Calix Inc: Overlooked 5G Stock Reports Record Q3 Results; More to Come

calx stockCalix Stock Up 217% YoY & Still Has Lots of Room to Run

Calix Inc (NYSE:CALX) is a great 5G play that continues to surprise the market with strong financial results.

In its third quarter, the maker of telecommunications equipment earned record revenue and record gross margin, which led to record earnings per share (EPS) and operating cash flow. That left Calix in its strongest-ever financial position.

A history of strong financials and encouraging outlooks is why CALX stock has soared 217% year-over-year, 200% year-to-date, and 326% since hitting March lows.

Despite those meteoric gains, Calix stock is poised for even greater growth over the coming years.

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The company has been transforming into a cloud and software platform business. And revenue from these systems has been growing much more quickly than Calix’s hardware sales. This should help propel CALX stock significantly higher as the demand for 5G tech surges.

In fact, based on a strong backlog and a solid pipeline of opportunities, Calix Inc expects to report another quarter of double-digit year-over-year revenue growth, improved profitability, and increased free cash flow (FCF).

Chart courtesy of StockCharts.com

CALX Stock Overview

Calix is the leading global provider of the cloud and software platforms, systems, and services required to deliver the unified access network in the U.S. and around the world.

The company’s cloud and software platforms help communication services providers (CSPs) deliver a range of services, from basic voice and data to advanced broadband services. (Source: “Calix Investor Day,” Calix Inc, March 4, 2020.)

“Calix Cloud” is an analytics platform that leverages network data and subscriber behavioral data. “Calix Marketing Cloud” is for CSP marketing teams and “Calix Support Cloud” is for CSP customer support teams.

“Experience eXtensible Operating System” is an operating system and software platform that supports residential, business, and mobile subscribers. “Access eXtensible Operating System” is a software platform built for the specific needs of the access network.

Q3 Estimates Beat; Record Revenue & Earnings

On October 20, Calix announced that its revenue for the third quarter ended June 30 came in above the high end of its guidance range, up 32% year-over-year at $150.5 million. (Source: “Letter to Stockholders,” Calix Inc, October 20, 2020.)

The company’s domestic revenue, which was 85% of its total revenue in the third quarter, increased 27% compared to the year-ago quarter. Its international revenue, which was 15% of its total revenue in the third quarter, increased 66% compared to the year-ago quarter.

Third-quarter net income was a record $20.5 million ($0.32 per share), compared to a net loss of $3.3 million ($0.03 per share) in the same period last year. Adjusted net income was a record $25.4 million, up from $3.3 million in the third quarter of 2019.

Calix reported operating cash flow of $17.0 million, which represents the fifth consecutive quarter of positive FCF.

The company ended the third quarter of 2020 with cash, cash equivalents, and marketable securities of $103.8 million, a sequential increase of $53.3 million.

During the third quarter:

  • Calix added 21 new service provider customers
  • Calix Cloud revenue increased 70% year-over-year
  • The “EXOS” platform had a record quarter, with license and systems revenue up by nearly 400%
  • “AXOS” platform shipments increased by more than 30%
  • Calix launched the “Revenue Edge Customer Success Service,” which helps service providers with best practices and coaching for call center, operations, and marketing teams

Q4 Business Outlook

For the fourth quarter, Calix expects to report:

  • Revenue in the range of $157.0 to $161 million, which, at the midpoint, represents a 32.5% increase over the $120.2 million in Q4 2019
  • Net income per share between $0.23 and $0.27, up from $0.01 in Q4 2019
  • Positive cash flow

Analyst Take

Calix stock is a great 5G stock with tremendous long-term growth potential.

The company has a strong balance sheet and, over the last four quarters, it has beat Wall Street expectations for earnings. Thanks to strong demand for Calix Inc’s platforms, along with the rapid expansion of its customer base, the company’s outlook is solid.