in mean, actually system take, new. an legacy System a Meta, technology it is Yes. next-generation to optics and the I concept, open Line over approach run not

doing it, business or If we’re form, that, to into we to you Line got purest submarine doing by want that for its overlaying close the decade Systems, decade. exactly in a a think about and

new. So that's not

I all that's trigger moving will Number system necessarily just that those in think lift not the past, for network twofold. As actually Huawei it of – touching the Huawei touching on comments sitting now, The and heavy circuits customers, the a our back-office applies to trigger. customers were list one the time. that a maybe take to a is operationally is is

priority thing from core though the Huawei, opposed around their of that we lot as prioritization some to are moving and other end The India. is a infrastructure, the press network possible the that in with optical world core I'll is, their the seeing exception we around see say away around getting activity infrastructure

I it. it. Got Thanks guys. appreciate

Thanks, Meta.

comes Your and of question Company. Cowen from Paul next Silverstein

line is open. Your

seeing any about pricing COVID and seeing could Jim, the from for customers, worse? change environment, you're a from Thanks. impact Web-scale or you versus Amazon's on are particular longer-term what standpoint? a comment better And you project in concerns

that's that in XXX-gig doesn't the or been share aggressor very not We it do have That was industry. market so company using meaningfully price company a that I some more than product, to is, has – an It's gain significant price one a question, Paul. to try and they're But I'd maintain one have cases. in think is say the pricing really environment changed.

customer, out to in that hasn't ended doing it we this of have really I much, say, large, might that. of by all think them. changed that for at the centers technology. But can't our any think that year the captured improved of It's say some sort their margin with year. – So our to we all with lower retain do your experimenting we're But about share margin, And specifics Web-scale, things just in customers essentially, do We we we think, the we because that are but adequately than year. a we slightly the We I'd think know own bit Web-scale we've our take that And still very certain the data that gross grow cost is we're systems. getting guidance thing. built with well. doing spend respect and to and one with difficulty regard

it. Appreciate

Paul. Thanks,

from Stifel, Your comes Nicolaus. Marchetti of John question next

open. Your line is

talked about you up still hold of regards better. pattern the quarter as then But you the much. business expect the just we've very trough the moves your true I'm that I'm at curious to XXXX, wondering Jim, it to you're And be second if seen and from often first for fiscal Thanks half least being XXXX? through in there? seasonal if going outlook

to the pattern is as going it be been. same always has The

quarter as always and been lighter, through first strengthened move year. has we've Our the then we

than Second half. has better the been half typically first

We be to same. the expect that trend

has than year. second been, will more lower half will we because be exaggerated half first However, our line first trend and difference the maybe have meaningfully the between this

In just I the it's obvious. do sure fact, you you have, John, and if numbers, pretty am

bit Our higher second half. a half quite our first than is

Right. And Gary. on then different a just maybe topic,

you're about in second even looking the for the of and activity XXXX? XXX-gig terms of maybe that of and we're how is the around how the of a at chipset, increasing lot the in systems I'm whatnot. year, service efficiencies maybe their focused into XXX as As dynamic versus more think providers, playing true of much performance of improving XXX-gig WaveLogic into that next just we half distance curious out new looking the even interest XXX,

it's and performance talked to much the I the performance. be the easy be dialed the set before. get may now may us give versus a platform, talked up et two-thirds split of how applications, previous on one-third per as you value Wave volume of XXX-gig, for of handle to to price sort the up cetera, of the We has to wherever difficult perfect, different you some the to X,XXX versus That propositions technology. XXX-gig until use of going basically between that is it, generation, at a twice surrogate That's we've but about been the that about even service. this, actually you performance will providers help dial need XXX-gig keep of it about Gary can around on indicator. service to you in for Web-scale. an an the track that this and various as and as John, of idea one and XXX-gig use quite maximum that's this say Not bit

much. very Thanks

John. Thanks,

Needham. of Henderson question next Your from comes Alex

open. is line Your

two about approach vendors you talk what the in hoping could much. geography split, was you about banned. seeing guys XX% the of a of little XX%, very on they bit Thank I their opportunity how open for think the market know the – How it one there a you. focus and I reopening timelines you what the for the you're then market terms replacement your majority India on number and be that approach their network bit extremely that My would there think of you hitting how decisions somewhere process? did one take of being are the if or that. Thank long do providers Chinese up? those player, implications they'll ZTE has implications of to service to that helpful. between Any that's and Huawei, FiberHome. the do vendors, And all will vast and And you you P&L in estimate share little

XX we've in there of sort just they've disproportionately I And of taxation in a very their low. issues previous providers around the et from challenging builds the it also India impact years, Alex, was some large of COVID, affected – last done been been obviously service on new their the the rolling definitely network. market the of couple cetera. of this think, out And so, then so the months issue initially or and economic the has yes,

market it's for very last sort So a years. of couple been of down the

got go. way activity As you still say, a outs and around build long there architectures to still is has the new they've continued because –

think India you which you Huawei, to EMEA, exposure about India about to total Huawei, we're mean say, have mitigate really if it specifically is is contrast relates in to faster, is roughly I to as XX% moved their as much compare Huawei. Europe, XX% the what I think, I to it infrastructure with and seeing of

it's carriers. than anything, office got because approaching you seem this takes more aggressively European systems, to Now cetera. they But time be like it et back the

that year, into couple on of in longer half from the do to and into takes see I and half you market of They plans of if Always that. we to third we of will side to again. migrate that opportunities away and COVID but think the making the movement sort India actually packet and seen but quite a second think play then little sure. beginning of as move won't bullish three XXXX for but second for as that the then India until the a see us, is they're this there, are first out, And on Huawei, than tailwind that you carriers ameliorate XXXX. the begins we we're the move particularly to think, effects we as that's two how carrier say, and around Unclear deployed half exactly all get very we've there's won. that we've Alex, market forward really dependent the

that obviously And have obviously of Again, you XX% that's point, of the just Huawei, What any decision process that Thanks, example that of billion. that in to floor. think sort these the you of for with very decisions one cede impact is? us made you customer $XX Can of sense seen give it's is, about I that Jio network think and their be taking other network some of large wholesale of then deployment decision. that something do on the going you vendors. a raise of mean, piece when geography? I'll the a huge back might some

clear. business. We've movement. We've I seen think that we that want to some of some already won be of

we've quarters, of in of it some course We specifically than migration have not we during the deployed we've more away business the it Europe. won aggressively yet, seen Huawei last replacement. the even of but Huawei that And India seen in couple from around

you think. takes always than Now longer

you all it's carriers decisions that play me exposure to by now to one ask But a these their through. made mitigating before three around of you it's timeline, really are moving Huawei. years and for being If

being than business. have made. but of winning fair Some exposure our decisions those that are more others, And we more than are share

you. Thank

Thanks, Alex.

Alex. Thanks,

Daryanani question ISI. next Amit comes of Evercore Your from

is line open. Your

that one, your X% Thanks growth to I the Web-scale we is fiscal XXXX any like a to in XXXX? in how think for customer talked could think the the versus on maybe touch my just and could win growth? look way specifically last up questions. ramping segment, that I first should about within you guess And stream quarter overall that then taking expectation, new X% about dimensionalize how side. Web-scale I in you think revenue very How

me… let Yes,

Gary lost may We there. have

driving logistically around expansion than the more It’s et data cetera, just in center and out.

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got beginning and during We'll second the and we're and as So dominated beginning we've the we've up movement out mid-single expect good in XXXX. market Web-scale about, basically got, plus, of during a Web-scale it's be in fourth we've roll that. It ramp half top. all we are this with main will four if grow the at largely year. to that of players, said we by and maintain think which to will talked look XX% the to and share, [indiscernible] now, We digit, market line the in Web-scale deploy – the see this We've to loaded, start see pretty players course we we'll as player, XXXX at the grow market year. now across

you how the gross I do structure Thank how opportunity just follow-up Perfect. earlier. you versus guess, – importantly, think pluggable discussion different think overall pluggables And on any then And the Ciena? if you. it is that on about would the I for the what margin side? we're do revenue can there you having is

we Ciena, not of take as all. From revenue don't I'll think the only see being guess for a opportunity, for anybody. first I significant XXXX I question, this a market perspective,

just has moved the right. the event. I timing-wise, industry [Indiscernible] to think XXXX

talked India different three I system as new I and specific is the of than that embodying then some the application that the be around that just moving the think versus other be very application was coherent business a a business. technology. system players, things, is think One technology, see miniaturization a I event. of I that smaller reach, would generation Think as And for think will it and [indiscernible] in I specifically very difference the [indiscernible]. in won't of of our coherent all discernable that natural still first margin The take in those space, don't XXXX obviously [indiscernible]. transport revenue three not net pluggables ways. dedicated Margin-wise, our on [indiscernible] previous of That it short metro/cap because whole it across to which coherent access, of time. a about, some opportunity no the the selling you're business different system substitutive

next on move question, can I operator. think we to

Okay.

Najam from Partners. comes of question next Your MKM Fahad

Your line is open.

I taking two Thank you questions. have questions. my for

of in $XXX it then to a is billion step on checks the X that Huawei, light you like most an a Does up – cadence OpEx in healthy outlook. revenue if are First, a million the suggest the like on mistaken, $X it to not you. terabit Acacia in a on overall? half industry opportunity in Are solution sounds your in first seeing XXXX? of increase cadence I increase. especially correct maybe going announce likely of for total that the to Seems in And R&D. pretty design if our is I'm related suspect part, question

or us you? would why your to potentially be don't three-year given outlook two give a a three-year a your as revenue up Why what on substantial So you outlook what not guys growth for be? give could it's revenue trend opportunity

Fahad. Okay. Thank you,

$XXX situation, that On have XXXX. we into just for the went to $XXX guide the this remind year and for for guided OpEx exactly average everybody, quarters OpEx number the for million to million That's be XXXX posted the as to year. we the

including we et spend in the step-up including higher higher a result XXXX – the a pandemic. is, of but cetera, is this number it's as So because XXXX, than than not didn't areas, really generally it medical, travel, speaking, some a is number

generally So flat big we what It's a increase. this expected not XXXX. speaking, for is to

Access mainly We areas to do are not stepping of in and spending up portion portfolio. has other that our investments R&D some and the Edge with in

It's base. us. the and back-office a On a large. lot of expensive I but Europe, new associated installed not has and got that moves, integrated geopolitical all of now, kinds you It's years in carriers amounts because, talked very this publicity, wholesale to of understand a couple for into issues and of make play massive in been while comments, very systems. take with a listen, for attention they've particularly dynamic Huawei it's going of lot those about are This getting of a these operational first it's to the their of to that is all,

would governments of So money. faster, though many also cetera, et costs go a lot like it that even to

Yes. folks number we as And so, it's the fast about last total then around is I to think, And feathered but not the of been you think over possibly factor earlier. as exception then yes, Europe billion all billion $X the happen like a a in great and it couple for years. in, your for is, India, talked and overall, in will of that the a will $X.X But something reality our the that? have and period market, into it year a forecast India they it's be and as share tailwind that – already time, of has of feathered with will

very to a dynamic us. having is apart positive appropriate to certainly which be But degree don't I years So out, would challenging. tailwind, it's three think for visibility and it is from that carve out of granularity that a

there. won that we India. now We've We some deploying. business just business winning in are Europe won some are We in

our of this people that because dynamic, with You Deutsche happening, look business we at Vodafone Group, are is overall Telekom, and it's BT, feathered like expanding those into but existing now. that customers are

Appreciate the answers. you. Thank

Thanks, Fahad.

question Samik of Chatterjee Your from JPMorgan. comes next

is open. Your line

have just the part guys. the network, Edge of I as asking to for question. about the being we picks part gains taking few in the and investments. should for Nokia share with I you obviously of thinking follow-up. how talking there, Thanks you're incumbent XG over the that next around the And Hey, network? the wanted about Access years start off some up, of where discussions But about the opportunity a large the and be

it? Scott, to take want you

Yes.

Edge driver all, piece, Access XG services enterprise of general is also our included of and metro another first driver. is one our in next evolution So that, business an there, in generation the

America past in and there strong it was those areas, of India, in the distributed around playing the IP in North I'll under our and that not very in historically backhaul I in investments rest with services partially our think businesses, world, generation space. because of we've wireless The networks the controllers, existing talked integrated and our enterprise the capability just say multilayer then like next with for our is converged for sort a optics, deep OS ground-up domain integrated next optimized things series fiber generation products making aggregation IP a with really XG, around we're IP the of and traffic.

faster an that opportunity that All think aggregate our business will of and our those Packet is up to we than expect things and forward. part grow we the show going our business, in Metro of

beyond at they term what's market on addressable going us opportunity decisions, look I make on to wireless start specifically, as our backhaul. XG of Now, installed real augmentation architectural that will will but our right today, longer their base historical where now benefit expand think existing stand-alone and instalments allow that sort architectures architectures, of have is backhaul us we our is wireless to

long-term be on, about think out for that gross Got leverage for talked your to range. provided it. the you follow-up Jim, range also said end long to outlook that your that margin, elevated you three-year. but bit is color a to of for of some if XX%? But three-year OpEx three if kind XX.X% than question moderating margins probably about about just you us XX% the I Do here. with year Primarily, are of long-term is And you for? which having years for give what because to investments if and we can with about you a you how going the I bit, I a think up guided going kind can ended the higher If run

our increase expect plan. in Without from deliver say would giving we I specific we to number, would going that a if operating XXXX, hit margin to we're what

that have little beyond margins said the would So XXXX. margins, years our going that we did of rate base to revenue in we grow OpEx we than bit. We gross more our indicate gross slowly think two yes, grow are improved a

increase to to XXXX. do operating in post going over years margin expect next than of So we couple we're the yes, our what

Samik. Thanks,

you. Thank

Ryan next from Securities. Rosenblatt Your of comes question Koontz

Your line is open.

Hi. Thanks question. the for

the able look per retain you. the wavelength from and deflationary disruptive pricing DCI think impact there, assuming that we to segment, impact we bit? like to there you about you're ZR when little As should on your a about ahead there? deflating how Seems with market to the incumbent price pretty customers Thank the share think

sort of of you the natural erosion think from the some in think the of you curve. introduction. you about price ZR curve the I in the that price how last see and that here's extrapolate that space decade if marketplace, about timing drive over the Ryan, typical the we It's technology point of and price see can Yes, sort optical erosion it, we

in innovation see I well. with if different we've as that's for being And than of ZR demonstrated integration and what we had sort So, in years you to flourish we on a this as your chain. industry actually that don't vertical lead the you that any intend and and can control of to space deal survive actually from supply technology do

demand should Thanks. Okay. of of kind follow-up there, QX. of just in about Helpful. in customer business, packet how affecting there change And any packet? just concentration number – or lumpiness terms on soft secular that in we The that is a kind that think quick

managed SMB and delivering out the some think of by built flows. in year. sort think the couple of Edge – of services, customers I ebbs ethernet service enterprise, last probably a half then impacted the that impacted logic was piece, businesses and it first heavily challenges the that that had I sort bit little type in of and a We carrier of around of was and the by

around a And ebbs go of Adaptive we now planning we said now. new I year expect it bit pull But that. installations of as that We've lot we've technology little of in and a the of normal got to good developed Some pretty to and got COVID we have flows as on forwards, a seven but IP, sort market. forward scaling. some

will XXXX business during Packet that well think actually we do So,

faster our than next believe. we business, few And years, grow it'll base the over

much. Thanks so Okay.

Thank you.

from Your Citi. question Suva next Jim of comes

open. Your line is

or core. in and for When And sure there you you. that with life you expect more the I of that place mentioned not those to one prepared assets the have longer? back a mentioned and back any And ask is, going that risk I just you have of come you carriers question. on come them that, lot in you the spend hope Thank agreements be to will where believe the actually you use why sweat the it it Edge your to the have and where are metro contracts comments is reason to core maybe more back? that come in it's bandwidth, their bandwidth comments you would they sweating kind the, assets into actually I'm on continue Is to continue continued spending have of some the Any just the or some great. in on visibility

into model terms sufficiently have and focused visibility. initial did the with account on. the are our see of you got think year, to been go we mainly Yes, the homes, points, making flows sure a just Edge, is takes traffic on those that supported, that's what things which is it Jim. number look our forecast question, a mean, kind for good what carriers I then access at in they what at When the of obviously of I focused we've

to and it's with these deep of it with some those we've RFP executive project it is what it's they're pipeline, – long-term it's providers. and activity, service large engagements obviously, relationships customers, of customers plans of orders, do. with Some pretty And our around engagement service planning is got many

good visibility So that. we have pretty into

of there and do the during metro It just to around that all at the risk want of those would normally COVID the large. a and the to those kind of do even this of really overriding are such this now, of when support happens their aversion they really think, with right out all that is during unknown be under a of they the that deploy assumption, network activities. traffic not is things I and the of time it's is about for lot Now, upgrades people focus for kind they'd issue. are budget their can't and not And that of to don't The they that course and that core. kinds that the of flows build pressure begins the what economy with it's messing dynamics of ameliorate year

gives to really the us combination need orders So, see we those that we a that'll big And assumption. elements a an it's right more that accentuated, going said, about be stronger of as if now, first. of be have what as It's this that and test uptick that, pretty – see go through second right of we some But we're Jim in visibility have We on looks QX. based year. a all than confidence just that believe, a assumption. good we half like always to that we'll

details clarifications. the for much so you and Thank

you, Thank Jim.

Year, everyone, at and well, joining holidays, and today and forward the with to time. next the We everyone, Thanks, Happy everybody New over few appreciate few for look morning. least us happy days your seeing next over weeks, everyone. remotely, up this following We

conference today's participating. call. concludes for this Thank gentlemen, and you Ladies

may disconnect. You now