Calix’s Russo: Gfast is challenging as a broad-based copper deployment strategy

Calix is keen to take part in the growing Gfast opportunity, a technology that allows service providers to theoretically deliver up to 500 Mbps to 1 Gbps using a building’s coax or copper wiring, but the vendor is being realistic that its main influence will be in multidwelling units (MDUs).

CEO Carl Russo told investors during its fourth-quarter earnings call that Gfast won’t be a good fit to enhance broadband speeds across a service provider’s broader last mile network.

Russo Calix
Carl Russo

“I think we've been clear for a long time that Gfast has a very good use case in MDUs,” Russo said during the earnings call, according to a Seeking Alpha earnings transcript. “But as a broad-based copper deployment strategy, we think it's challenging.”

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While he would not say which customers are using their products for their MDU Gfast deployments, Russo said that its base is growing.

“We're over a hundred customers and as you might imagine that's continued to expand,” Russo said. “We're doing just fine from a customer traction standpoint, but you have to think about that specific use case as to where it goes and specifically it's in MDUs and MTUs.”

Russo’s sentiment about Gfast certainly reflects the deployment strategies that large telcos such as AT&T, CenturyLink, Frontier and Windstream, all of which are at various stages of either trialing or rolling out Gfast in MDU environments.

AT&T, for one, began rolling out Gfast-based services in 22 metro markets across the United States in August. After conducting a Gfast trial in Minneapolis, AT&T named eight initial cities that have properties equipped with the hybrid fiber/copper and coax technology. Several of these cities, including Boston and New York City, are outside of AT&T’s traditional 21-state wireline internet serving area.

Meanwhile, CenturyLink and Frontier have continued to trial Gfast in target markets. CenturyLink installed Gfast in Platteville, Wisconsin, to deliver up to 500 Mbps broadband in 44 MDUs. The provider is also conducting similar deployments in Minnesota. Following a Gfast test bed it has been conducting in one building within Connecticut, Frontier plans to extend Gfast to more locations throughout 2018.

Here's a breakdown of Calix’s key metrics:

Products: Revenue was $116.5 million, representing 84% of total revenue, and was down 5% compared to the year ago period. Although Calix is seeing ongoing traction with its AXOS and Calix Cloud product offerings, product revenue was lower due to lower spending, as well as the impact from a major turnkey network improvement project.

Services: Revenue was $21.4 million, representing 16% of total revenue, and was up over 130% from the year ago period, as the vendor closed out nearly all of the previously awarded deployment services it called out in the third quarter call.

Domestic and International: Revenue was 88% of Calix’s fourth quarter revenue, and up 3% year-over-year. International revenue was 12% of Calix’s fourth quarter revenue, and was up 14% year-over-year. Calix noted it had one customer that was greater than 10% of revenue in the quarter.

Financials: For the quarter, Calix reported revenue of $137.9 million, a GAAP loss of 25 cents per share, and a non-GAAP loss of 15 cents per share. Calix said overall revenue was impacted by slower spending later in the quarter by a major customer, partially offset by strong quarter among the vendor's small and medium-sized customers.

Looking toward the first quarter, Calix has forecast revenue to be in the range between $102 million and $108 million. Calix said this range reflects the continued ramp of new products into the marketplace such as mesh and carrier class Wi-Fi devices, Calix Cloud and continued shipments of the AXOS E9-2. These developments will be offset by a slower than normal seasonal spending environment as some of the vendor’s customers have not yet finalized their capital spending plans.