Ciena Corporation

Good day, and thank you for standing by. Welcome to the Siena Fiscal Fourth Quarter and Year-End 2022 results. At this time, all participants enter listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star-1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Greg Lemp, Vice President of Investor Relations. Please go ahead. Thank you, Catherine.

Good morning, and welcome to Ciena's 2022 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 Products 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 the 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 that we're seeing as 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 forward-looking statements. Such statements, including our quarterly and annual guidance and long-term financial outlook, discussion of market opportunities and strategy, and commentary about impacts of supply chain constraints on our business and results, are based on current expectations, forecasts, and assumptions regarding the company and its markets, which include certain risks and uncertainties that could cause actual results to differ materially from the statements discussed today. Assumptions relating to our outlook, whether mentioned on this call or included in the investor presentation that we'll post shortly after, are an important part of such forward-looking statements, and we encourage you to consider them. Our forward-looking statements should also be viewed in the context of the risk factors detailed in our most recent 10Q filing and in our upcoming 10K filing. Our 10K is required to be filed with the SEC by December 28th, and we expect to file by that date. CCN assumes no obligations 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, though ask that you limit yourselves to one question and one follow-up. With that, I'll turn the call over to Gary.

Thanks, Greg, and good morning, everyone. Today, we reported strong fiscal fourth quarter results, including higher than expected revenue of $971 million. an adjusted gross margin of 45.2. This performance reflects the benefit of some favorable supply chain dynamics that occurred in the second half of the quarter, including that we received more integrated circuits than expected from certain suppliers, and that we were also able to procure more parts in the open market than originally projected. These developments enabled us to ship more product to customers in the quarter, especially modems, which also had a positive impact on both revenue and margin. For the full fiscal year, we delivered revenue of $3.63 billion, essentially flat with fiscal 2021, due entirely to the challenging supply chain conditions that we encountered during the year. Despite the difficult supply environment in fiscal 22, we saw robust demand from customers across our segments, regions, and applications, as evidenced by annual order growth of 26% and a backlog of greater than $4 billion as we exited the year. Our results across FY22, including the strong finish in Q4, demonstrate the continued volatility and unpredictable nature of the current supply dynamics. With respect to supply overall, we are seeing ongoing signs of gradual improvement. The majority of our suppliers are delivering to their current committed lead times and volumes are slowly increasing. And we also expect continued improvements in these areas as we move through fiscal 2023. We are also starting to benefit from the various mitigation steps that we've taken over the last year or so. As a reminder, these include product engineering redesigns and qualification of alternative components designed to minimize the impact of supply chain challenges on our customers. At the same time, the unpredictable performance of specific vendors for a relatively small number of components, even if they are low cost, low value, can negatively and disproportionately impact our revenue and significantly shift our product mix, which is what happened in Q3 of last year. Conversely, our Q4 results, particularly on revenue and margin, illustrate how these same supply dynamics can have an unexpected and disproportionate impact in a favorable direction. So to be clear, the volatility can obviously manifest as both headwinds and tailwinds, but generally we believe them to be moving in the positive direction. With respect to demand, we remain very positive that the fundamental drivers including 5G, cloud and automation are durable over the long term. Based on these drivers for network investment, we continue to see a strong demand environment in the coming quarters and the next several years. Importantly, We are confident that our leading technology, as well as our strategy to expand our addressable market in key areas, are closely aligned with these drivers and the areas of investment for our customers. As we look to FY23, specifically the combination of continued signs of gradual supply improvement and our significant backlog gives us confidence that we will deliver outside year-on-year revenue growth and gain market share. Jim will expand upon this shortly with more specifics on our outlook and how we are thinking about our business over the longer term within these demand and supply conditions. Before he does that, I want to share a few highlights from the fourth quarter and fiscal year. Of particular note is the growth in our routing and switching portfolio. for which quarterly revenue was up nearly 40% year-over-year in Q4, as we benefited from the addition of the Viata solutions and organic portfolio enhancements. In fact, during Q4, we reached a milestone of more than 200 adaptive IP customers, fueled by momentum in coherent routing, metro aggregation, PON, and high-speed business services. And we continue to invest in our next-gen metro and edge strategy, particularly in our routing and switching portfolio. As you saw, we recently closed the acquisition of Bennu Networks and announced that we are acquiring Tibit Communications, which we expect to close in Q1 23. These acquisitions will enable us to build upon our existing strategic investments in fiber broadband access and pursue a larger set of opportunities in this market segment. Specifically, the addition as advanced subscriber management and next-generation PON technologies will advance our ability to address fast-growing applications, including residential broadband, enterprise business services, and fixed wireless access. This also represents a significant addressable market expansion for Ciena, something we've been talking to you about for some time within our routing and switching segment. and is expected to be a considerable investment area for many of our customers. In optical, we added 15 new customers for WaveLogic 5e in Q4, bringing our total global customer count to more than 200, with more than 50,000 WaveLogic 5e modems shipped to date. In Blue Planet, we won several new logos during the year, while expanding our presence at a number of Tier 1 service providers. Additionally, our strategic win at DISH has now gone live with both our inventory and our service order orchestration solutions. And our network transformation services grew 50% year over year. I think this really reflects the increased demand from customers to move from legacy to next generation networks. And lastly, with respect to diversification, our non-Telco revenue was approximately 40% for the year. And within that, four of our top 10 customers were major web scalers. And like last year, we had more than one billion in orders from web scale customers in FY22. Once again, demonstrating continued strong demand from this key customer segment. With that, I'll now hand over to Jim to take us through the results in a little more detail and provide our outlook. Jim.