The third-quarter numbers in the financial markets still see an upside in Calix's transition from an access network hardware vendor to a cloud-based provider of open, platform software and services.
Calix reported revenue of $114.7 million for the third quarter ended Sept. 30, 2018, compared to year-ago revenue of $128.83 million. It generated earnings of $0.01 per share compared with an anticipated loss of $0.03 per share, beating Wall Street's expectations. Calix has surpassed consensus earnings per share estimates twice in the last four quarters, according to Zacks Investment Research.
On Monday, when the S&P 500 jumped 17 points on Election Day optimism, Calix shares were up $1.87 (24.85%) to $9.39 in normal trading. The company's third-quarter earnings were up 5.7%, its revenues were down 11% and its revenue guidance for next quarter landed between $122 million and $127 million, with analysts' consensus hovering around $124.5 million.
The news helped build on Calix's momentum coming out of Calix ConneXions in Las Vegas. During the vendor's annual conference, Tier 1 providers shared their digital transformation stories, and small, regional operators discussed their need to adopt new technologies, the challenge of tight budgets, and unwillingness to move fast at organizations with a low tolerance for widespread change or upheaval.
Changing a company
As President and CEO Carl Russo is fond of saying, Calix has been on a seven-year journey. With the very public embrace by mobile provider Verizon and UK wholesaler CityFibre of its new platforms, Calix's transformation gets recognition its strategy, products and services make sense for at least two large operators. (See How Verizon & Calix Unlocked NGPON2.)
"It seems that our customers and prospects are now really starting to understand the power of those platforms to help them shape their business models. I certainly expect AXOS as a network operating system to continue its ramp and to speed but remember these are network decisions that happen over a broad period of time," Russo said on Monday's earnings call. "But it has clearly captured the imagination of sort of the hardcore networking folks. But AXOS [will]... not only manage the complexity of the subscriber edge but start to monetize it, may, in fact, be the fastest ramping of the three. Fourth are the attached services... and we're going to see those service offerings ramp as well through 2018."
Verizon's path to NGPON2 recently came to fruition with the development of a production network. And Calix recently inked a multi-year deal to support British wholesaler CityFibre and its customer, Vodafone, to build infrastructure for 5 million homes. (See UK's CityFibre to Deploy Calix AXOS.)
"CityFibre represents a compelling contrast to Verizon's state-of-the-art retailer model. And both are deploying AXOS in their respective Unified Access infrastructures. CityFibre and Verizon are specific validations of our AXOS platform," Russo said. "Also, we continue to expand our addressable market and broaden our base at a torrid pace, adding 33 new customers [this quarter], which brings us to 99 new customers year-to-date."
Calix has about 1,400 to 1,500 customers, Russo said. Almost all new customers, signed in 2018, purchased Calix platforms and services, Russo said, but the company doesn't publicly disclose its services revenue.
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