Ciena Corporation

Good day and thank you for standing by. Welcome to the CNA Announcement reporting date and web broadcast for fiscal fourth quarter and year end 2021 results conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star one on your telephone. Please be advised that today's conference is being recorded. If we require any further assistance, please press star zero. I would now like to hand the conference over to Greg Lamb, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Siena's 2021 fiscal fourth quarter and year-end review. On the call today is Gary Smith, President and CEO, and Jim Moylan, CFO. Scott McFeely, our Senior Vice President of Global Product and Services, is also with us for Q&A. In addition to this call and the press release, we have posted to the investor section of our website an accompanying investor presentation that reflects this discussion as well as certain highlighted items from the quarter and fiscal year. Our comments today speak to our recent performance, our view on current market dynamics and drivers of our business, as well as a discussion of our financial outlook. Today's discussion includes certain adjusted or non-GAAP measures of standards for results of operations. A detailed reconciliation of these non-GAAP measures to our GAAP results is included in today's press release. Before turning the call over to Gary, I'll remind you that during this call, we'll be making certain follow-up updates. Such statements, including our quarterly and annual guidance and long-term financial targets, discussion of market opportunities and strategies, and commentary about the impact of COVID-19 and supply constraints are based on current expectations, forecasts, and assumptions regarding the company and its markets, which include risks and uncertainties that could cause actual results to differ materially from the statements discussed today. These statements should be viewed in the context of the risk factors detailed in our most recent 10-Q filing and then our upcoming 10-K filing. Our 10-K is required to be filed with the SEC by December 29, and we expect to file by that date. CN assumes no obligation to update the information discussed in this conference call, whether as a result of new information, future events, or otherwise. As always, we'll allow for as much Q&A as possible today, but we ask that you limit yourself to one question and one follow-up, please. This call is being recorded and will be available for replay on the investor's page of the website shortly after the call is concluded. With that, I'll turn the call over to Gary.

Gary Gensler, CFO Alphabet and Google Thanks, Greg, and good morning, everyone. Today, we reported strong fourth quarter and full fiscal year 2021 results. This performance further demonstrates our continued ability to successfully navigate challenging market conditions and to deliver on the objectives and financial outlook we laid out as we entered the year, including annual revenue growth of 2.5%, which was at the high end of our expectations, fiscal 21 adjusted gross margin of 48%, which exceeded our forecast, and adjusted operating margin of 16.8% for the full year, also above our original forecast. Revenue in the fourth quarter exceeded $1 billion for the first time and came in higher than expected. Additionally, orders in the quarter were once again significantly higher than revenue. And with our third consecutive quarter of orders outpacing revenue, we have substantial momentum and increased confidence in the demand environment. We ended the year with our highest ever backlog of approximately $2.2 billion, nearly double our backlog of a year ago. This performance, I think, reflects our market leadership within a very strong demand environment. Specifically, the combination of our differentiated balance sheet, leading innovation and R&D capabilities, and deep and growing customer relationships around the globe give us a distinct strategic advantage in the industry. And of course, our people continue to amaze us with their resilience and kindness as they continue to perform at the absolutely highest levels. One of the highlights from the fourth quarter and fiscal year, our focused investments are in three key areas. Optical, routing and switching, and software automation. And they are yielding great results. In optical, we continue to lead the market in high-capacity, coherent technology. Q4 was a record quarter for WaveLogic 5 Extreme. We added 34 new customers, including 13 new logos spanning all regions. Our total customer count for WaveLogic 5e is now 140 globally, and we've shipped nearly 25,000 modems to date. We also shipped our first customer orders in Q4 for our WaveLogic 5 nano coherent pluggable optics. We had a strong quarter in routing and switching, and we continue to build momentum in this space. In G4, we secured a dozen new wins, including significant multi-year deals with two of the largest US Tier 1 service providers, one of which is for a nationwide 5G cell site router deployment. Additionally, we've now closed the deal with AT&T to acquire its Viata virtual routing and switching technology, which will help strengthen our adaptive 5G capabilities and increase our exposure to certain 5G use cases. We also announced a partnership with Samsung to couple our X4 solutions, next-gen MCP domain controller, and services with Samsung's 5G core and RAN equipment to support global 5G networks. Moving to our software automation business, Blue Planet performed well in FY21, growing 23% in the year to deliver an annual revenue of $77 million, which again was above the high end of our target range, as well as record bookings for the year. Some of the marking wins in the year for Blue Planet included British Telecom, Vodafone, and Colt, as well as a major US Tier 1 service provider and large US MSO. I also want to highlight our global services business, which grew 7% year over year, with revenue growth across each of our service categories, and earning a 95% customer satisfaction rating in 2021. And also as part of that, really advancing a key part of our strategy, we landed major network migration wins, including three US Tier 1 service providers and an international Tier 1 service provider. Shifting to diversification in our business across both customers and regions, our top 10 customers for the year, including three US service providers, two international service providers, one MSO, and all four major web scalers. Strong illustration of the continued diversity in our business. In fact, our non-telco revenue was 41% of total revenues for the year. Also of note in FY21, we had more than 1 billion in orders from web scale customers. We also performed well once again in the submarine segment, gaining more than 2% market share year-over-year, bringing our SLTE market share to the mid-50s. And finally, international growth was also strong, led by EMEA and India, which each grew at 13% year-over-year. Overall, secular demand remains very strong, driven by increasing bandwidth needs, the shift to the cloud, and also the focus on edge applications, as well as digital transformation and the growing need for network automation. And we continue to take full advantage of our leading position to address these network priorities. And we're making forward investments in our portfolio and go-to-market resources that are aligned to these trends and longer-term opportunities. As an example, we are leveraging our optical expertise to offer where we are investing to expand that total addressable market in this growing market from about 13 billion overall currently to roughly 22 billion over the next several years. I would also like to highlight the development of critical assets in software automation, including network layer automation with MCP. This is our microservices-based domain controller that has now been adopted by the vast majority of our customers around the world. Also, our differentiating software for our adaptive IT approach. And this can be deployed and embedded in a routing and switching portfolio on white boxes or virtually. And finally, our multi-vendor blue client services automation software, which is now deployed at 30 of the largest global carriers around the world to help drive their digital transformation efforts. These software elements are delivering unique innovation in the marketplace and expanding our relationships with customers. Our overall software business currently constitutes less than 10% of our total revenue. We do see this growing over time as we expand both the adoption and applications and move to more recurring and subscription-based models. Of course, the strong sector demand for bandwidth and ordination remains challenged by the global supply chain constraints in the current environment. And we continue to believe that these supply challenges are likely to persist through at least to the middle of calendar 22. And to be clear, supply conditions are adversely impacting product costs, availability, and lead times, as well as our overall supply chain operations. We expect these variables to affect our gross margin as well as the level and timing of revenue during fiscal 22. And we've obviously incorporated all of these elements and considerations into our guidance accordingly. However, as you can see from our performance today, we continue to manage these challenges well. And while we are obviously not immune, we expect to continue to outperform others in this regard going forward. In fact, we've entered fiscal year 2022 with increased confidence and visibility. And in a moment, Jim will provide our outlook for FY22, which we believe will be a year of outsized revenue growth for CNF. And that is driven by several factors, including, number one, strong order flow and additional visibility to short-term customer purchasing decisions. Number two, overall return to historical customer spending levels to address the continued bandwidth demand following about two years of slow investment due to the pandemic. And thirdly, and most uniquely to Sienna, increased monetization of wins, both those that we've secured over the past couple of years, as well as new awards. Jim will also provide a new set of long-term targets that we are confident in providing now, given the positive demand environment and strength of our business and overall financial position. Jim.