David H. Allen - Treasurer & Head-Investor Relations Carl E. Russo - President and Chief Executive Officer William J. Atkins - Executive Vice President and Chief Financial Officer.

George C. Notter - Jefferies & Co. Inc. Timothy J. Quillin - Stephens Inc. Doug Clark - Goldman Sachs Sanjiv R. Wadhwani - Stifel Nicolaus & Company Amitabh Passi - UBS Investment Research Simon M. Leopold - Raymond James & Associates, Inc. Paul Silverstein - Cowen & Co, LLC Christian D. Schwab - Craig-Hallum Capital Group LLC.

Greetings, and welcome to the Calix Q4 2014 Earning Conference Call. At this time, all participants are in a listen-only-mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my please to introduce your host Mr. David Allen. Thank you, Mr. Allen. You may begin..

Thank you, operator, and good afternoon everyone.

Before we begin the call, I want to remind you that this conference call contains forward-looking statements regarding future events, including, but not limited to the size of our funnel of our sales opportunities, the long-term growth prospects for Calix, our expectations for the next quarter, development of new products that will continue to help our customers transform their networks, the future business and financial performance of the Company and expectations for revenue, gross margins, operating expenses, earnings per share, stock-based compensation and amortization of intangibles.

These forward-looking statements are based on estimates, judgments, current trends and market conditions and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements.

I would encourage you to review the Company’s various SEC reports, including our Annual Report on Form 10-K for the period ending December 31, 2013 and our Form 10-Q for the period ending September 27, 2014 available at www.sec.gov, in which we discuss these risk factors.

All forward-looking statements are made as of the date of this conference call and except as required by law, we do not intend to update this information. Also on this conference call, we will be discussing GAAP and non-GAAP results.

We are providing the non-GAAP estimates to enable interested parties to evaluate our performance in the same manner in which we evaluate our own operations.

These non-GAAP measures exclude certain charges and benefits which we do not consider to be a part of our ongoing activities or meaningful in evaluating our financial performance, including stock-based compensation expense, acquisition-related expenses if any, and amortization of acquisition-related intangible assets.

To help you better understand those results, we have included a reconciliation of our GAAP and non-GAAP results in our earnings press release. All numbers that are discussed in today’s conference call are non-GAAP unless otherwise noted.

This conference call will be available for audio replay in the Investor Relations section of the Calix website at www.calix.com.

In addition, our earnings press release, along with supplemental financial data has been posted in the Investor Relations section of the Calix website, which you may want to review in conjunction with our press release in conference call remarks. I’d now like to turn the call over to Calix President and CEO, Carl Russo.

Carl?.

Thank you, Dave and good afternoon everyone. Joining me on today’s call is William Atkins, our Executive Vice President and Chief Financial Officer. I’m happy to again report that the Calix team performed well achieving fourth quarter revenues that were up 19% year-over-year.

In addition, the excitement in the market around fiber-based, high-capacity service offerings continued to accelerate this quarter. I will come back with some thoughts on the market and our progress. However, I would now like to turn the call over to William to review Q4 in detail and then share our guidance for Q1.

William?.

revenue for the first quarter expected to be in a range of between $89 million and $93 million. For the midpoint of $91 million, which is up 6% from the $85.8 million level of Q1 of 2014. Gross margins are expected to be broadly in the same range of they were in Q4. We are guiding to a 47.5% to 48.5% range for Q1 up from last years Q1 level of 45.9%.

Operating expenses are expected to be in the range of $46.5 million to $47.5 million up from last years Q1 level of $40.7 million. The expectations are just finished taking you through result in a guidance range for Q1 earnings per share of minus $0.09 to minus $0.04. At this point, let me hand the call back over to Carl..

Thank you, William. 2014 was a year of significant progress for Calix. First we committed to improving the predictability of our business. An example of this to how we set guidance. We have achieved four straight quarters of leading guidance and we remain committed to this persist.

Second we committed to build a solid foundation from which to grow our business. An example of this if cash generation which resulted in the strongest balance sheet in our history.

Third we committed to improved execution; an example of this being our product development process, which yielded significant new solution offerings over the course of 2014. And that brings me to our singular focus for 2015 growth. We are seeing the early signs of strong growth opportunities for Calix and we intend to invest to achieve them.

One example is our new fiber enabled GigaCenter offering. Introduced in September the GigaCenter achieved orders from more than 100 customers and adjust its first quarter of availability. While this is the highest customer take up for a Calix product that I can remember.

Please keep in mind that these are mostly early deployment pilot and thus we anticipate unit volumes to grow materially over time. In closing, we are now addressing markets that offered us significant opportunities for growth and our focus for 2015 is to win them. With that I would like to turn the call over for questions.

Operator?.

Thank you. [Operator Instructions] Our first question comes from the line of George Notter with Jefferies. Please go ahead with your question..

Hi, guys this is George. Thanks very much. Hey, Carl, I wanted to ask you about your comments on Title II and the new classification of broadband services to 25 megabits. Can you kind of walk through sort of the logic? I think you said that you thought it was neutral or even positive for the Company.

Can you just give us a little bit more on why that is positive? And I guess I bring up the Title II discussion, because I think there is an argument that says that, theoretically, Title II can get challenged, that the forbearance aspect of Title II can get challenged.

And potentially there is a while, years down the road, where the FCC could actually require tariffing and a new regulatory environment around broadband. Could you just kind of walk us through how you see that and why is this good for Calix? Thanks..

Well, and I think William's comments for neutral or positive, so let me give you my view and I’ll ask William to add a little bit of color. My view is, George is focused very simply on the device enabled subscriber and the content and application cloud and the demand by the subscribers for access to that information is unrelenting.

So there are momentary things that can affect these things, but as we look at the unmet need or the unserved need and capital flows I just don’t see what stops it. And I think when you look at the Title II discussions and all of Chairman Wheeler comment it’s pretty clear that if it goes to Title II it’s going to be a lighter touch.

So there is sort of a fairway down which I think we can all see where this is going, so sure, can there be puts and takes, might there be momentary disruptions possibly, but in the long-term, and by long-term I mean not even over the course of years, all of this has to meet the demand.

William do you have some comments on the particulars that you’d like to add..

Yes, I think the only comment I would make, I guess there are two ways in which brake can affect the market more generally. One is just uncertainty, and we can argue that that uncertainty has been out there, since the middle of the summer, early summer and we haven’t seen it affecting our customers demand for our products.

And then more broadly the question is will government action lead to reduction in demand for broadband, and if anything, particularly given last week’s decision about the redefinition of what broadband is we see the government pushing in fact in the same direction the overall market is pushing.

So that’s why we see ourselves as being neutral to positive..

Got it. Okay. Great. Thanks for the perspective. I also wanted to ask about the international business. Another quarter here where you haven't seen growth there. I know, Carl, you talked about new customer wins and customer additions there, but it doesn't seem like it is translating yet from a revenue perspective.

Can you just talk about where you are and where we might see them be in the curve in terms of revenue on international? Thanks..

So, that’s exactly the right question to ask George. And what you saw year-over-year was that international growth was the same pace as North American growth. Obviously we are investing to enable international growth to outpace North American growth. And we believe we are starting to see the early signs of that.

So that’s exactly what should happen in 2015. You are right. I have mentioned a lot of new customer wins and we are seeing those pins on the map actually accelerate, and it's much the same way we built the business in North America.

But it takes time, so my view is that you should see it accelerate in 2015, and we will keep -- we will observe it from there..

Thank you. Our next question comes from the line of Tim Quillin with Stephens Inc. Please proceed with your question..

Hi, good afternoon. I just want to make sure that I am looking at the right numbers in terms of international. But looks like it was a $11.8 million, down from $13.6 million a year ago and down from $13.8 million in Q3.

So what - if those are the correct numbers, what is the reason for the decline in that business?.

What I would say Tim, it's William here. This business internationally as well as domestic is a choppy business. And if you look at the full year at the broadband line, last year we called it at 13% for 2013, we are calling a 12% for 2014. The actual difference between those numbers is less than a single percentage point, it’s rounding.

So I won’t put too much emphasis on quarter-to-quarter movements, there..

Okay. And I guess just to follow on with that line of questioning, though.

Is the next six months -- I mean, when is the put up or shut up time, where you either see more growth internationally or you start to think about reducing your expenses overseas?.

So the answer to your question is, if I’m setting our expectations from an investment perspective I think I just did on the 2015 over 2014 we expect to outgrow North America.

If you are asking us about how we lead the business internally everyday, so we're looking at the funnel, putting pins on the map and the leading indicators of what will drive that growth every single day and I’m encouraged by the pins on the map and the rate of new customer acquisition.

Having said that those have to be converted into installations, happy customers, reorders, and more new customers, and so that’s what we are watching. So the direct answer to your question is year-over-year..

Okay. And then a couple questions on the guidance. The midpoint of the guidance represents 6% revenue growth. And just trying to follow the trail of breadcrumbs through 2014 and I think your commentary suggests some momentum, especially on these gigabit networks. And so it didn't seem like a difficult comparison to last year's first quarter.

So maybe is that -- would you -- why is the growth not higher and would you expect that to accelerate through the year? And then the second question is on the operating expenses, which I think at the midpoint are up something like 15%, while revenue is up 6%.

When will we see a little more leverage on OpEx?.

I’ll start with the answer and I’ll pass the mice over to Carl.

In terms of Q1 as we are careful to state when we went through our prepared remarks, Q1 is the hardest quarter forecast and so while we remain optimistic about the prospects overall for our space, when it comes into Q1, just simply you have got less visibility, but we have sufficient visibility, let's call it as a quarter that’s going to be higher than last year and to Carl’s points about the overall take up for example of the GigaCenter, we are seeing customers take it into their networks to evaluate it, et cetera, but it doesn’t translate immediately into our scale shipments of those units.

In terms of OpEx, ultimately obviously OpEx is a very important factor in the operating and leverage that point you’ve made. Revenue being the other factor we are very focused on which is like call was very careful to emphasis that where it growth in his remarks.

And an OpEx what we are doing as we are basically investing in resources they are going to help position us for that growth in the future. I don’t know Carl if you want to comments on either one of those topics..

Yes, so the way I think about it is the following; if you look at Q4 this year the Q4 last year we saw 19% revenue growth and 14% growth in OpEx.

With the seasonality of the business and what we are seeing is sort of an increasing return to that seasonality and that’s William commented in his remarks this is our first year working through our new process and see works going on. We are going to call Q1 at revenue level that looks to us to be.

Again committed to our achieving what we set out to do. You wouldn’t take OpEx down to get underneath that revenue number in first quarter as I am sure you know, but that’s not a good answer to your question, because in fact what we’ve done is sort of almost take OpEx straight across into Q1 from Q4.

And the reason we are doing that is because of the opportunities that we see in front of us to drive growth. And that’s what were focused on in 2015..

Okay thank you..

Thank you. Our next question come from the line of Doug Clark with Goldman Sachs. Please go ahead with your question..

Great thank you very much. Just a quick follow-up clarification to that OpEx question.

Is it fair to assume, then, that OpEx – this is a new run rate for OpEx at these levels, if you are continuing to invest for growth?.

I mean what I would say Doug as I am sure you aware I mean headcount is essentially personnel and related costs is essentially to larger single component across the board of our OpEx. And so inherently while that can’t be flexible resources you tend not to model if that way and I wouldn’t model any adjustments in that number going forward.

So in terms of it being a new threshold we are going to how some puts and takes, but overall as I say we’re just investing toward the growth that we see around the corner..

Okay. Thanks.

And then looking at the quarter itself, kind of breaking down your various customer constituencies between your largest 10%, Tier 2, and Tier 3s, where was the source of outperformance, if it wasn't deferred revenues? Or if deferred revenues came in roughly in line with expectations?.

Appreciate the question Doug as you know we would not answer it in that way. The way I would answer with actually be that there wasn’t a remarkable single source of growth. So I don’t mean the size that the question, but there is nothing that I would necessarily call out as disproportionately the driver of that growth..

Yes, I mean just to take a few what ifs, we wouldn't for example to call out CAF as being a source of growth, we wouldn’t call out any specific tier of a customer. It was genuinely broadly balanced..

Okay. Okay, that makes sense. And then I just want to understand again on the guidance and I think it was suggested in an earlier question. But this is well below kind of normal seasonality for the first quarter.

Is that in any way related to the wind down or the roll off of deferred revenues? Or if not, what, again, is driving the below seasonality in the first quarter?.

So we’ve actually seen seasonality in the first quarter I think low single-digits down all the way up to 20% down. So to our point it’s at the low end of what we’ve seen. It is actually not outside of the range of what we’ve seen in history. So William you may want to add to that..

No, I think you’ve answered it I mean there is a classic variability, we’ve gone back and look at our Q4 to Q1 numbers to discern a pattern apart from them to being, so we say flat to down, the variant can be as much as 20%, so that’s pretty much all I can answer..

And the other thing I would echo was William's comment in his prepared text around budgets and budgets being finalized this year where many of our customers that as we said here today have not finalized those numbers.

And what that means is not necessarily that they will or will not invest in this quarter, but calling it at this moment it’s not a good idea..

Okay. Thanks..

Thank you. Our next question comes from the line of Sanjiv Wadhwani with Stifel. Please go ahead with your question..

Carl, I had a question on CAF. I think in mid-December, both Century and Windstream argued that the new 10/1 requirement for CAF wasn't realistic. I think that is up from 4/1. And these new requirements would require longer deployment cycles.

I am just curious, has this requirement to raise required speeds for CAF to funding altered your pipeline or made any changes in terms of how your customers are looking at projects? Thanks..

Nothing material that I can see I certainly understand and remember the comments, but I think that is in essence between some of our customers and the government. From a demand perspective we see an unrelenting demand in essence that’s moving across the access infrastructure, and so we haven’t seen any changes in that dimension..

Yes, we see CAF and similar programs is being substitutive sources of capital rather than incremental sources of capital. We maybe proven wrong in the upside in which case we’ll see it that in rearview mirror. But we are not calling it going forward..

Got it. And just one quick follow-up.

Carl, I mean, I understand that in Q4, you pointed out there wasn't one big source of outperformance, but when I am looking at 2015, is CAF going to be an important portion of what is going to drive revenue growth year-on-year?.

No, I don’t believe so. I think it’s an important source of funding. And I specifically think it’s an important source of trying to make sure that we don't have, in essence, an Internet divide in rural and urban environments. That is a societal statement.

But as William stated, then I will hearken back to before William was here, we learned a lot from going through BBS, which, when William joined he is now on the tail end of. And what we learned was that what was viewed as potentially being either accelerative or incremental turned out to be potentially accelerative.

But really what it was a substitution for CapEx so look we monitor it. We watch where the projects are going and we will certainly go compete, to us it's competing as if we were competing for normal business, because it feels to us like its inside of the CapEx budgets not additive to it..

Got it. That's helpful, thanks..

You’re welcome..

Thank you. Our next question comes from the line of Amitabh Passi with UBS. Please go ahead with your question..

Hi, guys I was hoping you would clarify for me again. I apologize to go back to this point.

But I'm still unclear where exactly are you spending the incremental dollars, particularly in OpEx? Is this part of your international expansion initiative? And when do you expect to see the fruits of these investments? Is that a 2015 event or do you think it takes longer?.

In terms of where we stand, I think as I noted in my remarks, Amitabh, we’re spending it on systems and software product development resources as well as on international sales or sources.

I mean obviously there are other increases and decreases around the company, but if were to highlight areas which were having investment, as it were, in heads, that is where it would be. Carl, do you want to take that..

Yes, I would say sales in general. In past it's been driven more by international but as we go forward, we are going to look for opportunities to invest in sales to drive growth and product development. Those are the two areas that drive in essence to growth of the company..

And then the 100 service providers that are procuring your GigaCenters, I don't know if you are able to give us a sense of just unit volumes.

Are we talking thousands, tens of thousands? And again, do you expect to recognize revenues in 2015 or, again, given the certification cycles, this is probably a longer time frame before you recognize revs?.

Great question, Amitabh. So here is what I said in my prepared comments and let me tie it together to answer your question. In the first quarter of its availability we actually received orders from over a 100 customers.

And if I had my druthers to have lots of orders that were small from lots of customers versus a few customers giving us big orders, I would take the former any day of the week, because that speaks to market penetration and that’s exactly what we are seeing, as we are seeing broad market acceptance.

Now those orders to your point are typically going to be small pilot deployments as folks get used to what is the new technology and they will typically deploy it in their labs and in a few houses and in the neighborhood and then they will start to rollout the programs and the vast majority of those orders are other that ilk and the customer sets are broad and varied.

So there is no one timeline that any one customers is on, so some of them are on shorter approval cycles and some of them are on longer. To your question about rollout, clearly this is a 2015 event; this is not something that goes outside of the year as far as waiting for it.

This is happening and will happen relatively quickly, but you are going to see a cap over the course of the beginning part of this year..

And just one final one for me.

Assuming GigaCenter ramps for you this year and assuming international comes back a little more strongly, how should we think about the impact to your gross margin line?.

Well our gross margin line has in a statically predictable way gone up. There are some quarters worth down, some quarters worth up, but actually I’m encouraged by the progress on gross margins and William mentioned some inventory that was addressed in last year.

So if you put all that together, I don't see anything in our business model that does anything other than goes forward on gross margins at some rate. And are above -- to finish that out, are greater than 50 points of gross margin is the model that we anticipate we will achieve..

Okay. Thanks..

Thank you. Our next question comes from the line of Simon M. Leopold with Raymond James. Please go ahead with your question..

A couple of things.

First on the housekeeping side, are you going to make us wait for the Form 10-K for the 10% customer details for the year or can you give us that metric tonight?.

If you are asking me Simon and thanks for asking. We had one 10% customer and yes we will make you wait otherwise you wouldn’t – we will remove all of the surprise and you wouldn’t actually read the 10-K and its such a wonderful documents. So yes we will make you wait..

Okay. I will read it cover to cover. I swear. Anyway, I wanted to ask about the gross margin trends.

I have tended to think that there is a seasonality that we haven't observed, but I thought there would be seasonality where the December-March would have higher gross margins central office equipment and construction season, sort of June-September, would have lower gross margins on more outside plant, more equipment in the households.

Just wondering if that trend exists within your business and just gets masked by other things or how to think about trending a gross margin in terms of mix?.

I wish I could give you know insight into that as I said it somewhat noisy, but its quite predictable over time. I would have to I think about that Simon I mean the only way I can answer your question is to say you are going to see it continue to go up over time.

And I don’t think its driven by that the installation cycles so much as it frankly is delivered more by individual situations or particular orders, I go back and look at that I will think there is any trend like that that I can identify..

I have taken a step out it to see whether it is predictable seasonality in gross margin Simon and frankly, I can tell you from the inside we don’t see it, obviously with the migration from copper to fiber in broadband given the fact that we sell products are both ends of the pipe as it where in fiber environment versus one end in a copper environment.

That can help us overall in terms of revenue mix and over time as we get better at manufacturing stuff inherently the margins in those products will grow and then you have to balance that against new customer acquisition where inherently chassis sales of footprint oriented and we are going to have lower margins of this initial sales.

So there is – this get sort of in a sense polluted if you will or secured by all of the other activities that we’re engaged in and therefore, you really cannot discern a seasonality to the gross margin trend. Sorry a long-winded answer to your question, just want to make sure that you heard where we are coming from..

Yes. No, no. That’s very helpful. If you can't see it, I sure can't see it. So you have certainly got better data than I do. And then just the last thing, I wanted to go back to the 1 gig projects. You did give us some metrics on progress there.

If you could just repeat where you are this quarter versus last in terms of these 1 gig and whether you have reached a threshold or neared a threshold of those projects contributing 10% or more of revenue? Thank you..

So here is my answer. It continues to grow at a significant phase, as William mentioned in his prepared remarks actually President Obama visited Cedar Falls, Iowa and so one of those deployments. There are many that have been publicly announced and many that are not, but we actually don’t look at it internally in the way you are asking.

Because we don’t look at the speeds tied to the network. Clearly there is an increase and a continued growth in fiber-based access infrastructure and that’s something that we have continued to innovate in, but we don’t look at it as a percentage of revenue. William, I don’t know if you have any additional comments..

No, we don’t. I mean the only additional comment I would make would be to answer one element of your question which was regarding the number of announced gigabit deployments that were out there that had a Calix tag on them as it were.

In the prepared remarks I stated that there were over 60 in fact, I think the number for this past quarter was 65 and in Q3 I think the number was 43, but these are directionally helpful numbers, but the fact of the matter is as I did state there are many networks out there that have not been announced is our policy as you know is not to announce deployments unless our customers do..

Okay. Thank you very much..

Thanks, Simon..

Thank you. Our next question comes from the line of Paul Silverstein with Cowen. Please go ahead with your question..

Good evening. I have got several questions. I'm going to apologize to you and others on the call if any of this is replicative of previous questions. If they are, I can take them off line, but here goes. First off, I think I saw where you all had 35 new customers this quarter, which looked like it was a pickup from previous quarters.

Are any of those new customers meaningful by size, if not by the order?.

Yes, I mean some of that I mean they are of all different sizes. And so sure, some of them will become meaningful customers over time, but I would caution you on as they become new customers they typically aren’t significant drivers. They are becoming new customers, they are starting new deployments, they are testing, they are doing whatever..

Carl, I understand that, but maybe I should frame the question in a better manner.

In terms of putting aside the dollars to you today or even tomorrow, in terms of how you would bucket or classify those new carriers, those new customers, are any of these Tier 2s, if not Tier 1s? As opposed to Tier 3 and below?.

Yes, and so I have to be careful, because we have different terms for different things, right, so especially when you go globally..

Yes, international Tier 1s versus domestic Tier 1s et cetera, right..

Understood..

Right, so with Tier 1 is by definition in the largest service provider in its country, so sure some of them could be Tier 1s, but I think your question is the size in an absolute sense compared to other large service providers. So their service providers that run the gamut in these new accounts. And again that’s the best I can do for you..

But Carl, to the point in terms of the way you framed it, some of this - one or more of the service providers you would deem to be meaningful in terms of the size and thereby, the potential revenue benefit to the Company over time..

Oh sure, absolutely..

Okay. All right. Let me move on. Going back to the – well, in light of Adtran's commentary about Tier 2s and Tier 3s, as well as your own commentary tonight, I know historically, you have pointed out that Tier 2s and Tier 3s are not identical in terms of the drivers of their spend.

So that being said, as you look forward, if you could help provide some incremental insight in what you are seeing from those two particular classes of customers from 50,000 feet up?.

At the end of the day, I would be consistent with what we are seeing last quarter, the small customers clearly are looking forward and saying okay, we got to go address these opportunities. And we are going to invest, it doesn’t mean all of them. But if it’s clearly continuing to improve as an attitudinal statement.

Some of the Tier 2s same bucket, some of them you know are on strike, okay. So that runs the gamut as well.

Am I answering your question?.

Carl, does that represent a change from what you have seen previously or what you have said previously?.

It is in Tier 2s, I think we are seeing a little more favorable environment in the Tier 2s..

Notwithstanding that some are on strike, when you net it out, you are saying you see a more favorable environment..

Yes. And yes, it does represent a change..

Okay.

And I will ask, although I am sure I know what the response is, but with respect to your large Tier 1, where your friends in Huntsville have said they expect to stabilize or regain share, any comment that we can get from you in terms of your expectations?.

No, other than – I mean we are encouraged by the relationships that we have into business that we do with our largest customer. I don’t know that I would make any more comments..

When the Form 10-Ks come out, you can compare the numbers. The issue is whether they are going to comparable given the slightly different - well, not slightly, but different revenue mixes that we have so..

William, I understand that, but obviously, I am asking a forward-looking question as opposed to market share, which is backward-looking. But a couple more, if I may.

On gross margin, any insight you can share with us on how much of the gross margin benefit, how much of the upside was from the decrease in non-US revenue relative to US as a percentage of total?.

I wouldn’t frankly hang anything on that. I mean I understand why you are asking because you perceive it as being an area, we are acquiring new customers, so I get it, but I wouldn’t pin that at all.

As I think I noted earlier in the call the actual difference in percentage terms between the two numbers year-to-year is less than a single percentage point frankly, we are just rounding it and it ends up being this way. I wouldn’t read anything into that..

All right. And I have got two additional questions, if I may. I want to challenge you all. Simon being a much more nicer and more politically correct guy that I am, he let you guys off the hook, but I am not going to do that. On the 10%....

That’s called damning with faint praise, Paul..

On the 10% customers, seriously, you're really going to make us wait for the Form 10-K and not tell us who and how much? We are going to find out eventually.

You know the numbers now -- why not just give it to us?.

Didn’t I say that you wouldn’t read the 10-K then and its packed full of all sorts of things. By the way I’m not going to go speak to those numbers. So [indiscernible], but I think we stay on the course of – within our efforts that we’ve had and I think you just let it come in the Form 10-K and then well will go have the conversation.

So yes, seriously I appreciate the question..

And I’m trying to wear Carl down, Paul, but it takes time..

Good luck. On -- one other thing, if I may. Coming back to -- I think it was George's question on international. If my numbers are accurate, it looks like for the year -- and I appreciate it. I think we all understand there was lumpiness in your business in total on a regional basis. I get it.

But if I look at the numbers for the year, I am surprised that there was no growth. Your non-US revenue was flat. You have been in customer acquisition mode. There has been a clear positive trend in terms of new customers added.

And yet, notwithstanding that the numbers are small, you're non-US revenue is flat for the year, notwithstanding your characterization of it earlier. And I am just trying to understand.

I'm not trying to give you all a hard time, but I am trying to understand why we are not seeing the corresponding growth, smoothing out the lumpiness, putting aside quarterly volatility, and looking more importantly, looking forward, what is going to change going forward? Why haven't we seen more predictable growth, even taking into account the lumpiness? Again, your revenue is flat on a year-over-year basis for 2014 for non-US.

What is going on?.

So when you look at it from a micro perspective, the way I would try and set your expectations is we are seeing good new account activity. Those new accounts add revenue had a certain rate as you add them that builds up a deploy they get satisfy the order more that’s an underlying uplift on the revenue.

Your question is say that uplift’s happening sounds like good things, why aren’t we seeing it at the topline. So they’re might be some other things that might be going on from a system footprint product shift and things of that nature. So let me give you an example.

Many of our customers internationally our evaluating the E7 platform that might have had other platforms installed prior.

And we are seeing a lot of interest around the E7, but when you get into that mode it slow things down and potentially all you have to have this one or two orders move from quarter to another and on a lower revenue number it has a material impact on that number.

So the underlying build up we are seeing and it is encouraging us to continue to bang away at it because there is more and more countries were Calix now has customers..

Okay..

Which is why I said earlier, it is a 2015 over 2014 piece.

We grew at the same rate that’s not what we want to grow that we want to accelerate our international growth and there is the investment that we’re making, but there is some other pieces that relate to our strategic products going forward, customers evaluating them, all good news takes some time..

Okay. And one last question, if I may.

Any impact from foreign currency?.

Not material to us. Are there discussion around it you know are there the same articles that you read in the paper that we read et cetera sure, but right now its not a effecting what were doing. It could but its not currently..

All right. I appreciate it. Thanks, guys..

You’re welcome Paul..

Thank you. Our next question comes from the line of Christian Schwab with Craig-Hallum Capital Group. Please go ahead with your question..

Thanks for taking my questions. My question is about growth.

What growth rates, if you don't want to talk about this year, maybe you want to talk about a CAGR for the next three years that you are anticipating you are going to get at this current OpEx level?.

We’re on focused on quarter-in and quarter-out, Christian, I appreciate the question, but there is no way I would be able to answer that..

I guess I am confused, because we talked - a lot of questions about OpEx and what maybe you don't believe is elevated, but slightly higher than obviously a lot of us analysts on Wall Street assumed you would remain at. And you guys said you were investing for growth. You are investing for growth. You are investing for growth.

Systems, products, international sales.

I think it is probably a fair question to be answered what that growth rate that you are investing to do to hold you accountable for that OpEx?.

I appreciate the question. And what we are seeing and what we are trying to indicate is there are green shoots that are driving customer interest. But we have got a cycle to get through of pilots and approvals. Before we can start to speak to more accurately what we might see in the growth rate.

In just a quarter or two out, but we are not going to drive towards a longer-term set the model sort of number..

Okay. That's fair. Thought it was worth asking. Thanks..

You are welcome Christian. Thank you..

Thank you. [Operator Instructions] Our next question is a follow-up question from Tim Quillin with Stephens Inc. Please go ahead with your follow-up..

Hey, let me take another shot at that same question. But if you just annualized your first-quarter anticipated operating expenses, you end up with operating expenses for the year, 2015 that are up something like 9.5% versus 2014 OpEx.

And I am just wondering, just philosophically, should your investors believe that you will grow faster than your OpEx? In other words, should we be thinking that you are targeting faster than OpEx top-line growth?.

So long-term my answer is yes, but you have momentary times given markets that you are addressing where the answer is no and so we have a bit of a surge to go address the growth opportunities that we think are significant in front of us. But there is going to be a surge in that where the answer to your question would be no.

Long-term, the answer is absolutely yes..

Okay. And then it is a high quality problem, but cash is starting to build up on the balance sheet. What would be your preferred uses of cash? Thank you..

Tim, we do from time-to-time look at the traditional mechanisms or returning cash to shareholders, whether they be buybacks or dividends. And we weigh those against the advantages of having a stronger balance sheet as we go out and compete for new business for new customers in particular.

And as we look at the opportunities that are out there, we think that we’re better advantaged by retaining the cash and keeping it on our balance sheet. So that is essentially why we are retaining the cash and why we are quite pleased with having this large cash balance..

Thank you..

Thanks, Tim. End of Q&A.

Thank you, ladies and gentlemen, there are no further questions at this time. I’d now like to turn the floor back over to David Allen for closing remarks..

Thank you, operator.

Calix will be participating in three investor conferences in the first quarter, the Stifel 2015 Technology, Internet & Media Conference on February 10th in San Francisco, the Goldman Sachs Technology & Internet Conference 2015 on February 11th also in San Francisco, and finally the Stephens West Coast one-on-one conference on March 19 again in San Francisco.

Information about these investor events is posted on the events page of calix.com. We remain focused on executing against the opportunities ahead of us and we look forward to meeting with you at one of these upcoming events. Thank you for joining us today and goodbye for now..

Thank you, ladies and gentlemen. This now concludes our teleconference for today. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day..