Calix (CALX) 20 Jul 232023 Q2 Earnings call transcript

Company Profile

Participants

Jim Fanucchi	VR, IR
Michael Weening	President and CEO
Cory Sindelar	CFO
George Notter	Jefferies
Ryan Koontz	Needham & Company
Christian Schwab	Craig-Hallum Capital Group
Samik Chatterjee	JPMorgan
Michael Genovese	Rosenblatt Securities
Timothy Savageaux	Northland Capital Markets
Greg Mesniaeff	WestPark Capital
Scott Searle	Roth

Call transcript

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Operator

Greetings everyone, and welcome to the Calix Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the brief prepared remarks. [Operator Instructions].

As a reminder, this conference is being recorded.

pleasure Investor your Relations. my Vice Jim now of President is to host, introduce Fanucchi, It Sir, go please ahead.

Jim Fanucchi

call. call Thank you Michael our earnings joining Thank Weening; you on Rob. And Officer, good second morning, and Chief quarter Cory and have President we everyone. Financial for Today CEO, the Sindelar. XXXX

posted was Relations stockholder yesterday Form X-K our Investor of after reminder, Calix website. letter, a our website. call on was market closed, Today's Investor in section issued Relations will for with furnished our in a the Calix As be of the the news section webcast which also release the which conference along replay available

call, all future financial Michael will materially I his and from remind those I its opening we the statements make and to about performance, remarks, differ operating this market to results will statements, forward-looking the outlook over Before actual refer turn company including to strategy, growth for want and on call contemplated everyone may these quarter SEC. forward-looking are to the filed and the Factors in reports results no actual assumes statements, stockholders forth set differ of cause second trends quarterly could to respective update as dates. letter in and any their the materially to with and speak annual by obligation forward-looking which Calix XXXX that statements. only

second will included the non-GAAP this A reconciliation stated, in non-GAAP. measures. in financial of be otherwise financial XXXX this in and stockholders. information non-GAAP discuss we referenced call, measures to GAAP Also all letter call Unless is both will GAAP to quarter

Michael, to turn to is please With the my pleasure that, go ahead. over Michael. call it

Michael Weening

across the financial the continued In team of track four for we objectives second Thank that performance measurable improvement, investors. our outlined Calix have in you, of record quarter XXXX, our the Jim.

we managed and leveraging remains and success as Calix our consecutive transformed teams. platform, while record growth, delivering as continues, quarter growth services strong the business communities revenue. ninth achieved by Demand our of revenue customers deliberate First, their customer

gross of fourth with expansion consecutive margin continued quarter Second, our margin growth.

management, fulsomely we in a we in generation that as this as we predictability exceeded discipline laid Third, for the we expense or continued, take advantage investors of out met fourth, guidance April. to operating invested ahead. ongoing growth And opportunity executed once

quarter, second continue a with providers team customers, time the service I as sizes continued In amount adding positive, members. with of broadband we invest that partners significant feedback to Calix. prospects, remains of meeting strategically The aligned are all and

not BSPs these to investor to As investment we partnered the attract impact are who of debt Calix tightening markets, credit in grow. They noted seeing our are continue back. public legacy letter, pulling the private and significant providers laden unlike

grow. Calix week, to that a announced known financing, green last Communication, $XXX bond end-to-end million in sustainable who secured example, we partnership as is For ALLO also with in

with XXXXs During meet new the BSPs, second XX our a hit to quarter, milestone long who time starting customer we aligned strategically their with our platform platform journey also the first goals. including for term their chose Calix,

first or deploy cloud managed Calix cloud, BSPs of the service of our XX new addition, In their signed services XX and support to launched one customers the or with on more team.

and we and not our times, Board BSP how collaborate certainly all constantly sales, on our the customer At success. to team but best never advisory teams Last, mindset. how asking, our our customers to better, supercharge sessions, success culture continued better, least, can is During embrace product, improve? marketing our

why key to purpose and has built is challenge Internally, improvement. our people This continue team driven we of join success the journey want contributes team to members our to encourage the of driver and which culture, customers, members, approach norm a partners of and non-stop Calix. our Calix

as be We in industry. to places any the best recognized work of one to continue

most for number ranked was XX list work in places inspiring Calix quarter second America. the on top to In North one the

were In of named best never entire strength time a driver Eleniak, corporate the success as of addition, improvement part our as the our place CPO Bay we team, XX in of the a growth. notion remote we to great one and mindset. our place better, a work achieved top and culture Area. noting awarded Shane number third Product is great Officer continue was the to customer embrace worldwide, Calix certification, of be work It through to Also, to we better, our Chief constant best

turn stellar Before in expand to Cory, on the over the performance it I'll quarter, to I team second close, Cory?

Cory Sindelar

our coming across in record at delivered ninth Thank well million, the at consecutive board, The sequential you, and of executed growth, our the of which end guidance $XXX high Calix quarter we revenue with range. Michael. team revenue quarterly was

platform our also -- improvement saw quarter high of expedite the an guidance due our was gross consecutive managed prices paid margin small intelligent At margin product margin gross from edge secondary excess expansion, in range, from an fourth and market. and GAAP This components non and gross a XXX of of continued expansion easing last plus for the basis the to of We edge, end shift quarter. points gross of to our and revenue with services, with the access of increase XX.X%. on

starting commitments our opponent which our consistently, back way purchase provides demand, model translated As with we us the subscriber suppliers. gets insights, have with said all the to platform unique

because $XXX purchase platform multiple to commitments During a product high million quarter are second $XXX million. is across the decreased XXXX. in quarter these down third is our of $XXX by SKUs. quarter, This our components $XX SKU of million from million first another from advantage of fungible count This the model the low

with crisis. on combined our basis ended the us say and we at that chain component have finished with suppliers to inventory induced our goods, pandemic supply Our hand provides

have time extended on Our Silicon subscriber times optimization, product lead and and improvements their supply cost but process focus chain analysis, are teams now to demand the improving. supplier expand reductions. are still

and commitments. inventory normalize able to our As we supplier improve, they will be

decrease -- inventory see turns the suppliers on-hand turns. quarters terms Over six expect to to return our long-term financial to our three to we middle of to next and the and of four component model at

third performance between the we sequential XX% gross expected to XXX and quarter previously. basis our quarter growth annual in increase margin, Based XXX points increase on for and margin we annual to expansion will gross close XXX and and be our second the be from now believe points, non-GAAP our will XXXX revenue basis noted an had XXX

discipline and cash on sheet. leverage. build with investments, strengthening levels higher supplier to gross our be you commitments will income will margin see generate operating and leverage With ever significantly further and our accelerating able balance OpEx levels, increased our When combined operating we inventory expansion you flow of free improved

to Back you, Michael.

Michael Weening

high delivering a for sheet, and invest come. Backed leveraging Cory. you, communities growth share balance end-to-end to aligned of by for strength, business, market pace. in a Calix very financial education, faster opportunity continue remain and growing closing, In Thank across I our excited pristine to and margins we strategically to They business to balance the our are serve, our customers. and and unmatched growing cash will ecosystem enable years the managed cloud platform, to at win they our faster customers and residential, services deliver about ahead growing offerings our

the open call let's for Jim, questions.

Jim Fanucchi

Operator, at open for please call questions. this time, the

Operator

Jefferies. of the comes question with first from with our And Instructions] Notter, George line proceed Please your [Operator question.

George Notter

improvement. margin points terrific. easing I basis were XXX the I'm were wondering, us at gross how another guess still about where if XXX an I you question to Hi, start build by I'm in there's and chain. there update to back the on that wanted I asking year, the you high And look line? I That's obviously much. of here. then the Obviously, of about guess last talking also. last a margins guys, have now what because year is, wondering margin big inventory. But chain thanks on very on I give supply supply consuming inventory, gross seeing crunches still that I go But And Are points a you're of guys you could headwind I headwind number, much been priced guess gross

Michael Weening

buckets to you of on largest there try and had do that through those is way product they line with get to for price The with costs designs. supply better challenges. rollback Indoors, get costs out going prices back. were future what three going first the George. large on with the those Deed induced Sure, will in said go to bucket price aren't those pandemic roll designs, the chain the we to the existing design aren't to increases where win, new And we the associated increases. have price bucket past, in of Consistent the

come. that that's stay So some us time with to likely to for still -- was

logistics see We'll And couple as market. The is that into to the around going see P&L. for those expedite out here finishes spot category roll going of costs And meeting had around the And through things only off. second third and you're starting transit first the trend quarters that next pricing, then the back before, those the already said and quarter all category but freight times. costs of back as the gone costs. all pre-pandemic, that not in those normalized to I was

the really good supply still normalizing is progress making lead we're quarter. on times silicon, we're only improving each the thing left the on they're So is and chain, that where with at

think for I'm that for that quantify you on much going the you overhead So P&L, already of an got mind our benefit me normalized of P&L? don't of all the But still probably logistics tell you are back already into already. you've translates so kind it can into to how I that. costs to

it. those the come third to and the third, second P&L starting category back connects going The are now is to to

years amplify build amount because are on look customer it model, point when out you And it product talked us the would fact creation. product this where if And was to every regard, huge new uniquely one entirely basically to Calix, take we stack. I front of George, is an integration. platform anywhere at put you our because that just to -- about end, five was want like certain to advantage from In building new of which the generally old two SKUs of

of When products. this appliances abstracted where opportunity gain we that you you is it, from have quick support that's a turn all can underlying platform what actually the

actually SKUs, shows it of there point the some from is quarter, want it have believe And to to wickedly across was saw fungibility just will So the I call significant in are in XXX has improvements but that I investor and we which surprised last got advantage driving yield you was this, that that advantages industry able you team letter XXX get to chorus frankly while when take components, below is to to in which been quick that going and time, me that team unheard this ongoing so competitive. the future. the uniquely is the to the now out we

George Notter

the the then increase And helpful. your follow-on here that's times the guys a on took it, if you I a was longer increase, I one remember know last in springtime Got of correctly, at point than just were price price lead year. year. back

I'm narrative part of is there is that product were more is So the gross benefit fully to this Or fully margin that here assuming And the part repriced sales model biting that point? in into Is down higher. that of the here? then at go?

Michael Weening

gets year. another on of silicon January prices. were And the because So it favorability getting on this in that price of the that the the increase excessive into George, eating put where kind some components of or was that's through there PPVs, convoluted,

of And offsetting the so where they're that's two. kind

giving year, supply point the effect we are the our and software why of of was get the that to a we where from neutral the edge excess to a product are us that a it's would intelligent at edge. letter that a margin thought the I as said a kind the now going bump, seeing little when of bit That's related purely of access to our benefit on we as price shift components beginning of chain off, P&L, But bit expansion little well, and said have rolling from revenue expansion. in very

bit in to little better margin? us the quarter give So that a help also off with

George Notter

Got it.

great. on. I'll guys. pass very it much, Okay, Thanks

Operator

Koontz Ryan proceed with question. question next & with Company. is Please from Needham the of Our line your

Ryan Koontz

are mostly ask the of seeing customers? Thanks customers plan softness in about of revisions U.S. Wonder commentary build the general type medium on the to sort on if your you this in downward segment in expand what Want customers? could on and that across is question. for you letter that,

Michael Weening

stated predictable to in Yes, of sequential the most the XX% financial our model to subscriber over back I This this unparalleled pandemic. from enabled as grow our the consider to year, grow their aspect have by And continuous help is our of valuable their Ryan, has inventories, the last anomalies us customers some all we XX%. And suppliers. We And no XX% them work year. as going model to And to not the growth problem. going prepared way business with changed growth. we long-term we're from you're component continue have throughout manage our and demand demand we sequential visibility to quarter-to-quarter. the continue the see through remarks, subscriber

in this And decline our relatively small they a inventories, strength we of you into demand because in a important visibility day. have. every most again, the unparalleled while continues point, the example, subscriber have to result that continued slight grow shipments the that For is balanced this customers. to medium the large and is of quarter, see seeing the But demand the subscriber customers,

terms base. in strength seeing And our customer of the so what entire of that's we're

Ryan Koontz

the edge. build revenue commentary on supply kind driven of revenue? assume I more shift seasonality? on cycle from good this that this chain some its can expecting maybe shift intelligent like Looks Is to great. and you've been traditional access give edge or That's

Michael Weening

Yes, revenue our as their of little customers the we themselves on side. our around got edge start work as -- balancing, they working a we where ahead inventory with continue with bit to

into a kind period. of the moving we're off just But that's working continued of that. So summer also buildings

And so drives demand. access more obviously, product that

of that's summer. for you're working inventories, little of off builds seeing, they're And prepared what getting so the bit a network this as

Cory Sindelar

are, will last kinds last what again Ryan, and shipping what reason this in this and a we customers everyone state planned. around work networks. only from in again on is things, And QX, those do we builders And going, their and large they between was why quarter, that will what was Yes. going restate is industry that and we we fast how point closely view like unique of quarter, also with stated the that actually network because is in QX just when in not really we're everything quarter, but we build these their of

then help them stand beside them And we subscriber and demand. drive

go a everything It's half, customers, should they're as So medium deciding corporation, leadership going partnership second plan as with that the and and QX, is no those customers, are large. and into there in we upon doing to team, surprises. ship be our or actually small as a we're we very us whom, QX based to whether what

Ryan Koontz

Thanks Yes, on. I'll pass helpful. it Super that. for

Operator

Please line Christian Our of next question is your from with question. the Craig-Hallum. Schwab with proceed

Christian Schwab

into on Great, expectations is thanks. improvement thinking original Cory, highest to which margin question, calendar George's pull our follow-up calendar I want of you year the we the just know, since year. next you’d gross based some about did, to way described, things in this gross be margin on already year-over-year? from improvements look

Cory Sindelar

Yes, thanks, Christian.

next we relates of year, to for haven't it any XXXX. given As kind guidance

applying market where to back XXX fall long-term that we've see would as financial I we to targeted model, here still points So basis on our XXX today. sit to and expansion we XXXX

Christian Schwab

be looks in be will awarded should being about wind it's of thinking the is we do know How like at then back? as that, how from likely be that guys out more XXXX that speeds deeds, some going And Or calendar be it but beads anticipate you in Do benefit we're should you counts? -- we selling that impacts and guys some thinking spent. not government money you those stimulus? all at to but that? of and great. and Okay, there way, competing than your anticipate -- to I about

Michael Weening

out that market, the there which question question say, to would Yes, the way winning a market in is is big unique greener that well taking a four legacy money the say gas it comes XX% from is the years, a out green positioned amount remains on, it bonfire through that bonfire. are also platform to now they million these else the think of Christian. at because it. and I quarters by XX% example, over been our next the that is means which of have providers, last, service answering on as which rolls they'll out, share $XXX of be a rate, for would already a significant is, great same, we that bond, over fact we've customers six than getting And like I rapid ALLO win growing a there when as shared are anything consistently going to they XX enabled

out make -- The taking areas Bonfire this faster course, stimulus is will building monstrous, And and make them of will sense, start but where already governance are help our the customers where economics government's them. didn't share. into move

go benefit, years. So XX and to term going the it's for sure long a next over there's

Cory, any comments?

Cory Sindelar

Yes, so of to views move start 'XX late current that we ought 'XX. into seeing we is that as our Christian, some and

Christian Schwab

great, what Okay, kind of Spectacular. from others. Thanks, guys. Awesome. hearing we're

Operator

the is from line J.P. of Morgan. question proceed questions. with Please next Samik Our Chatterjee your with

Samik Chatterjee

driving what's Like forward thinking numbers XX% in terms How when and it still of XX% in sort Hi. at Thank couple from what being very look is if growth can a or your XX% big mind, that? year you some XX%? sort are the that to big of roughly. for that the a are you of we for edge growth the to. XX% that it the quickly any if that year, by, here, you you is can start prior relative is stepping the a And forecast sort full a one, I you strong But companies first really buckets high have of compare to what obviously, change question. taking of for relative level, XX% driven the revenue and down about? to we my you growth growth from mean, pulled maybe with I I I is or sort the about talked of of your the these when about macro, ask think can

Michael Weening

elements to Well, so there's two it.

they to again, I'm and take over I've because for did not it's concerns this example, up, in into head be lot The their disposable their a does why. what if about absolvent, fact hunker customers, macro country actually their is and is do man. do? on. They're everything pop stated for club, they discussion We declined, that, any over it's form. income disposable whether like macro the going was this I you center to first depth and as any the going issue the that And what go are a macro in and to recession, a think and who somebody play, time simply going with actually way, shape, our spent to if see income, is on down at And can would to broad to advantageous house of education, example, of do center work, or

actually, around, is of there concern. if QX, road we it's advantageous, that. and our swinging was macro So, I said, as QX don't And some customers think have but we of all kind I don't trend the this see all on

to we've side, which growing the we're And the is seeing through our moving -- in his what a year. business growth sequentially a remarks, company. in as us Corey shift stated to With what's getting closer regards for on, on going see model, XX% we you're is

and in in through of continue there's to a what so going be that's instead this that this inherent 'XX. a already that away to that goes that means row. growth, that lumpiness or is nine out revenue. you're expect see business done year, of quarters going XXXX. lumpiness to Or our constant have we the in the you it And smoothing 'XX And sequential going is And we've

I of kind model business say. what the we're old just so would And eliminating is

top Cory, anything that. add on to of

Cory Sindelar

Samik. Yes,

don't lead growth in say decline the times inventory today I lot start their at going inventory. ensure XX% builds. with are to going where the just as to to they complete carry need seeing at times XX And supply we're much XX%, lead induced weeks, year revenue in, last coming as guys your inventory has chain The to you to challenges, do back customers they to can buy a think from us. when

that going customers rebalance really are their them, right with need we're the our period to they this adjusting So time we're finish of where have inventories. And materials through them to working so their build. they

and we're continuing where it. So constrained fast down to in continue can, continue as there's labor through but why are growing every news they're very day, But to we that's growth grow, they will issues permitting confident they're day. every to grow day. slowing the they talked is, grow. great we're in that forth, they revenue so sequential environment we builds, the an And as continuing about. their they going work and Therefore, to Every aren't

Samik Chatterjee

new do you if that sort type retail us managed which your a a those monetize relation I how how what out seeing thanks a adopting the they're versus wholesale to that. you And mentioned the services to customers customer? of of of revenue from XX to ask SmartTown, BSP can you in sort like like, up is Arlo are services. of play well, how model that And first? of in terms you, as seems to for like Follow Secure to adopting really hear with more Aldo offering? like be sort More customers are in What curious of of much

Michael Weening

And the that's when their think adding IQ a smart And with actually Wi-Fi, of different components? managed is experience market nailed, home. I've where finish virus I see they smart all we do really, text adoption start can the so home number is they what what generally them beyond you the Arlo and SmartTown, paths, add SmartBiz different thinking IQ then great smart up the and got them Well, I that's and to allow the okay, initial the how about that a then and about home malware components, where get question, now strategy. expand into expand I'm out is go to they

discounting becoming MVNO to and simple hearing situation this why a with because the an In it's broadband bumble you in partner we're That's provider customers Calix want become a that partner. reality discount, is market, you a your talking about an becomes lot of in that most a would actually only the is is I the is because good example a cases, want it be, of an fascinating you're And MVNO to broadband MVNO, a it, scenario, do package, a actually strategy. all unless phone fact Calix a and that and actually device, a basically fiber back calling, becomes if great if MVNOs you with across something town, now SmartTown about you're and coverage to would for experience the where are of important Wi-Fi that mobile them because on SmartTown, great with that can incredible, XG you're non-existent, speeds experience devices in town. take rural you interesting the network, really be put your America, is you getting now becomes where roaming those because that's regardless getting that ubiquitous you're living cell in coverage Wi-Fi

this and four, continuum to And I a revenue the component saying I'll we Cory, which Cory there customers a down, on at and maturity of And way guess is into way marching the revenue service long it's you if one comment it's three, long that goes is leave saying our of implications? forward. so and starts that see

Cory Sindelar

pulling into that would items. more of portfolio the of to finding it's And through I portfolio, the items it effect is to that has that, approach. the they more adopt wanting customers more Michael's add what start comments we put as What Yes. we're a is

offering we're at that with And strong the traction the our out the so seeing good came Bark. then very some beginning SmartBiz quarter saw well, strong in And there. year, traction as likewise, we so with traction of

So we're those attraction. marketplace, are seeing newer offerings in strong the

monetizing talked of it per know, Calix, user, that move basis per the we month long per think $X $XX -- you between subscriber the per about to a can over as fall In we terms subscriber month. and we've value representing and term, somewhere on

these larger applied to and new average $XX so to maybe help amounts mark. us that simply just the $X closer from be to offerings And albeit, attach that'll rate, move going are

Michael Weening

from growth? a about two think it and the is growth, actually components, you is margin. when Yes, what revenue Growth

out what supply to So this points on Cory is contributors these model. quarter, significant term to basis margin. of of managed of significant and will it in saw, be you chain to Those in you it to wasn't will and XXX XXX our calling because long contributors the contribution that our services strength just is be the saw strength that some that

Samik Chatterjee

Okay, the you. great. Thanks responses. Thank for

Operator

from Rosenblatt with Please, of question Michael the line next your Our proceed Genovese is with questions. Securities.

Michael Genovese

Great, lot. thanks a

First of us all, percentage RPOs? current you give as just a clarification, can of the

Michael Weening

I XX%. still around think it's

Michael Genovese

right? mean, us been this term. bit little on And weaker -- long more can quarters has going then, shift so just understand RPOs there? is of we just current a from towards should there's on we been don't you that last us And help you away what's since -- what sequential what's and mix exactly tell know RPOs, can about tell the you what just of can in couple subject, us, I the growth RPO

Michael Weening

what's right? you'd Cory, start RPOs, explaining by it think every explained quarter, in I we've

Cory Sindelar

they're with we making Yes, long contract us. term have this commitment mindset. to is a the where that any In customer a

some So the into has those kinds they of hardware not in a the means services where It's enter maintenance it that it, commitment. managed does mean? Well, is that in means things, our minimum commitment a contracts, there. clouds, of there, it's contracts, anything not what to that support what's

a marketplace, sale. one we do lower something bring barrier to usage so like tried new into is you things the service a to on the model, that of the take brand Anything we

new a usage experience has it on is no way So offering a that take the a basis. offer to with customer to easiest

end that long over get make So a one, understand rate it commitment they new you. will they time better we take this, sell I'm is to alright, some revenue and offerings What what can they on I comfortable no doing it, I what is with to attach my willing if how problem. find not, now is, these up term

And agreement, they back sign we'll of better a three-year come trading around, a so they're and course, commitment price. for this

what that's we see So there.

the because usage RPO the of more newer a So services there's are not model. the in number, meantime, in

those because all then model, the Software licenses up recognized true-ups. to the really usage are are thing third is not upfront. And in

of billing than these in lot have more that's extent the monthly a number. in basis. we And the subscribers recognize not and a RPO we're engagements going are committed they the that to, they to on to So that period,

in in RPO So of not what's that's a our summary number. and

Michael Genovese

long Just current term? some

Cory Sindelar

Yes.

Michael Genovese

fact we're much couple in RPOs what's that? but more last driving The for current quarters, that long-term? as getting the not Like growth

Cory Sindelar

renewals matter duration they're going timing contracts up just for That's continue and their way renewal, come replenish it. the work a the will over of on to when and and go to back

grow think that's a when billion-dollar startup. you the we're day, of just they're learning. is at But others. So still that that the lower And in you'll lumpy. a it's to can are on What some quarters for the our we we is that at understand stronger And grow every RPO see inherently And quarter if than are just inherent timing where in tell look contracts end I statement I you the at. expect that trends, foreseeable future. we our

Michael Genovese

deed programs, your -- little businesses customers helpful you explain get or just other Okay, of funding. you more think a can trying to green for guys color. part about the stimulus help now that's this green question, these I bit whether And then it's your for And or very other my funding, bonds? have

on hour you think you significant at how background to more an customer But, works. sort funding be? overall, us your very million base obviously, give kind just it's look this that of, do of And, as So how overall, could meaningful. $XXX is

Michael Weening

architecture. help that, we green ALLO our case you radically a and is what like build the so a business the model, bond, how a different through in assisted actually them of so at is platform with look if a customers, company we Well,

-- in and have an been is for reduction it that the deployed, the Verizon same where every very architecture costs And one end, drives would has in that they so a you operating transparent month. years five if the XX%

and And a onto capabilities, network you're provider collapsed platform single of it. has facing the our build axis that which who it consolidated, subscriber if appliance fact on and edge these capabilities, aggregation from all different five or had network, all functions four a Calix traditional the being those boxes, all different you build with and operate functions buying to the player, that boxes different or top go of comes versus a BNG,

going down massive single green. in to a five is boxes And from logically, a so four increase or system,

think then wouldn't it viruses you of actually reach Wi-Fi the saw all hot all you over habit. about see X systems, that top on popping when Wi-Fi across a And X, these up would it, like take the on you place, Wi-Fi well because X

capabilities, less and put X% you right. we that the optimize a extenders the we second architecture where system. to homes of require the all With we built, the all support, actually Wi-Fi So than place, and power, had different X that over

that house. system And put a so go you think single about of and example, that around to I boxes single different that's our you Calix in three I buy system. that's Amazon, with consumers different for cloud, my from power, actually versus and AI has our can run that something allows three optimized Well, a engines

view. Wi-Fi from efficient a So of XX%, more inherently, point that's power

then never management and are the and policy industry, unheralded because all together, came been support and this insights the analytics components so we in done these through customers which truck rolls of provider, in the we service on at that efficient level. it's a is all top of So stop to incredibly we before how give it,

just they fact those didn't rolls. And And we of our process the were remotely, the up truck. in that single are analytics margins few a drive negative every The they standing rolling their have a down are just customer insights fact, a their now. customers on is constantly vast actually stopping truck -- now biggest, in day have years and majority things where we're a ago, right

they to support it. were from on running customer with fire, customer everybody's because constantly So hair

with how the that green higher fact, funding the actually on to costs these environmental of our things with another view, And on they example, we're operating requests leads as completely changes it. do from in they to in really from great impact which been after promoted we of did in, that point their of has all pursuing they a involved an transformative vehicles, all obviously customers Galley, business put regards market them to leading this the them and EVP also business support and an funding, then how financial margins is who funding, work that's Martha into we were government or absolutely go this to highlight and types effort So model was as how she ESG doing, that public as growth.

little hope bit a that important an So long it, answer but it's asking. to thanks topic, and for

Michael Genovese

Michael. a lot, Thanks

Michael Weening

your question. for Thanks one. Great

Operator

proceed Markets. is of Please, Tim the Northland line question your question. with Savage next from Our Capital with

Timothy Savageaux

strong quarter. And morning. on congrats another good Hey,

Michael Weening

Thanks, Tim.

Timothy Savageaux

you're welcome. for of -- and you where page the XX of kind of report. focus element factors going to And break this the it seem half to My am to three year. Mike I'm on off Cory, factors, that's some you down the kind because the think gross I back the and point platform is into what plus both quarter three mention jumps about of talking question, in to seem margins, back shift? basis outlook, you're I software And ostensibly pricing, increases looking which the

the I'm that mind say, but going if third the then and meaningful the as half? both in a right you at again, second from assess, And you quarter a follow And my have factors can And for outlook, is And look each now, you wonder how one, might as up look and be? I that. into those the to I quarter of sure you're come remember.

Michael Weening

Sure, Tim. sure,

expedite. market one So pricing, purchases, and was the the talking supply you're excessive the spot third about chain,

But I'm impact break factors, based size they So it on are quantify of to and letter the those you. raised three for not impact. down going in --

continuing That driving the just just and presence, managed right? So first number obviously services, in our is it's selling foremost, the software unrelenting, that's software day. always one every it's is, growth and of continued

see continue. to going you're So that

and access second Also business third obviously, first we in quarter, quarter, still in the the think to the quarter, strong. be then going is

is network their builds. Third primarily quarter finishing because they're up

QX third the ago, we're So to quarter. in you year again like strong here print, going a access very with a that year saw I see suspect, a very, for ago, just

to help going that's So with our margins.

And purchase price commitments. likewise, the third one is the easing our of

way matter As charge a entered you the a this for consequently, a delayed in we that new just it, commitment there's haven't effect of days, XX previously quarters, a had PPV into second and time for that know, one it's we P&L. the their think that I so from in in you addition work to benefit of the And through you're see the to couple into going quarter. the to material saw entered next

Timothy Savageaux

it. Got related possibly that. somewhat And to

in a look maintain large of as changes any QX, a From summer that, If the mix the half, anticipating you you standpoint, comment the builds second in major of letter And saw at about, in impact smaller either QX? direction carrier, you gross the small large among one then kind BSPs. you have you we that carrier QX strength made any your and a into through or customer there, too, customer on least would that are the mentioned margins?

Michael Weening

Great, third know you're again think, the We great in strong don't to strong That was in that. question, first going see the quarter. Tim. pieces. material customer segment if in is second I strong the was that going quarter, that customer be movements in to quarter

medium can materially. around of our And are customers. business couple percentage with improve. part move it's so and not a move points going you've inherently even to that's strength, large the with But margins It around to those seen that continuing

Cory Sindelar

which -- freight commoditization. like simple growth to a Tim, in train we're because go broadband that on freight margin this train reason. coming. for that's And the is pivot point one forward think a you know, And the excited I'm I'm really big getting industry, about of it actually

cable the building stage broadband is or a that that, net broadband of broadband DSL in new myself, in or company a I'm a network, first we're building industry whether So the I'm a over provider. or

to market get it the and between the usually phase, is and low XX%, allows works share. XX% well, average and network to that share the During see, XX% XX% XXs technology market as me to get

growing in I'm building that dissatisfaction my and from component existing that a speed, commodity have share, up speed the too it a become will also stage work getting markets I'm so with I'm broadband, years to is market really which for, And billion network, invested because from getting second But a getting and what focused we've XX I'm hard phase and providers. initial and fast necessarily incumbent. significant into, of especially prepare share that $X.X not that on where that of is not differentiator, of broadband will the most actually

stuck there's have else they on to convince need actually in which in throw differentiation. and between and the next you this for, subscribers, kitchen market efficient move it no a needed look unless fast to over, farther NPS. if no decimation where see stage, broadband of really and my providers address share the education, come mobile built go-to business can't they're being everything top our Which their differentiate a a what they and is consumers market everything to to we providers carriers, this of and than have they sinks market high too And and try or toaster margin this is the with into it network, out subscribers, to mobile company broadband whether highly them build is

whatever customer to $X is, loyalty drive $X services, $XX, $X drives, into great that loyalty, got going they've and it that subscriber. So incremental I'm

can I actually win that so And customers. new

knew side, they on go margin time that opportunity huge the -- us, for high up, margins are new our because as And where service, a is go those the every forward yield we add services.

excited at get do to second because their especially to Calix they get I to point we and really half, now get XX% share. into XX%? now I and And this the XX%? okay, XXXX, And the maturity do How market they're how so I'm XX% turning looking reach saying, where

said, talking I was one got provider just to to I the fact, XX%. the two CEO in service ago, days And

do market of, how unless out figure bluntly legacy get to you're XX% want share, I model is to a I a in unheard which Now monopoly.

fate, margin, our that succeed. are then And to turn, the regards success market, find the us, comes. because the and sitting single of channels that's to because drive succeed, fact customer them to them actually out the and of them in customers where will this with what will how use, doing will fact will day, own segments that of then they and micro what we beside help margin masters are So help And we forward, work revenue, the customers entity how social understanding, do we our want I to building big with we're we drive as I our them or and that shift we right buy. every army go beside to

make ahead happen. about talking parts it's think, higher understand it to is massive, know, component you have actually important pull the to we're why level, some to of So unique opportunity insight a up and I to we of that the it, those just

Timothy Savageaux

and Great, That it. appreciate bonfire there, train and [indiscernible]. good couple freight pretty of

Michael Weening

a one. you. Thank Have good

Operator

questions. next WestPark the Mesniaeff with question your from Greg proceed with comes Please Capital. of Our line

Greg Mesniaeff

Yes, for taking question. thank my you

headcount And levels? referenced In how And was will R&D, end to that's the you the my two increase half marketing? is, I pretty question the x second expecting last guess your the been the this driving that increases of much area OpEx what up two part last my that and quarters. in was growth concentrator, ranges quarters, during are guidance You sales top continue headcount second of the trend year? at of to Thanks. impact for

Cory Sindelar

been quarters. with on I'll we've Michael lead let now And couple of right am the where comment on model. then a about of for good investments. our great. kind we're to making talk the to financial you We're where we're to going those and is of model, our on at kind model That’s I news that's

to and quarter marketing between will that the XX%. And just be sales it, recap XX%. so XX% And said we in at we and are

R&D, model, we to -- seem X% we're the said But it. for We've of half about we're gross second continue that repeatedly, put it going we continue our invest we're to and to want exactly all about in well profit. to a we're be year. together, where you will at right this be. when of fulsomely that. at XX% And to below revenue, we'd product we G&A, said and bit of of And be little

making where relates as wanted it investments so And made. are where share to investments, to being we those Michael those are

Michael Weening

to we're the are our to a excited opportunity at Carl, to they fulsomely, We love investment. an But new super because we're growing I'm word. we're actually it And it notion getting. And call see that to that expand we all with because help, to is see regards our there massive just opportunities rate, at the why need reiterate homage going ahead. investing a there's faster top you levels just we're this are into. for on us kinds market And of customers don't slowdown, reason

how where As $X getting you're $XXX who you've that Corey a said, that that's opportunity billion, we're from a startup, we you're has to just excited $X so billion when million started and moved feel.

With regards to board. where investing we're across the

marketing make as get capabilities. and I we and we you're continue Right, as So to us even how leverage I in But those those different continue best to which see sales But then, systems the all on side, significant investments out will the that in are, scalability in salesforce end, then that. to at and if with everything we would able top are leveraging regards and Financials systems phase. to at going to we right breed G&A. product our to move on IT back of all put look we're components, Oracle our built doing and IT

communities, them these about long we the a things awards, help with customers biggest that allowing is is and our all our of to one the we that model, that. for actually our meet component children, struggled they talk culture drive purpose fact, the we different And talent do use And that's winning, the with in and help of with education ways as time. inspiring, underprivileged the that's that who back really they which is of things customers incredibly all us all change to parts, great the one are and attract to they

to So you're investing us going fulsomely. see

Greg Mesniaeff

Thank that. you for

Michael Weening

Greg. Thanks,

Operator

Thank you.

your the with Our with Please next question line of proceed is Roth. Searle Scott from questions.

Scott Searle

Thanks in services talked could But on starting opportunities an you I of are sort XX for quarter. to initially or around or taking to you're I offering of was going beyond Hey, if suite guys, right, of moving to curated update explore? good us wondering, about that. what's managed go the give services, you morning. What the pipeline? wanted equation, you historically, back a Nice the side Hey, about questions. my

services And $XX? the of to at customers going maybe beyond I When follow-ups. see to XX point And at get with talked a couple expect a you to expect you of some there and that that number months, starting in that $X that? then of and end to to aggressive offering had more about of And if initial range upper do the be would we coupling it? time that maybe look is in

Michael Weening

where at collaborative six those And CEOs, what is run and a with -- is that one that executives this the So customers. or that way it's if a actually our it's build the ways don't the one the advisory in products the our that place, we now platform very We process I advisory five boards know of actually myself number are point. leadership COOs around work boards and them. with of are, advisory General business opportunities Managers of for

in we up broadband those services. the DNS should side, sample is cloud elements And which have and around these what one advisory identify boards on service, simplify our new margins through operations, field different And different do excite are then we with end new all do provisioning then and is whether platform, side support, and capabilities to the automation drive to that provider. around the we side, should end insights to managed what service marketing, which of operations

years that do And, on a opportunity. from launched, those you and most two and And were he customer we're came which I you on to that's and can out go customers. came that of watch me that connections last SmartBiz, SmartTown you year talked are know, recently, [indiscernible] rolling SmartTown he how Well, what in actually at about where are forward? fact managed to ago is gangbusters. going from the the or identify we if And two the proud services called really look stage.

on business saying, from XX not enterprise large does came customers us to or hard who down. really delivered the XX about And technology actually then small are pushing customers that's scale

comes down go And we so do next collaborations customers. year, actually to with our where that

in the actually all agency, a its right, small, fully a get small SmartBiz, just initial travel to managed. and parts, of the backup different how you for see component whatever, So business, us about a can it's stage where these corner bigger a get they store, example, wireless from

service rolls So for it's truck no really the margin high with provider.

provider they expensive see don't Well, purchased understand like, go? of need the service example, most they possible by, want and they what's they that the a things is SD-WAN, thing, it's customers eliminating to does time, functions, SD-WAN Where actually VPN. which XX% They all need the us know only is very for one

of So to where conversations. are those is go? types going that we're Potentially, the

and I say crazy. can't it the it, really them for create can goes just of they So a solutions here's sell it customers, actually have different bunch because logical down makes it sense whole part. to most like not We our many what comes other to, and cannot how sell

the beside customer, new that's teaching right have this the unmatched models. customer army that's is so them why us. And for success business this big we focus in And either industry, a

Let's SmartBiz they majority markets. an sell a to customers take vast only sell have our consumer. There's then. businesses enterprise lot who like organization, enterprise the the of their customers in sales But of

-- model practices a best us actually So small business, bring learning reliant launch. the to smart sell to an them on how and business they're essence for

that's focus so getting around is big And adoption. where our

commentary on Cory? dollars, so And

Cory Sindelar

thing. That's you Well, I'm too proud going big not futures. deep very of about

Michael Weening

you, you you me strangle viewed. that giving were although Thank

So.

Cory Sindelar

just said, while so being to Right. we've early take launched get going. Scott, days, what it's us That and a will

have So be far will now But to right in the not that we're of in we we more that created excited that ourselves too come rather market we've what ahead now. about just know platform, regard. there get

Michael Weening

topic out do driving the our bottom. just the done adopters because to is ones Tombigbee it's the they've to who the And we Hey, or of letter in adopters, top do press of and in what want in put in releases generally of us, process the also, Yes. all are they're those are technologies, in And adoption, and on the them adopting investor adopted advisory And boards, the put this. be this, of early with Fiber they've are who there. we early that one they

right amount they taking with ramp So who our and everything, they're customers those we are to which they is take in Those a and differentiating can them other types learn so and those customers are SmartBiz, great, launching pass competitive quickly. with from, ones they're of sharing and markets, who learn organization, there launched all learnings SmartTown, the of success in customer because then we that on fast. significant

Scott Searle

opportunities? if was I Are those very the could follow seem But on be pretty larger of that Mike, revenue Great, were driving you of like to going unique helpful. generators, large, some they're bit once to And and specifically, SmartBiz SmartTown up they MVNO there what earlier referring SmartTown, reach little specifically, do think, more you're a I maturity? on and then opportunities. able to potentially

community? And Do like that of model? the per a other you start person is as charging how per kind about seeing gateway and operator I that? around well? more you it, kind that it's think up city, a when sensor? model it of of work does to But Are smart seems then interest IoT end into Or the per

Michael Weening

really So, insightful. good, actually, very

great question, And Scott. so

them. lot been So on business, a of drawn the it's smart absolutely

enterprise there we're to And it baker. everybody's doesn't by bigger because how smart to it As take and is trying just market the the we stated, class business, gap technologies in shocked down the work. scale on

customers with upwards. at go If and looking start disruption, you go disruption small any

think service we disrupt for significant. our the the so And entire that to is market providers ability business

yes, so growth big a I there’s opportunity. And see

why to we at this sit hey, the That's say, talking mesh Wi-Fi the really town. now it's can actually SmartTown, absolutely, the as mayor way a down SmartTown, have been to the innovators and ubiquitous this. folks called concept. with were can across On about I haven't we looking I the But

meters. Now connecting parking we start can your

that biggest is problem they want connectivity. the have smart is towns become when this And to

in sim. Now without you wirelessly can putting a actually

other connect to lights, rely add I on can can the XG command I lights, or So can these meters, I all water the lamps, don't meters, I or XG you can now connect XG. and have things. parking traffic

a companies represents it is understand, revenue, And relationship SmartTown new permits folks legacy your who the and office, to And areas, great you a to into great you out only So administration significant all don't. what for the you're build if becomes for way relationship because them revenue build -- way in for put mayor’s our have it need, town. you with town. expand And the if generate them which changing and do to not first us, one a want but network a that what which those in customers permits. that's mind, with the your turn

Scott Searle

more but Got GigaSpire if as one solution. Great. it. who long was I conversations line with cross I you slip as a the had And could I've ISPs you’re are got here, agnostic. under various adopting and the wondering medium line wireless

within growth with quickly also well. up could fiber I'm that's if for you I that's guys to true as foot in door follow And deployments some on a is for think wondering deed as well. big basically the I if a opportunity getting additional carriers.

the horizon. further it's on I know

kind actually to their with detrimental it is deed And to a seems it's capitalization highly do. positioned potential going of are are rules for the matching terms asking. of seems is apologize your well politicized supposed I there up think that point what like environment. some whole to access new But to some to operators, on be of it But of So funds starting creep and which that like of front customers I in are capital.

some Thanks, standpoint? be speaking, achieve deed a So of what benefiting broadly guys. going are other capital guys them help from you can and your because customer to disproportionately you from versus base

Michael Weening

Scott, agnostic? bond in the to raise the way the or to in second not access then regards It's with private So from traditional that form answer a capital, to Deed. just things. all yes. actually those the question a equity, is And question have they first regards The to with other

other part cooperatives both significant is I to that a have access million for and network, customers capital. in have on other $XXX cash referred The flows, one our that, top cash significant of profit, are to you funded have it of build they And flow. who then XX% the past, of office customer we have not as

now other believe cash on flow we're legislator therefore the I you company sit who already, they They all really regardless from care say, yes, to expand impact in who actually community underfunding about is, you’re bet different on? view local not the that believe that only cash really capital But investing big with we've massive them in. And communities and regards and forever. deed, they uniquely the of this of point having actually legacy to thing they're or instrument do a do and positioned it So other things. to has to you and the Do care. a been are solas the access, they town positive to they're we're looking also, of when and front just Deed, them been going want

I think of that of regardless a investing, a goodwill and is go record them to. government track forward on element funding, advantage what will

Scott. question, for thanks So the

Scott Searle

Thank guys. you,

Operator

reached over end turn Fanucchi, and for the We've session, question-and-answer to remarks. you. Jim closing call Thank I'll the of the

Jim Fanucchi

page webcast both will this concludes to This a Rob. and Calix everyone day. events you, on in for call and Information you investor us good the several joining section in dates our conference the and Relations posted again, quarter, webcast be the about thank of third calix.com. on available events participate Calix virtually. interest person these and Investor today. and presentations for call. Thank of publicly events, in and will Once times including Have during leadership your

Operator

you You may lines now disconnect this your time. your Thank for at participation.

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