Item 1. Financial Statements

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

			Quarter Ended
			January 29,						January 30,
			2022						2021
Revenue:
Products			$	665,007					$	597,220
Services			179,436						159,910
Total revenue			844,443						757,130
Cost of goods sold:
Products			372,565						315,098
Services			87,691						84,141
Total cost of goods sold			460,256						399,239
Gross profit			384,187						357,891
Operating expenses:
Research and development			148,409						132,741
Selling and marketing			118,881						97,278
General and administrative			44,498						39,993
Significant asset impairments and restructuring costs			3,409						5,867
Amortization of intangible assets			8,918						5,910
Acquisition and integration costs			68						307
Total operating expenses			324,183						282,096
Income from operations			60,004						75,795
Interest and other income (loss), net			3,686						(1,121)
Interest expense			(8,648)						(7,360)
Income before income taxes			55,042						67,314
Provision for income taxes			9,219						11,966
Net income			$	45,823					$	55,348
Basic net income per common share			$	0.30					$	0.36
Diluted net income per potential common share			$	0.29					$	0.35
Weighted average basic common shares outstanding			154,151						155,174
Weighted average dilutive potential common shares outstanding			155,807						156,583

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

			Quarter Ended
			January 29,						January 30,
			2022						2021
Net income			$	45,823					$	55,348
Change in unrealized loss on available-for-sale securities, net of tax			(774)						(49)
Change in unrealized gain (loss) on foreign currency forward contracts, net of tax			(5,339)						6,617
Change in unrealized gain on forward starting interest rate swaps, net of tax			3,926						1,382
Change in cumulative translation adjustments			(13,157)						15,861
Other comprehensive gain (loss)			(15,344)						23,811
Total comprehensive income			$	30,479					$	79,159

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

			January 29, 2022						October 30, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	1,118,636					$	1,422,546
Short-term investments			460,368						181,483
Accounts receivable, net of allowance for credit losses of $9.4 million and $10.9 million as of January 29, 2022 and October 30, 2021, respectively.			795,247						884,958
Inventories, net			457,604						374,265
Prepaid expenses and other			332,259						325,654
Total current assets			3,164,114						3,188,906
Long-term investments			88,640						70,038
Equipment, building, furniture and fixtures, net			276,120						284,968
Operating right-of-use assets			43,340						44,285
Goodwill			322,822						311,645
Other intangible assets, net			101,026						65,314
Deferred tax asset, net			799,593						800,180
Other long-term assets			104,707						99,891
Total assets			$	4,900,362					$	4,865,227
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	310,107					$	356,176
Accrued liabilities and other short-term obligations			299,408						409,285
Deferred revenue			124,956						118,007
Operating lease liabilities			18,927						18,632
Current portion of long-term debt			6,930						6,930
Total current liabilities			760,328						909,030
Long-term deferred revenue			60,670						57,457
Other long-term obligations			159,942						166,803
Long-term operating lease liabilities			39,369						41,564
Long-term debt, net			1,065,263						670,355
Total liabilities			$	2,085,572					$	1,845,209
Commitments and contingencies (Note 21)
Stockholders’ equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding			—						—
Common stock – par value $0.01; 290,000,000 shares authorized; 152,990,723 and 154,858,981 shares issued and outstanding			1,530						1,549
Additional paid-in capital			6,567,474						6,803,162
Accumulated other comprehensive income (loss)			(14,905)						439
Accumulated deficit			(3,739,309)						(3,785,132)
Total stockholders’ equity			2,814,790						3,020,018
Total liabilities and stockholders’ equity			$	4,900,362					$	4,865,227

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

			Three Months Ended
			January 29,						January 30,
			2022						2021
Cash flows used in operating activities:
Net income			$	45,823					$	55,348
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements			23,653						23,188
Share-based compensation expense			24,297						18,964
Amortization of intangible assets			12,230						9,642
Deferred taxes			(766)						(905)
Provision for inventory excess and obsolescence			3,799						5,905
Provision for warranty			2,817						3,239
Other			(8,615)						4,277
Changes in assets and liabilities:
Accounts receivable			87,223						18,862
Inventories			(87,178)						(51,020)
Prepaid expenses and other			(14,134)						(13,835)
Operating right-of-use assets			4,120						4,103
Accounts payable, accruals and other obligations			(152,981)						(112,170)
Deferred revenue			10,417						31,917
Short- and long-term operating lease liabilities			(5,116)						(4,834)
Net cash used in operating activities			(54,411)						(7,319)
Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property			(25,804)						(20,868)
Purchase of available-for-sale securities			(350,465)						(71,756)
Proceeds from maturities of available-for-sale securities			50,000						51,266
Settlement of foreign currency forward contracts, net			1,346						2,357
Proceeds from sale of cost method equity investment			—						4,678
Acquisition of business, net of cash acquired			(56,036)						—
Net cash used in investing activities			(380,959)						(34,323)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of senior notes			400,000						—
Payment of long-term debt			—						(1,732)
Payment of debt issuance costs			(4,506)						—
Payment of finance lease obligations			(771)						(702)
Shares repurchased for tax withholdings on vesting of stock unit awards			(25,150)						(19,242)
Repurchases of common stock - repurchase program			(250,000)						(12,406)
Proceeds from issuance of common stock			15,146						13,447
Net cash provided by (used in) financing activities			134,719						(20,635)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(3,259)						2,879
Net decrease in cash, cash equivalents and restricted cash			(303,910)						(59,398)
Cash, cash equivalents and restricted cash at beginning of period			1,422,604						1,088,708
Cash, cash equivalents and restricted cash at end of period			$	1,118,694					$	1,029,310
Supplemental disclosure of cash flow information
Cash paid during the period for interest			$	7,670					$	7,566
Cash paid during the period for income taxes, net			$	6,112					$	8,798
Operating lease payments			$	5,480					$	5,387
Non-cash investing and financing activities
Purchase of equipment in accounts payable			$	2,972					$	5,935
Repurchase of common stock in accrued liabilities from repurchase program			$	—					$	800
Operating right-of-use assets subject to lease liability			$	3,376					$	555

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

			Common Stock Shares						Par Value						Additional Paid-in-Capital						Accumulated Other Comprehensive Income (Loss)						Accumulated Deficit						Total Stockholders’ Equity
Balance at October 30, 2021			154,858,981						$	1,549					$	6,803,162					$	439					$	(3,785,132)					$	3,020,018
Net income			—						—						—						—						45,823						45,823
Other comprehensive loss			—						—						—						(15,344)						—						(15,344)
Repurchase of common stock - repurchase program			(2,698,327)						(27)						(249,973)						—						—						(250,000)
Issuance of shares from employee equity plans			1,169,006						11						15,135						—						—						15,146
Share-based compensation expense			—						—						24,297						—						—						24,297
Shares repurchased for tax withholdings on vesting of stock unit awards			(338,937)						(3)						(25,147)						—						—						(25,150)
Balance at January 29, 2022			152,990,723						$	1,530					$	6,567,474					$	(14,905)					$	(3,739,309)					$	2,814,790

			Common Stock Shares						Par Value						Additional Paid-in-Capital						Accumulated Other Comprehensive Income (Loss)						Accumulated Deficit						Total Stockholders’ Equity
Balance at October 31, 2020			154,563,005						$	1,546					$	6,826,531					$	(35,358)					$	(4,283,122)					$	2,509,597
Net income			—						—						—						—						55,348						55,348
Other comprehensive income			—						—						—						23,811						—						23,811
Repurchase of common stock - repurchase program			(251,578)						(3)						(13,203)						—						—						(13,206)
Issuance of shares from employee equity plans			1,252,120						12						13,435						—						—						13,447
Share-based compensation expense			—						—						18,964						—						—						18,964
Shares repurchased for tax withholdings on vesting of stock unit awards			(375,602)						(3)						(19,239)						—						—						(19,242)
Effect of adoption of new accounting standard			—						—						—						—						(2,206)						(2,206)
Balance at January 30, 2021			155,187,945						$	1,552					$	6,826,488					$	(11,547)					$	(4,229,980)					$	2,586,513

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) INTERIM FINANCIAL STATEMENTS

The interim financial statements included herein for Ciena Corporation and its wholly owned subsidiaries (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires Ciena to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The inputs into certain of Ciena’s judgments, assumptions, and estimates reflect, among other things, the information available to Ciena regarding the economic implications of the COVID-19 pandemic, and expectations as to its impact on Ciena’s business. 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 Ciena’s estimates and actual results, Ciena’s consolidated financial statements will be affected. In addition, because the duration and severity of COVID-19 pandemic are uncertain, certain of these estimates could require further judgment or modification and therefore carry a higher degree of variability and volatility. As events continue to evolve, Ciena’s estimates may change materially in future periods.

In the opinion of management, the financial statements included in this report reflect all normal recurring adjustments that Ciena considers necessary for the fair statement of the results of operations of Ciena for the interim periods covered and of the financial position of Ciena at the date of the interim balance sheets. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations. The Condensed Consolidated Balance Sheet as of October 30, 2021 was derived from audited financial statements, but does not include all disclosures required by GAAP. However, Ciena believes that the disclosures are adequate to understand the information presented herein. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. These financial statements should be read in conjunction with Ciena’s audited consolidated financial statements and the notes thereto included in Ciena’s annual report on Form 10-K for fiscal 2021 (the “2021 Annual Report”).

Ciena has a 52 or 53-week fiscal year, with quarters ending on the Saturday nearest to the last day of January, April, July and October, respectively, of each year. Fiscal 2022 and 2021 are 52-week fiscal years.

(2) SIGNIFICANT ACCOUNTING POLICIES

Except for the changes in certain policies described below, there have been no material changes to Ciena’s significant accounting policies, compared to the accounting policies described in Note 1, Ciena Corporation and Significant Accounting Policies and Estimates, in Notes to Consolidated Financial Statements in Item 8 of Part II of the 2021 Annual Report.

Newly Issued Accounting Standards - Effective

In December 2019, the Financial Accounting Standards Board (the ”FASB”) issued Accounting Standards Update No. 2019-12 (“ASU 2019-12”), Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance. Most amendments within this standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. ASU 2019-12 is effective for Ciena beginning in the first quarter of fiscal year 2022. Ciena adopted ASU 2019-12 beginning in the first quarter of fiscal 2022 without any material impact on its financial position and results of operations.

In November 2021, the FASB issued ASU No. 2021-10 (“ASU 2021-10”), Government Assistance, to increase transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. Ciena elected to adopt ASU 2021-10 in the first quarter of fiscal 2022 without any material impact on its financial position and results of operations

In March 2020, the FASB issued ASU No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides temporary optional guidance on contract modifications and hedging accounting to ease the financial reporting burdens of the expected market transition from the London

Interbank Offered Rate (“LIBOR”) to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate activities. The new guidance was effective upon issuance and may be applied prospectively through December 31, 2022. Ciena adopted Topic 848 beginning in the first quarter of fiscal 2022 without any material impact on its financial position and results of operations.

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 is currently evaluating the impact of this accounting standard update on its condensed consolidated financial statements and related disclosures.

**(3)**REVENUE

Disaggregation of Revenue

Ciena’s disaggregated revenue represents similar groups that depict the nature, amount, and timing of revenue and cash flows for Ciena’s various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies may differ for each of its product lines, resulting in different economic risk profiles for each line.

The tables below set forth Ciena’s disaggregated revenue for the respective periods (in thousands):

			Quarter Ended January 29, 2022
			Networking Platforms						Platform Software and Services						Blue Planet Automation Software and Services						Global Services						Total
Product lines:
Converged Packet Optical			$	540,936					$	—					$	—					$	—					$	540,936
Routing and Switching			85,710						—						—						—						85,710
Platform Software and Services			—						72,917						—						—						72,917
Blue Planet Automation Software and Services			—						—						21,110						—						21,110
Maintenance Support and Training			—						—						—						72,491						72,491
Installation and Deployment			—						—						—						40,370						40,370
Consulting and Network Design			—						—						—						10,909						10,909
Total revenue by product line			$	626,646					$	72,917					$	21,110					$	123,770					$	844,443
Timing of revenue recognition:
Products and services at a point in time			$	626,646					$	29,682					$	8,774					$	8,491					673,593
Services transferred over time			—						43,235						12,336						115,279						170,850
Total revenue by timing of revenue recognition			$	626,646					$	72,917					$	21,110					$	123,770					$	844,443

			Quarter Ended January 30, 2021
			Networking Platforms						Platform Software and Services						Blue Planet Automation Software and Services						Global Services						Total
Product lines:
Converged Packet Optical			$	512,324					$	—					$	—					$	—					$	512,324
Routing and Switching			64,307						—						—						—						64,307
Platform Software and Services			—						49,839						—						—						49,839
Blue Planet Automation Software and Services			—						—						16,934						—						16,934
Maintenance Support and Training			—						—						—						67,630						67,630
Installation and Deployment			—						—						—						39,611						39,611
Consulting and Network Design			—						—						—						6,485						6,485
Total revenue by product line			$	576,631					$	49,839					$	16,934					$	113,726					$	757,130
Timing of revenue recognition:
Products and services at a point in time			$	576,631					$	16,062					$	5,173					$	1,857					$	599,723
Services transferred over time			—						33,777						11,761						111,869						157,407
Total revenue by timing of revenue recognition			$	576,631					$	49,839					$	16,934					$	113,726					$	757,130

Ciena reports its sales geographically using the following markets: (i) Americas; (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia Pacific, Japan and India (“APAC”). Americas includes activities in North America and South America. 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 based principally 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):

						Quarter Ended
						January 29,						January 30,
						2022						2021
Geographic distribution:
Americas						$	595,144					$	496,611
EMEA						150,785						155,418
APAC						98,514						105,101
Total revenue by geographic distribution						$	844,443					$	757,130

Ciena’s revenue includes $543.5 million and $439.4 million of United States revenue for the first quarter of fiscal 2022 and 2021, respectively. No other country accounted for 10% or more of total revenue for the periods presented above.

For the periods below, the only customer that accounted for at least 10% of Ciena’s revenue was as follows (in thousands):

			Quarter Ended
			January 29,						January 30,
			2022						2021
AT&T			$	110,876					n/a

n/a			Denotes revenue representing less than 10% of total revenue for the period

The customer identified above for the first quarter of fiscal 2022 purchased products and services from each of Ciena’s operating segments.

• Networking Platforms revenue reflects sales of Ciena’s Converged Packet Optical and Routing and Switching product lines.

• Converged Packet Optical - includes the 6500 Packet-Optical Platform, the Waveserver® stackable 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 sales of the Z-Series Packet-Optical Platform.

• Routing and Switching - includes the 3900 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, and the 8700 Packetwave Platform. This product line also includes the Vyatta virtual routing and switching products acquired from AT&T during the first quarter of fiscal 2022.

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 Condensed 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 provides analytics, data, and planning tools to assist customers in managing Ciena’s Networking Platforms products in their networks. Ciena’s platform software includes its Manage, Control and Plan (MCP) domain controller solution 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 Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

• Blue Planet® Automation Software and Services is a comprehensive, micro-services, standards-based open software suite, together with related services, that enables customers to implement large-scale software and IT-led operations support system (OSS) transformations by transforming legacy networks into “service ready” networks, accelerating the creation, delivery and lifecycle management of new, cloud-based services. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), inventory management (BPI), route optimization and analysis (ROA), network function virtualization orchestration (NFVO), 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 Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed 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 in which 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 Condensed 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 January 29, 2022						Balance at October 30, 2021
Accounts receivable, net						$	795,247					$	884,958
Contract assets for unbilled accounts receivable, net						$	117,003					$	101,355
Deferred revenue						$	185,626					$	175,464

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 Condensed Consolidated Balance Sheets. See Note 11 below.

Contract liabilities consist of deferred revenue and represent advanced payments against non-cancelable customer orders received prior to revenue recognition. Ciena recognized approximately $56.8 million and $46.4 million of revenue during the first three months of fiscal 2022 and 2021, respectively, that was included in the deferred revenue balance as of October 30, 2021 and October 31, 2020, respectively. Revenue recognized due to changes in transaction price from performance obligations satisfied or partially satisfied in previous periods was immaterial during the three months ended January 29, 2022 and January 30, 2021.

Capitalized Contract Acquisition Costs

Capitalized contract acquisition costs consist of deferred sales commissions, and were $29.6 million and $27.6 million as of January 29, 2022 and October 30, 2021, respectively. Capitalized contract acquisition costs were included in prepaid expenses and other and other long-term assets. The amortization expense associated with these costs was $7.0 million and $5.5 million during the first three months of fiscal 2022 and 2021, respectively, and was included in selling and marketing expense on the Condensed Consolidated Statement 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 January 29, 2022, the aggregate amount of RPO was $2.4 billion. As of January 29, 2022, Ciena expects approximately 89% of the RPO to be recognized as revenue within the next 12 months.

**(4)**BUSINESS COMBINATIONS

Vyatta Acquisition

On November 1, 2021, Ciena acquired AT&T’s Vyatta Software Technology (“Vyatta”), a provider of software-based virtual routing and switching technology for approximately $56.0 million in cash. This transaction has been accounted for as the acquisition of a business. AT&T is a customer of Ciena, see Note 3 above.

Ciena incurred approximately $1.4 million in acquisition-related costs associated with the acquisition of Vyatta, which were primarily incurred during the fourth quarter of fiscal 2021. 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 Condensed Consolidated Statement of Operations.

The following table summarizes the final purchase price allocation related to the acquisition based on the estimated fair value of the acquired assets and assumed liabilities (in thousands):

			Amount
Prepaid expenses and other			$	191
Equipment, furniture and fixtures			694
Customer relationships and contracts			15,800
Developed technology			32,300
Goodwill			11,521
Accrued liabilities			(4,470)
Total purchase consideration			$	56,036

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 Vyatta 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 the acquisition of Vyatta 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 of Vyatta since the acquisition date included in the Condensed Consolidated Statement of Operations for the reporting period are immaterial.

(5) RESTRUCTURING COSTS

Ciena has undertaken a number of restructuring activities intended to reduce expense and to 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 Condensed Consolidated Balance Sheets, for the three months ended January 29, 2022 (in thousands):

			Workforce reduction						Other restructuring activities						Total
Balance at October 30, 2021			$	781					$	—					$	781
Charges			410			(1)			2,999			(2)			3,409
Cash payments			(421)						(2,999)						(3,420)
Balance at January 29, 2022			$	770					$	—					$	770
Current restructuring liabilities			$	770					$	—					$	770

(1) Reflects employee costs associated with workforce reductions during the three months ended January 29, 2022 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.

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 Condensed Consolidated Balance Sheets for the three months ended January 30, 2021 (in thousands):

			Workforce reduction						Other restructuring activities						Total
Balance at October 31, 2020			2,915						$	—					$	2,915
Charges			1,990			(1)			3,877			(2)			5,867
Cash payments			(2,994)						(3,877)						(6,871)
Balance at January 30, 2021			$	1,911					$	—					$	1,911
Current restructuring liabilities			$	1,911					$	—					$	1,911

(1) Reflects employee costs associated with workforce reductions during the three months ended January 30, 2021 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.

(2) Primarily represents variable costs and imputed interest expense related to restructured real estate facilities and the redesign of certain business processes.

(6) INTEREST AND OTHER INCOME (LOSS), NET

The components of interest and other income (loss), net, are as follows (in thousands):

			Quarter Ended
			January 29,						January 30,
			2022						2021
Interest income			$	754					$	534
Gains (losses) on non-hedge designated foreign currency forward contracts			(4,259)						4,530
Foreign currency exchange gains (losses)			4,766						(6,918)
Unrealized gain on cost method equity investment			4,120						—
Other			(1,694)						733
Interest and other income (loss), net			$	3,686					$	(1,121)

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 local currencies as their functional currencies. Ciena recorded $4.8 million in foreign currency exchange rate gains for the first three months of fiscal 2022 and $6.9 million in foreign currency exchange rate losses during the first three months of fiscal 2021, as a result of monetary assets and liabilities that were transacted in a currency other than Ciena’s functional currency. The related remeasurement adjustments were recorded in interest and other income (loss), net, on the Condensed Consolidated Statements of Operations. From time to time, Ciena uses foreign currency forwards to hedge this type of balance sheet exposure. 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, on the Condensed Consolidated Statements of Operations. During the first three months of fiscal 2022, Ciena recorded losses of $4.3 million and during the first three months of fiscal 2021, Ciena recorded gains of $4.5 million from non-hedge designated foreign currency forward contracts. During the first quarter of fiscal 2021, Ciena recorded an unrealized gain of $4.1 million on its cost method equity investment.

(7) INCOME TAXES

The effective tax rate for the quarter ended January 29, 2022 was lower than the effective tax rate for the quarter ended January 30, 2021, primarily due to an increased tax benefit associated with stock compensation.

Ciena’s 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. Ciena continues to monitor these items and will adopt strategies to address their impact as appropriate.

(8) SHORT-TERM AND LONG-TERM INVESTMENTS

As of the dates indicated, investments are comprised of the following (in thousands):

			January 29, 2022
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
U.S. government obligations:
Included in short-term investments			$	460,683					$	—					$	(315)					$	460,368
Included in long-term investments			89,527						—						(887)						88,640
			$	550,210					$	—					$	(1,202)					$	549,008

			October 30, 2021
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
U.S. government obligations:
Included in short-term investments			$	181,488					$	5					$	(10)					$	181,483
Included in long-term investments			70,225						—						(187)						70,038
			$	251,713					$	5					$	(197)					$	251,521

The following table summarizes the final legal maturities of debt investments at January 29, 2022 (in thousands):

			Amortized Cost						Estimated Fair Value
Less than one year			$	460,683					$	460,368
Due in 1-2 years			89,527						88,640
			$	550,210					$	549,008

(9) FAIR VALUE MEASUREMENTS

As of the date indicated, the following table summarizes the assets and liabilities that are recorded at fair value on a recurring basis (in thousands):

			January 29, 2022
			Level 1						Level 2						Level 3						Total
Assets:
Money market funds			$	711,027					$	—					$	—					$	711,027
Bond mutual fund			100,456						—						—						100,456
Time deposits			30,046						—						—						30,046
Deferred compensation plan assets			13,847						—						—						13,847
U.S. government obligations			—						648,981						—						648,981
Foreign currency forward contracts			—						6,885						—						6,885
Total assets measured at fair value			$	855,376					$	655,866					$	—					$	1,511,242
Liabilities:
Foreign currency forward contracts			$	—					$	3,012					$	—					$	3,012
Forward starting interest rate swaps			—						10,784						—						10,784
Total liabilities measured at fair value			$	—					$	13,796					$	—					$	13,796

			October 30, 2021
			Level 1						Level 2						Level 3						Total
Assets:
Money market funds			$	1,120,851					$	—					$	—					$	1,120,851
Bond mutual fund			75,425						—						—						75,425
Time deposits			30,036						—						—						30,036
Deferred compensation plan assets			12,968						—						—						12,968
U.S. government obligations			—						251,521						—						251,521
Foreign currency forward contracts			—						14,935						—						14,935
Total assets measured at fair value			$	1,239,280					$	266,456					$	—					$	1,505,736
Liabilities:
Foreign currency forward contracts			$	—					$	716					$	—					$	716
Forward starting interest rate swaps			—						15,928						—						15,928
Total liabilities measured at fair value			$	—					$	16,644					$	—					$	16,644

As of the date indicated, the assets and liabilities above are presented on Ciena’s Condensed Consolidated Balance Sheets as follows (in thousands):

			January 29, 2022
			Level 1						Level 2						Level 3						Total
Assets:
Cash equivalents			$	841,529					$	99,973					$	—					$	941,502
Short-term investments			—						460,368						—						460,368
Prepaid expenses and other			—						6,885						—						6,885
Long-term investments			—						88,640						—						88,640
Other long-term assets			13,847						—						—						13,847
Total assets measured at fair value			$	855,376					$	655,866					$	—					$	1,511,242
Liabilities:
Accrued liabilities and other short-term obligations			$	—					$	3,012					$	—					$	3,012
Other long-term obligations			—						10,784						—						10,784
Total liabilities measured at fair value			$	—					$	13,796					$	—					$	13,796

			October 30, 2021
			Level 1						Level 2						Level 3						Total
Assets:
Cash equivalents			$	1,226,312					$	—					$	—					$	1,226,312
Short-term investments			—						181,483						—						181,483
Prepaid expenses and other			—						14,935						—						14,935
Long-term investments			—						70,038						—						70,038
Other long-term assets			12,968						—						—						12,968
Total assets measured at fair value			$	1,239,280					$	266,456					$	—					$	1,505,736
Liabilities:
Accrued liabilities and other short-term obligations			$	—					$	716					$	—					$	716
Other long-term obligations			—						15,928						—						15,928
Total liabilities measured at fair value			$	—					$	16,644					$	—					$	16,644

Ciena did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

(10) INVENTORIES

As of the dates indicated, inventories are comprised of the following (in thousands):

			January 29, 2022						October 30, 2021
Raw materials			$	295,866					$	175,399
Work-in-process			10,304						10,260
Finished goods			149,931						180,800
Deferred cost of goods sold			36,925						44,765
Gross inventories			493,026						411,224
Reserve for inventory excess and obsolescence			(35,422)						(36,959)
Inventories, net			$	457,604					$	374,265

The increase in raw materials inventory is related to the steps Ciena is taking to mitigate the impact of current supply chain constraints and the global market shortage of semiconductor parts. 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 the first three months of fiscal 2022, Ciena recorded a provision for inventory excess and obsolescence of $3.8 million, 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 disposal activities.

(11) PREPAID EXPENSES AND OTHER

As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands):

			January 29, 2022						October 30, 2021
Contract assets for unbilled accounts receivable, net			$	117,003					$	101,355
Prepaid VAT and other taxes			66,871						77,388
Prepaid expenses			64,288						62,189
Product demonstration equipment, net			40,638						29,362
Capitalized contract acquisition costs			23,950						21,753
Other non-trade receivables			11,951						18,408
Derivative assets			6,885						14,935
Deferred deployment expense			673						264
			$	332,259					$	325,654

Depreciation of product demonstration equipment was $2.4 million during the first three months of fiscal 2022 and $2.6 million during the first three months of fiscal 2021.

For further discussion on contract assets and capitalized contract acquisition costs, see Note 3 above.

(12) INTANGIBLE ASSETS

As of the dates indicated, intangible assets are comprised of the following (in thousands):

			January 29, 2022																		October 30, 2021
			Gross Intangible						Accumulated Amortization						Net Intangible						Gross Intangible						Accumulated Amortization						Net Intangible
Developed technology			$	428,027					$	(367,304)					$	60,723					$	395,726					$	(359,828)					$	35,898
Patents and licenses			7,815						(3,544)						4,271						7,815						(3,321)						4,494
Customer relationships, covenants not to compete, outstanding purchase orders and contracts			390,840						(354,808)						36,032						375,329						(350,407)						24,922
Total intangible assets			$	826,682					$	(725,656)					$	101,026					$	778,870					$	(713,556)					$	65,314

The aggregate amortization expense of intangible assets was $12.2 million during the first three months of fiscal 2022 and $9.6 million during the first three months of fiscal 2021. Expected future amortization of intangible assets for the fiscal years indicated is as follows (in thousands):

Fiscal Year			Amount
2022			$	32,026
2023			29,444
2024			18,493
2025			13,287
2026			7,067
Thereafter			709
			$	101,026

(13) OTHER BALANCE SHEET DETAILS

As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands):

			January 29, 2022						October 30, 2021
Compensation, payroll related tax and benefits (1)			$	106,365					$	201,119
Warranty			46,173						48,019
Vacation			30,099						31,200
Income taxes payable			8,820						13,577
Finance lease liabilities			3,711						3,620
Interest payable			1,067						598
Other			103,173						111,152
			$	299,408					$	409,285

(1) Reduction is primarily due to the timing of bonus payments to employees under Ciena’s annual cash incentive compensation plan.

The following table summarizes the activity in Ciena’s accrued warranty for the periods indicated (in thousands):

						Beginning Balance												Current Period Provisions						Settlements						Ending Balance
Three Months Ended January 30, 2021						$	49,868											3,239						(4,923)						$	48,184
Three Months Ended January 29, 2022						$	48,019											2,817						(4,663)						$	46,173

As of the dates indicated, deferred revenue is comprised of the following (in thousands):

			January 29, 2022						October 30, 2021
Products			$	15,438					$	12,859
Services			170,188						162,605
Total deferred revenue			185,626						175,464
Less current portion			(124,956)						(118,007)
Long-term deferred revenue			$	60,670					$	57,457

(14) DERIVATIVE INSTRUMENTS

Foreign Currency Derivatives

Ciena conducts business globally in numerous currencies, and thus is exposed to adverse foreign currency exchange rate changes. To limit this exposure, Ciena enters into foreign currency contracts. Ciena does not enter into such contracts for speculative purposes.

As of January 29, 2022 and October 30, 2021, Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce variability principally related to research and development activities. The notional amount of these contracts was approximately $260.4 million and $288.6 million as of January 29, 2022 and October 30, 2021, respectively. These foreign exchange contracts have maturities of 24 months or less and have been designated as cash flow hedges.

As of January 29, 2022 and October 30, 2021, 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 $240.0 million and $296.1 million as of January 29, 2022 and October 30, 2021, 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 LIBOR interest on its term loan borrowings (see Note 15 below) and has hedged such risk by entering into floating to fixed interest rate swap arrangements (“interest rate swaps”). The interest rate swaps fix the LIBOR rate for $350.0 million of the 2025 Term Loan (as defined in Note 15 below) at 2.957% through September 2023. The total notional amount of interest rate swaps in effect was $350.0 million as of January 29, 2022 and October 30, 2021.

Ciena expects the variable rate payments to be received under the terms of the interest rate swaps to offset exactly the forecasted variable rate payments on the equivalent notional amounts of the 2025 Term Loan. These derivative contracts have been designated as cash flow hedges.

Other information regarding Ciena’s derivatives is immaterial for separate financial statement presentation. See Note 6 and Note 9 above.

(15) SHORT-TERM AND LONG-TERM DEBT

2025 Term Loan

On January 23, 2020, Ciena entered into a Refinancing Amendment to Credit Agreement pursuant to which Ciena refinanced the entire outstanding amount of its then existing senior secured term loan and incurred a new senior secured term loan in an aggregate principal amount of $693.0 million and maturing on September 28, 2025 (the “2025 Term Loan”).

The net carrying value of Ciena’s 2025 Term Loan was comprised of the following for the periods indicated (in thousands):

						January 29, 2022																								October 30, 2021
						Principal Balance						Unamortized Discount						Deferred Debt Issuance Costs						Net Carrying Value						Net Carrying Value
2025 Term Loan						$	680,873					$	(1,170)					$	(2,188)					$	677,515					$	677,285

Deferred debt issuance costs that were deducted from the carrying amounts of the 2025 Term Loan totaled $2.2 million as of January 29, 2022 and $2.3 million at October 30, 2021. Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate, through the maturity of the 2025 Term Loan. The amortization of deferred debt issuance costs for the 2025 Term Loan is included in interest expense, and was $0.2 million during the first three months of each of fiscal 2022 and fiscal 2021. The carrying value of the 2025 Term Loan listed above is also net of any unamortized debt discounts.

As of January 29, 2022, the estimated fair value of the 2025 Term Loan was $681.7 million. Ciena’s 2025 Term Loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2025 Term Loan using a market approach based on observable inputs, such as current market transactions involving comparable securities.

2030 Notes

On January 18, 2022, Ciena entered into an Indenture among Ciena, as issuer, certain domestic subsidiaries of Ciena, as guarantors (collectively, the “Guarantors”), and U.S. Bank National Association, as trustee (the “Trustee”), pursuant to which Ciena issued $400.0 million in aggregate principal amount of 4.00% senior notes due 2030 (the “2030 Notes”).

Ciena’s obligations under the 2030 Notes and the Indenture are irrevocably and unconditionally guaranteed, jointly and severally, on an unsecured senior basis by each of its domestic subsidiaries that is a borrower under or guarantor with respect to the 2025 Term Loan and Ciena’s senior secured asset-based revolving credit facility (the “ABL Credit Facility”).

The net proceeds from the sale of the 2030 Notes, after deducting costs, were approximately $395.5 million. Ciena intends to use the net proceeds from the Offering for general corporate purposes.

The 2030 Notes bear interest at a rate of 4.00% per annum and mature on January 31, 2030. Interest is payable on the 2030 Notes in arrears on January 31 and July 31 of each year, commencing on July 31, 2022.

The 2030 Notes and related subsidiary guarantees are the general unsubordinated unsecured senior obligations of Ciena and the Guarantors, respectively, and (i) rank equally in right of payment with all other existing and future senior indebtedness of Ciena and the Guarantors; (ii) are effectively subordinated to all existing and future secured indebtedness of Ciena and the Guarantors, including indebtedness under the 2025 Term Loan and the ABL Credit Facility, to the extent of the value of the assets securing such indebtedness; (iii) are structurally subordinated to all existing and future obligations, including indebtedness, of Ciena’s subsidiaries that do not guarantee the 2030 Notes; and (iv) are senior in right of payment to all of Ciena’s existing and future unsecured indebtedness that is, by its terms, expressly subordinated in right of payment to the 2030 Notes.

The Indenture contains restrictive covenants that limit the ability of Ciena and the Restricted Subsidiaries (as defined in the Indenture) or the Guarantors, as applicable, to, among other things, create certain liens or consolidate or merge with or into, or sell, lease, transfer, convey or otherwise dispose of all or substantially all the assets of Ciena or Ciena and its subsidiaries taken as a whole. These covenants are subject to a number of important exceptions and qualifications as set forth in the Indenture.

The Indenture provides for events of default (subject in certain cases to customary grace and cure periods) that include, among others, nonpayment of principal or interest when due, breach of covenants or other agreements in the Indenture, defaults in payment of certain other indebtedness and certain events of bankruptcy or insolvency. Generally, if an event of default occurs, the Trustee or the holders of at least 25% in principal amount of the outstanding 2030 Notes may declare the principal amount of and accrued but unpaid interest on all of the 2030 Notes to be due and payable immediately, provided that such amounts become due and payable without any further action or notice in the case of an event of bankruptcy or insolvency that constitutes an event of default.

Prior to January 31, 2025, Ciena may redeem the 2030 Notes, in whole or part, at a price equal to 100% of the principal amount thereof, plus a “make-whole” of 102% of the principal amount of the notes to be redeemed, and any accrued and unpaid interest. On or after January 31, 2025, Ciena may redeem the 2030 Notes, in whole or part, at the redemption prices set forth in the Indenture and form of the 2030 Notes, plus any accrued and unpaid interest. In addition, until January 31, 2025, Ciena may redeem up to 40% of the aggregate principal amount of the 2030 Notes with the net cash proceeds of certain equity offerings, as described in the Indenture, at a redemption price equal to 104% of the principal amount of the 2030 Notes to be redeemed, plus any accrued and unpaid interest. If a change of control triggering event occurs, as described in the Indenture, Ciena must offer to repurchase all of the 2030 Notes (unless otherwise redeemed) at a price equal to 101% of the principal amount thereof, plus any accrued and unpaid interest.

The net carrying value of the 2030 Notes was comprised of the following for the periods indicated (in thousands):

						January 29, 2022
						Principal Balance						Deferred Debt Issuance Costs						Net Carrying Value
2030 Senior Notes 4.00% fixed-rate						$	400,000					$	(5,322)					$	394,678

Deferred debt issuance costs that were deducted from the carrying amounts of the 2030 Notes totaled $5.3 million as of January 29, 2022. Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate, through the maturity of the 2030 Notes. The amortization of deferred debt issuance costs for the 2030 Notes is included in interest expense, and was minimal during the first three months of fiscal 2022.

As of January 29, 2022, the estimated fair value of the 2030 Notes was $395.5 million. Ciena’s 2030 Notes are categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2030 Notes using a market approach based on observable inputs, such as current market transactions involving comparable securities.

(16) ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes in accumulated balances of other comprehensive income (“AOCI”), net of tax, for the three months ended January 29, 2022 (in thousands):

			Unrealized Gain (Loss) on																		Cumulative
			Available-for-sale Securities						Foreign Currency Forward Contracts						Forward Starting Interest Rate Swaps						Foreign Currency Translation Adjustment						Total
Balance at October 30, 2021			$	(164)					$	6,216					$	(12,179)					$	6,566					$	439
Other comprehensive gain (loss) before reclassifications			(774)						(4,477)						1,364						(13,157)						(17,044)
Amounts reclassified from AOCI			—						(862)						2,562						—						1,700
Balance at January 29, 2022			$	(938)					$	877					$	(8,253)					$	(6,591)					$	(14,905)

The following table summarizes the changes in AOCI, net of tax, for the three months ended January 30, 2021 (in thousands):

			Unrealized Gain (Loss) on																		Cumulative
			Available-for-sale Securities						Foreign Currency Forward Contracts						Forward Starting Interest Rate Swaps						Foreign Currency Translation Adjustment						Total
Balance at October 31, 2020			$	45					$	(219)					$	(21,535)					$	(13,649)					$	(35,358)
Other comprehensive loss before reclassifications			(49)						7,848						(659)						15,861						23,001
Amounts reclassified from AOCI			—						(1,231)						2,041						—						810
Balance at January 30, 2021			$	(4)					$	6,398					$	(20,153)					$	2,212					$	(11,547)

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 Condensed Consolidated Statements of Operations. All amounts reclassified from AOCI, related to settlement (gains) losses on forward starting interest rate swaps designated as cash flow hedges, impacted interest and other income (loss), net, on the Condensed Consolidated Statements of Operations.

(17) EARNINGS PER SHARE CALCULATION

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 that 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):

			Quarter Ended
			January 29,						January 30,
			2022						2021
Net income			$	45,823					$	55,348
Basic weighted average shares outstanding			154,151						155,174
Effect of dilutive potential common shares			1,656						1,409
Diluted weighted average shares			155,807						156,583
Basic EPS			$	0.30					$	0.36
Diluted EPS			$	0.29					$	0.35
Antidilutive employee share-based awards, excluded			761						135

(18) STOCKHOLDERS’ EQUITY

Stock Repurchase Program and Accelerated Share Repurchase Agreement

On December 9, 2021, Ciena announced that its Board of Directors authorized 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 an initial share delivery of approximately 2.7 million shares of its common stock from Goldman, representing approximately 80% of the expected share repurchases under the ASR Agreement, based on the closing price of Ciena’s common stock of $74.12 on December 13, 2021. Shares repurchased pursuant to the ASR Agreement were immediately retired upon receipt. The purchase price for the shares of Ciena’s stock repurchased is reflected as a reduction of common stock and additional paid-in capital. Repurchased common stock is reflected as a reduction of stockholders’ equity. The repurchases contemplated by the ASR Agreement were completed on February 15, 2022. See Note 22 below for information relating to the settlement of the ASR Agreement following the end of Ciena’s first quarter of fiscal 2022.

Stock Repurchases Related to Stock Unit Award Tax Withholdings

Ciena repurchases shares of its common stock to satisfy employee tax withholding obligations due on vesting of stock unit awards. The purchase price of $25.2 million for the shares of Ciena’s stock repurchased during the first three months of fiscal 2022 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.

(19) SHARE-BASED COMPENSATION EXPENSE

The following table summarizes share-based compensation expense for the periods indicated (in thousands):

			Quarter Ended
			January 29,						January 30,
			2022						2021
Products			$	900					$	953
Services			1,584						1,205
Share-based compensation expense included in cost of goods sold			2,484						2,158
Research and development			6,830						4,794
Selling and marketing			7,060						5,816
General and administrative			7,912						6,358
Share-based compensation expense included in operating expense			21,802						16,968
Share-based compensation expense capitalized in inventory, net			11						(162)
Total share-based compensation expense			$	24,297					$	18,964

As of January 29, 2022, total unrecognized share-based compensation expense was approximately $237.6 million, which relates to unvested stock unit awards and is expected to be recognized over a weighted-average period of 1.74 years.

(20) SEGMENTS 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, 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 January 29, 2022, equipment, building, furniture and fixtures, net, totaled $276.1 million, and operating ROU assets totaled $43.3 million both of which support asset groups within Ciena’s four operating segments and unallocated selling and general and administrative activities. As of January 29, 2022, finite-lived intangible assets, goodwill and maintenance spares are assigned to asset groups within the following segments (in thousands):

			Networking Platforms						Platform Software and Services						Blue Planet Automation Software and Services						Global Services						Total
Other intangible assets, net			$	51,317					$	—					$	49,709					$	—					$	101,026
Goodwill			$	77,582					$	156,191					$	89,049					$	—					$	322,822
Maintenance spares, net			$	—					$	—					$	—					$	55,464					$	55,464

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; and provision for income taxes.

The table below sets forth Ciena’s segment profit (loss) and the reconciliation to net income for the periods indicated (in thousands):

			Quarter Ended
			January 29,						January 30,
			2022						2021
Segment profit (loss):
Networking Platforms			$	134,125					$	156,431
Platform Software and Services			49,496						27,660
Blue Planet Automation Software and Services			(1,034)						(2,434)
Global Services			53,191						43,493
Total segment profit			235,778						225,150
Less: Non-performance operating expenses
Selling and marketing			118,881						97,278
General and administrative			44,498						39,993
Significant asset impairments and restructuring costs			3,409						5,867
Amortization of intangible assets			8,918						5,910
Acquisition and integration costs			68						307
Add: Other non-performance financial items
Interest expense and other income (loss), net			(4,962)						(8,481)
Less: Provision for income taxes			9,219						11,966
Net income			$	45,823					$	55,348

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):

			January 29, 2022						October 30, 2021
Canada			$	233,644					$	240,968
United States			47,504						50,744
Other International			38,312						37,541
Total			$	319,460					$	329,253

(21) COMMITMENTS AND CONTINGENCIES

Canadian Grant

During fiscal 2018, Ciena entered into agreements related to the Evolution of Networking Services through a Corridor in Quebec and Ontario for Research and Innovation (“ENCQOR”) project with the Canadian federal government, the government of the province of Ontario and the government of the province of Quebec to develop a 5G technology corridor between Quebec and Ontario to promote research and development, small business enterprises and entrepreneurs in Canada. Under these agreements, Ciena can receive up to an aggregate CAD$57.6 million (approximately $45.1 million) in reimbursement from the three Canadian government entities for eligible costs over a period commencing on February 20, 2017 and ending on March 31, 2022. Ciena anticipates receiving recurring disbursements over this period. Amounts received under the agreements are subject to recoupment in the event that Ciena fails to achieve certain minimum investment, employment and project milestones. 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 Condensed Consolidated Statement of Operations to which the grant activity relates. As of January 29, 2022, Ciena has recorded CAD$54.8 million (approximately $42.9 million) in cumulative benefits as a reduction in research and development expense of which CAD$3.9 million ($3.0 million) was recorded in the first three months of fiscal 2022. As of January 29, 2022, amounts receivable from this grant were CAD$2.9 million ($2.2 million) included in prepaid expenses and other in the Condensed Consolidated Balance Sheets.

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.

(22) SUBSEQUENT EVENTS

Stock Repurchase Program and Accelerated Share Repurchase Agreement

On February 15, 2022, Ciena received delivery of the remaining 884,531 shares of common stock repurchased under the ASR Agreement, for a total delivery of approximately 3.6 million shares, calculated based on the average of the daily volume-weighted average prices of Ciena’s common stock of $69.78 for the period December 14, 2021 to February 11, 2022, less a discount, which completed the repurchases contemplated by the ASR Agreement.