CALX - Earnings call transcript Q2 2020

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Operator

Greetings, and welcome to the Calix Second Quarter 2020 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 call over to your host Mr. Investor Calix. of Director Dinges, Relations for Tom Thank you.

may begin. You

Tom Dinges

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

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

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

Carl Russo

Thank you, Tom.

it more than continues, pandemic everyone everything mission and clear is connect ever. vital is COVID-XX our to the As

to the quarter. through meet the forces creating second quarter capacity the has These needs. two expansion resulting additional immediate to demand from view industry, drive moving reinforced that second our also pandemic communications bookings of effects the combined in secular the accelerated The subscriber while strong

However, the challenge continued component the chain. has to pandemic supply

supply quarter to Fortunately, chain above deliver of guidance. Calix the outperformed enabled in the and high results our us team end well the

the sooner. it future is appears Calix, For

of unified and and so service we top customers service has our of result, transformation, embrace overall future. are Ironically, further focusing thus, reduced to the we product on us our the of lowest a base of building on These class This have full are business reflected we at There superior to subscriber undertaken restructuring And it decided the the These three in to now. we our is culture. we aggressive a business. a our second access infrastructure. the As years quarter. changes targeted allowed do They footprint. have as growing a the of offerings growing models facilities GAAP their our work-from-anywhere might be earnings all-platform pandemic charge providers the deliver from in capital. business in real are subscriber have and attracting the they are our requirement, their impacts new took providers are experience, quarter, accelerating cost. as our estate as Furthermore, re-imagine end

confirmation new virtually our of them call quarter. with along second added opportunity the offerings questions. the service we quarter win. eliminated is XX all that, helping us With focused speak are still and guidance customers for Our on with when the for we the Even open the Melissa? ahead. in platform loudest provider let is travel third aggressor the strong customer This

Operator

Our a Notter question-and-answer question. with with of first will proceed Jefferies. session [Operator from we time, comes this George the Please At you. question conducting Instructions] your Thank be line

George Notter

at some already if answered guess, I systems And questions particularly, additional also? ask you mix the were was Certainly, anything Is guys the mix And systems Is might Thanks. release pandemic? going from chain yet margins, of through then shareholder higher. around if And of understand systems gross gross costs Is three and just letter. gross it there? much. very Thanks in to Calix I I be equivalent by December can points night I are margin guys. you. about supply give But roughly margins. expedite lot couple my wanted gross that. the Hi, else and or ago get wondering revenue, on last did quarter. a the systems margins the guys to that you But that product helping it customer And also Cloud? quarters for I'm in color look us printed that were impacted what because a that more you of

Carl Russo

of first to for your of letter stockholder the and will being lots George, Dinges in all, pass your questions. on I compliment Tom answering comprehensive

to directly gross question that margins. your for thanks So on And now complement.

long that expect said business particular be is sort saw quarter, gross upward this a all that we time bit have know, we expect though benefit margins expand. little said you for platform we also to to even In quarter the the we of, noisy we As have on But of of gross accelerates, margins as actually clear. any trend noise. the a long-term

opening doing the of But of our we've during favor. we what better in seen of factors capacity talked are we strategy. A pull-forward I were an pandemic of the uplift had my versus what that -- number of percentage about just comments, is So in our also mix. sort

of minority. And it So transformation an that customers transform it's as but the good themselves a this actually using is quicker. opportunity minority to

combined just the path. further down those factors are So

and we quarterly actually To expedite you expedite are. yes, gross charges get question color the components. are Cory So and margin where do add you your some we want think on fees fees in that? noise are I with to challenged adding included still they on to spot on and

Cory Sindelar

chain. fair in of a supply we're say that seeing prohibitions mean, I amount the I Yes. would just

So we are component out inventory. there looking for

order higher demand. the then usually And to the that's for States third the to meet sure. on we're to buying see than continuing market quarter And air spot into into cost. standard material fees our trend the customer we're in freight expedite that We're continuing right? United Sometimes that

So from continue we the work aggressively response shortages them. supply see chain where component in to to we

Carl Russo

-- it real and of Cory's the for what part quickly gives guidance QX, the George are And obviously just mind also combination in right? of us comments

George Notter

Got it.

trying supply normalize systems Okay. was Any try at how I for that the that in your impact for big just gross look stuff? I'm margins guess, to sense and of quarter? some to chain

Cory Sindelar

broken to help give could not something piece. on But going you We out. it. that's I'm George it that that report we much don't We on certainly haven't Yes, quantify separately.

George Notter

And much Could any it. work-from-home been benefit then that any in could us you answer, for top-line? would Got guys. question how give the great. you the on to be quarter. Thanks I give have easy it's but might us sense benefit there know probably color talked an the about lot, not you a

Carl Russo

the we When you what standpoint? top-line on revenue from a say saw so

George Notter

Correct.

Carl Russo

want into number I things. two to up our break the a Yes. different it Again, customers. in of pandemic behaviors drives

on portion model. of it's for majority so it relates of pull the we capacity. platform acceleration beat forwards The up our And an broken a that the saw And of minority actually into all to sure. was that there's significant

let's So beat. majority quantify of that I to say how don't the just just say the it it's know more than to

George Notter

you. Thank Okay.

Carl Russo

George. Thanks,

Operator

Thank you.

next Silverstein Cowen. your questions. proceed comes the of Our with Paul line Please question with from

Paul Silverstein

give the us for collectively? sense they're they any Thanks. question small us the what EXOS the can what ramping already -- give are I answer. sense I'll you letter although still can any suspect you beyond Carl where for albeit and in try Access and asking percentage as total the shareholder a But I I early you of know on Edge aggressively. know Cloud revenue had

Carl Russo

No than Paul. before we've characterized differently

So today. -- we've XX% you it's It's and And would less keep do where know XX%. greater the said it than that's we than answer.

Paul Silverstein

quarter. that a It greater that letter? the much than Presumably as last Okay. XX% the in greater you numbers shareholder it's also given discussed percentage was

Carl Russo

aggressive grow Correct. at an pace. to continuing It's

Paul Silverstein

you also terms of at not number that with are while in CenturyLink the now the still Any customers returned also larger XX% two thoughts but of Okay. With have has X%, it X%, to with your And it Tier they've growth. contributing they're share to to not also those they been much only moderated, risk like become larger respect looks over what's looks on customers the minority us going could like But revenue? one. of profile. growth X% revenue

Carl Russo

broaden me your now. and because let Actually large, Yes. small at you are look all medium comments growing if

moving which quarters bit is quarter on we their from plan. not that business through might is in my of, the are many now Paul. where dread CenturyLink is along headwinds in is One rate. the plan. grow And sets, those flat expect at starting be no else and one And be change would their been roughly there's year-over-year. sort to up be would on Everyone past, there quarter comments to CenturyLink little everybody of new But we news so have own a down. forward they chugging might appear it basically

Paul Silverstein

of All either in a that quarter is coming finally and this one-off right. nature And there or the you quarters? anything anticipate in quarter would

Carl Russo

any of one-offs think my perspective. you? Cory, from can't I

Cory Sindelar

a comparing took comb a through of what level -- has would the going higher debt bad quarter write-off in customer. be to area. incentive QX second to for in also we second or XX-Q couple to in compensation it you'll QX quarter the expect forward. think led OpEx in one I you the a overperformance that And of international we The the see we as

we wouldn't happen to enough that called I And so the size expect out that that was again. in so Q. reasonable it

Paul Silverstein

the had I if strong Cory phenomenon? another on we in assume and quarter would same or the the see QX QX, similarly overcompensation better-than-expected you compensation.

Cory Sindelar

not same but Not to true, extent. the

kind targets QX was at looking where lower. the set were a target you if So of were

greater So there's performance. percentage a over

is QX be the will larger. degree. to to for expectation same Our overperform harder It

Paul Silverstein

bills been ask if last a the of on recently me you it Carl may in I senate speculate insight the actions a right. let different timing? like acceleration. about house question. but the the future, Any share? in with may there's have proposing the know thoughts of Any can press, All incremental and I lot Congress sound one RDOF, lot most you that two you

Carl Russo

is Speculating about the future fun.

So moment let's spend RDOF. a on

accelerating on made. Opportunity this is those discussions Fund distributed going see discussed RDOF, won't let speed is flight. we've Digital may earlier Capital There Hill If will current until in. are year. even in the next into year. course There those pulled be the of being funds going As There third of program. full late you funds being some currently bids and maybe fruit, on about be on discussions potentially year awards bear But this quarter Rural next

see and us However, provider, probably quarter platform a second we if systems of that until for year. being occurs effect wouldn't next an

two by going be but us it for to to say Congress. it pass still speculative quarters, that would So the that's change might revenue impact very

Just about with as we've RDOF, might talked be various top investments. for investments that states' along coming other of on infrastructure

be So lot is magnitude timing spread and general frankly believe of, a I infrastructure we investment decade. of and you those under heading I there the things think the in over the will agree. The next out all broadband, would of

Paul Silverstein

to question. -- for and on more everybody call apologize So I you one else the

not the On it's federal, us programs flavor is magnitude? -- the up types brought you the any give Can also you of for but an states. point, which important just and

Carl Russo

a and sort through they're of of million. That be we'd lots But longer There's have much to tens potentially programs. them. because millions $XXX conversation, the would in go of state

states but these radar. quite below RDOF, compared on go So various frequently and to fly the actually in they're is modest

Paul Silverstein

been I U.S. all the pickup programs in some Federal, on there's assume part? with bigger some those focus extent as to with the

Carl Russo

Yes.

been. I over thinking As that about pickup I was there's how history saying was much

and been Paul. I pickup. defer if that homework. me of little there, don't there's but may a sort have a Let always been there do material know They've been

one you. So and rain-check to going to take I'm that on back a come

Paul Silverstein

right. pass you. it on. I’ll Thank All

Carl Russo

Thank you, Paul.

Operator

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

Christian Schwab

aggregate, you heard Hey, given year, still September had in XXXX very current would quick in outlook. regarding want a to flat half plan. follow-up that that half. less correct? December of I sure, expect versus only Is the But have on the good strong are I will first one first the potentially question the a be CenturyLink. year-over-year, that guys and you great your that in correctly is start and make quarter be you them than to XXXX congratulations they've I just suggesting

Carl Russo

Well both they've number. they're of customer And XX% I quarters. of million a a with running that been think dollars couple that in ahead flat

to view try be to be of be Christian. a getting that to don't I have And sort we So it parse really it's not closer and to into. it's going would the going detail -- down think same any

Christian Schwab

Great. particular last tight what Can today? be us for you highlight to components question. for And you I super need that one then guess are expedited in

Carl Russo

optics They wish and run It's the the it components gamut narrow a from all was to silicon over to place. chiclets. small set. I

Christian Schwab

stuff Is saying. broad-based -- is I guess fair? that what But it's set of a you're is

Carl Russo

It it's so improving. our and slowly is is But demand.

we have the candle ends. team burning quarter both supply so chain And another of at

Christian Schwab

No Fabulous. you. questions. other Thank Congrats again.

Carl Russo

congratulations. for Appreciate Thanks the it.

Operator

Thank you.

line question next Our Northland of with Please your Capital from comes Savageaux proceed the Tim questions. Markets. with

Tim Savageaux

Good And very some on results. add I'll morning. my congratulations strong

the story gross if two And I look on eventual or start top what the maybe should a and like? regard the at what seemed I'll results want wonder that to I greater status look the model guess kind transition on which that One with a guidance your of software is of questions. look basis. X.X gross focus company's business one close on Calix and that. margins what I margin year-over-year or think margins, question. of line. than margins, incremental to And an And tell Both I might XXs I gross of in indicator guess the you I'll take platform then be to with I from we even on to interesting incremental have fairly being follow-up. the

Carl Russo

of away you're I with one that all a is So that first thing take calculator. good

So be that my would first comment.

long, past itself could this long-term the in model resolve XXs. spoken we've the long, in Secondly, about that

that directionally up for in us it. sets as fully sense as platforms independent, abstracted you systems. Keep that know But they we're a gives are think how our you to there's software all about for future, white I an systems thinking have because hardware many to while the operating So believe a stable foreseeable box really that mind our we for hardware customers, of be not potentially the independent provide market future, we software. providing always the from will are

So over continue the time, see to we more. think model we'll

You But number right taking from term. directionally drive into dissuade incremental calculation. and the the on in the you are with model near track margin your would I starting to it that

Tim Savageaux

But healthy top carriers. think in looking mentioned, Right. the pretty direction terms Switching No Yeah. there. XX% problem among you'd of smaller a metric. I I line, growth just think to

the U.S. a say that to or if rate it already later have driving there in would context, mid-XXs a I what's the context the overall on been I can And above pretty short-term wonder, there. above can Although, the are rate is to that. might if might such we see CityFibre you in point. rural ramping in company's that which U.S. degree this small did in some I'm you well that this that addressed if is carrier in – rural on? significant But growth internationally that might growth of your trend make to And imagine weakness And internationally the happening you've potentially Thanks. some there extent growth quarter, that targets right? kind talk comment broadband to of point looks long-term is you growth pull-in dynamic you calculation getting drive at broadband that other if are issues indeed outperformance. especially like any

Carl Russo

Yeah.

and lumpy go around. is is let's know portion international our which as smaller of to it quite business, which is moves So just a international first, you always

your the minority clearly calculations, performance. the percentage there's there's being seeing So conclusions an in to we're what On directly But largest draw point uplift other no that model. there. forward the pull is to of a of will I over

the genuinely on of sort and much things how next looking that's these opportunity continues and pull of around are that the focused forward uplift not to one is minority nature we customers of is an couple accelerate as at are pandemic that versus our XXXX, quarters. transformations. of have noodle in we're their strategic through as so of But what get go an the our where outperformance from to the the And representing model looking we to a you of as what arms uplift

in because that the extent driver incremental would And And biggest we margin you business. sense. understand transform business of feed that future. are the obviously choose think do them so that our of the pandemic ultimately, could customers models. more the I to sooner, the strategic that's their you of involved trust to I calculation that our makes in what helping did

Tim Savageaux

does. once Thanks It very again. much. Congrats

Carl Russo

appreciate much, Tim, it. thanks very

Operator

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

Fahad Najam

you competitors? supply gauged outperformed? What just that outperforming? that chain supply question. your other chain the think Thanks you've on against mean supply Carl, that you the suggest about comments that can elaborate my that for market issue outperforming think by think taking you your do is does what chain chain your broader do And you the share you supply

Carl Russo

simple. quarter. demand a Very we demand going they constraint. a Ordinarily, into outperformed QX being They the And supply so quarter. going When supply. we more our did set for of it the and based quarter, without setting last you're outperformed particular into balance simply the as upon expectations our expectations expectations

focus don't given terms As all for of the think we business, in se, share. don't we see market market for any that of share it platform per so business, the competitors of

This So I is would simply question. not not think. how answer that we

Fahad Najam

our We're the home. much experiencing the wouldn't Got you're question, climate caught ever current of it. probably all providers case best best in that Tim's you it's thing trying stuck happen. the bit how And service But mostly it. now. is are We're kind pull grapple probably flat-footed. a of fact And our could mobility. fair that the limited at right a scenario. in that still forward Appreciate to to you're say to alluded And be your to with, response it

for And to is certainly of and be the gap ability so indicative But your add provide there adding between to capacity seems that right seem huge as capacity now. be demand their to there quite bandwidth that they capacity. results,

maybe added. the And think of. the and is say of as the normalizes can it capacity you goes scenario gets declines scenario, down then best and kind essentially is probably that that could So you this like this case here best demand that you is environment have? this on best from Wouldn't ever just

Carl Russo

I could a best certainly good is I that have No have. imagination with me the it's ever very But could better up to environment, this scenarios. an wouldn't say we one. come allow

time why capacity and we're focused this is However, a It's forward. represent trying on. we take the of more the say, model to that parse upgrades we're to uplift pull that, the

for home so is And a What's is wait say, from of very temporary us providers not to service lot us forwards. actually good that pull that, for our what's work good the a actually is very minute. causing

have to deliver trucks. our services rolling We out how figure without to

a to the what subscribers the most offerings out focused at in cause We our our That's lasting we're all and is satisfy business. and them what the types the a of way start past. uptake And platform have to way look that's to figure to that accelerate those. haven't those we shift questions in in of on. And telling

Fahad Najam

answers. I appreciate it along. I'll pass the

Carl Russo

Fahad. Thanks,

Operator

the allowed gentlemen, Dinges, floor concludes you. any for comments. Ladies our I'll Thank to and back this final for Mr. time turn questions.

Tom Dinges

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

Operator

concludes This call. you. today's Thank conference

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

Calix (CALX) 22 Jul 202020 Q2 Earnings call transcript