CALIX, INC Q4 FY2024 earnings call

• The industry is at a crossroads, with broadband providers needing to differentiate through broadband experiences. Calix's mission is to help customers win by leveraging its platform to simplify operations, innovate with new experiences, and grow. - MGW SmartTown in Virginia is an example of a customer using Calix's network to provide secure WiFi and aid in disaster recovery. - Strong demand for Platform Cloud and managed services led to record non-GAAP gross margin. - Added 18 new ESP customers in Q4, with overwhelming majority being competitive takeaways. - Balance sheet metrics remained pristine with record cash and investments, industry-best DSO, and strong inventory turns.

In the fourth quarter, Calix delivered revenue of $206 million, which is at the high end of the guidance range provided in October and represents 2.6% sequentially quarterly revenue growth. Demand for Platform Cloud and managed services was strong, with RPOs growing 10% sequentially to $326 million and increasing 34% year-over-year. The non-GAAP gross margin in the fourth quarter was a record 55.5%. The company added 18 new ESP customers, with 21 customers adopting the platform, 15 starting with Calix Cloud, and 32 customers deploying to managed service for the first time.

• For the first quarter of 2025, revenue outlook is between $204 million and $210 million. - Non-GAAP gross margin is expected to remain flat to slightly up due to product mix. - Anticipate annual gross margin improvement will be at the lower end of the target financial model of 100 to 200 basis points. - Plan to continue to hold 2025 operating expenses flat to slightly up compared with 2024 in terms of absolute dollars.

• Noise around government programs and new administrations creating uncertainty. - Recapture of prior tax credits leading to a normalized higher effective tax rate moving forward.

Q: About the large increase in RPO this quarter, was it due to a large deal and thoughts on momentum in 2025?

A: Michael said momentum came from ConneXions event with many CEOs and GM's, shift in customer mindset towards transformation. Cory added Q4 is typically strongest as people align contracts, and momentum expected to continue.

Q: Thoughts on risks around government programs and new administration?

A: Michael said there's a lot of noise and no news, so business run based on facts and will adjust strategy accordingly.

Q: Focus on targeting and monetizing installed base of fiber-served homes and businesses?

A: Michael said Calix's broadband platform helps service providers differentiate and win subscribers to monetize, with growth model focused on expanding fiber network and incremental services.

Q: Tax rate guidance and international customer strength?

A: Cory said international won't grow disproportionately, tax rate higher due to recapture of prior tax credits.

Q: Large new customers and RPO strength?

A: Michael said no large contract in Q4, but strong diversified business with many medium-sized contracts and broad-based customer growth.

Q: Quantify multiyear outlook?

A: Cory said no specific multiyear guidance, but expect to be in middle of growth range by end of 2025.

Q: Medium and large carrier growth and margin guide?

A: Michael said expect growth by second half of 2025, margins lower end of range due to mix shift to subscriber systems but long-term positive.

Q: RPO adoption and gestation period?

A: Michael said depends on customer pressure, focus on customer success organization to help customers progress from network operator to experience provider.

Q: Competitive takeaways and inventory normalization?

A: Michael said normalization completed, most new wins are competitive takeaways as customers change business strategy for long-term transformation.