Driven again by small broadband service providers, Calix has reported revenue of $177.4 million for Q3 2021, up 14% from the year-ago quarter.
That growth of small and "to a lesser extent" medium-sized customers adopting the company's All Platform offerings helped to offset ongoing, declining purchases of the company's legacy systems and products from large customers.
While revenue from medium-sized customers remained at 8% of total revenue for Calix for both Q2 and Q3 2021, those customers represented an "increase of 15% in absolute dollars" year-on-year. That reflected "a continued rebound in investment as well as classification shifts for several customers due to subscriber growth and mergers," according to an executive letter to investors.
Meanwhile, large customers represented just 6% of total Calix revenue, compared to 16% in Q3 2020, representing a "decrease of 54% in absolute dollars." The company attributes this primarily to "lower shipments to Lumen Technologies."
Whereas Lumen had represented 18% of Calix's total revenue in 2018, and 11% in 2020, Calix CEO Carl Russo told investors on a call today that "only one customer represented greater than 10% of revenue in the quarter" but that they "do not expect this customer to be greater than 10% of revenue for the fourth quarter of 2021 nor for the year." He said Calix will continue to focus on "finding strategically aligned customers of all types and sizes for our All Platform offerings."
"There's a lot of strength in smaller customers," said Russo. "Some smaller customers, depending on what they're building, especially greenfield customers, can drive quite a bit of revenue."
In terms of progress for the quarter, Calix highlighted that it added 38 new broadband service provider customers "of all types." It also increased Calix Marketing Cloud customers by 56% year-on-year. Revenue for products, including the EXOS platform and AXOS platform, were up 190% and 29% respectively, from the year-ago quarter.
Supply chain pain
Calix executives stressed that the company is performing well and maintains a positive outlook for the future, despite ongoing stressors from the pandemic – including global vaccination rates that are "well below the level needed" to successfully reopen economies. This, combined with higher demand for products, has taken its toll on the supply chain.
Further, said Calix president and COO Michael Weening on a call with investors, those supply chain constraints have been made worse by other factors, such as COVID outbreaks and even extreme weather events at shipping ports seen in California this week.
Indeed, said Russo, the company is bracing for another year-plus of supply chain issues.
"The short-term supply challenges will persist for longer than we anticipated just a year or quarter ago. We now expect the supply challenges to persist through the entirety of 2022. While our supply chain team again performed well in the third quarter, their struggle will continue for the next four or five quarters."
Despite the ongoing challenges and uncertainty, Russo told investors that Calix starts Q4 2021 "in the strongest financial position in our history with robust bookings, clear customer and product focus, and believe we are perfectly placed to execute on the opportunity ahead."
In terms of cash flow, Calix reported achieving positive free cash flow for the fifth consecutive quarter, and the company's highest-ever cash and investments balance of $188.7 million.
Nevertheless, the company's guidance for Q4 is fairly modest, projecting flat to 4% revenue growth. While Calix expects "another strong quarter of demand for our All Platform offerings," writes Russo, "we expect our revenue will continue to be impacted by supply chain constraints and logistical challenges."
— Nicole Ferraro, site editor, Broadband World News; senior editor, global broadband coverage, Light Reading. Host of "The Divide" and "What's the Story?" on the Light Reading Podcast