CALX - Earnings call transcript Q1 2018

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Operator

Greetings and welcome to the Calix First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Tom Dings. begin. may you you, Thank

Tom Dings

as Thank you, joining on Thank for Carl afternoon, call, Cory Financial Sindelar. and QX, XXXX good Russo; CEO, our and Today have everyone. as Earnings Chief we Officer, you President operator, well Conference the Call.

this released to consist the at the a a XK prepared conference Calix The remarks. In to Letter an section is our we Calix stockholders in only. Section reminder, available As this lieu of as Investor and of The well question Relation call, call for letter and any answer stockholders Filing, as afternoon, audio we Investor on the the be will replay website. in website. Relations

may financial and open is conference please Stockholders. A of this for and Letter respective and to as that operator included to session, this forth statements, discuss Letter And Calix and non-GAAP to to of set Factors from start today's cause Before dates. in make turn future are forward-looking strategy, forward filed refer statements in we call the quarterly statements. measures. our results we With our we GAAP results the that will in Also that GAAP both with growth non-GAAP no to to the financial answer remind and their stockholders contemplated which materially update call only questions. in you these we include all statements, speak annual those obligation trends looking and to the call, reports reconciliation on call actual to which performance, about actual measures our to we operating by want operator, assumes SEC. market the question differ over differ any could forward-looking and outlook. materially

Operator

conducting go you. Marshall Meta Our [Operator Stanley. ahead. from question Please Morgan we'll this time, Instructions] question-and-answer-session. Thank is At a be first from

Meta Marshall

Great, thanks guys.

more this On where then that, it CAFX, predicting have where your M&A of CAFX start surprised? review largest just slowdown difficulty post was to more implementation or the they expected, the couple I'm you read rest year visibility second but be a shortfall, were fallout you're just post of as with. having kind services understanding quarter-to-quarter side into finish you full you seeing shortfall And for of in product the the maybe slowdown customer, helpful. might basis and just Just the on that the kind where of on their them a is on or kind convey would letter, post

Carl Russo

Thanks Meta and good afternoon.

me let way with of to do revenue it mix our new we're revenue re-characterize address it do a products, with thinking customer standpoint. So, the enough, to through is actually first. is interestingly The where legacy heading actually versus of less from more more part sort I

some As letter, new we've same you well. doing revenue number noticed products of side the really the actually new customers and had And theme the in a around revenues that transitions, of the legacy example, predicting going arms getting as projecting our some they're you now, quarters an through. of some the of as and customers the on stockholder actually to for that are from through go I challenges back very around they are wire-line our

by make you see can all on that, platforms, new and which by customers the So you fit offset way show the up the in margin and line. was new actually we're driven the sense? on for what by Does lightness really gross revenue that seeing

Meta Marshall

sense. makes That Yeah.

Carl Russo

to processes, continuing purchasing new we're governance strategies work process and your in their processes internal Okay. question they And then really how to capital their and the about CenturyLink, your understand message starting works. there change direct is no through are

bullish their to it's taking on on bullish there imagine than very remain help might succeed I is you work thought. and really them and them standpoint, longer to bit than a other change very strategic we our as no opportunities ability there succeed time the For through little strategic perhaps so process to the

Meta Marshall

customers? in smaller customers letter kind like, where the then And Calix through your the on of point Cloud, know, of can that you there tier X is traditional products uptick noted seeing it and product you customers there, success you customers with smaller new of but AXOS most tier you kind the your Okay. just across like couple maybe are is the is WiFi X or

Carl Russo

if from our as side are We the three network essence then we it seeing and from -- in product about side. standpoint, from premises of Calix legged a uptick stool, thinking Cloud all across the

standpoint, the your are smaller well premises to revenue in well. is be question But the from going is actually network cloud than around three revenue doing very in a side. the very, all If

Meta Marshall

kind is products that, since guess get growth speakers]. just of customers network part a of the new the [multiple still traditional uptick just sense a of just I or that And was kind of in newest to trying is and premise of material side side,

Carl Russo

Okay.

I give little So see a if let you can me there. bit more

And a EXOS to. some like now. the EXOS is the market to is subscriber coming on quite but our continues third Giga been generation the time weed family our edge, was remember for growing So Giga second generation, has it's the and family.

very opportunity for bullish opportunities subscriber the on on for are So edge we growth. the

you So are all AXOS showing dollar but Calix great that's and area all growing have different clearly will think a different revenue are grow. growing sort dollars at an they Cloud growth. through are our they Having of three that, that as Analytics continue just that's and grip licenses, margin to said to and being are

ILACs really us, smaller sort segmented growth the the us the for sort to in or whether of diversification. as me into are is or of municipalities ILACs or what's of customer think as because [ph], hospitality far CLAX ILACs. or both species for very As tend traditional well cable customers small of We all is revenue whole good customers, you providers, as opportunity they customers or the small segment as [ph] MSOs utilities electric count. And that the of

at base pretty revenue our steep clip. diversify to a continue we So

Meta Marshall

Thanks. on. it pass will I

Carl Russo

Thanks Meta.

Operator

Instructions] [Operator from Williams is go Hamilton. Drexel question Our ahead. Please from David next

David Williams

Good for want first movement guys. talk a thanks evening bit Verizon I everything has Hey, and to if maybe there, I questions. last see guess little wanted ramp to are you any about taking and since maybe if seeing you changed quarter. my

Just Verizon. any update I guess on

Carl Russo

all a heading and We company point be with where about be continue to Verizon very we at progress continue And to in to than ship would continue alignment with that's to willing we think it. to mean I our excited this say Verizon. other I time as they are and

David Williams

before still thought said be forward, still maybe had going you that I you guess you they -- comfortable And it could that customer. at Is that think still with size be you you are could [ph] that? XX% how

Carl Russo

are, think this yes, possible we certainly we In any in long-term given and that's quarter that David. year

David Williams

how orders? Thanks. it does have does do obviously and flood year the are what rest back maybe think you year of all release And that and slowly unfolds in guess, we then are you come April Kind constrained creating thinking into I that of the demand the thinking are maybe been about just pent-up constrain budgets or get held does some low -- the maybe half of at up, back budgets to this that not or of the a come how 's you you but maybe once? preparing the for get in comes

Carl Russo

is wireline So specific more folks, would that I publically think a referring traditional be you is there are traded customers that that of set to there correct?

David Williams

Yes, sir.

Carl Russo

in CapEx that I So though their off not would of think know do but the to be typically up indicate when Street would are that for that sort There the just to too i.e. is that much people I start, catch case, holding to lots to we customers they of that to David. systemically messaging be slow wise that projection year, the even a would are on is happens, CapEx on do. there it's hard later a recognize

will expect I pick that know do spending than be case, catches it less I to to the think up, any us if albeit, wise year. So previous to for that's we sit and up think it of not

that help does So you?

David Williams

exposure one the opportunity and to What guess did I between dollars with III I CenturyLink guess and potential some had then does, opportunities level question. you making and It pick budget previously And CapEx maybe increased a appreciate I combined that. with what or there CenturyLink Level last up with acquisition? is X, there

Carl Russo

and not So, fiber-based, strategy exposure have forward, see we're your encouraged serving none, for think they around services, early yeah, X, that To then what and think we and did given level are about CenturyLink, higher historically. from coming we direct combined what as and might it we and new be, to strategies alignment answer think the and I be, might significant their an the going what are markets there. the think it by their signs that their they see through were and as we history opportunities question likely were more strategic where what to -- speed very we we is

an But through again, that, those they're working do we So, just things. still for I'd opportunity yes, see strategic maybe you growth. caution

David Williams

on one then last the on guidance… if I the, And may, Okay.

Carl Russo

Please go David, take ahead your time.

David Williams

just that in guidance, release to on Sorry, a guidance the tended I much front the you that thought, on of guess your provided? kind revenue and be of to giving being better of It comments today, this the just just the that how guidance have you I stay maybe risk quarter. it budget is little I'd are you seems than on would have some is that of visibility what shortfall

Carl Russo

think how tell let this give I'll little I'll And question me maybe to, what, going you and answer of I'm first. through. on a do bit color So, well, that you let you this Cory

guidance very total we're is of customers, the seeing our diversified laid our the to which we're new good think uptick messages platforms continue and favorable I in I just reviews out products the seeing and marketplace. have amongst is very sum

seeing just on that's margin. the we're So, gross

on the customers. attenuated somewhat what's On at of we're revenue understand to because these going trying side, being

mean, on you're see segment. days, going a still XX gross to to the the bit But, us going disciplined we're on of growth to so grow company, next And it OpEx profit cautious we're I of fashion. a speaks sort in little as continue hands revenue where very see keep and some together on to in you're continue going to

add? to color any Cory So,

Cory Sindelar

say probably of you bit QX, that little and from making from uptick with where difficult the purchasing just cycles part up see QX. a the it's seasonal pretty of increase it in QX I'd to shortfall a and

David Williams

you the certainly appreciate to the on for and best Thanks quarter. of luck color it, guys. I

Carl Russo

David. Thanks

Operator

Christian [Operator Instructions] Our question Schwab next go Please comes from ahead. Craig-Hallum. from

Christian Schwab

Thanks for question. taking my

let also your was the dollar that customer service understand, CAFX of percentage a expectation might far versus and key is then can that CAFX So, you in for it amount rough all product? been as us at was have It XXXX. just what that of customer

Carl Russo

So, CAFX, could we never sure that broke we deliver on out to say it. we were other making focused than

break out I service -- For do I'd you have this. be versus about product Cory doing of very a careful mean,

if our margin on services see our quite can if from services the I you were the up. look mix me bit was of as it services QX, while Let same a revenue time, differently. down at in at previous percentage comment gross mix year, Obviously, a the

I to what's very it. CAFX their we're probably fashion deployment services I But controlled against CAF, in say extrapolate deploy as So, you is cover the think on a the would can the happening start way continuing a standpoint to side, I'd program. and question from from

Christian Schwab

Right.

saying So, in quarters, what last to you've another been said the line with way. few

other we've Now, overtime, as that kind the held view structured other improve poorly of talked in basis? go your that us kind that of is put that that together of, a things in, of service profitability fundamental layered will that, done people forward is about as kind point agreement on CAFX maybe still back

Carl Russo

giving sure, you it is, other a of one because those pass, me to was people for that make me. except Well, you it I did correct

it gross snap the letter, services at what that services we as and is gross the the stepped and CAF Page services quarters, much exactly things, as shrink at in grow margin better grow to we last in also you services. execution it's platforms been the of the So, is grow, margins. from along I higher back margins driving services and against but with discussed the as the gross are and things. other expect product in on the in deployment we've we've few as our saying I'm there, it for and stockholder them look if to what one as in look are the percentage margin margins, go two you'll continue X, see think and services we've that a the revenue, themselves But that going that first then at expansion attached get you what's And we'll happened this profitability place

to So, yes, your point, exactly consistent.

Christian Schwab

How those with product migrations I seeing little that is been of customer thing a as and long-term uptake successes about platforms, that takes, talked that know this that longer then, as multi-year beginning far it And as target, while. as anticipating talk really that really you're to Verizon far bracket million we your Perfect. about want at and for you we've a $XXX do or a we ramp, to kind that reviews new point?

Carl Russo

to in perspective. year, us the here's cautious you I to moment revenue to let's what can about the model. the be I do side be what I seeing this spend and early bracket I on flip it, but that But growth it's a -- because sure want don't tell causing revenue want from make we're is,

that tell on. set predict new our certainly right there're can are and look that growth the rate are your what's of on out very point, busily X, our we're uptake. a think customer you the I chart of margin to revenue around overtime now that And that things now challenging our growing and you get are and on new customers Page revenue and is model. gross control. X, we I platform our all control, question OpEx really can realize now at how there're to There're the base and the But things expenses is, Page to and chart operating in

of So, far a future, put execute to on as it. we're our bracketing levers, those what the I go to sort are of the want inside planning the date But against. in clearly not as way it. It's with it's wouldn't

Christian Schwab

us, out any letter best read we the everybody's other thank all don't time. But with of use That's the information, reading to great. because will have putting instead can I of all you the say, I questions. for it for

So, thank you for doing that.

Carl Russo

that it. You're in tired Christian. know also you throughout were I'll you both we we were, it much welcome. take so And And and very long spirit thank speech. probably hearing us I that a of appreciate

Operator

Jefferies. next Please Our from Instructions] [Operator question is ahead. from George go Notter

Unidentified Analyst

Hi, is for this on question. a Thanks lot for taking Kyle George. the

services result it nice quarter. I margin for business. gross two, the margin by specifically back and way revenue with to of result One progress circle and your lower the that how the services services of forward? careful a there mix business this we want And the should services be that to was gross in noticed the terms just quarter going forward of How trajectory type professional to current rest in this year? going in quarter? or projecting What is the of trajectory engineering higher the was know indicative

Cory Sindelar

Yeah.

waiting seeing as told deployment types So in the margin services relative amongst execution of terms What make-up Carl still as you of you're the the services. largely a the better about, is improvement. different is

progress see we total coming balance of it about a percentage amount of continuing that the of year. We services, the as significantly continue total that year, will trend that be and where for to as is revenue. the expect through the a down We as

Unidentified Analyst

of thanks. seasonality end project through we should the business of type should timeline Okay, kind shape kind services lumpiness about the about CAFX like then, where just terms think the the And of through year? should in the any into there this are through topline of business? -- look for the we the How services of any think there Is that looking way year? it we end year, of be ramps the at year this the

Cory Sindelar

Yeah.

typical other I'll to thing of particularly adoption in out, prior our like So, years seasonality have services see with complete. the curve, you think point XXX, now going and are seen I contracts our a you're

completed So, progression being it's going it might've terms little would in past. and linear as to of be the a been to revenue more bit opposed as it as lumpy contract in

Unidentified Analyst

business diversification pick is like you if see in up merger slack visibility at saw customers, and terms the benefit may in of tier being related Okay, you Thanks. [ph] nice customer your great. can to the anything and there, me, the backup looks when last And else to impact some the of what smaller That X. from trends for some add there said, larger one weakness any? picking

Carl Russo

to right go but a for to customers spoke do they're to work I some for them to want it. and when and of to help We our company, and succeed. it us But very grew bit with wire customers it of Yeah. little before them. through best is line challenging good now a happy set up an we as call hand with a first found we're initial

so, projecting revenues. on cautious we're very just And

that is prospects, inside our and our platforms ability customers, being expand base of and customer grow and said, So, those actually to the to applications continuing unabated. new reach our expand new

profit And cautious growing. sets the So, base it a very gross think, thing that's do. that's just prudent on only to customers, those robust business I forecasting we underneath will be the

turning believe up, lot off you catch I so and we're if being you being there far cautious that disingenuous, a they'll better the I a saying the their just served As folks behind, to does fact it's think is catch just question up. of from or I that to hard heard to are they're by numbers, start, get going around, don't the about think very too a dishonest David, that they're if as far they're hold mean earlier CapEx to slow question asked up.

about our customers forecast on we're gross be going being focus OpEx. that growth So, driving disciplined our very muted we're to to we're that going profit sure we how making and on we're those and

Unidentified Analyst

great, a Okay, lot. fair thanks enough,

Carl Russo

Tell Kyle. prays George much for very you us. our Thank

Unidentified Analyst

will. I

Operator

for back comments. like the if no I'd And any Dings to floor Mr. to closing questions, turn over Instructions] [Operator further

Tom Dings

call call. everyone this on your you for us thank operator. now. the joining for bye on Once today. interest Calix in you and thank concludes conference again, Thank This webcast and Good for our you

Operator

teleconference. today's concludes This

your time. You your participation. at this again lines may for disconnect Thank you

Calix (CALX) 8 May 182018 Q1 Earnings call transcript