CALX - Earnings call transcript Q3 2018

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Operator

Greetings and welcome to the Calix Third Quarter 2018 Earnings 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 your host, Tom Dings.

Tom Dings

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

our Relations As this replay available X-K as website. The of as a well for conference section in Calix section Stockholders the Relations Calix afternoon, released audio filing Investor reminder, on of the in the Letter we call an Investors to the website. be will

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

Carl Russo

open some remarks then up I it to Tom. make questions. Thank brief will you, and

I'm the it disciplined financial and OpEx by per range share us an report to enables growth, gross quarter Calix of $X.XX high in of very With the income, investments, predictability. was team. better net metrics or our were happy end revenue deliberate all execution than guidance to non-GAAP platform expansion, above margin guidance that increased our all model ranges. excellent Our deliver

validations our our unified complete us discussion of we brings comments tariffs. we their new base respective we specific from which Vodafone highlights speak CityFibre of highest CityFibre Kingdom many and businesses. are XX new Calix million per like Also customer While the many Verizon's infrastructure two. a are means there both addressable and quarter build exposed revolutionary companies up will year-to-date. that customers AXOS XX for to built is have market platform. us in continue represents services pace validation Like are to broad-based to not per in are X United without about platform. expand cloud, to to on. fiber the cost at to and are access is building and AXOS My which be Verizon - only their our customers our U.S. infrastructure. global bit others CityFibre tariff. the quite would homes as and joined a infrastructure lowest compelling a with mile reach AXOS to I working a torrid model capacity wholesaler would CXOS adding a state-of-the-art they of provide This the interesting chain deploying to broaden supply CityFibre retailer contrast

no more unlike last companies the other to quarters. However expect most impact we for three than

going of We to platform our we our chain accelerate take have been reengineering work. advantage the already to remaining supply and simply are

being to of have these U.S. we the decided customers. pass tariffs to term our impact short on the costs With not

of cost and financials. fourth guidance and want revenue we our not into the our Our to to revolutionary include in you $XX focus XX% this platforms and the mind million per this download strongly tariffs tariff for quarter clear for non-GAAP million the our of market to sales million each on share. team margin remain third that in will quarter non-GAAP ramping effort. Furthermore is net our the to marketing With are related we of $X.XX U.S. of of Calix. I OpEx and encourage future $X.XX into the to With view get and $XXX the $XX million, the on to stockholder income XX%, gross and details all $XXX letter

Let's open Operator? for the questions. call

Operator

[Operator Cowens. Instructions] Silverstein with Our line of from proceed question. first question comes Paul from the Please your

Paul Silverstein

and year, new Thanks. the you customers question The Carl, small larger question, the of XX to many? XX how which that's question. just brings small out the for

Carl Russo

of You a as company? mean customers have how we out do many

Paul Silverstein

Correct?

Carl Russo

mean, I take. between roughly customers or give we have X,XXX X,XXX and

Paul Silverstein

access, or XX for new those customers access all cloud? were either And

Carl Russo

Quite literally, all. virtually

have our obviously new weren't. think two been may there or that new drives platforms all that customer acquisition. is one I our But it of

Paul Silverstein

if me wrong. correct am I And Okay.

You guys for is revenue access that cloud, out access, and aren't yet correct? breaking

Carl Russo

correct. is That

Paul Silverstein

Okay. it. At point plan some to you do

Carl Russo

There's no to you can't predict plans future. current do it, the

Paul Silverstein

cloud you're and like seeing could access, Okay. data quantitative in to insight with qualitative Any sizable respect you of seems opportunities. up. The larger access can would a horizon what question, some offer you beyond take preferably points but share? city I Or that what say regarding metrics fiber

Carl Russo

but share ramping. qualitative I you can quantitative with Yet. Not all that they're

we the fact me those their of ramp start we customers the to the folks. you on shape connections happen sort of attached of our complexity ramping an edge, over newly our been our expect these fastest as I the is, as going early ramp that faster up models. help network fourth as of hardcore But three. through are give in a it's and ramping that But of Calix understand of up adopter especially the network help edge, a I user not refer and certainly monetize. sense, captured now businesses. a to just XXXX. It better and So are deploying. to is system quite Cloud our those to up. It business just a the since his a wrapping if of into for continue expect its are to customers broad excellent subscriber customers than now as can are few Greg doing start to group are time. But the really manage we have see, we're networking seems came AXOS And But that power be transform operating AXOS remember, really even starting job because and their on subscriber it's imagination to steepen. may we program prospects as course, offerings customers been only them decisions service the I services let believe, the clearly of which to helping it's period market, to I ramp have what XXXX. of team platforms the The going see well an off but

better my expectations, the of or coming connections. at moving all energy qualitatively especially off than get So

Paul Silverstein

enough why From My plus reason excess model? your more perspective, off hard apologies, any people the any up percent Is decline if platforms But margin look grow I also predict to a other is there as couldn't wouldn't base. as cloud on margin in recognize reason question. be a XX small ask road, down you legacy could be structure this there near-term. or call, one why to I the

Carl Russo

I revenue term. I start obviously way focused and statement. future in and long business, know XX certainly It the what's go to happening and if way, or and is where way, could understand we're Paul. sooner you XXs. don't flow extrapolating at to long in made be ebbs on the deliver near-term $XXX margin points, in revenue. the that million But very the above a that's you Well, start incremental way,

throw there's it. So But can't such no range reason I long it a that be. wouldn't that's start

Paul Silverstein

Out you. others All of I will right. consideration pass it on. to Thank

Carl Russo

Paul. Thanks

Operator

[Operator with question. of Notter from Instructions] comes the from Our George question next Please Jefferies. proceed your line

George Notter

customers from here. help very and so there I'm I the Maybe customers the is quo, rate faster in right away like decision new to so switching traditional some understand products more now? line, products products? me same AXOS along to Hey and Is the ask and are can't that, under quickly this What the the incumbency the But of me guess traditional customer let of also you I EXOS. move from inhibits are status costs customers why assume pushing moving run AXOS kind much. it on revenue even guys, EXOS it interested back there still way systems of transition if thanks

Carl Russo

our Well, of forward. so TAM expansion approach great question approach so from them we platforms let's make all going we're understanding sure George. how We first,

fact start So us our in goal our to allow TAM. would address first used was to cases that expand to

investment the sort Intelligent trying Lap, can customer that Network think Edge you from then back to in work because R&D. the and return your delay biggest you you're simply your sure existing that back customers, your getting to make of you're just trying into base, way regards NG-PONX, on not if you're make So Verizon, you

What but of your do being question cards directly to AXOS are the it line on comes in the AXOS your to the GPON case now point value understand we're out to and or that going AXOS XX is coming it there cards other it. to exists allowing a force migrate not So the slowly of new line the so line than literally and and available card giga customer. the that aggregation it surely run inside after EX value discount that to line in is are nothing so market. customers cards to There the in down see

them. let to value address stay are literally more in AXOS That and But this decision So EXA. year to step on rate swap line used is year. help the them to see up AXOS If more availability next we're we'll what occur happy is to on can be perfectly will now and happy of to customers happy they obviously of they make occurring earnest that attenuates that cards that EXA and just cases.

George Notter

I on of anyway you in total your shipments of to be sort just now right card cards out quarter line curiosity. mix measure those might look the AXOS it, line of if mean of availability available that at Got what

Carl Russo

way there's Yeah a measure. to

I that think you're me share I asking measurement that you, is with right? will

George Notter

Correct.

Carl Russo

the fiber now is still on we're Yeah, and early focus so side. right the days

XXXX. year From will let before adopted but ramp in line available access knock will in they'll cards programs fiber standpoint and early be some them to be So me line the access the all the continue the substantially to if can essence see will end be - of all all thesis. available and shipments volume fiber I on of of before for a our basically cards the

George Notter

mentioned just back that below customers decided you you and helps. about on those China wanted doing you to doing as wanted Okay, it and great, I back then And go can the many it right then come pass you taking to about counter why surcharge ask the side, well. not but So you're component us like also tell sourcing? the what the mitigate tariff exactly us what that to something on on to Thanks. impact is tell are manufacturing also situation you guys a now? ask companies can try And to other to themes as seeing we're and to plans

Carl Russo

various to fourth And reason there are great, for frankly as from counter utterly hardware. because in So began answer four platforms counter hardware platforms. abstracted manufacture it in change we know year platforms our We've the and now so we're way networks our develop the is going the because years been platforms we ago on design you the are our and it's started fully the running XXXX, we and is, developing is we've forms. and the been

contract been product our or JDM our systems slowly chain percentage are called have ODM operations which who much what team in So but relationships means greater heads a surely manufacturing. model, supply and with are realigning in our of developed Mehdi, platform in our less his

continue re-engineering course Our original to and the year. next that it plan of was over complete

So what tariffs up. come the happens? Well,

our under have will be to such, plan. you quarters, that can maybe basically couple what our our that three want doing customers, tariffs our based we as work remainder upon of it. now our a is on the exactly marketing and and we the explaining and our the from and believe volume of opportunity a understand tariffs decisions on Once accelerating given question tariffs the you keep platforms, energies folks cost opportunity and reengineering opportunity focused is on no ramping a steady we the pass platforms new our to we So to extent infect and or you're and the our And high very looking quarters. to platforms focus cost state marketing we if the the and strategic Calix folks so accelerate more supply out of of which of decision it. simple. would were mature, ramp But will those we these want on AXOS, the them take want to do of the on asked, If have exposing is the decisions. correct statement new Cloud you Do about we we new tariffs, sales the sales chain to simply with company, customers cost that getting EXOS at

hope that your I answers So question.

George Notter

it. good. much. Thank Very Got you very

Carl Russo

Feel George. by way. Thanks, better the

Operator

comes Our Schwab from question. from Craig-Hallum. the of Please with proceed next question [Operator Christian Instructions] line your

Christian Schwab

quarter Congratulations I on maybe over to end would to million one near-term, say, able question. get do you feel a margin being your solid I $XXX gross plus In have XX% guys. in only target, the imagine revenue? better? quick about yearly Carl,

Carl Russo

million? can think rephrase to $XXX to your in I'm heard the before question you Christian, you which So way it I it do is, get going

Christian Schwab

Yes.

Carl Russo

is model. not a to view change give we And just the mechanics we clear about how So we're our and changing your answer But do. we're let work, to good you that until not me question yes, qualifier. The a have model. going

see think as you over by transitions whatever. off And COGS, systems. that AXOS along up some accelerated family course the you there our do it lifecycle are when that things, ramp product what George's and in what don't coming or or first in show you generation leftover of ESA that they and we Giga up show back because OCOGs, those it our had comes But components things If systems. way, to of EXOS the with may be this year on question,

So I directionally the line you're that sight. us make we yes, would get next to sure a answer to question your of be to in question cautious year is correct. clear want But the your

Christian Schwab

Verizon? you one just as categorized the guess ramp I would a up, opportunity to of fiber compare customer? follow you How full could the Great. to quick previously eventually Verizon kind would

Carl Russo

great It is substantial. It question. is, so

on at funding to CityFibre Kingdom. drive literally in it. So businesses committed to CityFibre in just and they're customer $X.X because Vodafone, driving let's look homes fact, million to, in United X their the homes the closed and driving what's that's billion to that a

from connection, to statement statement and the pardon the this made the they're within next going they're on wait going And and stage to was years. stage CityFibre the do that So Nash me. try - on made X

a million those at and you're So when you rollouts talking start looking about endpoints.

way multiple But that than customer and that we when try be. probably sure we say wanted what large it's be every are. can just Let's large smaller that make things to Verizon could look, said one year. There over doing we you years, back add that would ramping

Christian Schwab

Thanks. Great. No other questions?

Carl Russo

Christian, much. so thank

Operator

[Operator Capital Please from Savageaux the ahead of with question. line from your Tim Our question Markets. next comes go Northland Instructions]

Tim Savageaux

that question more guidance. afternoon of Hi, was and results good timing CityFibre you and Really follow on of, kind congrats that question of a in the terms ramp. expect when to

more the opportunity? color timing of revenues in any have but ramping in thing, that You you can a terms quarter. see in down of guessing the International ticket the 'XX I'm that's do maybe a of

Carl Russo

opportunity on on work because XXXX as from lot you're ramp do. correctly at pretty over to that is over going that committed but The of see there and going to think XXXX. see to team particular continue Well, CityFibre you to that going got they so this stated you're rapidly I a

Tim Savageaux

a landscape competitive talk as of your terms situation for the perhaps is in on using able landscape comment of this of and maybe assume the differentiate proxy was when any and microcosm CityFibre what can sort not as usual CityFibre typical competitive question, competitive general Calix's might the I of substitute how or kind that? for or a the about that to kind could you suspects that, maybe - in be of Great, opportunity be maybe to a relative other

Carl Russo

sensitive. allows might interesting a a Well, CapEx looked other bit, AXOS wholesaler very are decision OpEx the they it's is might that but so things I what and along what per OpEx and doing as for obviously is mile, reasoning key imagine known AXOS to to us that comments else. cost not they a and spoke but because and imagine basis. anything me per think well And per opening we're subscriber because with on you CapEx certainly way sort quite and that CityFibre, it's great are is thanks why quite that's deploying, infrastructure. well are go. differentiation of get to it in-go the sensitive we're the question that right you understanding asking to what lowest far do said drove that is a Tim, my targeted efficient collapse also the in AXOS network more way But to at they to that's [ph] literally as wholesaler The I the

If what you building subscribers, doing, all their network. Verizon renting can same Verizon sort of network And the network. actually they're not is is the their anyone. providing retailer they're with doing compare what building to ultimate they're out to They're services

have it clearly it's the prospects right all at network models these continue where is and So down renders to path. focused the you counterpoint that same business two going this and me going we're finding of very I pretty minded clear to think on stay going solution, arriving

Tim Savageaux

Is your would of would the you of renting form if out you software versus your or more network kind as describe differently? the there to two they perhaps how cloud those are product used flexibility advantage advantage retailing cases

Carl Russo

native multiple and and up exists very same run time. thing does CityFibre and because them a That's the as actually doing a it that answer almost customer to themselves potential their expose and cost telemetry allows network stupid same the to have from and the net dial it intelligence to customers network at know yes, allow and fully the modeled interface the in a AXOS question you is yang

advantage in way. in fact a quite AXOS does it unique So

Tim Savageaux

Got letter quarter and within can? you to it, of and - what speak the XX% may quarter and overall missed have but it been somewhere in you and this maybe if are can concentration the the may I in have customers levels

Carl Russo

it's the customer customer. of ability have more the business can more systems as XX% our legacy customers from just new And even the those new dealing base predictable longer take-rate term frankly go-forward you than ramp platform the the customer much frankly the access on one older the on business, model though predictability even around with predictable. been and Just expanding expanding, hear is is is the it's

Tim Savageaux

last, into or for which me your part you'd guidance at like my are think you I of leaves question That sequential as a the side kind any other thing look call two as Tier like uptick, U.S. X upticked margin there to systems is, to there nice you on the drivers particular versus QX that overall your within then looks systems And again any QX guidance? continue I expect on margins reflect they trend on as that bit well to what if services wonder quarter would in or you do comments margin have out? a

Carl Russo

And go the building are set to which me The sleep go or note anything. any margins Remarkably, first that first. the to for the on is we systems night. things out to statistical let really is nice answer is question dependent thing, given on QX ability my so remarkable to unremarkable. second calling is to and very Okay, the at less less

you that caveat general systems to to to gave expand. a guidance, back to I give to I the but George's continue just in question around margins expect give we to go want view, not transitions. So

up. fall this And XXXX And should although The note in going going out to organization will a the don't Services some I cloud customer the in then sort success and to it's going is And have up, that. about platforms. and of to are done growth nervous. we're to general cliff, are to next, turns flattish 'XX. some a modest make I cautious in to in back go be quarter You slightly such thing. and in anybody on go of first careful quarter. services that this. be down are its throughout like again, QX But be a services general modest the success actually to that trend investments. It's we not on money deploying it rate go margins, going but into cloud will get related invest very so good off the goes QX, right the it out to be it's ramping want like ramp about to going our we

that that's only give So guidance. as shaping would the I you. take don't Please specific

Tim Savageaux

very Thanks I'll on. much. it Understood. pass

Carl Russo

Tim. Thanks,

Operator

and call Ladies remarks. we reached Instructions] session. turn would Tom to I Dings for the closing back of to And like [Operator end have the the gentlemen, question-and-answer

Tom Dings

November today. fourth you, Annual York XX. in including regarding the your relations the events bye & Details Calix and Thank XXXX, on several Summit now. for City and our the Xth everyone for on investor Good York of in are thank us during these participating conference operator. of Capital investor Once Group and calix.com. section will call XX joining the on to quarter Select New webcast for available in call. Cybersecurity this New be concludes you Conference the Craig-Hallum Cowen interest on City in Networking again thank This conferences December you Alpha on Calix

Operator

This concludes today's conference.

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

Calix (CALX) 5 Nov 182018 Q3 Earnings call transcript