Ciena 10-Q 2024-01-27

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

For the quarterly period ended January 27, 2024

OR

For the transition period from to

Commission File Number: 001-36250

Ciena Corporation

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

7035 Ridge Road, Hanover, MD

(Address of principal executive offices)

23-2725311

(I.R.S. Employer Identification No.)

21076

(Zip Code)

(410) 694-5700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

CIENA CORPORATION

INDEX

FORM 10-Q

PART I – FINANCIAL INFORMATION

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

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

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

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)

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Cautionary Note Regarding Forward-Looking Statements

This report contains statements that discuss future events or expectations, projections of results of operations or financial condition, changes in the markets for our products and services, trends in our business, operational matters including the expansion of manufacturing capacity and accumulation of inventory, business prospects and strategies and other “forward-looking” information. Forward-looking statements may appear throughout this report, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” In some cases, you can identify “forward-looking statements” by words like “may,” “will,” “would,” “can,” “should,” “could,” “expects,” “future,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “projects,” “targets,” “prepare,” or “continue” or the negative of those words and other comparable words. You should be aware that the forward-looking statements contained in this report are based on our current views and assumptions, and are subject to known and unknown risks, uncertainties, and other factors that may cause actual events or results to differ materially.

For a discussion identifying some of the important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in this report. For a more complete understanding of the risks associated with an investment in our securities, you should review these factors and the rest of this report in combination with the more detailed description of our business and management’s discussion and analysis of financial condition and risk factors described in our Annual Report on Form 10-K for the fiscal year ended October 28, 2023, which we filed with the Securities and Exchange Commission (the “SEC”) on December 15, 2023 (our “2023 Annual Report”). However, we operate in a very competitive and dynamic environment and new risks and uncertainties emerge, are identified or become apparent from time to time and therefore may not be identified in this report. We cannot predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. You should be aware that the forward-looking statements contained in this report are based on our current views and assumptions. We undertake no obligation to revise or to update any forward-looking statements made in this report to reflect events or circumstances after the date hereof or to reflect new information or the occurrence of unanticipated events, except as required by law. The forward-looking statements in this report are intended to be subject to protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Unless the context requires otherwise, references in this report to “Ciena,” the “Company,” “we,” “us,” and “our” refer to Ciena Corporation and its consolidated subsidiaries.

Overview

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide an understanding of Ciena’s financial condition, results of operations, and cash flows, and should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes thereto included in Item 1 of Part I of this report and in Item 8 of Part II of our 2023 Annual Report.

We are 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. We provide hardware, software, and services that support the delivery of video, data, and voice traffic over core, metro, aggregation, and

access communications networks. Our solutions are used globally by communications service providers, cable and multiservice operators, cloud providers, submarine network operators, governments, and enterprises across multiple industry verticals. Our portfolio is designed to enable the Adaptive Network, which is our 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 analytics and intelligence. Our solutions include Networking Platforms, including our Optical Networking and Routing and Switching portfolios, 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. To complement our Networking Platforms, we offer Platform Software, which includes our Navigator Network Control SuiteTM (“Navigator NCS”), which we previously referred to as Manage, Control, and Plan (MCP), applications that deliver advanced multi-layer domain control and operations. Through our Blue Planet Software, we also enable complete service lifecycle management automation with productized operational support systems (OSS), which include inventory, orchestration and assurance solutions that help our customers to achieve closed loop automation across multi-vendor and multi-domain environments.

Order Volumes

From the second quarter of fiscal 2021 through the third quarter of fiscal 2022, we received an unprecedented volume of orders for our products and services, which significantly exceeded our revenue and historical order volumes. We believe some portion of these large orders reflected customer acceleration of future orders due to a constrained supply environment, as well as orders which were delayed due to the dynamics of the COVID-19 pandemic. Our order volumes began to moderate in the fourth quarter of fiscal 2022, and we experienced order levels below revenue during fiscal 2023 and the first quarter of fiscal 2024, particularly from our communications service provider customers. Our expected return to more typical order patterns with our service provider customers in fiscal 2024 is taking longer than anticipated. We believe this is, in part, due to service providers in North America working through relatively high levels of inventory previously acquired, which has been made more difficult due to challenges installing and deploying equipment, including site readiness and access to fiber or other resources. In addition, in certain international geographies, we believe that caution driven by macroecononic concerns and market-specific issues are contributing to lower-than-expected order volumes from service providers. We expect these dynamics with our service provider customers to persist for the next few quarters. Notwithstanding these near-term impacts, we continue to believe that certain trends and shifts in business and consumer behaviors, including enterprise and consumer cloud network adoption, 5G, high-definition video, generative AI, and network operator focus on resilience and automation, represent positive, long-term drivers of bandwidth demand and long-term opportunities for our business.

Backlog and Order Delivery Timing

Historically, a meaningful portion of our quarterly revenue was generated from customer orders received during that same quarter (which we refer to as “book to revenue”) and was therefore less predictable and subject to fluctuation. As a result of elevated order volumes during portions of fiscal 2021 and fiscal 2022, however, our backlog grew from $1.2 billion at the end of fiscal 2020 to $4.2 billion at the end of fiscal 2022. Accordingly, our revenue in recent fiscal years has been more significantly impacted by factors including availability of supply and customer delivery deferrals, as we converted our existing backlog to revenue. As supply chain conditions have improved, and we have been able to increase shipment volumes and reduce lead times, our backlog decreased to $2.2 billion as of the end of the first quarter of fiscal 2024. We expect our backlog to continue to reduce during fiscal 2024 as supply chain conditions continue to improve and customers place fewer advanced orders. As that happens, we expect that our reliance upon securing quarterly book to revenue orders will grow, and that increased orders and a return to a more typical composition of our quarterly revenue will be a critical element of any future revenue growth.

The timing and degree to which we fulfill our backlog will have a significant impact on our revenue and can be affected by factors outside of our control, including customer readiness and willingness to receive shipment against existing orders. During fiscal 2023 and the first quarter of fiscal 2024, certain customers, including communications service providers and cable and multiservice operators in North America, that had earlier placed significant advanced orders, rescheduled deliveries for a portion of such orders. We believe that this was the result of a number of factors, including the rapid improvement in our delivery lead times as supply chain conditions improved and their capital expenditure and inventory levels. Accordingly, our results for a particular period can be difficult to predict. As a result of these and other factors, the timing of our fulfillment of backlog could cause some volatility in our results of operations and our backlog should not necessarily be viewed as an accurate indicator of revenue for any particular period.

For additional information regarding our business, industry, market opportunity, competitive landscape, and strategy, see our 2023 Annual Report.

Consolidated Results of Operations

Operating Segments

Our results of operations are presented based on the following operating segments: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. See Note 3 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Revenue

Revenue and Currency Fluctuations

As a result of the reduction in orders relative to revenue described under “Overview” above, our revenue declined by 1.8% in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. In addition, during the first quarter of fiscal 2024, approximately 14.3% of our revenue was non-U.S. Dollar-denominated primarily including sales in Euros, Canadian Dollars, and British Pounds. During the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023, the U.S. Dollar primarily weakened against these currencies. Consequently, our revenue reported in U.S. Dollars slightly increased by approximately $3.4 million, or 0.3%, as compared to the first quarter of fiscal 2023, as a result of foreign exchange rates.

Operating Segment Revenue

The table below sets forth the changes in our operating segment revenue for the periods indicated (in thousands, except percentage data):

• Denotes % change from fiscal 2023 to fiscal 2024

** Denotes % of total revenue

Quarter ended January 27, 2024 as compared to the quarter ended January 28, 2023

• Networking Platforms segment revenue** decreased by $47.9 million, reflecting product line sales decreases of $39.8 million of our Optical Networking products and $8.1 million of our Routing and Switching products.

◦Optical Networking sales decreased, primarily reflecting a sales decrease of $178.6 million of our 6500 Packet-Optical Platform, primarily to communications service providers. This sales decrease was partially offset by sales increases of $73.5 million of our 6500 Reconfigurable Line System (RLS) products and $64.5 million of our Waveserver® modular interconnect system, both primarily to cloud providers.

• Routing and Switching sales decreased, primarily reflecting a sales decrease of $29.8 million of our virtualization software primarily to communications service providers, partially offset by sales increases of $11.0 million of our 3000 and 5000 families of service delivery and aggregation switches, primarily to cable and multiservice operators, $5.6 million of our platform independent software and $5.3 million of our 8100 Coherent IP networking platforms, both primarily to communications service providers.

• Platform Software and Services segment revenue** increased by $16.3 million, reflecting sales increases of $8.8 million of our software platforms and $7.5 million in our software maintenance services, both primarily for our Navigator NCS software platform.

• Blue Planet Automation Software and Services** segment revenue decreased by $1.5 million reflecting a sales decrease of $2.8 million in software platforms, partially offset by a sales increase of $1.3 million in professional software services, both primarily to communications service providers.

• Global Services** segment revenue increased by $14.3 million, primarily reflecting sales increases of $8.1 million of our installation and deployment services and $6.2 million of our maintenance support and training.

Revenue by Geographic Region

Our operating segments engage in business and operations across three geographic regions: the United States, Canada, the Caribbean and Latin America (“Americas”); Europe, Middle East and Africa (“EMEA”); and Asia Pacific, Japan and India (“APAC”). The geographic distribution of our revenue can fluctuate significantly from period to period, and the timing of revenue recognition for large network projects, particularly outside of the United States, can result in large variations in geographic revenue results in any particular period. The decrease in our Americas region revenue for the quarter ended January 27, 2024 was primarily driven by decreased sales in Canada and the United States. The decrease in our APAC region revenue for the quarter ended January 27, 2024 was primarily driven by decreased sales in India. The increase in our EMEA region revenue for the quarter ended January 27, 2024 was primarily driven by increased sales in the Netherlands.

The following table reflects our geographic distribution of revenue, principally based on the relevant location for our delivery of products and performance of services. The table sets forth the changes in geographic distribution of revenue for the periods indicated (in thousands, except percentage data):

• Denotes % change from fiscal 2023 to fiscal 2024

** Denotes % of total revenue

Quarter ended January 27, 2024 as compared to the quarter ended January 28, 2023

• Americas revenue decreased by $46.9 million, primarily reflecting sales decreases of $59.7 million within our Networking Platforms segment and $1.4 million within our Blue Planet Automation Software and Services segment,

partially offset by sales increases of $8.8 million within our Platform Software and Services segment and $5.3 million within our Global Services segment. The decrease within our Networking Platforms segment reflects product line sales decreases of $42.3 million of our Optical Networking products and $17.4 million of our Routing and Switching products. The decrease within our Optical Networking product line was primarily related to a sales decrease of $136.1 million of our 6500 Packet-Optical Platform, primarily to communication service providers. This decrease was partially offset by sales increases of $55.8 million of our 6500 RLS products, primarily to cloud providers, and $39.7 million of our Waveserver® modular interconnect system, primarily to cloud providers and communication service providers. The decrease within our Routing and Switching product line primarily reflects a sales decrease of $29.8 million of our virtualization software, primarily to communications service providers.

• EMEA revenue increased by $54.6 million, primarily reflecting sales increases of $42.5 million within our

Networking Platforms segment, $7.1 million within our Global Services segment and $5.4 million within our Platform Software and Services segment. The increase within our Networking Platforms segment primarily reflects product line sales increases of $36.8 million of our Optical Networking product line, primarily related to a sales increase of $24.8 million of our Waveserver® modular interconnect system, primarily to cloud providers.

• APAC revenue decreased by $26.5 million, primarily reflecting a sales decrease of $30.7 million within our

Networking Platforms segment, partially offset by increased sales of $2.1 million within our Platform Software and Services segment and $1.8 million within our Global Services segment. The decrease within our Networking Platforms segment primarily reflects a product line sales decrease of $34.3 million of Optical Networking products, which primarily reflects a sales decrease of $40.5 million of our 6500 Packet-Optical Platform, primarily to communication service providers.

Cost of Goods Sold and Gross Profit

There are a number of important factors or conditions that can adversely affect or cause our gross profit as a percentage of product or service revenue, or “gross margin,” to fluctuate on a quarterly basis. For example, early stages of new network builds also often include an increased concentration of lower margin “common” equipment, photonics sales, and installation services, with the intent to improve margin as we sell channel cards and maintenance services to customers as they add capacity. The component elements that comprise our product cost of goods sold and services cost of goods sold, and certain factors that can cause gross margin to fluctuate, are described in detail in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of our 2023 Annual Report.

The tables below set forth the changes in revenue, cost of goods sold and gross profit for the periods indicated (in thousands, except percentage data):

• Denotes % change from fiscal 2023 to fiscal 2024

** Denotes % of total revenue

• Denotes % change from fiscal 2023 to fiscal 2024

** Denotes % of product revenue

• Denotes % change from fiscal 2023 to fiscal 2024

** Denotes % of services revenue

Quarter ended January 27, 2024 as compared to the quarter ended January 28, 2023

• Gross profit increased by $11.0 million. Gross margin increased by 180 basis points, primarily due to reduced component costs and improved margins on Blue Planet software services, partially offset by a higher concentration of lower margin product mix.

• Gross profit on products decreased by $8.1 million. Product gross margin increased by 120 basis points, primarily due to reduced component costs and higher software sales, partially offset by a higher concentration of lower margin product mix and higher inventory excess and obsolescence costs.

• Gross profit on services** increased by $19.1 million. Gross margin increased by 450 basis points, primarily due to improved margins on Blue Planet software services due to improved efficiencies on delivery. Additionally, margins on deployment services increased due to increased revenue and efficiencies reducing costs.

Operating Expense

Currency Fluctuations

Approximately 48.0% of our operating expense was non-U.S. Dollar-denominated during the first quarter of fiscal 2024, including expenses in Canadian Dollars, Indian Rupees, and Euros. During the first quarter of fiscal 2024, as compared to the first quarter of fiscal 2023, the U.S. Dollar fluctuated against these currencies. Consequently, our operating expense, net of hedging, reported in U.S. Dollars, was adversely affected by approximately $0.9 million, or 0.2%.

The component elements that comprise each of our operating expense categories in the table below are set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2023 Annual Report. The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):

• Denotes % change from fiscal 2023 to fiscal 2024

** Denotes % of total revenue

Quarter ended January 27, 2024 as compared to the quarter ended January 28, 2023

• Research and development expense increased by $5.5 million. This increase primarily reflects increases in employee headcount and related compensation costs, partially offset by decreased professional services related to design engineering, fabrication and production of ASIC chips.

• Selling and marketing expense increased by $4.4 million. This increase primarily reflects increases in employee-related compensation costs.

• General and administrative expense increased by $3.8 million. This increase primarily reflects increases in employee-related compensation costs and bad debt expense, partially offset by decreased costs for professional services.

• Significant asset impairments and restructuring costs** reflects 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 remained relatively unchanged.

• Acquisition and integration costs in the first quarter of fiscal 2023 reflect financial, legal, and accounting advisors and employee-related costs related to our acquisitions of Benu Networks, Inc. (“Benu”) and Tibit Communications, Inc. (“Tibit”) during the first quarter of fiscal 2023.

Other Items

The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):

• Denotes % change from fiscal 2023 to fiscal 2024

** Denotes % of total revenue

Quarter ended January 27, 2024 as compared to the quarter ended January 28, 2023

• Interest and other income, net decreased by $21.3 million, primarily resulting from 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 in the first quarter of fiscal 2023, partially offset by higher interest income on our investments.

• Interest expense increased by $7.9 million, primarily due to higher interest rates on our floating rate debt, net of hedging activity. For more information on our short-term and long-term debt, see Note 13 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

• Provision for income taxes** decreased by $3.1 million, primarily due to the effect of research and development expenditures and tax credits. The effective tax rate for the first quarter of fiscal 2024 was higher than the effective tax rate for the first quarter of fiscal 2023, primarily due to the tax benefit of a gain on our cost method equity investment in the first quarter of fiscal 2023.

Segment Profit (Loss)

The table below sets forth the changes in our segment profit (loss) for the periods indicated (in thousands, except percentage data):

• Denotes % change from fiscal 2023 to fiscal 2024

Quarter ended January 27, 2024 as compared to the quarter ended January 28, 2023

• Networking Platforms segment profit decreased by $18.4 million, primarily due to lower product sales volume and increased research and development costs, offset by slightly higher gross margin as described above.

• Platform Software and Services segment profit increased by $12.4 million, primarily due to higher sales volume as described above, partially offset by increased research and development costs.

• Blue Planet Automation Software and Services segment loss decreased by $4.0 million, primarily due to improved margins on software services as described above, partially offset by lower sales volume as described above.

• Global Services segment profit increased by $7.5 million, primarily due to higher sales volume and improved margins as described above.

Liquidity and Capital Resources

Overview. For the three months ended January 27, 2024, we generated $266.1 million of cash in operating activities. Net income (adjusted for non-cash charges) provided approximately $136.1 million of cash and working capital provided approximately $130.0 million of cash. For additional details, see “Cash Provided By Operating Activities” below.

Cash, cash equivalents and investments increased by $225.6 million during the first three months of fiscal 2024. Cash from operations was partially offset by the following: (i) cash used for stock repurchases under our stock repurchase program of $38.2 million; (ii) cash used to fund our investing activities for capital expenditures totaling $16.6 million; and (iii) stock repurchases on vesting of our stock unit awards to employees relating to tax withholding of $10.1 million. In addition to cash provided by operating activities, proceeds from the issuance of equity under our employee stock purchase plan provided $16.9 million in cash during the three months ended January 27, 2024.

The following table sets forth changes in our cash, cash equivalents and investments in marketable debt securities for the periods indicated (in thousands):

Principal Sources of Liquidity. Our principal sources of liquidity on hand include our cash, cash equivalents, and investments, which, as of January 27, 2024 totaled $1.5 billion, as well as the unused portion of the Revolving Credit Facility, to which we and certain of our subsidiaries are parties. The Revolving Credit Facility 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

January 27, 2024, letters of credit totaling $70.6 million were issued under the Revolving Credit Facility. There were no borrowings outstanding under the Revolving Credit Facility as of January 27, 2024.

Foreign Liquidity. The amount of cash, cash equivalents and short-term investments held by our foreign subsidiaries was $214.6 million as of January 27, 2024. Approximately $93.0 million of future cash generated from these foreign subsidiaries is expected to be repatriated with any remaining amount continuing to be indefinitely reinvested. A deferred tax liability related to the expected repatriation amount was accrued in fiscal 2023. There are no other significant temporary differences related to our investment in the foreign subsidiaries for which a deferred tax liability has not been recognized.

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 the first quarter of fiscal 2024, we repurchased an additional $32.0 million of our common stock under the stock repurchase program, and $218.0 million remained under the current repurchase authorization as of January 27, 2024. 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 16 to our Condensed Consolidated Financial Statements included in Item 1 of Part I 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 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 $266.1 million of cash provided by operating activities during the first three months of fiscal 2024:

Net income (adjusted for non-cash charges)

The following table sets forth our net income (adjusted for non-cash charges) during the period (in thousands):

Working Capital

We provided $130.0 million of cash for working capital during the period. The following table sets forth the major components of the cash used in working capital (in thousands):

As compared to the end of fiscal 2023:

• The $135.2 million of cash provided by accounts receivable during the first three months of fiscal 2024 primarily reflects increased cash collections and lower sales volume as compared to the fourth quarter of fiscal 2023;

*•*The $56.2 million of cash provided by inventories during the first three months of fiscal 2024 primarily reflects the consumption of raw materials in excess of purchases, partially offset by 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 $17.1 million of cash provided by prepaid expense and other during the first three months of fiscal 2024 primarily reflects lower non-trade receivables, upfront fees paid to customers and capitalized contract acquisition costs;

• The $90.9 million of cash used in accounts payable, accruals, and other obligations during the first three months of fiscal 2024 primarily reflects the timing of payments to employees under our annual cash incentive compensation plans;

• The $14.0 million of cash provided by deferred revenue during the first three months of fiscal 2024 represents an increase in advanced payments received on multi-year maintenance contracts from customers prior to revenue recognition; and

• The $1.5 million of cash used in operating lease assets and liabilities, net, during the first three months of fiscal 2024 represents cash paid for operating lease payments in excess of operating lease costs.

Our days sales outstanding (“DSOs”) decreased from 103 for the first three months of fiscal 2023 to 88 for the first three months of fiscal 2024. The calculation of DSOs includes accounts receivables, net and contract assets for unbilled receivables, net included in prepaid expenses and other. Our inventory turns increased from 1.7 for the first three months of fiscal 2023 to 1.9 for the first three months of fiscal 2024.

Cash Paid for Interest, Net

The following table sets forth the cash paid for interest, net, during the period (in thousands):

(1) 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 the first quarter of fiscal 2024, the interest rate on the 2030 New Term Loan was 7.34%.

(2) 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.

(3) 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.

(4) During the first three months of fiscal 2024, we utilized the Revolving Credit Facility to issue certain standby letters of credit and paid nominal commitment fees, interest expense and other administrative charges primarily relating to the Revolving Credit Facility, approximately $0.3 million was accrued as of January 27, 2024.

For additional information about our debt and interest rate swaps, see Notes 12 and 13 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Contractual Obligations

Our contractual obligations have not changed materially since October 28, 2023, except for the items listed below. For a summary of our contractual obligations, see Item 7 of Part II of the 2023 Annual Report.

Purchase Order Obligations. As of January 27, 2024 we had $1.9 billion in outstanding purchase 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.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates have not changed materially since October 28, 2023. For a discussion of our critical accounting policies and estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our 2023 Annual Report.

Effects of Recent Accounting Pronouncements

See Note 2 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report for information relating to our discussion of the effects of recent accounting pronouncements.

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. For a discussion of quantitative and qualitative disclosures about market risk, see Item 7A of Part II of our 2023 Annual Report.

Disclosure Controls and Procedures

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 Securities Exchange Act of 1934, as amended). Based upon 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 (the “Exchange Act”)) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under the heading “Litigation” in Note 19 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report, is incorporated herein by reference.

Investing in our securities involves a high degree of risk. Before investing in our securities, you should consider carefully the information contained in this report and in our 2023 Annual Report, including the information under “Risk Factors” in Item 1A of Part I thereof. This report contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” above. Our actual results could differ materially from those contained in the forward-looking statements. Any of the risks discussed in our 2023 Annual Report, in this report, in other reports we file with the SEC, and other risks we have not anticipated or discussed, could have a material adverse impact on our business, financial condition, or results of operations. Except as set forth below, there has been no material change to the material factors that make an investment in our securities speculative or risky from those presented in our 2023 Annual Report.

If we are unable to secure order growth, our revenue may not reach the levels we anticipate.

As a result of unprecedented order volumes placed by customers to address supply chain constraints and longer delivery lead times, our backlog grew from $1.2 billion at the end of fiscal 2020 to $4.2 billion at the end of fiscal 2022. Our revenue grew by 21% during fiscal 2023 as we consumed a significant portion of this backlog. Customer order volumes rapidly decreased and, throughout much of fiscal 2023 and into the first quarter of fiscal 2024, we experienced orders that were below our revenue. As a result, our backlog decreased to $2.2 billion as of the end of the first quarter of fiscal 2024 and we expect it to continue to reduce during fiscal 2024. As backlog consumption reduces and represents a relatively smaller portion of our quarterly revenue, we expect to increasingly rely upon securing orders growth, particularly orders that we are able to convert into revenue during the same quarter in which they are received (which we refer to as "book to revenue"). Our future revenue growth will depend on securing increased orders, particularly from our service provider customers. Our failure to reach increased order levels, including a more typical composition of our quarterly revenue comprised of book to revenue orders, would adversely affect our revenue and results of operations.

The international scale of our sales and operations exposes us to additional risk and expense that could adversely affect our results of operations.

We market, sell and service our products globally, maintain personnel in numerous countries, and rely on a global supply chain for sourcing important components and manufacturing our products. Our international sales and operations are subject to inherent risks, including:

• adverse social, political and economic conditions, such as continued inflation and rising interest rates;

• effects of adverse changes in currency exchange rates;

• greater difficulty in collecting accounts receivable and longer collection periods;

• difficulty and cost of staffing and managing foreign operations;

• higher incidence and risk of corruption or unethical business practices;

• less protection for intellectual property rights in some countries;

• tax and customs changes that adversely impact our global sourcing strategy, manufacturing practices, transfer-pricing, or competitiveness of our products for global sales;

• compliance with certain testing, homologation or customization of products to conform to local standards;

• significant changes to free trade agreements, trade protection measures, tariffs and other import measures, export compliance, economic sanctions measures, domestic preference procurement requirements, qualification to transact business and additional regulatory requirements;

• natural disasters (including as a result of climate change), acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic; and

• uncertain economic, legal and political conditions in Europe, Asia and other regions where we do business, including, for example, as a result of continued impacts of Brexit on the relationship between the United Kingdom and Europe, the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, including related maritime impacts in the Red Sea, and changes in China-Taiwan and U.S.-China relations.

We utilize a sourcing strategy that emphasizes global procurement of materials that has direct or indirect dependencies upon a number of vendors with operations in the Asia-Pacific region. We also rely upon third-party contract manufacturers, including those with facilities in Canada, Mexico, Thailand and the United States, to manufacture, support and ship our products. Physical, regulatory, technological, market, reputational, and legal risks related to climate change in these regions and globally are increasing in impact and diversity and the magnitude of any short-term or long-term adverse impact on our business or results of operations remains unknown. The physical impacts of climate change, including as a result of certain

types of natural disasters occurring more frequently or with more intensity or changing weather patterns, could disrupt our supply chain, result in damage to or closures of our facilities, and could otherwise have an adverse impact on our business, operating results, and financial condition.

Our international operations are subject to complex foreign and U.S. laws and regulations, including anti-bribery and corruption laws, antitrust or competition laws, data privacy laws, such as the GDPR, and environmental regulations, among others. In particular, recent years have seen a substantial increase in anti-bribery law enforcement activity by U.S. regulators, and we currently operate and seek to operate in many parts of the world that are recognized or perceived as having greater potential for corruption. Violations of any of these laws and regulations could result in fines and penalties, criminal sanctions against us or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in certain geographies, and significant harm to our business reputation. Our policies and procedures to promote compliance with these laws and regulations and to mitigate these risks may not protect us from all acts committed by our employees or third-party vendors, including contractors, agents and services partners or from the misinterpretation or changing application of such laws. Additionally, the costs of complying with these laws (including the costs of investigations, auditing and monitoring) could adversely affect our current or future business.

Our business, operations and financial results could also be adversely impacted by instability, disruption or destruction in a significant geographic region, including as a result of war, terrorism, riot, civil insurrection or social unrest; natural or man-made disasters; public health emergencies; or economic instability or weakness. For example, 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, which could damage or disrupt international commerce and the global economy. We are complying with a broad range of U.S. and international sanctions and export control requirements imposed on Russia and, in March 2022, we announced our decision to suspend our business operations in Russia immediately. Although this decision did not materially impact our results of operations for fiscal 2022 or 2023 due to the limited amount of business that we conducted in Russia historically, it is not possible to predict the broader or longer-term consequences of this conflict, which could include further sanctions, export control and import restrictions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets. In addition, the conflict between Israel and Hamas, and related regional impacts have recently resulted in damage to submarine cables in the Red Sea and disruption of networks using those cables, which could impact future projects by our customers in this region. Such geopolitical instability and uncertainty could have a negative impact on our ability to sell to, ship products to, collect payments from, and support customers in certain countries and regions based on trade restrictions, sanctions, embargoes and export control law restrictions, and logistics restrictions including closures of air space, and could increase the costs, risks and adverse impacts from supply chain and logistics challenges.

The success of our international sales and operations will depend, in large part, on our ability to anticipate and manage these risks effectively. Our failure to manage any of these risks could harm our international operations, reduce our international sales, and could give rise to liabilities, costs or other business difficulties that could adversely affect our operations and financial results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides a summary of repurchases of our common stock during the first quarter of fiscal 2024:

(1) 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 our previous stock repurchase program. The program may be modified, suspended, or discontinued at any time. During the first quarter of fiscal 2024, we repurchased $32.0 million of our common

stock under the stock repurchase program, and we had $218.0 million remaining under the current repurchase authorization as of January 27, 2024.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Rule 10b5-1 Trading Arrangements

The following table describes, for the quarter ended January 27, 2024, 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):