CALX - Earnings call transcript Q4 2018

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Operator

Greetings, and welcome to the Calix Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Tom Dinges. Thank you.

You may begin.

Thomas Dinges

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. This 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 Investor to the website. be will

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

Carl Russo

guidance per and upper in was and the by share. end better-than-expected transformation all-platform beating non-GAAP consensus you, Thank of quarter fourth earnings company. $X.XX an better-than-expected at to delivered This our progress driven by Tom. the range our We

we in came ask, is on margins an the in yet The special than of our One this our total mix our and might between note, business range was This legacy underperformed. has underperformance our and better lower performed how legacy such non-GAAP overall earnings. and all-platform gross came we resulted while had systems beat and in our expected, platform range. margin was platforms on high-margin high Our our revenue possible? our end thus at OpEx leverage, very OpEx for more margins below our that in XX%. Furthermore, business gross the business

QX more tied business closely is future, into performs legacy how together our our peek leading to sneak diminishing profitability income all-platform in revenues, platforms and to wrapping Our gross words, margins significant disciplined and legacy our was to business. expand In OpEx, less a other and leverage. yielding

are about While X. like the from would briefly quarter, speak there to I many highlights

there Calix more just these addition new EXOS magnitude AXOS, is aren't or that or our We To addressable to in torrid market only continue a this new extraordinary. to service as all of one customer communication customers many our of XXX put of at virtually, customers purchased broaden added sell our Cloud we them. To in pace new have platforms. and XXXX. and we And context, this providers expand base

for as in and Second, United in significant any a the to to for highlighted with being are Greenfield here examples platforms. year our an directly to networks state-of-the-art the ideal United previously, than and forward-looking more Cloud And platforms fit Verizon business. are contributor XXXX. Cloud deployed Kingdom our Calix Calix States the services Cloud track and have become Calix now doubled of the speaking Last, aligned our on is platform, and analytics CityFibre Calix full builds. we

all-platform aligned CSPs morphed opportunities effect be of types. of with our to while want that I are by Calix, all deployed make clear well However, can types offerings these extremely for

Transforming from one an CityFibre the in be For end of on bigger our exchange industry the the spectrum can yet carriers. ILEC and achieved. opposite be success represents local of example, might challenges incumbent

play. have following proud adding hands subscribers. represents and the strategic Windstream chose challenging Marketing most In can the to the for to to our And Cloud help are are and of stay in those team fourth on reversed we simply to his am continue help many, alignment. deploy the focused broadband our excited must one trend that say deploy I success space, For the now quarter, Windstream to We that the Tony they opportunity Thomas team for platforms CSP. trend. to have looking every Calix help. And to a sum, know

Net $X.XX Calix. sure that, $X.XX loss all letter OpEx for With the the of strongly for I each $XXX quarter the I the our million. to of of questions, to details encourage to XX% to $XX.X million. per $XX.X you first guidance and our all into million XXXX. Before want quarter on of XX%. of of and to $XXX million a of share. you Gross I view call future have to stockholder the margin get be download fourth open Revenue

call Let's for open the questions. Operator?

Operator

from Instructions] Company. first [Operator question Paul & from is Cowen Our Silverstein

Paul Silverstein

but Carl, queue to to me back you go actually I've come on. later before, to ask this I'm going and never done the back in

Carl Russo

That's fine, We'll happy be here. be Paul. to

Operator

next Our from from George Jefferies. is question Notter

George Notter

you about you customers quarter. curious I the end larger Can about guess, talk off. we slowdown? talking of letter were I'm just just maybe learn the slowdown types to any starting about about? at more the magnitude that. or that I are you the curious And about What in slower customers sorts the of was of referenced slowdown? can motivated apply, size what What

Carl Russo

Okay.

So we basically spoke customers. it's to, X

few. a said we think I

changed would up of are obviously martial For paying, that are are of shortfall. that and October the debt to be October expectations in these customers for folks CapEx. were the the set from The most with account in made X. and carrying dividend that ILECs majority they They December part, it's X

let if have you there see follow-on, frame just it me So a and George.

George Notter

it. Got

of Or here? Or what Is or improve that position basis? market I'm that and slowdown? on move. drove sorry, of a go-forward want like to CapEx sort And shift will that just the your that Okay. sheet spending year-end sort share the any I secured make business sure there was just is balance is

Carl Russo

surprise. the Well, so in in to being actually copper carry fool pressure that, But talk are think on again sitting some They me current They stringent were model. not I'm very But under their highlights dividends I'm types and quarter, very here, have let's this To access those of in referring simply we interesting. infrastructures. shame by have share, going, market is once, it market. per say. our bit again, customers me as are a QX. a us significant I with of a of company caught debt. which with about that blunt, fool place the They on a There a predictability the you issues It's that it's the be are me, as CapEx. lot different part there's because

sense? second shrinkage in this your to a be a left. are make your segment I part to sort But middle that those to of to there's be going customers So of CapEx. that think represent Does we've messaged of prone not erosion of it's blunt, most are do to that lot question, of set throughout continuation as going

George Notter

Sure.

I'd some it. give the it you year? the And curious, that the be Got can for XX-K. us curious the give customers could those XX% typically of I'd you think information then, you Okay. just lines, in us to maybe if put I be along guys now?

Carl Russo

greater just customer answer bit. you expand you suitably I the had chat put little XX% was couple allow will years K, it Silverstein And share Paul want don't to And very tell Those the amplify sites why with I X it, XX%. that you is, "You're to on of than may to this, actually pointed a you now." and me yes. So a it back, remember about we if actually was going me

over significantly First of one the X do customer the know that's XX% than all, concentration last for years. you had numbers last less Cory, years? had X we the we've

Cory Sindelar

in for X Yes. customer In 'XX, X XXXX, in XX%, XX%. for accounted And XXXX, respectively. accounted customers XX%

Carl Russo

Yes.

up we're of sort grow the point is, business So there the around to these. continuing and of

accounted look math, you is the If other few there around contributors $XX a imagine, you back that million to look customer, which at as our reduction CenturyLink you largest might revenue. $XX of and it. if CenturyLink, year-over-year, George, were for in actually you at And it do our million

a lot there's So happening set. around growth of core that in the business

yes, you to a better gentleman, way to I if to just than to with comparison, fourth I happening do say, shifts, other business quarter you think, the me. give going pull numbers, bear I'm quarter at what's Calix fourth of As a can't these understanding

a as we million revenue. in or think million million so And $X in I down -- are Those about $XXX last we to $XXX revenue think we year, year our this anything did happening in the versus company. revenue lost we $XX need year. in million this I roughly platform made business say shift what's else million $X to don't and I the

George Notter

Got it.

comes platform certainly. I then, I highlight you mean, a And total I of those the revenue no that would just new us from any you you're just mean, Okay. if it to great to legacy systems along or be chance from say product business, do that of could or expecting but way mix am in the shift conversely revenue? the trying sales here, product of kind lines, to give comes

Carl Russo

it. way would do It be a to great

the shift message, obviously, way other you're in gross first you is, it margin as The have which to see do in is see we before to going revenue. it

you did answer asking Calix So platforms can issue. set as significant give my that's I specific contributor is our it a a of in in some is to now, But way quick become I one a you're question business. to the pieces opening which directional as competitive remarks. won't because Cloud, the in I breakout

becoming now material that. and So these things soon the become after are in business significant will

Operator

Schwab Instructions] is next Christian from question from [Operator Craig-Hallum. The

Christian Schwab

a good Congratulations revenue the question. one on the despite I quick have in execution shortfall. quarter

earlier away thanks range have to And and you What we revenue information we in CenturyLink. if in diversifying sharing Y? customer like be list what essence for As successfully, top as all line be the thinking would logical just discussed this from X assume from year? comments, ourselves should you a would quite that we broadening for highlighted, prepared can for

Carl Russo

death. so going leap to let me out does But -- Okay, of kick choke to probably to Cory me me think. yes, try here before and that, going table I you be either just I'm and he table what is because careful across the the so tell or

XXXX XXXX. me, that's you right we It's all X% us had growing going think To the than it be. I number. was just basically into to less that number was the thought

growth that we the question, Christian? your finished the right it lower a answer think is But XXXX Does of I in So number number off rate I think it's when roughly. out.

Christian Schwab

would What the then, that question business margin gentleman's of does. just is really earlier, than revenue of the Yes, said this gross legacy certainly way. when on less business? follow-up a in like rate And a look half run different

Carl Russo

to I of first I point Notter you out to compelled all, referred feel want that take him as just that a note gentleman. So to George

So this. to get question breadcrumbs I you if noting. see I think worthwhile let But me enough and can give address of your sort that's after

First platform business way is be incremental of so doing is all, very you I from It is don't clear, margin all me know, the that. business. about the clear know, calculation different all let as that

I However, legacy the legacy is, sure, of the which to box business I draw make to the communications frankly, want industry. because all attention business,

continuing pricing while year, are platforms forward. and I grow are SKUs actually sometimes in they're our at suspect medium, answer to systems pressure that may to low. is, to than gross customers them buying obviously they're erosion some because they're business, margins under the you the XX gross that that in replace this marketplace. but of average that not legacy are of legacy be margin. lower are this one me not the telling you legacy margin in to lot our not our causes be look in see products point folks question The a corporate platforms space, I'm your are we that XXs, piece high, we XXs, to in able our in going sometimes they're with a sometimes our going platforms our If going

that's just as and what I have it actually know much So driven this over go don't and focus And I XXXX going looks this next get to yet, will that XX% through inevitably, look year, a spoken in over a we're company But is on what read to as our on like. Christian, we're about like. the we you that going where better fact year.

question, So lots I can words that's around know the answering probably best a of give not you. but your I it's

Operator

Silverstein Paul Instructions] from is Cowen [Operator our & Company. question And from next

Paul Silverstein

point to tricks? out, I Carl, old says off, who you new an like dog First just can't teach

Carl Russo

we XX-K to Well, that to listen that suitably chastise, upon XX%. I deliver sure was promise, the continue want make

Paul Silverstein

disclosure. you get I more to more should chastise

Carl Russo

there, Please, Paul.

Paul Silverstein

I'm or may. one going I if to two ask questions,

like sounds and sense your disappointment. down margins margin ADTRAN revenue along this of some it the seems I you and the or notwithstanding you're doing with almost now divorce. up, without to it framing So in with revenue a old revenue friends got there along be go job think if fail see would In days, go you've expansion

apologize. to? I question my So a the assume And too can early go talk course And if think drivers? tear beyond, I you when about stated role, about you key to where progression and that to it of already over still you you is, volume margin but plays earlier, can the year the margins is

Carl Russo

me mind, if so So don't directly. answer your question you let

it revenue we Calix, go going provided the you a I that sort X with you of answer when sensitive and of just and not diminishing take and separation, company succeed, X quarter, expense at lower higher go business volume the The path. some started we okay. years said at the and end are frankly, are sort said that would revenue Calix Windstream ask, with -- deals deploy and not cliff sound because we but question Cloud, you'd funding, as able the you'd way should actually pursue to can end look up going than -- to the fourth so with were years a with, anywhere margins pricing also and, short of last to are That our end, probably you end want a off to And right because, only with have that help revenue tell without many margin. chasing you are margin falling getting short go been platforms platforms piece we've and the customer not broadband we is any the Greenfield to driven of them decreasingly ago, earnings. is sense to lower major drive about volume, most and be to are calculation. Having I up Volume you you any our, but will career. wants lift that the falling the forward were going we access our platform, a ago software business though -- base, on have obviously, doing high, chart our well success. in you margins into it's on margin margin. not in picture it's box thinking ever were try they're to obviously, business that, and make and platform are to a leading-edge And did continue our does go-forward XX% seen business accordingly. to to with we if go times content familiar of didn't companies our incremental back fixed fiber able a the Marketing confronted margins if and platforms confronted We just down the expand on quarter quarter to we all

about, analysts We all we what where spoke are place at is have line. even I may less then the very there's line, though bottom starts at less spoke with at line. a you the difficulties predictability business and the the the as very, and at different times about we bottom and actually And in sensitive company. The top a increasing

know not and you're So to. I I'm direct question know because expecting today, not your it's me business Paul, very answering a very, just I different

XX%. say, Let's it's than higher well just

Paul Silverstein

be knows I crowd. now be or don't the know, from might year who you a other given X to back that may going of it since ones

Let hopefully than let better note, especially, Carl. me handle Cory, you, on -- got me Cory, serious numbers a you've ask the in a

the you OpEx lower? to risk an opportunity as the From What's year? be the OpEx Carl. go be higher? throughout what's key What will it being for joking, Just perspective, the of drivers

Cory Sindelar

Yes.

the think operating the that the fourth what you a of in able quarter we're to is model. fact take the I leverage in benefit saw So

than together. those We're going progress business came in forward-looking going scrape still through opportunities for where present lighter out QX the look nickels to so, take we're they to to opportunity some make we continue At quarter. as the traditional we dimes old investments And costs in the originally and we'll time, to forecasted. those into the had the business themselves, and same

little my the a say, yielding -- And of the combination in X, the quarter. move will us last, side. be well quarters. seen several as we've a of on the some is, of end forward So that expectation than do as business legacy the X through front improvements in better we bit what We'll quarters kind investing

Carl Russo

Yes.

you numbers, so, chastising you of And again, the we Paul, the XXXX-and-some-odd the to XXXX, very XX-K At numbers XXXX, being but shortly. at me end exact do And other of hold different don't see a just to these roughly the risk numbers of end you'll company. roughly me were were It's out, giving XXX. into employees. we prior

Paul Silverstein

flat grow all throughout you year? do or some the you expect go headcount to from you trimming Do here as to to expect remain

Carl Russo

the invest job see it's sort Look, the be I finding roughly to Cory of done what it, in business. the of to. another out embodiment in to excellent flat, dimes take underneath team platform expect and takes. has an legacy of and of to headcount puts It's you're dollars sort spoke expense continually of but to nickels a business going and continue --

In lot we like in anything enough, in QX. you're too. the, a work one OpEx, see enough of OpEx. look didn't wasn't It ran going old -- ran so old extraordinary and And We and ran. do sort of you QX, I'm of on

Okay, resulted that's going go just it miss We're to let's And continuing to in. work on we're plan. OpEx. revenue, cut what the

good we staying think, a at have shot I So pretty flat.

Paul Silverstein

if whatever to to you on the volumes make or Just just articulated of I Cory slowing is clear misunderstand? you'll front you have and I'm based but the in apologize adjustments did but an plan fly I what relative and uptake of say revenue, be you ahead revenue, here, investment on

Carl Russo

things no, investment think ramp that revenue faster, going it deliberate we Where model. slower. pretty be an invest on sure to you're ramp we'll inside we're faster; we'll -- make going our all we're we're to if making of want to slower, the Well, of invest we're plan. But Obviously, doing ahead of. would stay things aware that we investment,

actually marvelous to QX, then additional will if team we're in you we'll addition margins because QX over We down on Greg that we and and customer investing to some expect investments go success QX that going in out And up of back we called actually some services' and to said call out. be expect that, down expected going margins we services. the having his those some job QX, gross doing did we way, are and services' gross remember, in because made make Having go in a By would for outperformed COGS forward and it specifically to to investments. go be to again. it

we the the it continued now just out So of in it's reservation, specific inside model. call work otherwise you're on so that not off might the but cases,

Paul Silverstein

right. All

on us if last Let update question, an you're on you Can ask what seeing? one me landscape. I give may, you competitive

Carl Russo

vendor the on opportunities year up, very roughly but that is because really the the to vendor that's in just built. They're the way side are their box the But now all in framework are technologies that platform of another looking morphed not our tacking have. a don't some going they RFP. about this those in direction we've third play. about go eighth have to We that legacy for been we at of service competition got out couple entirely looking business, would building most there their those -- discussions of because that into field. the providers of On of in the We and for being networks. that Not competition The in a started distinctly differently same. We've that, interested going because we're opening changing going careful the going actually our are have see be in network to Huawei I not be interested about be probably are likely business. opportunities yield open they're opportunities

Operator

floor Instructions] there for [Operator I'd further management questions, any are comments. closing the As no back like to turn to

Thomas Dinges

of earnings are Thank of you, stockholders quarter before we as conclude call, timing release operator. well conference our of to the today's release changing Please the results, our the XXXX first our starting call. we note, with quarterly letter as

in We approximately X:XX our to letter stockholders Eastern open before will release the market Time. morning a.m. at

and to our of conference Goodbye X:XX stockholders, thank joining for webcast at to us call again, in Once letter we this interest for release call. today. will the the for Calix, conference thank now. Eastern Time. host on and earnings starting on you everyone This Following our our concludes call you your

Operator

today's concludes this again, Once teleconference.

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

Calix (CALX) 5 Feb 192018 Q4 Earnings call transcript