Q2 2021 Calix Inc Earnings Call
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It is now my pleasure to introduce your host Mr. Tom Dinges director of Investor Relations. Thank you Sir Please go.
Thank you Donna and good morning, everyone. Thank you for joining our second quarter of 2021 earnings call today on the call, we have chairman and CEO, Carl Russo Chief Financial Officer, Cory Sindelar, and President and Chief operating Officer, Michael winning.
As a reminder, yesterday after the close of market, we released our letter to stockholders and 8.
Ahead of time.
On the Investor Relations section of the Calix website.
This conference call will be available for audio replay on the Investor Relations section of the Calix website.
Before I turn the call over to Carl for his brief opening remarks, I want to remind you that during this call. We refer to forward looking statements, which include all statements, we make about our future financial and operating.
The performance growth strategy and market outlook and actual results may differ materially from those contemplated by these forward looking statements factors that could cause actual results and trends to differ materially are set forth in our second quarter 2021 letter to stockholders and in our annual and quarterly reports filed with the SEC Calix assumes.
There is no obligation to update any forward looking statements, which speak only as of the respective date.
Also on this conference call, we will discuss both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in our letter to stockholders unless otherwise stated on this call we will reference non-GAAP measures and with that let.
Let me turn the call over to Carl Carl Thanks, Tom.
Second quarter saw the calix team achieved the number of milestones on our March to on all platform World.
On a wave of continued strong demand from.
For the first time, our all platform offerings software and the associated.
Some of them services, we're greater than 50% of our bookings.
We expect this trend to continue.
For the third quarter on a row, we did not have a 10% customer.
And we do not expect to have 1 of the current quarter.
This speaks directly to the breadth of.
Of our customer base and the predictability of our all platform model.
At the same time, we brought on a reset and the <unk> 7 products to end of sale.
These 2 systems, where the founding systems of talent.
And this marks another milestone in our continued pursuit of our off platform.
The divestiture.
With these milestones behind us.
The board of directors.
Has added the chairmanship of ice CEO role I will continue my focus on our long term strategy and I am confident that our executive team led by Michael <unk>, Our President and Chief operating Officer will continue.
The key our strategy with excellence.
While supply remains the challenge and will remain a challenge well into next year.
Organic demand for our solutions remains growth.
Every day, we are excited to help our customers simplified our revenue.
<unk> per subscribers and grow.
<unk> value.
With that let us open the call for questions.
Donna.
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Our first question is coming from George Notter of Jefferies. Please go ahead.
Hi, guys. Thanks, very much and congratulations on the strong results I guess I.
I wanted to ask about.
Gross margins.
If I remember going back 3 months ago, you mentioned that you had the shipment of low margin product that.
Got pushed from Q1 into Q2, I guess I'm wondering if that had some impact on the gross margin result, this quarter and then also.
I would imagine your component costs are higher also given the supply constraints around the industry and any sense you can give us for how that might have impacted gross margins also would be great.
Yes, George the right.
If I remember correctly.
That the shipping pushed from Q1 into Q2 and that had some impact.
<unk>.
Margin.
Also correct that the component of increasing prices and higher freight boss contributed to.
The sequential decline in margin from Q1 to Q2.
Got it any any chance you guys could quantify.
By that is that the.
Point of margin 2 points of margin half of point anything you could steer as to would be great.
I think current in the past you said of.
Not a significant.
But we haven't tried to bracket it I think in the past Corie has said that.
It's more than a point Leslie from higher.
Number it's a significant number of.
George on that so I think the best way to with the.
Got it Okay, that's great and then.
I guess I also wanted to ask about the <unk>.
<unk> I guess now called lumen.
Your larger customers, where that segment with the was down quite a bit year on year.
Because of the Centurylink it sounds like is going through a strategic process of some of their assets, but any perspective on what's going on there and any chance that account could improve going forward, let's say they do make some strategic decisions.
Maybe get some cash proceeds from the strategic decisions could they reinvest in the.
Areas of the business that you guys are exposed to.
Yes, Jerry I think that's the correct observation as you know over the last couple of few quarters, they've been pretty tight on Capex as I think <unk> been going through the strategic valuation. Thank you.
You'll notice in the announcement around the Latin American assets.
They.
Our equity true likely use of proceeds of the Capex and investments.
But we think it's kind of continue like this for a while as they continue that.
That focus on where they want to go strategically.
Good.
Our business continues to move along if you look across the industry.
Spoke of and Youll see that their capex was down across the number of spaces.
I think there is a chance it will improve.
It may improve.
Through lumen it may improve through the spun off assets wherever they may day, so stay tuned.
Okay I'll pass.
Thanks, very much guys.
George Thank you.
Thank you. Our next question is coming from Paul Silverstein of Cowen. Please go ahead.
Thanks.
The 43, new customers on the quarter.
The book from your historical troughs of into 'twenty for the preceding quarter of that.
20 years in the teens before that.
This the new norm was there something specific about this quarter and we've got a couple of thoughts.
I don't know if it's the new norm.
Arm.
I would really characterize it as.
You know that we've been investing to get up to our model and our significant.
Some of that has been in sales of marketing and.
So I would say stay tuned.
But I think youre going to is the.
Increasing aggression on the part of the sales and marketing organization, Michael the use of an era, where do you want to add to that I would just say that the.
Different sized customers.
Important in small to medium size and <unk>.
In fact, we said Carl is that the investments that we're making in the sales and marketing organization are paying off.
Along with the platforms being very matured at of customers say to me the other day.
That were the only Wi Fi 6 platform that's carrier.
Class of mature in the marketplace and that's why they went with us and it's paying off dividends because we were the first in the market and now that we have all of our new buses remained in place on our new solutions out of there very excited about the future risk weighting of new customer acquisition.
Alright.
<unk>.
I remember the number.
The.
We're up again very strong the thing that's worth 6 or 8% growth this quarter on top of the other 30% growth from the previous quarter.
Is that theyre going to book.
Something.
Clearly of symbols on sustainable at that level or the.
Back to growth mode for the.
The principal period of time, and what's going on there in the most of the development.
Yes, so I think.
We have to take care of on the mid sized customers because it's easy to remember of the past.
And think of mid size customers out of the tier twos.
And if you remember, we said mid sized customers that those greater than 250000 subscribers less than $2.5 million. So it isn't.
Picketer of something in the future, but it's not necessarily that the tier twos, a rekindling of the status of our value proposition as you heard Michael alluded to in small and medium customers and starting to work its way up the stack of customer size.
Yeah.
Got it 1 last question on the non USD 1 billion cash against.
What would U S demand.
And so you have the correct me if I'm wrong.
<unk> been deploying a significant amount of incremental investment in terms of Opex. So Tom resources into non U S. With the non Nielsen is of strong once again this quarter.
And the incremental insight to offer the <unk>.
In the future.
So.
And the story from my perspective, and I'll, let Michael add some color we are being very much focused on North America.
Globally.
Paul will drive towards where from anywhere of broadband et cetera is the wave that's moving through to the marketplace of Michael maybe you want to ask the color.
On the international side of it.
The various.
Static on how we expand and a lot of the growth that we're seeing is actually from existing customers, who are making incremental investments in their networks of the markets, but they cover and we're getting the benefit of it as we are of a long history with them. They chose us as their strategic partner and I think thats. The key differentiator is that the companies who.
The premise of international markets for the 1 who actually understand the value of our platform how the simplify their operations and excite their subscribers and they're betting on us long term and that's the.
And more capital they partner with us.
Alright, thanks, guys.
Paul.
Thank you. Our next question is coming from Chris Howe of Barrington Research. Please go ahead.
Good morning, everyone and congrats on the quarter.
Good morning, Chris and welcome to the party of the quarter.
Yes, the parties deep.
With a few questions here.
But leading off just tying together some thoughts with some of the previous questions. The.
<unk> 43, new customers in the quarter.
And in the shareholder letter.
You had a brief highlight related to favorable regional mix.
On the success you have.
Net of new customers.
Should we think of that as being tied to how you've targeted.
The potential customer base on them on them.
Geographic basis.
It is time at the same model that we've been pursuing which is we have of direct model that we're containing.
The 2 invest in and so there is more smaller customers and there are medium customers of our medium customers on our larger customers and so on a numbers basis.
Youre going to see the most of them and in the smaller customers. Michael do you want anything of that yes. The other part is the net.
If you look at the maturity of our.
Turning to cloud platforms, what we are unique in the market.
With is the fact that we can actually enter a customer on many different vectors. So where if you go back to the history of Calix 15 years ago, we would of primarily partnering with the customers and access vendor.
We're now able to go and transform the call center, we're able to trend.
Our form of their marketing like nobody else in the marketplace true behavioral analytics insight, we're able to help them build out on the virtual storefront on the home with Wi Fi 6 and therefore that gives us on access to competitive accounts that we never had before.
And we're entering into the different vector and allowing.
The windows customers.
Great. Thank you for the color.
Just digging into total operating expenses.
We came in better than expected.
Can you put this leverage into context for the current quarter.
The kind of at what points.
You saw.
The potential leverage start to realize itself of how.
Perhaps we should think about that on an ongoing basis I know were moving towards the.
The target financial model on a percentage basis.
That you highlighted in the letter.
But perhaps you can go into some of the leverage.
1 of these or what we could potentially see as revenue perhaps over grows on the total expense line.
Yeah.
So.
Let me shape my answer to your question and our return on investment manner.
Because obviously, we expect to make disciplined investments in opex.
The Chegg deals returns.
And we are very focused on growth.
That being said the leverage.
In our view and a return on investment by driving the growth of the business.
And opening up new margin expansion opportunities.
It is not.
And the leverage at the bottom line from having opex the below our model or do you want to add some color for Christy of that.
And where we're heading share.
The underperformance on the Opex growth largely due to.
Not meeting our hiring goals of the quarter.
So we did.
At a roughly 5% to the workforce from the quarter.
But but fell short of what we expected over the near term, we intend to get to model.
And so those opex investments, we will continue to increase yes, im sorry of the way I'll be referring to Chris just your perspective.
<unk>, we are planning for success.
But we're not going to lower the bar.
For folks coming into the meat of head count goal, we're going to go get the very best Mount of Academy of Sneaker culture support staff.
Okay, Great I guess that speaks to 1 of the recent press releases surrounding.
In the quality of talent that you're attracting the calix non.
Lowering the bar for that.
My last question is just quickly it was asked about the law.
The margin items that got pushed forward from Q1, as we look at kind of the end of Q2.
And.
The share that we should make note of as it relates to Q3.
Sure.
The thing a little bit more of.
Purchase price variances on spot market buys are going to start affecting margins.
We factor that obviously of the guidance.
<unk> that we provided but we are moving into the tougher part of of our fourth quarter.
Remember back when the and our first quarter call, we've talked about the push out in lead times.
Lead times, leaving a gap in the fourth quarter.
So as we approach the fourth quarter, its obviously, becoming increasingly more.
Anything else.
The demand and so.
That is the ensuing cost increased share increased.
Component prices.
So whereas on through the most challenging the white part that we've faced in the last 18 months in the next couple of quarters.
Okay, great. Thanks for taking my questions.
Thanks, Greg and welcome aboard.
Thank you. Our next question is coming from Michael Genovese of West Park Capital. Please go ahead.
Great. Thanks very much.
With the with the upside versus where the street numbers.
Typically or in <unk>.
Do you have any update to.
On the full year outlook.
Okay.
Mike we do.
And then I'll, let Corey cover that with your current go ahead.
Yes, the last quarter was 70, so we can grow.
About 15% per the year.
With the improvement over performance of the second quarter of outlook for Q3 at this point of the kidney and growth, 20% or more off of the year. So for the year, what does that make it.
Generally talk cash 660 from the U K does that out Mike.
Yes, yes, absolutely.
Thanks.
On.
Okay. So.
Alright.
Just could you just quickly talk about I just think it's important when you talk about the the legacy products.
I guess quite realize you have so many legacy products.
No.
They're all fiber, but what's really the difference between the legacy stuff the same thing out in the in the all access.
Yes, because of some color there would be helpful.
Well we.
We do have.
The 21 year old company. The company was founded on the <unk> Kevin.
When we acquired the company called the outcome, which had its founding product on the B zone and you may notice from my introductory remarks that we actually achieved and of the sale in June on both of those systems.
After the systems came to market in 2007, we felt the E series.
Aerie product family, which may bring about bigger E series continues to this day.
The initial E series was built on an operating system called Exa.
And those of our copper and fiber systems.
We also then build the gigabit centre family, which was our first generation of on premises systems.
And all of those are going to what we refer to now as our traditional or legacy systems.
The bill.
They have the broad deployment.
E series with the phenomenally successful system and so we have many many customers that have built networks with E series and have premise of systems on Giga Center that is still robust.
The border.
When we project our cash.
Platforms to market.
<unk> and <unk> assets, which have become the intelligent access edge and the revenue range along with our cloud that is our all platform business going forward the.
And so and the excellent operators.
Even though they are abstracted from the hardware still have hardware resources underneath them we.
The continued with the E series 4 of the asset side and we've now got the gig inspire family of the market for <unk>.
No.
We are slowly but surely growing.
Our all platform systems.
But the customers that have networks built on E series or the gig is on our premises. If they chose to continue to order of our systems.
Either 1 of them perfectly happy to take the order and as they see the opportunity to deploy our platform. They will move to the Michael do you want to add some.
When I joined 5 years ago Carl.
Shared the view, even 5 years into it and we're down the path.
On the journey to build these platforms and I would say the only thing I would say the important to understand what's going on the legacy and the new as of <unk>.
Frozen the very different path from our competition, but our competition has done.
Its actually kept their existing systems that have been there for 20 plus years, they havent under upgraded the fundamental underlying technology and instead, they're taking the very traditional technology path of actually putting middleware over top of it and actually building out all over the top of it.
Covering it up.
What Carl on the leadership team did in years ago was actually rebuild these platforms from the bottom up using industry standard technologies like net comp gang and all of those elements, which is why our products are unique in the market. There are built from the bottom up to actually embrace the future of which is all around helping service providers.
Scan their customer leverage data and win and so that's the difference between the old and the year.
From my perspective, I, just wanted to point out that I'll I'll take that comparable assets.
Why join Mike keep going okay, well, thank you I mean the dose.
Great color for that that question I'm going to ask.
On the floor analysts estimate once even though they are on different topics.
Wanted to take your temperature on gross margin expansion for the overall year.
The typical 1 to 200 basis points, where do you stand on that right now and then secondly, just how are you feeling about <unk>.
Congress and.
Infrastructure.
Sure related further stimulus for this industry. Thank you.
Okay. So let me let me just I wanted to put some color on the gross margin of ask for it then.
2 of it.
I wanted to go back to the quarter was saying earlier about Q4 of drilling in the et cetera.
And I want to frame that with what Michael just said.
We.
Furthermore, the enormous opportunity in front of us it is a secular disruption.
And we are very energized by helping our customers succeed.
That drives us to do.
Is to work very hard to meet their expanding needs, which means delivering systems.
And not raising prices.
For example.
Our vendors have raised their prices. So we are all orders on the water to meet our customers demand, which means we will pay expedite fees do things on freight find things on the open market for silicon and Thats. The color of that quarter was talking about support you on the shape.
This is further to the direct question and then I'll come back and talk about.
The Congress.
Sure.
I think the strength in gross margin in the first quarter.
<unk> performance in the second can submit all of them that we think we will achieve.
Margin expansion of 100 to 200 basis points.
Year over year.
So I think we're on track to do exactly that.
And at the site.
No 1 should take away that the.
The Asia thing right now at the site on Congress.
Look.
There's lots of puts and takes and we're all following the spin here's the.
<unk>.
The theme that in the vernacular.
Regardless of the affiliation everyone now knows they were interested in hardcore infrastructure roads bridges and internet.
No matter of party affiliation you hear the same freight.
So why do I say that because it.
Thing I worry about the bid and ask on if the Internet infrastructure has resolved itself of 65 billion.
Either way, there's going to be a large amount of dollars investor day.
When how it share with us.
We could have long discussions about im on record assets having.
Having set the following and I'll repeat it.
These programs.
It's always turned out to be larger than using.
They take longer than you think.
And what I've said about calix remains true it is not a pull forward of boxes. It is an uplift of our entire model as we help our customers build of new business model on top of the new infrastructure they're building.
Thanks again appreciate it.
Thanks, Mike.
Thank you. Our next question is coming from Ryan Koontz of need.
All of <unk> Company. Please go ahead.
Hey, good morning, Thanks for the question.
The impressive metric there with the software bookings north of 50% can you give us any color.
Program here on some of the trends are.
Fairly familiar with the products, but what's what's driving that and is it should we think about that as the new normal or kind of of onetime events.
So let me make sure I'm being very clear it is our all platform business, which is software the associated systems.
Color there remember theres, a hardware resource underneath both the access infrastructure of the premises.
And the services that go along with it so that business not just offer of this the whole business.
<unk> has now made it over 50%.
And obviously once having made it over 50%, it's not going backwards.
So I won't speak of it again.
Brian prior to you joining us.
Net debt at some point in time, we're going to go over the 50% in revenue I.
I thought it was maintenance of the share when we had eclipsed the 50% in bookings.
So thats the 1 ticket and we expect it to continue.
The bad health.
It does thanks, so much.
Hi, Brian maybe slip.
That's it.
Can you hear me okay.
We can go ahead.
Great.
Specifically on the R&R programs are you seeing any option there we've heard from.
From some of your peers that maybe some of the engineering work is.
Turning to be funded maybe by internal mechanisms, but folks are looking to get going.
Late this year early next year as the inline of what you guys have taken. Thank you you mean, you've heard from some folks that previously 2 years ago side of it is going to happen next quarter. So all.
All of our kind of aside from maybe we're going to be clear as I said it on.
It takes longer that being said, we are clearly seeing now people planning starting to put in some orders, but it's still early days, Michael do you want to add some color to that.
I would say that's exactly the case the growth that Youre seeing right now is based.
Based upon us taking market share.
So while thats the great future looking opportunity for us and Carl just stated.
It takes longer interest there and so we expect that to start flowing through in subsequent years, but the results of youre seeing today or about our.
Users can actually taking market share based on our customers understanding the value of our platforms and their desire to build the new business model to fundamentally transform and win customers against the biggest spread which is the consumer direct companies, who want to get inside the home only match subscriber and monetize.
The organism or incremental services, which the service provider needs to do.
Yeah.
Helpful. Thank you very much.
And lastly, any color on the international side, obviously, great great quarter, there on revenues any regional color you can the entre. Thanks, so much.
Given the continued continued execution of core do you want to add some new issue on the acute tomorrow. It was pretty broad based the came from a number of regions.
The strength, particularly in Europe.
Great. Thanks, so much I'll pass the person on.
Alright, Thanks and welcome.
Thank you. Our next question is coming from Christian Schwab of Craig Hallum Capital Group. Please go ahead.
Hey, congratulations on another good quarter and guide guidance.
Most of my questions have been asked colleagues of 1 quick question. When you look at small customers here domestically the less the.
The 250000 subscribers.
Your penetration rate.
Into that customer base currently is and could you identify.
A number of how many target customers that are left out there that the.
Our non customers at all.
All of Europe, all platform offering.
So we are well penetrated from 20 years of working on North America as counts.
Having said that with our all platform offering you've heard me say we are very early days.
I would say the to Michael as of.
Our VP of sales 1 set of my very early selling career when it comes the orders too much is never enough. So Michael I don't know if you have some follow up but these are we are so early in this transformation process.
Michael maybe you want to get some color on the business transformation of how.
Earlier on I want to go back from what we talked about earlier, which place that in the past. If you were to go back 15 years ago.
Even with the number of.
And then our competitors and our pool of our only offering within the access network. What we're actually seeing on went over again as again with multiple vectors into the customer, but do you believe when there.
Their marketing organization to win the transformation of their call center can completely change how they bring services to market in the home in the compete with the consumer Giants and then the access side that means we can go back to customers can we really have enough. We can talk about it before because they've made a big access network investment and they're like I'm not going to switch the midway through.
And talk about all of these other business transformation element so for us, it's an amazing opportunity, which again goes back from my previous comment which is the growth that youre seeing is us taking market share as we enter into not only new customers, but actually places where we're getting on some indigo to talk to them about the fr and absolutely now we do.
Yes.
Okay I appreciate that the let me ask it a different way.
Given your long history of the access.
What percentage of your historical access customer base over the last 15.20 years of EBIT Sally too is correctly.
On a euro platform solution to that.
A large minority are buying some portion of it but it is still a minority.
Okay Alright.
A lot going causes I'm, just trying to you know.
Frame of couple of different ways how.
The opportunity for you can be in the small penetration rate follow up on the earlier question about the new customer additions in the <unk> platform so relative.
Is there is there you know.
500.
<unk>.
With existing customers the adult by an old platform solution.
But it's something like that I guess.
So the first.
Dante.
Yes.
Let me be clear the Bergen, David many times.
Every day I get up and go to work.
I get more excited by the opportunity we have in front of us.
And the reason of any more excited because I'm looking at what customers are doing.
Solutions, and then come to the realization that we're even earlier in this opportunity than I thought.
So that's 1 way of thinking about of the second thing you've heard me say that our model expands on multiple dimensions in multiple ways.
And so it's not only as you heard Michael speak earlier.
We can add on a customer.
Some of them with marketing cloud.
The only thing they deploy.
As they start to do marketing cloud then they might expand the support cloud and they might flow to the revenue hedge theres. So many dimensions of expansion.
Even with our customer base.
<unk> thousand 500, plus strong.
We are still.
Barely scratch.
Scratching the surface for that expansion opportunity, even though there are quite of few hundred net.
That of deployed some aspect of what we're doing on the platforms. So the expansion, which is what youre getting at.
Okay.
Just getting off the back of the first day.
Yeah, that's that's great color. Thank you.
Guys Congrats again.
Thanks, Chris.
Thank you. Our next question is coming from Ken <unk> of Northland Capital markets. Please go ahead.
Hey, good morning.
Congrats on attendance.
Good morning, I, just wanted to follow up on some.
The market share commentary.
Hum.
See you guys are you know have been a pretty established.
No player in the market, especially on the rural side.
For for quite some time, so I was getting a little bit struck by that comment and learned of follow up with.
The weather.
The and you can define your addressable market.
How you like.
I'd be focused on the kind.
Maybe the small carrier segment or perhaps the U S in general.
If you could estimate.
What you think of your current share of that market opportunity is.
<unk>.
And from whom are you taking market share do you think in Oklahoma.
So the market share Michael is the term market share GAAP to keep in mind that in the disruption market share is an interesting thing because of what youre focused on is actually as you heard him say.
Addressing new opportunities that don't exist.
And the way the service part of thinks about it.
So.
If you looked at as just overall quote on quote spend from service providers.
We are growing the share of that spend but it's in places that are different than the way you would traditionally think about.
And so.
The best way I can point the.
<unk>.
It is over time.
You'll have you'll be able to look back on a basket of different vendors that are in the space.
And I think youll see a different growth rate out of calix.
And then others around us in the space and Thats. The best way I can give you to think about it in the aggregate so hopefully that based.
Based on.
The second be sales.
When you look at the overall opportunity Tam Sam all of those different metrics.
You've heard me say that hardware aside we think that.
Our customers will share between 1 and $10 per month per subscriber as well.
1 of them grow more and more successful business models.
And so who are you taking quote on quote share from.
Take care of about that term share.
Because part of it is the new spaces that don't exist.
And so ultimately the.
The best way I can answer your question is I think Hugo.
We held the the.
The folks that you would think of non let's say in the rearview mirror, which businesses grow at what rate, which businesses expand margins at what rate.
So that's the way I would address the question.
Okay.
Okay.
Can I understand that.
So you're kind of thing you are taking share from your maybe your customers kind of internal marketing departments for.
Of the Permian from.
So sort of the non traditional definition of the Tam.
Although in the funding it.
Go ahead <unk>.
So let's be clear.
When you hear us say <unk>.
The Pfizer businesses excite the subscribers of grow their value.
What we're actually trying to do is actually increase the value.
Of our customers by helping them.
Grow their revenues lower their costs and we will participate in the share of that.
It's a very different way of thinking that the traditional markets.
Statistics.
Yeah.
Okay still of a number there, but I hear what you're saying.
And I wanted to follow up on the couple of them you know finer points on a few market segments that you touched on.
1 would be tier 2.
Sure.
Do you, perhaps see some.
Taking the activity there is a few of those.
Then again towards the tail.
In terms of how they are defined but there does seem to be some broadly some more activity. There. So I'm wondering if you could maybe segment again.
And then I think the overall theme here on trying to get to as market.
The growth versus share gains and there does seem to be a lot of market growth. So.
In terms of whether Theres something.
New and interesting happening in tier 2 land on 1 hand.
And then on international I guess, the comment was about existing customers. So we should think more about Canada, Mexico Caribbean in terms of.
Use.
Versus some of your new kind of all the carrier engagements U K and elsewhere in <unk>.
In terms of what's driving that and that's it from me.
So all of them.
The tier twos again to go back to what I said earlier the.
The mid size customers journey from 3000, the 2.5 million.
Is the segment that's growing.
But tier twos are part of that but they are not all of that.
And so what we are seeing back to Michael's point earlier, as we are having more and more success working with customers that are on larger and larger share dipped.
<unk> platforms and build these new business models.
As for the the traditional tier twos that are going through various forms of restructuring and reinvestments.
We think there will be an opportunity there over time.
But we'll see how they align their business strategies.
As for international.
I think we covered that earlier on.
Where we're seeing it which is to Michael's point earlier from our existing customers for the most of our expanding we have we did add the names in the international market to be sure.
But frankly, the result of our continued focus as we have been on where we're aligned.
With customers internationally.
It's not because we are expanding internationally.
Okay.
Okay.
Okay.
Yeah.
Once again, ladies and gentlemen that is star 1 congrats on your question at this time.
Our next question is coming from Paul Silverstein of Cowen. Please go.
Oh, sorry.
Sorry, Carl you're competing with the confidence on that on broadband on all of that so you guys offline.
Thanks, Paul.
Okay Paul.
Others.
At this time, we've reached the end of our question and answer session I would like to turn it turn it back over to Mr. <unk> for closing comments.
Go ahead. Thank you Donna calculator ship will participate in a number of investing positive EBITDA during the third quarter of 2021 information about these events, including dates and times of the webcast management interviews will be posted on the events and presentations page of the Investor Relations section of Calix Com.
Once again, thank you to everyone.
Everyone on this call on on the webcast for your interest in health and for joining US today. This concludes our conference call Goodbye for now.
Yes.
Ladies and gentlemen, thank you for your participation you may disconnect. Your lines of a couple of the webcast at this time and have a wonderful day.
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Amen.
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Okay.