CALX - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Calix Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the brief introductory remarks. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Dinges. Tom you. Thank

begin. You may

Tom Dinges

Russo; Operator, joining and Today Thank you, CEO, morning, the Officer, Chief Cory Sindelar. good third quarter for Carl and our President Call. we you well XXXX as call, Financial Thank have everyone. as earnings on conference

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

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

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

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

Carl Russo

be which in revenue, in revenues Tom. to quarter, We flat third our clear, marks year-over-year grow intend significant you, here. solid our a results turn from we the Thank delivered business. To achieving

the growth. expectations, of and for strong, a and our to the backlog third with solid return quarter, was and throughout we business, in strong above Street forecast thus results were with the enter quarter generated cash. Demand fourth we Our revenue quarter earnings our

software, cloud, CSPs and has systems for company all types to underway transformation providing been of facilities-based services years. Our all-platform an to few a

energized on have now and line. pleased through it are to show begin top We to the

the As it we rolling right. our we believe for industry, secular have disruption through

We right Support we customers right the Farmers X improvement resulted automation reallocating Northwest the recent our Cloud, practices, the achieve of is Rivers and the support subscribers' team third nine-fold a Calix right Cloud to their experience their in have elevate our tech services achieve XX% leveraging examples Telecom a Three used marketing campaign. best outcomes and Communications professional Calix GigaSpire. resource helped in tools, a efficiency. their with quarter time. XX% in business to that achieved the Marketing costs Cooperative reduction most in increase systems in quality those resources our services Cooperative And platforms with EXOS-powered were, engaged and at Communications

week, promises we Helping achieve the on this pipeline business to central when And our Event, deploy are yet. entering our quarter strong mission. that us solid their the to is top they next and of our backlog. excited a Connections now customers has outcomes best focus a be of core demand our with XXXX We're which hosting fourth platforms

wave we communications and We out. service all-platform provider the disruption the on as through here positioned secular ride of to from leader, are to moving the marketplace, grow intend

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

Operator

Thank you.

the Cowen. session. with Paul question-and-answer Instructions] [Operator line comes Silverstein Please first question. now will We be from proceed with your of Our question conducting a

Paul Silverstein

that. customers margins growth letter Thanks, could about commentary in if as going Carl. there? on the give the the I can had any then investor customer us obviously all to us questions, One, and the us give group over products, by you also impacted be margins, incremental to past a that'd you down percentage perspective, the revenue growing, any of XX%, up that originally you not and revenues, as from be which may. group on incremental a Tier being that'd been positive "Legacy" your incremental Two can insight with insight not appreciated. are What's CenturyLink, think give insight and products a And new respect customer was negative, The year would you the but incremental drag I would positive. on or two, in any Xs be on which that, disclosed U.S. Thanks.

Carl Russo

morning. good and Thanks, Paul,

Let me address order. those in

a we that from we've red quarter grow versus four and they the accelerate we the red any systems margins given I up. terms mix said as ocean are platforms, challenge still red for going of have in tend to product our it you're vary And The blue. blue, these we be line margin next that quarters noise in to throughout, et are, ocean expect two. in continue right, One to standpoint, is we say product blue think to move in really revenues would here, blue while can ocean, and So, margin legacy as mix, and what from ocean our to some of blue margins. of on continuing transition cetera, business there's to the would the

line might large than that The margins has pricing, average imagine, have you better that, more than I'm that it is pricing is lower that corporate frankly was second margins. having the as happy in customer margin factor a mix. the very gross and actually be pretty Verizon, we XX% therefore than In the corporate and a customer might being in and where with now quarter,

at So the that's I way look the would margins.

last legacy we been remember, less than question, said and And it's We the include of would sort we being all because of very and a tell roughly in that in this the running customer, you were that XX% that. by today the said they've included, we business. XX% but same the they of were roughly XX% you last XX%, one of second to of XX% they I CenturyLink quarter's if in XX% albeit think call in QX our I they're customers year. on XX% was that the three with to we range about your from start and business, CenturyLink On zone the group CenturyLink quarters XX%, if of it legacy those spoke and forward, between of different our way project

ask So, he has your hopefully answer before that helps you, color Cory I add, if that did questions, to Paul?

Paul Silverstein

number those -- access I from about as quick I all does. you [ph] data very access on us you a and that, us still as gave points you growth is the perspective. it's launches but a It But a can early base cloud, growth a percentage directional well from us in gave recognize products of follow-up for give unit today? acquisition -- what in customer of sense the platforms appreciate revenue

Carl Russo

to it full-fledged some excited maybe growing significantly going in and rapidly. been color is and is So platforms I for we because language for EXOS expectations I a -- into you and want do use would quite To to not thing the connections just this three platform would it's our some go. to have consider beyond that GigaSpire very because Cory, it's can I have is has quite best basically ask little systems -- answer the -- it we it's Edge unfortunately we any obviously help, no, are The that's what point do that material color competitive say point. too so subscriber that as add time, data -- at but just of run the great you a add are for any a it, didn't and market. these? And you all

Cory Sindelar

No, I -- you said think it right. we're

Carl Russo

Okay, Paul, sorry.

Paul Silverstein

back but perhaps a and with trust XX-plus be over the understand recognize revenue, not the Yes, Verizon, longer term, to the a is question, that above meaningfully greater benefit I can go, margin way I there's case? the Carl, or as but about XX%-plus this you still of but I the to margin I quite -- and going model trust work point

Carl Russo

case. the definitely is That

Paul Silverstein

Okay, Thank pass on. I'll you. it I it. appreciate

Carl Russo

Thanks, Paul.

Operator

you. Thank

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

Christian Schwab

XX% the the customer in Great. quarter. Verizon Congratulations on being

that XXXX, part growth look the for on out? we of is in As from here customer at that enthusiasm

Carl Russo

the see new for the Paul's their because are, continued what is really, drives platforms of in growth; it our the two question, and but of of expansion see earlier Verizon, What being excited the It's what really in manifested what's our sea enthusiasm, that what new and unlike and we is else market enthusiasm. in you numbers are is the customers in market served albeit yes, those a differentiated that enthusiasm the business, the ways, it's very not very part on we're marketplace, only we that predictable, drives that the change customer my value but it's numbers building set on the not That by but addressable the our excitement anything company the by we're you but giving is the we rate, marketplace. not expansion said, giving is in highly attack. drives of opinion, far are

Christian Schwab

mix be get the follow-up December guidance scenario to given Great. with Can for you what give the XX%-plus of margin would that a And your of expect to on or gross the gross of margin the then that to for type and margin? continue. gross just and comment you're revenue quarter mix you to happy question, business would us very needed

Carl Russo

way different a asking following. question not asked, Christian, -- of answer the the is that of I'm it, way sort the is which would I I Sure, Paul guess

the new back I our quarters platforms on the grow right XX-point you a give that that come As rearview distant business we a couple continue to accelerate to we of part our a Obviously, too would come a occurs and reserve not in the going answer. time mirror, more and direct we in growing and to that platforms there. of rapidly. and there's future where think you continue margin to that's material to in are from our new

Christian Schwab

Great. other Thank No you. questions.

Carl Russo

Christian. thanks, Yes,

Operator

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

Tim Savageaux

performance and volatility, difference is level, a of space there's copper on guess, seen your that in I what both the first outlook, expect has of guess if across you important that the and that Tier but sort to kind been fiber it guess driven bit up of I like, to the results. of addition wonder to XX%-XX%, or in has on results wonder I growth. broadband themes would X might been you was and market I Verizon, in of kind like terms Hi, continue, Seems comment you've kind I congrats the U.S. in good as more is in solutions. kind a peers up your you some of kind my domestic that most terms reflect spanning talk of unsettled internationally, as is about between among focus the been if of that morning, putting delta Calix fair of to access bit we've to results little sort real of that. point higher bit your here, of and a Thanks. the question the which seen

Carl Russo

for sure, to back question. it paint relate I around the see about question picture. Tim, and I'm and going if then to thanks can enthusiasm Verizon, a Christian's

we're their being it a are makeup, of by are but a fiber infrastructure, to I'm of small So, in out come building customer they more just open and model them customers wireless, to customers the that said, aggressive all from aligned more way next just deploying think for looking industry That large, a there about standpoint that changing also going using generation are analytics. general statement finding that at being sizes. and business strategically than we're being reiterate

line so, key customers of are And our focus. those

of fibre for somewhat the us, one Verizon a fibre one is Edge is basically generation of in next we Verizon a large. infrastructure. very actually edge they level where But and infrastructure the is with combines best obviously obviously unusual. are which technological at represent heading leading Intelligent very wireless

So, that's focused are clearly we what on.

our business. The second number the market a obviously that things platforms from is piece are product of about of a standpoint, changing

that deals and big -- past, actually in customer customers selling company, are Calix and the we boxes likely the things reason X.X XX% is to when for less of have are fill box large you is than changing you in One obviously next are is the to in a the quarter. the forever future it's chasing

shift but As over standpoint. value, lower stretched services, quarter from do more They box are higher software, given time. more actually differentiable revenues in we platforms, our are are any out they more a

So we that contract be XX% significant a can large do would never a with and to software customer very happens make it threshold. very the

predictably our obviously, diverse. So, revenues and from you should perspective, going wouldn't our see up And it go up the visibility it. are that is quite with

level always when -- of X.X a I there sort and high there you together, Calix highly business mentioned I with concentrated. a tie up some to witheringly somewhat those you like an It's in are companies empathy all-platform like and companies antithesis is end are And what some going the So, the difficult have model. we is you at predict. concentration of are of all it's look environment, that because of where

it's now our -- not Our intent.

concentrated We are of to just be of less because platforms, towards as many one to customers many because is you any less and going move XX%. able customer more software get to and

paint that picture you? did a for So,

Tim Savageaux

segment? and and guess but growth does, then further significant the comment of topic like pretty that's the that in would It of I you -- growth be share of X on kind terms market possibly sort on whether to market back XX%. ironically or Sorry. in could U.S. in your Tier increasing sales platform big I particular you the And of sequential penetration, what saw kind year-over-year customers of

talk your how terms some well. reference U.K. you of wonder you the with customer seem could that's if about I In kind outlook, as CityFibre progressing increasing in to probably big international of ramp

Carl Russo

customer larger level. a obviously that said remain the On down a do as And every Let's each XX% do huge the second, is a believe quarter customer, bounce most that we and as the and we from you build for infrastructure has build, go base. be they will a they Verizon, CityFibre think take customer part and to embedded it will know, some that will ones you good CenturyLink the expect fiber ONT. at doing up XX% quarter you the to and end, I are first I a first. and XX% very the quarter. Calix then OLT ultimately it get customer. head

that not new of in always a so Tier and it than building that are or we We it you And do they use MSOs, talk or market we see the cooperatives, electric deliberate. customer capital growth, statement. is the space, longer takes as see on telco of you to share go do front making we are tremendous Tier needs, still Xs opens that actually use but growing of infrastructure. progress. before, well about customers. legacy are Small as go us not and up as brand just -- formation telcos the all said cable ramp to WISPs. in the unmet can reason But different the is they sort And we When think. lots small the on. in And address IOCs, we segments municipalities, X, term we growing use is itself. that of X term Tier and anymore. believe well is we We term and And cooperatives,

CAF committed and carriers for longer state parallel, key CAF big take being block there which on Rural If which that's Fund. of RDOF, provider is now feature the which generation is forward RDOF Opportunity and be there No don't is difference service the to means next which is whole which basis. they don't excited, a Digital come look, whole a would I agree referred in to block -- anybody to you as bid of price look and around but because census could is The getting CAF, be between removed CAF, allowing census by state is overly a proposed clause a a distributed want debated the I currently the it.

new service those block as these funds are quickly. going advantaged able capital all the census just down well. formation, we They to of smaller lots be very of And flow level. going lots see pursuing quite in brand are are capital providers be in And to of to Now you a space. into models build

And and our so, in see we that space we growing see growing. presence that

Tim Savageaux

Okay, much. very thanks

Carl Russo

Does that answer your question?

Tim Savageaux

Yes.

Carl Russo

Tim. Thanks,

Operator

of and Fahad comes Cowen the with from question. Thank Company. next with your Please question you. Instructions] Our line proceed [Operator Najam

Fahad Najam

it's overall headwind I beneficial the we for prospectively margin. your visit Thanks year-on-year, -- to these headwind be that services that that start gross have services have your that behind my been bulk expect such extent to to To will the services the of margin Carl. Or, new expect and taking services would question. customers declined increasing a again? business. are the ramping, lifting long is Hi, in should we given wanted that revenue gross business should the services growth XX% us? heavy Obviously, services

Carl Russo

combination Actually, both. it's of a

So, to customer what which with the services to have from you you low continually actually to behind. lifting us And as services deployment was business we as at and in our grow heard engaged we a modest expect is the to our here success. aligning start margin referred platforms been because gently see rate heavy services really is say,

underneath start what's much mix differentiable do higher that But, happening and will offerings value albeit to more, grow. as will revenue you is So and more lower the revenue. expand. offerings service number margins the But are the to they is shifting continue towards

expect we reasonable in margin services. gross with modest So, growth revenue expansion

Fahad Najam

helpful. That's

deployment So, services going a those you CAF there types in, commentary deployments? through the is -- can deployment. generation the coming CAF your assume component is heavy walk with typically would to I back next of those about CAF in services funding mix us how type II of type

Carl Russo

like will mode. oriented to go it's be we would So what going going a because I be like, that's Literally we success customer honest, look blown to RDOF full Fahad. I With as what forward in perfectly when know dart. platform don't know to be offering, I look happens, don't service throwing

Fahad Najam

Got it. Appreciate the answers.

Carl Russo

go to low we value-added services. going margin not to backwards go are deployment we is you tell eat-on-the-street not going will on on are I thing because take one gross The

there. have you Just to lay fears any may

Fahad Najam

very That's very Thank much. you helpful.

Carl Russo

Fahad. Thanks for question, the

Operator

Thank you.

line from question George Notter with Please of proceed the comes Jefferies. your questions. with Our next

George Notter

Hey, guess thanks the to product a transition guys. lot needle wanted more. on some I I

to transitioning think converting next-gen XOS, red the et And customers about talked existing wining then, so or more have older relatively cetera? as blue more about to a really you about new I it is EXOS products, guys customers is about You or it customers, and systems ramping the speak. And to transition, new of follow-up.

Carl Russo

is but don't it's was answer the with actually more, term I the both, that cautious know convert. I be would that So

customers. and to we platforms Blue obviously So happy think certainly on they board. they want are them our systems, we them, thinking are well. see uptake want the to they about as help to value that that are our and we as they the we it, the Ocean legacy to of all To extent order do our that extent continue don't obviously to happy To

prefer So, we drift, get not us. decision, necessarily but discontinue forced you are going of a our march to let or certainly if we offer not that our We issued sales going are would we of end make do them, behavior. my to customers to go systems, sort

So, help answer the does question paint I you that didn't the picture ask? before

George Notter

you I existing and of looking the and got are new -- You dataset, buying customers go a mix obviously customers you've Yes. can right? back at look new guess products. the

them wondering their second move friction existing of who understand trying So, of is customers to slowly situations are products? of the those points moving was the more it new customers the again or not to to cause product. about next-gen guess legacy are guess with I that piece off the I What this is stuff? increasing I then, what driving I that was mix what's And also

Carl Russo

are aggressive Great that the aggressive, slowly. rapidly very they provider, literally The the our more more simple. question. It's platforms; less more service simple you I will parameter. the give uptaking the

they want the to from So, aligned, well less are they the take aligned. taking with take share, in approach, churn, are to that a and they if slow to them we systems. they existing footprint they other unbelievably to they happy extent to they support raise competitors, want are To aggressive our are continue markets want and lower the they are ARPUs, want to their

George Notter

Got it.

enough. Fair right. Okay, Thanks.

Carl Russo

thank Yes, you, George.

Operator

you. Thank

remarks. would session. our I call We for the to closing have to the reached question-and-answer over end any Mr. back of like Dinges turn

Tom Dinges

Once the meetings Calix you, be and about quarter page management Thank on during Presentations these of to concludes in you interest will now. will Investor future this for you Relations on XXXX. call. everyone conference a of thank our posted and and participating investor be of of calix.com. conferences in webcast joining call fourth section the your thank Operator. events number for the the Information Events Calix. This again, Goodbye for us And on today.

Operator

Goodbye.

Calix (CALX) 23 Oct 192019 Q3 Earnings call transcript