Segments and Entity-Wide Disclosures

6 Months Ended

May 02, 2020

SEGMENTS AND ENTITY-WIDE DISCLOSURES

Segment Reporting

Ciena has the following operating segments for reporting purposes: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. During fiscal 2019, Ciena separated its previous Software and Software-Related Services segment into two stand-alone operating segments. Because Ciena previously disclosed its Platform Software and Services and Blue Planet Automation Software and Services as distinct product lines in its presentation of segment revenue for Software and Software-Related Services, there is no significant change to the presentation of segment revenues as a result of this separation. Comparative periods have been retrospectively adjusted to disclose segment profit for Platform Software and Services and Blue Planet Automation Software and Services. See Note 3 to Ciena’s Condensed Consolidated Financial Statements.

Ciena's long-lived assets, including equipment, building, furniture and fixtures, right-of-use assets, finite-lived intangible assets and maintenance spares, are not reviewed by Ciena's chief operating decision maker for purposes of evaluating performance and allocating resources. As of May 2, 2020, equipment, building, furniture and fixtures, net, totaled $260.9 million, and operating right-of-use assets totaled $47.9 million both of which support asset groups within Ciena’s four operating segments and unallocated selling and general and administrative activities. As of May 2, 2020, finite-lived intangible assets, goodwill and maintenance spares are assigned to asset groups within the following segments (in thousands):



	May 2, 2020
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total

Other intangible assets, net	$	15,586	$	—	$	99,950	$	—	$	115,536
Goodwill	$	65,029	$	156,191	$	89,049	$	—	$	310,269
Maintenance spares, net	$	—	$	—	$	—	$	58,476	$	58,476

Segment Revenue

The table below sets forth Ciena’s segment revenue for the respective periods (in thousands):



	Quarter Ended				Six Months Ended
	May 2,		May 4,		May 2,		May 4,
	2020		2019		2020		2019
Revenue:
Networking Platforms
Converged Packet Optical	$	654,294	$	623,838	$	1,245,844	$	1,172,835
Packet Networking	64,167		73,138		131,675		144,707
Total Networking Platforms	718,461		696,976		1,377,519		1,317,542

Platform Software and Services	44,985		35,229		96,873		76,827

Blue Planet Automation Software and Services	15,017		12,473		30,482		27,447

Global Services
Maintenance Support and Training	71,479		68,788		133,271		130,065
Installation and Deployment	34,242		41,322		69,196		71,944
Consulting and Network Design	9,869		10,223		19,624		19,713
Total Global Services	115,590		120,333		222,091		221,722

Consolidated revenue	$	894,053	$	865,011	$	1,726,965	$	1,643,538

Segment Profit (Loss)

Segment profit (loss) is determined based on internal performance measures used by Ciena’s chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive officer excludes the following items: selling and marketing costs; general and administrative costs; amortization of intangible assets; significant asset impairments and restructuring costs; acquisition and integration costs; interest and other income (loss), net; interest expense; loss on extinguishment and modification of debt and provision for income taxes.

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



	Quarter Ended						Six Months Ended
	May 2,			May 4,			May 2,			May 4,
	2020			2019			2020			2019
Segment profit (loss):
Networking Platforms	$	210,987		$	175,191		$	379,256		$	311,782
Platform Software and Services	21,668			12,477			50,619			32,940
Blue Planet Automation Software and Services	(4,399		)	(5,941		)	(7,512		)	(7,988		)
Global Services	53,540			54,981			99,068			94,682
Total segment profit	281,796			236,708			521,431			431,416
Less: Non-performance operating expenses
Selling and marketing	101,214			103,502			208,280			201,615
General and administrative	42,030			42,154			84,498			81,397
Amortization of intangible assets	5,839			5,529			11,692			11,057
Significant asset impairments and restructuring costs	3,811			4,068			8,283			6,341
Acquisition and integration costs	1,414			1,135			3,233			2,743
Add: Other non-performance financial items
Interest expense and other income (loss), net	(10,525		)	(9,715		)	(15,694		)	(14,903		)
Loss on extinguishment and modification of debt	—			—			(646		)	—
Less: Provision for income taxes	25,308			17,867			35,122			27,006
Consolidated net income	$	91,655		$	52,738		$	153,983		$	86,354

Entity-Wide Reporting

Ciena’s operating segments each engage in business across three geographic regions: Americas; Europe, Middle East and Africa (“EMEA”); and Asia-Pacific, Japan and India (“APAC”). Americas include activities in North America and South America (previously, Caribbean and Latin America (“CALA”)). The following table reflects Ciena’s geographic distribution of revenue principally based on the relevant location for Ciena’s delivery of products and performance of services. For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):



	Quarter Ended				Six Months Ended
	May 2,		May 4,		May 2,		May 4,
	2020		2019		2020		2019
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	$	894,053	$	865,011	$	1,726,965	$	1,643,538

Ciena’s revenue includes $598.4 million and $545.6 million of United States revenue for the second quarter of fiscal 2020 and 2019, respectively. For the six months ended May 2, 2020 and May 4, 2019, United States revenue was $1.1 billion and $1.0 billion, respectively. No other country accounted for 10% or more of total revenue for the periods presented above.

The following table reflects Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, and operating right-of-use assets, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, and operating right-of-use assets specifically identified. Equipment, building, furniture and fixtures, net, and operating right-of-use assets attributable to geographic regions outside of the U.S. and Canada are reflected as “Other International.” For the periods below, Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, and operating right-of-use assets was as follows (in thousands):



	May 2, 2020		November 2, 2019
Canada	$	198,334	$	211,901
United States	75,110		58,119
Other International	35,287		16,864
Total	$	308,731	$	286,884

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



	Quarter Ended				Six Months Ended
	May 2,		May 4,		May 2,		May 4,
	2020		2019		2020		2019
AT&T	$	105,630	$	108,416	$	189,640	$	195,125
Verizon	n/a		106,350		203,630		202,587
Web-scale provider	n/a		n/a		n/a		174,853
Total	$	105,630	$	214,766	$	393,270	$	572,565



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

The Web-scale provider noted above contributed greater than 10% of total revenue for the first time in fiscal 2019 and purchased products from each of Ciena’s operating segments excluding Blue Planet Automation Software and Services. The other customers identified above purchased products and services from each of Ciena’s operating segments.