Greetings, and welcome to the Calix First Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Today on the call, we have Calix’s Chairman and CEO, Carl Russo; Chief Financial Officer, Cory Sindelar; and President and Chief Operating Officer, Michael Weening.

As a reminder, yesterday, after the close of the market, Calix released its letter to stockholders in an 8-K filing as well as on the Investor Relations section of the Calix website. This conference call will be available for audio replay in the Investor Relations section of the Calix website.

During this call Calix will refer to forward-looking statements, which include all statements the company will make about its future financial and operating performance, growth strategy and market outlook. And actual results may differ materially from those contemplated by these forward-looking statements.

Factors that could cause actual results and trends to differ materially are set forth in the first quarter 2022 letter to stockholders in their 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 on this conference call, Calix will discuss both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in the first quarter 2022 letter to stockholders. Unless otherwise stated, all numbers will reference on this call will be non-GAAP measures.

With that, let me turn it over to Calix’s Chairman and CEO, Carl Russo.

Carl?.

Thank you, Laura. Robust demand for our all platform offerings continued in the first quarter as the Calix team again, executed with excellence. This combination delivered a breakthrough in our business model, a 5% sequential increase in revenue from the fourth quarter of 2021.

We have put the seasonality associated with traditional systems businesses in our rear view mirror, and we are confident we will deliver sequential quarterly revenue growth from now on. This is the last significant piece of our evolution to delivering increased predictability resulting from our continued shift to our all platform model.

This shift continues to build as over 70% of our bookings in the quarter came from our software platforms and associated systems and services. This is up from 50%, just three quarters ago. Our platforms enable BSPs to offer broadband as an exceptional service rather than just a dumb pipe.

This makes our BSPs essential to their subscribers and thus very resistant to macroeconomic factors. Furthermore, it ensures demand for Calix platforms will remain robust. However, supply remains the key challenge and will continue to be for the foreseeable future.

That said we are making progress in our 14% year-over-year revenue in the first quarter has given us enough confidence to raise our 2022 full-year guidance from 5% to 10% growth to 10% to 15% growth. This is in line with the long term guidance we gave at our Investor Day at the end of February.

In essence, we are now pulling forward our entire guidance model into 2022, except for gross margin, which we believe will remain around 50% in 2022 and then grow from there. We have made modest and targeted pricing adjustments, which will roll into the revenue line over time.

While these will not change our gross margin guidance for 2022, they do reinforce our confidence in returning to our 100 basis points to 200 basis points of gross margin improvement in 2023 and beyond. In closing, the enormous secular opportunity we are capitalizing on growth every day.

And the Calix team is committed to executing with excellence to help our customers simplify their businesses, excite their subscribers and grow their value. With that let’s open the call for question.

Operator?.

Good morning. Thanks. Not something I normally ask about, but Cory, what’s the tax rate issue.

And is this just going to impact this year or is that going to be the new norm going forward this 26 to 28, you referenced in the letter as opposed to the low-20s you had previously referenced and that everybody else is paying?.

Good morning, Paul, this issue relates to a set of new rules that were created with the Tax Cuts and Jobs Act 2017 include a set of rules called BEAT, Base Erosion and Anti-Abuse Tax. This tax was intended to prevent U.S. companies from avoiding domestic tax liability by shifting profits out of the U.S.

And because of our growth rate, we now fall under these rules. Most large companies pay enough U.S. Federal income tax. That BEAT is not triggered. However, given that we’re using our NOLs, we have a BEAT tax obligation. So this BEAT tax is based on our planned annual foreign expense reimbursement and does not fluctuate with our profitability.

So the expectation is, we will be in a BEAT paying situation until our NOLs run out. And so we will be paying this tax for a couple of years. So, I would advise that the 26% to 28% rate will be with us for one or two years, three years..

So through and including at least 2024, maybe 2025?.

Not 2025. So 2022, 2023 and 2024, potentially 2024..

And it will – you’ll go back to the rate, everybody else’s point paying when you consume the NOLs?.

Correct..

All right. That’s actually all I have. Thank you..

Our next question comes from the line of Michael Genovese with Rosenberg Securities. You may proceed with your question..

Thanks a lot. My first question, can you just give us the remaining performance obligation number and then also, I think of that number as primarily reflecting the three year contracts for the cloud sales, but I think there’s probably some other stuff in there.

So could you just help us think, how much of it is cloud and how much of it is other stuff?.

Sure, sure. Mike the number four Q1 you will see it posted on our 10-Q filed end of day-to-day. It’s $138 million for the quarter, at the end of the quarter. It is the majority cloud, also included in cloud, you have the attending suites, there’s also support contracts and extended warranty in there. There is no hardware included in those numbers.

Those are all non-cancelable contracts..

Right. And then if my understanding that the operating systems licenses are one year. So they’re not in the RPOs.

Is that right?.

That is correct. The operating software is recognized as they sign contract and is not included, it’s been delivered once the contract signed. So you don’t all find that in the RPO..

Yes. And I just want to just confirm my numbers here way. I mean, that looks like it’s about up about 82% year-over-year. That’s – that is okay. Great. And then Cory, can you also, Cory and or Carl talk about the decision. I mean, it looks to me like you’re a little bit above.

I mean, it’s certainly at the high end, if not above the OpEx target model, just for 2Q, I know you’re going to be at the model for the full year, but can you talk about the decision to hire that many people right now, and what’s behind that?.

What’s behind it is, what’s in front of us, which is an enormous opportunity that we intend to fully take advantage of. And so as we get better and better at growing the team we have the ability as we grow revenue to invest fulsomely in our model.

And so very clearly you should take that as a very strong indicator of what I said at the start of my comment, which is we had robust bookings, and we see the opportunity in front of us to be unrelenting. So, we intend to take advantage of it, and not leave any of this opportunity, lying fallow in the field..

Great. And Carl last question for you, I guess, in the world, in the financial community there’s a debate about what exactly is going on in the macro and, what’s going to happen with the consumer? Then your customer subscribers are households, and set under the definition of consumer.

So, there’s basically a debate about how resilient broadband will be. And I’d love to get your view on that..

Great question, Mike, and obviously in reading your note, you sort of picked up on some of it. One of the things that everybody I think has concluded is that broadband is becoming a necessity.

I think you hear that all the time, and there’s sort of an assumption with that, that therefore dollars will be spent by subscribers and consumers and businesses on broadband. That is true. What we are focused on, however, is helping our customers deploy broadband as a service with all sorts of things that excite their subscribers.

Why is that important? Because broadband sold as a dumb pipe is a commodity. And while it’s a necessity, if a competitor comes along with a lower price or a higher speed, you’re going to lose that subscriber. When you’re doing what we’re doing and helping our customers build what they’re building.

We are actually ending up helping our customers have very high net promoter scores, very low churn rates. And they’re building a very, very different model, which is actually sort of recession proof. They don’t have competitive issues. And if our customers are recession proof, then actually we are recession proof.

And maybe, let me ask Michael here in the moment to give you an example of a customer success story or two around this. I want to go on the supply side for a moment as well.

So, I think not only is our demand recession proof, but on the supply side, if there’s a recession, I think it actually frees up in the broad sense, shipping and silicon and might actually benefit us. I’m sad to say with a recession, but I actually think we turn out to be better in a recession.

But Michael, if you have a one or two customer success stories, you can just share to help everybody understand how this different model that we’re helping our BSPs build?.

Sure. So on the networking side, we had a significant customer success story in that we had Blue Ridge cable, who has over 250,000 subscribers, a cable company who in the past has remained on to axis and ultimately cable companies have been unchallenged over the last 10 years versus DSLs and other.

And they’ve decided that actually they’re going to over their entire existing cable network, rebuild it with fiber as they see the significant opportunity ahead in the transition of the consumer to amplify what Carl stated, the recession proof of a broadband network. First is the not a dumb pipe. They’re a full service provider.

So for example, they’re looking to us to do things like going well beyond the fiber that they provide today and expanding out with services like ProtectIQ, which is our malware and security deployments. We had companies like Canadian Fiber who are now stopping over a 100 threats a month per home.

And then they’re also looking to us to expand out their offerings around very sticky services, like the announcement that we made this quarter with Arlo, where we started out with web cameras, and we’re now going to enable even the smallest broadband service provider to build out a full home security solution with Arlo, install it into your home, and then ensure that if someone else comes in and offers a lower pipe or a lower price, it doesn’t matter, because you’ve now got all these great services, including securing your home from a web camera, doorbells, locks, all those types of things with your service provider you trust on a daily basis, which means you are never changing.

So those elements are, are the reason why they’re transitioning and the successes that they’re seeing. The last success I’ll add is that at the same time, there’s significant broadband funding going into this market as you’re well aware.

And one of the areas that we’re very focused on with Calix Support Cloud, which is the largest deployed support cloud in North America by far, we’ve actually built full custom testing into it.

So that to meet those government obligations, all of them can actually simply without any additional integration due to the testing and provide feedback to the government to ensure that they’re meeting their obligations with the broadband funding that you’re getting.

And we’re now in exceeding 20 million tests a month, no one in the marketplace is even close to what we’re doing. In fact, we’re replacing competitors on a very rapid pace because their solutions are failing. And so you add all those things together.

We make it very simple for them to meet their performance obligations to the government and at the same time, delight their subscribers..

Thanks, Michael. Good stuff..

Our next question comes from the line of George Notter with Jeffries. You may proceed with your questions..

Hi guys. Thanks very much. Maybe just kind of continuing on the Calix Cloud discussion.

Can you guys give us a sense for how you’re doing in terms of subscriber or customer adoption on Operations Cloud, and then maybe some of the revenue suites, ProtectIQ, ExperienceIQ, like what are you seeing there in terms of adoption rate?.

So early days on Operations Cloud, as you know, but I guess the way I would gauge it is, where interest goes booking soon to follow, and it is ramping quickly, but obviously off of a zero pace.

So, I would tell you, we are robustly certain that Operations Cloud will be every bit the winner that Support Cloud has been as it grows rapidly through our customers. On the revenue edge side and the suites Michael, maybe you have an anecdote, but I’ll just give you the overarching.

You’re seeing that in the 82% year-over-year growth in RPOs, Michael, do you have an example you might want to just anecdotally add from a customer on that?.

Well, I’ll state that if you look through our press releases from Q1, we actually press release at 90% growth in the suites. Specifically around ProtectIQ. I’ve already identified that Canadian fibers now is stopping a 100 threats per month in their home.

There’s other companies in that press release like Centranet, who’s seen a 94% adoption of ProtectIQ. So, we’re seeing this ongoing massive ramp on the suite side, as the service providers are educated by our customer success team on how to be successful and change the lives of their subscriber.

What’s very interesting is that as we engage with cooperatives and other, not for profits make up a large percentage of our base, they are really embracing this because they see it as their obligation to improve the lives of their members.

And they see one of the best things you can do is help with security, because everybody with everything going on can never have enough security. I’ll just add one point on what said – on Carl said about Operations Cloud in that, Operations Cloud is our fastest ramping cloud ever.

It is also probably one of our most important because it solidifies in the marketplace that Calix platforms are unique. Nobody is doing what we’re doing in that no one is tying the subscriber platform to the access network and that outdoor network.

And so Operations Cloud is that, that glue between the two that allows those service providers to automate their entire operational process in a way that was never done before big companies can do that through massive teams of custom coders, we’re doing it by operation,– operationalizing and automating all those workflows through Operations Cloud.

So even the smaller service provider can be as efficient as Verizon and Verizon has gone on the record it over and over again, saying that they will reduce their OpEx by 80% a year with our platforms.

So, when you add the subscriber network on top of that, it’s a massive operational saving for our customers, which is why it’s ramping faster than any other cloud before..

Got it. Thank you..

Our next question comes from the line of Christian Schwab with Craig-Hallum. You may proceed with your question..

Hey, congratulations on a good quarter and improved revenue outlook. I guess my only question, is it relates to gross margins.

So it sounds like, just make sure I heard it correctly that you guys are raising prices modestly on certain products or certain platform products or platform offerings to help offset the significant component logistic costs that kind of impacted us this quarter. However, that improvement won’t be seen until 2023.

And that’s when we kind of return to a 100 basis points to 200 basis points of gross margin improvement for a couple of years.

Did I hear that correctly?.

Yes, I want, well sort of, let me see if I can make sure I’m being clear. The first thing is we’re bringing our model forward except for gross margin. At the same time, I also made the comment that we have made targeted specific pricing adjustments and they’re across different products in different places.

So not just platforms that could be legacy et cetera. With that in mind, we did not go make anything retroactive. So these are prices going forward on new quotes in business, not on backlog or something of that nature. And so you have to recognize that given lead times and other things, these will roll through bookings and then into revenue.

It’s just going to take time. They are not the reason we believe that we will return to 100 basis points to 200 basis points of margin growth in 2023. They just at one level make us more confident that we will achieve that. We think our own work going on plus the platform acceleration, which obviously is software.

It’s not subject to hardware cost is going to continue to drive our gross margin model. So in this year, as we said at the Investor Day 50 points is where we believe we’re going to be give or take going into 2023. We think we will get back to our 100 basis points to 200 basis point improvement.

Does that help Christian?.

Yes, that’s perfect.

And then just remind us, what do you think as the mix becomes over time, what is peak growth margin potential for Calix?.

Don’t know, because as we continue to layer into the model and you heard some of the things Michael spoke to, as you go up the platform and provide more and more value for our BSPs subscribers, those products typically have higher and higher margins. So, we know we will go above 60. We don’t know where it will go from there.

It also depends on from an abstraction standpoint, we are able to deliver software without hardware, depends on how the market shapes, if in the future, the market has stable white box solutions, where the customer can buy hardware from one place and deploy our software on top of it, that also changes the model.

So, I have no answer for you as far as where it peaks. We just know we want to get back to our 100 basis points, 200 basis points and keep going, and we can certainly get above 60 points of gross margin as a corporate average..

Great. No other questions. Thanks guys..

Thanks Christian..

Our next question comes from the line of Chris Howe with Barrington Research. You may proceed with your question..

Good morning, Carl. Good morning, Cory. Just leading off here on the topic of bookings you mentioned 70% of total bookings. As we think more about this number, you obviously have many different points of adoption within the customer, whether it’s your Support Cloud or other avenues that Michael highlighted.

Can you go into a little bit greater detail? There should be a little bit of organic acceleration of adoption as this matures further down the line, as well as work that’s being done by your Salesforce?.

So are you asking me, does the 70% as a percentage of next continue to grow or what’s underlying it’s more?.

It’s more just kind of getting behind the 70%, what portion of it is just the natural evolution of opportunities within your subscriber base? Just based on the maturation of the different points of adoption that you can offer to subscribers and to the BSPs?.

Right. So there there’s a continuous drumbeat of land and expand of our platforms that the only change that we’re experiencing is that it’s accelerating. Separate from that in our mix. As you may remember, Chris our legacy systems we stopped developing quite a while ago.

And as such as new technologies came along, we did not put them into our legacy systems. So as an example, our legacy systems you can do GPON from, by the way, our platform systems are AXOS systems, you can do GPON in, but XGS-PON, which is 10G PON was not developed into our legacy systems. It’s only in our systems that run our platforms.

And so as customers naturally want to move to 10G PON, that actually there’s a reason to come over to the platforms. The same is true with Wi-Fi 6 versus Wi-Fi 5. And so those two things are going to cause that notion of switch over in our bookings from our legacy systems to our new systems.

Now on top of all of that, there’s constant growth in our platforms, et cetera.

And you know if I can, Michael, can you speak to maybe your experiences and just this whole platform business and what it looks like and how it grows from here?.

Sure. Carl mentioned, I would say two elements from a hardware point of view that might get a customer saying, Hey, I’d like to change my mind and start thinking about, is this a pivot point for me.

But those open up the conversation, which allows us to then really dive into how do we transform that customer’s business because of the fact that we’ve actually built out unique platforms for the subscriber side and on the network side that provide different capabilities for our customers.

It allows us to completely change the conversation from how you radically transform your operational, operate your OpEx, which is a simplicity statement. And how do you radically change your go-to-market, which is the excite statement, changing your relationship with your subscriber.

So with those platforms, we then get into the conversation with the customer around the fastest capabilities, every single quarter, we have another release where we provide the level of capabilities and new processes and products that has never been seen in our industry before.

And then integrate all of those into go-to-markets that again, have never been seen in our industry before, because of the fact that it comes pre-integrated out of the box.

We go do everything from the behavioral analytics, the campaign creation, and then how do you launch it to drive an upsell? So all those things come together to change that conversation. So, when the customer is ready to have it, we’re at we’re ready to explain to them how they can change their business.

And then in behind it, you have the sales organization, but I would also say our very mature customer success organization also follows in behind and says, we’re not just going to give you this new technology, these new go-to-markets, these new solutions and leave you alone.

Know our customer success organization is going to lean in, give you best practices, help you train your call center, help you train your marketing organization, how help you train your operations organization, and then take those best practices and ensure that you get the most value out of what you’ve invested in as a BSP.

So all of those elements come together to position us uniquely and speed our growth at a pace that’s never been seen before. Whether you are an existing customer who is expanding with us, or as we’ve identified in our shareholder letter, the 33 new customers who have decided to select Calix and the platform for their future..

Thanks, Michael. That’s certainly very helpful. Thanks, Michael. And just one quick follow up. I know it’s a small percentage as we look at the entire business but international revenue it’s about 10% of revenue. You mentioned the European customer.

The timing didn’t quite work out this quarter, but broadly speaking, as we look at your target financial model, how should we look at the international opportunity versus the domestic opportunity anything there that we should pay particular attention to as we look forward?.

No, it’s consistent with what we’ve said, which is we continue to – own our international efforts, but our first priority is North America and taking advantage of the huge opportunity that’s in front of us. So it has not changed Chris..

Okay. All right. Thanks Carl..

Thank you..

Our next question comes from the line of Tim Savageau with Northland Capital. You may proceed with your question..

All right, good morning. Sorry about that. And congratulations on the results and outlook. I’m wanted to follow up on gross margins given a couple of factors, which is this increase in the all platform bookings presented to 7% from 50, I guess you said that was Q3 of 2021. So pretty dramatic as well as the price increases.

So, I know you’re not changing gross margin guidance for the year, but can you share with us, I imagine your estimate of the impact of supply issues may have increased.

So given those dynamics that we’ve seen about the changing software mix and the price increases X, can you give us an estimate of X supply issues, where would gross margins be either for the quarter, for the year?.

Yes. I mean that’s a really hard question Tim, because as you know, and we’ve discussed, we don’t know where things exit, but if this never happened, we’d be a whole heck of a lot higher as we talked about at the Investor Day. And so I don’t even know how to give you an estimate. Let me address your question slightly differently on the looking forward.

The supply is going to continue to be a challenge. There’s all sorts of indicators of there’s a few things that are improving supply. There are a few things that are getting worse in supply. Air freight is reducing. But the supply environment is so choppy as we look forward that it’s hard for us to put a stake in the ground on that side.

The flip side is as you heard Michael speak to it, the platform is compelling. And so as we try and put all that together along with some modest price increases that we’ll roll through, we’re comfortable with a 100 basis points to 200 basis points next year. This year is sort of it’s going to be a fight to keep that 50 in front of it.

So that’s the best answer I can give you..

Okay. Thanks very much..

Thanks, Tim..

Our next question comes from the line of Fahad Najam with Loop Capital. You may proceed with your question..

Good morning. So I’ll follow-up on Tim’s question. Can you kind of give us a breakdown of your gross margin headwinds? Component cost versus freight I think you mentioned that freight was somewhat getting better.

But can you kind of give us a sense one of these two factors? Is it both like 50/50 or one is more pronounced than the other?.

It varies by the day, but I think Cory has stated in the past that if you want to sort of look at them roughly, you could split them for the time being. Cory, I don’t know if you want to add a little bit of color to that, but there’s 50/50 as good as a proxy as any I can answer.

Cory?.

Yes. I would probably waited to material cost rising more so then the freight costs at this point in time because of the PPVs that we have to pay to go source those missing components. But so I waited a little bit more to that side..

Got it, appreciate it. And then I noticed of healthy increase in employee stock comp expense.

I know you added new head count in the quarter, but can you give us a sense on what are the inflationary pressures you guys are seeing in terms of hiring new talent? How should we be thinking about your OpEx rate going forward? Any color there?.

Well, let me answer the OpEx model and then I’ll let Cory add some color. As you know, our OpEx model, as we stated at the Investor Day is 17% to 19% on sales and marketing, 30% a product gross profit in R&D and now 8% on G&A. So we moved sales and marketing at one point and G&A down one point.

We will invest as fulsomely to that model as we can, because we believe that model yields the best return on this opportunity that’s in front of us.

As for color underneath that around different inflationary points, Cory, do you want spend a moment on that?.

Yes. I mean, if you’re looking at our OpEx investments, it’s continues to be largely personnel driven as we’re making those investments across the organization. And the G&A side, a little bit more on the systems.

I would say that we’ve been able to hire at a robust rate and we could plan to continue to invest wholesomely to the model to address the large opportunity that we see in front of us. So I think you should expect us to continue to be right at our OpEx model for the foreseeable future..

And one other piece that I would like to add, and I’m going to ask Michael to add some color on this is, in this day and age of you read all these stories about quit rates and the great resignation. In my opinion, when you have an inflationary environment, one of the things that happens is people job hop because they can get a better offer.

Obviously, one of the things that we’re focused on is the consistency of our team so that we can help our customers succeed and deliver these services to the subscriber. So culture’s been a big focus area. Michael, maybe you want to add a little bit of color on the work that goes on there and what we continue to focus on..

Yes. So from a culture point of view, we’re very focused on ensuring that we listen to our employees and build a type of culture that is constantly changing and adapting.

One of the things that we state over and over again is our philosophy with regards to culture is better, better and ever best, which is our culture is not meant to be retained, our culture is meant to grow and change, especially as we bring all these new people in, we continue to learn and grow. That approach to the marketplace has paid off.

First of all, Fortune 100, our Fortune added us to the top 50 midcap. And we received another four comparably awards this quarter, best company outlook, best engineering team, best global culture and best places to work in the Bay Area.

That last one being very prestigious and then if you look at that list, the people around us are the Apple’s and the Google’s of the world who also invest significantly to make it happen.

So those elements are very important because there isn’t a single new hire who doesn’t spend a lot of time researching the company because they want to make the right career decision. And we want them to make the right career decision also.

When I speak to new hires, they all, every single one of them to a person, no matter what level has read through the glass doors and really understood what the culture is and how we’re growing.

So with regards to our hiring that’s had a profound impact on our brand because our team members are making this a great place to work, which is really great..

Other questions, Fahad?.

Yes. I actually have one more question on the software recognition.

So if the end consumer adds a new service to the existing offering, does that – is that constructed as a new contract or is that, and thereby you recognize new software revenue? Can you just help us understand when customers are adding on new services? How are you Calix recognizing that revenue is that considered a new contract and thereby new software revenue growth recognition just kind of understanding how this [indiscernible] expand works?.

Sure, fine. Let me break that up between operating licenses, software licenses and our SaaS clouds. So a customer will buy our OSS a license basis. They may buy for certain number of subscribers. Let’s just say a 1,000 subscribers. We’ll recognize that license revenue up front.

Obviously, there’s a portion of that that’ll be related to maintenance that has a ongoing annuity associated with it. After they bring on more than a 1,000 subscribers onto the that cloud or that, that platform, they’ll buy more licenses and we’ll recognize some additional license software at that point in time.

On the clouds that’s recognized over time, again, there are frequent true ups depending on what it is that they’re buying could be either monthly or annually.

And so as more subscribers come onto the platform, we will do a true up, that’ll be reflected into an increasing growth rate in our clouds and continue to be recognized ratably over the service period in which they've committed.

Some customers will go out a little bit further on the curve, commit to more, get a better rate, and generally we'll sign a three-year agreement. And that's what you see. We're starting to reflect on our numbers as customers are ramping the adoption of the platforms within their networks..

Thanks, Cory. Great. Thank you. Appreciate the answers..

Thanks Fahad..

Our next question comes from the line of Ryan Koontz with Needham. You may proceed with your question..

Thanks for the question. Would you comment, Carl, on this, on your strength and your mid-size customer base and the opportunity there, we’re clearly seeing a broad shift from copper over to fiber in this segment it seems. Thanks..

Yes, it's not necessarily copper and fiber that's driving it, although that's part of it.

When you think midsize so if you look at our shareholder letter, which I think is what you're citing and you go to the small, medium and large mix, what you're starting to see in our mix, if you look over the last five quarters is small, kept growing and growing and growing in percentage.

And as we've just talked about a disruption always happens from small customers to large and the medium and the large kept getting squeezed down. Last quarter we started to see some of our smaller customers actually growing and becoming medium customers. So they went over to 250,000 subscriber line.

We're also seeing some other additional medium customers join us on our journey. And as you know, from the Brightspeed announcement that they made, we're starting now to see some larger customers understand the disruption.

And so, as we said over time, this will start to move where larger and larger customers start to see this disruption and want to come on board. It is very early days, in the case of Brightspeed, we're probably still six months away from when their acquisition of the spun off Lumen assets will be completed. But there's no question it's covered.

So does that help Ryan?.

Yes, it does. Thanks..

Okay.

Other questions Ryan?.

Covered them all..

Thanks. Laura, I don't know if there's any other questions in the queue..

[Operator Instructions] Our next question comes from the line of Paul Silverstein with Cowen. You may proceed with your question..

Thanks. Obviously I reconsidered.

Well, I think last time I asked you this question, you said it was in the high dozens, but the question being, what is the breadth of adoption of either one or multiple software suites? I recognize we're talking about less than a handful in total of how many customers are present and what's the take of rate in terms of new customers, not necessarily new Calix customers, but new customers in the sense of customers that have finally migrated to adopting one or more suites.

What is that running on a quarterly basis? Now, I assume it's accelerating all beat off a small base, but can you give us any sense in terms of the breadth of adoption at present and how it's progressing?.

Well, we've said before that, there are hundreds of customers now that are deploying one or another aspect of our cloud platforms. And you can assume that the intersection, i.e. of those sets where customers have deployed two or more clouds is growing.

And I would merely tell you that two or more clouds is over 100 customers, but you shouldn't assume anything more than that..

Well, Carl, but how about the software enabled by Access, whether it's ProtectIQ or one of the other couple of offers that you have?.

Yes. Back to Michael's comment earlier again, ramping and broadly deployed but again, think in terms of hundred not tens but not thousands..

And you're adding how many quarters roughly?.

I'll leave you with new customers at 33 and you know that we're expanding inside of our existing customers. So likely you're seeing many tens being added in a quarter..

All right. I suspect, I know answering this question the last, since President unless have asked you, but there's obviously a lot of investor concern about the ongoing lockdowns in China. Any thoughts you'd care to share with us in terms of….

Yes, I mean the lockdowns. Sure. Let me share a couple thoughts. I think there's a big challenge. As a virus gets more transmissible to try and ring fence it with quarantines. And the coronavirus has evolved into something that's more and more transmissible. And so you end up having to cast a wider net on an output.

It's going to be very challenging for China to maintain this quarantining approach and not shift. That said they – if you watch what's going on from a commerce standpoint, they are having lockdowns with a lot of commercial exceptions where they're allowing certain businesses to continue to run. So can it affect us? Sure. Is it an effect right now? No.

And we'll see where it goes from here. If I were to say, what do I think will happen? I think there'll be these minor interruptions that we will deal with, but I don't think it's going to turn into a major situation like we saw two years ago..

Is there some point four weeks from now, eight weeks from now where if this were to continue, it becomes meaningful and its impact on capital?.

Well, if it becomes meaningful, you won't see it because it probably won't become meaningful in the quarter. It'll create some gap out at some lead time. So stay tuned if it does, obviously we'll be speaking to it, but right now there's no effect that I would say we would talk to..

I've got one last question. I think you asked – you answered it earlier, but some clients have raised the question. In terms of going back to the resiliency of your customer spending or current buildouts fully committed even in an economic downturn..

Sure. Because obviously on the build-out side, that's not the revenue edge side, that's not our platform. That's just in essence to fiber and the network systems, what we call the Intelligent Access Edge systems. It's a smaller part of the business, but it's also the one that has the government funding underneath it.

So on the network side, you're not going to see that be terribly elastic based upon macroeconomic factors, but then when you go towards subscriber, it's actually the opposite. What we bring to our DSPs is their ability to now actually differentiate and change utterly their model from a commodity pipe provider to a Broadband-as-a-Service provider.

And that is compelling, especially in downtimes..

Right. Two last quick questions for me. Since there's nothing like quantification on your Michael's statements about culture, what is employee turnover? Has it changed? And I'm hoping Corey, you could give us also the current RPO number. I know you gave us the RPO number before, and I know we're going to see them in the queue..

Yes. So our turnover is very, very low and way below any industry’s comparables. So I would leave it at that.

On the RPO score, do you want cover the RPO number and the year-over-year comp list?.

Current RPO that you'll see at the end of the day is $138 million that compares to $75 million in the year ago period, 125 last quarter..

Okay..

Thanks Paul..

Thank you, that’s all. Thanks..

Laura, any other questions?.

We have reached the end of this question-and-answer session. I would like to turn this call back over to Mr. Sindelar for closing remarks..

Thank you, Laura. Calix leadership will participate in a number of investor meetings during the second quarter of 2022. Information about these events, including dates and times for public webcasts of management presentations will be posted on the Events and Presentations page of the Investor Relations sections of calix.com.

Once again, thank you to everyone on the call and on the webcast for your interest in Calix and for joining us today. This concludes our conference call. Goodbye for now..

You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day..