Calix, Inc. Q2 FY2025 earnings call

• Michael Weening emphasized that investments in 2024 are yielding results, and the industry is at a crossroads with broadband providers needing to shift to experience-based models. - Calix has invested over 15 years and nearly $2 billion in its platform. The third-generation platform is in preproduction for a second half 2025 launch, with goals including sovereign data centers, private clouds, and agentic AI to help customers move faster. - Cory Sindelar highlighted the strong second quarter, broad-based demand, record RPOs, gross margin, balance sheet metrics, and supply chain management.

In the second quarter, Calix reported revenue of $242 million. Record RPOs grew 2% sequentially to $347 million, with a 30% year-over-year increase. Current RPOs were $134 million, up 5% sequentially and 30% year-over-year. Non-GAAP gross margin was 56.8%, representing a 60 basis point sequential increase. The company also had record free cash flow of $36 million, a DSO of 24 days (a record), and inventory turns at 3.4%.

• Third quarter 2025 revenue outlook is between $243 million and $249 million, midpoint representing 2% sequential revenue growth. - Non-GAAP gross margin guidance at midpoint is a slight increase from the second quarter, reflecting customer and product mix expectations. - For 2025, annual gross margin improvement is expected to be at the higher end of the target financial model (100-200 basis points). - OpEx investments are constrained until the company is back in its target financial model, with a slight increase in Q3 due to incremental sales and marketing investments, but operating expenses as a percentage of revenue will decline as revenue grows.

Q: Scott Searle asked about the organic growth of smaller customers without reclassification and the impact of AI on OpEx/Revenue.

A: Cory Sindelar said it's mid-single digits impact. Michael Weening discussed how AI helps customers with marketing campaigns, enabling micro-segmented, cost-effective campaigns and monetization through higher ARPU.

Q: Samik Chatterjee inquired about RPO growth deceleration vs revenue growth acceleration.

A: Michael Weening explained RPOs work with contract sign-ups and renewals, and Cory Sindelar mentioned acceleration was on the appliance side due to legacy vendor challenges.

Q: George Notter asked about agentic AI benefits to end subscribers and supply situation.

A: Michael Weening said the mobile app is a brand portal with cyber enhancements, etc. Cory Sindelar said supply is stable with no immediate changes needed.

Q: Timothy Paul Savageaux asked about large customer wins and impact on second half outlook.

A: Cory Sindelar said demand is broad-based, and Michael Weening mentioned a brand new large cloud customer.