Business Overview
Calix, Inc. is a leading provider of a comprehensive platform (cloud, software and systems) and managed services that enable broadband service providers (BSPs) of all sizes to innovate and transform their businesses. The company's innovative solutions are empowering BSPs to simplify their operations, grow their subscriber base, and deliver exceptional experiences to their customers.Calix was founded in 1999 and is headquartered in San Jose, California. The company's platform and managed services focus on the subscriber-facing network, which governs available bandwidth and determines the range and quality of services that can be offered to subscribers. Calix's solutions enable BSPs to utilize real-time data and insights to simplify their businesses and deliver experiences that excite their subscribers. These insights allow BSPs to grow their businesses through increased subscriber acquisition, loyalty and revenue, thereby increasing the value of their businesses and contributions to their communities.
Calix serves a diverse customer base, ranging from smaller, regional service providers to some of the world's largest BSPs. The company has approximately 1,600 active customers that have deployed passive optical, Active Ethernet or point-to-point Ethernet fiber access networks or its subscriber premise systems. Calix's revenue is primarily derived from the sale of its platform (cloud, software and systems) and managed services, with a growing portion coming from recurring revenue streams.
Financials
In the fiscal year ended December 31, 2023, Calix reported annual revenue of $1,039,593,000 and net income of $29,325,000. The company generated annual operating cash flow of $56,251,000 and free cash flow of $38,396,000. These strong financial results demonstrate Calix's ability to execute its strategy and deliver value to its customers.For the second quarter of 2024, Calix reported revenue of $198,139,000, a decrease of 24% compared to the same period in the prior year. The decline in revenue was primarily due to delayed purchasing decisions by customers as they evaluated and prepared for various government stimulus programs, as well as customers adjusting their purchases due to Calix's shortened lead times. Despite the revenue decline, the company's gross margin expanded to 54.3% in the quarter, up from 52.3% in the same period last year, driven by the continued growth in Calix's platform, cloud and managed services offerings.
Calix's operating expenses for the second quarter of 2024 were $118,959,000, up slightly from $124,659,000 in the same period last year. The company's focus on disciplined expense management has allowed it to maintain a strong financial position, with cash, cash equivalents and marketable securities totaling $261,219,000 as of June 29, 2024.
Geographic Breakdown
Calix generates the majority of its revenue from the United States, which accounted for 92% and 93% of total revenue in the three and six months ended June 29, 2024, respectively. International revenue, which includes the Americas ex U.S., Europe, Middle East & Africa, and Asia Pacific, contributed 8% and 7% of total revenue during the same periods.Revenue Breakdown and Trends
Calix's revenue is primarily generated from the sale of its platform (cloud, software and systems) and managed services. In the second quarter of 2024, revenue from the company's large, medium and small customers decreased by 55%, 35% and 18%, respectively, compared to the same period in the prior year. This decline was primarily due to delayed purchasing decisions by customers, as well as customers adjusting their purchases due to Calix's shortened lead times.However, the company's platform, cloud and managed services offerings continued to drive strong growth, with the number of customers deploying these solutions increasing significantly in the quarter. Specifically, Calix added 17 new platform customers, 19 new cloud deployments, and 22 additional customers deploying a managed service for the first time. This momentum is reflected in the company's remaining performance obligations (RPOs), which grew 9% sequentially and 25% year-over-year to $267 million as of June 29, 2024.
Outlook
For the third quarter of 2024, Calix expects revenue to be between $198 million and $204 million, indicating a return to sequential quarterly revenue growth. The company believes the second quarter of 2024 marked the bottom for the year, and it is confident in its ability to grow from here, driven by an expanding funnel of opportunities and the continued adoption of its platform, cloud and managed services offerings.Looking ahead, Calix remains optimistic about the long-term growth prospects for its business, particularly as the industry continues to "Cross the Chasm" from early adopters to the early majority. The company believes it is well-positioned to capitalize on the $42 billion Broadband Equity, Access and Deployment (BEAD) program, with 20 states and territories already approved through all 10 steps of the program, representing $12 trillion of the total funding. Calix expects to start receiving BEAD-related orders in the first quarter of 2025, which it believes will provide a meaningful contribution to its revenue in the coming years.
Risks and Challenges
Despite Calix's strong competitive position and growth opportunities, the company faces several risks and challenges that investors should be aware of. These include:1. Dependence on third-party vendors: Calix is highly dependent on its global supply chain and third-party manufacturers, which exposes the company to potential disruptions and supply chain challenges.
2. Intense competition: The market for Calix's products and services is highly competitive, and the company faces competition from both established and new players, which could impact its pricing and market share.
3. Regulatory and government funding changes: Calix's customers rely significantly on government funding and subsidies, and changes to these programs could negatively impact the company's revenue and growth prospects.
4. Cybersecurity risks: As a technology company, Calix is exposed to the risk of cyberattacks and data breaches, which could harm its reputation and financial performance.
5. Fluctuations in quarterly results: Calix has experienced fluctuations in its quarterly financial results due to various factors, including customer spending patterns and purchasing decisions, which can make it difficult to predict the company's future performance.