CALX - Earnings call transcript Q2 2019

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Operator

Greetings, and welcome to the Calix Second Quarter 2019 Earnings Conference Call. [Operator Instructions].

It is now my pleasure to introduce your host, Tom Dinges, Director of Investor Relations. Thank you.

You may begin.

Thomas Dinges

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

of Calix replay As yesterday be conference the to in section of the X-K a an call the in available Relations on released as of as Relations after close will stockholders well reminder, filing the Investor our Investor market, website. the Calix letter audio we for section This website.

begin, actual include assumes we obligation results to remind XXXX quarter trends as our statements. Factors quarterly that we reports contemplated Before actual performance, the and want our we speak you and may dates. which to about materially outlook, filed operating results our in to those refer and by of to any we letter differ growth in forth only these their are forward-looking this market annual no from could respective strategy future with that make to Calix all forward-looking cause update set forward-looking second call, financial and statements, statements, stockholders in and and which statements differ SEC. materially

measures. GAAP we will discuss reference will GAAP on call, stated call, this letter otherwise this on in Also we to non-GAAP to is our and Reconciliation non-GAAP included both measures financial of non-GAAP stockholders. Unless measures.

Carl. me Carl? With call to that, let turn over the

Carl Russo

Tom. Thank you,

was and quarter a Demand strong, good, OpEx second Our was one. margin disciplined. was gross good was expansion

partners supply our manufacturing success. met harmonize was with to and considerable Our with demand effort new

and I like our customers their complete will say now meaningful to thank work. can their risk in and remaining. we we would finished, completely not no are patience for the hard quarter, third is we continued be our employees for there While that

will customers ILEC traded and fourth third publicly quarter through continue our from into the the quarter. Headwinds

years no is delivers the less headwinds flip this model. ago, future meaningful noting that X/X longer confident Today, than be XXXX. of our many of The It factor not are business. category story represented of of X/X worth of business customers the will robust entering than that more set a of this is nature these the Calix narrow We business in our customers business. that same side

to continue new than That to the is per add continue new subside, rate a We business business headwinds XXX will this greater And customers our at remarkable. legacy shine. year. from as

As I last call, have stated we on it our right.

the right have We the services right and the platforms time. right at

and systems second year-over-year; next-generation continued Annual as edge AXOS Edge now than examples -- growth Cloud were: Calix types; AXOS brief telecoms innovative doubled in Cloud sequentially; adding Light their the systems the XX quarter the rapid shipments GigaSpire Leading from and most continued bookings strong of quarter than platform Reading than our Access of of Solution from EXOS-powered rapid as the Lights product and recognized and more bookings quarter more at doubled Awards. as AXOS Intelligent expansion as of another year-over-year; all generated analytics Some the new customers tripled bookings more sizes customers Calix using

and cash. to as quarter generating We profitability look forward return a to good we begin

that, for call With let's open questions. Operator? the

Operator

[Operator Instructions].

Our Company. and Cowen Paul first coming Silverstein is question from of

Paul Silverstein

your CityFibre, then on incremental ramp? got Verizon us receivable at And you insight where the Carl, they opportunities, two are CityFibre? I've shares could in us quarter. quarter a And thoughts also on Verizon the accounts at? any -- first give XX% that follow-up. big can you with and was believe a in Where I they're if customer

Carl Russo

Paul. Thanks,

built saying That is long big X I've the on go fact up Verizon say quarters that continuing in me that the period CityFibre that got that Verizon is obviously, will for be and year. let can promise in and to their that build-outs will certain time. be said, left a two. they a out of quite achieve are fulfilled, now this record this continuing to I'm So, build-out in We've split XX% These been both, being theirs. over infrastructure I customer year.

press to have that for ago may adding CityFibre, of of noted were the As that endpoints XX to X they're you to And CityFibre actually a million issued them now cities. that just release X of million rollout initial cities reach. -- their a they that that reach looking couple days basically, XX allowed

just continuing year is they to And side continuing still for still Albeit, it early and their ramp of days days, throughout expect of ramp. build-out. to are the their they're next with this and early into the is we so but build It continue us systems obviously, us, beyond.

in starting know, As build are to last of pulling but biggest them infrastructure see builds, the start just going in well. But engineering all build both that your quarter we are the orders moving answer these say, and you really is with infrastructure keep mind part would but question? that this you Does actually into quarter to from again, when accelerating. the and multiyear are infrastructure, starting I fiber,

Paul Silverstein

It to Would within in does. any levels difference there difference most control, -- to not a of rule predict. to anywhere If build-out? the are be would X ramp I your It's general recognize be quarters X remember, it's there as with aced respect Verizon from hard peak I but thumb. these product to in markets, to most build-outs any

Carl Russo

there has there difference. be a Well, been difference? any Would

-- ramp you to just those because X start you typically the forward to projects. But I I roughly I usual see quarters wanted think That's fiber. so in right. X you're they slower a as think I is than looking off got know, to say larger on these think their correct. they would no, building less are But

Paul Silverstein

the if included have one last CenturyLink. right. to middle-sized pressure, down With collectively, final under then traditional XX% carriers and I that think they customers," were recall, All me. that public And question respect those been I "legacy quarter, for to

of of were dragging that by but XX%, they to like as sounds is that are than like the go that feel collective to revenue quarter on the get for this downside even not referenced there terms it than further were less revenue This in a group quarter they they less you there? just much they're I would confident fact you're falling that X/X. I And a assume where virtue contribution. better

Carl Russo

Yes.

give So couple of Cory we ask want are, in. and I comparisons, you to I'm a to going to and chime

right? Cory, going to the release So Q, we're

Cory Sindelar

Correct.

Carl Russo

show And quarter? in as CenturyLink will percent what this

Cory Sindelar

XX%.

Carl Russo

Okay.

number the in there So XX% the your is CenturyLink quarter. of Q, which in advance is

perspective. mid-tier Now let the and see me I address into this can put if

was QX QX in likely actually, QX last Like from down differences there year-over-year, flat be with quarter year, we last of unlike If contributed last comparable versus is you in and middle roughly those we were revenue essence, between will this year at guidance, our look near-material QX tier that from year. year. significant what where

point last there's and as see see also into we QX QX. We are I getting So think year. we look the we we so a -- no in where can the would but said risk when numbers represent year-over-year these from reason the don't that's -- see number a really mitigating don't at see risk, probably grow growth not that you it in XXXX, to that have QX, in QX, from QX to you good from if opportunity only

answer question, in confidence to the hopefully, because we're your that no longer returning a meaningful that long-winded That's So much numbers and the are gaining you to gives sense. growth, more we're color. just but obviously

Operator

[Operator Instructions].

Our Schwab from Craig-Hallum. next Christian coming question is of

Christian Schwab

on the team, products, sales can and Windstream, that's starting Frontiers, Carl to legacy world, then new we our exit -- of we point, and XX% to That's we legacy as XX% and as customers, correct? XX% Right? of -- platforms. growth XXXX have to XX% a CenturyLinks

Carl Russo

to there's ways can that looking at standpoint, things, of is No. careful that, No. and different right? look it our be XX%. not. very then than from X want XX% it No, which markers. customer's is when we separate product to We less we're And I what say from a at statement about speaking because

So, of, let's numbers. still minority rapidly, but say, off our growing are platforms very

still supporting and the products legacy or business. products traditional large majority Our our of are the

matrix of So, there. you to a sort have do

Christian Schwab

Okay.

exiting can predictability of the guess, have rate the XXXX you success or Can and predictable new you frame longer -- beyond, us growth. for tell growth a the however, as this no time created to help the we over of multi-year what and in investors headwind, I and kind the believe we of base you will what XXXX foundation business a investors be starting less So, for profitable company line ILEC should customer growth when exit the top responsible platforms? given be of expect

Carl Russo

we understand to saw where thought hope that company headwinds there flat better a through into you have we when But you day XXXX as as accelerated that the actually the up think will or having to opportunity investors understand -- would be will gone initially. we a had a would I that. much I sense probably we coming be potentially

through QX, Now be until is, we and bad QX. establish those good a throw QX, beyond in the now to accelerated. low I The we're have a saying would news will the greatly that we're it I rate, now behind see is here go news at us. that dart can growth growth we those XXXX sitting to mean start headwinds, see we headwinds

Christian. no I a that we'll but be position that, So, do in where think at -- am from to do now, place better quarters today, X probably I to

Operator

Instructions]. [Operator

coming Our question from next Notter of Jefferies. is George

George Notter

just I clarification, this the than exclude around for this the talk that think, when maybe less sales include coming isn't about diversification more of ILEC from or group, you me. and in clear, Just sinking of But some well does CenturyLink? very company mid-tier be to XX%

Carl Russo

Yes.

mid-tier mixed my going here, probably So, ILECs. talking the apologies, there's confused. to is on a right about The we're a that sort headwind be little you're of ILECs and [ph]

and about, was at have going because of view through on going what X, Although previously, CenturyLink we their we talked structure. but CenturyLink size Level obviously, differently in

you XX% than as confident the the in predictability Then meaningful starts less take give a that that now was mid-tier the trying spoke that including far get feel no and longer headwinds actually Cory Paul of business. are as about you for risking why to CenturyLink. are to we the So what XX%, the after sense from we

George Notter

Got it.

Okay.

number" CenturyLink, a that "mid-tier it will sounds CenturyLink continue So, but it like be forward? certainly going proportion meaningful includes ILEC to of

Carl Russo

strategy I'll working you mind, moment And their you and increasingly CenturyLink give I'm as looking encouraged the one, is through to CenturyLink. don't future. a Item Yes. if on

the being has making projections. and going view more And where seeing that going don't so we making relatively they're that of CenturyLink the more amount a company, our know clarity we that's company. we And us. as smooth see whole the and to think we to more in sense inside can something an they're and of increasingly about be their for You thinking that company, spending, decisions are fiber-oriented risk

George Notter

Got it.

and customers XX of if a that past the we brought guys the can translating history problem? more Okay. of in customers that of in in success. you different about you understand it have guess explain at And customers. the additions I of the historically, quarter, company. think of had that of where success a then talking what's company? I into Could had you Great. that the and aggressively And trying the But exactly diversification in there theme of certainly, the look having, the company, you're been here. more back go you're are And I lot talk just coming customers. this a material to genre a helps you exactly talked about Is why large and number you adding – to like always that's or have kind that's diversification seems I'm customer mean a I

Carl Russo

Yes, diversification. the

company IPO. are but the go the been type. you So obviously, was let's familiar of the because The at well having diverse of count, the from Paul, with customer back, standpoint base not history

wireline the really it founded to bring was to when broadband company founded, So, providers. access was service

Calix, what will, small. built base, ILECs, you it IOCs, if all did were large X.X a but was diverse so, And and customer they

or or a and don't any we've now, municipalities WISPs cable gone CLECs or not through MSOs from whomever. long for ILEC As view the world, we the we cooperatives have platforms different time view how and or or

that our view those as when want communication providers AXOS at platforms active service provide because a in EXOS that subscribers. an so, CityFibre same deploying at And services same we a the that deploy to system system is system WISP, it's of is a emerging small deploy to MSO, an IOC. deploying. essence, the system it's deploy Verizon we we at we cable leveraging or traditional When their That's subscriber edge people the uniquely would EXOS AXOS

to and different in believe the to trying that the future will service we're of from come we're the business, not providers And reach go we so, we of fact view they happen all as now what consciously -- winning diversification to be trying diversify types. all

ends help? naturally diversifying it So, business. that Does up the

George Notter

that and incremental Yes, where Is it simply Is there here networks? does. incumbent out more got the existing you've success? C more you're overbuilding that folks having

Carl Russo

clearly happening. but -- which ago. be years service that providers, are example now service recent clean small sheet exist it, areas. under-served of there big very providers behind going are a It's X weed There's capital really formation shining of by more CityFibre lots didn't serving like a could

carrying we're a able help so, build as a a wholly platforms from yes, logical a a clearly, you ways the succeed And continue in on business of well. look, operating system of very lot exist, all going of that's get But said debt, And I to play, hand service take and our to provider now and scratch are of to model funding. copper-based them work different some service key architecture, that's our is most a standpoint. we're and with with even but finding notes, it hands challenging which architecture, tough part more physical and provider to going our a is what's that as CSP from to customers

Operator

Instructions]. [Operator

next Savageaux Our question of coming Capital. Northland is from Tim

Timothy Savageaux

I year-over-year. and looks and start more, the lot is order the look growth is QX, that imagine maybe segments in headlines more Frontiers XX% business. and of the the CenturyLink of customer My the down the disclosed of of with, the want Tier given that of asset balance something dynamics Windstreams X my see you that, be some similar down assumption, various on XX%, focus also around to questions to in And of sales and is you QX universe something sort this just for at if that continue for world. to with what than the we a to just

QX really carry and in of maybe digits your at rest work your the look overall, doesn't look guide, as double-digits. if at like right of there, you you to set kind in and half given the is double the business right? issues. growth I to guidance manufacturing first as am So Or I segments? looks those solid looking assumptions QX the that the at math That But year-over-year grow for close rates

Carl Russo

you to They're year too CenturyLink you with continue careful platforms close $XX to we They XX% our down to to them. where don't was not want get heading want align I going Pretty center be So to I that. yes. down by might to and XX%. right. we're number on and with said. be on the CenturyLink. last by million be as work over

of of to underneath all underneath pretty you your probably under this. all a of that's out there to was been yes, approximation. which that's space from this underneath business general the just this. And So point in a the a is better the part is direction, rapidly pretty growing cited, Chapter et Maybe all But rapidly. of biggest out a have XX from the what We you and and happening. in man them of all few could a in duress. things Maybe could maybe could But lot you you potentially those see But in you last sale, not. of terrible cetera. lots the happened can out quarters general, dividend look filing, spin-offs asset anticipate has future restructuring, anticipate get

not the predict happened it's happened effect on quickly. a business going anticipated. now than our where here we've sitting where ability And a It's to so position we're the seen forward. But in meaningful that's quickly biggest we more It's duress. just

seeing that. of way my that's So

Timothy Savageaux

Yes.

be the that the the I'm customer of kind also focus that the growth the Can Okay. in might segment? that's are that? And compromise And and lack have in wise? itemized order maybe guys that sounds to have any dynamic driving color carriers, a your you growth you're the growth the business. key we to trends think what's likely municipal better Is kind particular, part describe that of be know of of big like I just additions? mid-tier I'd something overall to And piece you've the the if moving about outside pretty of kind then of kind expectations that's dynamics to what driver you what of the But kind your if carrying a of be on view for small looks of wonder describe company. tiny biggest of close group. as interested you? just you on you on In in your whether kind the X -- visibility ILECs, drive that look here. Xs, sort to of which Directly, across guys give mean the to or funding, terms I need will, possible, least business to it's own of than can previously, that Tier Tier you extent competition you us talk be why mentioned of fairing I material -- half very

Carl Russo

So seeing? what new expectations through to our Look, state, is are before well, get a want are. which get high we sort But high I these So say What business underlying is growth We being couple level, go that's there can question. Christian, forward. mean level here's drivers? and violate behind of the us, to legacy of customers, the what you from your what I'll existing customers, this, customers. question some no growth right take of at able are headwinds I won't project I start a rate being quarters growth I of will. to to going said I at the employees

No service such you're network, of to in and the a efficient build benefits weight can dealing can long of new on with model different a say, other better you business. way a space, product provider build you more single a let's sheet flip over doing But business able build them provider, of ultimately, service than sheet business top every business. put any one go cycles of legacy If much and is versus efficient that more everybody provider. a hey, a someone a clean legacy the if on of room life clean in service the

those So Gordian legacy almost with. I of that knot managing mean, folks these are a all dealing it's OSSs,

with company any you there answer like if getting build And yes. are now down the would scratch? Again, from so that funding. sat your will what said, be they're I think customer and and you to you that if people are could, Well, doing

or so take service Tim, an a platforms Analytics, usually networks the here's EXOS in capable Calix some OSSs built, mile. bit I These network, per to they and They DSSs. cost And your provider. that took of build per AXOS used money, a revenue. the start of the and are we subscriber lowest have you And go if say, Cloud as environment open

run You can with few very them people.

a And competitive so it just becomes withering framework.

infrastructure. them of of some of typically means, co-ops, clean all-fiber the building are they the sheets, What no of common them some are wireless space, are municipalities, Some cooperatives in some gamma. them are biggest that's, by runs although they're is things. of have all are an WISPs, them It and some electric

We are winning our them with platforms.

now, we Christian traditional and XX new about bunch won new that the true is question had of of platforms. our that They're for asked virtually this won are with will all the the product our product you added, versus markets customer statements. customers So set. I with quarters not tell earlier, last

Does different-looking building service very, they're a help? very just provider. So that communication

Timothy Savageaux

well, again, And comparable QX QX. let's manufacturing that guess talk about issues. the just is, given really I But not again, does. It

growth next we're -- in talking not guided, expecting what growth about, just that you sort you of quarter? As rate, that are long-term segment

Carl Russo

there sure growing I say of are are would go segments would and the double I be that not digits that. at business merely that to beyond

Operator

[Operator Instructions].

coming from Cowen. of Our question is next Fahad Najam

Fahad Najam

X in terms I Tier X, to the think Tier U.S. the question your in earlier. the ILECs you X is in my about Tier a comment you business described it a Carl, the maybe the U.K. and Tier of in on made shifting what If from X diversification U.S.

fundamental business your say and Windstream, the see understand, of In help Verizon CityFibre, business, terms you in is I what diversification when diversification fundamentally from going of optimism a driving model? us is Frontier, your on diversifying, being it the business your essentially

Carl Russo

I question. sure follow not the I'm your Driving assets...

Fahad Najam

to two have customers, In from large at what present you CenturyLink have and essence, and you're Verizon CityFibre going Windstream.

the value rate diversification? the X your a contract business question? that I remainder that mean what's one the set it increasing customers business are large to of new moving diversifies you're the the Is at So those fundamentally logos essentially adding, from you're such that clarify with Does of customers. model? average

Carl Russo

does. It

when to XX%. asking So that I talking let Christian about me back XX%, about matrix was go that was the

numerically, And swapping if in concentrated so why fair a you you're the customers those look what to did [indiscernible]? diversification I you're of and up for any hear is, different environment. these going a sort saying then that end Is

Fahad Najam

Yes.

Carl Russo

Okay, good.

our existing is what an of So very different what Calix product there's way obviously, One do we're evolution, doing we're evolutions is all customer box about to X.X, One have systems X of X.X of is all was and and the a trying going X But that is help platform. traditional different on. statement thinking ship Calix is offerings. company the you complex sort customers.

but lot value. It new different what the value, a customers are operating a They than for the along it, coming than an that a driven box the cloud it's somewhat X.X ship of different with to We look the Calix new environment. traditional have systems and like. older -- would systems really customer platform type different look into looks by model. The contract and

new it's percentage business model. that the and a business, obviously, standpoint, the it's diversifying That's what are growing put different of because years just but very, we're changes not box It's structure over of as not box being as up So business than small in model. do very part it's learning or ship a but as don't things, on diversified we X the diversification revenue a shows X years. customer the statement except contracts a place of a potentially example, but it pure only into for course ship shows that and up

dimensions X just that's So one. that the help? diversification, Does of the not

Fahad Najam

That at does. you? kind an becoming see XG besides to any related ask on, deployment if growth I one incremental question are Verizon? for of XG driver you may And more beginning wins Is

Carl Russo

XG opportunity. is mostly, actually opinion, et incremental is know, understood But in marketing technology but cetera. my I spectrums what well some that? huge in XG it How's an you is, works, think it look, the across, marketing I not yet issue, a think, pieces, and how it runs

As we years. devices multi-spectrum content-rich demand the these believe it's each Inevitably, understand growing going on and and the exponentially. And think increasingly can and is infrastructure are that lot XG I of the single a is all carry that people standard But number they device. Irrespective communications of agree devices, a becomes over few devices a the across of you quite happen XG, believe know industry. working standard. thing I I to that's the

port of And devices anymore. growing only wireless Ethernet and way and noticed don't you an physical have They they connect -- the exponentially number layer. have by sure is to a I'm that. the that you've the all

so exponential device growth deal content that with to way in richness devices have fact antenna. less only to going is any on And given and you're rate the

way center. when the economically, a And resolve to going to believe both you somehow try Wi-Fi back fiber and antennas on. you that and the X, So can only data have we that to you has infrastructure of get proliferation connect enormous run you're whether wavelengths physics the edge shared is what there over is XG, that, of it's

And regardless what the of the -- the of on whether that it. so at is you're NG-PONX for antenna putting pathfinder rest with mind, of in end industry a Verizon

technical does help your that at? we're what background, you given So see

Fahad Najam

Yes.

uptick case, are greater your seeing expertise around an more because winning differently, And of that your asked presumably So into share wins that's besides leading is have you with you Verizon? the NG-PONX? in dealing NG-PONX if

Carl Russo

optics see in growing, base. a the somewhat still lot are But keep for certainly sure that customer supply across NG-PONX in more are our in NG-PONX constrained. mind We but interest

is at today. So the the interest supply our a go is them given the consumer to major fact somewhat ability still constrained there Verizon deploy that rate of is

is more matrix than So actually there's supplied.

Sorry, does that make sense?

Operator

question next of coming from is Schwab Our Craig-Hallum. Christian

Christian Schwab

Carl, systems question revenue if talk different basis on do? quick opportunity outcomes, but have software customer, providing opportunity if revenue wondering and range I sure platform per a the there's or a of I'm wide go-forward and follow-up. to I application on a customer I'm get a you're can can investors you easy to that lot. customers this by you walk the about just help by the through, cloud of that's kind understand

Carl Russo

know don't it I is. It done that we've publicly, so...

Christian Schwab

have we Now a chance.

Carl Russo

Yes.

about And so respectively going think we've do until stage us appreciate demur what the I'm and I to shared. I you're I know giving that, but to

So next I'll hold that for quarter.

Christian. Let me and -- I publicly, stated got to go back look at we've what

be know would anything. is, to. internally then don't [indiscernible] that we we've not and shared been obviously, I answer we the haven't So clearly

stiff-arm going to I'm sorry for to So this stiff-arm I'm time. but have you, at you

Operator

Dinges to Thank time, back floor Mr. you. to this I'd the for over comments. At turn like closing

Thomas Dinges

participating during about Investor the Information the be of Events page and be these will events conferences investor Relations on of and meetings posted management in Calix will XXXX. third of Operator. future you, investor section a the quarter Presentations Thank of number calix.com.

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

Calix (CALX) 24 Jul 192019 Q2 Earnings call transcript