Ciena Corporation

Good day and welcome to the Siena Fiscal First Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Greg Lamp, Vice President of Investor Relations. Please go ahead.

Thank you, Michael. Good morning, and welcome to Ciena's 2025 Fiscal First Quarter Conference Call. On the call today is Gary Smith, President and CEO, and Jim Moyland, CFO. Scott McFeely, Executive Advisor, is also with us for Q&A. In addition to this call and the press release, we have posted to the Investors section of our website an accompanying investor presentation that reflects this discussion as well as certain highlighted items from the quarter. 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 Ciena's results of operations. A 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, commentary on market dynamics, and discussion of our opportunities and strategy, are based on current expectations, forecasts, and assumptions regarding the company and its markets, which includes 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, 10K, excuse me, and our 10Q, which we expect to follow with the SEC by this Thursday. 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 will allow for as much Q&A as possible today, so ask that you limit yourselves to one question and one follow-up. Also, in case there's a slightly longer pause than usual during Q&A, please note that our team is in two different locations for this call. With that, I'll turn the call over to Gary.

Thank you, and good morning, everybody. Today, we delivered strong fiscal first quarter results. including revenue of 1.07 billion, adjusted gross margin of 44.7, and adjusted EPS of 64 cents per share. Positive demand dynamics drove very strong order flow in the quarter. Significantly, direct orders from cloud providers were half of overall orders in Q1. And we've had our strongest back-to-back quarters of orders from service providers in over two years. This outstanding performance reflects balanced growth and strong momentum across all aspects of our business as we execute our strategy to take full advantage of the growth of cloud and AI traffic. Since speaking with you last in mid-December, we've seen the continuation of the positive demand dynamics that we've been discussing in recent quarters. This is playing out across our primary customer segments and geographies, and in both our foundational business and our market expansion opportunities. The rapid expansion and distribution of AI training and inferencing infrastructure has is driving global investment in ultra scalable, high performance networks operated by both service providers and cloud providers. And as the global leader in high speed connectivity, we are best positioned to partner with them on these critical infrastructure builds to help scale and monetize their networks. So, as we continue to execute our strategy and take full advantage of these opportunities, we remain focused on extending our leadership and growing market share in our core businesses, inclusive of subsea, long-haul, metro, DCI, and MOFON opportunities, and growing our addressable market into adjacencies, particularly inside and around the data center over time, as well as in metro routing, all areas where our foundational optical technologies and leadership provide a significant competitive advantage. To best understand how our investments are fully aligned with these market dynamics and our customers' priorities, we believe that viewing our business through the lens of our major customer segments provides the most insight. So let's start with service providers. The supply and demand dynamics that we experienced in previous periods continue to come into balance, and we believe service provider inventory digestion impacts are largely now complete. Accordingly, we saw ongoing improvement in Q1 in revenue and orders, with North America leading the way and international markets continuing to show positive progress. Service provider revenue in Q1 increased 14% year-over-year, comprising approximately 51% of total revenue. Clearly, these customers are once again investing to scale their networks, specifically for the anticipated increase in cloud traffic and new AI workloads, including for MoFan opportunities with the cloud providers. We've now seen a couple of quarters with an improving service provider trend line, And we believe these positive service provider spending dynamics will continue moving forward. Moving now to cloud providers. We continue to broaden and deepen our relationships with cloud customers. In Q1, total direct cloud revenue comprised 32% of the total revenue, with five cloud providers in our top 10 customers for the quarter. AI is the key driver of scaling and provisioning these high-speed networks to support increased bandwidth demand and enable the monetization of AI today and well into the future. We expect these to be large, long-term investment plans over many years to come, as evidenced by the strong CapEx plans and strategic commentary that most cloud providers have recently announced relating to networks. Turning to the critical technologies that are required by both our service provider and cloud provider customers, we are seeing broad-based momentum again across our portfolio. WaveLogic 6 Extreme is off to an incredibly strong start in the marketplace, gaining momentum with customers who seek increased capacity and reduced space and power requirements in their networks. In Q1, we added 20 new customers for WaveLogic 6E. And we continue to ship our WaveLogic 5 solution. In Q1, we reached more than 1,600 WaveLogic modems shipped worldwide, 160,000. Confirming the WaveLogic portfolio is the foundation for world-class network backbones for the AI and cloud economy, both terrestrial and subsea. And our intelligent line systems, including our RLS photonic platform and Wave Server wavelength solution, are designed for the type of traffic and applications that are emerging and are the preferred choice for both service providers and cloud product customers alike. In fact, we have nearly 100 total customers now for RLS and more than 400 total for Wave Server. Importantly, our InterConnex portfolio is gaining traction and represents a substantial growth opportunity for us moving forward, particularly in the context of AI within the metro data center campus and in the future inside the data center itself. As a reminder, InterConnex is a general industry term to describe the infrastructure technologies that provide the connectivity between and within data centers. It includes both pluggables and component technologies. Demand for our high-performing, best-in-class pluggables is strong and growing. Q1 was our highest orders quarter yet for pluggables, as we continue to take share in this fast-growing market. We are also on track for general availability of our 800 gig WaveLogic 6 nano pluggable solution in the first half of this calendar year and expect deployments later in the calendar year for Metro DCI use cases. The WaveLogic 6 nano technology also supports the industry's first 1.6T coherent light solution for 2 kilometers to 20 kilometer campus applications. which will also be productized for deployment in the 2026 timeframe. And in fact, we will also be showing the first live 1.6T coherent light solution demonstration at the upcoming OSC conference in San Francisco in early April. And we will be hosting investor meetings to provide further details about our ongoing R&D efforts in this area. Before handing over to Jim, I'd summarize by saying that as the global leader in high-speed connectivity for both systems and the underlying technology, we are incredibly well positioned to partner with customers to address rapidly increasing bandwidth demands driven by cloud connectivity and AI. As a result, we have strong momentum across our business, which is driving balanced growth, and providing a solid visibility and confidence in our future. Jim, can you now take us through a more detailed readout of our financial performance in Q1, as well as our outlook? Jim.