Revenue

6 Months Ended

May 02, 2020

Revenue from Contract with Customer [Abstract]

Revenue

REVENUE

Disaggregation of Revenue

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

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

	Quarter Ended May 2, 2020
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	654,294	$	—	$	—	$	—	$	654,294
Packet Networking	64,167		—		—		—		64,167
Platform Software and Services	—		44,985		—		—		44,985
Blue Planet Automation Software and Services	—		—		15,017		—		15,017
Maintenance Support and Training	—		—		—		71,479		71,479
Installation and Deployment	—		—		—		34,242		34,242
Consulting and Network Design	—		—		—		9,869		9,869
Total revenue by product line	$	718,461	$	44,985	$	15,017	$	115,590	$	894,053
Timing of revenue recognition:
Products and services at a point in time	$	718,461	$	16,978	$	4,745	$	4,677	$	744,861
Services transferred over time	—		28,007		10,272		110,913		149,192
Total revenue by timing of revenue recognition	$	718,461	$	44,985	$	15,017	$	115,590	$	894,053

	Quarter Ended May 4, 2019
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	623,838	$	—	$	—	$	—	$	623,838
Packet Networking	73,138		—		—		—		73,138
Platform Software and Services	—		35,229		—		—		35,229
Blue Planet Automation Software and Services	—		—		12,473		—		12,473
Maintenance Support and Training	—		—		—		68,788		68,788
Installation and Deployment	—		—		—		41,322		41,322
Consulting and Network Design	—		—		—		10,223		10,223
Total revenue by product line	$	696,976	$	35,229	$	12,473	$	120,333	$	865,011
Timing of revenue recognition:
Products and services at a point in time	$	696,976	$	11,101	$	3,047	$	5,575	$	716,699
Services transferred over time	—		24,128		9,426		114,758		148,312
Total revenue by timing of revenue recognition	$	696,976	$	35,229	$	12,473	$	120,333	$	865,011

	Six Months Ended May 2, 2020
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	1,245,844		$	—	$	—	$	—	$	1,245,844
Packet Networking	131,675		—		—		—		131,675
Platform Software and Services	—		96,873		—		—		96,873
Blue Planet Automation Software and Services	—		—		30,482		—		30,482
Maintenance Support and Training	—		—		—		133,271		133,271
Installation and Deployment	—		—		—		69,196		69,196
Consulting and Network Design	—		—		—		19,624		19,624
Total revenue by product line	$	1,377,519	$	96,873	$	30,482	$	222,091	$	1,726,965
Timing of revenue recognition:
Products and services at a point in time	$	1,377,518	$	30,092	$	8,482	$	8,874	$	1,424,966
Services transferred over time	—		66,781		22,001		213,217		301,999
Total revenue by timing of revenue recognition	$	1,377,518	$	96,873	$	30,483	$	222,091	$	1,726,965

	Six Months Ended May 4, 2019
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	1,172,835	$	—	$	—	$	—	$	1,172,835
Packet Networking	144,707		—		—		—		144,707
Platform Software and Services	—		76,827		—		—		76,827
Blue Planet Automation Software and Services	—		—		27,447		—		27,447
Maintenance Support and Training	—		—		—		130,065		130,065
Installation and Deployment	—		—		—		71,944		71,944
Consulting and Network Design	—		—		—		19,713		19,713
Total revenue by product line	$	1,317,542	$	76,827	$	27,447	$	221,722	$	1,643,538
Timing of revenue recognition:
Products and services at a point in time	$	1,317,542	$	27,145	$	9,275	$	9,141	$	1,363,103
Services transferred over time	—		49,682		18,172		212,581		280,435
Total revenue by timing of revenue recognition	$	1,317,542	$	76,827	$	27,447	$	221,722	$	1,643,538

Effective the beginning of fiscal 2020, Ciena’s Global Sales and Marketing organization combined its previous North America and Caribbean and Latin America (“CALA”) regions into a new “Americas” sales region. Accordingly, Ciena reflects its sales geographically around the following markets: (i) Americas; (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia Pacific, Japan and India (“APAC”). Within each geographic area, Ciena maintains specific teams or personnel that focus on a particular region, country, customer or market vertical. These teams include sales management, account salespersons and sales engineers, as well as services professionals and commercial management personnel.

For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):

	Quarter Ended				Six Months Ended
	May 2,		May 4,		May 2,		May 4,
	2020		2019		2020		2019
Geographic distribution:
Americas	$	650,381	$	615,492	$	1,224,385	1,131,973
EMEA	141,431		114,993		271,396		244,183
APAC	102,241		134,526		231,184		267,382
Total revenue by geographic distribution	$	894,053	$	865,011	$	1,726,965	$	1,643,538

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

• Converged Packet Optical - includes the 6500 Packet-Optical Platform, 5430 Reconfigurable Switching System, Waveserver® stackable interconnect system (“Waveserver”), the family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. This product line also includes sales of the Z-Series Packet-Optical Platform.

• Packet Networking - includes the 3000 family of service delivery switches and service aggregation switches and the 5000 family of service aggregation switches. This product line also includes the 8700 Packetwave Platform, the Ethernet packet configuration for the 5410 Service Aggregation Switch, and the 6500 Packet Transport System (PTS), which combines packet switching, control plane operation, and integrated optics.

The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Operating system software and enhanced software features embedded in Ciena hardware are each considered distinct performance obligations for which the revenue is generally recognized upfront at a point in time upon transfer of control.

• Platform Software and Services provides analytics, data, and planning tools to assist customers in managing Ciena’s Networking Platforms products in their networks. Ciena’s platform software includes its Manage, Control and Plan (MCP) domain controller solution, OneControl Unified Management System, ON-Center® Network and Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. Platform software-related services revenue includes sales of subscription, installation, support, and consulting services related to Ciena’s software platforms, operating system software and enhanced software features embedded in each of the Networking Platforms product lines above. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

• Blue Planet® Automation Software and Services is a comprehensive, open software suite, together with related services, that allows customers to use enhanced knowledge about their networks to drive adaptive optimization of their services and operations. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), analytics, network health predictor (NHP), route optimization and assurance (ROA), inventory management, unified assurance and analytics (UAA) and Ciena’s SDN Multilayer Controller and virtual wide area network (V-WAN) application. Services revenue includes sales of subscription, installation, support, consulting and design services related to Ciena’s Blue Planet Automation Platform. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

Ciena’s software platform revenue typically reflects sales of either perpetual or term-based software licenses, and these sales are considered a distinct performance obligation where revenue is generally recognized upfront at a point in time upon transfer of control. Revenue from software subscription and support are recognized ratably over the period during which the services are performed. Revenue from professional services for solution customization, software and solution support services, consulting and design, and build-operate-transfer services relating to Ciena’s software offerings are recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period.

• Global Services reflects sales of a broad range of Ciena’s services for maintenance support and training, installation and deployment, and consulting and network design activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statements of Operations. Ciena’s Global Services are considered a distinct performance obligation where revenue is generally recognized over time. Revenue from maintenance support is recognized ratably over the period during which the services are performed. Revenue from installation and deployment services and consulting and network design services are recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period. Revenue from training services is generally recognized at a point in time upon completion of the service.

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities (deferred revenue) from contracts with customers (in thousands):

	Balance at May 2, 2020		Balance at November 2, 2019
Accounts receivable, net	$	693,963	$	724,854
Contract assets for unbilled accounts receivable	$	87,746	$	84,046
Deferred revenue	$	149,917	$	156,873

Our contract assets represent unbilled accounts receivable where transfer of a product or service has occurred but invoicing is conditional upon completion of future performance obligations. These amounts are primarily related to installation and deployment and professional services arrangements where transfer of control has occurred, but Ciena has not yet invoiced the customer. Contract assets are included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

Contract liabilities consist of deferred revenue and represent advanced payments against non-cancelable customer orders received prior to revenue recognition. Ciena recognized approximately $76.5 million and $73.0 million of revenue during the first six months of fiscal 2020 and 2019 that was included in the deferred revenue balance at November 2, 2019 and November 3, 2018, respectively. Revenue recognized due to changes in transaction price from performance obligations satisfied or partially satisfied in previous periods was immaterial during the six months ended May 2, 2020 and May 4, 2019.

Capitalized Contract Acquisition Costs

Capitalized contract acquisition costs consist of deferred sales commissions, and were $13.3 million and $15.7 million as of May 2, 2020 and November 2, 2019, respectively, and were included in other current assets and other assets. The amortization expense associated with these costs was $10.1 million and $8.4 million during the first six months of fiscal 2020 and 2019, respectively, and was included in sales and marketing expense.

Remaining Performance Obligations

Remaining Performance Obligations (RPO) are comprised of non-cancelable customer purchase orders for products and services that are awaiting transfer of control for revenue recognition under the applicable contract terms. As of May 2, 2020, the aggregate amount of RPO was $1.078 billion. As of May 2, 2020, Ciena expects approximately 83% of the RPO to be recognized as revenue within the next twelve months.