Calix, Inc. (CALX) Earnings

Management highlights

Michael mentioned it was an incredible execution quarter with record revenue and completion of migration of all existing customers to third - generation platform on Google Cloud, and AI starting to contribute to customers' success. Corey walked through results: first quarter record revenue, 14 new customers, remaining performance obligations details, non - GAAP gross margin details, strong balance sheet, free cash flow and buyback info. Also mentioned second quarter revenue guidance, full - year revenue growth expectation, gross margin guidance, operational expenses forecast and upcoming investor day tomorrow at NYSE.

Guidance

Second quarter 2026 revenue guidance: $287 - $293 million, a 4% increase at midpoint over prior quarter. Full - year revenue growth expected: 15 - 20%. Second quarter gross margin guidance: 54.25% - 57.25%. Full - year non - GAAP gross margin expected to decline 50 - 150 basis points. Second quarter 2026 non - GAAP operating expenses forecast: $128 million at midpoint, up $1 million sequentially. Expect to return to target financial model for operating expenses by end of 2026.

Segment performance

In the first quarter of 2026, Calix delivered record revenue of $280 million, marking a sequential increase of 3% driven by strong demand for the platform. Welcomed 14 new customers. Remaining performance obligations were $376 million, down 2% sequentially and up 11% year over year. Current RPOs in the first quarter were a record $157 million, up 3% sequentially and 22% year over year. Non - GAAP gross margin was 57.2%, down 80 basis points sequentially but up 100 basis points year over year. Generated free cash flow of $7 million in the quarter. Invested $171 million to buy back 3.3 million shares and board authorized another $100 million for buyback program.

Risks & headwinds

Actual results may differ materially from forward - looking statements as set forth in the first quarter 2026 letter to stockholders and SEC reports. Memory components demand - supply disconnect may affect some companies. Higher memory component costs and whether surcharges can fully recover margin is uncertain.

Analyst Q&A

• Q: Hi. Thanks for taking my questions. I have a couple. Maybe if I can just start with you, Corey, on the gross margin guide here just to fully understand the drivers. Once you put the surcharges through, are you expecting a recovery in the back half of the year in relation to gross margins on the appliances as some of these surcharges flow through on your revenue line? And then if memory does continue to sort of go higher, memory costs continue to go higher, what's the plan here? Because you're not passing through the margin on the cost increase, so what prevents more downside on the margin percentage as you go through the year if memory costs continue to increase? And I will follow up, thank you.

  A: Yeah, thank you for the question. So our plan is to recover the costs And so if there are further cost increases, we would adjust the surcharges accordingly. The effect of the surcharges by themselves put a headwind to the gross margin. I estimate that in 2026, the effect of the surcharges for here to the end of the year represent a 200 basis point headwind because you're adding a large amount of revenue at zero points of margin to go through it. Okay, good. And then maybe just on the demand side, you did mention sort of stronger demand from your customers, and I'm sort of trying to parse out, obviously haven't been able to do the math yet in terms of your raising the revenue guide from earlier talking about 10 to 15% growth on the top line to now 15 to 20, and you also are outlining stronger sequential growth for 2Q than you have in the last couple of quarters. How much of that is stronger customer demand that you're seeing in terms of orders versus the benefit from the price increase, which you're referring to as a sort of decently large price increase that's going to go through the revenue line as well? So just maybe help us break that down and What are you seeing in terms of customer orders that's maybe giving you a bit more confidence as well? Thank you. A: Yeah, great question. The majority of the quarter or quarter increase is due to customer demand, and a lesser portion is the surcharges. We are rolling out those surcharges now. They'll take effect in May. We're not getting a full quarter of recovery this current quarter. But so consequently, the majority of that increase in revenue is coming from increased demand and to a lesser extent, memory and price increases. Okay, great. Thank you. Thanks for taking my questions.

• Q: Hey, good afternoon. Thanks for taking my questions. Just wanted to dive in on the gross margins related to the dual cloud costs. It looks like it was in the three to four million range. Just want to clarify, does that go away completely by the second half? How should we think about modeling that? And then I had a follow - up.

  A: Yeah, great question, Scott. That's the good news story, is that we've got all the customers migrated onto the new cloud. And so, yes, the dual cloud environment is done. So it's done. As we sit here today, it's done. So the penalty that we incurred happened in the first quarter. I think you got it sized about right. So what you would expect to see on that line is for it to return back to levels that were previously at. So I would expect within the next quarter or two, we'll be back at record levels and continuing the progress that we've been making on that line. In terms of my follow - ups, I've got a lot as it relates to the one platform, but rather than preempt tomorrow, I'll save it for then. So maybe if I just could, fiber availability in general, how is that impacting demand? And it's been interesting to see some of the Starlink numbers that are filtered to the marketplace where they've gotten some traction in places that I really didn't expect that they would in terms of more dense suburban environments than you would ordinarily think that they'd participate. I'm wondering, you know, what you're seeing in terms of your customer response on that front, you know, in terms of their demand, their rollout plans. Is this pushing them to accelerate? You know, how is that kind of factoring into the calculus in terms of the overall market demand of your core customers? Thanks. A: I spend a lot of time with customers. It's Michael. And, you know, while the Starlink thing is there, you generally see it in rural areas where there's, You know, when you have a six mile run to actually join a farm, obviously Starlink is a good example there. I don't hear anyone saying I need to accelerate my roll out of fiber to compete. But for us, frankly, another competitive pressure is a good thing for Calix because if you think about, which we'll talk about tomorrow, we try to think about the experience - based nature of what we're doing and how we help our customers. differentiate and transform their business to win subscribers and grow net revenue by delivering an amazing experience, whether it's in consumer, small business, or multi - dwelling units. Frankly, that's good for our business because that gets them listening if in the past they didn't feel that competitive threat. So, you know, it's all good. Hey, Mike, in just fiber availability, what are customers saying? And maybe if I could sneak one other in. I think you talked about guidance for 15% to 20% this year. 15% is really just kind of bumping along at the level you're at today. So what kind of visibility do you have in terms of deployments into the second half? Are you starting to feel pretty good about the lower end of that range? Thanks. A: I haven't heard anything about fiber availability. Have you? There's been some talk that... A little bit of like scuttlebutt? For bead. For bead, yeah. But we expected that as all that bead money starts flowing, that there's going to be some supply, right? So, Corey, any comments on that? A: Yeah, Scott, I'm either more bullish or more negative on bead at the moment. I would say my temperature is about the same. It's progressing as we would expect. We've got tens of millions of dollars forecast in the second half of 26 related seed. We're starting to see states actually start receiving their money. So things are kind of working its way out. We are not hearing that fiber shortages is causing a significant impact to the bead demand as we're hearing it. Great. Thanks. I look forward to the analyst day tomorrow. See you tomorrow. Thank you.

• Q: Congrats on the good quarter. Just for clarity, our previous guidance was 10% to 15% top line and near the high end, and now we've taken it to 15% to 20%. Should we just assume that that's the surcharges that is going on? You know, there's incrementally better visibility and continued strong demand, but demand isn't accelerating beyond what you thought 90 days ago, is it?

  A: It's yes and yes to that Christian. So, so clearly the effect of surcharges is going to move us up into that higher part of the range. Um, but we're also seeing some of the best demand that we've, we've seen. Yeah, and as we'll talk about tomorrow on Investor Day, right? So for us, as everybody knows, when you're rolling out the next stage in a platform, going through that evolution, there can be unexpected challenges. We had done pretty hard for being done in Q1, and I'm really proud to say that the team got through it. So having got through that and not facing any incremental delays, that allows Corey and I to sit on this call and be very bullish about the future for 2026, because this is what our team has worked towards for, you know, since November of 2023, we've been pounding away at this for over two and a half years. And now our AI native platform is got 12, more than 1200 customers loaded. And tomorrow we're going to talk about how, how fast we're going to go and how we're going to go skidding out into that nice big blue ocean of incremental TAM. and compete aggressively to grow the company. So, yes, you're hearing me be very bullish, as you'll hear tomorrow during investor day. Great. And then my just quick follow - up question is, as it relates to BEAT, congrats on finally getting some of that dollars generated for the company. I think you said tens of millions in the second half of calendar 26. you know what is the internal plan for um what year you think will be the peak of that program and what type of you know annual revenue number uh should we be thinking about A: christian we we've you know we've talked about that in the past um you know we've done some high level math i i think that you'll start to see this thing ramp more significantly in 2027, probably peaks in 28. And I don't think that I would want to kind of put a number on it, but it's, you know, it's potentially high tens of tens of tens of millions. Okay, great. Go ahead. No, as we said about beef, we see that as an accelerant on top of the core growth model, right? A: Correct. Correct. Got it. All right. No other questions. Thanks, guys. Thank you.

• Q: This is Karen on for George. Just a quick question. Any updates on traction with tier one customers, just on the cloud side?

  A: None that we're willing to share. Okay, got it. And then any comments on the quarter - on - quarter uptick in appliances? I assume, I think you guys have mentioned in the past that DZS takeouts are mostly done, if not all out. But what drove that, just the quarter - on - quarter? A: Customer demand. Customer demand. For our products because of the fact that we're better than our competitors. Yeah, and it was within our guidance that we provided. So there was no surprises in the quarter. And then we added customers. Thank you so much. Added customers, and we'll talk about that tomorrow on Investor Day when we walk through the core drivers of growth. Great to hear. Awesome. Thank you. Thank you. Thank you.

• Q: Hey, good afternoon. Maybe a couple of questions. First, I don't know if you mentioned it up front, but if you can go through the BEAD commentary again. Was it any more granular than tens of millions in the second half? And maybe on a somewhat related note, there's been some news out of the FCC recently about foreign - made routers in the U.S. and some exemptions there. I wonder if any of that has any implications for Calix. Thanks.

  A: Yeah, Tim, on the beat piece, all that we've said is that we would start to see revenue that I'm either more bullish or less bullish. I'm even keeled through last quarter to this quarter. Things are progressing along as you would expect it to. We think that then translates into tens of millions of dollars in the back half of this year. And obviously the ramp will start next year. In terms of FCC regulation, it appears to be that the timing is fairly quick, kind of measured in weeks, not months. So we would expect to be receiving our conditional approval here soon. You know, Calix has sought and received various government approvals over Calix's 26 - year history. Looks like no difference here. You know, but I would also point out that FCC approval alone doesn't really differentiate your product at all. Where Calix wins is after you deploy with automation and intelligence and subscriber experience. You know, that lowers OPEX and drives business outcomes. Which we'll talk a lot about tomorrow at Investor Day is that You know, as Corey said, in the last 26 years, we've done this frequently through a myriad of government programs, and it's a proud American company. And, you know, we're actually going to show you tomorrow what the power of an AI native, agentic - ready platform, how that's going to help us transform our customers' business, and that's going to drive outcomes. So, you know, press release on SEC is kind of irrelevant. We do it. Well, okay, but maybe just a quick follow - up there. I mean, is the timing of this conditional approval having any impact on the business at all? A: None. Zero. Absolutely none. Absolutely none. The FCC is actually moving really quickly, so we anticipate no issues whatsoever. It's a non - event. We will do this quickly because we're already well down the cycle and So we won't press release it. We'll just, all of our customers remain aware quickly as that resolves itself. So Tim, to be a little bit more clear on it, any existing product that's shipping is not at risk. So there's not having any impact on current shipments. It is the next release in terms of new products coming into the marketplace. And so we have a number in the pipeline and those are what we've applied for conditional approval. So expect to get those approvals at a It appears that the FCC is moving pretty fast, which is great, which we are surprised at how fast the process is going. It's great. So we don't anticipate there being any problems as a result of that, of those new rules. Got it. Appreciate that, Collar. Yeah. Thanks for the question. Good one. Thank you. Will we see you tomorrow? Oh. How are we doing? Go ahead, Alicia. Apologies. We have reached the end of our question and answer session. I would now like to turn the call back over to Nancy Fazioli for closing remarks. Thank you. Calix will participate in several investor events during the second quarter, most importantly hosting our Investor Day at the New York Stock Exchange tomorrow as referenced. Information about these events, including dates and times and publicly available webcasts, will be posted on the events page of the Investor Relations section of calix.com. Once again, thank you to everyone on this call and webcast for your interest in Calix and for joining us. This concludes our conference call. Have a good day.