Ciena 10-Q 2025-05-03

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

For the quarterly period ended May 3, 2025

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 or organization)

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 November 2, 2024, which we filed with the Securities and Exchange Commission (the “SEC”) on December 20, 2024 (our “2024 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 our financial condition, results of operations, and cash flows, and it 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 2024 Annual Report.

We are a network technology company, providing hardware, software, and services to a wide range of network operators and enabling enhanced network capacity, service delivery, and automation. Our solutions support network traffic across a wide range of applications, including cloud, video, data, artificial intelligence (“AI”), and voice. Our network 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 network analytics and intelligence. Our solutions include Networking Platforms, including our Optical Networking portfolio and our Routing and Switching portfolio, which can be applied from the network core to end-user access points, and which allow network operators to scale capacity, to increase transmission speeds, to allocate traffic efficiently, and to adapt dynamically to changing end-user service demands. To complement our Networking Platforms, we offer Platform Software, which includes our Navigator Network Control Software (NCS) and advanced applications that deliver multi-layer domain control and operations for network operators. Through our Blue Planet Automation Software, we also enable complete service lifecycle management automation with productized operational support systems, including inventory, orchestration and assurance solutions that help our customers to achieve closed loop automation across multi-vendor and multi-domain environments.

Market Opportunity and Investment in Technology Innovation

The market into which we sell our communications networking solutions is dynamic and is characterized by a high rate of change, including rapid growth in bandwidth demand and network traffic, the proliferation of cloud-based services, and new approaches, or “consumption models,” for designing and procuring networking solutions. Drivers of increased bandwidth demand include enterprise and consumer cloud network adoption, AI, 5G, high-definition video, and network operator focus on resilience and automation. To address these growing service demands and manage network cost, many network operators are looking to adopt next-generation infrastructures that are more programmable and better capable of leveraging data for network insight, analytics and automation.

We believe that our investment capacity and our efforts to push the pace of innovation are important competitive differentiators in our markets. Keeping pace with the market’s demand for technology innovation requires considerable research and development investment capacity and expenditures, and research and development spending represented 18.5% of our revenue in the first half of fiscal 2025. During the first half of fiscal 2025, we invested $407.5 million in research and development activities, an increase of 6.5% compared to the first half of fiscal 2024. In particular, in an effort to capture certain market opportunities created by the impact of AI on networks, we have continued to innovate, increase the performance of, and enhance the capabilities for our leading WaveLogicTM coherent modem technology in multiple form factors. Through this innovation, we seek to extend our leadership in our core business and leverage this to expand our addressable market into complementary and adjacent network applications, including inside and around the data center.

Business Momentum

During the second quarter of fiscal 2025, we continued to experience broad-based business momentum, with orders for our products and services exceeding our revenue, resulting in increased backlog. We experienced year-over-year order growth in our major customer segments, particularly with large communications service provider customers and cloud provider customers, with one cloud provider customer continuing to provide a significant volume of orders. As a result, our revenue increased by 23.6% to $1.1 billion in the second quarter of fiscal 2025 as compared to $910.8 million in the second quarter of fiscal 2024. Three of our top five customers by revenue for the second quarter of fiscal 2025 were cloud providers. Although our business remains subject to quarterly fluctuations due to customer purchasing patterns and supply chain dynamics, we continue to believe that certain trends and shifts in business and consumer behaviors and the drivers of bandwidth demand described above under the heading “Overview - Market Opportunity and Investment in Technology Innovation” in this Item 2 represent long-term opportunities for our business.

For additional information regarding our business, industry, market opportunity, competitive landscape, and strategy, see our 2024 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

Our revenue increased by 23.6%, or $215.1 million in the second quarter of fiscal 2025 as compared to the second quarter of fiscal 2024, and 12.8%, or $249.6 million in the first six months of fiscal 2025 as compared to the first six months of fiscal 2024.

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 2024 to fiscal 2025

** Denotes % of total revenue

Quarter ended May 3, 2025 as compared to the quarter ended April 27, 2024

*•*Networking Platforms segment revenue increased by $190.1 million.

• Optical Networking products revenue increased by $213.4 million, primarily driven by increases in sales of our 6500 Reconfigurable Line Systems (“RLS”), our Waveserver® system, and our coherent pluggables, each primarily to cloud provider customers, and our 6500 Packet-Optical Platform primarily to communications service providers.

• Routing and Switching products revenue decreased by $23.3 million, primarily driven by decreases in sales of our 3000 and 5000 series of service delivery and aggregation platforms.

• Platform Software and Services segment revenue** remained relatively unchanged.

• Blue Planet Automation Software and Services** segment revenue increased by $13.5 million, primarily reflecting sales increases in our unified assurance and analytics software and software services and inventory management software services.

• Global Services** segment revenue increased by $11.5 million, primarily reflecting a sales increase in our installation and deployment and support services, partially offset by a sales decrease in our consulting and network design services.

Six months ended May 3, 2025 as compared to the six months ended April 27, 2024

• Networking Platforms segment revenue** increased by $204.0 million.

• Optical Networking sales increased by $245.5 million, primarily driven by increases in sales of our 6500 RLS and our coherent pluggables, both primarily to cloud provider customers, and our 6500 Packet-Optical Platforms, primarily to service provider customers. These increases were partially offset by a reduction in Waveserver revenue, primarily related to decreased sales to cloud provider customers.

• Routing and Switching sales decreased by $41.5 million, primarily driven by decreases in sales of our 3000 and 5000 series of service delivery and aggregation platforms, partially offset by an increase in sales of our virtualization software.

• Platform Software and Services segment revenue** increased by $5.3 million, primarily reflecting sales increases of our software consulting services and our software maintenance services, partially offset by sales decreases of our software platforms.

• Blue Planet Automation Software and Services** segment revenue increased by $25.6 million, primarily reflecting sales increases in our unified assurance and analytics software and software services and inventory management software services.

• Global Services segment revenue** increased by $14.7 million, primarily reflecting a sales increase in our installation and deployment and support services, partially offset by a sales decrease in our consulting and network design services.

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 variations in geographic revenue results in any particular period.

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 2024 to fiscal 2025

** Denotes % of total revenue

Quarter ended May 3, 2025 as compared to the quarter ended April 27, 2024

• Americas revenue increased by $171.0 million, primarily driven by increased sales to cloud providers, partially offset by decreased sales to government customers, each primarily in the United States.

• EMEA revenue increased by $35.8 million, primarily driven by increased sales to cloud providers in the Netherlands.

• APAC revenue increased by $8.3 million, primarily driven by increased sales to communications service providers in Japan.

Six months ended May 3, 2025 as compared to the six months ended April 27, 2024

• Americas revenue increased by $248.4 million, primarily driven by increased sales to cloud providers and communications service providers, partially offset by decreased sales to government customers and cable and multiservice operators, each primarily in the United States.

• EMEA revenue decreased by $13.7 million, primarily driven by decreased sales to submarine network operators.

• APAC revenue increased by $14.9 million, primarily driven by increased sales to communications service providers in India and Japan.

Currency Fluctuations

During the second quarter and first six months of fiscal 2025, approximately 13.1% and 14.2% of our revenue was non-U.S. Dollar-denominated, respectively. During the second quarter and first six months of fiscal 2025 as compared to the second quarter and first six months of fiscal 2024, the U.S. Dollar generally strengthened against other currencies. These currency fluctuations had an adverse effect on our revenue reported in U.S. Dollars of approximately $3.0 million, or 0.3%, as compared to the second quarter of fiscal 2024, and $9.5 million, or 0.4%, as compared to the first six months of fiscal 2024.

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, photonic line systems, and installation services, with the intent to improve margin as we sell channel cards, advanced software, and maintenance services to customers as they add capacity. In addition, products that are in early or introductory phases may carry lower margins. 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 “Consolidated Results of Operations - Cost of Goods Sold and Gross Profit” in Item 7 of Part II and “Risk Factors” in Item 1A of Part I of our 2024 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 2024 to fiscal 2025

** Denotes % of total revenue

Quarter ended May 3, 2025 as compared to the quarter ended April 27, 2024

• Gross profit increased by $64.2 million. Gross margin decreased by 250 basis points, primarily reflecting decreased product and services margins.

• Gross profit on products increased by $63.0 million from $285.6 million for the second quarter of fiscal 2024 to $348.6 million for the second quarter of fiscal 2025. Product gross margin decreased by 190 basis points, from 40.7% for the second quarter of fiscal 2024 to 38.8% for the second quarter of fiscal 2025, primarily due to product mix and the effect of tariffs, partially offset by manufacturing efficiencies.

• Gross profit on services increased by $1.2 million from $103.1 million for the second quarter of fiscal 2024 to $104.2 million for the second quarter of fiscal 2025. Services gross margin decreased by 330 basis points, from 49.2% for the second quarter of fiscal 2024 to 45.9% for the second quarter of fiscal 2025, primarily due to increased costs related to delivering maintenance arrangements.

Six months ended May 3, 2025 as compared to the six months ended April 27, 2024

• Gross profit increased by $69.0 million. Gross margin decreased by 180 basis points, primarily reflecting decreased product and services margin.

• Gross profit on products increased by $57.7 million from $654.9 million for the first six months of fiscal 2024 to $712.6 million for the first six months of fiscal 2025. Product gross margin decreased by 200 basis points, from 42.6% for the first six months of fiscal 2024 to 40.6% for the first six months of fiscal 2025, primarily due to product mix, partially offset by manufacturing efficiencies.

• Gross profit on services increased by $11.3 million from $200.7 million for the first six months of fiscal 2024 to $212.1 million for the first six months of fiscal 2025. Services gross margin decreased by 110 basis points, from 48.8% for the first six months of fiscal 2024 to 47.7% for the first six months of fiscal 2025, primarily due increased costs related to delivering maintenance arrangements.

Operating Expense

The component elements that comprise each of our operating expense categories in the table below are set forth in the “Consolidated Results of Operations - Operating Expense” in Item 7 of Part II of our 2024 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 2024 to fiscal 2025

** Denotes % of total revenue

Quarter ended May 3, 2025 as compared to the quarter ended April 27, 2024

• Research and development expense increased by $19.5 million. Net of hedging, this increase primarily reflects increases in employee-related compensation costs primarily due to increases in incentive compensation, share-based compensation expense and headcount; and professional services related to design engineering, fabrication and production of application-specific integrated circuit (“ASIC”) chips.

• Selling and marketing expense increased by $15.6 million. This increase primarily reflects increases in employee-related compensation costs primarily due to increases in incentive compensation.

• General and administrative expense increased by $7.4 million. This increase primarily reflects increases in employee-related compensation costs primarily due to increases in incentive compensation and share-based compensation expense; and professional services.

• Significant asset impairments and restructuring costs decreased by $13.7 million, primarily due to a reduction in restructuring activities. For more information on our restructuring costs, see Note 4 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

• Amortization of intangible assets decreased by $1.4 million, primarily reflecting certain intangible assets having reached the end of their economic lives.

Six months ended May 3, 2025 as compared to the six months ended April 27, 2024

• Research and development expense increased by $24.9 million. Net of hedging, this increase primarily reflects increases in employee-related compensation costs primarily due to increases in incentive compensation, share-based compensation expense and headcount; and professional services related to design engineering, fabrication and production of ASIC chips.

• Selling and marketing expense increased by $24.0 million. This increase primarily reflects increases in employee-related compensation costs primarily due to increases in incentive compensation.

• General and administrative expense increased by $6.6 million. This increase primarily reflects increases in employee-related compensation costs primarily due to increases in incentive compensation and share-based compensation expense; and professional services, partially offset by lower bad debt expense.

• Significant asset impairments and restructuring costs decreased by $17.1 million primarily due to a reduction in restructuring activities. For more information on our restructuring costs, see Note 4 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

• Amortization of intangible assets decreased by $2.1 million, primarily reflecting certain intangible assets having reached the end of their economic lives.

Currency Fluctuations

During the second quarter and first six months of fiscal 2025, approximately 49.5% and 48.5% of our operating expense was non-U.S. Dollar-denominated, respectively. During the second quarter and first six months of fiscal 2025, as compared to the second quarter and first six months of fiscal 2024, the U.S. Dollar generally strengthened against other currencies. These currency fluctuations, net of hedging, had the effect of reducing our operating expense by approximately $6.4 million, or 1.5%, as compared to the second quarter of fiscal 2024, and $11.9 million, or 1.5% as compared to the first six months of fiscal 2024.

Segment Profit (Loss)

Segment profit (loss) is determined based on internal performance measures used by our 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; interest and other income, net; interest expense; loss on extinguishment and modification of debt; and provision for income taxes.

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 2024 to fiscal 2025

Quarter ended May 3, 2025 as compared to the quarter ended April 27, 2024

• Networking Platforms segment profit increased by $37.1 million, primarily due to higher sales volume, partially offset by lower product margin as described above, and higher research and development costs.

• Platform Software and Services segment profit decreased by $3.6 million, primarily due to lower services margin, and increased research and development costs.

• Blue Planet Automation Software and Services segment profit increased by $12.1 million, primarily due to higher sales volume as described above, and improved margins on products and services.

• Global Services segment profit slightly decreased, primarily due to reduced services margin as described above, partially offset by increased sales volume also described above.

Six months ended May 3, 2025 as compared to the six months ended April 27, 2024

• Networking Platforms segment profit increased by $20.5 million, primarily due to higher sales volume, partially offset by lower product margin as described above, and higher research and development costs.

• Platform Software and Services segment profit slightly increased by $1.5 million, primarily due to higher services sales volume, partially offset by lower software sales volume and increased research and development costs.

• Blue Planet Automation Software and Services segment profit increased by $23.7 million, primarily due to higher sales volume as described above, and improved margins on products and services.

• Global Services segment profit slightly decreased by $1.5 million, primarily due to reduced services margins as described above, partially offset by increased sales volume also described above.

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 2024 to fiscal 2025

** Denotes % of total revenue

Quarter ended May 3, 2025 as compared to the quarter ended April 27, 2024

• Interest and other income, net decreased by $3.9 million, primarily resulting from the impact of foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity.

• Interest expense decreased by $2.2 million, primarily due to lower interest rates on our floating rate debt, net of hedging activity. For more information on our short-term and long-term debt, see Note 12 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

• Provision for income taxes increased by $9.2 million, primarily due to the increase in pre-tax book income.

Six months ended May 3, 2025 as compared to the six months ended April 27, 2024

• Interest and other income, net decreased by $3.0 million, primarily resulting from lower interest income on our investments.

• Interest expense decreased by $3.0 million, primarily due to primarily due to lower interest rates on our floating rate debt, net of hedging activity. For more information on our short-term and long-term debt, see Note 12 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

• Loss on extinguishment and modification of debt reflects the refinance of our 2030 Term Loan in the first quarter of fiscal 2025. See Note 12 to our Condensed Consolidated Financial Statements included in Item 1 of Part 1 of this report for more details.

• Provision for income taxes increased by $11.3 million, primarily due to the increase in pre-tax book income.

Liquidity and Capital Resources

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 (as defined below), 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 capital structure, liquidity position, debt obligations, and anticipated cash needs to fund our operating or investment plans or increase our strategic flexibility, and we will continue to consider capital raising and other market opportunities.

Principal Sources of Liquidity. Our principal sources of liquidity on hand include our cash, cash equivalents, and investments, which, as of May 3, 2025, totaled $1.3 billion, as well as the unused portion of our senior secured revolving credit facility (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 May 3, 2025, letters of credit totaling $64.3 million were issued under the Revolving Credit Facility. There were no borrowings outstanding under the Revolving Credit Facility as of May 3, 2025.

Foreign Liquidity. The amount of cash, cash equivalents and short-term investments held by our foreign subsidiaries was $166.7 million as of May 3, 2025. Approximately $92.2 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 October 2, 2024, 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 2022. During the first six months of fiscal 2025, we repurchased $163.5 million of our common stock under the stock repurchase program, and $836.5 million remained under the current repurchase authorization as of May 3, 2025. 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 15 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report as well as Item 2 of Part II of this report.

Cash Flows

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

Cash, cash equivalents and investments increased by $13.9 million during the first six months of fiscal 2025. Cash from operations generated $260.7 million which was partially offset by the following: (i) cash used for stock repurchases under our stock repurchase program of $168.2 million; (ii) cash used to fund our investing activities for capital expenditures totaling $55.6 million; and (iii) stock repurchases on vesting of our stock unit awards to employees relating to tax withholding of $42.3 million. In addition to cash provided by operating activities, proceeds from the issuance of equity under our employee stock purchase plan provided $17.1 million in cash during the six months ended May 3, 2025.

Cash Provided By Operating Activities

The following sections set forth the components of our $260.7 million of cash provided by operating activities during the first six months of fiscal 2025. Net income (adjusted for non-cash charges) provided cash of approximately $227.0 million and cash provided by operating assets and liabilities was approximately $33.7 million.

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):

Operating Assets and Liabilities

Operating asset and liability requirements decreased by $33.7 million during the period. The following table sets forth the major components of the cash changes in operating assets and liabilities (in thousands):

As compared to the end of fiscal 2024, for the first six months of fiscal 2025:

• The change in accounts receivable primarily reflects the timing of cash collections from customers;

• The change in inventories primarily reflects increases in raw materials;

• The change in prepaid expenses and other primarily reflects reduced refundable cash advances to a third-party contract manufacturer and lower non-trade receivables;

• The change in accounts payable, accruals, and other obligations primarily reflects the timing of payments for income taxes;

• The change in deferred revenue represents an increase in advanced payments received on multi-year maintenance contracts from customers prior to revenue recognition; and

• The change in operating lease assets and liabilities, net, represents cash paid for operating lease payments in excess of operating lease costs.

Our days sales outstanding (“DSOs”) decreased from 92 for the first six months of fiscal 2024 to 89 for the first six months of fiscal 2025. 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 six months of fiscal 2024 to 2.4 for the first six months of fiscal 2025.

Cash Paid for Interest, Net

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

(1) The 2030 Term Loan bore interest at SOFR for the chosen borrowing period plus a spread of 2.00% subject to a minimum SOFR rate of 0.00%.

(2) Interest on the Refinanced 2030 Term Loan is payable periodically based on the interest period selected for borrowing. The Refinanced 2030 Term Loan bears interest at SOFR for the chosen borrowing period plus a spread of 1.75% subject to a minimum SOFR rate of 0.00%. At the end of the second quarter of fiscal 2025, the interest rate on the Refinanced 2030 Term Loan was 6.07%.

(3) The 2030 Notes bear interest at a rate of 4.00% per annum. Interest is payable on the 2030 Notes in arrears on January 31 and July 31 of each year.

(4) Our interest rate swaps fix the SOFR rate for $350.0 million of our Term Loan at 3.47% through January 2028 and another $350.0 million of our Term Loan at 2.968% through September 2025.

(5) During the first six months of fiscal 2025, 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.

For additional information about our debt and interest rate swaps, see Notes 10 and 12 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 November 2, 2024. For a summary of our contractual obligations, see “Liquidity and Capital Resources – Contractual Obligations” in Item 7 of Part II of our 2024 Annual Report.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates have not changed materially since November 2, 2024. For a discussion of our critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” in Item 7 of Part II of our 2024 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 2024 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 (the “Exchange Act”)). 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 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 “Commitments and Contingencies - Litigation” in Note 18 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 2024 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” in Item 2 of Part I of this report. Our actual results could differ materially from those contained in the forward-looking statements. Any of the risks discussed in our 2024 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 2024 Annual Report.

Tariffs and other import measures imposed by the United States or other countries may adversely affect our business, operations, and financial results.

In January 2025, the U.S. government commenced a broad review of U.S. trade relations and began imposing, or threatening to impose, tariffs on certain countries, materials, and industries. In response, certain impacted countries have imposed or threatened various retaliatory tariffs or other trade restrictions. We rely on a global sourcing strategy and third-party contract manufacturers outside of the United States to perform substantially all of our manufacturing. Moreover, revenue in the United States represented approximately 70% of our revenue in fiscal 2024. Significant changes to trade policy, the imposition of tariffs, or retaliatory responses thereto, have adversely impacted and could materially adversely impact our business, operations, and financial results, including by increasing our costs, by decreasing our profit margins, and/or by making our products less competitive. The tariff policy environment has been and can be expected to continue to be dynamic. Tariffs recently implemented or proposed that have impacted or could materially impact our business include tariffs on imports:

• from Canada and Mexico, as products making up a significant portion of our revenue are manufactured in or distributed from Mexico, and we generally introduce new products and conduct related early volume manufacturing in Canada;

• of steel and aluminum, including derivative goods that include certain of our products;

• from China, as our supply chain includes certain China-based suppliers; and

• from a wide range of countries globally, including Thailand, where we also rely on third-party manufacturing operations for a significant portion of our revenue.

The U.S. government is also currently investigating imports of a range of different products, including semiconductors, critical raw minerals, and derivative products relevant to our business and products, which could result in additional tariffs. Certain tariffs that have been implemented or proposed are subject to legal challenges, but there can be no assurance that such challenges will be successful or that, if successful, additional or alternative tariffs will not be imposed.

We have taken steps, and may take additional steps, to attempt to mitigate the impact of tariffs on our business, including: by availing ourselves of certain exemptions to tariffs; by making changes to our supply chain practices, sources of supply, or manufacturing locations; and by passing the cost of tariffs to customers. These changes could take considerable time to implement, result in significant costs, and cause supply chain delays or disruption. There can be no guarantee as to which of our products will be impacted by tariffs or eligible for exceptions under existing or future trade agreements or executive orders. Moreover, there can be no assurance as to customer reaction to the current trade environment, the imposition of new tariffs, or any tariff mitigation steps we elect to take. Among other things, customers may elect to reduce spending, renegotiate contracts, defer orders or delivery of existing orders, or shift purchases to other vendors, each of which would adversely impact our financial results and competitive position with customers.

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 second quarter of fiscal 2025:

(1) On October 2, 2024, 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. The program may be modified, suspended, or discontinued at any time. During the second quarter of fiscal 2025, we repurchased $84.3 million of our common stock under the stock repurchase program, and we had $836.5 million remaining under the current repurchase authorization as of May 3, 2025. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Stock Repurchase Authorization” in Item 2 of Part I of this report and Note 15 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report for information regarding the stock repurchase program authorized by our Board of Directors.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Rule 10b5-1 Trading Arrangements

During the second quarter of fiscal 2025, none of our directors and officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated, or modified the amount, pricing or timing provisions of any trading arrangement for the sale or purchase of our securities 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).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.