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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 28, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareCIENNew York Stock Exchange
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.
Large accelerated filer☑Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company☐
Emerging growth company☐

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:
ClassOutstanding as of March 3, 2023
Common Stock, par value $0.01 per share149,159,768


CIENA CORPORATION
INDEX
FORM 10-Q
 PAGE
NUMBER
 
 
2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended
 January 28,January 29,
 20232022
Revenue: 
Products$877,715 $665,007 
Services178,806 179,436 
Total revenue1,056,521 844,443 
Cost of goods sold: 
Products500,337 372,565 
Services100,238 87,691 
Total cost of goods sold600,575 460,256 
Gross profit455,946 384,187 
Operating expenses: 
Research and development181,730 148,409 
Selling and marketing123,807 118,881 
General and administrative50,896 44,498 
Significant asset impairments and restructuring costs4,298 3,409 
Amortization of intangible assets7,441 8,918 
Acquisition and integration costs2,558 68 
Total operating expenses370,730 324,183 
Income from operations85,216 60,004 
Interest and other income, net31,973 3,686 
Interest expense(15,870)(8,648)
Income before income taxes101,319 55,042 
Provision for income taxes25,078 9,219 
Net income$76,241 $45,823 
Basic net income per common share$0.51 $0.30 
Diluted net income per potential common share$0.51 $0.29 
Weighted average basic common shares outstanding149,081 154,151 
Weighted average dilutive potential common shares outstanding149,551 155,807 

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


3

CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Quarter Ended
 January 28,January 29,
 20232022
Net income $76,241 $45,823 
Change in unrealized gain (loss) on available-for-sale securities, net of tax 1,050 (774)
Change in unrealized gain (loss) on foreign currency forward contracts, net of tax5,342 (5,339)
Change in unrealized gain (loss) on forward starting interest rate swaps, net of tax(5,025)3,926 
Change in cumulative translation adjustments15,979 (13,157)
Other comprehensive gain (loss)17,346 (15,344)
Total comprehensive income$93,587 $30,479 

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


4

CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
January 28,
2023		October 29,
2022
ASSETS 
Current assets: 
Cash and cash equivalents$1,054,549 $994,352 
Short-term investments100,424 153,989 
Accounts receivable, net of allowance for credit losses of $12.1 million and $11.0 million as of January 28, 2023 and October 29, 2022, respectively.
1,054,917 920,772 
Inventories, net1,178,089 946,730 
Prepaid expenses and other374,590 370,053 
Total current assets3,762,569 3,385,896 
Long-term investments3,242 35,385 
Equipment, building, furniture and fixtures, net278,985 267,779 
Operating right-of-use assets48,438 45,108 
Goodwill446,548 328,322 
Other intangible assets, net244,648 69,517 
Deferred tax asset, net797,214 824,008 
Other long-term assets90,853 113,617 
      Total assets$5,672,497 $5,069,632 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$478,486 $516,047 
Accrued liabilities and other short-term obligations343,938 360,782 
Deferred revenue164,758 137,899 
Operating lease liabilities19,098 18,925 
Current portion of long-term debt11,930 6,930 
Total current liabilities1,018,210 1,040,583 
Long-term deferred revenue66,620 62,336 
Other long-term obligations156,572 150,335 
Long-term operating lease liabilities45,305 42,392 
Long-term debt, net1,547,495 1,061,125 
Total liabilities$2,834,202 $2,356,771 
Commitments and contingencies (Note 22)
Stockholders’ equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding
— — 
Common stock – par value $0.01; 290,000,000 shares authorized; 149,157,588 and 148,412,943 shares issued and outstanding
1,492 1,484 
Additional paid-in capital6,422,091 6,390,252 
Accumulated other comprehensive loss(29,299)(46,645)
Accumulated deficit(3,555,989)(3,632,230)
Total stockholders’ equity2,838,295 2,712,861 
Total liabilities and stockholders’ equity$5,672,497 $5,069,632 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5

CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Three Months Ended
 January 28,January 29,
 20232022
Cash flows used in operating activities: 
Net income$76,241 $45,823 
Adjustments to reconcile net income to net cash used in operating activities: 
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements22,208 23,653 
Share-based compensation costs30,512 24,297 
Amortization of intangible assets10,325 12,230 
Deferred taxes(7,247)(766)
Provision for inventory excess and obsolescence5,503 3,799 
Provision for warranty8,230 2,817 
Gain on cost method equity investment(26,455)(4,120)
Other7,325 (4,495)
Changes in assets and liabilities:
Accounts receivable(133,067)87,223 
Inventories(235,059)(87,178)
Prepaid expenses and other4,667 (14,134)
Operating lease right-of-use assets3,891 4,120 
Accounts payable, accruals and other obligations(56,979)(152,981)
Deferred revenue29,459 10,417 
Short- and long-term operating lease liabilities(5,193)(5,116)
Net cash used in operating activities(265,639)(54,411)
Cash flows used in investing activities: 
Payments for equipment, furniture, fixtures and intellectual property(30,030)(25,804)
Purchases of investments(35,411)(350,465)
Proceeds from sales and maturities of investments123,249 50,000 
Settlement of foreign currency forward contracts, net(4,001)1,346 
Acquisition of business, net of cash acquired(230,048)(56,036)
Net cash used in investing activities(176,241)(380,959)
Cash flows provided by financing activities: 
Proceeds from issuance of senior notes— 400,000 
Proceeds from issuance of term loan, net497,500 — 
Payment of long-term debt(1,732)— 
Payment of debt issuance costs(3,996)(4,506)
Payment of finance lease obligations(913)(771)
Shares repurchased for tax withholdings on vesting of stock unit awards(12,980)(25,150)
Repurchases of common stock - repurchase program— (250,000)
Proceeds from issuance of common stock14,315 15,146 
Net cash provided by financing activities492,194 134,719 
Effect of exchange rate changes on cash, cash equivalents and restricted cash9,884 (3,259)
Net increase (decrease) in cash, cash equivalents and restricted cash60,198 (303,910)
Cash, cash equivalents and restricted cash at beginning of period994,378 1,422,604 
Cash, cash equivalents and restricted cash at end of period$1,054,576 $1,118,694 
Supplemental disclosure of cash flow information 
Cash paid during the period for interest$10,536 $7,670 
Cash paid during the period for income taxes, net$8,383 $6,112 
Operating lease payments$5,638 $5,480 
Non-cash investing and financing activities 
Purchase of equipment in accounts payable$7,354 $2,972 
Operating right-of-use assets subject to lease liability $6,244 $3,376 
Gain on cost method equity investment $26,455 $4,120 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6

CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Common Stock
Shares		Par ValueAdditional
Paid-in-Capital		Accumulated Other
Comprehensive Income (Loss)		Accumulated
Deficit		Total
Stockholders’
Equity
Balance at October 29, 2022148,412,943 $1,484 $6,390,252 $(46,645)$(3,632,230)$2,712,861 
Net income— — — — 76,241 76,241 
Other comprehensive income— — — 17,346 — 17,346 
Issuance of shares from employee equity plans1,009,649 11 14,304 — — 14,315 
Share-based compensation expense— — 30,512 — — 30,512 
Shares repurchased for tax withholdings on vesting of stock unit awards(265,004)(3)(12,977)— — (12,980)
Balance at January 28, 2023149,157,588 $1,492 $6,422,091 $(29,299)$(3,555,989)$2,838,295 
Common Stock
Shares		Par ValueAdditional
Paid-in-Capital		Accumulated Other
Comprehensive
Income (Loss)		Accumulated
Deficit		Total
Stockholders’
Equity
Balance at October 30, 2021154,858,981 $1,549 $6,803,162 $439 $(3,785,132)$3,020,018 
Net income— — — — 45,823 45,823 
Other comprehensive loss— — — (15,344)— (15,344)
Repurchase of common stock - repurchase program(2,698,327)(27)(249,973)— — (250,000)
Issuance of shares from employee equity plans1,169,006 11 15,135 — — 15,146 
Share-based compensation expense— — 24,297 — — 24,297 
Shares repurchased for tax withholdings on vesting of stock unit awards(338,937)(3)(25,147)— — (25,150)
Balance at January 29, 2022152,990,723 $1,530 $6,567,474 $(14,905)$(3,739,309)$2,814,790 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
7

CIENA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) INTERIM FINANCIAL STATEMENTS
The interim financial statements included herein for Ciena Corporation and its wholly owned subsidiaries (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires Ciena to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Among other things, these estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. To the extent that there are material differences between Ciena’s estimates and actual results, Ciena’s consolidated financial statements will be affected.
In the opinion of management, the financial statements included in this report reflect all normal recurring adjustments that Ciena considers necessary for the fair statement of the results of operations of Ciena for the interim periods covered and of the financial position of Ciena at the date of the interim balance sheets. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations. The Condensed Consolidated Balance Sheet as of October 29, 2022 was derived from audited financial statements, but does not include all disclosures required by GAAP. However, Ciena believes that the disclosures are adequate to understand the information presented herein. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. These financial statements should be read in conjunction with Ciena’s audited consolidated financial statements and the notes thereto included in Ciena’s annual report on Form 10-K for fiscal 2022 (the “2022 Annual Report”).
Ciena has a 52 or 53-week fiscal year, with quarters ending on the Saturday nearest to the last day of January, April, July, and October, respectively, of each year. Fiscal 2023 and 2022 are 52-week fiscal years.

(2) SIGNIFICANT ACCOUNTING POLICIES
Except for the changes in certain policies described below, there have been no material changes to Ciena’s significant accounting policies, compared to the accounting policies described in Note 1, Ciena Corporation and Significant Accounting Policies and Estimates, in Notes to Consolidated Financial Statements in Item 8 of Part II of the 2022 Annual Report.

Newly Issued Accounting Standards - Not Yet Effective

In October 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08 (“ASU 2021-08”), Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers to improve the accounting for acquired revenue contracts with customers in a business combination to address recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. ASU 2021-08 is effective for annual periods beginning after December 15, 2022 on a prospective basis. Early adoption is permitted. Ciena is currently evaluating the impact of this ASU on its condensed consolidated financial statements and related disclosures.

(3)REVENUE
Disaggregation of Revenue

Ciena’s disaggregated revenue as presented below depicts the nature, amount, and timing of revenue and cash flows for similar groupings of Ciena’s various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies may differ across Ciena’s product lines, resulting in different economic risk profiles for each line.

The tables below set forth Ciena’s disaggregated revenue for the respective periods (in thousands):
8

Quarter Ended January 28, 2023
Networking PlatformsPlatform Software and ServicesBlue Planet Automation Software and ServicesGlobal ServicesTotal
Product lines:
Converged Packet Optical
$735,634 $— $— $— $735,634 
Routing and Switching119,505 — — — 119,505 
Platform Software and Services
— 73,445 — — 73,445 
Blue Planet Automation Software and Services
— — 15,405 — 15,405 
Maintenance Support and Training
— — — 67,891 67,891 
Installation and Deployment
— — — 34,575 34,575 
Consulting and Network Design
— — — 10,066 10,066 
Total revenue by product line
$855,139 $73,445 $15,405 $112,532 $1,056,521 
Timing of revenue recognition:
Products and services at a point in time
$855,139 $18,864 $3,982 $9,255 $887,240 
Services transferred over time— 54,581 11,423 103,277 169,281 
Total revenue by timing of revenue recognition
$855,139 $73,445 $15,405 $112,532 $1,056,521 


Quarter Ended January 29, 2022
Networking PlatformsPlatform Software and ServicesBlue Planet Automation Software and ServicesGlobal ServicesTotal
Product lines:
Converged Packet Optical
$540,936 $— $— $— $540,936 
Routing and Switching85,710 — — — 85,710 
Platform Software and Services
— 72,917 — — 72,917 
Blue Planet Automation Software and Services
— — 21,110 — 21,110 
Maintenance Support and Training
— — — 72,491 72,491 
Installation and Deployment
— — — 40,370 40,370 
Consulting and Network Design
— — — 10,909 10,909 
Total revenue by product line
$626,646 $72,917 $21,110 $123,770 $844,443 
Timing of revenue recognition:
Products and services at a point in time
$626,646 $29,682 $8,774 $8,491 $673,593 
Services transferred over time
— 43,235 12,336 115,279 170,850 
Total revenue by timing of revenue recognition
$626,646 $72,917 $21,110 $123,770 $844,443 


Ciena reports its sales geographically using the following markets: (i) the United States, Canada, the Caribbean and Latin America (“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. The following table reflects Ciena’s geographic distribution of revenue based principally on the relevant location for Ciena’s delivery of products and performance of services.
For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):
9

Quarter Ended
January 28,January 29,
20232022
Geographic distribution:
Americas
$765,096 $595,144 
EMEA
152,804 150,785 
APAC
138,621 98,514 
Total revenue by geographic distribution
$1,056,521 $844,443 
Ciena’s revenue includes $693.6 million and $543.5 million of United States revenue for the first quarter of fiscal 2023 and 2022, respectively. No other country accounted for 10% or more of total revenue for the periods presented above.
For the periods below, the only customers that accounted for at least 10% of Ciena’s revenue were as follows (in thousands):
Quarter Ended
 January 28,January 29,
 20232022
AT&T$149,981 $110,876 
Web-scale provider121,327 n/a
Total$271,308 $110,876 

_____________________________________
n/a    Denotes revenue representing less than 10% of total revenue for the period
The Web-scale provider noted in the above table purchased products from each of Ciena’s operating segments excluding Blue Planet® Automation Software and Services. AT&T purchased products and services from each of Ciena’s operating segments for each of the periods presented.

•Networking Platforms revenue reflects sales of Ciena’s Converged Packet Optical and Routing and Switching product lines.
•Converged Packet Optical - includes the 6500 Packet-Optical Platform, the Waveserver® modular interconnect system, the 6500 Reconfigurable Line System (RLS), the 5400 family of Packet-Optical Platforms, and the Coherent ELS open line system (OLS). This product line includes the WL5n 100G-400G
coherent pluggable transceivers. This product line also includes the Z-Series Packet-Optical Platform and Optical Microsystems products.

•Routing and Switching - includes the 3000 family of service delivery platforms and the 5000 family of service aggregation. This product line also includes the 6500 Packet Transport System (PTS), which combines packet switching, control plane operation, and integrated optics, the 8100 Coherent IP networking platforms, the 8700 Packetwave Platform, and Vyatta virtual routing and switching products. This product line also includes SD-Edge software and passive optical network (“PON”) routing and switching portfolio (“RSP”) components from our recent acquisitions of Benu Networks, Inc. (“Benu”) and Tibit Communications, Inc. (“Tibit”) respectively, during the first quarter of fiscal 2023.

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 offerings provide domain control management, analytics, data and planning tools, and applications to assist customers in managing their networks, including by creating more efficient operations and more proactive visibility into their networks. Ciena’s platform software includes its Manage, Control and Plan (“MCP”) domain controller solution, its suite of MCP applications, and its OneControl Unified Management System, as well as planning tools and a number of legacy software solutions that support Ciena’s installed base of network solutions.
10

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, cloud native, and standards-based software portfolio, together with related services, that enables customers to realize digital transformation through the automation of the services lifecycle. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), inventory management (BPI), route optimization and analysis (ROA), network function virtualization orchestration (NFVO), and unified assurance and analytics (UAA). Services revenue includes sales of subscription, installation, support, consulting and design services related to Ciena’s Blue Planet Automation Platform. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

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

•Global Services revenue reflects sales of a broad range of Ciena’s services for maintenance support and training, installation and deployment, and consulting and network design activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

Ciena’s Global Services are considered a distinct performance obligation for which revenue is generally recognized over time. Revenue from maintenance support is recognized ratably over the period during which the services are performed. Revenue from installation and deployment services and consulting and network design services is also recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period. Revenue from training services is generally recognized at a point in time upon completion of the service.

Contract Balances

The following table provides information about receivables, contract assets, and contract liabilities (deferred revenue) from contracts with customers (in thousands):
Balance at January 28, 2023Balance at October 29, 2022
Accounts receivable, net$1,054,917 $920,772 
Contract assets for unbilled accounts receivable, net$148,758 $156,039 
Deferred revenue$231,378 $200,235 

Ciena’s contract assets represent unbilled accounts receivable, net where transfer of a product or service has occurred but invoicing is conditional upon completion of future performance obligations. These amounts are primarily related to installation and deployment and professional services arrangements where transfer of control has occurred, but Ciena has not yet invoiced the customer. Contract assets are included in prepaid expenses and other on the Condensed Consolidated Balance Sheets. See Note 11 below.

Contract liabilities consist of deferred revenue and represent advanced payments against non-cancelable customer orders received prior to revenue recognition. Ciena recognized approximately $67.9 million and $56.8 million of revenue during the first three months of fiscal 2023 and 2022, respectively, that was included in the deferred revenue balance at October 29, 2022 and October 30, 2021, respectively. Revenue recognized due to changes in transaction price from performance obligations satisfied or partially satisfied in previous periods was immaterial during the three months ended January 28, 2023 and January 29, 2022.

Capitalized Contract Acquisition Costs
11


Capitalized contract acquisition costs consist of deferred sales commissions, and were $38.2 million and $39.7 million as of January 28, 2023 and October 29, 2022, respectively. Capitalized contract acquisition costs were included in (i) prepaid expenses and other and (ii) other long-term assets. The amortization expense associated with these costs was $7.2 million and $7.0 million during the first three months of fiscal 2023 and 2022, respectively, and was included in selling and marketing expense on the Condensed Consolidated Statements of Operations.

Remaining Performance Obligations

Remaining Performance Obligations (“RPO”) are comprised of non-cancelable customer purchase orders for products and services that are awaiting transfer of control for revenue recognition under the applicable contract terms. As of January 28, 2023, the aggregate amount of RPO was $2.7 billion. As of January 28, 2023, Ciena expects approximately 90% of the RPO to be recognized as revenue within the next 12 months.

(4)BUSINESS COMBINATIONS

Benu and Tibit Acquisitions

On November 17, 2022, Ciena acquired Benu, a portfolio of cloud-native software solutions, including a virtual Broadband Network Gateway ((v)BNG), that complements Ciena’s existing portfolio of broadband access solutions. On December 30, 2022, Ciena acquired Tibit, a provider and developer of PON-specific hardware and operating software that can be integrated into a carrier-grade Ethernet switch and will strengthen Ciena’s portfolio of next-generation PON solutions that support residential, enterprise, and mobility use cases. These businesses were acquired for an aggregate of approximately $291.7 million, of which $244.7 million was paid in cash and $47.0 million represents the fair value of Ciena’s previously held cost method equity investment in Tibit. The acquisition of Tibit triggered the remeasurement of Ciena’s previously held investment in Tibit to fair value, which resulted in Ciena recognizing a gain on its cost method equity investment of $26.5 million. Each of these transactions has been accounted for as the acquisition of a business.
Ciena incurred approximately $2.5 million in acquisition-related costs associated with these acquisitions. These costs and expenses primarily include fees associated with financial, legal, and accounting advisors and employment-related costs. These costs were recorded in acquisition and integration costs on the Condensed Consolidated Statement of Operations.
The following table summarizes the final purchase price allocation related to the acquisitions based on the estimated fair value of the acquired assets and assumed liabilities (in thousands):
Amount
Cash and cash equivalents$14,634 
Accounts receivable, net443 
Inventories, net1,406 
Prepaid expenses and other810 
Equipment, furniture and fixtures1,090 
Goodwill117,997 
Developed technology75,400 
In-process technology89,100 
Customer relationships and contracts18,400 
Order backlog2,480 
Deferred tax asset, net(27,782)
Accounts payable(420)
Accrued liabilities and other short-term obligations(874)
Deferred revenue(851)
Other long-term obligations(144)
Total purchase consideration$291,689 

12

Developed technology represents purchased technology that has reached technological feasibility and for which the acquired companies had substantially completed development as of the date of acquisition. Fair value was determined using future discounted cash flows related to the projected income stream of the developed technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Developed technology is amortized on a straight-line basis over its estimated useful life of five years.
In-process technology represents purchased technology that had not reached technological feasibility as of the date of acquisition. Fair value was determined using future discounted cash flows related to the projected income stream of the in-process technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Upon completion of the in-process technology, it will be amortized on a straight line basis over its estimated useful life, which will be determined on that date.
Customer relationships and contracts represent agreements with existing Tibit customers and have an estimated useful life of three years. Order backlog is amortized over the fulfillment period.
The goodwill generated from these acquisitions is primarily related to expected economic synergies. The total goodwill amount was recorded in the Networking Platforms segment. The goodwill is not deductible for income tax purposes.
Pro forma disclosures have not been included due to immateriality. The amounts of revenue and earnings for these acquisitions since the acquisition dates, which are included on the Condensed Consolidated Statement of Operations for the reporting period are immaterial.

(5)SIGNIFICANT ASSET IMPAIRMENT AND RESTRUCTURING COSTS

Restructuring Costs

Ciena has undertaken a number of restructuring activities intended to reduce expense and to align its workforce and costs with market opportunities, product development, and business strategies. The following table sets forth the restructuring activity and balance of the restructuring liability accounts, which are included in accrued liabilities and other short-term obligations on the Condensed Consolidated Balance Sheets, for the three months ended January 28, 2023 (in thousands):
Workforce
reduction		Other restructuring activitiesTotal
Balance at October 29, 2022$1,215 $4,620 $5,835 
Charges704 
(1)
3,594 
(2)
4,298 
Cash payments(1,498)(8,214)(9,712)
Balance at January 28, 2023$421 $— $421 
Current restructuring liabilities$421 $— $421 

(1) Reflects employee costs associated with workforce reductions during the three months ended January 28, 2023 as part of a business optimization strategy to improve gross margin, constrain operating expense, and redesign certain business processes.
(2) Primarily represents the redesign of certain business processes associated with Ciena’s supply chain and distribution structure reorganization and costs related to restructured real estate facilities.

The following table sets forth the restructuring activity and balance of the restructuring liability accounts, which are included in accrued liabilities and other short-term obligations on the Condensed Consolidated Balance Sheets for the three months ended January 29, 2022 (in thousands):
Workforce
reduction		Other restructuring activitiesTotal
Balance at October 30, 2021$781 $— $781 
Charges410 
(1)
2,999 
(2)
3,409 
Cash payments(421)(2,999)(3,420)
Balance at January 29, 2022$770 $— $770 
Current restructuring liabilities$770 $— $770 
(1) Reflects employee costs associated with workforce reductions during the three months ended January 29, 2022 as part of a business optimization strategy to improve gross margin, constrain operating expense, and redesign certain business processes.
13

(2) Primarily represents the redesign of certain business processes associated with Ciena’s supply chain and distribution structure reorganization and costs related to restructured real estate facilities.

(6) INTEREST AND OTHER INCOME, NET
The components of interest and other income, net, are as follows for the periods indicated (in thousands):
Quarter Ended
January 28,January 29,
20232022
Interest income$7,121 $754 
Losses on non-hedge designated foreign currency forward contracts(1,769)(4,259)
Foreign currency exchange gains (losses)(1,889)4,766 
Gain on cost method equity investment26,455 4,120 
Other2,055 (1,694)
Interest and other income, net$31,973 $3,686 

During the first quarter of fiscal 2023, the acquisition of Tibit triggered the remeasurement of Ciena’s previously held investment in Tibit to fair value, which resulted in Ciena recognizing a gain on its cost method equity investment of $26.5 million. See Note 4 above.
Ciena Corporation, as the U.S. parent entity, uses the U.S. Dollar as its functional currency; however, some of its foreign branch offices and subsidiaries use local currencies as their functional currencies. Ciena recorded $1.9 million in foreign currency exchange rate losses for the first three months of fiscal 2023 and during the first three months of fiscal 2022, Ciena recorded $4.8 million in foreign currency exchange rate gains, both as a result of monetary assets and liabilities that were transacted in a currency other than Ciena’s functional currency. The related remeasurement adjustments were recorded in interest and other income, net, on the Condensed Consolidated Statements of Operations. From time to time, Ciena uses foreign currency forwards to hedge this type of balance sheet exposure. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income, net, on the Condensed Consolidated Statements of Operations. During the first three months of fiscal 2023, Ciena recorded losses of $1.8 million and during the first three months of fiscal 2022, Ciena recorded losses of $4.3 million from non-hedge designated foreign currency forward contracts.

(7) INCOME TAXES

The effective tax rate for the quarter and three months ended January 28, 2023 was higher than the effective tax rate for the
quarter and three months ended January 29, 2022, primarily due to the mandatory capitalization of research and development expenses in the first quarter of fiscal 2023.

(8) CASH EQUIVALENT, SHORT-TERM AND LONG-TERM INVESTMENTS

As of the dates indicated, investments are comprised of the following (in thousands):
 January 28, 2023
Amortized CostGross Unrealized
Gains		Gross Unrealized
Losses		Estimated Fair
Value
U.S. government obligations$89,789 $— $(2,473)$87,316 
Corporate debt securities16,356 1 (7)16,350 
Time deposits41,022 — — 41,022 
$147,167 $1 $(2,480)$144,688 
Included in cash equivalents$