Q1 2025 Calix Inc Earnings Call
Speaker Change: Greetings and welcome to the Calix First Quarter, 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Speaker Change: 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 the first quarter of 2025 letter to stockholders unless otherwise stated all financial information referenced in this call will be non-GAAP, but that Michael. Please go ahead. Thank you Nancy as I stated.
Speaker Change: Throughout 2024, and will reiterate as we step into 2025.
Speaker Change: The street is at a crossroads, a broadband provider much decided to remain a speed based network, operator that risks commoditization or embrace differentiation through broadband experiences across residential fitness and municipal within the communities. They serve.
Speaker Change: The first quarter of 2025 showcase the strength of our experienced base broadband business driven by our unique appliance based platform cloud and managed services model and industry, leading customer success team.
Speaker Change: A great example of this is windstream kinetic business as they launched our small business solution smart beds to differentiate and win across 18 states.
Speaker Change: Same time, our platform continued to expand beyond the consumer and small business segments. As we added a new segment multi dwelling units with the February release of Smart M D.
Speaker Change: That said as you are all aware it seems yet again, we faced a dynamic environment and yet again, our unique business model will ensure that colleagues and our customers thrive. During this time of uncertainty our platform enables broadband experience providers customers to simplify operation.
Speaker Change: And their go to market intimate with unique market differentiating experiences and grow for their investors members and the communities they serve.
Speaker Change: The dynamic environment will be defined by three components demand.
Speaker Change: Fly and cost.
Speaker Change: While some box providers will look at demand is a function of capital expenditure I will reiterate that our business model is different we partner with our customers to leverage our platform to create demand by enabling their sales and marketing teams to reduce churn.
Speaker Change: Grow revenue per subscriber and attract new subscribers as we look forward through 2025, we will see growing demand and the dynamic environment will not change that.
Speaker Change: Consumers and businesses have a growing need for broadband experiences and calix will help our customers meet that demand.
Speaker Change: Furthermore, subscriber demand for broadband is inelastic as we saw at Netflix earnings last week, which they blew out and forecasted a great future. When end consumers are uncertain. They cannot disposable income items, such as taking a flight or eating at a restaurant and <unk>.
Speaker Change: Hey, and watch them.
Speaker Change: If there are hybrid work they will try to travel to the office less and work at home more and each of these scenarios broadband becomes more important and the broadband provider with the best experience wins information demand is strong and will continue to grow through two.
Corey: Twenty-five Corey please cover supply and cost for sharing insights on our outstanding Q1, and if you want a strong Q2.
Corey: Thank you Michael.
Corey: To address the effects of the dynamic environment that we find ourselves in we.
Corey: We have one of the most talented and capable supply chain teams in the industry that learned and adapted rapidly during the pandemic induced supply chain crisis.
Corey: Furthermore, our appliance based platform model.
Corey: It has allowed us to reduce our active SKU count to less than 200.
Corey: Which further reduces the complexity of managing in these dynamic times.
Corey: We haven't diversified supply chain manufacturing presence.
Corey: Around the world.
Corey: So data direct relationship we have with our customers combined with our strong balance sheet allows.
Corey: Allows us to make intelligent investments in critical areas such as the one in inventory and incremental finished goods.
Corey: Thereby ensuring supply for our customers.
Corey: Our costs will be affected by this dynamic environment.
Corey: However, it is difficult to forecast with precision.
Corey: We will do our best to minimize the impact to our customers.
Corey: And to the extent we pass on these costs it will be done strictly on a pass through basis.
Corey: Meaning we will add no profit margin to these costs.
Corey: Now, let's turn our attention to the first quarter results.
Corey: Saw strong demand during the first quarter and delivered revenue of $220 million, which represented 7% sequential quarterly revenue growth.
Corey: In addition to the continued strength from our platform cloud and managed services.
Corey: We had a large sized customer pull forward demand, which contributed to the over performance in the quarter.
Corey: As an indicator of strength of our platform cloud and managed services model.
Corey: <unk> grew 4% sequentially to $340 million and increased 39% year over year.
Corey: Our current RPI OS for $128 million up 6% sequentially and up 30% year over year.
Corey: The aforementioned strength led to record non-GAAP gross margin of 56, 2% in the first quarter.
Corey: The sequential increase related to customer mix.
Corey: And our brought our DXP customers, winning new subscribers as they continue the adoption of our platform.
Corey: In the first quarter, we added 16, new BSP customers as we continue to focus on landing new footprint the.
Corey: The majority of these customer wins were competitive takeaways.
Corey: And we expect this trend to continue.
Corey: Our balance sheet metrics remained pristine we generated double digit free cash flow for the eighth consecutive quarter, ending with cash and investments of $282 million.
Corey: Even after utilizing $40 million for share repurchases.
Corey: DSO was an outstanding 30 days down six days sequentially and down 10 days from the year ago quarter.
Corey: Inventory turns were three six.
Corey: Aligned with operational discipline management of our working capital remains a focus to enable consistent quarterly double digit free cash flow.
Corey: Moving to guidance.
Corey: For the second quarter of 2025, our revenue outlook is between 221 and $227 million, which.
Corey: Which at the midpoint would represent a 2% sequential increase in revenue.
Corey: For the second quarter of 2025.
Corey: non-GAAP gross margins.
Corey: At the midpoint of our guidance would represent a slight increase from the first quarter and reflects our expectations regarding customer and product mix.
Corey: For 2025, we anticipate annual gross margin improvement will be within our target financial model 100 to 200 basis points.
Corey: Regarding non-GAAP operating expenses, we plan to continue to hold our 2025 operating expenses flat to slightly up compared with 2024.
Corey: In terms of absolute dollars and they will continue to decline as a percentage of revenue as our revenue grows each quarter.
Corey: With our improved disability the strength of our U S centric platform model.
Corey: An increased expectation expected free cash flow generation.
Corey: The board increased our common stock purchase repurchase program by another $100 million.
Michael: Michael back to you.
Michael: Thanks, Corey after highlighting the board's decision to allocate an additional 100 million for our stock repurchase program I believe theres nothing more to add Nancy let's open the call for questions.
Michael: Yeah.
Michael: Sterile ready to go ahead.
Michael: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Michael: A confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Michael: Yeah.
Speaker Change: Our first questions come from the line of Ryan <unk> with Needham and company. Please proceed with your questions.
Speaker Change: Okay, great and congrats on a great quarter, there Oh, my God I'm wanted to ask about Brian could you speak up a little bit sorry, we're having a little hard time hearing you.
Speaker Change: Is that better.
Speaker Change: That's better yes, alright, thanks, when asked about the macro spending environment you know what you're hearing from your customers about their capex plans for 25 I'd expect that your your Bx peas are are going to remain pretty resilient in this climate and given the inelastic characteristic of broadband so any kind of commentary you might share with us.
Speaker Change: From you know kind of a different customer cohorts would be helpful. Thank you.
Speaker Change: Thanks Ryan.
Speaker Change: Well.
Speaker Change: From a capital point of view, we continue to see Theyre investing appropriately and so theyre all of them have plans with their bills. You know that's the capital part of the Bill the second part of capital is around consumer demand. So for example, and business demand. So if they win a new subscriber then they have to make a capital investment into the home and portable.
Speaker Change: Hi Fi system in place and then they monetize and from our perspective as I stated in my opening remarks, our we are uniquely positioned unlike the dumb box vendors, who really do not add any incremental value in that scenario rather than shipping a box and saying see later our whole business model is built around how do we use marketing analytics.
Speaker Change: So insights into the consumer to not only drive up sell cross sell but how do you expand out those new subscribers and Wyndham and that is what does the business broadband experience provider. It's all about how do I track that new subscriber, which will then drive capital. So do we feel comfortable with that I think that you'd see from them.
Speaker Change: In Q1.
Speaker Change: Strong results or more importantly that we're guiding higher than Q2 because of the fact that we absolutely believe that our business model is the winning model and as they look to monetize the networks that.
Speaker Change: Through the pandemic in the last couple of years, they've been investing in we are the best answer to help them win in the markets. They serve.
Speaker Change: That's all that's helpful. Michael maybe a quick follow if I could you mentioned in your letter twice about some customer pull forwards. We we saw a I think an international customer pull forward in Q4 and now your large customer cohort here in Q1.
Speaker Change: Curious if this has anything to do with tariffs. This was purely just budget timing typical things, you're having a large customers.
Speaker Change: Craig answered it has nothing to do with tariffs. It's actually just the you know every quarter, we see the inherent lumpiness of the business, where you know one customer has different demands and we move things around health now Corey any other color on that no nothing new tariffs.
Speaker Change: I agree it had nothing to do with tariffs, obviously Q1 happened without the effect of tariffs.
Speaker Change: Yep.
Speaker Change: That said that that pull forward.
Speaker Change:
Speaker Change: Yeah, we see enough strength of our business, but there's no air gap behind it no pocket and so you know, we obviously raised our guidance for Q2 sequentially by 2%.
Speaker Change: And so we see revenue continuing to grow off this higher base.
Speaker Change: Even with that pull for it and buy it.
Speaker Change: That large customer.
Speaker Change: That's that's helpful and any any customer commentary about since the tariffs were enacted what kind of behaviors. They are exhibiting and with regards to demand in the near term.
Speaker Change: Alright, so if you're talking about their demand and whether it's ink from seen from scratch subscribers. There is none but as I alluded to in my opening remarks.
As the economy changes, let's say to the downside than there is we've heard the recession word in Wall Street Journal and all these other places I'd say that happens I keep going back to the fact that.
Speaker Change: Broadband is a inelastic and highly resilient so I wouldn't suspect and this is something I've talked to many Ceos about not only suspect that we'll see ongoing demand if not strengthening of demand you know one can just look through the pandemic and what happened when everyone's stayed home demand went through the roof and so you saw that with <unk>.
Speaker Change: Like Netflix you know had a good quarter, but more importantly, they forecasted the year is gonna be insane for them why people stay home and they watch more movies and you know I would say that that's the exact same thing that's going to happen broadband will continue to expand both on the consumer and business side, which is why we felt very comfortable with raising our guidance for the year right.
Speaker Change: We see no change in demand in the first part of Q2 remains strong.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thanks for the questions.
Speaker Change: Thank you our next questions come from the line of Michael Genovese with Rosenblatt Securities. Please proceed with your questions.
Michael Genovese: Oh, great. Thanks.
Michael Genovese: Following up on those last questions. I mean, you know in the past you guys have said that you expect to grow sequentially every quarter. You know kind of moving forward are you know a without any seasonality hitting the business again I is that is that still the taken I mean, specifically.
Michael Genovese: Do you think in the back half of 2025 that will see sequential revenue growth.
Speaker Change: Yes, yes, Michael we believe we can continue to grow sequentially.
Michael Genovese: From here.
Speaker Change: Even with the demand pull forward by that large customer.
Speaker Change: You can continue to grow sequentially moving forward and particularly in the back half of 2025.
Speaker Change: Yeah.
Speaker Change: Great and then just in terms of like a 26 growth rate I think in the past you guys have.
Speaker Change: You know kind of put what a normalized annual growth rate should be for you guys is has anything changed there or is that is that still the same.
Speaker Change: Yeah, We would still guide you to low double digit growth rate for next year.
Speaker Change: Okay, perfect and then on the gross margin I mean, you know I I guess were seeing some higher.
Speaker Change: You know tariff costs are you know, but your gross margin continues to.
Speaker Change: To move up so you know or are we seeing any impact from the tariffs there and and you know on the gross margin right now and then just looking ahead you know how important is it to you guys that sort of you know tayo.
Speaker Change: Taiwan and Southeast Asia, you know get deals done you know does that matter or if those reciprocal tariffs fully go into effect, how does that make a bigger difference.
Speaker Change: In the future for you guys, how do we think about that.
Speaker Change: Yes. So for Q1, there was no impact related to tariffs is nothing had been enacted at this time.
Speaker Change: But obviously, we have inventory on our balance sheet that kind of protects us going into Q2.
Speaker Change: But in this dynamic environment.
Speaker Change: It changes almost on a daily basis so.
Speaker Change: Forecasting what will happen in the future is almost impossible and not something we're going to do and so as you heard Cory said, though is that we will just pass that through with no margin.
Speaker Change: And so consequently, the best thing to understand is that we have a fantastic supply chain team.
Speaker Change: Can react rapidly and we will do our best to minimize those costs as we move forward.
Speaker Change: At the same time, we've got a strong balance sheet.
Speaker Change: And take that balance sheet and utilize it by making investments in components and incremental finished goods.
Speaker Change: Which then should help us with obviously supply and.
Speaker Change: And playing out the timing here.
Speaker Change: The impact of such tariffs to our customers.
Speaker Change: Okay, Great and then just a final for me I mean, you guys have always said that you know in disruptions you guys would you know we gained ground in and gained share in them you know and I'm wondering if that's not what we're.
Speaker Change: As seen here with this extra layer of disruption and and and that you know the kind of the crossing the chasm that you guys are doing is really going to shine through in particular, because because of more disruptions in the market. What do you. What do you guys think about that.
Speaker Change: I think I think you're spot on.
Current are laughing yesterday about the fact that.
Speaker Change: Yeah, I mean, it's not one thing it's another and that's why I use the word yet again right now we had a pandemic then we had.
Speaker Change: Ongoing high interest rates than we had questions about b and we had this that and the other thing and so you know what you are seeing us as taking share. This is absolutely what we're doing and the way we take shares by educating and the executive teams of our customers on whereas the market going.
Speaker Change: And how do they do the most important three things for any broadband business, which is.
Speaker Change: Reduce churn.
Speaker Change: Grow revenue per subscriber and attracting subscribers and you know again on the wrong I was on the road again way too much this quarter.
Speaker Change: Which is another theme that happens every quarter and and I spend a lot of time with Ceos and that is the conversation not by a dumb box not you know time, it's actually how do I grow my business and we are uniquely positioned we're the only ones having that conversation with them because we are a good business partner and that's.
Speaker Change: Why unlike everybody else we have this massive customer success army that spend every single day coaching them on how to use data and analytics to understand where the growth opportunities are how to improve their operational efficiency through less truck rolls in all the other insight and then how to drive ins, yes, and build the most.
Speaker Change: Loyal base of customers and so you're spot on this is just another bunch of crappy noise around us that we will plow through unfortunately, it's corey.
Speaker Change: You talked about the strong supply chain team isn't just a strong supply chain team. It's actually a broad calix organization that is highly motivated continues to win cultural awards understands our purpose.
Speaker Change: And customers, who who partner with us to succeed and so we are absolutely taking share.
Speaker Change: Great. Thanks very much.
Speaker Change: Thanks for the questions.
Speaker Change: Thank you. Our next question is coming from the line of stomach Chatterji with J P. Morgan. Please proceed with your questions.
Speaker Change: Hi, Thanks for taking my questions and congrats on the results here, maybe if I can just start with first of all on the guidance. So you had a strong 7% sequential growth in revenue in one Q, you're guiding to a modest sequential growth into Q Mitch if he can sort of outline what are you embedding in there for the.
Speaker Change: The large customer that had a pull forward in <unk> are you embedding the similar run rate to continue I think its 20 million plus to continue into the second quarter or.
Speaker Change: Is the pull forward sort of symbolic of them sort of stepping down.
Speaker Change: In terms of that run rate into Q and maybe a side question on that front. It seems like from the customer segmentation that you have that.
Speaker Change: You are seeing that inherent lumpiness from your customers. So what's giving you the confidence of a longer term investment cycle from them, particularly are they giving you more maybe of forward visibility into their demand then they wouldn't wait when he food just wanted to understand the confidence. Despite the lumpiness that you have in terms of those invest.
Speaker Change: But as a company and I have a quick follow up thank you.
Speaker Change: Okay.
Speaker Change: Talking to broaden their higher levels of the organization you know one of the things that we're able to do is partner closely with our customers look at the data look at their inventory levels understand their daily demand and actually all of them are cashed out effectively and we're getting better insight as.
Speaker Change: As we talked about it through 2024 and.
Speaker Change: There was some inventory changes that we had to work through as is lead times went from a peak of 71 month.
Speaker Change: Months or whatever.
Speaker Change: Our weeks down to 12.
Speaker Change: 12 to 14 weeks and so we worked through that effectively with them and we have very strong visibility on on how to work through it and with regards to the segments. You know every quarter is lumpy because the same question every quarter, which is a you know ones up near as the other one catastrophic and as the other one up in the other ones now and they're real.
Speaker Change: David you kind of a lumpy business. So Corey when you talk about you know as he said no ear GAAP combined.
Speaker Change: Yeah. So specific to answer your question directly yes, we do.
Speaker Change: Don't expect that large customer to have run rate moving forward.
Speaker Change: Forward.
Speaker Change: But it's being back by broad across our business.
Speaker Change: You saw the strength in the first quarter of our small business.
Speaker Change: <unk> customer segment.
Speaker Change: That will continue.
Speaker Change: And I expect Oh.
Speaker Change: There'll be other larger customers, who will backfill that customer.
Speaker Change: But that's kind of the lumpy nature of some of those large accounts, but for the most part we're seeing broad based strength across all customer segments.
Speaker Change: Got it great and I guess, that's the cost, especially in the back half of 'twenty five.
Speaker Change: Got it.
Speaker Change: Great and then maybe for my follow up just in terms of what's the discussion with your customers at this point related to bead looking like it sounds more like the customers I'm not really reading at this point to see any sort.
Speaker Change: It's boatsman to funds from bead and sort of moving ahead with their plans, but just still don't really understand what are you hearing from them on that front and.
Speaker Change: Any expectations that you are seeing in terms of timing there. Thank you.
Speaker Change: No I would say I mean, you are seeing in our minds in the field with customers. All the time is that if they had to eat plants, they're still working through those with the different government channels and if they didn't have the plans they're continuing to go forward.
Speaker Change: Alright, and then you have some insights on the court.
Speaker Change: So I would say on the front end of the curve that front that has slowed down.
Speaker Change: Some extent waiting for the Finalization of rules and the appointment of the NTIA director.
Speaker Change: But the back part of the curve they continue moving forward.
Speaker Change: And so if they were behind in later in their approval cycle, they're not moving forward gathering the data.
Speaker Change: And so what you ultimately see as more of a compressed front end.
Speaker Change: But the rest of it kind of moving through.
Speaker Change: And what we understand is the rules are expected to be finalized by the end of May.
Speaker Change: So this could all go the bottom line is we aren't counting on eat in our numbers.
Speaker Change: Indeed happens or whatever it is we'll do well, which goes back to what we've been consistently saying for the last two years, which is I would take a lot longer for it to arrive.
Speaker Change: Sure is.
Speaker Change: When it does arrive.
Speaker Change: Ill go over at a last longer than anticipated and then it'll be bigger than people expect.
Speaker Change: Alright. Thank you thanks for taking my questions.
Simon: Thank you Simon.
Speaker Change: Thank you. Our next question does come from the line of Christian Schwab with Craig Hallum. Please proceed with your questions.
Christian Schwab: Oh, great I just have one question guys, congratulations though on on great execution and outlook in the current environment.
Christian Schwab: Understanding you know back to bead, you know understanding that it'll be a significant tailwind eventually at some point.
Christian Schwab: But.
Christian Schwab: I got to believe you feel much better about our supply.
Christian Schwab: Supply in your customer base I know supply chain, you know different components particular semi conductors who knows what may happen.
Christian Schwab: But you guys you know like other people in the industry.
Christian Schwab: Increase your hardware manufacturing capabilities you guys in particular at Michigan with J Jill on the hardware side to make products in the United States for the United States. So do you view that is.
Christian Schwab: A fortunate situation today.
Speaker Change: Well, so I'll talk to the broader business one of the things that corium has spoke about on his comments when he said 200 Skus, it's actually 150 skus.
Christian Schwab: Right and so.
Christian Schwab: And when it comes to designing out our business and what we've done through the pandemic is we use that as an opportunity to grow as a company and put ourselves into a stronger position.
Christian Schwab: And so and in fact, you know we continue to have an evolutionary approach to our business regularly.
Christian Schwab: Which is becoming better and better and once again when you know competitors, they're gonna have skus of.
Christian Schwab: Added zero to it or you know added zero and times it by two or three or four we are uniquely positioned in this industry to lead and to pivot as required and then at the same time from a manufacturing diversity, we talked about our United States. Since he said anything so I think we're in a great position.
Speaker Change: Anything to add.
Christian Schwab: Yeah Christian will will be.
Speaker Change: We're gonna be very adept and move quickly.
Speaker Change: The United States, certainly gives us the capacity to deal with or cyclical tariffs that should come to pass.
Speaker Change: But ultimately you know manufacturing in the United States comes at a higher cost and so we will continue to optimize our supply chain as we move forward.
Speaker Change: And Oh.
Speaker Change: We've moved quickly to minimize those costs as they as they may occur.
Speaker Change: Great no other questions. Thanks, guys.
Speaker Change: Great day. Thanks.
Speaker Change: Thank you. Our next question is come from the line of Tim <unk> with Northland Capital markets. Please proceed with your questions.
Speaker Change: Hey, good morning, and congrats on the strong results and outlook I.
Speaker Change: I wanted to go.
Speaker Change: Back to the large customer category.
Speaker Change: And I know you've mentioned pull forwards here, but.
Speaker Change: Verizon has been pretty open.
Speaker Change: Open about plans to increase.
Speaker Change: Their fiber homes passed build rate this year.
Speaker Change: So I wonder if that's playing a factor in the strength here in what you might expect out of that large customer for the year, given our result and.
Speaker Change: And as an aside and I know, it's still pretty early any indications on what.
Speaker Change: Kind of opportunities frontier might bring you guys then I have a follow up.
Speaker Change: Yes exactly.
Speaker Change: Yes, Sir yes, Verizon as it continues to be a long term customer. They you know they invested us in sole source their fiber network to S ages ago is it five six years ago or longer.
Speaker Change: They've been a great partner and they continue to expand and as they continue to build that farmer as others do.
Speaker Change: We will benefit from that so that close partnership tenants has yielded.
Great dividends and that will continue.
Speaker Change: Anything else to say on that and it's too early on frontier. We don't have an idea of what that might look like.
Speaker Change: Yeah, I figured that might be the case, but who knows.
Speaker Change: From a follow up perspective, I'm wondering if you could talk to any.
Speaker Change: Opportunities potential tailwind.
Speaker Change: Coming out of the D C S bankruptcy for for Calix.
Speaker Change: Well the first thing is I'd like to express my sympathy for all of the customers who are in that situation. It's crappy right. When you. When you buy these products do you anticipate that you're going to be able to depreciate. It over a 10 to 15 year lifecycle and I do not envy any of those customers obviously with.
Zone going down a peculiar path and we all thought they would go into chapter 11, and they did that and I would.
Speaker Change: Colorado Nefarious man I'm going to chapter seven and stripping that strip mining that thing.
Speaker Change: Customers in an awkward position because it's not even like the asset is worth anything and you can you know you can expect to get supported and so that's the first thing is I don't envy them now in their situations and with that perspective in mind, what we've been doing in speaking to a lot of companies who are in that situation and frankly offering how are we up.
Speaker Change: And so you know I I feel bad about saying the word opportunity frankly, because of the fact that it feels like you're kicking some fun when theyre down how about we are offering a helping hand empathetic to their horrible situation feel bad for the leaders in their investors because it's something that they shouldn't have to go through due to the.
Speaker Change: Yeah.
Speaker Change: Bad actions or a bad actor and and we will do everything that we can and we have been so yes out of that will come some opportunity, but at the same time, our focus isn't really about how to make hay there our focus is how to help.
Thanks very much.
Speaker Change: Thank you our last question will come from the line of Scott Searle with Roth Capital Partners. Please proceed with your questions.
Scott Searle: Hey, good morning, Thanks for taking my questions great job on the <unk> results in the second quarter outlook.
Scott Searle: Maybe my salary to dive in on the macro front.
Scott Searle: Small customers certainly coming back in a meaningful way it sounds like it's broad based.
Scott Searle: Can you provide a little bit of color is that deeper penetration into existing footprints or is that expanding within those footprints and Corey. It's I just want to clarify the comments around beat in growth for 26, I think you were talking about double digit growth without the and then coming back to the the dreaded B question again.
Scott Searle: And in terms of when that starts to ramp up we saw a pause last year.
Scott Searle: I'm ahead of that as customers were evaluating those build plans S. B starts to filter into the mix whenever that is whether it's second half of this year of 26 do the existing programs and build cycle slowdown at all do you expect to continue to see linearity on growth on that front and be just kind of feathers in incrementally.
Scott Searle: Oddly I'm going to answer all those questions.
Scott Searle: So the first one is small or not coming back small continued to be strong and so the business is inherently lumpy. Some customers we have to move things around from a shipping point of view through the quarter or to deal with different the vagaries of the business.
Scott Searle: Small businesses continue to always be strong I would say that through 2020 for what we were they were very <unk> customers were all strong. It was we were dealing with in.
Scott Searle: Lead times going from 70 weeks down to 12 to 14 weeks and helping them manage through that so that you know now that we're well through that and demand remains strong as it was through 2024 and they will continue to grow on the on beating our numbers you're just not in our numbers, we do not actually forecast them as growth.
Scott Searle: Because at this point, there's not clarity, while we're getting closer there's not clarity with regards to when you go ahead and then with regards to your question on B and whether or not there would be a pause before the cycles and all of those things I will go back to how I answered that question in the past and when I. Just said one of the other question, which is if you are not.
Scott Searle: Or b and you just plowing ahead.
Scott Searle: If you are going for B, we've been working with you on this for the last two years.
Scott Searle: And you've been planning that in year cycle. So there is no pause in demand because you're not doing anything about it anyways and so all it is is that it's an ongoing delay and when do you actually feel comfortable when you've been allocated the money and how you do it and the reason why I need is not in our growth numbers is because of the south Louisiana, Louisiana.
Scott Searle: Pause some of the disbursement of money there is still uncertainty and so forth.
Scott Searle: Fortunately unlike a lot of other dumb box sky, we have not been forecasting in this this center numbers, we have not pinning our hopes on it because we don't have we have a very strong broadband business model that is unique to this industry and we help our customers drive demand by winning subscribers.
Scott Searle: Great very helpful. Thank you one question.
Scott Searle: So I can answer part of it sorry.
Scott Searle: And lastly, if I could could like Rps. They continue at a really torrid pace, you know up 30% year over year continuing to grow sequentially.
Speaker Change: You made some comments I believe M. Do you kicked off in the first quarter you've had growth in small business I'm wondering if you could.
Speaker Change: Kind of maybe stack rank what the biggest drivers are on that front and what the growth rate you think looks like for <unk>.
Speaker Change: Over the course of 'twenty five and beyond.
Speaker Change: Well, so as you know with our P O as we burn them off on a regular on a daily basis, and therefore have to backfill them with and they are indicators of customer signing on three year contracts right with regards to stack rank and demand you know I wouldn't say it goes from left to right based upon mature.
Speaker Change: So you know if it was the strongest demand is continuing penetration on the consumer there.
Speaker Change: The second one behind it is what we're doing on <unk>.
Speaker Change: On a small business with smart beds, which is our customers came to us and really wanted us to displace their ubiquity nightmare because that product is a 19 based product and doesn't really serve their business well. So we expanded our platform with smart beds and made it so that they can provide incremental cyber network.
Speaker Change: Management and great capabilities, using the existing Wifi appliances, and all of the existing clouds. So no incremental complexity in fact, the radical simplification, which then led to this newest one where you know we we.
In November we put up a personal leasing and in February we put out what I would call them.
Speaker Change: The M B P release for for multi dwelling units and this is the the next demand from our customers, saying empty use are a nightmare ever having to use different whether it's a wi fi footprint, because I can have a triplex our quad flags. So I can have an apartment building with 600 apartments, you know theirs.
Speaker Change: Every form factor on the planet, there's a pool and that you know there's an outdoor pool. There's a parking garage you have real complexity with regards to physical Wi Fi challenges and then on top that you layer in the business model challenged in our business model challenges is bulk.
Speaker Change: Purses every unit is a residential and so we are in the process of knocking that challenge down for our customers by radically simplifying it again expanded out our software. So that we can cover an MDU both from a business model playing with his friend senior bulk, but more importantly through are as important.
Speaker Change: From a Wi Fi footprint point of view, because you can take our appliances makes them matched I'm infinitely cover any physical Wi Fi footprint imaginable with just with a different piece of software and that will allow our customers to do what they've always wanted to do.
Speaker Change: Wishes go after MDU business.
Speaker Change: The simple way based upon while building upon their existing small business and consumer business and so that's the third one and the least mature from a market penetration point of view and I would that's how I would stack rank those three and so the great thing about MDU as an M. D. You also opens up other channels.
Speaker Change: The segments from a from a channel point of view. So were empty use will be served by our existing broadband customers. There are a large number of M. D. The companies out there who just deal with MDU and then they will partner with private companies in the backend and so this to us.
Speaker Change: M D. You actually represents what I would call a tam expansion.
Speaker Change: As you know it addressable market just got larger because we won't be going on beyond broadband customers.
Speaker Change: Great. Thanks, so much.
Speaker Change: Yeah.
Speaker Change: Thanks for the questions.
Speaker Change: Thank you I would now like to turn the floor back over to Nancy Fuzzy Holly for any closing comments.
Speaker Change: Thank you Carol Calix will participate in several investor events during the second quarter information about these events, including dates and times and publicly available that can you tell me in that presentation page of the Investor Relations section of Calix Dot com. Once again, thank you to everyone on this call and webcast for your interest in calix that for joining us.
This concludes our conference call have a good day.
Speaker Change: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines have a great day.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: [music].