Calix Q4 2025 Earnings Call - Third-gen platform and Agent Workforce push company into a sustained growth phase

Daryl, Conference Operator: ...Greetings, everyone, and welcome to the Calix fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the brief prepared remarks. 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. It is now my pleasure to introduce your host, Nancy Fazioli, Vice President of Investor Relations. Nancy, please go ahead.

Nancy Fazioli, Vice President of Investor Relations, Calix: Thank you, Daryl, and good morning, everyone. Thank you for joining our fourth quarter 2025 earnings call. Today on the call, we have President and CEO, Michael Weening, and Chief Financial Officer, Cory Sindelar. As a reminder, yesterday after the market closed, Calix issued a news release, which was furnished on a Form 8-K, along with our stockholder letter and was also posted in the investor relations section of the Calix website. Today’s conference call will be available for webcast replay in the investor relations section of our website.

Before I turn the call over to Michael for his opening remarks, I want to remind everyone that on this call, we will refer to forward-looking statements, including all statements the company will make about its future financial and operating performance, growth strategy, and market outlook, and that 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 the fourth quarter 2025 letter to stockholders and in the annual and quarterly reports filed with the SEC. Calix assumes no obligation to update any forward-looking statements which speak only as of their respective dates. Also, in 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 fourth quarter 2025 letter to stockholders.

Unless otherwise stated, all financial information referenced in this call will be non-GAAP. With that, Michael, please go ahead.

Michael Weening, President and CEO, Calix: Thank you, Nancy, and good morning. We closed 2025 with the best performance in the company’s history, expanding our strong foundation that we have invested 15 years building with team members, customers, and partners. Record revenue, our sixth quarter of consecutive revenue growth while guiding higher in first quarter. Record gross margin, our eighth quarter of consecutive margin improvement, expanding RPOs, driven by excitement around our third generation platform and continued operational discipline, yielding our eleventh consecutive quarter of eight-figure free cash flow and ending the year with record cash. These results underscore the strength of our platform model as we contribute to the success of our broadband experience provider customers. We also launched the third generation of our Calix platform in December, with more than 300 customers already migrated as of today, and we are working to complete all customer migrations by the end of first quarter.

This marks a significant milestone for Calix and our customers as Calix Agent Workforce integrates into everything that we do, while our partnership with Google Cloud allows our platform to be deployed to any customer in the world, whether Calix hosted or as a private instance for a large customer. Last, we continued to improve the culture that supports the success of our customers every single day, as evidenced by our 44 culture and 20 innovation awards, adding 16 awards in fourth quarter alone. Our team is particularly proud of these awards as success starts with people. The Q4 results, our strong culture, and the successful launch of the third generation of our platform that adds capacity and capability for existing customers through Agent Workforce Cloud.

The opportunity in the MDU market with SmartLife and the ability to address new global markets and large customers with private clouds has our team entering 2026 very confident in our ability to continue our track record of enabling customers to simplify operations and go to market, innovate across residential, business, MDU, and municipal segments, which enables them to grow for their members, investors, and the communities they serve at a faster and faster pace. As we exit 2025, it also marks the end of the early adopter phase of the market disruption and with demand visibility at an all-time high, our entrance into a sustained growth phase for 2026 and beyond. Cory, over to you to walk through the specifics of our Q4 performance.

Cory Sindelar, Chief Financial Officer, Calix: Thank you, Michael. In the fourth quarter of 2025, Calix delivered record revenue of $272 million, marking a sequential increase of 3% and a robust 32% year-over-year growth. This capped off a milestone year in which we surpassed $1 billion in annual revenue, reflecting 20% growth over 2024. Our results were driven by continued strong demand for our platform among broadband experience provider customers, who are leveraging our appliance-based platform, cloud and managed services to attract new subscribers, minimize churn, raise NPS scores and ARPU, and expand their footprints. The addition of 25 new customers this quarter further demonstrates the broad-based adoption of our solutions. Remaining performance obligation reached a record $385 million, up 9% sequentially and 18% year-over-year.

Current RPOs were also a record at $152 million, representing an 8% sequential increase and a 26% rise from the same period last year. These robust metrics underscore the visibility we have into the ongoing strength of our business model as we see more BXP customers adopt our platform, cloud, and managed services, add incremental offerings, and win new subscribers. The accelerating interest in Agent Workforce Cloud is another clear indicator that the BXP-led disruption is past the elbow, and we have left the early adopter phase and are now in a sustained growth phase. To that end, we have aligned our publicly disclosed financial metrics to reflect the growth and value of our model. We have split out our appliance revenue and gross margin from our recurring software and services revenue and gross margin.

Simultaneously, we have ceased providing metrics such as platform adoption and customer size that were proxies for our progress during the early adopter phase. The combination of our customers’ ongoing subscriber growth with our platform and the strength of our appliances deployment resulted in another record non-GAAP gross margin of 58%, representing our eighth consecutive quarter of margin improvement. The continued expansion is primarily due to the adoption of our platform by new broadband service providers and the success of our BXP customers. While gross margin may fluctuate quarter to quarter, depending on customer and product mix, as well as memory costs, we remain confident in our ability to drive further gross margin growth as our platform, cloud, and managed services scale.

Regarding memory costs, we will remain proactive, and as we did during COVID, we will partner closely with our customers to ensure continuity of supply and address any cost increases resulting from higher memory pricing. Our balance sheet remains strong. DSO at the end of the fourth quarter was an industry-leading 35 days. Inventory turns were 3, reflecting investments to address robust demand. We generated record free cash flow for the quarter of $40 million. We have now produced positive quarterly free cash flow for over five years, including 11 consecutive quarters with eight-figure amounts. We ended the year with record cash and investments of $388 million, an increase of $48 million sequentially and $91 million year-over-year. This strong cash position reflects our ongoing profitability and disciplined operational execution.

Also, during the fourth quarter, we deployed $17 million to purchase 300,000 shares of our common stock. As we have discussed, we have a disciplined capital allocation process, and we remain a disciplined buyer of our own stock. That said, as visibility increases, our internal valuation models have moved up, and this is illustrated by our fourfold increase in share buybacks from the third quarter to the fourth quarter. Furthermore, our board of directors has authorized an increase of $125 million in our stock repurchase plan. Given the robust demand environment and the strong pace at which our customers are adopting our model, we expect to continue delivering sequential revenue growth, including in the first quarter, which has traditionally experienced slower growth due to seasonal trends.

Our revenue guidance for the first quarter of 2026 is between $275 million and $281 million, representing a 2% increase at the midpoint over the prior quarter. This outlook reflects our confidence in the multi-year growth opportunity ahead, as more service providers recognize the value of transforming into a broadband experience provider. Regarding progress on BEAD, we now have a clearer view of the size and timing of the program. The available size of the opportunity for Calix is between $1 billion and $1.5 billion. While we have already seen orders from BEAD recipients, we expect deliveries of appliances later this year and meaningfully ramping into next year and beyond, providing a tailwind to our growth. Strategically, the BEAD awards also give insight to the practical differences between fiber-to-the-premises technology and low Earth orbiting satellites.

The vast majority of funds, some 85%, went to fiber-based deployments, while only 5% of funds went to low Earth orbiting satellites. This speaks to pure physics, this speaks to physics, pure and simple. Fiber has the highest bit rate carrying capacity, a multi-decade life cycle, and the lowest operating costs. In short, it is financially practical to get fiber to the premises you will. For those sites that are too far away, alternate technologies, such as fixed wireless or low Earth orbiting satellites, are a good solution. As such, one should quickly realize, to the extent that competition exists, it exists between fixed wireless and satellite, not between fiber and anything else.

For the first quarter of 2026, we expect non-GAAP gross margin to remain strong, with some near-term impact due to customer mix and from overlapping cloud costs as we transition to our third-generation platform. I would also note that while we are making this investment in running dual clouds, the transition to the third generation platform is on track and progressing well. Regarding non-GAAP operating expenses, we expect a sequential increase in the first quarter of 2026, primarily related to accelerating the development of AI functionality and capabilities across our platform, cloud, and managed services. Importantly, we expect to return to our target financial model for operating expenses by the end of 2026, positioning us for sustained long-term profitability and growth. We are entering 2026 with strong visibility and confidence in our growth trajectory.

We are excited to host our Investor Day at the New York Stock Exchange on February 24th, where we will share more about our strategy and long-term growth opportunities. We look forward to seeing you there. Michael, back to you.

Michael Weening, President and CEO, Calix: Thanks, Cory. At a time when the pace of change is accelerating at a rate that has never been seen before, we enter 2026 ready to make that pace of change our advantage and in turn, an advantage for our customers. We have successfully launched Agent Workforce and demand visibility is at an all-time high. We have executed with operational rigor to ensure that we have the financial strength to continue to invest and grow by winning new customers and helping our existing customers differentiate and dominate in the markets they serve. Last, our team culture is ready for the opportunity that we have invested and worked so hard towards. Our better, better, never best cultural mantra will ensure that our internal teams make the most of AI to improve how we operate, while our platform delivers incredible results for our customers.

The next step in Calix’s journey is here. I’m excited to lead the team as we speed our ability to transform the broadband industry and enable the success of our customers and partners. I would like to close by thanking our team, customers, partners, and shareholders whose passion, grit, and trust have brought us to this exciting next stage in the Calix journey. Nancy, let’s open the call for questions.

Michael Genovese, Analyst, Rosenblatt Securities: Darryl?

Daryl, Conference Operator: Thank you. We’ll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Sameet Chatterjee with J.P. Morgan. Please proceed with your questions.

Joe Cardoso, Analyst, J.P. Morgan: Hi, good morning, everyone. This is Joe Cardoso on for Sameet Chatterjee. Thanks for the questions. Maybe for the first one, I think last quarter you talked about a revenue growth outlook for 2026, tracking to the low end of the 10%-15%, 10%-15% range ex-BEAD. You know, curious if that range is still fair to think about for modeling assumptions here. And then second, just in regards to the better visibility now that you have around the BEAD program, any update on how you’re thinking about a contribution for 2026, and how we should think about that layering into the financials here as we progress through 2026 and into 2027? Thank you, and then I have a follow-up.

Cory Sindelar, Chief Financial Officer, Calix: Yeah, I think, with our high visibility and understanding where BEAD is coming in, I think we’ll be somewhere in that range of 10%-15%. I don’t think we’ll be at the low end.

Michael Weening, President and CEO, Calix: We’re confident. Demand visibility is high, and you know, the other part is for an update. That’s one of the things we intend on walking through, right, Cory?

Cory Sindelar, Chief Financial Officer, Calix: Yes.

Michael Weening, President and CEO, Calix: At the Investor Day at length, because a lot of our investors are asking questions with regards to how will we achieve those growth rates. So we’re very confident.

Joe Cardoso, Analyst, J.P. Morgan: Nope. Got it. Appreciate the color there. And then maybe just a follow-up in a, in a similar vein, you know, I think, you know, you’ve been referencing new market expansion, including international opportunities. You know, any updated thoughts there? Like, as we think about these new markets and Calix going out there and trying to cultivate these opportunities, like, how should we think about that as part of the 2026 growth story? I, I think last quarter, too, you, you referenced that that’s not necessarily in the numbers, but, you know, how tangible is that in terms of contribution for 2026? Or should we think about, you know, this being longer in the tooth as you try to, like, kind of do the block and tackling in terms of opening up these opportunities for Calix?

Just curious, big picture there, like how we should think about that coming into the Calix story?

Michael Weening, President and CEO, Calix: That’s a great question. So the first part of it, as we were, we did invest—you know, when we had this call last quarter, we were also coming up to the launch of our platform, and therefore, we wanted to ensure that it was out. So from a confidence point of view, for us to actually understand how we’d potentially open up new markets, we had to get over the hump of actually getting the platform out, because that’s the grand enabler, and that means we have to move our customers over. So the great thing is that in December, we started those transitions, and as I said on the call, you know, we have over 300 customers already over.

I believe we’re going to load another 100 over the next week, and by the end of the quarter is our goal, to actually have all of our existing customer base onto the new platform. So that, in essence, is kind of the, the first gate, and we’re through that and very confident with regards to the trajectory on, on that transition. So that’s the first part, which is great, which is why as we look out to 2026. You know, we can feel confident with regards to the expansion in international markets and the ability to go after large customers with dedicated private clouds. You know, what is the revenue in 2026? We actually haven’t really built that.

We have not added that into the the numbers, primarily because, as you know, as you go after large customers or open new markets, you have a lot of investment work to do, and then you have to build it out. That being said, if you’ll look at my LinkedIn, you’ll notice that yesterday I announced that I will be keynoting at Mobile World Congress in Barcelona in March. This is the first time we’ve really showed up at that event, which is the largest communications biz event in the world. Over, I think it’s like 140,000 people attend it. They take over Barcelona. I’ve personally been there, you know, 10 times when I was at Microsoft and Bell.

But for us to be keynoting should be a very good indicator that everybody goes and talks to them about what is your story. And when they heard what we’re doing with regards to artificial intelligence and how far ahead we are, which is enabled by our platform, they were quite surprised and gave us an opportunity. Again, I would encourage you to look at who’s speaking. We’re in the Architects of AI section, which is Keynote six. Go look at the speakers in there, and you’ll see that, you know, the CEO of Qualcomm, amongst others, that these are the leaders in AI. And we’re right in the middle of that.

And as we go and accelerate through 2026, while we haven’t layered that into the revenue numbers, we will be getting a lot of attention because what we’ve done is groundbreaking, and we’re way ahead of the competition. So, there is no one doing what we’re doing in this segment. The last part I’ll say on that is, the value of artificial intelligence is yet to be seen.

So you know, when I go back to five years ago, I was in a course at Wharton, and I was talking to their AI and data scientist leader, and he said, "As I look at artificial intelligence over the long term, the real value in that is how we drive business outcomes, not necessarily the AI engines." And so as we’re working through our platform, the value is how we actually work with agent workforce and provide value to our customers, and then that is the ultimate value of what we’re doing with the platform, as it unlocks at the end of the quarter for all of our customers and future prospects.

Daryl, Conference Operator: Got it. Thank you, Michael. Thank you, Cory.

Michael Weening, President and CEO, Calix: Welcome.

Daryl, Conference Operator: Thank you. Our next question has come from the line of Ryan Koontz with Needham & Company. Please proceed with your questions.

Ryan Koontz, Analyst, Needham & Company: Great, thanks. Yeah, Michael, I wonder if you could expand a little bit on, on... You just spoke to your traction upmarket with Tier Ones. Can you maybe unpack, where your entry points there are upmarket, where you see the most exciting opportunities with the new platform?

Michael Weening, President and CEO, Calix: Well, so I, what I stated was that we’re starting that pursuit, and so the entry points into a Tier One, there’s really four vectors to it. So the value of our platform is that we can, when we talk to a large customer, we can probe broadly with our sales organization around what are the problems that you currently have. And so the vectors are, you have to find your beachhead into an account. So the first vector is, you talk to their enterprise organization around what they’re doing in business, so small business and MDU. That represents a significant opportunity. MDU, as an example, is a significant issue inside every single large customer and small customer, frankly, which is why we built that groundbreaking product to help them succeed, and that opens up a significant market opportunity, both in our existing base and in Tier Ones.

So that represents a beachhead. The second beachhead is what we’re doing around networking. That’s much more traditional, based upon what we’ve built with AXOS and how we won Verizon seven years ago, and that really comes down to the insights that we provide from an automation, an automated platform. And obviously, when you put artificial intelligence on it, and because we understand end-to-end from a networking point of view, what our customers do, not only from an access but also from a subscriber management, all the other component parts, we can automate that at a level that no one else can, which drives significant value. And as evidenced by the reason why we got sole sourced at Verizon all those years ago, is because we represent an 80% reduction in operating costs.

The way they really acquired that operating cost benefit is they had to build a lot of their own clouds. We now have that inside our cloud with our AI engines through Operations Cloud and those capabilities. That’s the second way in. The third and most important one is actually demonstrating a model for how you provide subscriber experience. How do you win that consumer and residential market? The value we offer there is evidenced by all of our existing customers who can achieve NPSs as high as 94. They can offer incremental services, but more importantly, they can move at a really fast pace with new product launches, as evidenced by Brightspeed, who was able to get to market in two days. Where I was talking to a Tier One the other day, they launched a small business product.

It took them 2 years and $20 million. We could have launched that small business product with our platform for $50,000 or less, no integration costs, no IT work, and they could have been in market in 30 days. And so that represents a significant opportunity, and if you look at the challenge inside large customers, the challenge that they have is how, everyone’s talking about network automation and cost cutting. Well, the real growth, path to growth is: How do I add subscribers? How do I grow revenue per subscriber? And how do I re-reduce churn? And that’s something we do all day long. And when you layer in agent workforce-

Cory Sindelar, Chief Financial Officer, Calix: ... as we build out our agentic army, we’re gonna automate those capabilities to help them drive at a significant fast rate. And then the last one is an opportunity for us to speak to them around agentic at a higher level. If you look at the platform that we’ve built, and we all go in-depth at the Investor Day, so I’d encourage everybody to come to Investor Day, and we walk you through our broad architecture with regards to AI. Our architecture is not constrained to our cloud and what we do. We can actually take our knowledge and orchestration layer and apply it to an entire business, and use an agentic framework that could provide knowledge across the company and help them drive efficiencies way beyond our existing business.

And so those are the four beachheads that we have with the customer. Those are the conversations that I am personally having, yes, with the sales teams and the product team as we talk to our customers, and that’s why we will be at Mobile World Congress for the first time. I haven’t been there for five years. We will be there speaking to the large Tier Ones because, frankly, what we’ve done is unmatched. No one’s doing what we’re doing. And so that’s the opportunity you had. But as I said, come to the Investor Day, and we will go through that in depth.

Ryan Koontz, Analyst, Needham & Company: That’s great. We’ll be there and hope to see you over in Spain, too. And, Cory, just in terms of gross margins and memory costs, you kind of mentioned partnering with customers and passing through some of these transitional costs. Can you maybe unpack that a little bit for us about your thoughts?

Cory Sindelar, Chief Financial Officer, Calix: So Ryan, in the first quarter, we’re really not having any of those costs. Remember, the advantage of our supply chain team is we got ahead of this, and so we’re doing really well in that regard. So no immediate near-term impact, and it’s one of those things that as we progress through the year, we’ll partner with our customers to deal with what we see coming down the pipe.

Ryan Koontz, Analyst, Needham & Company: Sure. All right, great. I’ll get back in the queue. Thanks, guys.

Cory Sindelar, Chief Financial Officer, Calix: Thanks, Ryan.

Daryl, Conference Operator: Thank you. Our next question has come from the line of Michael Genovese with Rosenblatt Securities. Please proceed with your question.

Michael Genovese, Analyst, Rosenblatt Securities: Great, thanks. So I wanted to talk about some of the new disclosure numbers that we have in the shareholder letter, you know, systems and software versus appliance. I guess to begin with, I mean, you know, it seems like as a percentage of revenue, software and systems has gone down over the past year, which is somewhat surprising since we’re not in a BEAD, like build more footprint type of environment. So can you just help clarify, you know, the reason for that?

Cory Sindelar, Chief Financial Officer, Calix: Sure. As we have said all along, our software is tied to subscriber growth, and that happens in a consistent and upward trajectory all of the time. Where you’re gonna get volatility is gonna be on the appliance line, where it can, you know, grow and shrink at, you know, in a given period. And so what you saw this year is obviously reacceleration of the appliances from 2024. Meanwhile, throughout that entire period of time, the software and services number continues up into the right, and it grows every day. It’s the reason why we say our margins are gonna continue to expand over time, because that’s unrelenting in terms of its growth, and that’s what you’re seeing.

Specifically, if you do look at the tables or the charts related to software and services, you’ll see that there was a bit of a downtick from Q2 to Q3. But one anomaly inside of the software line that can create quarter-to-quarter fluctuations is the amount of AXOS licenses. As you know, those are recognized immediately upon signing, and they are not ratable. In Q2, we had a little bit more AXOS licenses than any other period, you know, in the first quarter or third quarter. Consequently, you see that bump up.

Michael Genovese, Analyst, Rosenblatt Securities: Great. And then, you know, related type of question, you know, I guess the other thing that surprised me about those charts is how high your appliance gross margins are and how the software and services gross margins are only a few points higher than the appliances. So the questions that follow from that are: How are the appliance margins so high? But, you know, secondly, as you sort of, you know, as the clouds mature and you know, move to one cloud versus, you know, hosting on two clouds, where could you just give us a sense of where those software margins should be headed over time? Thank you.

Cory Sindelar, Chief Financial Officer, Calix: Sure. Sure. If I, if I take a look at the software margins, you know we’re going through the transition currently, and so they’re temporarily depressed due to the dual cloud costs. But once we lift that yoke off, those margins will continue. Ultimately, you know, they probably go past 70% and beyond. We ultimately don’t know what the upper limit is to the software and services margin because it depends on success at Tier Ones, where you know, the amount of that will likely be just software-only revenue with no hardware or appliances attached to it. And so the more of that you mix in, you know, it’s hard to say where that ultimately adds into it too, but they should clearly move beyond 70%.

Michael Genovese, Analyst, Rosenblatt Securities: Great. But just talking about on the high appliance margins, just how you accomplish that?

Michael Weening, President and CEO, Calix: ... Well, we accomplished it because of the fact that if you look at the $2 billion that we’ve invested in our platform, a big part of that is that we built two operating systems which are fully abstracted from the silicon and give us significant flexibility with regards to components. The reason why a customer can turn up a system like Brightspeed, who has, you know, older back-office systems that are very complex from, they brought those over from Lumen initially. The reason why they can actually do what no one else in the industry can do, is because of our platform. Because everything is abstracted, the complexity sits inside the software, not at a hardware layer, which allows us to actually transition at a very fast pace. It also allows us to simplify our SKU count.

If you go back to where Calix was when I first started 10 years ago, we had almost 4,000 SKUs, and that means that you have all of this component complexity. If you can actually build out an abstracted operating system from the systems and the appliances, what you gain is massive scale with regards to buying single components and putting them across all of your systems, which means that you get higher margins. And so that is ultimately our silver bullet, is that we have built truly abstracted in the network. We’re the only ones who have done it, and on the other side, with regards to our premises, it’s the same thing. And that’s why we have a low SKU count, maximize inventory, and simplify significantly.

Cory Sindelar, Chief Financial Officer, Calix: And I’ll add a couple things to that. I mean, clearly, the appliances show the differentiated value on our model, and there’s a couple other added. You know, we’ve got a very tight fit to the market requirements that allows us to obviously reduce SKU count, but also allow us to reduce the power consumption. So that’s an added on the access side. And on the premises side, you know, we’ve got some clever designs that allow us to cover a number of use cases, further shrinking SKU count. And when you shrink that SKU count, not only does that create benefits for Calix in terms of the amount of SKUs that we have to manufacture, right? It reduces the risk to ENO, excess and obsolete inventory, reduces the overhead, so our OCOGS can be lower.

But that lower SKU count also translates to a benefit to the service provider in terms of them managing inventory, the number of SKUs that are on the trucks, the amount of their components in terms of the spares depot. So all of that simplification that we’re driving through our platform translates to a differentiated value on behalf of the service provider as well. So I would add those points to what Michael said.

Michael Genovese, Analyst, Rosenblatt Securities: Great. Perfect. Thanks so much. Appreciate it.

Daryl, Conference Operator: Thank you. Our next question has come from the line of George Notter with Wolfe Research. Please proceed with your question.

George Notter, Analyst, Wolfe Research: Hi there. Thanks a lot, guys, for the disclosures on the software side of the business. I think it’s terrific. Hey, I’m just wondering, when I look at software and services together, I’m wondering how much of that is the services piece. You know, if I go back to, like, 2022, you guys used to break out services. I think back then, about $10 million or $11 million per quarter was in the services line. It was a services-only line. I’m just curious on what -- how much is software and how much is services. I’ve got another question as well.

Cory Sindelar, Chief Financial Officer, Calix: Yeah, George, we’re not gonna go into further breaking that down, but you can use that as a proxy, and that’s-

Michael Weening, President and CEO, Calix: Service is a small component of our business. We’re a software company and cloud company, and we’re not a services company.

George Notter, Analyst, Wolfe Research: Got it.

Cory Sindelar, Chief Financial Officer, Calix: Nor is your growth part.

George Notter, Analyst, Wolfe Research: Okay, and then also on the software piece, I guess I’m wondering how much of that software is recurring versus perpetual. Any sense for what that might look like?

Cory Sindelar, Chief Financial Officer, Calix: It’ll fluctuate from quarter to quarter, George, like I said, with AHLS, but the majority, large, large majority of it is recurring.

George Notter, Analyst, Wolfe Research: Got it. Okay, great. And then, I also was just curious on, kinda where you are with the Agent Workforce Cloud. Obviously, you’re rolling it out, you’re putting the platform out there, which is terrific. I guess I’m just curious on what that looks like in terms of the timing of the revenue ramp, how you guys are monetizing it. Anything you can say there would be great. Thanks a lot, guys.

Michael Weening, President and CEO, Calix: Yeah, we’re... that’s something we’ll cover at the Analyst Day, and, you know, in depth, we’ll actually have demos and those elements, so we’ll be able to show those things. Again, the most important part of it was we had to actually get the platform out, which enables it to happen. That’s in progress right now, and therefore, what you’re going to see is a rapid... What happens is that once the platform is out, think of it as like building a house, right? The plumbing’s done, the walls are in, and now we can actually do what agents are, which is the cool stuff. You know, put in the windows, paint it, the paint the house, all those different elements, which is add a ton of agents.

You’re gonna see a very active ramp of our capabilities, and that means that the customer value will start to roll in as we go through Q2 onwards. Let me give you a simple example. I was speaking to a customer who actually signed an AI contract with us just after Christmas. They went all in, and one of the things, the reason why he said that was he is a very good customer who believes that we will deliver quickly, and he actually, we showed him when he’s gonna be transitioning over and how that rolls out for him. He said the greatest problem that he has is that he had never bought Engagement Cloud, which is our marketing cloud, because of the fact that he did not have the capacity and capability to do it.

His team members were not sophisticated enough to do some of the micro-segmentation that it provides. And he said, "Now I’m super confident because agents," and as I shared at Connections, where I walked through, and so I would encourage anyone on the call who hasn’t actually watched my Connections keynote, you can go look at the marketing element and walk through what is our view of how an agentic workflow works. You know, segmenting down to the individual of one, parsing out what is their social media preferences, so where do you place the ad, allowing for very low-cost ads, but more importantly, understanding all the white space through agents and what the upsell, cross-sell opportunity is.

By having that in an agentic framework and agent workflow, he can now take somebody who’s not sophisticated enough to actually do that on their own because they’re not a data scientist, et cetera, and in his rural market, he can now aggressively go after those customers in a very different way. And so he’s all in. And so I think from the end of the quarter, as we roll off, you’re gonna see our resources also roll out of the plumbing element of our project, and those resources free up to go hard at building agents and expanding it quickly. And the agent part, frankly, when you talk to our product team, building an agent’s easy. It’s a bunch of Python code. The magic is in understanding the workflow.

And if you look at our three clouds, Operations Cloud, Engagement Cloud, which is marketing, and Service Cloud, all those are, is hard-coded workflows. And, and so we actually know exactly what agents to build and how to assemble them in an orchestration layer, to deliver the value. And you’re gonna see that in spades at a pace that no one can match, starting the end of the quarter as, as we finish up the, the migration. Again, come to Investor Day, we’ll cover that in depth.

Cory Sindelar, Chief Financial Officer, Calix: Thank you, George. You’re gonna see it first, you’re gonna see it first in the RPO number.

Michael Weening, President and CEO, Calix: Sure.

Cory Sindelar, Chief Financial Officer, Calix: Great. Thank you.

Daryl, Conference Operator: Thank you. Our next question has come from the line of Tim Savageau with Northland Capital Markets. Please proceed with your questions.

Cory Sindelar, Chief Financial Officer, Calix0: Hey, good morning. Wanted to come back to the BEAD discussion and appreciate the quantification of the opportunity here, you know, which I assume, I don’t know, stretching over, what? 3-5 years, and that could be pretty significant on an annual basis. And you mentioned a bigger ramp into 2027. And I guess my question is, as you look at that opportunity, you know, I guess, is it apparent at this point, would that be fully incremental to your current run rate business? Would it add to it? How should we think about layering in what could be, you know, I don’t know, $200 million a year relative to your current run rate business?

You know, would you expect another step function into a higher growth rate in 2027, you know, something maybe in the twenties, relative to your 10%-15% target?

Cory Sindelar, Chief Financial Officer, Calix: Thanks, Tim, for the question. I would say if you wanna start talking about 2027, please come to the Analyst Day. That’s where we might provide some color on that. As it relates to additive revenue, you got to remember that there’s a limited number of resources that the industry has to go do this work. Crews are not just sitting around waiting for BEAD, you know, they’re gonna go do projects. So some portion of that would come at the cost of other work being done, because these crews would do locations that they would be otherwise built, and now they’ll go do some BEAD.

Michael Weening, President and CEO, Calix: Yeah. And I kept-

Cory Sindelar, Chief Financial Officer, Calix: So there’s some of that. So ultimately, for this to be additive, you’re gonna have to increase your capacity and rates at which you’re gonna go deploy. But the important part is, this opens up more of the premises revenue, right? As they go out and build these networks, you’re gonna then start hanging new subscribers off of them. And so that’s the aspect that, you know, kind of adds to the acceleration of revenue, which we’re more excited about, in addition to the BEAD revenue alone.

Cory Sindelar, Chief Financial Officer, Calix0: Thanks very much.

Daryl, Conference Operator: Thank you. Our next question has come from the line of Scott Searle with Roth Capital Partners. Please proceed with your questions.

Scott Searle, Analyst, Roth Capital Partners: Hey, good morning. Thanks for taking the questions. Nice to see the RPOs continue to hit record highs and continue to post good year-over-year growth numbers. Maybe to follow up on George’s question, and I suspect you might be referring me to the Analyst Day, but as we start to get full commercialization across the installed base of the third-gen platform and agentic workforce and SmartLife, I’m wondering if you could talk a little bit to the time to monetization of when you’re expecting to see that start to ramp? It would appear, kind of given the features and functionality of the platform, that we might start to see some of that contribution starting to accelerate in the second half of 2026.

I wondered if you could also kind of put that in the context of, historically, we’ve talked about going from $1 per subscriber to $10 per subscriber, kind of how you’re thinking about that, and do we start to see software and services in late 2026 and 2027 starting to inflect above RPO growth, particularly as RPOs, I believe, are just reflecting minimum contract revenue levels and not as we start to see incremental monthly subscriber revenues on top of that. So it’s a bunch of things rolled into there. Basically, you know, when do you think we start to see the monetization of the third-gen platform, and kind of the inflection point of when that starts to hit more critical mass?

Michael Weening, President and CEO, Calix: Scott, I think you’re right. I think second half, you start to see that, and it will be reflected in RPOs. I also think that, you know, as we stated, we’re entering this sustained growth period because we have this significant monetizable base that’s already in place, and one of the things that has been constraining, you know, later adopters is the fact that they don’t have the capacity and capability to actually deploy the technology and win in their markets.

If I go back to the example that I just provided in the previous one, what I talked about was a customer who did not have the capacity in the form of, I don’t have a data scientist, I don’t have that, some of those capabilities, or the capability in the form of, if I think about marketing, you know, you can do most, most service providers, regardless of size, small ones to large ones, do very, what I would call, unsophisticated marketing. It is brand-based, or it is price and speed, and I, I don’t really customize my offerings to the, the needs of the individual. What we’re introducing with Agent Workforce is the ability to go through and do significant, significant micro segmentation of a customer base and get down to a segmentation of one.

So looking at a household and understanding all the behaviors and the needs of that household, and then at a very low cost, hitting a button and providing a custom campaign into the social media that is relevant for them. So as opposed to, you know, spending, you know, $10 and blasting it out onto everyone, I can spend $0.05 and buy an ad on Instagram from 8:00 P.M. till 9:00 P.M., which is a social media channel of preference, with an ad that actually hits the sweet spot of their white space. So these represent significant opportunities. In the past were barriers because you needed to be a large company with a data scientist team and all the other things.

Frankly, even if you were a large company, the truth in this industry is that all of these companies have tons of data scientists, and they generally serve the C-suite. They do not have the capability to do that either, because you can’t actually do a mass segmentation down to a small level to serve the sales and marketing team who are trying to close deals with customers, win new subscribers, and drive upsell and cross-sell.

Best example I can give is that when I was an executive running a $900 million business at a large Tier One telco, we had 27 data warehouses, and I had to go, and I had, like, something like a thousand, you know, scientists, and inside of my $200 million P&L, I had to go build out a $10 million data warehouse for my team because I couldn’t get the data that I wanted. And so this represents. You know, our ability to unlock the data in their business and automate it so that they can do the most important thing in their business, which is not cut costs, it is win new subscribers and grow revenue per sub while reducing churn, is our magic.

And so this is a huge enabler for us as we go, just like you said, in the latter part of 2026 and through 2027. More importantly, or as importantly, at the same time, opening up new markets. And so when I’m at Mobile World Congress and other, and in these events, those are the conversations we’re gonna have because everyone’s talking about how to cut costs. The magic is how to make money, and this is what we’re really good at. We’re gonna help them make lots of money. And in the past, we had to convince them to do the actions based upon best practices. Now, we can say, "Here’s what the data says across 1,100 customers, 1,200 customers. Here’s what the agent, here’s the trained agents to make it happen. Press the button. Press the button," and it works.

So this is a seismic shift in what’s possible in our industry, and we are at the forefront of it, which is why, you know, we’ve been quiet about it since November of 2023, as we’ve been building it all out, and now we’re good to go.

Scott Searle, Analyst, Roth Capital Partners: Thanks, Mike. That’s very helpful. And if I could just from a follow-up, you know, given the third generation platform and now that you could start to address larger customers with private clouds, you also have an evolutionary path, with the hybrid architecture, no stranded assets for those customers. I’m wondering two things: How is that conversation and dialogue going now with the Tier Twos and the Tier Ones, in terms of what you’re able to offer now with, the new platform? And what’s the timing of when we should expect to see some, incremental customer contribution and/or monetization of those Tier Ones, Tier Twos, and potentially international customers? Thanks.

Michael Weening, President and CEO, Calix: With the Tier Two customers, that’s been happening because a Tier Two, for the most part, is a super regional. Like, if you think about a Tier Two, is that they’re generally across, you know, 5-20 states. You know, they’re not global in nature and, really a lot of their needs, they still have the constraints that you see in the smaller customers in that, you know, their ability to invest. You know, do I invest my dollars in building more fiber or, you know, am I gonna be building out all these data science teams and all the other things? So I think, you know, those conversations are happening very actively.

For larger customers, as we said, we talked about the Tier Ones that we’ve already actively engaged with and, you know, that’s going to take a step up as we basically unveil what we’re doing at Mobile Congress to the world and to the Tier Ones in partnership with Google. So, you know, the other part in this is that we’ve transitioned ourself away from AWS, and everything that we’re doing is on Google Cloud, and Google is an incredible partner. Not only are they interested in our go-to-market strategy because of the fact that we offer workloads on their Google Cloud that they can talk to their customers about, our insights and capabilities, specifically our business insight on how to run a business, represents a market shift and an ability for them to differentiate against their competition when it comes to clouds.

We will be at Mobile Congress in the Google booth, demoing and partnering with them, talking to large customers.

Nancy Fazioli, Vice President of Investor Relations, Calix: Got you. So just from a timeline-

Michael Weening, President and CEO, Calix: The revenue stream on that is, sorry, the timeline is, that, you know, large enterprise accounts have been doing this all my life, and those are 18-24-month sales cycles. So you’re talking, you know, we’re gonna be going into a lot of POCs, through 2026. We’re gonna be demonstrating it and educating them, because that’s the other part. The large customer mindset is I’ll build it myself and generally very siloed. So they’ll take an individual use case, and they’ll build a silo, and then another area of the business will take a use case of the problem that they have and build their own silo. Whereas we represent a significant shift in mindset and that we step into a large Tier One with, here is our agentic library that’s fully trained, point it at your data, and it goes.

Oh, by the way, here’s our agent toolkit on how you build out your own agents and build those into the orchestration layer. So it’s gonna require a lot of education, so it’s latter part of 2026 and, and definitely growth trajectories for 2027, on top of the Q&A earlier questions with regards to the tailwinds on BEAD. So, but it’s also why, in our letter, we were, we used the words entering a sustained growth phase. There are a lot of good things coming together at this point in time.

Nancy Fazioli, Vice President of Investor Relations, Calix: Great. Thanks so much.

Michael Weening, President and CEO, Calix: Come to the... And by the way, come to New York. We will walk through a lot of this in New York at the Stock Exchange, at the analyst day.

Daryl, Conference Operator: Thank you. Our next question has come from the line of Christian Schwab, with Craig-Hallum. Please proceed with your questions.

Christian Schwab, Analyst, Craig-Hallum: Hey, thanks for squeezing me in here, and most of my questions have been answered, but just a quick follow-up on the BEAD. Given your historical strength and the smaller of the regional telco companies, would you assume that you would get 50% market share, you know, over a timeframe in the TAM that you guys outlined for BEAD? Is 50% a good starting point, or now that you’ve probably gotten more color, exactly who has money, that it could potentially be bigger than that?

Michael Weening, President and CEO, Calix: Hey, Christian, thank you for the question. You know, as you know, we do very well in that segment, and I suspect we’ll continue to do very well as it relates to BEAD.

Christian Schwab, Analyst, Craig-Hallum: All right.

Michael Weening, President and CEO, Calix: I’ll take that. You know, by the way, let me expand out on the BEAD thing, right? So BEAD is the infrastructure that goes into a home pass. A home pass is not a home line. You know, so we have incredible technology to provide the lowest operating expense to run a network and to automate it, and the third generation of our platform takes what we can do for network automation to the next level. Everybody else is at, you know, no one has an abstracted operating system, no one has built subscriber management into the platform, all the different capabilities that are critical to run a headless network.

We can run a headless, lights-out network, top to bottom, and significantly eliminate power issues, because you’re taking 3 or 4 boxes, collapsing them down to one box, and at the same time, you know, give the highest level of reliability because the data path is inside the operating system, not service chain across multiple boxes. All those things come together to run great networks, is what Calix does. But then the other part, and this is the most important part, is that as BEAD rolls out, they still have to go and win the subscriber. That just puts in place that I can get the network in place, but I have to go win the subscriber.

And so regardless of whether what our market share is for BEAD, whether or not we win the network or not, what our value proposition, and which is going to get significantly stronger, especially in these early stages for our regional customers, is the capability to win new subscribers. And with this capability of allowing our customer success organization to transition from saying to Cory, if he’s a service provider, "Cory, here are the things that you need to do to win more subscribers, grow revenue per subscriber, and reduce churn," and then beg Cory to listen, because we’re not the ones who actually come up with this advice.

It’s best practices based upon looking at 1,200 customers, and then that’s the advice we give Cory, based upon seeing everybody’s successes and failures, and then begging Cory to do something, and Cory saying, "I’m stubborn, and I don’t want to do it." We can now transition to our success organization saying to Cory, "Here is the best practices. Here are the yields it can provide. By the way, press the button. This is what the agentic workflow will actually do for you so that you don’t have to do the work for yourself." And so this marks a, this, in the end, is the promise of agents. This is the promise of what you can do with deep insight, with regards to how to run a business, and then apply agentic on top of it. No one, no one cares about the LLM.

The LLM is a commodity, and we can use all the LLMs. We can pick whoever’s best for whatever the use case is, but the value here is the business insight and then saying to Cory, "Push the button." This is the marked transition. I’ve talked about crossing the chasm forever. We have crossed the chasm. We’re on the other side because we now have the capability to, in essence, help them automate their business and take the capacity and capability constraints off the table, which is a market opportunity for us to accelerate growth. Because in the end, if you want to talk about software and clouds, our goal is to help our customers win subscribers and grow revenue. And when they do that, we get a portion of it. And so, unlike everybody else, that’s what our goal is: help them win by driving money.

Christian Schwab, Analyst, Craig-Hallum: Ah, fantastic. Thank you for that answer. No other questions. Thanks.

Michael Weening, President and CEO, Calix: Thank you, Christian.

Daryl, Conference Operator: Thank you. Thank you. We have reached the end of our question and answer session, and with that, I’d like to turn the call back over to Nancy Fazioli for closing remarks.

Nancy Fazioli, Vice President of Investor Relations, Calix: Thank you, Daryl. Calix will participate in several investor events during the first quarter, most importantly, hosting our investor day at the New York Stock Exchange on February twenty-fourth, as Cory and Michael referenced. Please register to join us. Information about these events, including dates and times and publicly available webcasts, will be posted on the Calendar page of the Investor Relations section of calix.com. Once again, thank you to everyone on this call and webcast for your interest in Calix and for joining us. This concludes our conference call. Have a good day.