Blue Planet Automation軟件產品組合使運營商能夠通過整個服務生命週期方法快速完成服務並滿足最終客戶的體驗質量期望。它還推動網絡運營商通過閉環自動化實現自我修復和自我優化網絡的願景。我們進入與這些軟件自動化功能相關的市場仍處於早期階段，因此，藍色星球自動化軟件和服務部門的收入仍然佔我們總收入的相對較小的一部分。
James E.小莫伊蘭 於2007年加入Ciena，並自2007年12月以來擔任高級副總裁兼首席財務官。
Andrew C.彼得裏克 1996年加入Ciena，並自1997年8月以來擔任副總裁兼財務總監。他還於1997年8月至2008年10月擔任財務主管。
Jason M.菲普斯 於2002年加入Ciena，並自2017年2月起擔任全球客戶參與高級副總裁（原名全球銷售和營銷高級副總裁），負責Ciena的全球銷售、系統工程、服務和合作夥伴組織。2014年1月至2017年2月，Phipps先生擔任北美銷售副總裁兼總經理，期間他還負責全球合作伙伴和渠道業務，2011年3月至2013年12月，他擔任全球銷售運營副總裁。Phipps先生此前還曾在Ciena擔任多個銷售和營銷領導職位。
David M.羅森斯坦 於2001年1月加入Ciena，自2022年3月起擔任代理首席戰略官後，自2023年1月起擔任高級副總裁兼首席戰略官。2008年11月至2023年1月，他擔任高級副總裁、總法律顧問兼秘書。在此之前，他於2004年7月至2008年10月擔任副總裁兼副總法律顧問，此前曾擔任助理總法律顧問。
We rely on third-party contract manufacturers, including those with facilities in Canada, Mexico, Thailand, and the United States, to perform a substantial portion of our supply chain activities, including component sourcing, manufacturing, product testing and quality, and fulfillment and logistics relating to the distribution and support of our products. There are a number of risks associated with our dependence on contract manufacturers, including:
•reduced control over delivery schedules and planning;
•reliance on the quality assurance procedures of third parties;
•potential uncertainty regarding manufacturing yields and costs;
•availability of manufacturing capability and capacity, particularly during periods of high demand;
•the impact of wage inflation and labor shortages on cost;
•the impact of supply chain constraints on our contract manufacturers’ costs and business models;
•risks associated with the ability of our contract manufacturers to perform to our manufacturing needs;
•risks and uncertainties associated with the locations or countries where our products are manufactured, including manufacturing disruptions caused by social, geopolitical, environmental, or health factors, such as the COVID-19 pandemic;
•risks associated with data security incidents, including disruptions, interdiction, or cyber-attacks targeting or affecting our third-party manufacturers, including manufacturing disruptions or unauthorized access to or acquisition of information;
Certain service partners may provide similar services for other companies, including our competitors. We may not be able to manage our relationships with our service partners effectively, and we cannot be certain that they will be able to deliver services in the manner or time required, that we will be able to maintain the continuity of their services, or that they will adhere to our approach to ethical business practices. We may also be exposed to a number of risks or challenges relating to the performance of our service partners, including:
•delays in recognizing revenue;
•liability for injuries to persons, damage to property or other claims relating to the actions or omissions of our service partners;
•our services revenue and gross margin may be adversely affected; and
At this time, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the U.S., tax policy related to international commerce, increased export control and investment restrictions, import or use of foreign communications equipment, or other trade matters. Based on our manufacturing practices and locations, there can be no assurance that any future executive or legislative action in the United States or other countries relating to tax policy and trade regulation would not adversely affect our business, operations and financial results.
During fiscal 2023, approximately 49.4% of our operating expense was non-U.S. Dollar denominated, including Canadian Dollars, Indian Rupees, and Euros. During fiscal 2023 as compared to fiscal 2022, the U.S. Dollar primarily strengthened against these and other currencies. Consequently, our operating expense reported in U.S. Dollars decreased by approximately $23.3 million, or 1.5%, net of hedging.
Operating expense increased in fiscal 2023 from the level reported for fiscal 2022, primarily due to increases in employee headcount and variable compensation costs associated with our annual cash incentive compensation plan and increases in professional services. We have also experienced, and are continuing to experience, increases in the cost of labor and other costs of doing business due to inflation, and continued inflationary pressures could have an adverse impact on our profitability. We
expect operating expense to continue to increase from the level reported in fiscal 2023 primarily due to planned investment in research and development to advance our strategy and higher employee compensation costs.
Operating expense consists of the component elements described below.
•Research and development expense primarily consists of salaries and related employee expense (including share-based compensation expense), prototype costs relating to design, development, product testing, depreciation expense, and third-party consulting costs.
•Selling and marketing expense primarily consists of salaries, commissions and related employee expense (including share-based compensation expense) and sales and marketing support expense, including travel, demonstration units, trade show expense, and third-party consulting costs.
•General and administrative expense primarily consists of salaries and related employee expense (including share-based compensation expense) and costs for third-party consulting and other services.
•Significant asset impairments and restructuring costs primarily reflect actions we have taken to improve the alignment of our workforce, facilities and operating costs with perceived market opportunities, business strategies, changes in market and business conditions, the redesign of certain business processes and significant impairments of assets.
•Amortization of intangible assets primarily reflects the amortization of both purchased technology and the value of customer relationships derived from our acquisitions.
•Acquisition and integration costs primarily consist of expenses for financial, legal and accounting advisors and severance and other employee-related costs, associated with our acquisition activity. For more information on our acquisitions, see Note 4 to our Consolidated Financial Statements included in Item 8 of Part II of this report.
The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):
Fiscal Year
2023
%*
2022
%*
Increase (decrease)
%**
Research and development
$
750,559
17.1
$
624,656
17.2
$
125,903
20.2
Selling and marketing
490,804
11.2
466,565
12.9
24,239
5.2
General and administrative
215,284
4.9
179,382
4.9
35,902
20.0
Significant asset impairments and restructuring costs
23,834
0.5
33,824
0.9
(9,990)
(29.5)
Amortization of intangible assets
37,351
0.9
32,511
0.9
4,840
14.9
Acquisition and integration costs
3,474
0.1
598
—
2,876
480.9
Total operating expenses
$
1,521,306
34.7
$
1,337,536
36.8
$
183,770
13.7
_________________________________
*
Denotes % of total revenue
**
Denotes % change from 2022 to 2023
•Research and development expense benefited from $16.3 million as a result of foreign exchange rates, net of hedging, primarily due to a stronger U.S. Dollar in relation to the Canadian Dollar and Indian Rupee. Including the effect of foreign exchange rates, net of hedging, research and development expenses increased by $125.9 million. This increase primarily reflects increases in employee headcount and related compensation costs including variable compensation costs associated with our annual cash incentive compensation plan, and professional services related to design engineering, fabrication and production of ASIC chips. The increase in employee headcount was partially due to our acquisitions of Benu and Tibit.
•Selling and marketing expense benefited from $5.4 million as a result of foreign exchange rates, primarily due to a stronger U.S. Dollar in relation to the Canadian Dollar and the Euro. Including the effect of foreign exchange rates, sales and marketing expense increased by $24.2 million. This increase primarily reflects increases in travel and entertainment costs, professional services and employee-related compensation costs primarily related to higher costs associated with our annual cash incentive compensation plan.
•General and administrative expense benefited from $1.6 million as a result of foreign exchange rates, primarily due to a stronger U.S. Dollar in relation to the Canadian Dollar and Indian Rupee. Including the effect of foreign exchange rates, general and administrative expenseincreased by$35.9 million. This increase primarily reflects increases in employee-related compensation costs primarily related to higher costs associated with our annual cash incentive compensation plan, costs incurred as a result of the settlement of certain patent infringement claims and the resolution of related legal proceedings, and professional services.
•Significant asset impairments and restructuring costs decreased by $10.0 million. This decrease primarily reflects the effect of a $3.8 million impairment charge due to our suspended operations in Russia recorded in fiscal 2022 and lower costs on actions that we have taken with respect to our operations, global workforce, and facilities as part of a business optimization strategy to improve gross margin, constrain operating expense, redesign certain business processes, and restructure real estate facilities.
•Amortization of intangible assets increased by $4.8 million reflecting additional intangibles acquired in connection with our acquisitions of Benu and Tibit during the first quarter of fiscal 2023, partially offset by certain intangible assets having reached the end of their economic lives.
•Acquisition and integration costs increased by $2.9 million and primarily reflect financial, legal, and accounting advisors and employee-related costs related to our acquisitions of Benu and Tibit.
Other Items
The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):
Fiscal Year
2023
%*
2022
%*
Increase (decrease)
%**
Interest and other income (loss), net
$
62,008
1.4
$
6,747
0.2
$
55,261
819.0
Interest expense
$
(88,026)
(2.0)
$
(47,050)
(1.3)
$
40,976
87.1
Loss on extinguishment and modification of debt
$
(7,874)
(0.2)
$
—
—
$
7,874
100.0
Provision (benefit) for income taxes
$
68,826
1.6
$
29,603
0.8
$
39,223
132.5
_________________________________
*
Denotes % of total revenue
**
Denotes % change from 2022 to 2023
•Interest and other income (loss), net increased by $55.3 million, primarily resulting from higher interest income on our investments and the remeasurement of our previously held investment in Tibit to fair value, which resulted in a gain on our cost method equity investment of $26.5 million. These increases were partially offset by foreign currency exchange gains (losses), net of foreign currency hedging impact. For more information on our acquisition of Tibit, see Note 4 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
•Interest expense increased, primarily due to additional indebtedness, including the 2030 Term Loan entered into during the first quarter of fiscal 2023, and increased interest on the unhedged portion of the 2025 Term Loan, 2030 Term Loan and 2030 New Term Loan (as defined below), primarily due to higher interest rates. For more information on our short-term and long-term debt, see Note 19 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
•Loss on extinguishment and modification of debt primarily reflects $1.9 million of extinguishment of debt costs and $6.0 million in debt modification costs, both related to our term loan refinancing which occurred in the fourth quarter of fiscal 2023. For more information, see Note 19 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
•Provision (benefit) for income taxes increased by $39.2 million, primarily due to the increase in pre-tax income in fiscal 2023. The effective tax rate for fiscal 2023 was higher than the effective tax rate for fiscal 2022, primarily due to the mandatory capitalization of research and development expenses in fiscal 2023.
Segment Profit (Loss)
The table below sets forth the changes in our segment profit (loss) for the respective periods (in thousands, except percentage data):
•Networking Platforms segment profitincreased by $206.3 million, primarily due to higher sales volume as described above, and higher gross margin, partially offset by increased research and development costs.
•Platform Software and Services segment profitincreased by $11.8 million, primarily due to higher software-related services sales volume as described above, partially offset by lower software sales volume, increased research and development costs, and lower gross margin on software-related services.
•Blue Planet Automation Software and Servicessegment loss increased by $11.3 million, primarily due to lower sales volume, increased research and development costs and lower gross margin on software-related services, as described above.
•Global Services segment profit decreased by $14.3 million, primarily due to higher incremental costs on maintenance related support and lower maintenance support and training revenue, as described above.
Liquidity and Capital Resources
Overview. For the fiscal year ended October 28, 2023, we generated$168.3 million of cash from operations, as our net income (adjusted for non-cash charges) of $565.1 million exceeded our working capital requirements of $396.8 million. For additional details on our cash used in operating activities, see the discussion below under the caption “Cash Provided by Operating Activities.”
Cash, cash equivalents and investments increased by $65.9 million during fiscal 2023. Cash from operations was partially offset by the following: (i) cash used for stock repurchases under our stock repurchase program of $242.2 million; (ii) cash used for the acquisition of businesses of $230.0 million, net of cash acquired; (iii) cash used to fund our investing activities for capital expenditures totaling $106.2 million; (iv) stock repurchased upon vesting of our stock unit awards to employees relating to tax withholding of $38.5 million; and (v) cash used for payments on our term loans of $9.4 million. In addition to cash provided by operations, the following items also contributed to the increase in cash: (i) proceeds from the issuance of the 2030 Term Loan, which provided $492.5 million in cash, net of paid debt issuance costs; and (ii) issuance of equity under our employee stock purchase plans which provided $31.4 million in cash during fiscal 2023.
See Notes 4, 19, and 22 to our Consolidated Financial Statements included in Item 8 of Part II of this report for information relating to these transactions.
The following table sets forth changes in our cash and cash equivalents and investments in marketable debt securities (in thousands):
October 28, 2023
October 29, 2022
Increase (decrease)
Cash and cash equivalents
$
1,010,618
$
994,352
$
16,266
Short-term investments in marketable debt securities
104,753
153,989
(49,236)
Long-term investments in marketable debt securities
134,278
35,385
98,893
Total cash and cash equivalents and investments in marketable debt securities
$
1,249,649
$
1,183,726
$
65,923
Principal Sources of Liquidity. Our principal sources of liquidity include our cash, cash equivalents and investments, which as of October 28, 2023 totaled $1.2 billion, as well as the unused portion of the Revolving Credit Facility. The Revolving Credit Facility, which we and certain of our subsidiaries entered into on October 24, 2023, replaced the ABL Credit Facility and provides for a total commitment of $300.0 million with a maturity date of October 24, 2028. We principally use the Revolving Credit Facility to support the issuance of letters of credit that arise in the ordinary course of our business and for general
corporate purposes. As of October 28, 2023, letters of credit totaling $72.5 million were outstanding under our Revolving Credit Facility. There were no borrowings outstanding under the Revolving Credit Facility as of October 28, 2023.
Foreign Liquidity. The amount of cash, cash equivalents and short-term investments held by our foreign subsidiaries was $308.0 million as of October 28, 2023. During the fourth quarter of fiscal 2023, we evaluated the undistributed earnings of the foreign subsidiaries and identified approximately $222.0 million in earnings that we no longer consider to be indefinitely reinvested. We have recorded a provision of $2.5 million that reflects the income tax effects of the repatriation of these earnings. No additional income tax expense has been provided for any remaining undistributed foreign earnings, or any additional outside basis difference inherent in our foreign subsidiaries, as these amounts continue to be indefinitely reinvested. See Note 23 to our Consolidated Financial Statements included in Item 8 of Part II of this report.
Stock Repurchase Authorization. On December 9, 2021, we announced that our Board of Directors authorized a program to repurchase up to $1.0 billion of our common stock, which replaced in its entirety the previous stock repurchase program authorized in fiscal 2019. During fiscal 2023, we repurchased an additional $250.0 million of our common stock under the stock repurchase program, and we had $250.0 million remaining under the current repurchase authorization as of October 28, 2023. The amount and timing of any further repurchases under our stock repurchase program are subject to a variety of factors including liquidity, cash flow, stock price and general business and market conditions. The program may be modified, suspended, or discontinued at any time. See Note 22 to our Consolidated Financial Statements included in Item 8 of Part II of this report.
Liquidity Position. Based on past performance and current expectations, we believe that cash from operations, cash, cash equivalents, investments, and other sources of liquidity, including our Revolving Credit Facility, will satisfy our currently anticipated working capital needs, capital expenditures, and other liquidity requirements associated with our operations through the next 12 months and the reasonably foreseeable future. We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our operating or investment plans, and will continue to consider capital raising and other market opportunities that may be available to us. We have historically been successful in our ability to secure such sources of financing; however, our access to these sources of capital could be materially and adversely impacted, and we may not be able to receive terms as favorable as we have historically received, whether due to inflation or other factors. We regularly evaluate alternatives to manage our capital structure and market opportunities to enhance our liquidity and provide further operational and strategic flexibility.
Cash Provided by Operating Activities
The following sections set forth the components of our $168.3 million of cash provided by operating activities for fiscal 2023:
Net Income (adjusted for non-cash charges)
The following table sets forth our net income (adjusted for non-cash charges) during fiscal 2023 (in thousands):
Year Ended
October 28, 2023
Net income
$
254,827
Adjustments for non-cash charges:
Loss on extinguishment of debt
1,864
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements
We used $396.8 million of cash for working capital during fiscal 2023. The following table sets forth the major components of the cash used in working capital (in thousands):
Year Ended
October 28, 2023
Cash used in accounts receivable
$
(94,565)
Cash used in inventories
(132,497)
Cash used in prepaid expenses and other
(51,965)
Cash used in accounts payable, accruals and other obligations
(138,469)
Cash provided by deferred revenue
27,412
Cash used in operating lease assets and liabilities, net
(6,667)
Total cash used for working capital
$
(396,751)
As compared to the end of fiscal 2022:
•The $94.6 million of cash used in accounts receivable during fiscal 2023 primarily reflects increased sales volume in the fourth quarter of fiscal 2023;
•The $132.5 million of cash used in inventory during fiscal 2023 related to increases in finished goods inventories from planned fulfillment of customer advance orders for which some deliveries have since been rescheduled as described in “Overview” above;
•The $52.0 million of cash used in prepaid expenses and other during fiscal 2023 primarily reflects increases in prepaid value added taxes;
•The $138.5 million of cash used in accounts payable, accruals and other obligations during fiscal 2023 primarily reflects the timing of payments to suppliers, partially offset by a higher accrual rate related to Ciena’s 2023 annual cash incentive compensation plan;
•The $27.4 million of cash provided by deferred revenue during fiscal 2023 represents an increase in advanced payments received on multi-year maintenance contracts from customers prior to revenue recognition; and
•The $6.7 million of cash used in operating lease assets and liabilities, net, during fiscal 2023 represents cash paid for operating lease payments in excess of operating lease costs. For more details, see Note 18 to our Consolidated Financial Statements included in Item 8 of Part II of this report.
Our days sales outstanding (“DSOs”) were 95 for fiscal 2023, as compared to 107 for fiscal 2022. The calculation of DSOs includes accounts receivable, net and contract assets for unbilled receivables, net included in prepaid expenses and other. Our inventory turns slightly increased from 1.8 during fiscal 2022 to 2.0 during fiscal 2023 due to the supply chain beginning to stabilize as described above.
Cash Paid for Interest, Net
The following table sets forth the cash paid for interest, net during fiscal 2023 (in thousands):
(1) The 2025 Term Loan bore interest at LIBOR for the chosen borrowing period plus a spread of 1.75% subject to a minimum LIBOR rate of 0.00% prior to its amendment on January 19, 2023, and then bore interest at SOFR for the chosen borrowing period plus a spread of 1.75% subject to a minimum SOFR rate of 0.00%. The 2025 Term Loan was terminated on October 24, 2023.
(2) The 2030 Term Loan bore interest at SOFR for the chosen borrowing period plus a spread of 2.50% subject to a minimum SOFR rate of 0.00%. The 2030 Term Loan was terminated on October 24, 2023.
(3) Interest on the 2030 New Term Loan is payable periodically based on the interest period selected for borrowing. The 2030 New Term Loan bears interest at SOFR for the chosen borrowing period plus a spread of 2.00% subject to a minimum SOFR rate of 0.00%. At the end of fiscal 2023, the interest rate on the 2030 New Term Loan was 7.33%.
(4) The 2030 Senior Notes bear interest at a rate of 4.00% per annum and mature on January 31, 2030. Interest on the 2030 Notes is payable semiannually on January 31 and July 31 of each year.
(5) Our interest rate swaps fix the SOFR rate for $350.0 million of our Term Loans at 3.47% through January 2028 and another $350.0 million of our Term Loans at 2.968% through September 2025. In January 2023, we entered into a LIBOR to SOFR basis swap (“basis swap”). The basis swap and our LIBOR interest rate swaps, which matured in September 2023, fixed the SOFR rate for $350.0 million of our Term Loans at 2.883% from January to September 2023.
(6) During fiscal 2023, we issued certain standby letters of credit under the Revolving Credit Facility and its predecessor, the ABL Credit Facility and paid $2.1 million in commitment fees, interest expense and other administrative charges primarily relating to the ABL Credit Facility. The ABL Credit Facility was terminated on October 24, 2023.
For additional information about our short-term and long-term debt, revolving credit facilities and derivative instruments, see Notes 16, 19 and 20 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report and Item 7A of Part II of this annual report.
Contractual Obligations
Debt. As of October 28, 2023, we had $1.2 billion outstanding principal associated with our 2030 New Term Loan, with $8.8 million maturing within 12 months. Interest payments on the 2030 New Term Loan and payments to be received under the interest rate swaps are variable and are calculated using the interest rate in effect as of the October 28, 2023. Future interest payments associated with the 2030 New Term Loan totaled $589.7 million, with $87.2 million payable within 12 months. As of October 28, 2023, we had $400.0 million outstanding principal associated with the 2030 Notes payable January 31, 2030. Future interest payments associated with the 2030 Notes totaled $104.0 million, with $16.0 million payable within 12 months. Future interest payments to be received net of payments under the interest rate swaps totaled $44.4 million, with $15.1 million to be received within 12 months. For additional information about our short-term and long-term debt and interest rate swaps, see Notes 16 and 19 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report and Item 7A of Part II of this annual report.
Purchase Order Obligations. As of October 28, 2023, we had $1.7 billion inoutstandingpurchase order commitments to our contract manufacturers and component suppliers for inventory. In certain instances, we are permitted to cancel, reschedule or adjust these orders. Consequently, only a portion of this amount relates to firm, non-cancelable and unconditional obligations.
Leases. We have lease arrangements for facilities including research and development centers, engineering facilities and smaller offices in regions throughout the world to support sales and services operations. Office facilities are leased under various non-cancelable operating or finance leases. As of October 28, 2023, we had fixed lease payment obligations of $125.7 million, with $25.8 million payable within 12 months. See Note 18 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any equity interests in so-called limited purpose entities, which include special purpose entities (SPEs) and structured finance entities.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. Note 1 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report describes the significant accounting
policies and methods used in the preparation of the Consolidated Financial Statements. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we reevaluate our estimates, including those related to revenue recognition, share-based compensation, bad debts, inventories, intangible and other long-lived assets, goodwill, income taxes, warranty obligations, restructuring, derivatives and hedging, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. Among other things, these estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. To the extent that there are material differences between our estimates and actual results, our consolidated financial statements will be affected.
We believe that the following critical accounting policies reflect those areas where significant judgments and estimates are used in the preparation of our consolidated financial statements.
Revenue Recognition
Revenue is allocated among performance obligations based on standalone selling price (“SSP”). SSP reflects the price at which we would expect to sell that product or service on a stand-alone basis at contract inception and that we would expect to be entitled to receive for the promised products or services. SSP is estimated for each distinct performance obligation and judgment may be required in its determination. The best evidence of SSP is the observable price of a product or service when we sell the products separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.
We apply judgment in determining the transaction price, as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration can include various rebate, cooperative marketing, and other incentive programs that we offer to our distributors, partners and customers. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and updates the estimate at each reporting period as actual utilization data becomes available. We also consider any customer right of return and any actual or potential payment of liquidated damages, contractual or similar penalties, or other claims for performance failures or delays in determining the transaction price, where applicable.
When transfer of control is judged to be over time for installation and professional service arrangements, we apply the input method to determine the amount of revenue to be recognized in a given period. Utilizing the input method, we recognize revenue based on the ratio of actual costs incurred to date to the total estimated costs expected to be incurred. Revenue for software subscription and maintenance is recognized ratably over the period during which the services are performed.
Our total deferred revenue for products was $28.4 million and $19.8 million as of October 28, 2023 and October 29, 2022, respectively. Our services revenue is deferred and recognized ratably over the period during which the services are to be performed. Our total deferred revenue for services was $200.1 million and $180.4 million as of October 28, 2023 and October 29, 2022, respectively.
Business Combinations
We record acquisitions using the purchase method of accounting. All of the assets acquired, liabilities assumed, contractual contingencies and contingent consideration are recognized at their fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and net intangible assets acquired is recorded as goodwill. The application of the purchase method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to allocate purchase price consideration properly between assets that are depreciated and amortized from goodwill. These assumptions and estimates include a market participant’s use of the asset and the appropriate discount rates for a market participant. Our estimates are based on historical experience, information obtained from the management of the acquired companies and, when appropriate, include assistance from independent third-party appraisal firms. Our significant assumptions and estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur that may affect the accuracy or validity of such estimates. During fiscal 2022, we completed the acquisitions of AT&T’s Vyatta Software Technology (“Vyatta”) and Xelic, Inc. (“Xelic”) for an aggregate purchase price of $64.1 million. During fiscal 2023, we completed the acquisitions of Benu and Tibit for an aggregate purchase price of $291.7 million. See Note 4 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information regarding these transactions.
We estimate the fair value of our restricted stock unit awards based on the fair value of our common stock on the date of grant. Our outstanding restricted stock unit awards are subject to service-based vesting conditions and/or performance-based vesting conditions. We recognize the estimated fair value of service-based awards as share-based expense ratably over the vesting period on a straight-line basis. Awards with performance-based vesting conditions require the achievement of certain financial or other performance criteria or targets as a condition to the vesting, or acceleration of vesting. We recognize the estimated fair value of performance-based awards as share-based expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based on our determination of whether it is probable that the performance targets will be achieved. At the end of each reporting period, we reassess the probability of achieving the performance targets and the performance period required to meet those targets, and the expense is adjusted accordingly. Determining whether the performance targets will be achieved involves judgment, and the estimate of expense may be revised periodically based on changes in the probability of achieving the performance targets. Revisions are reflected in the period in which the estimate is changed. If any performance goals are not met, no compensation cost is ultimately recognized against that goal and, to the extent previously recognized, compensation cost is reversed.
Share-based compensation expense is taken into account based on awards granted. In the event of a forfeiture of an award, the expense related to the unvested portion of that award is reversed. Reversal of share-based compensation expense based on forfeitures can materially affect the measurement of estimated fair value of our share-based compensation. See Note 24 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for information regarding our assumptions related to share-based compensation and the amount of share-based compensation expense we incurred for the periods covered in this report. As of October 28, 2023, total unrecognized compensation expense was $201.0 million, which relates to unvested restricted stock units and is expected to be recognized over a weighted-average period of 1.39 years.
We are required to record excess tax benefits or tax deficiencies related to stock-based compensation as income tax benefit or expense when share-based awards vest or are settled.
Reserve for Inventory Obsolescence
We make estimates about future customer demand for our products when establishing the appropriate reserve for excess and obsolete inventory. For fiscal 2023, future demand was calculated using both customer backlog and future forecasted sales. For fiscal 2022, future demand was calculated primarily based on customer backlog. Generally, our customers may cancel or change their orders with limited advance notice, or they may decide not to accept our products and services, although instances of both cancellation and non-acceptance are rare. We write down inventory that has become obsolete or unmarketable by an amount equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about future demand, which are affected by changes in our strategic direction, discontinuance of a product or introduction of newer versions of our products, declines in the sales of or forecasted demand for certain products, and general market conditions. Inventory write downs are a component of our product cost of goods sold. Upon recognition of the write down, a new lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. In an effort to limit our exposure to delivery delays and to satisfy customer needs, we purchase inventory based on forecasted sales across our product lines. Beginning in the second half of fiscal 2021, we started placing significant, advanced orders for supply of certain long lead time components to address our expected customer demand for fiscal 2022 and the then-emerging supply chain challenges. During the second half of fiscal 2023, supply for certain long lead time components began to stabilize and the need to place advance orders decreased for these components. As of October 28, 2023 and October 29, 2022, we had $1.7 billion and $2.6 billion, respectively, in outstanding purchase order commitments to our contract manufacturers and component suppliers for inventory. In addition, part of our research and development strategy is to promote the convergence of similar features and functionalities across our product lines. Each of these practices exposes us to the risk that our customers will not order products for which we have forecasted sales, or will purchase less than we have forecasted.
We recorded charges for excess and obsolete inventory of $29.5 million, $16.2 million and $17.9 million in fiscal 2023, 2022 and 2021, respectively. Our inventory, net of allowance for excess and obsolescence, was $1.1 billion and $946.7 million as of October 28, 2023 and October 29, 2022, respectively.
Allowance for Credit Losses for Accounts Receivable and Contract Assets
We estimate our allowances for credit losses using relevant available information from internal and external sources. This information is related to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. When assessing for credit losses, we determine
collectability by pooling assets with similar characteristics. The allowances for credit losses are each measured on a collective basis when similar risk characteristics exist. The allowances for credit losses are each measured by multiplying the exposure probability of default (the probability that the asset will default within a given time frame) by the loss given default rate (the percentage of the asset not expected to be collected due to default) based on the pool of assets.
Probability of default rates is published by third-party credit rating agencies. Adjustments to our exposure probability may take into account a number of factors, including, but not limited to, various customer-specific factors, the potential sovereign risk of the geographic locations in which the customer is operating and macroeconomic conditions. These factors are updated regularly or when facts and circumstances indicate that an update is deemed necessary.
Our accounts receivable, net of allowance for credit losses, was $1.0 billion and $920.8 million as of October 28, 2023 and October 29, 2022, respectively. Our allowance for credit losses was $11.7 million and $11.0 million as of October 28, 2023 and October 29, 2022, respectively.
Our contract assets for unbilled accounts receivable, net of allowance for credit losses, was $150.3 million and $156.0 million as of October 28, 2023 and October 29, 2022, respectively. Our allowance for credit losses was $0.1 million and $0.2 million as of October 28, 2023 and October 29, 2022, respectively.
Goodwill
Our goodwill was generated from the acquisitions of (i) Cyan, Inc. during fiscal 2015, (ii) the high-speed photonics components assets of TeraXion, Inc. during fiscal 2016, (iii) Packet Design, LLC and DonRiver Holdings, LLC during fiscal 2019, (iv) Centina Systems, Inc. during fiscal 2020, (v) Vyatta and Xelic during fiscal 2022 and (vi) Benu and Tibit during fiscal 2023. The goodwill from these acquisitions is primarily related to expected economic synergies. Goodwill is the excess of the purchase price over the fair values assigned to the net assets acquired in a business combination. We test goodwill for impairment on an annual basis, which we have determined to be as of the last business day of fiscal September each year. We also test goodwill for impairment between annual tests if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value.
We test goodwill impairment by comparing the fair value of the reporting unit with the unit’s carrying amount, including goodwill. Goodwill is allocated to reporting units based on relative fair value using a discounted cash flow model. If this test indicates that the fair value is less than the carrying value, then an impairment loss is recognized limited to the total amount of goodwill allocated to that reporting unit. A non-cash goodwill impairment charge would have the effect of decreasing earnings or increasing losses in such period. If we are required to take a substantial impairment charge, our operating results would be materially adversely affected in such period. As of October 28, 2023 and October 29, 2022, the goodwill balance was $444.8 million and $328.3 million, respectively. There were no goodwill impairments resulting from our fiscal 2023 and 2022 impairment tests and no reporting unit was determined to be at risk of failing the goodwill impairment test. See Note 14 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
Long-lived Assets
Our long-lived assets include equipment, building, furniture and fixtures, operating right-of-use assets, finite-lived intangible assets and maintenance spares. As of October 28, 2023 and October 29, 2022, these assets totaled $575.0 million and $427.2 million, net, respectively. We test long-lived assets for impairment whenever triggering events or changes in circumstances indicate that the assets’ carrying amount is not recoverable from its undiscounted cash flows. Our long-lived assets are assigned to asset groups which represent the lowest level for which we identify cash flows. We measure impairment loss as the amount by which the carrying amount of the asset or asset group exceeds its fair value.
Deferred Tax Assets
Pursuant to ASC Topic 740, Income Taxes, we maintain a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income (including the reversals of deferred tax liabilities) during the periods in which those deferred tax assets will become deductible. In evaluating whether a valuation allowance is required under such rules, we consider all available positive and negative evidence, including prior operating results, the nature and reason for any losses, our forecast of future taxable income, utilization of tax planning strategies, and the dates on which any deferred tax assets are expected to expire. These assumptions and estimates require a significant amount of judgment and are made based on current and projected circumstances and conditions.
Quarterly, we perform an analysis to determine the likelihood of realizing our deferred tax assets and whether sufficient evidence exists to support reversal of all or a portion of the valuation allowance. The valuation allowance balances at October 28, 2023 and October 29, 2022 were $189.9 million and $162.1 million, respectively. The corresponding net deferred tax assets were $809.3 million and $824.0 million, respectively. We will continue to evaluate future financial performance to determine whether such performance is both sustained and significant enough to provide sufficient evidence to support reversal of all or a portion of the remaining valuation allowance. The value of our net deferred tax asset may be subject to change in the future, depending on our generation or projections of future taxable income, as well as changes in tax policy or our tax planning strategy.
During fiscal 2021, we completed an internal transfer of certain of our non-U.S. intangible assets, which created amortizable tax basis resulting in the discrete recognition of a $119.3 million deferred tax asset with a corresponding tax benefit. The recognition of the deferred tax asset from the internal transfer of the non-U.S. intangible assets requires management to make estimates and assumptions to determine the fair value of the intangible assets transferred and significant judgments in evaluating the application of tax laws in the applicable jurisdictions, including where the deferred tax asset will be recovered. Estimates in valuing the intangible assets include, but are not limited to, internal revenue and expense forecasts, the estimated life of the intangible assets, and discount rates, which are affected by expectations about future market or economic conditions. Although we believe the assumptions and estimates that we have made are reasonable and appropriate, they are based, in part, on historical experience and are inherently uncertain.
For further discussion, see Note 23 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
Warranty
Our liability for product warranties, included in accrued liabilities and other short-term obligations, was $57.1 million and $45.5 million as of October 28, 2023 and October 29, 2022, respectively. Our products are generally covered by a warranty for periods ranging from one to five years. We accrue for warranty costs as part of our cost of goods sold based on associated material costs, technical support labor costs and associated overhead. Material cost is estimated based primarily on historical trends in the volume of product returns within the warranty period and the cost to repair or replace the equipment. Technical support labor cost is estimated based primarily on historical trends and the cost to support customer repairs within the warranty period. The provision for product warranties, net of adjustments for previous years’ provisions, was $31.7 million, $17.4 million and $17.1 million for fiscal 2023, 2022 and 2021, respectively. The provision for warranty claims may fluctuate on a quarterly basis depending on the mix of products and customers in that period. If actual product failure rates, material replacement costs, service or labor costs differ from our estimates, revisions to the estimated warranty provision would be required. See Note 15 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
Effects of Recent Accounting Pronouncements
See Note 1 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for information relating to our discussion of the effects of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. The following discussion about these market risks includes forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements.
Interest Rate Sensitivity. We maintain an investment portfolio of various holdings, types, and maturities. See Notes 7 and 8 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for information relating to investments and fair value. These investments are sensitive to interest rate movements, and their fair value will decline as interest rates rise and increase as interest rates decline. The estimated impact on these investments of a 100 basis point (1.0%) increase in interest rates across the yield curve from rates in effect as of the balance sheet date would be a $2.3 million decline in value.
Our earnings and cash flows from operations would be exposed to changes in interest rates because of the floating rate of interest on our 2030 New Term Loan if such loan were not hedged using floating-to-fixed rate interest rate swaps. See Note 16 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report. We have entered into interest rate swaps that fix the floating rate for $350.0 million of our floating rate debt at 2.968% from September 2023 through September 2025, and another $350.0 million of our floating rate debt at 3.47% from January 2023 through January 2028. As such, a 100 basis point (1.0%) increase in the SOFR rate as of our most recent SOFR rate setting would increase our annualized interest expense by approximately $4.7 million on the unhedged portion of our 2030 New Term Loan as recognized in our Consolidated Financial Statements. See Notes 16 and 19 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for information relating to our 2030 New Term Loan.
Foreign Currency Exchange Risk. As a global concern, our business and results of operations are exposed to and can be impacted by movements in foreign currency exchange rates. Because we sell globally, some of our sales transactions and revenue are non-U.S. Dollar denominated, with the Euro, Canadian Dollar and British Pound being our most significant foreign currency revenue exposures. If the U.S. Dollar strengthens against these currencies, our revenue for these transactions reported in U.S. Dollars would decline. For our U.S. Dollar denominated sales, an increase in the value of the U.S. Dollar would increase the real costs of our products to customers in markets outside the United States, which could impact our competitive position. During fiscal 2023, approximately 14.9% of revenue was non-U.S. Dollar denominated. During fiscal 2023 as compared to fiscal 2022, the U.S. Dollar primarily strengthened against a number of foreign currencies. Consequently, our revenue reported in U.S. Dollars was adversely impacted by approximately $4.7 million or 0.1%. As it relates to costs of goods sold, employee-related and facilities costs associated with certain manufacturing-related operations in Canada represent our primary exposure to foreign currency exchange risk.
With regard to operating expense, our primary exposure to foreign currency exchange risk relates to the Canadian Dollar, Indian Rupee and Euro. During fiscal 2023, approximately 49.4% of our operating expense was non-U.S. Dollar denominated. If these foreign currencies strengthen against the U.S. Dollar, costs reported in U.S. Dollars will increase. During fiscal 2023 as compared to fiscal 2022, the U.S. Dollar primarily strengthened against these and other currencies. Consequently, our operating expense reported in U.S. Dollars decreased by approximately $23.3 million, or 1.5%, net of hedging impact.
From time to time, we use foreign currency forward contracts to reduce variability in certain forecasted non-U.S. Dollar denominated cash flows. Generally, these derivatives have maturities of 24 months or less and are designated as cash flow hedges. At the inception of the cash flow hedge, and on an ongoing basis, we assess whether the forward contract has been effective in offsetting changes in cash flows attributable to the hedged risk during the hedging period. The derivative’s net gain or loss is initially reported as a component of accumulated other comprehensive loss and, upon the occurrence of the forecasted transaction, is subsequently reclassified to the line item in the Consolidated Statements of Operations to which the hedged transaction relates.
During fiscal 2023, we recorded $0.4 million in foreign currency exchange losses, as a result of monetary assets and liabilities that were transacted in a currency other than the entity’s functional currency, and the re-measurement adjustments were recorded in interest and other income (loss), net on our Consolidated Statements of Operations. From time to time, we use foreign currency forwards to hedge these balance sheet exposures. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net. During fiscal 2023, we recorded losses on non-hedge designated foreign currency forward contracts of $3.9 million. See Notes 1, 6 and 16 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Ciena Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ciena Corporation and its subsidiaries (the “Company”) as of October 28, 2023 and October 29, 2022, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended October 28, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of October 28, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 28, 2023 and October 29, 2022, and the results of its operations and its cash flows for each of the three years in the period ended October 28, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 28, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Reserve for Excess and Obsolete Inventory
As described in Notes 1 and 10 to the consolidated financial statements, the Company’s consolidated inventory balance, net of the allowance for excess and obsolescence, was $1.1 billion as of October 28, 2023. Management records a provision for excess and obsolete inventory when an impairment has been identified and has a reserve for excess and obsolete inventory of $50.0 million as of October 28, 2023. Management writes down its inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about future demand, which are affected by changes in the Company’s strategic direction, discontinuance of a product or introduction of newer versions of products, declines in the sales of or forecasted demand for certain products, and general market conditions.
The principal considerations for our determination that performing procedures relating to the reserve for excess and obsolete inventory is a critical audit matter are the significant judgment by management when developing their estimate, which in turn led to a high degree of auditor judgment, subjectivity, and effort to perform procedures and evaluate the audit evidence obtained relating to the assumptions regarding future demand.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the Company’s evaluation of the reserve for excess and obsolete inventory, including controls over the assumptions used within the model. These procedures also included, among others, testing management’s process for determining the reserve for excess and obsolete inventory. This included evaluating the appropriateness of the inventory reserve model and the reasonableness of the significant assumptions relating to the future demand. Evaluating the assumptions related to future demand involved evaluating whether the assumptions used were reasonable considering historical sales and expectations regarding future sales. Testing management's process for determining future demand included procedures to evaluate the reliability, completeness and relevance of management's data used in the future demand assumption. Testing the relevance and reliability of the data included evaluating the reasonableness of the long-term sales forecasts and historical activity.
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
December 15, 2023
We have served as the Company’s auditor since 1992.
(1) CIENA CORPORATION AND SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
Description of Business
Ciena Corporation (“Ciena” or the “Company”) is a network platform, software, and services company, providing solutions that enable a wide range of network operators to deploy and manage next-generation networks that deliver services to businesses and consumers. Ciena provides hardware, software and services that support the delivery of video, data and voice traffic over core, metro, aggregation and access communications networks. Ciena’s solutions are used globally by communications service providers, cable and multiservice operators, cloud providers, submarine network operators, governments, and enterprises across multiple industry verticals.
Ciena’s portfolio is designed to enable the Adaptive Network™, Ciena’s vision for a network end state that leverages a programmable and scalable network infrastructure, driven by software control and automation capabilities, that is informed by network analytics and intelligence. By transforming network infrastructures into dynamic, programmable environments driven by automation and analytics, network operators can realize greater business agility, adapt dynamically to changing end-user service demands and rapidly introduce new revenue-generating services. They can also gain valuable real-time network insights, allowing them to optimize network performance and maximize the return on their network infrastructure investment.
Ciena’s solutions include Networking Platforms, including its Optical Networking portfolio and Routing and Switching portfolio, which can be applied from the network core to end-user access points, and which allow network operators to scale capacity, increase transmission speeds, allocate traffic efficiently and adapt dynamically to changing end-user service demands. Ciena’s Optical Networking portfolio, which was previously referred to as Ciena’s Converged Packet Optical portfolio, includes products that support long haul and regional networks, submarine and data center interconnect networks, and metro and edge networks. Ciena’s Routing and Switching portfolio includes products and solutions that enable efficient internet protocol (“IP”) transport in next-generation metro, core, aggregation, and access networks, including in enterprise edge and broadband access applications.
To complement its Networking Platforms, Ciena offers Platform Software, which includes its Manage, Control and Plan (“MCP”) applications that deliver advanced multi-layer domain control and operations. Ciena, through its Blue Planet® Software, also enables complete service lifecycle management automation with productized operational support systems (“OSS”), which include inventory, orchestration and assurance solutions that help its customers to achieve closed loop automation across multi-vendor and multi-domain environments.
In addition to its systems and software, Ciena also offers a broad range of services that help its customers build, operate and improve their networks and associated operational environments. These include network transformation, consulting, implementation, systems integration, maintenance, network operations center (“NOC”) management, learning, and optimization services.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Ciena and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Ciena has a 52 or 53-week fiscal year, which ends on the Saturday nearest to the last day of October in each year (October 28, 2023, October 29, 2022, and October 30, 2021, for the periods reported). Fiscal 2023, fiscal 2022 and fiscal 2021 each consisted of a 52-week fiscal year.
Business Combinations
Ciena records acquisitions using the purchase method of accounting. All of the assets acquired, liabilities assumed, contractual contingencies and contingent consideration are recognized at their fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and net intangible assets acquired is recorded as goodwill. The application of the purchase method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed, in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill. These assumptions and estimates include a market participant’s use of the asset and the appropriate discount rates for a market participant. Ciena’s estimates are based on historical experience, information obtained from the management of the acquired companies and, when appropriate, include assistance from independent third-party appraisal firms. Significant assumptions and
estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates.
Use of Estimates
The preparation of the financial statements and related disclosures in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used for selling prices for multiple element arrangements, shared-based compensation, bad debts, valuation of inventories and investments, recoverability of intangible assets, other long-lived assets and goodwill, income taxes, warranty obligations, restructuring liabilities, derivatives, contingencies and litigation. Ciena bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results may differ materially from management’s estimates.
Cash and Cash Equivalents
Ciena considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Any restricted cash collateralizing letters of credit is included in other current assets and other long-term assets depending on the duration of the restriction.
Investments
Ciena’s investments in debt securities are classified as available-for-sale and reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss. Ciena recognizes losses in the income statement when it determines that declines in the fair value of its investments below their cost basis are other-than-temporary. In determining whether a decline in fair value is other-than-temporary, Ciena considers various factors, including market price (when available), investment ratings, the financial condition and near-term prospects of the investee, the length of time and the extent to which the fair value has been less than Ciena’s cost basis, and Ciena’s intent and ability to hold the investment until maturity or for a period of time sufficient to allow for any anticipated recovery in market value. Ciena considers all marketable debt securities that it expects to convert to cash within one year or less to be short-term investments, with all others considered to be long-term investments.
Ciena has minority equity investments in privately held technology companies that are classified in other long-term assets. These investments are carried at cost because Ciena owns less than 20% of the voting equity and does not have the ability to exercise significant influence over the company. Ciena monitors these investments for impairment and makes appropriate reductions to the carrying value when necessary. As of October 28, 2023, the combined carrying value of these investments was minimal. Ciena elects to estimate the fair value at cost minus impairment, if any, plus or minus observable price changes in orderly transactions for identical or similar investments of the same issuer. Ciena evaluates these investments for impairment or observable price changes quarterly and records adjustments to interest and other income (loss), net on the Consolidated Statements of Operations.
Inventories
Inventories are stated at the lower of cost or market, with cost computed using standard cost, which approximates actual cost, on a first-in, first-out basis. Ciena records a provision for excess and obsolete inventory when an impairment has been identified.
Segment Reporting
Ciena’s chief operating decision maker, its chief executive officer, evaluates the Company’s performance and allocates resources based on multiple factors, including measures of segment profit (loss). Operating segments are defined as components of an enterprise that engage in business activities that may earn revenue and incur expense, for which discrete financial information is available, and for which such information is evaluated regularly by the chief operating decision maker for purposes of allocating resources and assessing performance. Ciena has the following operating segments for reporting purposes: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. See Note 25 below.
Goodwill is the excess of the purchase price over the fair values assigned to the net assets acquired in a business combination. Ciena tests goodwill for impairment on an annual basis, which it has determined to be the last business day of fiscal September each year. Ciena also tests goodwill for impairment between annual tests if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value.
Annually, Ciena tests goodwill impairment qualitatively, or quantitatively by comparing the fair value of the reporting unit with the unit’s carrying amount, including goodwill. If this test indicates that the fair value is less than the carrying value, then an impairment loss is recognized limited to the total amount of goodwill allocated to that reporting unit. A non-cash goodwill impairment charge would have the effect of decreasing earnings or increasing losses in such period. If Ciena is required to take a substantial impairment charge, its operating results would be materially adversely affected in such period.
Long-lived Assets
Long-lived assets include equipment, building, furniture and fixtures, operating right-of-use (“ROU”) assets, finite-lived intangible assets and maintenance spares. Ciena tests long-lived assets for impairment whenever triggering events or changes in circumstances indicate that the asset’s carrying amount is not recoverable from its undiscounted cash flows. An impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair value. Ciena’s long-lived assets are assigned to asset groups that represent the lowest level for which cash flows can be identified.
Equipment, Building, Furniture and Fixtures and Internal Use Software
Equipment, building, furniture and fixtures are recorded at cost. Depreciation and amortization are computed using the straight-line method, generally over useful lives of three years to five years for equipment and furniture and fixtures and the shorter of useful life or lease term for leasehold improvements.
Qualifying internal use software and website development costs incurred during the application development stage, which consist primarily of outside services and purchased software license costs, are capitalized and amortized straight-line over the estimated useful lives of two years to five years.
Leases
At the inception of a contract, Ciena must determine whether the contract is or contains a lease. The contract is or contains a lease if the contract conveys the right to control the use of the property, plant, or equipment for a designated term in exchange for consideration. Ciena’s evaluation of its contracts follows the assessment of whether there is a right to obtain substantially all of the economic benefits from the use and the right to direct the use of the identified asset in the contract. Operating leases are included in the Operating ROU assets, Operating lease liabilities and Long-term operating lease liabilities in the Consolidated Balance Sheets. Finance leases are included in Equipment, building, furniture and fixtures, net (“Finance ROU assets”), Accrued liabilities and other short-term obligations and Other long-term obligations in the Consolidated Balance Sheets.
Ciena has operating and finance leases that primarily relate to real property. Ciena has elected not to capitalize leases with a term of 12 months or less without a purchase option that it is likely to exercise. Ciena has elected not to separate lease and non-lease components of operating and finance leases. Lease components are payment items directly attributable to the use of the underlying asset, while non-lease components are explicit elements of a contract not directly related to the use of the underlying asset, including pass-through operating expenses like common area maintenance and utilities.
Operating ROU assets and lease liabilities and Finance ROU assets and lease liabilities are recognized on the Consolidated Balance Sheets at the present value of the future lease payments over the life of the lease term. Ciena uses discount rates based on incremental borrowing rates, on a collateralized basis, for the respective underlying assets, for terms similar to the respective leases when implicit rates for leases are not determinable. Operating lease costs are included as rent expense in the Consolidated Statements of Operations. Fixed base payments on operating leases paid directly to the lessor are recorded as lease expense on a straight-line basis. Related variable payments based on usage, changes in an index, or market rate are expensed as incurred. Finance ROU assets are generally amortized on a straight-line basis over the lease term with the interest expense on the lease liability recorded using the interest method. The amortization and interest expense are recorded separately in the Consolidated Statements of Operations.
Ciena has recorded finite-lived intangible assets as a result of several acquisitions. Finite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the expected economic lives of the respective assets, up to seven years, which approximates the use of intangible assets.
Cloud Computing Arrangements
Ciena capitalizes certain costs related to hosting arrangements that are service contracts (cloud computing arrangements). Capitalized costs are included in Other long-term assets in the Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life.
Maintenance Spares
Maintenance spares are recorded at cost. Ciena depreciates spares ratably over four years.
Concentrations
Substantially all of Ciena’s cash and cash equivalents are maintained at a small number of major U.S. financial institutions. The majority of Ciena’s cash equivalents consist of money market funds. Deposits held with banks may exceed the amount of insurance provided on such deposits. Because these deposits generally may be redeemed upon demand, management believes that they bear minimal risk.
Historically, a significant percentage of Ciena’s revenue has been concentrated among sales to a small number of large communications service providers and cloud providers. Consolidation among Ciena’s customers has increased this concentration. Consequently, Ciena’s accounts receivable are concentrated among these customers. See Note 2 below.
Additionally, Ciena’s access to certain materials or components is dependent on sole or limited source suppliers. The inability of any of these suppliers to fulfill Ciena’s supply requirements, or significant changes in supply cost, could affect future results. Ciena relies on a small number of contract manufacturers to perform the majority of the manufacturing for its products. If Ciena cannot effectively manage these manufacturers or forecast future demand, or if these manufacturers fail to deliver products or components on time, Ciena’s business and results of operations may suffer.
Revenue Recognition
Ciena recognizes revenue when control of the promised products or services is transferred to its customer, in an amount that reflects the consideration to which Ciena expects to be entitled in exchange for those products or services.
Ciena determines revenue recognition by applying the following five-step approach:
•identification of the contract, or contracts, with a customer;
•identification of the performance obligations in the contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the contract; and
•recognition of revenue when, or as, Ciena satisfies a performance obligation.
Generally, Ciena makes sales pursuant to purchase orders placed by customers under framework agreements that govern the general commercial terms and conditions of the sale of Ciena’s products and services. These purchase orders under framework agreements are used to determine the identification of the contract or contracts with this customer. Purchase orders typically include the description, quantity, and price of each product or service purchased. Purchase orders may include one-line bundled pricing for both products and services. Accordingly, purchase orders can include various combinations of products and services that are generally distinct and accounted for as separate performance obligations. Ciena evaluates each promised product and service offering to determine whether it represents a distinct performance obligation. In doing so, Ciena considers, among other things, customary business practices, whether the customer can benefit from the product or service on its own or together with other resources that are readily available, and whether Ciena’s commitment to transfer the product or service to the customer is separately identifiable from other obligations in the purchase order. For transactions where Ciena delivers the product or services, Ciena is typically the principal and records revenue and costs of goods sold on a gross basis.
Purchase orders are invoiced based on the terms set forth either in the purchase order or the framework agreement, as applicable. Generally, sales of products and software licenses are invoiced upon shipment or delivery. Maintenance and
software subscription services are invoiced quarterly or annually in advance of the service term. Ciena’s other service offerings are generally invoiced upon completion of the service. Payment terms and cash received typically range from 30 to 90 days from the invoicing date. Historically, Ciena has not provided any material financing arrangements to its customers. As a practical expedient, Ciena does not adjust the amount of consideration it will receive for the effects of a significant financing component as it expects, at contract inception, that the period between Ciena’s transfer of the products or services to the customer and customer payment for the products or services will be one year or less. Shipping and handling fees invoiced to customers are included in revenue, with the associated expense included in product cost of goods sold. Ciena records revenue net of any associated sales taxes.
Ciena recognizes revenue upon the transfer of control of promised products or services to a customer. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment or delivery to the customer. Transfer of control can also occur over time for services such as software subscription, maintenance, installation, and various professional services as the customer receives the benefit over the contract term.
Significant Judgments
Revenue is allocated among performance obligations based on standalone selling price (“SSP”). SSP reflects the price at which Ciena would expect to sell that product or service on a stand-alone basis at contract inception and that Ciena would expect to be entitled to receive for the promised products or services. SSP is estimated for each distinct performance obligation, and judgment may be required in its determination. The best evidence of SSP is the observable price of a product or service when Ciena sells the products separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, Ciena determines SSP using information that may include market conditions and other observable inputs.
Ciena applies judgment in determining the transaction price, as Ciena may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration can include various rebate, cooperative marketing, and other incentive programs that Ciena offers to its distributors, partners and customers. When determining the amount of revenue to recognize, Ciena estimates the expected usage of these programs, applying the expected value or most likely estimate and updates the estimate at each reporting period as actual utilization data becomes available. Ciena also considers any customer right of return and any actual or potential payment of liquidated damages, contractual or similar penalties, or other claims for performance failures or delays in determining the transaction price, where applicable.
When transfer of control is judged to be over time for installation and professional service arrangements, Ciena applies the input method to determine the amount of revenue to be recognized in a given period. Utilizing the input method, Ciena recognizes revenue based on the ratio of actual costs incurred to date to the total estimated costs expected to be incurred. Revenue for software subscription and maintenance is recognized ratably over the period during which the services are performed.
Capitalized Contract Acquisition Costs
Ciena has considered the impact of the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 340-40, Other Assets and Deferred Costs; Contracts with Customers, and the interpretations of the FASB Transition Resource Group for Revenue Recognition with respect to capitalization and amortization of incremental costs of obtaining a contract. In conjunction with this interpretation, Ciena considers each customer purchase in combination with the corresponding framework agreement, if applicable, as a contract. Ciena has elected to implement the practical expedient, which allows for incremental costs to be recognized as an expense when incurred if the period of the asset recognition is one year or less. If the period of the asset recognition is greater than one year, Ciena amortizes these costs over the period of performance. Ciena considers sales commissions incurred upon receipt of purchase orders placed by customers as incremental costs to obtain such purchase orders. The practical expedient method is applied to the purchase order as a whole and thus the capitalized costs of obtaining a purchase order is applied even if the purchase order contains more than one performance obligation. In cases where a purchase order includes various distinct products or services with both short-term (one year or less) and long-term (more than a year) performance periods, the cost of commissions incurred for the total value of the purchase order is capitalized and subsequently amortized as each performance obligation is recognized.
For the additional disclosures on capitalized contract acquisition costs, see Note 2 below.
Warranty Accruals
Ciena provides for the estimated costs to fulfill customer warranty obligations upon recognition of the related revenue. Estimated warranty costs include estimates for material costs, technical support labor costs and associated overhead. Warranty
is included in cost of goods sold and is determined based on actual warranty cost experience, estimates of component failure rates and management’s industry experience. Ciena’s sales contracts do not permit the right of return of the product by the customer after the product has been accepted.
Allowance for Credit Losses for Accounts Receivable and Contract Assets
Ciena estimates its allowances for credit losses using relevant available information from internal and external sources, related to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. When assessing for credit losses, Ciena determines collectability by pooling assets with similar characteristics. The allowances for credit losses are each measured on a collective basis when similar risk characteristics exist. The allowances for credit losses are each measured by multiplying the exposure probability of default (the probability that the asset will default within a given time frame) by the loss given default rate (the percentage of the asset not expected to be collected due to default) based on the pool of assets.
Probability of default rates are published by third-party credit rating agencies. Adjustments to Ciena’s exposure probability may take into account a number of factors, including, but not limited to, various customer-specific factors, the potential sovereign risk of the geographic locations in which the customer is operating and macroeconomic conditions. These factors are updated regularly or when facts and circumstances indicate that an update is deemed necessary.
Accounts Receivable Factoring
Ciena has entered into factoring agreements to sell certain receivables to unrelated third-party financial institution on a non-recourse basis. These transactions are accounted for in accordance with ASC Topic 860, “Transfers and Servicing” and result in a reduction in accounts receivable because the agreements transfer effective control over, and risk related to, the receivables to the buyers. Ciena's factoring agreements do not allow for recourse in the event of uncollectability, and Ciena does not retain any interest in the underlying accounts receivable once sold. Trade accounts receivables balances sold are removed from the consolidated balance sheets and cash received is reflected as cash provided by (used in) operating activities in the Consolidated Statements of Cash Flow. Factoring related interest expense is recorded to interest and other income (loss), net on the Consolidated Statements of Operations. See Note 9 below.
Research and Development
Ciena charges all research and development costs to expense as incurred. Types of expense incurred in research and development include employee compensation, prototype equipment, consulting and third-party services, depreciation, facility costs and information technology.
Government Grants
Ciena accounts for proceeds from government grants as a reduction of expense when there is reasonable assurance that Ciena has met the required conditions associated with the grant and that grant proceeds will be received. Grant benefits are recorded to the particular line item of the Consolidated Statement of Operations to which the grant activity relates. See Notes 3 below.
Advertising Costs
Ciena expenses all advertising costs as incurred.
Legal Costs
Ciena expenses legal costs associated with litigation as incurred.
Ciena measures and recognizes compensation expense for share-based awards and employee stock purchases related to its Amended and Restated 2003 Employee Stock Purchase Plan (the “ESPP”) based on estimated fair values on the date of grant. Ciena estimates the fair value of employee stock purchases related to the ESPP using the Black-Scholes option-pricing model. Ciena recognizes the estimated fair value of restricted stock units subject only to service-based vesting conditions by multiplying the number of shares underlying the award by the closing price per share of Ciena common stock on the grant date. In each case, Ciena only recognizes expense in its Consolidated Statements of Operations for those restricted stock units that ultimately vest. Awards with performance-based vesting conditions (i) require the achievement of certain operational, financial or other performance criteria or targets or (ii) vest based on Ciena’s total stockholder return as compared to an index of peer companies, in whole or in part. Ciena recognizes the estimated fair value of restricted stock units subject to performance-based vesting conditions other than total stockholder return by assuming the satisfaction of any performance-based objectives at the “target” level and multiplying the corresponding number of shares earned based upon such achievement by the closing price per share of Ciena common stock on the grant date. Ciena recognizes the estimated fair value of performance based awards subject to total stockholder return as compared to an index of peer companies using a Monte Carlo simulation valuation model on the date of grant. At the end of each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. See Note 24 below.
Stock Repurchase Program
Shares repurchased pursuant to Ciena’s stock repurchase program are immediately retired upon purchase. Repurchased common stock is reflected as a reduction of stockholders’ equity. Ciena’s accounting policy related to its share repurchases is to reduce its common stock based on the par value of the shares and to reduce its capital surplus for the excess of the repurchase price over the par value. Since the inception of its stock repurchase programs, Ciena has had an accumulated deficit balance; therefore, the excess over the par value has been applied to additional paid-in capital. Once Ciena has retained earnings, the excess will be charged entirely to retained earnings.
Income Taxes
Ciena accounts for income taxes using an asset and liability approach. This approach recognizes deferred tax assets and liabilities (“DTA”) for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, and for operating loss and tax credit carryforwards. In estimating future tax consequences, Ciena considers all expected future events other than the enactment of changes in tax laws or rates. Valuation allowances are provided if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. In addition, tax authorities periodically audit Ciena’s income tax returns. These audits examine significant tax filing positions, including the timing and amounts of deductions and the allocation of income tax expenses among tax jurisdictions. Ciena is currently under audit in India for 2018 through 2021, in Canada for 2014, and in the United Kingdom for 2016 through 2021. Management does not expect the outcome of these audits to have a material adverse effect on Ciena’s consolidated financial position, results of operations or cash flows. Ciena’s major tax jurisdictions and the earliest open tax years are as follows: United States (2020), United Kingdom (2016), Canada (2014), and India (2018). Limited adjustments can be made to federal U.S. tax returns in earlier years in order to reduce net operating loss carryforwards. Ciena classifies interest and penalties related to uncertain tax positions as a component of income tax expense.
Ciena is required to record excess tax benefits or tax deficiencies related to stock-based compensation as income tax benefit or expense when share-based awards vest or are settled.
The Tax Cuts and Jobs Act (the “Tax Act”) includes provisions that affected Ciena starting in fiscal 2019, including a provision designed to tax global intangible low-taxed income (“GILTI”). An accounting policy choice is allowed to either treat taxes due on future U.S. inclusions related to GILTI in taxable income as a current-period expense when incurred (the “period cost method”) or factor such amounts into the measurement of deferred taxes (the “deferred method”). The calculation of the deferred balance with respect to the GILTI tax provisions will depend, in part, on analyzing global income to determine whether future U.S. inclusions in taxable income are expected related to GILTI and, if so, what the impact is expected to be. Ciena is electing to use the period cost method for future GILTI inclusions. Additionally, Ciena is electing to use the incremental cash tax savings approach when determining whether a valuation allowance needs to be recorded against the U.S. net operating loss (“NOL”) due to the GILTI inclusions.
The Tax Act also introduced an alternative tax known as the base erosion and anti-abuse tax (“BEAT”). An accounting policy choice has been made to consider BEAT as a period cost when incurred.
Loss Contingencies
Ciena is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. Ciena considers the likelihood of loss or the incurrence of a liability, as well as Ciena’s ability to estimate the amount of loss reasonably, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Ciena regularly evaluates current information available to it in order to determine whether any accruals should be adjusted and whether new accruals are required.
Fair Value of Financial Instruments
The carrying value of Ciena’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair market value due to the relatively short period of time to maturity. For information related to the fair value of Ciena’s short-term and long-term debt, see Note 19 below.
Fair value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Ciena utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows:
•Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities;
•Level 2 inputs are quoted prices for identical or similar assets or liabilities in less active markets or model-derived valuations in which significant inputs are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and
•Level 3 inputs are unobservable inputs based on Ciena’s assumptions used to measure assets and liabilities at fair value. The fair values are determined based on model-based techniques using inputs Ciena could not corroborated with market data.
By distinguishing between inputs that are observable in the marketplace, and therefore more objective, and those that are unobservable, and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Restructuring
From time to time, Ciena takes actions to align its workforce, facilities and operating costs with perceived market opportunities, business strategies and changes in market and business conditions and redesign business processes. Ciena recognizes a liability for the cost associated with an exit or disposal activity in the period in which the liability is incurred, except for one-time employee termination benefits related to a service period, typically of more than 60 days, which are accrued over the service period. See Note 5 below.
Foreign Currency
Certain of Ciena’s foreign branch offices and subsidiaries use the U.S. Dollar as their functional currency because Ciena Corporation, as the U.S. parent entity, exclusively funds the operations of these branch offices and subsidiaries. For those subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date, and the statement of operations is translated at a monthly average rate. Resulting translation adjustments are recorded directly to a separate component of stockholders’ equity. Where the monetary assets and liabilities are transacted in a currency other than the entity’s functional currency, re-measurement adjustments are recorded in interest and other income (loss), net on the Consolidated Statements of Operations. See Note 6 below.
From time to time, Ciena uses foreign currency forward contracts to reduce variability in certain forecasted non-U.S. Dollar denominated cash flows. Generally, these derivatives have maturities of 24 months or less. Ciena also has interest rate swap arrangements to reduce variability in certain forecasted interest expense associated with its term loans. All of these derivatives are designated as cash flow hedges. Ciena also uses foreign currency forward contracts to minimize the effect of foreign exchange rate movements on is net investments in foreign operations. Generally, these derivatives have maturities of 24 months or less. These derivatives are designated as net investment hedges. At the inception of these hedges, and on an ongoing basis, Ciena assesses whether the derivative has been effective in offsetting changes attributable to the hedged risk during the hedging period. The derivative’s net gain or loss is initially reported as a component of accumulated other comprehensive loss, and upon occurrence of the forecasted transaction, is subsequently reclassified to the line item in the Consolidated Statements of Operations to which the hedged transaction relates.
Ciena records derivative instruments in the Consolidated Statements of Cash Flows within operating, investing, or financing activities consistent with the cash flows of the hedged items.
From time to time, Ciena uses foreign currency forward contracts to hedge certain balance sheet foreign exchange exposures. These forward contracts are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net on the Consolidated Statements of Operations.
See Notes 8 and 16 below.
Computation of Net Income per Share
Ciena calculates basic net income per common share (“Basic EPS”) by dividing earnings attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per potential common share (“Diluted EPS”) includes other potential dilutive shares that would be outstanding if securities or other contracts to issue common stock were exercised or converted into common stock. Ciena uses a dual presentation of Basic EPS and Diluted EPS on the face of its income statement. A reconciliation of the numerator and denominator used for the Basic EPS and Diluted EPS computations is set forth in Note 21 below.
Software Development Costs
Ciena develops software for sale to its customers. GAAP requires the capitalization of certain software development costs that are incurred subsequent to the date technological feasibility is established and prior to the date the product is generally available for sale. The capitalized cost is then amortized using the straight-line method over the estimated life of the product. Ciena defines technological feasibility as being attained at the time a working model is completed. To date, the period between Ciena achieving technological feasibility and the general availability of such software has been short, and software development costs qualifying for capitalization have been insignificant. Accordingly, Ciena has not capitalized any software development costs.
Newly Issued Accounting Standards - Not Yet Effective
In October 2021, the FASB issued ASU No. 2021-08 (“ASU 2021-08”), Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers to improve the accounting for acquired revenue contracts with customers in a business combination to address recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. ASU 2021-08 is effective for annual periods beginning after December 15, 2022 on a prospective basis. Early adoption is permitted. Ciena does not expect adoption of ASU 2021-08 to have a material impact on its consolidated financial statements and related disclosures.
In November 2023, the FASB issued ASU No. 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 on a retrospective basis. Early adoption is permitted. Ciena is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. Ciena is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
Ciena’s disaggregated revenue as presented below depicts the nature, amount, and timing of revenue and cash flows for similar groupings of Ciena’s various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies may differ for each of its product categories, resulting in different economic risk profiles for each category. Effective as of the fourth quarter of fiscal 2023, Ciena renamed its “Converged Packet Optical” product line to “Optical Networking.” This change, affecting only the presentation of such information, was made on a prospective basis and does not impact comparability of previous financial results. However, references to prior reported “Converged Packet Optical” product line have been changed herein to “Optical Networking.”
The tables below set forth Ciena’s disaggregated revenue for the respective period (in thousands):
Ciena reports its sales geographically around the following markets: (i) the United States, Canada, the Caribbean and Latin America (“Americas”); (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia Pacific, Japan and India (“APAC”). Within each geographic area, Ciena maintains specific teams or personnel that focus on a particular region, country, customer or market vertical. These teams include sales management, account salespersons and sales engineers, as well as services professionals and commercial management personnel. The following table reflects Ciena’s geographic distribution of revenue principally based on the relevant location for Ciena’s delivery of products and performance of services.
For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):
Ciena’s revenue includes United States revenue of $2.8 billion for fiscal 2023, $2.4 billion for fiscal 2022 and $2.3 billion for fiscal 2021. No other country accounted for 10% or more of total revenue for the periods presented above.
For the periods below, the only customers that accounted for at least 10% of Ciena’s revenue were as follows (in thousands):
October 28, 2023
October 29, 2022
October 30, 2021
Cloud Provider
$
561,397
n/a
n/a
AT&T
464,662
$
433,418
$
447,403
Verizon
n/a
402,787
n/a
Total
$
1,026,059
$
836,205
$
447,403
________________________________
n/a
Denotes revenue representing less than 10% of total revenue for the period
The cloud provider noted in the above table purchased products from each of Ciena’s operating segments, excluding Blue Planet® Automation Software and Services, for each of the periods presented. The other customers identified above purchased products and services from each of Ciena’s operating segments for each of the periods presented.
While Ciena has benefited from the diversification of its business and customer base, its ten largest customers contributed 53.7% of fiscal 2023 revenue, 56.3% of fiscal 2022 revenue and 55.5% of fiscal 2021 revenue.
◦Networking Platforms revenue reflects sales of Ciena’s Optical Networking and Routing and Switching product lines.
▪Optical Networking - includes the 6500 Packet-Optical Platform, the Waveserver® modular interconnect system, the 6500 Reconfigurable Line System (RLS), the 5400 family of Packet-Optical Platforms, and the Coherent ELS open line system (OLS). This product line also includes the WaveLogic 5 Nano (WL5n) 100G-400G coherent pluggable transceivers.
▪Routing and Switching - includes the 3000 family of service delivery platforms and the 5000 family of service aggregation. This product line also includes the 6500 Packet Transport System (PTS), which combines packet switching, control plane operation, and integrated optics, the 8100 Coherent IP networking platforms, the 8700 Packetwave Platform, and virtualization software. This product line also includes SD-Edge software and our microplug Optical Line Terminal (OLT) transceiver, from our recent acquisitions of Benu Networks, Inc. (“Benu”) and Tibit Communications, Inc. (“Tibit”) respectively, during the first quarter of fiscal 2023. This product line also includes Ciena’s WaveRouterTM product, which was introduced during the second quarter of fiscal 2023, for which there have been no sales to date.
The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Consolidated Statements of Operations. Operating system software and enhanced software features embedded in Ciena hardware are each considered distinct performance obligations for which the revenue is generally recognized upfront at a point in time upon transfer of control.
◦Platform Software and Services offerings provide domain control management, analytics, data and planning tools and applications to assist customers in managing their networks, including by creating more efficient operations and more proactive visibility into their networks. Ciena’s platform software includes its MCP domain controller solution, its suite of MCP applications, and its OneControl Unified Management System, as well as planning tools and a number of legacy software solutions that support Ciena’s installed base of network solutions. Platform software-related services
revenue includes sales of subscription, installation, support, and consulting services related to Ciena’s software platforms, operating system software and enhanced software features embedded in each of the Networking Platforms product lines above. Revenue from the software portion of this segment is included in product revenue on the Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Consolidated Statements of Operations.
◦Blue Planet® Automation Software and Services is a comprehensive, cloud native, and standards-based software portfolio, together with related services, that enables customers to realize digital transformation through the automation of the services lifecycle. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), inventory management (BPI), route optimization and analysis (ROA), multi-cloud orchestration (MCO), and unified assurance and analytics (UAA). Services revenue includes sales of subscription, installation, support, consulting and design services related to Ciena’s Blue Planet Automation Platform. Revenue from the software portion of this segment is included in product revenue on the Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Consolidated Statements of Operations.
Ciena’s software platform revenue typically reflects either perpetual or term-based software licenses, and these sales are considered distinct performance obligations where revenue is generally recognized upfront at a point in time upon transfer of control. Revenue from software subscription and support is recognized ratably over the period during which the services are performed. Revenue from professional services for solution customization, software and solution support services, consulting and design, and build-operate-transfer services relating to Ciena’s software offerings is recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period.
◦Global Services revenue reflects sales of a broad range of Ciena’s services for maintenance support and training, installation and deployment, and consulting and network design activities. Revenue from this segment is included in services revenue on the Consolidated Statements of Operations.
Ciena’s Global Services are considered a distinct performance obligation where revenue is generally recognized over time. Revenue from maintenance support is recognized ratably over the period during which the services are performed. Revenue from installation and deployment services and consulting and network design services is recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period. Revenue from training services is generally recognized at a point in time upon completion of the service.
Contract Balances
The following table provides information about receivables, contract assets and contract liabilities (deferred revenue) from contracts with customers (in thousands):
Balance at October 28, 2023
Balance at October 29, 2022
Accounts receivable, net
$
1,003,876
$
920,772
Contract assets for unbilled accounts receivable, net
$
150,312
$
156,039
Deferred revenue
$
228,460
$
200,235
Ciena’s contract assets represent unbilled accounts receivable, net, where transfer of a product or service has occurred but invoicing is conditional upon completion of future performance obligations. These amounts are primarily related to installation and deployment and professional services arrangements where transfer of control has occurred, but Ciena has not yet invoiced the customer. Contract assets are included in prepaid expenses and other in the Consolidated Balance Sheets. See Note 11 below.
Contract liabilities consist of deferred revenue and represent advanced payments received from customers against non-cancelable customer orders received prior to revenue recognition. Ciena recognized approximately $135.5 million and $111.3 million of revenue during fiscal 2023 and 2022, respectively, that was included in the deferred revenue balance at October 28, 2023 and October 29, 2022, respectively. Revenue recognized due to changes in transaction price from performance obligations satisfied or partially satisfied in previous periods was immaterial during fiscal 2023 and 2022.
Capitalized contract acquisition costs consist of deferred sales commissions and were $30.2 million and $39.7 million as of October 28, 2023 and October 29, 2022, respectively, and are included in (i) prepaid expenses and other and (ii) other long-term assets. The amortization expense associated with these costs was $34.2 million and $27.3 million during fiscal 2023 and fiscal 2022, respectively, and are included in selling and marketing expense on the Consolidated Statements of Operations.
Remaining Performance Obligations
Remaining Performance Obligations (“RPO”) are comprised of non-cancelable customer purchase orders for products and services that are awaiting transfer of control for revenue recognition under the applicable contract terms. As of October 28, 2023, the aggregate amount of RPO was $1.8 billion. As of October 28, 2023, Ciena expects approximately 81% of the RPO to be recognized as revenue within the next twelve months.
(3) CANADIAN EMERGENCY WAGE SUBSIDY
In April 2020, the Canadian government introduced the Canada Emergency Wage Subsidy (“CEWS”) to help employers offset a portion of their employee wages for a limited period in response to the COVID-19 outbreak, retroactive to March 15, 2020. The CEWS program expired in October 2021. The subsidy covered employers of all sizes and across all sectors.
Ciena accounts for proceeds from government grants as a reduction of expense when there is reasonable assurance that Ciena has met the required conditions associated with the grant and that grant proceeds will be received. Grant benefits are recorded to the particular line item of the Consolidated Statements of Operations to which the grant activity relates. Amounts from the CEWS program positively impacted Ciena’s operating expense and measures of profit in the year ended October 30, 2021. For the fiscal year ended October 30, 2021, Ciena recorded a CAD$52.2 million ($41.3 million) benefit, net of certain fees, related to CEWS for claim periods beginning March 15, 2020, including CAD$43.9 million ($35.4 million) related to employee wages during fiscal 2020. There was no CEWS activity in fiscal 2023 or 2022.
The following table summarizes CEWS for the period indicated (in thousands):
Year Ended October 30, 2021
Product
$
4,283
Service
2,667
CEWS benefit in cost of goods sold
6,950
Research and development
29,519
Sales and marketing
2,604
General and administrative
2,207
CEWS benefit in operating expense
34,330
Total CEWS benefit
$
41,280
(4) BUSINESS COMBINATIONS
Fiscal 2023 Acquisitions: Benu and Tibit
On November 17, 2022, Ciena acquired Benu, a portfolio of cloud-native software solutions, including a virtual Broadband Network Gateway ((v)BNG), that complements Ciena’s existing portfolio of broadband access solutions. On December 30, 2022, Ciena acquired Tibit, a provider and developer of passive optical network (“PON”)-specific hardware and operating software that can be integrated into a carrier-grade Ethernet switch and will strengthen Ciena’s portfolio of next-generation PON solutions that support residential, enterprise, and mobility use cases. These businesses were acquired for an aggregate of approximately $291.7 million, of which $244.7 million was paid in cash, and $47.0 million represents the fair value of Ciena’s previously held cost method equity investment in Tibit. The acquisition of Tibit triggered the remeasurement of Ciena’s previously held investment in Tibit to fair value, which resulted in Ciena recognizing a gain on its cost method equity investment of $26.5 million. Each of these transactions has been accounted for as the acquisition of a business.
Ciena incurred approximately $3.4 million in acquisition-related costs associated with these acquisitions. These costs and expenses primarily include fees associated with financial, legal, and accounting advisors and employment-related costs. These costs were recorded in acquisition and integration costs on the Consolidated Statements of Operations.
The following table summarizes the final purchase price allocation related to the acquisitions based on the estimated fair value of the acquired assets and assumed liabilities (in thousands):
Amount
Cash and cash equivalents
$
14,634
Accounts receivable, net
443
Inventories, net
1,406
Prepaid expenses and other
810
Equipment, furniture and fixtures
1,090
Goodwill
116,644
Developed technology
75,400
In-process technology
89,100
Customer relationships and contracts
18,400
Order backlog
2,480
Deferred tax asset, net
(26,429)
Accounts payable
(420)
Accrued liabilities and other short-term obligations
(874)
Deferred revenue
(851)
Other long-term obligations
(144)
Total purchase consideration
$
291,689
Developed technology represents purchased technology that has reached technological feasibility and for which the acquired companies had substantially completed development as of the date of acquisition. Fair value was determined using future discounted cash flows related to the projected income stream of the developed technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Developed technology is amortized on a straight-line basis over its estimated useful life of five years.
In-process technology represents purchased technology that had not reached technological feasibility as of the date of acquisition. Fair value was determined using future discounted cash flows related to the projected income stream of the in-process technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Upon completion of the in-process technology, it will be amortized on a straight line basis over its estimated useful life, which will be determined on that date.
Customer relationships and contracts represent agreements with existing Tibit customers and have an estimated useful life of three years. Order backlog is amortized over the fulfillment period.
The goodwill generated from these acquisitions is primarily related to expected economic synergies. The total goodwill amount was recorded in the Networking Platforms segment. The goodwill is not deductible for income tax purposes.
Pro forma disclosures have not been included due to immateriality. The amounts of revenue and earnings for these acquisitions since the acquisition dates, which are included on the Consolidated Statements of Operations for the reporting period, are immaterial.
Fiscal 2022 Acquisitions: Vyatta and Xelic
On November 1, 2021, Ciena acquired AT&T’s Vyatta Software Technology (“Vyatta”), a provider of software-based virtual routing and switching technology. AT&T is a customer of Ciena; see Note 2 above. On March 9, 2022, Ciena acquired Xelic, Inc., a provider and developer of field programmable gate array (FPGA) and application-specific integrated circuit (ASIC) technology and optical networking IP cores. These businesses were acquired for an aggregate of approximately $64.1 million, of which $63.3 million was paid in cash and $0.8 million represents a future payable arrangement. These transactions have each been accounted for as the acquisition of a business.
Ciena incurred approximately $1.7 million in acquisition-related costs associated with these acquisitions. These costs and expenses primarily include fees associated with financial, legal and accounting advisors. These costs were recorded in acquisition and integration costs in the Consolidated Statements of Operations.
The following table summarizes the final purchase price allocation related to the acquisitions based on the estimated fair value of the acquired assets and assumed liabilities (in thousands):
Amount
Cash and cash equivalents
$
201
Prepaid expenses and other
1,614
Equipment, furniture and fixtures
694
Customer relationships and contracts
15,800
Developed technology
32,491
Goodwill
17,698
Accrued liabilities
(4,434)
Total purchase consideration
$
64,064
Customer relationships and contracts represent agreements with existing Vyatta customers and have an estimated useful life of two years.
Developed technology represents purchased technology that has reached technological feasibility and for which the acquired companies had substantially completed development as of the date of acquisition. Fair value was determined using future discounted cash flows related to the projected income stream of the developed technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Developed technology is amortized on a straight-line basis over its estimated useful life of five years.
The goodwill generated from these acquisitions are primarily related to expected economic synergies. The total goodwill amount was recorded in the Networking Platforms segment. The goodwill is not deductible for income tax purposes.
Pro forma disclosures have not been included due to immateriality. The amounts of revenue and earnings for these acquisitions since the acquisition dates, which are included in the Consolidated Statements of Operations for the reporting period, are immaterial.
(5) SIGNIFICANT ASSET IMPAIRMENT AND RESTRUCTURING COSTS
Ciena has undertaken a number of restructuring activities intended to reduce expense and align its workforce and costs with market opportunities, product development and business strategies. The following table sets forth the restructuring activity and balance of the restructuring liability accounts, which are included in accrued liabilities and other short-term obligations on Ciena’s Consolidated Balance Sheets, for the fiscal years indicated (in thousands):
Workforce reduction
Other restructuring activities
Total
Balance at October 31, 2020
$
2,915
$
—
$
2,915
Charges
5,938
(1)
23,627
(2)
29,565
Cash payments
(8,072)
(23,627)
(31,699)
Balance at October 30, 2021
781
—
781
Charges
3,156
(1)
26,814
(2)
29,970
Cash payments
(2,722)
(22,194)
(24,916)
Balance at October 29, 2022
1,215
4,620
5,835
Charges
6,885
(1)
16,949
(2)
23,834
Cash payments
(6,187)
(21,569)
(27,756)
Balance at October 28, 2023
$
1,913
$
—
$
1,913
Current restructuring liabilities
$
1,913
$
—
$
1,913
_________________________________
(1) Reflects employee costs associated with workforce reductions as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.
(2) Primarily represents the redesign of certain business processes associated with Ciena’s supply chain and distribution structure reorganization and costs related to restructured real estate facilities.
In February 2022, armed conflict escalated between Russia and Ukraine. The United States and certain other countries have imposed sanctions on Russia and could impose further sanctions. On March 7, 2022, Ciena announced its decision to suspend its business operations in Russia immediately. As a result, Ciena recorded impairment charges of approximately $3.8 million of which $1.8 million was a provision for credit losses.
(6) INTEREST AND OTHER INCOME (LOSS), NET
The components of interest and other income (loss), net, were as follows (in thousands):
Year Ended
October 28, 2023
October 29, 2022
October 30, 2021
Interest income
$
45,011
$
10,060
$
2,051
Gains (losses) on non-hedge designated foreign currency forward contracts
(3,896)
(4,018)
11,172
Foreign currency exchange gains (losses)
(427)
2,501
(14,622)
Gain on cost method equity investments, net
26,368
4,120
164
Other
(5,048)
(5,916)
(533)
Interest and other income (loss), net
$
62,008
$
6,747
$
(1,768)
During the first quarter of fiscal 2023, the acquisition of Tibit triggered the remeasurement of Ciena’s previously held investment in Tibit to fair value, which resulted in Ciena recognizing a gain on its cost method equity investment of $26.5 million. See Note 4 above. During fiscal 2023 and fiscal 2022, Ciena recorded a net gain of $26.4 million and $4.1 million, respectively, on its cost method equity investments.
Ciena Corporation, as the U.S. parent entity, uses the U.S. Dollar as its functional currency; however, some of its foreign branch offices and subsidiaries use the local currency as their functional currency. During fiscal 2023 and 2021, Ciena recorded $0.4 million and $14.6 million, respectively, in exchange rate losses as a result of monetary assets and liabilities that were transacted in a currency other than the entity’s functional currency. During fiscal 2022, Ciena recorded $2.5 million in exchange rate gains as a result of monetary assets and liabilities that were transacted in a currency other than the entity’s functional currency. The related remeasurement adjustments were recorded in interest and other income (loss), net on the Consolidated Statements of Operations. From time to time, Ciena uses foreign currency forwards to hedge certain of these balance sheet exposures. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is also reported in interest and other income (loss), net on the Consolidated Statements of Operations. During fiscal 2023 and 2022, Ciena recorded losses of $3.9 million and $4.0 million, respectively, from non-hedge designated foreign currency forward contracts. During fiscal 2021, Ciena recorded a gain of $11.2 million from non-hedge designated foreign currency forward contracts.
(7) CASH EQUIVALENT, SHORT-TERM AND LONG-TERM INVESTMENTS
As of the dates indicated, investments classified as available-for-sale are comprised of the following (in thousands):
The following table summarizes the legal maturities of debt investments at October 28, 2023 (in thousands):
October 28, 2023
Amortized Cost
Estimated Fair Value
Less than one year
$
234,318
$
234,029
Due in 1-2 years
134,455
134,278
$
368,773
$
368,307
(8) FAIR VALUE MEASUREMENTS
As of the dates indicated, the following tables summarize the fair value of assets and liabilities that were recorded at fair value on a recurring basis (in thousands):
Ciena did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.
(9) ACCOUNTS RECEIVABLE
As of October 28, 2023, two customers accounted for 11.0% and 10.0% of net accounts receivable, respectively. As of October 29, 2022, two customers accounted for 13.0% and 11.0% of net accounts receivable, respectively. Ciena has not historically experienced a significant amount of bad debt expense. The following table summarizes the activity in Ciena’s allowance for credit losses for the fiscal years indicated (in thousands):
Year Ended
Beginning Balance
Effect of adoption of new accounting standard
Provisions
Net Deductions
Ending Balance
October 30, 2021
$
10,598
$
2,206
$
2,346
$
4,238
$
10,912
October 29, 2022(1)
$
10,912
$
—
$
4,199
$
4,153
$
10,958
October 28, 2023
$
10,958
$
—
$
5,718
$
5,022
$
11,654
(1) On March 7, 2022, Ciena announced its decision to suspend its business operations in Russia immediately. As a result, Ciena’s allowance for doubtful accounts includes a provision for a significant asset impairment of $1.8 million for a trade receivable related to this decision.
Accounts Receivable Factoring
During fiscal 2023 and 2022, the gross amount of trade accounts receivables sold totaled approximately $60.3 million and $11.8 million, respectively. Prior to the start of fiscal 2022, Ciena had not entered into any factoring arrangements. Factoring related expense recorded to interest and other income (loss), net was $3.1 million and $0.6 million for fiscal 2023 and fiscal 2022, respectively.
(10) INVENTORIES
As of the dates indicated, inventories are comprised of the following (in thousands):
October 28, 2023
October 29, 2022
Raw materials
$
664,797
$
664,916
Work-in-process
55,242
18,232
Finished goods
314,168
258,584
Deferred cost of goods sold
66,634
41,084
Gross inventories
1,100,841
982,816
Reserve for excess and obsolescence
(50,003)
(36,086)
Inventories, net
$
1,050,838
$
946,730
Ciena has been expanding its manufacturing capacity and accumulating raw materials inventory of components that are available, in some cases with expanded lead times, in an effort to prepare Ciena to produce finished goods more quickly when supply constraints ease for certain common components, including integrated circuit components, for which delivery continues to be delayed. Raw materials inventory is related to the steps Ciena has taken to mitigate the impact of supply chain constraints on its business and customers in recent prior periods and the global market shortage of semiconductor parts. The increase in finished goods inventories resulted primarily from planned fulfillment of customer advance orders for which some deliveries have been rescheduled outside of fiscal 2023.
Ciena makes estimates about future customer demand for its products when establishing the appropriate reserve for excess and obsolete inventory. For fiscal 2023, future demand was calculated using both customer backlog and future forecasted sales. For fiscal 2022, future demand was calculated primarily based on customer backlog. Generally, Ciena’s customers may cancel or change their orders with limited advance notice, or they may decide not to accept its products and services, although instances of both cancellation and non-acceptance are rare. Ciena writes down its inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about future demand, which are affected by changes in Ciena’s strategic direction, discontinuance of a product or introduction of newer versions of products, declines in the sales of or forecasted demand for certain products,
and general market conditions. During fiscal 2023, fiscal 2022 and fiscal 2021, Ciena recorded a provision for excess and obsolescence of $29.5 million, $16.2 million, and $17.9 million, respectively, primarily related to a decrease in the forecasted demand for certain Networking Platforms products. Deductions from the provision for excess and obsolete inventory relate primarily to the sale of previously reserved items and disposal activities.
The following table summarizes the activity in Ciena’s reserve for excess and obsolete inventory for the fiscal years indicated (in thousands):
Year Ended
Beginning Balance
Provisions
Disposals
Ending Balance
October 30, 2021
$
39,637
$
17,850
$
20,528
$
36,959
October 29, 2022
$
36,959
$
16,184
$
17,057
$
36,086
October 28, 2023
$
36,086
$
29,464
$
15,547
$
50,003
(11) PREPAID EXPENSES AND OTHER
As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands):
October 28, 2023
October 29, 2022
Contract assets for unbilled accounts receivable, net
$
150,312
$
156,039
Prepaid VAT and other taxes
96,724
63,975
Prepaid expenses
58,954
55,440
Product demonstration equipment, net
40,682
35,929
Capitalized contract acquisition costs
23,326
33,516
Other non-trade receivables
33,408
24,026
Deferred deployment expense
1,170
877
Derivative assets
1,118
251
$
405,694
$
370,053
Depreciation of product demonstration equipment was $8.0 million, $8.7 million and $9.8 million for fiscal 2023, 2022 and 2021, respectively.
For further discussion on contract assets and capitalized contract acquisition costs, see Note 2 above.
(12) EQUIPMENT, BUILDING, FURNITURE AND FIXTURES
As of the dates indicated, equipment, building, furniture and fixtures are comprised of the following (in thousands):
October 28, 2023
October 29, 2022
Equipment, furniture and fixtures
$
676,485
$
619,160
Building subject to finance lease
67,904
69,247
Leasehold improvements
74,391
80,415
Equipment, building, furniture and fixtures
818,780
768,822
Accumulated depreciation and amortization
(538,633)
(501,043)
Equipment, building, furniture and fixtures, net
$
280,147
$
267,779
During fiscal 2023, fiscal 2022 and fiscal 2021, Ciena recorded depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements of $84.6 million, $87.2 million and $86.5 million, respectively.
(13) INTANGIBLE ASSETS
As of the dates indicated, intangible assets are comprised of the following (in thousands):
Customer relationships, covenants not to compete, outstanding purchase orders and contracts
410,983
(386,725)
24,258
390,271
(366,859)
23,412
Total intangible assets
$
1,012,496
$
(806,869)
$
205,627
$
826,904
$
(757,387)
$
69,517
The aggregate amortization expense of intangible assets was $49.6 million, $44.3 million and $36.0 million for fiscal 2023, fiscal 2022 and fiscal 2021, respectively. Expected future amortization of intangible assets for the fiscal years indicated is as follows (in thousands):
Fiscal Year
Amount
2024
$
40,601
2025
34,582
2026
23,348
2027
15,843
2028
1,991
Thereafter
162
(1)
$
116,527
(1) Does not include amortization of in-process technology, as estimation of the timing of future amortization expense would be impractical.
(14) GOODWILL
The following table presents the goodwill allocated to Ciena’s operating segments as of October 28, 2023 and October 29, 2022, as well as the changes to goodwill during fiscal 2023 (in thousands):
Balance at October 29, 2022
Acquisitions
Translation
Balance at October 28, 2023
Platform Software and Services
$
156,191
$
—
$
—
$
156,191
Blue Planet Automation Software and Services
89,049
—
—
89,049
Networking Platforms
83,082
116,644
(201)
199,525
Total
$
328,322
$
116,644
$
(201)
$
444,765
(15) OTHER BALANCE SHEET DETAILS
As of the dates indicated, other long-term assets are comprised of the following (in thousands):
(1) During fiscal 2023, fiscal 2022 and fiscal 2021, Ciena recorded amortization of cloud computing arrangements of $2.6 million, $2.8 million and $2.4 million, respectively.
(2) Deferred debt issuance costs relate to Ciena’s senior secured revolving credit facility (the “Revolving Credit Facility”) entered into during fiscal 2023 and its predecessor asset-backed credit facility (described in Note 20 below). The amortization of deferred debt issuance costs for the Revolving Credit Facility and its predecessor is included in interest expense, and was $0.4 million for fiscal 2023, fiscal 2022 and fiscal 2021.
(3) During the first quarter of fiscal 2023, Ciena acquired its previously held cost method equity investment in Tibit in a business combination, see Note 4 above.
As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands):
October 28, 2023
October 29, 2022
Compensation, payroll related tax and benefits (1)
$
159,530
$
126,338
Warranty
57,089
45,503
Vacation
29,503
26,396
Income taxes payable
16,341
11,472
Foreign currency forward contracts
14,509
15,604
Interest payable
4,514
4,793
Finance lease liabilities
3,953
3,758
Other
145,980
126,918
$
431,419
$
360,782
(1) Increase is primarily due to a higher accrual rate related to Ciena’s 2023 annual cash incentive compensation plan.
The following table summarizes the activity in Ciena’s accrued warranty for the fiscal years indicated (in thousands):
Year Ended
Beginning Balance
Current Year Provisions
Settlements
Ending Balance
October 30, 2021
$
49,868
$
17,093
$
(18,942)
$
48,019
October 29, 2022
$
48,019
$
17,440
$
(19,956)
$
45,503
October 28, 2023
$
45,503
$
31,742
$
(20,156)
$
57,089
As of the dates indicated, deferred revenue is comprised of the following (in thousands):
As of the dates indicated, other long-term obligations are comprised of the following (in thousands):
October 28, 2023
October 29, 2022
Finance lease liabilities
$
48,192
$
53,176
Income tax liability
98,259
72,644
Deferred compensation plan liability
11,444
12,535
Other
12,512
11,980
$
170,407
$
150,335
(16) DERIVATIVE INSTRUMENTS
Foreign Currency Derivatives
Ciena conducts business globally in many currencies, and thus is exposed to adverse foreign currency exchange rate changes. To limit this exposure, Ciena entered into foreign currency contracts. Ciena does not enter into such contracts for speculative purposes.
As of October 28, 2023 and October 29, 2022, Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce variability that is principally related to research and development activities. The notional amount of these contracts was approximately $367.3 million and $272.2 million as of October 28, 2023 and October 29, 2022, respectively. These foreign exchange contracts have maturities of 24 months or less and have been designated as cash flow hedges.
In May 2023, Ciena entered into forward contracts designated as net investment hedges to minimize the effect of foreign exchange rate movements on its net investments in foreign operations. The notional amount of these contracts was approximately $48.0 million as of October 28, 2023. These foreign exchange contracts have maturities of 24 months or less and have been designated as net investment hedges.
As of October 28, 2023 and October 29, 2022, Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce the variability in various currencies of certain balance sheet items. The notional amount of these contracts was approximately $226.3 million and $108.0 million as of October 28, 2023 and October 29, 2022, respectively. These foreign exchange contracts have maturities of 12 months or less and have not been designated as hedges for accounting purposes.
Interest Rate Derivatives
Ciena is exposed to floating rates of interest on its term loan borrowings (see Note 19 below) and has hedged such risk by entering into floating-to-fixed interest rate swap arrangements (“interest rate swaps”).
Prior to amending our term loan due September 28, 2025 (the “2025 Term Loan”) in January 2023, to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”), Ciena was exposed to floating rates of LIBOR interest on its 2025 Term Loan borrowings. In October 2018, Ciena hedged this risk by entering into interest rate swaps to fix the LIBOR rate for the first $350.0 million of its floating rate debt at 2.957% through September 2023. In January 2023, Ciena entered into a LIBOR to SOFR basis swap (“basis swap”) to hedge its exposure to SOFR rate. The basis swap offset the LIBOR exposure risk of the interest rate swaps and effectively fixed the SOFR rate for the first $350.0 million of its floating rate debt at 2.883% through September 2023. These swaps expired in September 2023. In April 2022, Ciena entered into forward starting interest rate swaps to fix the SOFR rate for the first $350.0 million its floating rate debt at 2.968% from September 2023 through September 2025 (“2025 interest rate swaps”). The total notional amount of the 2025 interest swaps was $350.0 million as of October 28, 2023.
In January 2023, Ciena entered into interest rate swaps to fix the SOFR rate for an additional $350.0 million of its floating rate debt at 3.47% through January 2028 (“2028 interest rate swaps”). The total notional amount of the 2028 interest rate swaps in effect as of October 28, 2023 was $350.0 million.
Ciena expects the variable rate payments to be received under the terms interest rate swaps to offset exactly the forecasted variable rate payments on the equivalent notional amount of the 2030 New Term Loan (as defined in Note 19 below). These derivative contracts have been designated as cash flow hedges.
Other information regarding Ciena’s derivatives is immaterial for separate financial statement presentation. See Notes 6 and 8 above.
(17) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes the changes in accumulated balances of other comprehensive income (“AOCI”), net of tax (in thousands):
Unrealized Gain (Loss) on
Available-for-Sale Securities
Foreign Currency Forward Contracts
Interest Rate Swaps
Cumulative Translation Adjustment
Total
Balance at October 31, 2020
$
45
$
(219)
$
(21,535)
$
(13,649)
$
(35,358)
Other comprehensive gain (loss) before reclassifications
(209)
16,856
(261)
20,215
36,601
Amounts reclassified from AOCI
—
(10,421)
9,617
—
(804)
Balance at October 30, 2021
(164)
6,216
(12,179)
6,566
439
Other comprehensive gain (loss) before reclassifications
(2,801)
(16,299)
14,512
(49,446)
(54,034)
Amounts reclassified from AOCI
—
(114)
7,064
—
6,950
Balance at October 29, 2022
(2,965)
(10,197)
9,397
(42,880)
(46,645)
Other comprehensive gain (loss) before reclassifications
2,593
(8,455)
19,600
(5,321)
8,417
Amounts reclassified from AOCI
—
10,496
(10,035)
—
461
Balance at October 28, 2023
$
(372)
$
(8,156)
$
18,962
$
(48,201)
$
(37,767)
All amounts reclassified from AOCI related to settlement (gains) losses on foreign currency forward contracts designated as cash flow hedges impacted research and development expense on the Consolidated Statements of Operations. All amounts reclassified from AOCI related to settlement (gains) losses on interest rate swaps designated as cash flow hedges impacted interest and other income (loss), net on the Consolidated Statements of Operations.
(18) LEASES
Ciena leases over 1.1 million square feet of facilities globally. Ciena’s corporate headquarters are located in Hanover, Maryland. Ciena’s largest facilities are research and development centers located in Ottawa, Canada and Gurgaon, India. Ciena also leases smaller engineering facilities in the United States, Canada, and Europe. In addition, Ciena leases various smaller offices in regions throughout the world to support sales and services operations. Office facilities are leased under various non-cancelable operating or finance leases. Ciena's current leases have remaining terms that vary up to 9 years. Certain leases provide for options to extend up to 10 years and/or options to terminate within 4 years.
Leases included in the Consolidated Balance Sheets for the fiscal periods indicated were as follows (in thousands):
Operating lease liabilities and Long-term operating lease liabilities
$
49,914
$
61,317
Finance leases:
Buildings, gross
Equipment, building, furniture and fixtures, net
$
67,904
$
69,247
Less: accumulated depreciation
Equipment, building, furniture and fixtures, net
(30,079)
(26,266)
Buildings, net
$
37,825
$
42,981
Finance lease liabilities
Accrued liabilities and other short-term obligations and other long-term obligations
$
52,145
$
56,934
ROU assets that involve subleased or vacant space aggregate $7.5 million as of October 28, 2023. Finance lease buildings, net, that involve subleased or vacant space aggregate $6.0 million as of October 28, 2023. These assets may become impaired if tenants are unable to service their obligations under the sublease, and/or if the estimates as to occupancy are not realized.
For the periods indicated, the components of lease expense included in the Consolidated Statements of Operations were as follows (in thousands):
Year Ended
Year Ended
Year Ended
Classification
October 28, 2023
October 29, 2022
October 30, 2021
Operating lease costs
Operating expense
$
16,080
$
17,966
$
16,602
Finance lease cost:
Amortization of finance ROU asset
Operating expense
4,448
4,592
4,773
Interest on finance lease liabilities
Interest expense
4,069
4,601
4,882
Total finance lease cost
8,517
9,193
9,655
Non-capitalized lease cost
Operating expense
910
917
1,152
Variable lease cost(1)
Operating expense
3,421
5,898
5,690
Net lease cost(2)
$
28,928
$
33,974
$
33,099
(1) Variable lease costs include expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease. Variable lease costs are determined by whether they are to be included in base rent and if amounts are based on a consumer price index.
(2) Excludes other operating expense of $6.5 million, $12.8 million, and $8.8 million for the fiscal years ended October 28, 2023, October 29, 2022, and October 30, 2021, respectively, related to amortization of leasehold improvements.
Future minimum lease payments and the present value of minimum lease payments related to operating and finance leases as of October 28, 2023 were as follows (in thousands):
Less: Current portion of present value of minimum lease payments
16,655
3,953
20,608
Long-term portion of present value of minimum lease payments
$
33,259
$
48,192
$
81,451
The weighted average remaining lease terms and weighted average discount rates for operating and finance leases were as follows (in thousands):
Weighted-average remaining lease term in years:
As of October 28, 2023
As of October 29, 2022
Operating leases
4.07
3.85
Finance leases
8.71
9.71
Weighted-average discount rates:
Operating leases
3.88
%
2.97
%
Finance leases
7.56
%
7.56
%
(19) SHORT-TERM AND LONG-TERM DEBT
2030 New Term Loan
On October 24, 2023, Ciena, together with certain of its domestic subsidiaries as guarantors, entered into an Incremental Amendment Agreement (the “Amendment”) to its Credit Agreement, dated July 15, 2014, as amended (the “Credit Agreement”), by and among Ciena, certain of its subsidiaries, the lenders party thereto, and Bank of America, N.A., as administrative agent (“Bank of America”), to which Ciena incurred a new tranche of senior secured term loans in an aggregate principal amount of $1.2 billion (the “2030 New Term Loan”) and a new senior secured revolving credit facility of $300 million (the “Revolving Credit Facility” as defined in Note 20 below).
The proceeds of the 2030 New Term Loan, net of original issuance discount, replaced, in full, $668.7 million of outstanding principal of the 2025 Term Loan and $497.5 million of outstanding principal of the 2030 Term Loan (as defined below) (“Refinanced Term Loans”), including accrued interest, and pay transaction fees and expenses, resulting in proceeds of $0.8 million. The 2030 New Term Loan requires Ciena to make installment payments of $2.9 million on a quarterly basis.
Based on the continuation of existing lenders and the addition of new lenders, this arrangement was primarily accounted for as a modification of debt and, as such, $6.0 million of debt issuance costs associated with the 2030 New Term Loan were expensed. The aggregate balance of approximately $4.4 million of debt issuance costs and approximately $2.2 million of original discount from the 2025 Term Loan and 2030 Term Loan, $0.1 million of debt issuance costs associated with new lenders for the 2030 New Term Loan, and approximately $2.9 million of original discount from the 2030 New Term Loan, were included in the carrying value of the 2030 New Term Loan.
The Amendment amends the Credit Agreement and provides that the 2030 New Term Loan will, among other things:
•mature on October 24, 2030;
•amortize in equal quarterly installments in aggregate amounts equal to 0.25% of the principal amount of the 2030 New Term Loan as of January 19, 2023, or $2.9 million, or $11.7 million annually, with the balance payable at maturity;
•be subject to mandatory prepayment upon the occurrence of certain specified events substantially similar to the Refinanced Term Loans, including upon the occurrence of certain specified events such as asset sales, debt issuances, and receipt of annual Excess Cash Flow (as defined in the Credit Agreement);
•bear interest, at Ciena’s election, at a per annum rate equal to (a) SOFR (subject to a floor of 0.00%) plus an applicable margin of 2.00%, or (b) a base rate (subject to a floor of 1.00%) plus an applicable margin of 1.00%; and
•be repayable at any time at Ciena’s election, provided that repayment of the 2030 New Term Loan with proceeds of certain indebtedness prior to April 24, 2024 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment.
Among other things, the Amendment also amends the Credit Agreement by (i) modifying the “accordion” feature to provide for incremental term loan facilities (the “Incremental Term Loans”) in an aggregate amount not to exceed the sum of (A) the greater of (1) $640 million and (2) an amount equal to consolidated EBITDA on a pro forma basis for the most recently ended four-quarter period and (B) an amount (1) in the case of secured incremental term facilities that rank pari passu with or junior to the 2030 New Term Loan, such that the Total Secured Net Leverage Ratio (as defined in the Credit Agreement) would not be greater than 3.00 to 1.00 at the time of incurrence and (2) in the case of unsecured incremental term facilities, such that the Interest Coverage Ratio (as defined in the Credit Agreement) would not be less than 2.00 to 1.00 at the time of incurrence, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the Credit Agreement, to provide such increased amounts and (ii) amending certain negative covenants.
Basic net income per common share (“Basic EPS”) is computed using the weighted average number of common shares outstanding. Diluted net income per potential common share (“Diluted EPS”) is computed using the weighted average number of the following, in each case, to the extent the effect is not anti-dilutive: (i) common shares outstanding, (ii) shares issuable upon vesting of stock unit awards; and (iii) shares issuable under Ciena’s employee stock purchase plan and upon exercise of outstanding stock options, using the treasury stock method.
The following table presents the calculation of Basic and Diluted EPS (in thousands except per share amounts):
Stock Repurchase Program and Accelerated Share Repurchase Agreement
On December 13, 2018, Ciena announced that its Board of Directors authorized a program to repurchase up to $500 million of Ciena’s common stock. During fiscal 2021, Ciena repurchased 1.7 million shares of its common stock, for an aggregate purchase price of $92.1 million at an average price of $54.27 per share. Under this program, Ciena repurchased a total of 7.4 million shares of its common stock, for an aggregate purchase price of $316.7 million at an average price of $42.75 per share.
On December 9, 2021, Ciena announced that its Board of Directors replaced its previously authorized program, as described above, with a program to repurchase up to $1.0 billion of its common stock. On December 13, 2021, Ciena entered into an accelerated share repurchase agreement (the “ASR Agreement”) with Goldman, Sachs & Co. LLC (“Goldman”) to repurchase $250.0 million (the “Repurchase Price”) of its common stock as part of the repurchase program. Under the terms of the ASR Agreement, Ciena paid the Repurchase Price to Goldman, and received approximately 3.6 million shares of its common stock from Goldman, calculated based on the average of the volume-weighted average prices of Ciena’s common stock of $69.78 for the period from December 14, 2021 to February 11, 2022, less a discount, which completed the repurchases contemplated by the ASR Agreement. Shares repurchased pursuant to the ASR Agreement were immediately retired upon receipt. During the remainder of fiscal 2022, Ciena repurchased an additional 4.8 million shares of its common stock, for an aggregate purchase price of $250.0 million at an average price of $51.53 per share.
During fiscal 2023, Ciena repurchased an additional 5.7 million shares of its common stock, for an aggregate purchase price of $250.0 million at an average price of $44.08 per share. As of October 28, 2023, Ciena has repurchased an aggregate of 14.1 million shares for an aggregate purchase price of $750.0 million at an average price of $53.17 per share and has an aggregate of $250.0 million of authorized funds remaining under its stock repurchase program.
The purchase price for the shares of Ciena’s stock repurchased is reflected as a reduction of common stock and additional paid-in capital.
Impact of Inflation Reduction Act 1% Excise Tax on Share Repurchases
Beginning fiscal 2023, a 1% excise tax on the market value of shares repurchased offset by 1% of the market value of shares issued was implemented. During fiscal 2023, a net excise tax of $1.5 million was recorded to additional paid-in capital on the Consolidated Balance Sheets.
Stock Repurchases Related to Restricted Stock Unit Tax Withholdings
Ciena repurchases shares of common stock to satisfy employee tax withholding obligations due upon vesting of stock unit awards. The related purchase price of $38.5 million for the shares of Ciena’s stock repurchased during fiscal 2023 is reflected as a reduction to stockholders’ equity. Ciena is required to allocate the purchase price of the repurchased shares as a reduction of common stock and additional paid-in capital.
(23) INCOME TAXES
For the periods indicated, the provision (benefit) for income taxes consists of the following (in thousands):
For the periods indicated, income before provision (benefit) for income taxes consists of the following (in thousands):
Year Ended
October 28, 2023
October 29, 2022
October 30, 2021
United States
$
93,682
$
28,784
$
298,514
Foreign
229,971
153,721
164,237
Total
$
323,653
$
182,505
$
462,751
Ciena’s foreign income tax as a percentage of foreign income may appear disproportionate compared to the expected tax based on the U.S. federal statutory rate and is dependent on the mix of earnings and tax rates in foreign jurisdictions.
For the periods indicated, the tax provision reconciles to the amount computed by multiplying income before income taxes by the U.S. federal statutory rate of 21% for fiscal 2023, fiscal 2022 and fiscal 2021 as follows:
Our future income tax provisions and deferred tax balances may be affected by the amount of pre-tax income, the jurisdictions where it is earned, the existence and ability to utilize tax attributes and changes in tax laws and business reorganizations.
In fiscal 2021, Ciena began implementation of a plan to reorganize its global supply chain and distribution structure more substantially, which included a legal entity reorganization and related system upgrade. Ciena completed the first phase of this plan in fiscal 2021, and substantially completed the reorganization during fiscal 2022. As part of this reorganization, Ciena completed an internal transfer of certain of its non-U.S. intangible assets, which created amortizable tax basis resulting in the discrete recognition of a $119.3 million deferred tax asset with a corresponding tax benefit. The impact of this transfer is reflected in Ciena’s effective tax rate for the year ended October 30, 2021, which had a significant, one-time impact on its net income for the period.
Ciena is also required to make accounting policy elections as a result of the Tax Act. These include whether a valuation allowance is recorded for the estimated effect of the application of GILTI and BEAT or if these will be treated as period costs when incurred. Ciena had made the incremental cash tax cost policy election with respect to analyzing the impact of GILTI on the assessment of the realizability of net operating losses. The realizability of U.S. tax carryforwards is not impacted by the BEAT, and the BEAT is a period cost when incurred. Ciena is also required to elect to treat taxes due on future GILTI inclusions in U.S. taxable income either as a current period expense when incurred or reflect such portion of the future GILTI inclusions in U.S. taxable income that relate to existing basis differences in Ciena’s current measurement of deferred taxes. Ciena’s accounting policy election is to treat the taxes due on future U.S. inclusions in taxable income under GILTI as a period cost when incurred.
The significant components of deferred tax assets are as follows (in thousands):
Year Ended
October 28, 2023
October 29, 2022
Deferred tax assets:
Reserves and accrued liabilities
$
82,160
$
76,839
Depreciation and amortization
712,098
690,636
NOL and credit carry forward
197,984
154,707
Other
6,934
63,902
Gross deferred tax assets
999,176
986,084
Valuation allowance
(189,870)
(162,076)
Deferred tax asset, net of valuation allowance
$
809,306
$
824,008
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):
Decrease related to positions taken in prior period
(22,854)
Reductions related to settlements with taxing authorities
(654)
Increase related to positions taken in current period
5,510
Reductions related to expiration of statute of limitations
(659)
Unrecognized tax benefits at October 30, 2021
77,091
Increase related to positions taken in prior period
4,732
Reductions related to settlements with taxing authorities
(3,229)
Increase related to positions taken in current period
2,959
Reductions related to expiration of statute of limitations
(1,039)
Unrecognized tax benefits at October 29, 2022
80,514
Increase related to positions taken in prior period
9,940
Reductions related to settlements with taxing authorities
(625)
Increase related to positions taken in current period
4,960
Reductions related to expiration of statute of limitations
(869)
Unrecognized tax benefits at October 28, 2023
$
93,920
As of October 28, 2023 and October 29, 2022, Ciena had accrued $7.9 million and $5.2 million of interest and penalties, respectively, related to unrecognized tax benefits included in other long-term obligations in the Consolidated Balance Sheets. Interest and penalties of $2.7 million and $1.7 million were recorded as a net expense to the provision for income taxes during fiscal 2023 and 2022, respectively. During fiscal 2021, Ciena recorded a net benefit to the provision for interest and penalties in its provision for income taxes of $0.1 million. If recognized, the entire balance of unrecognized tax benefits would impact the effective tax rate. Over the next 12 months, Ciena does not estimate any material changes in unrecognized income tax benefits.
During the fourth quarter of fiscal 2023, Ciena evaluated the undistributed earnings of its foreign subsidiaries and identified approximately $222.0 million in earnings that are no longer considered to be indefinitely reinvested. Ciena recorded a provision of $2.5 million that reflects the income tax effects of the repatriation of these earnings. No additional income tax expense has been provided for any remaining undistributed foreign earnings, or any additional outside basis difference from investments in the foreign subsidiaries, as these amounts continue to be indefinitely reinvested. If the remaining undistributed foreign earnings and profits of $381.0 million were repatriated to the U.S., the provisional amount of unrecognized deferred tax liability, which is primarily related to foreign withholding taxes, is an estimated $30.0 million; however, the amount may be lower depending on Ciena’s ability to utilize tax credits associated with the distribution. Additionally, there are no other significant temporary differences for which a deferred tax liability or asset has not been recognized.
As of October 28, 2023, Ciena continues to maintain a valuation allowance of $189.9 million against its gross deferred tax assets primarily. The valuation allowance is primarily related to state and foreign net operating losses and credits that Ciena estimates it will not be able to use.
The following table summarizes the activity in Ciena’s valuation allowance against its gross deferred tax assets (in thousands):
Year Ended
Beginning Balance
Additions
Deductions
Ending Balance
October 30, 2021
$
151,427
$
17,897
$
9,690
$
159,634
October 29, 2022
$
159,634
$
15,245
$
12,803
$
162,076
October 28, 2023
$
162,076
$
28,746
$
952
$
189,870
(24) SHARE-BASED COMPENSATION EXPENSE
Ciena has outstanding equity awards issued under its 2017 Omnibus Incentive Plan (the “2017 Plan”), its 2008 Omnibus Incentive Plan, and certain legacy equity plans and equity plans assumed as a result of previous acquisitions. All equity awards granted on or after March 23, 2017 are made exclusively from the 2017 Plan. Ciena also makes shares of its common stock available for purchase under the ESPP. Each of the 2017 Plan and the ESPP are described below.
The 2017 Plan has a ten-year term and authorizes the issuance of awards including stock options, restricted stock units (RSUs), restricted stock, unrestricted stock, stock appreciation rights (SARs) and other equity and/or cash performance incentive awards to employees, directors and consultants of Ciena. Subject to certain restrictions, the Compensation Committee of the Board of Directors has broad discretion to establish the terms and conditions for awards under the 2017 Plan, including the number of shares, vesting conditions, and the required service or performance criteria. Options and SARs have a maximum term of ten years, and their exercise price may not be less than 100% of fair market value on the date of grant. Repricing of stock options and SARs is prohibited without stockholder approval. Certain change in control transactions may cause awards granted under the 2017 Plan to vest, unless the awards are continued or substituted for in connection with the transaction.
The 2017 Plan authorizes and reserves 21.1 million shares for issuance. The number of shares available under the 2017 Plan are also increased from time to time by: (i) the number of shares subject to outstanding awards granted under Ciena’s prior equity compensation plans that are forfeited, expire or are canceled without delivery of common stock following the effective date of the 2017 Plan, and (ii) the number of shares subject to awards assumed or substituted in connection with the acquisition of another company. As of October 28, 2023, the total number of shares authorized for issuance under the 2017 Plan was 21.1 million and approximately 5.6 million shares remained available for issuance thereunder.
Stock Options
There were no stock options granted by Ciena during fiscal 2023, fiscal 2022 or fiscal 2021. Outstanding stock option awards granted to employees in prior periods are generally subject to service-based vesting conditions and vest over a four-year period. The following table is a summary of Ciena’s stock option activity for the periods indicated (shares in thousands):
Shares Underlying Options Outstanding
Weighted Average Exercise Price
Balance at October 29, 2022
32
$
30.98
Granted
—
—
Exercised
(22)
$
33.98
Canceled
(3)
$
45.32
Balance at October 28, 2023
7
$
16.94
The total intrinsic value of options exercised during fiscal 2023, fiscal 2022 and fiscal 2021 was $0.3 million, $1.6 million and $0.5 million, respectively.
The following table summarizes information with respect to stock options outstanding at October 28, 2023, based on Ciena’s closing stock price on the last trading day of Ciena’s fiscal 2023 (shares and intrinsic value in thousands):
Options Outstanding and Vested at
October 28, 2023
Number
Weighted Average Remaining
Weighted
Range of
of
Contractual
Average
Aggregate
Exercise
Underlying
Life
Exercise
Intrinsic
Price
Shares
(Years)
Price
Value
$
14.38
—
$
18.22
7
0.36
$
16.94
$
178
Assumptions for Option-Based Awards
Ciena recognizes the fair value of stock options as share-based compensation expense on a straight-line basis over the requisite service period. Ciena did not grant any option-based awards during fiscal 2023, fiscal 2022 or fiscal 2021.
Restricted Stock Units
A restricted stock unit is a stock award that entitles the holder to receive shares of Ciena common stock as the unit vests. Ciena’s outstanding restricted stock unit awards are subject to service-based vesting conditions and/or performance-based vesting conditions. Awards subject to service-based conditions typically vest in increments over a three or four-year period.
However, the 2017 Plan permits Ciena to grant service-based stock awards with a minimum one-year vesting period. Awards with performance-based vesting conditions (i) require the achievement of certain operational, financial or other performance criteria or targets or (ii) vest based on Ciena’s total stockholder return as compared to an index of peer companies, in whole or in part.
During fiscal 2023, Ciena introduced a benefit pursuant to which, upon completion of ten years of service and reaching age 60, executive officers who are residents of the United States, the United Kingdom, or Canada and who provide 12 months’ notice of their retirement will receive continued vesting of all of their granted but unvested restricted stock unit (“RSU”) awards and a pro-rated amount of their performance stock unit awards and market stock unit awards. Other employees in these countries will be subject to the same eligibility and notice requirements, but will receive acceleration of their granted but unvested RSU awards upon retirement. This program accelerates the recognition of share-based compensation expense.
Assumptions for Restricted Stock Unit Awards
Ciena recognizes the estimated fair value of restricted stock units subject only to service-based vesting conditions by multiplying the number of shares underlying the award by the closing price per share of Ciena common stock on the grant date. Share-based expense for service-based restricted stock unit awards is recognized ratably over the vesting period on a straight-line basis.
Ciena recognizes the estimated fair value of restricted stock units subject to performance-based vesting conditions other than total stockholder return, by assuming the satisfaction of any performance-based objectives at the “target” level and multiplying the corresponding number of shares earned based upon such achievement by the closing price per share of Ciena common stock on the grant date. Share-based compensation expense is recognized over the performance period, using graded vesting, which considers each performance period or tranche separately, based on Ciena’s determination of whether it is probable that the performance targets will be achieved. At the end of each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. The estimation of whether the performance targets will be achieved involves judgment. Revisions are reflected in the period in which the estimate is changed. If any performance goals are not met, no compensation cost is ultimately recognized against that goal and, to the extent previously recognized, compensation expense is reversed.
Share-based compensation expense for restricted stock units subject only to service-based vesting conditions and restricted stock units subject to performance-based vesting conditions other than total stockholder return, is recognized only for those awards that ultimately vest. In the event of a forfeiture of an award, the expense related to the unvested portion of that award is reversed. Reversal of share-based compensation expense based on forfeitures can materially affect the measurement of estimated fair value of Ciena’s share-based compensation.
Ciena recognizes the estimated fair value of performance based awards subject to total stockholder return as compared to an index of peer companies using a Monte Carlo simulation valuation model. Ciena reverses share-based compensation expense on performance based awards subject to total shareholder return only when the requisite service period is not reached. Assumptions for awards granted during fiscal 2023, fiscal 2022 and fiscal 2021 included the following:
Year Ended
October 28, 2023
October 29, 2022
October 30, 2021
Expected volatility of Ciena common stock, which is a weighted average of implied volatility and historical volatility
40.37%
38.27%
41.00%
Historical volatility of Ciena common stock
43.11%
42.17%
42.80%
Historical volatility of S&P Networking Index
30.93%
27.22%
27.30%
Correlation coefficient
0.7781
0.7049
0.6800
Expected life in years
2.89
2.89
2.87
Risk-free interest rate
3.95%
0.94%
0.17%
Expected dividend yield
0.0%
0.0%
0.0%
The following table is a summary of Ciena’s restricted stock unit activity for the period indicated, with the aggregate fair value of the balance outstanding at the end of each period, based on Ciena’s closing stock price on the last trading day of the relevant period (shares and aggregate fair value in thousands):
As of October 28, 2023 and October 29, 2022, 0.3 million of the total restricted stock units outstanding are performance based awards subject to total stockholder return. The total fair value of restricted stock units that vested and were converted into common stock during fiscal 2023, fiscal 2022 and fiscal 2021 was $98.2 million, $119.0 million and $110.0 million, respectively. The weighted average fair value of each restricted stock unit granted by Ciena during fiscal 2023, fiscal 2022 and fiscal 2021 was $50.48, $67.03 and $48.70, respectively.
Amended and Restated ESPP
Ciena makes shares of its common stock available for purchase under the ESPP, under which eligible employees may enroll in a twelve-month offer period that begins in December and June of each year. Each offer period includes twosix-month purchase periods. Employees may purchase a limited number of shares of Ciena common stock at 85% of the fair market value on either the day immediately preceding the offer date or the purchase date, whichever is lower. The ESPP is considered compensatory for purposes of share-based compensation expense. Unless earlier terminated, the ESPP will terminate on April 1, 2031.
During fiscal 2023, Ciena issued 0.8 million shares and during both fiscal 2022 and fiscal 2021, Ciena issued 0.7 million shares, respectively, under the ESPP. At October 28, 2023, 11.3 million shares remained available for issuance under the ESPP.
Share-Based Compensation Expense
The following table summarizes share-based compensation expense for the periods indicated (in thousands):
Year Ended
October 28, 2023
October 29, 2022
October 30, 2021
Products
$
4,518
$
3,867
$
3,408
Services
10,470
7,533
5,181
Share-based compensation expense included in cost of goods sold
14,988
11,400
8,589
Research and development
42,331
31,879
21,863
Sales and marketing
35,136
31,280
25,152
General and administrative
37,587
30,435
28,804
Share-based compensation expense included in operating expense
115,054
93,594
75,819
Share-based compensation expense capitalized in inventory, net
413
137
(72)
Total share-based compensation
$
130,455
$
105,131
$
84,336
As of October 28, 2023, total unrecognized share-based compensation expense was $201.0 million which relates to unvested restricted stock units and is expected to be recognized over a weighted-average period of 1.39 years.
(25) SEGMENT AND ENTITY WIDE DISCLOSURES
Segment Reporting
Ciena has the following operating segments for reporting purposes: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services.
Ciena’s long-lived assets, including equipment, building, furniture and fixtures, operating ROU assets, finite-lived intangible assets, and maintenance spares, are not reviewed by Ciena’s chief operating decision maker for purposes of evaluating performance and allocating resources. As of October 28, 2023, equipment, building, furniture and fixtures, net,
totaled $280.1 million, and operating ROU assets totaled $35.1 million both of which support asset groups within Ciena’s four operating segments and unallocated selling and general and administrative activities. As of October 28, 2023, finite-lived intangible assets, goodwill and maintenance spares are assigned to asset groups within the following segments (in thousands):
October 28, 2023
Networking Platforms
Platform Software and Services
Blue Planet Automation Software and Services
Global Services
Total
Other intangible assets, net
$
188,383
$
—
$
17,244
$
—
$
205,627
Goodwill
$
199,525
$
156,191
$
89,049
$
—
$
444,765
Maintenance spares, net
$
—
$
—
$
—
$
54,042
$
54,042
Segment Profit (Loss)
Segment profit (loss) is determined based on internal performance measures used by Ciena’s chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive officer excludes the following items: selling and marketing costs; general and administrative costs; significant asset impairments and restructuring costs; amortization of intangible assets; acquisition and integration costs; interest and other income (loss), net; interest expense; loss on extinguishment and modification of debt and provision (benefit) for income taxes.
The table below sets forth Ciena’s segment profit (loss) and the reconciliation to consolidated net income for the respective periods indicated (in thousands):
Year Ended
October 28, 2023
October 29, 2022
October 30, 2021
Segment profit (loss):
Networking Platforms
$
778,641
$
572,305
$
850,901
Platform Software and Services
186,945
175,108
136,602
Blue Planet Automation Software and Services
(33,669)
(22,388)
(711)
Global Services
196,375
210,663
198,521
Total segment profit
1,128,292
935,688
1,185,313
Less: non-performance operating expenses
Selling and marketing
490,804
466,565
452,214
General and administrative
215,284
179,382
181,874
Significant asset impairments and restructuring costs
23,834
33,824
29,565
Amortization of intangible assets
37,351
32,511
23,732
Acquisition and integration costs
3,474
598
2,572
Add: other non-performance financial items
Interest and other income (loss), net
62,008
6,747
(1,768)
Interest expense
(88,026)
(47,050)
(30,837)
Loss on extinguishment and modification of debt
(7,874)
—
—
Less: Provision (benefit) for income taxes
68,826
29,603
(37,445)
Consolidated net income
$
254,827
$
152,902
$
500,196
Entity Wide Reporting
The following table reflects Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, and operating ROU assets, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, and operating ROU assets specifically identified. Equipment, building, furniture and fixtures, net, and operating ROU assets attributable to geographic regions outside of the United States and Canada are reflected as “Other International.” For the periods below, Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, and operating ROU assets was as follows (in thousands):
Ciena has a Defined Contribution Pension Plan that covers a majority of its Canada-based employees. The plan covers all Canada-based employees who are not part of an excluded group. Total contributions (employee and employer) cannot exceed the lesser of 18% of participant earnings and an annual dollar limit of CAD$31,560 (approximately $25,748 for 2023). This plan includes a required employer contribution of 1% for all participants and an employer matching contribution equal to 50% of the first 6% an employee contributes each pay period. During fiscal 2023, 2022 and 2021, Ciena made matching contributions of approximately CAD$10.6 million (approximately $7.6 million), CAD$10.1 million (approximately $7.3 million) and CAD$8.3 million (approximately $6.0 million), respectively.
Ciena has a 401(k) defined contribution profit sharing plan that covers a majority of its United States-based employees. Participants may contribute up to 60% of base pay through pre-tax or Roth contributions, subject to certain limitations. The plan includes an employer matching contribution equal to 50% of the first 8% an employee contributes each pay period. Ciena may also make discretionary annual profit contributions up to the IRS regulated limit. Ciena has made no profit sharing contributions to date. During fiscal 2023, 2022 and 2021, Ciena made matching contributions of approximately $10.4 million, $9.2 million and $8.4 million, respectively.
(27) COMMITMENTS AND CONTINGENCIES
Tax Contingencies
Ciena is subject to various tax liabilities arising in the ordinary course of business. Ciena does not expect that the ultimate settlement of these tax liabilities will have a material effect on its results of operations, financial position or cash flows.
Litigation
Ciena is subject to various legal proceedings, claims and other matters arising in the ordinary course of business, including those that relate to employment, commercial, tax and other regulatory matters. Ciena is also subject to intellectual property related claims, including claims against third parties that may involve contractual indemnification obligations on the part of Ciena. Ciena does not expect that the ultimate costs to resolve such matters will have a material effect on its results of operations, financial position or cash flows.
Purchase Order Obligations
Ciena has certain advanced orders for supply of certain long lead time components. As of October 28, 2023, Ciena had $1.7 billion inoutstandingpurchase order commitments to contract manufacturers and component suppliers for inventory. In certain instances, Ciena is permitted to cancel, reschedule or adjust these orders. Consequently, only a portion of this amount relates to firm, non-cancelable and unconditional obligations.
As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Report of Management on Internal Control Over Financial Reporting
The management of Ciena Corporation is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).
The internal control over financial reporting at Ciena Corporation was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Ciena Corporation;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America;
•provide reasonable assurance that receipts and expenditures of Ciena Corporation are being made only in accordance with authorization of management and directors of Ciena Corporation; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Management of Ciena Corporation assessed the effectiveness of the Company’s internal control over financial reporting as of October 28, 2023. Management based this assessment on criteria for effective internal control over financial reporting described in “COSO 2013 Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, as of October 28, 2023, Ciena Corporation maintained effective internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.
PricewaterhouseCoopers LLP, independent registered public accounting firm, who audited and reported on the consolidated financial statements of Ciena Corporation included in this annual report, has also audited the effectiveness of Ciena Corporation’s internal control over financial reporting as of October 28, 2023, as stated in its report appearing in Item 8 of Part II of this annual report.
/s/ Gary B. Smith
/s/ James E. Moylan, Jr.
Gary B. Smith
James E. Moylan, Jr.
President and Chief Executive Officer
Senior Vice President and Chief Financial Officer
December 15, 2023
December 15, 2023
Item 9B. Other Information
Rule 10b5-1 Trading Arrangements
The following table describes, for the quarter ended October 28, 2023, each trading arrangement for the sale or purchase of our securities adopted, terminated or for which the amount, pricing or timing provisions were modified by our directors and officers
(as defined in Rule 16a-1(f) of the Exchange Act) that is either (1) a contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a “Rule 10b5-1 trading arrangement”) or (2) a “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K):
Name (Title)
Action Taken (Date of Action)
Type of Trading Arrangement
Nature of Trading Arrangement
Duration of Trading Arrangement
Aggregate Number of Securities to be Purchased or Sold
David Rothenstein (Senior Vice President, Chief Strategy Officer and Secretary)
Adoption (September 22, 2023)
Rule 10b5-1 trading arrangement
Sales
Until January 14, 2025, or such earlier date upon which all transactions are completed or expire without execution
Up to 42,000 shares of common stock
Scott McFeely (former Senior Vice President, Global Products and Services)
Adoption (October 12, 2023)
Rule 10b5-1 trading arrangement
Sales
Until December 31, 2024, or such earlier date upon which all transactions are completed or expire without execution
Up to 38,500 shares of common stock
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
Item 10. Directors, Executive Officers and Corporate Governance
Information relating to our directors and executive officers is set forth in Part I of this annual report under the caption “Item 1. Business—Information About Our Executive Officers and Directors.”
Additional information responsive to this item concerning our Audit Committee and regarding compliance with Section 16(a) of the Exchange Act is incorporated herein by reference from our definitive proxy statement with respect to our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K.
As part of our system of corporate governance, our board of directors has adopted a code of ethics that is specifically applicable to our chief executive officer and senior financial officers. This Code of Ethics for Senior Financial Officers, as well as our Code of Business Conduct and Ethics, applicable to all directors, officers and employees, are available on the “Corporate Governance” page of our website at www.ciena.com. We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Ethics for Senior Financial Officers by posting such information on our website at the address above.
Item 11. Executive Compensation
Information responsive to this item is incorporated herein by reference from our definitive proxy statement with respect to our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information responsive to this item is incorporated herein by reference from our definitive proxy statement with respect to our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information responsive to this item is incorporated herein by reference from our definitive proxy statement with respect to our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K.
Item 14. Principal Accountant Fees and Services
Information responsive to this item is incorporated herein by reference from our definitive proxy statement with respect to our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K.
Item 15. Exhibits and Financial Statement Schedules
(a)1. The information required by this item is included in Item 8 of Part II of this annual report.
2.The information required by this item is included in Item 8 of Part II of this annual report.
3.Exhibits: See Index to Exhibits, which is incorporated by reference in this Item. The Exhibits listed in the accompanying Index to Exhibits are filed herewith or incorporated by reference as part of this annual report.
(b)Exhibits. See Index to Exhibits, which is incorporated by reference in this Item. The Exhibits listed in the accompanying Index to Exhibits are filed herewith or incorporated by reference as part of this annual report.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 15th day of December 2023.
Ciena Corporation
By:
/s/ Gary B. Smith
Gary B. Smith
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signatures
Title
Date
/s/ Patrick H. Nettles, Ph.D.
Executive Chairman of the Board of Directors
December 15, 2023
Patrick H. Nettles, Ph.D.
/s/ Gary B. Smith
President, Chief Executive Officer and Director
December 15, 2023
Gary B. Smith (Principal Executive Officer)
/s/ James E. Moylan, Jr.
Sr. Vice President, Finance and Chief Financial Officer
December 15, 2023
James E. Moylan, Jr. (Principal Financial Officer)
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
—
—
—
X
________________________________
*
Represents management contract or compensatory plan or arrangement
++
Representations and warranties included in these agreements, as amended, were made by the parties to one another in connection with a negotiated transaction. These representations and warranties were made as of specific dates, only for purposes of these agreements and for the benefit of the parties thereto. These representations and warranties were subject to important exceptions and limitations agreed upon by the parties, including being qualified by confidential disclosures, made for the purposes of allocating contractual risk between the parties rather than establishing these matters as facts. These agreements are filed with this report only to provide investors with information regarding its terms and conditions, and not to provide any other factual information regarding Ciena or any other party thereto. Accordingly, investors should not rely on the representations and warranties contained in these agreements or any description thereof as characterizations of the actual state of facts or condition of any party, its subsidiaries or affiliates. The information in these agreements should be considered together with Ciena’s public reports filed with the SEC.
#
Certain portions of this document have been omitted based on a request for confidential treatment submitted to the SEC. The non-public information that has been omitted from this document has been separately filed with the SEC. Each redacted portion of this document is indicated by a “[*]” and is subject to the request for confidential treatment submitted to the SEC. The redacted information is confidential information of Ciena.
