Q1 2022 Calix Inc Earnings Call
[music].
Greetings and welcome to the Calix first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode.
Question and answer session will follow the brief prepared remarks and <unk>.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
On the call, we have college, chairman and CEO , Carl Russo Chief Financial Officer, Cory said, though our president and Chief operating Officer, Michael Whang.
As a reminder, yesterday after the close of market Calix release letter to stockholders in an 8-K filing.
Well as on the Investor Relations section of the Calix website.
This conference call will be available for audio replay and the Investor Relations section of the Calix website.
During this call calix well refer to forward looking statements, which include all statements. The company will make about it is your financial operating 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.
I'm trying to differ materially are set forth in the first quarter 2022 letter to stockholders and their annual and quarterly reports filed with the S. E C.
Kelly.
No obligation to update any forward looking statements, which speak only as of their respective dates.
On this conference call Couse will discuss both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in the first quarter 2022 letter to stockholders unless otherwise stated all numbers referenced on this call will be non-GAAP measures with that let me turn the call over to.
Calix, chairman and CEO called himself.
No.
Thank you Laura.
Robust demand for our all platform offerings continued in the first quarter as the Calix team again executed with excellence. This combination delivered a breakthrough in our business model.
5% sequential increase in revenue from the fourth quarter of 'twenty or 'twenty one.
We have put the seasonality associated with traditional systems businesses in our rearview mirror and we are confident we will deliver sequential quarterly revenue growth from now on.
This is the last significant piece of our evolution to delivering increased predictability, resulting from our continued shift to our all platform model.
This shift continues to build as over 70% of our bookings in the quarter came from our software platforms and associated systems and services.
This is up from 50% just three quarters ago.
Our platforms enable b S. Skus to offer broadband has an exceptional service.
Rather than just a dumb pipe.
This makes our B S. P is essential to their subscribers.
That's very resistant to macroeconomic factors.
Furthermore, it ensures demand for Calix board platforms will remain robust.
However supply remains the key challenge and we will continue to be for the foreseeable future.
That said, we are making progress in our 14% year over year revenue growth in the first quarter has given us enough confidence to raise our 2022 full year guidance from 5% to 10% growth.
210% to 15% growth.
This is in line with the long term guidance, we gave at our Investor day at the end of February .
Since we are now pulling forward our entire guidance model into 'twenty to 'twenty two.
Except for gross margin, which we believe will remain around 50% in 2022.
And then grow from there.
We have made modest.
And targeted pricing adjustments, which will roll into the revenue line over time, while these will not change our gross margin guidance for 2022.
They do reinforce our confidence in returning to our 100 to 200 basis points of gross margin improvement in 2023 and beyond.
In closing.
The enormous secular opportunity we are capitalizing on grows every day.
And the Calix team, that's committed to executing with excellence to help our customers simplify their businesses.
Excite their subscribers and grow their value.
With that let's open the call for questions operator.
Operator.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question to you might price start huge here and move your question from the queue for participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star keys, one moment, while we poll for questions.
Our first question comes from the line of Paul Silverstein with Cowen You May proceed with your question.
Morning, Thanks, not something you normally ask about food court or Cory.
Cory once the tax rate issue and is this just going to impact this year or is that going to be the new norm going forward 2020, as you referenced in the letter.
As opposed to the low twenty's, you've previously referenced not everybody else's pain.
Good morning, Paul.
This this issue as it relates to a set of new rules that were created with the tax cuts and job Act of 2017.
Include a set of rules called beat base erosion anti abuse tax.
This tax was intended to prevent U S companies from avoiding domestic tax liability.
Shifting profits out of the U S.
And because of our grocery we now fall under these rules most.
Most large companies pay enough U S. Federal income tax that beta is not triggered.
However, given that we are using our Nols.
We have a beat tax obligation.
So this beat taxes based on our planned annual foreign expense reimbursement does not fluctuate with our profitability.
So the expectation is we will be in a beat pain situation until our Nols run out.
And so we will be paying this tax.
A couple of years.
So I would advise that the 26% to 28% rate wont be with us for one or two years three years.
So through and including at least 2024.
2012.
Not 25, so not wanting to three and four potentially four.
It will you'll you'll go back to the read everybody else's pain, when you consume the NOL.
Correct.
Yeah.
Or that's actually all I have thank you.
Alright, that's us.
Comes from the line of Michael Genovese with Rosenblatt Securities. You May proceed with your question.
Oh. Thanks, a lot. My first question can you just give us the remaining performance obligation number and then also you know.
I think of that number is primarily reflecting the the three year contracts for the cloud sales, but I think there's probably some other stuff in there so.
Could you just help us think how much of it is cloud and how much of it is other stuff.
Sure sure Mike.
The number for Q1.
We'll see it posted in our 10-Q filed.
And the day to day.
It was $138 million for the quarter at the end of the quarter.
It is the majority cloud.
Also included in cloud you have up the attending suites.
There is also a support contracts and extended warranty.
There is no hardware included in those numbers those are all noncancelable contracts.
Right and then it's my understanding that the operating systems.
Licenses are one year, so they're not they're not in the rpms does that cause that right.
That is correct.
Right. The operating software is recognized as they signed contract and is not included it's been delivered once the contract sign so you won't find that in the Rps.
And I just wanted to just confirm my numbers here right I mean that looks like it's about up about 82% year over year.
That's correct.
Great and then Cory can you also or you know Cory under Carl I'm talk about the.
The decision I mean, it looks to me like you're a little bit above I mean, it's certainly at the high end if not above.
The Opex target model just for QQ, I know youre going to be in at the model for the full year, but can you talk about your decision to go.
Hire that many people right right now and what's behind that.
What's behind it is what's in front of US, which is an enormous opportunity that we intend to fully take advantage of.
And so as we get better and better at growing the team.
We have the ability as we grow revenues to invest fulsomely.
Our model and so very clearly you should take that as well.
A very strong indicator.
What I said at the start of my comment, which is we had robust bookings.
And we see the opportunity in front of us to be unrelenting.
So we intend to take advantage of it and not leave any of this opportunity lying fallow in the field.
Great and I Carl a last question for you.
Yes.
In the world and the financial community.
There's a debate about what exactly is going on in the macro and you know what what's going to happen with the consumer and then you know your customer subscribers are households, and you know sit under the definition of consumer. So you know, there's basically a debate about how resilient.
<unk> will be and I, you know I'd love to get your view on that.
Yeah, Great question, Mike and obviously in reading your notes, you're sort of picked up on some of it.
One of the things that everybody. I think has concluded is that broadband is becoming a necessity I think you hear that all the time.
And there's sort of an assumption with that that therefore dollars will be spent by subscribers and consumers and businesses on broadband that is true.
What we are focused on however is helping our customers deploy.
Deploy broadband as a service.
With all sorts of things that excite their subscribers why is that important because broadband it's sold as a dumb pipe as a commodity and while it's a necessity if a competitor comes along with a lower price or a higher speed.
Youre going to lose that subscriber.
When youre doing what we're doing in helping our customers build what they are building, we are actually ending up helping our customers.
Have very high now.
The net promoter score has very little churn rates and they're building a very very different model, which is actually sort of recession proof that you don't have competitive issues.
And if our customers are recession proof.
Actually we're recession proof.
And maybe you know let me let me ask Michael here in a moment to give you. An example of a customer success story or two around us I want to go on the supply side for a moment as well. So I think not only is our demand recession proof, but on the supply side, if there's a recession.
It actually frees up in the broad sense shipping and silicon.
And might actually benefit us I'm sad to say with a recession, but I actually think we turned out to be better.
In a recession, but Michael do you have a one or two customer success stories, you can just share to help everybody understand.
This different model that we're helping our BSP adult.
Sure.
So on the on the networking side, we had significant customer success story in that we had Blue Ridge cable has over 250000 subscribers a cable company who in the past has remained on DOCSIS and ultimately the cable companies have been and challenged over the last 10 years versus D. S L and other and they've just.
Sided that actually theyre going to overlay their entire existing cable network rebuild it with fiber as they see the significant opportunity ahead in the transition of the consumer to amplify what Carl stated the recession proof of our broadband networks first is a not a dumb pipe, they're a full service provider.
For example, they're looking to us to do things like going well beyond the fiber that they provide today and expanding out with services like protect IQ, which is our malware and security deployments. We had companies like Canadian fiber, who are now stopping over 100 threats of months per home and then they're also looking to us to <unk>.
Panned out their offerings around very sticky services like the announcement that we made this quarter with Arlo, where we started out with web cameras and we're now gonna enable even the smallest broadband service provider to build out a full home security solution with arlo install it into your home and then ensure that if someone else comes in and offers.
A lower pipe for a lower price it doesn't matter because you've now got all these great services, including securing your home from a web camera door bells locks all those types of things with your service provider huge rise on a daily basis, which means you're never changing so those elements are are the reason why.
They're transitioning and the successes that they're saying the last success I'll add is that at the same time, there's significant broadband funding going into this market as you're well aware and one of the areas that we're very focused on with calix support cloud, which is the largest deployed and support cloud.
In North America by far we've actually built full custom testing into it so that to meet those government obligations all of them can actually simply without any additional integration do that testing and provide feedback to the government to ensure that they are meeting their obligations with the broadband funding that you're getting right now exceeding 20 million.
Tests some months no one in the marketplace.
Even close to what we're doing in fact, we're replacing competitors on a very rapid pace because their solutions are failing and so you add all those things together, we make it very simple for them to meet their performance obligations to the government and at the same time delight their subscribers.
Thanks, Michael good stuff.
Yeah.
Our next question comes from the line of George noted with Jefferies. You May proceed with your question.
Hi, guys. Thanks, very much maybe just kind of continuing on the the calix cloud discussion can you guys give us a sense for how.
How are you doing in terms of subscriber or customer adoption on operations cloud and then.
Maybe some of the revenue suites protect IQ experience IQ like Oh, what are you seeing there in terms of adoption rate.
So early days on operations cloud as you know but.
The way I would gauge it is where interest goes.
<unk> soon to follow and it is ramping quickly, but obviously off of a zero basis. So I would tell you. We are robustly certain that operations cloud will be every bit the winter that support cloud has been as it grows rapidly.
Through our customers.
On the on the revenue side and the suites, Michael maybe you have an anecdote, but I'll just give you the overarching.
You're seeing that in the 82% year over year growth.
In our P. O's, Michael do you have an example, you might want to just anecdotally and from a customer on that.
Well I'll state that if you look through our press releases from Q1, we actually press release at 90% gross in the suites and specifically around protect IQ I've already identified that Canadian farmers now is stopping 100 threats per month in their home. There's other companies in that press release like center and that he has seen a nine.
84% adoption of protect IQ. So we're seeing this ongoing massive ramped them on the on the sweet side as the service providers are educated by our customer success team on how to be successful and change the lives of their subscriber what's very interesting is that as we engage with cooperatives and either not for profits who make up.
A large percentage of our base. They are really embracing this because they see it as their obligation to improve the lives of their members and they see one of the best things you can do is help a security because everybody now with everything going on can never have enough security I'll just add one point on what said on Karl set about operations cloud.
And that operation is cloud is our fastest ramping cloud ever. It is also probably one of our most important because it it solidifies in the marketplace that calix platforms are unique nobody is doing what we're doing in that no. One is tying the subscriber platform to the access network and that outdoor network.
And so operations cloud is that that glue between the two that allows those service providers to automate their entire operational process in a way that was never done before big companies can do that through massive teams of custom coders were doing it by operation After operationalize ing.
Automating all of those work flows through operations clouds, so even the smallest service provider can be as efficient as Verizon and Verizon has gone on the record over and over again, saying that they will reduce their opex by 80% a year with our platforms. So when you add the subscriber network on top of die, it's a massive operational safe.
For our customers, which is why it's ramping faster than any other cloud before.
Okay.
Got it thank you.
Our next Lora.
Our next question comes from the line of Christian Schwab with Craig Hallum. You I proceed with your question.
Hey, congratulations on a good quarter and our improved revenue on what.
Yes.
The question is as it relates to gross margins. So it sounds like just to make sure I heard it correctly that you guys are raising prices modestly certain products or certain platform products or platform offerings to help offset the significant component legit.
It costs that kind of impacted us this quarter. However.
However that improvement won't be seen until 'twenty, three and that's why we kind of return to a 100 to 200 basis points of gross margin improvement for a couple of years did I did I hear that correctly.
Yeah, I Wanna, well sort of I mean, let me see if I can make sure I'm being clear.
The first thing is we're bringing our model forward except for gross margin.
At the same time I also made the comment that we have made targeted specific.
Pricing adjustments.
And they're across different products and different places.
Not just platforms that could be legacy et cetera.
With that in mind we.
We did not go make anything retroactive.
So these are prices going forward on new quotes and business not on backlog or something of that nature and so you have to recognize that given lead times and other things. These will roll through bookings and then into revenue, it's just going to take time.
They they are not the reason we believe that we will return to 100 to 200 basis points of margin growth in 'twenty or 'twenty three.
They just at one level make us more confident that we will achieve that.
We think our own work going on plus the platform acceleration, which obviously is software it's not subject to hardware costs.
It's going to continue to drive our gross margin model. So in this year as we said at the Investor Day 50 points is where we believe we're going to be give or take.
Going into 'twenty to 'twenty, three we think we will get back to our 100 to 200 basis point improvement.
Does that help Christian.
Yeah, that's perfect and then just remind us what do you think is is the is the mix becomes.
Overtime, you know what is peak gross margin potential for calix.
Don't know because as we continue to layer into the model and you heard some of the things Michael spoke to.
As you go up the platform and provide more and more value.
For our B S P subscribers.
Those products typically have higher and higher margins. So we.
We know we will go above 60, we don't know where it will go from there. It also depends on from an abstraction standpoint, we are able to deliver software without hardware it depends on how the market shapes.
They've been the future of the market has stable white box solutions, where the customer can buy hardware from one place and deploy our software on top of it that also changes the model. So I have no answer for you as far as where it peaks. We just know we wanted to get back to our wanted or 200 basis points and keep going and we can certainly get it.
60 points of gross margin as a corporate average.
Great no other questions. Thanks, guys.
Thanks Christian.
Our next question comes from the line of Chris Howe with Barrington Research you May proceed with your question.
Good morning, good morning Cory.
Okay.
Just leading off here I'm on the topic of bookings.
You mentioned, 70% of total bookings as we think more about this number you obviously have many different points of adoption.
Within the customer whether it's your support cloud or other avenues that Michael highlighted.
Mhm can you go into a little bit greater detail, there should be a little bit of organic.
Acceleration of adoption.
As this matures further down the line as well as work that's being done by your sales force.
So are you asking me does the 70% as a percentage of Mexican tend to grow or what's underlying it's.
More just.
It's more just kind of getting behind the 70% what portion of it is just the natural evolution of opportunities within your subscriber base is.
Just based on that.
On the maturation.
Of the different points of adoption that you can offer.
<unk> subscribers and to the P. S T.
Right. So there there's a continuous drumbeat of land and expand of our platforms that the only change that we're experiencing is that it's accelerating.
Separate from that in our mix as you May remember Chris.
Our legacy systems.
We stopped developing quite a while ago and as such as new technologies came along we did not put them into our legacy system. So as an example, our legacy systems you can do Chi Fong from by the way our platform systems. Our <unk> systems, you can do cheaper there.
But ex G S Pom, which is 10 gig PON.
It was not developed into our legacy systems, it's only in our system does that run our platforms and so as customers naturally want to move to 10 gig PON that actually is a reason to come over to the platforms. The same is true with Wi Fi.
Six versus why five five.
And so those two things are going to cause.
That notion.
Of.
Switchover in our bookings.
From our legacy systems to our new systems now on top of all of that.
Constant growth in our platforms et cetera.
And.
If I can Michael can you just speak to maybe your experiences and.
Just this whole platform business and what it looks like and how it grows from here.
Sure Karl mentioned I would say two elements from a hardware point of view that it might get a customer, saying, hey, I'd like to change my mind and start thinking about is this a pivot point for me, but the those open up the conversation, which allows us to then really dive into how do we transform that customers business because.
Or the fact that we've actually built a unique platforms for the subscriber side and on the network side.
That provide different capabilities for our customers. It allows us to completely change the conversation from how do you radically transform your operational operate your Opex, which is a simplicity statement and how do you radically changed your go to market, which is the X sight statement changing your relationship with your.
So with those platforms, we then get into the conversation with the customer around the fastest capabilities every single quarter, we have another.
Release, where we provide a level of capabilities and new processes and products that has never been seen in our industry before and then integrate all of those and to go to markets that again have never been seen in our industry before because of the fact that it comes pre integrated out of the box, we don't do everything from the behavioral.
The campaign creation and then how do you launch it to drive an upsell. So all those things come together to change that conversation. So when the customer is ready to have it.
Whereas we're ready to explain to them how they can change their business and then in behind it you have the sales organization, but I would also say our very mature customer success organization also falls in behind and says we're not just going to give me. This new technology. These new go to market. These new solutions and leave you alone no our customer success organization is going.
To lean in and give your best practices. How do you train your call Center helps you train your marketing organization help you train your operations organization and then take those best practices and ensure that you get the most value out of what you've invested in as a b S. P. So all of those elements come together in a position us uniquely and speed our gross it up.
That's never been seen before whether you are an existing customer who is expanding with us or as we've identified in our shareholder letter.
The 33, new customers, who have decided to select calix.
The platform for their future.
Thanks, Michael that's certainly.
Very helpful. Thanks, Michael and just one quick follow up I know, it's a small percentage as we look at the entire business.
But international revenue.
About 10% of revenue.
Mentioned the European customer.
Timing didn't quite work out this quarter, but broadly speaking as we look at your target financial model, how should we look at the international opportunity.
Versus the domestic opportunity.
Anything there that we should pay particular attention to as we look forward.
No it's consistent with what we've said, which is we continue to hone our international efforts, but our first priority is North America.
And taking advantage of the huge opportunity that's in front of us. So it has not changed scripts.
Okay, alright, thanks Carl.
Thank you.
Our next question comes from the line that Tim <unk> with Northland Capital You May proceed with your question.
Yes.
Hi, good morning, sorry about that and congratulations.
On the results and outlook I wanted to follow up on gross margins.
Given them a couple of factors, which is this increase.
In the old platform bookings percentage to 70% from 50, I guess, you said that was Q3 of 'twenty one so.
A pretty dramatic as well as the price increases so you're not changing your gross margin guidance for the year, but can you share with us.
You know I imagine your your estimate of the impact of supply issues may have increased so.
Given those dynamics that we've seen about the changing software mix and the price increases.
You know X can you give us an estimate of X supply issues, where would gross margins be.
They're either for their quarter for the year.
Yeah.
That's a that's a really hard question, Tim because as you know and we've discussed we don't know where things exit, but it just never happened.
We'd be a whole heck of a lot higher as we've talked about at the Investor day.
And so I don't even know how to give you an estimate let me let me address your question slightly differently on that looking forward.
Fly.
Yeah.
Is going to continue to be a challenge.
There's all sorts of indicators.
You know there's a few things that are improving the supply there are a few things that are getting worse and supply.
Airfreight is reducing but the supply environment is so choppy as we look forward.
That it's hard for us to put a stake in the ground.
On that side.
Flip side is as you heard Michael speak to it.
The platform.
Is compelling.
And so as we try and put all that together along with some modest price increases that will roll through.
We're comfortable with 100 to 200 basis points next year. This year, it's sort of it's going to be right.
To keep that 50 in front of it. So that's the best answer I can give you.
Okay. Thanks very much.
Thanks, Dan.
Our next question comes from the line of Fahad Michel <unk> with loop capital you May proceed with your question.
Oh good morning, So I'll follow up on Tim's question can you kind of give us a breakdown of your gross margin headwinds.
Component cost sources freight I think he mentioned that freight was somewhat getting better.
But can he.
Kind of give us a sense on.
Of these two factors is it both like 50 50 or one that's more pronounced than the other.
It varies by the day, but I think you know Cory as stated in the past that if you wanted to sort of look at the roughly you could split them for the time being Cory I don't know if you want to add a little bit of color to that but.
There's.
50, 50 is as good as a proxy as any I can answer Cory.
Yes, I would probably weighted to material cost rising.
Yeah.
More so than the freight costs at this point in time.
Because of the P. P vs that we have to pay to go source those missing components.
So I waited a little bit more to that side.
Got it appreciate it and then I noticed.
The increase in our employee stock comp expense I know you added you head count in the quarter, but can you give us a sense on what are the inflationary pressures you guys are seeing in terms of hiring new talent, how should we be thinking about your opex rate going forward.
Any color there.
Well, let me just let me answer the Opex model and all that Cory add some color.
As you know our Opex model as we stated at the Investor Day, It was 17% to 19% on sales and marketing.
30% of product gross profit.
And R&D and now 8% on G&A. So we moved sales and marketing up one point in G&A down one point we.
We will invest as full somebody to that model as we can because we believe that model yields the best return on this opportunity that's in front of us as for color underneath that around different inflationary points. Cory do you want to spend a moment on that.
Yeah.
Yeah I mean.
If you're looking at our Opex investments continues to be largely personnel driven.
So we're making those investments across the organization.
And the G&A side, a little bit more on systems.
I would say that we've been able to hire at a robust rate.
And.
We plan to continue to invest a wholesome late in our model.
Just the large opportunity that we see in front of us. So I think you should expect us to continue to be right at our Opex model.
For the foreseeable future.
Yeah.
And one other piece that I would like to add and I'm going to ask Michael to add some color on that.
As you know.
In this day and age of you know you read all these stories about quit.
Quit rates in that and the great resignation.
And in my opinion, when you have an inflationary environment one of the things that happens is people job-hop because they can get a better offer.
Obviously, one of the things that we're focused on is the consistency of our teams. So that we can help our customers.
Exceed and deliver these services to the subscriber so culture has been a big focus area. Michael maybe you want to add a little bit of color on the work that goes on there and what we continue to focus on.
Yeah. So from a cultural point of view, we're very focused on ensuring that we listen to our employees and build the type of culture that.
It's constantly changing and adapting one of the things that we state over and over again is our philosophy with regards to culture is better better never best which is our culture is not meant to be retained our culture is meant to grow and change, especially as we bring all these new people and we continue to learn and grow that approach to the market.
Place has paid off.
First of all Fortune 100, or fortune added us to the top 50 mid cap.
And we received another four comparably awards this quarter Best Company outlook Best Engineering team Best Global Culture, and Best places to work in the Bay area and that last one being very prestigious and then if you look at that list are the people around us are the apples and the googles of the world, who also invest significantly to make it happen. So those.
Elements are very important because there isn't a single and new hire who doesn't spend a lot of time researching the company because they want to make the right career decision and we want them to make the right career decision also when I speak to new hires. They all every single one of them to a person no matter what level has read through the glass doors and really under.
Good.
What the culture is and how we're growing so with regards to our hiring.
That's had a profound impact on our brand.
Because our team members, who are making this a great place to work, which is really great.
Yeah.
Other questions.
Yeah.
So you have one more question on on the software recognition. So if the end consumer adds a new service.
To that existing offering.
Does that.
Is that because it is a new contract or is that and thereby you recognize the new software revenue can you just help us understand what customers are adding on new services how are you.
Kylix are recognizing that.
Revenue is that considered a new cognizant, thereby new software revenue growth recognition.
Kind of understanding how this.
Land and expand works.
Sure Fun, let me break that up between operating licenses.
Operating software licenses in our SaaS clouds.
So a customer will buy our Oh S as a licensed basis.
They may buy for a certain number of subscribers, let's just say and thousands of subscribers will recognize that license revenue upfront.
There's a portion of that that'll be related to maintenance that has ongoing annuity associated with it.
After the.
Bring on more than 1000 subscribers under the under the cloud.
That platform.
They'll buy more licenses and we'll recognize some additional license software at that point in time.
On the cloud gets recognized over time.
Again, there are frequent true ups, depending on what it is that they are buying can be either monthly or annually.
And so.
As more subscribers come onto the platform, we will do a true up that will be reflected into an increasing growth rate in our clouds and continue to be recognized ratably over the service period in which they've committed.
Some customers will go out a little bit further on the curve commit to more get a better rate and generally will sign a three year agreement and that's what you see or are starting to reflect in our numbers as customers are ramping the adoption of the platforms within their networks.
Yeah.
Thanks Cory.
Thank you appreciate the answers thanks Rod.
Our next question comes from the line of Ryan <unk> with Needham You May proceed with your question.
Hi, Thanks for the question if you could comment Karl on this phone is your strength and your midsized customer base and the opportunity there.
Unity, there were clearly seeing a broad shift from copper to fiber in this segment it seems like.
Yeah, it's not necessarily copper and fiber that's driving it although that's part of it when you think mid size. So if you look at our shareholder letter, which I think is what you're citing and you go to the small medium and large mix.
What you're starting to see in our mix. If you look over the last five quarters.
<unk> kept growing and growing and growing in percentage and as we've just talked about disruption.
What has happened is from small customers to large and the medium and the large kept getting squeezed down.
Last quarter, we started to see some of our smaller customers actually growing.
In becoming medium customers. So they went over the 250000 subscriber line we're.
We're also seeing some other additional medium customers join us on our journey.
And as you know from the bright speed announcement that they made we're starting now to see some larger customers understand the disruption and so as we've said over time this will start to move.
We're a larger and larger customers start to see this disruption and want to come on board. It is very early days.
In the case of bright speed, we're probably still six months away from when their acquisition of the spun off live in assets will be completed but there's no question it's coming.
So does.
Does that help Ryan.
Yeah, Yeah, that's it thanks.
Okay.
Other questions Ryan.
Covered them all.
Thanks, Laura I don't know if there's any other questions in the queue.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes the line of Paul Silverstein with Cowen You May proceed with your question.
Thanks, Tavis reconsidered.
Well I think.
I think last time.
Ask you. This question you said it was in the high <unk>, but the question being what is the breadth of adoption of either one or multiple software suites originally from talking about less than a handful in total, but how many customers are present and what.
What's the take up rate in terms of new customers not necessarily new customers, but new customers in the sense of customers that have.
Finally migrated to adopting one of more suites, what is the roaming on a quarterly basis. So it's accelerating albeit off a small base, but can you give as soon as soon as in terms of the breadth of adoption.
And how it's progressing.
Well, we have said before that you know there are hundreds of customers now that are deploying.
One or another aspect of our cloud platforms and you can assume that the intersection.
Although sets where customers have deployed two or more cloud.
It is growing.
And I would merely to tell you that to a more clouds.
It was over 100 customers.
But you shouldn't assume.
Anything more than that.
But how about how about the software enabled by us.
If it wasn't as protect to one or the other.
<unk> offers that you have.
Yeah back to Michael's comment earlier.
Again ramping and broadly deployed but again thinking in terms of hundred.
Not tens.
But not thousands.
And you're adding how many quarters roughly.
[laughter].
I'll I'll leave you with new customers at 33, and you know that we're expanding inside of our existing customers.
So likely you're saying many tens being added in a quarter.
Alright, I suspect you'll notice on this question of the lessons plus level Sebastian, but there's obviously a lot of investor concern about the ongoing lockdowns in China.
Any thoughts secure to shareholders.
So.
Yeah, I mean, the Lockdowns look sure let me share a couple of thoughts.
I think.
There's a big challenge.
As the virus gets more transmissible to try and ring fence it with quarantines.
And.
The coronavirus has evolved into something that's more and more transmissible and so you end up having to cast a wider net on an outbreak it's gonna be very challenging for China to maintain this quarantine and approach.
And not shift that said.
If you watch what's going on from a commerce standpoint.
They're having lockdowns with a lot of commercial exceptions, where they're allowing certain businesses to continue to run.
No.
Can it affect US sure as it is in fact right now no.
And we'll see where it goes from here.
If I were to two.
No.
Hey, what do I think will happen I think there'll be you know these minor interruptions that we will deal with.
But I don't think it's going to turn into a major situation like we saw two years ago.
Is there a is there some 0.4 weeks from now at least from now.
This work to continue.
Becomes meaningful.
And its impact on it.
Yeah, well, if it becomes meaningful you won't see it because it probably won't become meaningful in the quarter it'll create some gap.
We got some lead time.
So stay.
Stay tuned if it does obviously it won't be speaking to it but right now.
Theres no effect that I would I would say we would talk to.
I've got one last question I think you asked you answered it earlier, but some clients raise the question.
In terms of going back to the resiliency of your customer spending.
Our current build outs fully committed even in an economic downturn.
Oh sure.
Because obviously on the build outside.
Not the revenue side, that's not our platform that's just that's it.
The fiber and the network systems, what we call the intelligent access their systems.
You know, it's a smaller part of the business.
But it's also the one that has the government funding underneath it.
So on the networking side.
Youre not going to see that be terribly elastic based upon macroeconomic factors, but then when you go towards subscriber it's actually the opposite.
What we bring to our B S p's.
Is there ability to now actually differentiate.
And changed utterly their model from a commodity pipe provider to a broadband as a service.
Provider and that is compelling, especially in downtime.
Alright to us glucose from the since there's nothing really quantification on your Michael statements about.
Culture, what is employee turnover hasnt changed.
And I'm, hoping you could give us also the current or fewer number I know you gave us the European number before and I know, we're just sort of in the queue.
Yeah. So our turnover is very very low.
And way below any industry comparables.
So I would leave it at that.
On the RP OS Cory do you want to.
Cover the RVO number and the.
Year over year Congress.
Currently.
Yeah.
Current RP O that you'll see at the end of the day to day is 38 million.
That compares to.
$75 million in the year ago period, and 125 last quarter.
Okay.
Thanks, Paul.
Alright, thank you.
Thanks.
Ladies and gentlemen, any other questions.
We have raised this question and answer session I would like to turn this call back over to Mr. Sanjay Lad for closing remarks.
Okay.
Thank you Laura.
Alex leadership will participate in a number of investor meetings during the second quarter of 2020 to.
Information about these events, including dates and times for public webcast management presentations will be posted on the events and presentations page of the Investor relations sections of Calix dotcom.
Once again.
Thank you to everyone on the call.
And on the webcast for your interest in Calix and for joining US today. This concludes our conference call Goodbye for now.
You may disconnect your lines at this time. Thank you for your participation enjoyed the rest of your day.
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