Ciena Corp Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tim Long - Barclays Capital Inc. - Analyst : Thank you. Maybe if you could talk a little bit about kind of order book in the fiscal Q2. I'm not sure if you gave that. And then, it sounds like the telco continues to push out getting you to the lower end of the range, what confidence do you have that we'll see that in October or January? When do you think we'll start to really see and that telco business is fully recovering? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 12:30PM, CIEN.N - Q2 2024 Ciena Corp Earnings Call

Question: Tim Long - Barclays Capital Inc. - Analyst : Thank you.

Question: Karl Ackerman - BNP Paribas Securities Corp. North America - Analyst : Yes, thank you. Good morning. In your deck today, you highlighted an emerging opportunity for coherent pluggables, both inside and around the data center. For inside the data center, are you suggesting these would be used in 7 to 10 kilometer lengths? Or would there be shorter reach links also possible? And I have a follow-up.

Question: Karl Ackerman - BNP Paribas Securities Corp. North America - Analyst : Very interesting and helpful. Thank you. For my follow-up, you indicated that orders -- you've already received orders for WaveLogic 6 E products, but do you expect WaveLogic 6 E and 6 Nano will be [GA] in the second half of this calendar year? And I guess as you address that, does a muted outlook for telecom impede in any way the near term demand uplift you see of these new products? Thank you.

Question: Karl Ackerman - BNP Paribas Securities Corp. North America - Analyst : Very helpful. Thank you.

Question: Tal Liani - BofA Global Research - Analyst : Hi, guys. My question is about the non-service provider. Two questions. First, cloud went down from 33% to 25% of this non-cloud portion. And I'm trying -- I want to understand what is driving the trends right now in the cloud, meaning they're investing heavily inside the data center, doesn't it translate into more traffic outside that requires your solutions? And if that's the case, it means that they had tons of inventory before. So where are we on the absorption of cloud inventories? The second question is about the government and enterprise; this portion is growing. And can you talk about trends there? What's driving it et cetera? Thanks.

Question: Tal Liani - BofA Global Research - Analyst : Great. Thank you.

Question: Ruben Roy - Stifel, Nicolaus & Company, Incorporated - Analyst : Yes, thank you. Gary, I wanted to double-click a bit on some of the commentary you had on investing to address some of the opportunities and especially around the cloud service providers. One of the things that's coming up more recently at OFC and other events is, it seems like there's a demand for customized architectures and that type of thing. So wondering as you think about those types of investments, are you thinking about disaggregating some of your market leading technologies, i.e., DSPs or optical front ends, et cetera?

Question: Ruben Roy - Stifel, Nicolaus & Company, Incorporated - Analyst : That's great. Thank you. Just a quick follow-up. It's great to see the very broader deployments at Verizon. Can you maybe just talk about conversations you're having with either other service providers in North America or elsewhere or cloud service providers on that product specifically?

Question: Ruben Roy - Stifel, Nicolaus & Company, Incorporated - Analyst : Thank you.

Question: George Notter - Jefferies LLC - Analyst : Hi, guys. Thanks very much. Just a couple of modeling questions. I was looking at the DSO number, I think was 98 in the quarter. That's up 10 days sequentially. Was there something going on this quarter with linearity or collections? What can you say there? And then also wanted to ask about inventories. Your inventories were up sequentially. I know that you guys said previously you don't expect them to go down that rapidly this year, but I guess I was a bit surprised to see inventories go up sequentially, so any insights there would be great. Thanks.

Question: George Notter - Jefferies LLC - Analyst : The linearity question.

Question: George Notter - Jefferies LLC - Analyst : Fair enough. Thank you very much.

Question: Amit Daryanani - Evercore ISI Institutional Equities - Analyst : Good morning and thanks for taking my question. I've two as well. I guess maybe the first one is, when I think about your back half guide on the question that folks seem to be kind of struggling with is, you're sort of implying 20%-plus sequential growth in the October quarter at this point, [to hit the $4 billion] number, that seems to be a very steep acceleration given kind of what you're seeing so far in the year. So I'd love to just understand what's underpinning from a vertical basis, maybe that the sizable acceleration that you expect in October quarter right now?

Question: Amit Daryanani - Evercore ISI Institutional Equities - Analyst : Perfect. That's really helpful. And then Garry, you sound a lot more -- you sound incrementally more positive on the AI opportunity and how does that ramp up for you folks over the next couple of years? I'm wondering, given everything that you've highlighted so far, does that alter your view of the long-term growth range for Ciena as we go forward? And when do you think some of these opportunities will start to show up on your revenue stream? Thank you.

Question: Amit Daryanani - Evercore ISI Institutional Equities - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 12:30PM, CIEN.N - Q2 2024 Ciena Corp Earnings Call

Question: Simon Leopold - Raymond James & Associates, Inc. - Analyst : Thanks for taking the question. I wanted to first ask about the concentration of your cloud customers because I guess the lumpiness that you've called out should have been expected. You had two really big customers in your October and January quarters. What I'm looking for is an understanding of how you expect the concentration within cloud evolves. Do you expect others to get more significant beyond the two that have been the major drivers of your direct to cloud revenue? And then I've got a quick follow-up, I'll come back with them.

Question: Simon Leopold - Raymond James & Associates, Inc. - Analyst : Thanks. And then the follow-up and maybe this is for Scott, is that the ZR market is thought of as a revenue headwind. I presume ZR+ would be somewhat different because that's a product or a technology that's not necessarily a standard and provides much better performance than the ZRs. Can you talk about how ZR+ affects your assumptions and the market overall? Thank you.

Question: Simon Leopold - Raymond James & Associates, Inc. - Analyst : Thank you.

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Hi, thanks for taking my question. You're sounding a lot more positive in terms of the opportunity with telecom service providers with bandwidth growth as well as AI that you talked about. However, I mean another way that investors I think are also looking at it is, when we look at your telco revenue like from 2019 every year, 2019-2020 till like even 2024 the run rate you are at, it's been largely sort of in this [2.1 billion, 2.2 billion] range pretty consistently. And when we think about sort of pluggable, et cetera, it seems like the telcos have found a way to sort of drive the overall spend that they do despite the increase in bandwidth towards sort of very consistent level. When you think about the drivers that you called out, how do you think about breaking out of that range in terms of what the telcos have spent? Are the telcos really willing to spend or are they going to look at other ways, including like pluggable us to keep that spend to that sort of similar level? That's largely, I would say the concern in terms of even as we sort of think about these broader sort of bandwidth expiration trends. This telcos haven't really shown their appetite to spend more over time. Can you just share your thoughts on that please and I have a follow up?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Got it. And if I can just do a quick follow up. Jim, you mentioned in your remarks that you're expecting orders in Q3 to be slightly above revenue potentially. Is that really what's embedded in the Q4 guide because my math would indicate that you're sort of implying a 50% increase in the orders from Q2 to then sort of drive to that order level in Q3. Am I doing the -- am I getting it in the ballpark in terms of what's embedded in the revenue recovery in Q4?

Question: Ryan Koontz - Needham & Company, LLC - Analyst : Great. Thanks for the question. Just circle back to some previous commentary around the 800 ZR impacts. Can you specify when you think the timing of that impacts to cloud business, which segments of cloud, you expect 800 ZR to impact in terms of DCI, metro, long-haul, subsea? Thanks.

Question: Ryan Koontz - Needham & Company, LLC - Analyst : Later in the year.

Question: Ryan Koontz - Needham & Company, LLC - Analyst : It's great to here. And just shifting gears real quick on the broadband side, sounds like some decent momentum there. Can you maybe outline the different segments you are seeing success in terms of cable and Tier 2s and what your differentiation is, what the competitive environment is like there? Appreciate it. Thank you.

Question: Ryan Koontz - Needham & Company, LLC - Analyst : Perfect. Thanks a lot, Scott.