Greetings, everyone and welcome to the Calix Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the brief prepared remarks. [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Nancy Fazioli, Vice President of Investor Relations. Please go ahead..

Thank you, Latanya, and good morning everyone. Thank you for joining our fourth quarter 2024 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 close, 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 2024 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 on this conference call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the fourth quarter 2024 letter to stockholders. Unless otherwise stated, all financial information referenced on this call will be non-GAAP. With that, Michael, please go ahead..

Thank you, Nancy. As I stated at ConneXions, the industry is at a crossroads. A broadband provider must decide if they remain a speed-based network operator, risking commoditization, or embrace differentiation through broadband experiences.

The fourth quarter delivered strong results as our business model was embraced by a growing number of broadband experience providers to meet the needs of the entire community, consumer, small business, education, MDU, government and the municipality. By doing so, the experience provider becomes a community brand that wins.

One such story is MGW SmartTown network in Virginia. MGW utilized their network to provide secure WiFi across multiple towns, transforming how residents work, play, learn and communicate. During Hurricane Helene, MGW's SmartTown network ensured seamless outdoor WiFi aiding in disaster recovery.

This highlighted MGW's commitment to their community and ensured their brand is synonymous with the communities they serve. Going way beyond speed and price.

Our mission remains aligned to help our customers win for the disruption ahead as they leverage our platform to simplify operations and their go-to-market, innovate with new experiences that differentiate their offerings and grow for their investors, members and the communities they serve.

The strength of our mission strategy and execution is evidenced in our results in the fourth quarter. Cory, over to you to cover the quarter..

Thank you, Michael. We saw strong demand during the fourth quarter and delivered revenue of $206 million, which is at the high end of our guidance range we provided in October and represents 2.6% sequentially quarterly revenue growth.

Demand for our Platform Cloud and managed services was strong once again and is best evidenced by growth in our RPOs, which grew 10% sequentially to $326 million and increased 34% year-over-year. Our current RPOs were $121 million, up 10% sequentially and up 27% year-over-year.

This strength in our platform cloud and managed services led to record non-GAAP gross margin of 55.5% in the fourth quarter. As we have said all year, our focus remains on landing new footprint. And in the fourth quarter, we added 18 new customers -- ESP customers. The overwhelming majority of these customer wins were competitive takeaways.

On the expansion front, 21 customers adopted our platform, 15 customers started with Calix Cloud and 32 customers deployed to managed service for the first time. These are all examples of customers partnering with Calix to cross the chasm and become broadband experience providers to win in their markets. Our balance sheet metrics remain pristine.

After purchasing $7 million of our common stock during the quarter, we ended the year with record cash and investments of $297 million. DSO remained an industry best at 36 days. Inventory turns were 3.1. And if you exclude component inventory, inventory turns were over 4. This compares to our target range of 3 to 4 turns.

Inventory deposits decreased by $4 million, bringing our inventory deposits to $63 million, down from a peak of $78 million a year ago. Coupled with operational discipline, management of our working capital remains a focus to enable consistent quarterly double-digit free cash flow. Moving to guidance.

For the first quarter of 2025, our revenue outlook is between $204 million and $210 million, which at the midpoint would represent a sequential increase in revenue. For the first quarter of 2025, non-GAAP gross margin is expected to remain flat to slightly up due to product mix as we continue to see a shift toward subscriber systems.

For 2025, we anticipate annual gross margin improvement will be at the lower end of our target financial model of 100 to 200 basis points. We expect clients' margins to be a headwind to overall margins due to a mix shift towards subscriber systems and an increase in revenue from medium and large customers as we land new footprint.

Regarding non-GAAP operating expense, we plan to continue to hold our 2025 operating expenses flat to slightly up compared with 2024 in terms of absolute dollars. In summary, our visibility continues to improve.

Our objective is to implement our strategy with discipline, helping our customers become broadband experience providers who deliver value to their subscribers and succeed in the marketplace, to continue to increase our footprint by landing new broadband service providers and to continuously expand our platform, cloud and managed services with each of our customers.

Michael, back to you..

Thank you, Cory. We're in the early stages of this once-in-a-generation opportunity as the broadband industry disrupts. The Calix broadband platform, cloud and managed services enable network operators to cross the chasm and become broadband experience providers that win in the communities they serve.

We are excited about the opportunity ahead in 2024, and we thank our team, our customers, our partners and shareholders for their support. Nancy, let's open the call for questions..

Thank you. Latanya, we're ready to start..

At this time, we will conduct a question-and-answer session. [Operator Instructions]. Our first question comes from Samik Chatterjee with JPMorgan. Please proceed..

Hey, good morning. Thanks for the question. This is Joe Cardoso on for Samik. I guess, maybe just for the first one. You had the large increase in RPO this quarter, which was pretty impressive following similar step-ups the last couple of quarters. I think in both from the prior quarters, you referenced large deals that were closed and call them now.

Just curious, was the increase this quarter a function of another one of these large deals coming through and you guys closing? And then how are you guys thinking about momentum continuing in 2025 on the RPO front just given the success you have had over these past couple of quarters in these large increases? And then I have a quick follow-up..

Sure. As we came through Q4, we had ConneXions, right? And while that was right before the previous earnings call, we came out of that event with a lot of momentum.

And the big part of that was the CEOs and General Managers who were there, which was the largest number we ever had, over 300, we had a lot of conversations with regards to how the industry is disrupting and how they need to change.

And there was this -- it was a significant shift in mindset that I noticed and that our selling teams noticed where the customers were in the past were saying, no, I'm going to continue with my old business model. They were saying, no, I need to embrace it. And that's what RPOs are.

RPOs are an example of customers who are embracing the transformation that they have to go through to launch new managed services, launch experiences. And as part of that, they drive incremental revenue, and we reflect that through our RPO growth.

And you really saw that in Cory's opening statement where he talked about how many net new customers, the number of customers, I think it was 32 to launch some managed service for the first time. So that momentum, we expect that to continue..

And Joe, I'd add one other comment on that, which is in the fourth quarter is typically our strongest quarter as people are aligning their contracts with their operating plans for the following year.

And so we normally see a strong -- and as our platforms all monetize on subscriber adds, as these customers cross the chasm and become broadband experience providers, we expect that momentum to continue going forward, albeit it may be at varied rates, but we expect it to continue to increase as we go forward..

Got it guys. Thanks for the color there. And then for my next question, last question, Obviously, there's this lingering narrative around the risks around for government programs or broadly coming under increased scrutiny that mean new administration coming in.

Maybe you can just share your thoughts on these concerns or updated thoughts on these concerns, the conversations that you're having with customers which is perhaps making you less concerned of the perceived risks from the investment community? Thanks for the questions guys..

Yes, there is a lot of noise and no news. So we run our business based upon facts and things changing. And therefore, as the facts evolve, we'll adjust our strategy accordingly. But at this point, we have no comment because it's just a lot of noise..

Understood. Thanks, Cory. I appreciate it. Sorry, thanks Michael. Appreciate it..

Thanks, Joe.

Next question, operator?.

Next question comes from Ryan Koontz with Needham & Company. You may proceed..

Great, thanks. Really nice RPO number. Maybe step back big picture here, given all the noise about beat you mentioned. And I think as a lot of the traditional infrastructure suppliers, you're nervous about that. But your primary business is really built on subscriber connections.

Can you maybe speak to how the company is focusing on targeting and monetizing the installed base of fiber-served homes and businesses? That would be great. Thank you..

Yes. Thanks, Ryan. Great question. As you'll notice in the letter, I don't believe the word beat is used once in the entire letter because the fundamentals of our business model is regardless of government funding, we're going to succeed.

And as you stated, the whole premise and growth model for Calix, which we've been investing in for now 13 years, $1.4 billion is to build a broadband platform that allows our customers to do what you just said, which is monetize the subscriber.

And that monetized subscriber can be on what is going to focus on is expanding our fiber network and connections to subscribers. But for us, it's around whether it's a Calix network or someone else's network, how do we help that service provider differentiate in what is becoming a commodity market and win the subscriber to monetize.

And then on top of that, how do you grow ARPU through incremental services that are very sticky, which is what my whole keynote at ConneXions was about where I personally was with a service provider.

They basically took my fiber connection when I signed out from $80 down to $54 and then three to five months in for free, when I really should have been monetized that between $100 and $150 a month.

So to your point, our growth model, what you saw in the RPOs and our focus is on how do we actually win, help our customers win more subscribers regardless of the network. And that's about -- that's why we use the words crossing the chasm.

So we're very comfortable right now that we've gone through the product adoption cycles of the early adopters and the innovators. We're now crossing that chasm into the early adopters and ConneXions was a great indicator and RPOs were a great indicator that more and more customers are crossing that chasm.

Cory, nothing to add?.

No, I think you covered it, Michael..

Great. And maybe we can double-click on the smaller customers. It looked like they were pretty weak relative to recent trends going back for a while here. How do you think about that particular market, the U.S.

Tier 3s kind of getting going again relative to their greenfield projects? Do you have much hope that that's going to pick up this year? Or did you think that you think about that as upside to numbers? Or how should investors think about that core market of yours? There's talk about ACAM and the CPF awards may be starting to help that segment.

Thanks..

Yes, Ryan, we see strength kind of across the board. So everything's kind of returned back to more normal ordering patterns. As we -- as you look at that chart, it's a little misleading in the sense that there were two large -- two medium-sized customers really driving the growth in the quarter.

One of those customers, if you were to look at the year ago period, was in the small category. And during the year last year became a medium. So it's a little bit of comparing apples to oranges if you're looking at that bar chart. So if you were to kind of put that guy back down in the smalls, it wouldn't look so dramatic as it does today..

Got it. And is that a U.S.

or international customer, can you tell me?.

International..

Perfect. All right. Great, thank you..

Yes, the other thing I would add in there is just that there's a seasonality element to that, right? It's kind of like when -- in previous quarters when they were like, oh, the largest down significantly is that an issue I would not read anything into the mix from the quarter at all to Cory's point, strong across both segments..

All right, thanks guys..

Thank you..

The next question comes from George Notter with Jefferies. Please proceed..

Hi guys. Thanks a lot. I guess I'd like to start by asking about -- if I look at your tax rate guidance for the year, and I heard what you said about adding or growing an international customer, it seems like there's a lot of strength in international, which would push that tax rate up.

I guess I'm inferring that, that customer or maybe other international customers are going to remain strong for a good chunk of the year.

But can you talk us through the dynamics that you're seeing there? And maybe anything you can tell us on these new customer wins or the ramp in existing customers internationally?.

Yes, George, on the international side, it's going to be fairly consistent. So this is one of those things where I think as we all seen in the past, those international costs of customers can be lumpy right? If you were to go back, there would be a quarter or two or it be up and then it goes back down.

I suspect you're going to see the same thing as we look at 2025. Overall, I don't think international will grow disproportionately to the United States. And so therefore, I think it will be relatively the same as you look at it for the whole year. So I think that's it. I wouldn't characterize that you're going to see an increase in international.

It's certainly not going to grow faster than what's going on in the United States.

Does that make sense? What was your second part of your question?.

Yes, I assume the tax rate was part of this.

Why is the tax rate higher, I guess is the question?.

It is where we were able to take advantage of some tax credits and those are running off a bit. And so it's just normalized a little bit higher -- so we've had some recapture of some prior tax credits that brought down the effective rate last year, and those have run out. So this is kind of more of our normalized rate moving forward..

Got you. Okay. And then I think each of the last two quarters, you talked about a large new customer coming on board. I think maybe more in the context of the cloud offerings. But was that part of the RPO strength this quarter? Or is that still to come in terms of the RPO improvement. Thanks..

Yes. You're right, when we were talking about the largest deal signed in the second quarter and then topped it in the third quarter, that was related to our cloud -- our Platform Cloud in managed services. In the fourth quarter, there was no such large contract..

We had no large contract of....

So there are lots of medium-sized contracts and it was broad-based across a number of -- many customers. Go back to our opening statements. We had the reason why Q4 was strong and the makeup of that was a very strong diversified business, which we're very proud of, which is 31 net new customers or 32, who launched their first managed service.

And when they launched that managed service, they sign up with us for a multiyear contract and with a ramp or however we end up doing it with them depending on the deal specifics, and that was a makeup of the fourth quarter strength.

So a good thing and what makes Cory and I very confident and happy about the quarter with RPOs is actually wasn't one deal. It was strength across the board..

Great, super. Thanks a lot. I appreciate it guys..

Thanks, George..

The next question comes from Christian Schwab with Craig-Hallum. Please proceed..

Hey, good morning guys. So in the letter, we again talked about this once in a generation disruption in the broadband industry, and you said you guys are excited about your multiyear outlook for the business.

Can you quantify what that multiyear outlook looks like, revenue and earnings potential over some type of multiyear time frame that you're running the business to? I don't know what you guys have talked about that recently..

No. We haven't provided any color out there, certainly over a multiyear period. If anything, I would fall back to our Target Financial Model, which says, hey, we can grow somewhere in that 10% to 15% range. At this point, we haven't provided anything over a longer term than that..

Okay. And then earlier this morning, very early, our time, can you did talk about the fact that they were shipping to some customers already in Q4.

I know there's only been a few states that have released money, but have you seen any benefits from those few states that already got their money?.

Yes. So in terms of what we see so far is, yes, we've received our first order out of Louisiana, albeit it's small. And in conversations with those customers, they're looking to do exactly what we thought they would do, which is continue to place orders in the first and second quarter.

They'll have their first customer turnups in the third and fourth quarters, and so you'd expect delivery in the third and fourth quarters. So it's like what we expected would happen, and we're seeing it come to fruition..

Fantastic. No other questions. Thanks guys..

Thank you..

The next question comes from Tim Savageaux with Northland Capital. Please proceed..

Good morning. Excuse me. This question kind of comes out of the comments around gross margins for the year or the improvement being at the low end of the range. And I guess, I want to kind of marry that up with revenue growth expectations.

Given that you're talking about more medium to large carrier appliance growth, could we see somewhat of an offset, I guess, to the low-end gross margin guide in terms of stronger-than-expected revenue growth given those dynamics? And as you mentioned, the 10% to 15% range, I mean, do you think the company could be in a position? I know you got a tough comp for Q1 here in terms of the year, but in a position to return to that double-digit growth range by the end of calendar '25 or at some point in the second half given those dynamics you mentioned of larger revenue -- more revenue from larger customers and lower gross margins? Thanks..

Yes, Tim. So in a sense, if you look at what we just did, in the fourth quarter, we grew 2.6% sequentially. If you annualize that, we're back to kind of a double-digit growth rate as it was. Now we're obviously not guiding for that in the first quarter. What we've said is that we will grow sequentially between 1% and 5% going forward.

And we said that we expect to be in the middle of the range as we exit 2025. So as long as we can get back to that, 2%, 3% growth rate sequentially, you're a double-digit grower. And so the answer to your question is, yes, we think that happens certainly by the second half of this year. And that's with no meaningful impact from be it in that number.

So I think we'll do that just with what customers we acquired over the last year and the growth of our existing customers. As it relates to margins, though....

May I take that one? So I want to talk about mix?.

So what we identified in the margin in the way at the low end of the range is because you're seeing a mix shift over to the subscriber, what are you calling out subscriber system side, right? And as an investor, that's the most important thing you need to pay attention to because you should be looking at that and saying that oh, look, Calix always said that the most important thing that we should be doing is winning new subscribers.

And we do that by our customers, winning subscribers, putting systems into home and business and then we monetize on top of it through incremental services. So when I look at the lower end of the range, our margins, think of this as us laying out significant incremental footprint that will monetize over a long period of time.

So we look at this as a significant positive through the year. It's not necessarily a short-term revenue bump, although Cory did identify some opportunities for that and how we're back into double-digit growth. But -- for us, this is core to who we are and how our leadership team is focused, expand the footprint, monetize on top of it.

And that's the biggest thing we're focused on. And that creates long-term value for shareholders from our perspective -- from our opinion..

Great. And if I could follow-up on the medium and large carrier front.

I guess, would you characterize that growth that you expect is coming from existing or new customers? And in particular, do you have any more visibility here as we worked through the end of last year and into this year on prospects for growth at Verizon, given what's going on over there? Thanks..

Verizon continues to -- Verizon has been a customer in for what, six years now. And so they've continued to invest in Calix technology in a pretty consistent rate, a bit lumpy, but I would expect not some significant shift from Verizon in the way that they're operating, and it's just going to continue on.

With regards to winning customers, we talked about how Tier 2 customers and the medium-sized basically launched smart business for the very first time and is a big win for us in second half last year.

And that represents for us a great example where that segment of the market who is generally slower to move than the smaller customers simply because of the fact that smaller customers can be more agile, but they're also starting to acknowledge that there is a significant challenge in the market with regards to broadband commoditization that they need to operate differently.

So do I think that those opportunities open up for us through the year? Yes. I lead from the front. I did a lot of miles last year meeting with customers. And I think part of that is conversing with them around the state of their business and what they're concerned about.

And I consistently hear that they look at this commoditization, if you look at the challenge of what you're hearing from the Tier 1 is something called convergence, which frankly convergence is a bit of a nonsense. It's really just a bundle, how do I build a broadband, mobile bundle and then discount.

And so they look at those challenges, and they're saying, how do I compete, and this represents significant opportunity for Calix to work with them to change their go-to-market and win through experiences..

Great, thanks very much. I will pass the line..

Appreciate your questions..

Scott Searle of ROTH Capital Partners. Please proceed..

Hey, good morning. Thanks for taking the questions. Nice job on the quarter. Mike, maybe to dive in a little bit deeper on the RPO front, significant growth on a sequential and year-over-year basis. You talked a little bit about some of the high-level reasons.

I wonder if you could dive down a layer in terms of what services you're seeing the adoption for, where is the real interest there? And are you guys thinking about different metrics in terms of how you report that to us beyond just RPOs, for example, the number of different services that customers are using? And how should we be thinking about growth in 2025 and beyond given that now you're well above 20% growth the last couple of quarters on a year-over-year basis?.

Sure. So from, it's difficult to say is the one product, like one go-to-market strategy that's growing, it really depends on the maturity of the customers. So our customer success organization has established a really good maturity of customer model.

So what we do is we look at the stages from network operator, which means I know how to dig trenches and run a network, all the way up to a full experience provider, which I would say, as an example, would be people who are up on stage. You heard Bright speed talking about how they're going down that model.

The -- you saw Tombigbee, as a cooperative who has done that very effectively and deployed all every technology that we have in every go-to-market model. And then you have this mix of everything in between. And so our entire success organization, which is unique in the market.

We have over 100 people that do this every single day who invest in our customers and really help them progress through that maturation model, unlike anyone else in the industry, that's what they do every single day, and it really just depends on where the customer is.

So is there one that we are more excited about than another? Absolutely not because it just comes down to having the network operator, as you heard from the 32 in this quarter, we did launch their first managed services, okay, I've launched from basic fiber and WiFi management to a managed service of some type.

And now I'm going to march up the stack. Do I launch SmartTown next? Do I launch small business next? It really just comes down to their leadership, what the stressors are in their market and what their brand strategy is.

And so there's nothing specific that I would give out like other than perhaps how -- as we go through our customer base, which is over 1,000 broadband providers, the only interesting thing in there is how many are one, how many are two services, how many are three, that's something that we can contemplate.

But there is not one specific thing other than there is a very clear journey map that we have that we share with customers on how to progress from network operator to high margin, very profitable crushing your competition experience provider..

Mike, maybe just to follow-up on that.

Is what is that gestation period in terms of taking that customer from the initial nimble of managed services to a more deep penetration? And is that time line shrinking now with the commercial success you're seeing with a lot of other BEP customers out there?.

Well, so that's -- it really depends on the customer. And frankly, I would say that it's not so much -- they look at their peer group and they would say, "Oh, that guy is doing it really well. And that woman is doing something really innovative. I want to be like them.

That's a traditional adoption curve." But what actually drives in my -- from my perspective, the time lines, frankly is how much pressure they're under. So the more competition they're in, in the market, when someone's kicking their butt, it's fascinating to watch. You'll see a CEO who's like, you know what, I'm good enough.

I'm going to keep building fiber. I'm going to -- I've got a basic managed service. I'm not doing outdoor WiFi. I'm not doing these other things, but I'm pretty happy. And all of a sudden, someone announces that they're going to overbuild their market.

And it's amazing to watch their demeanor change overnight, and they realize they're about to get their bucket. So from my perspective, it's really around how do we continue to educate and drive that sense of urgency because, frankly, the CEOs who wait until the crisis is there, should be fired. It's not simple.

And so we really need to educate them on the freight train that's coming and that they need to change. And I would say we're doing a good job of that.

That was kind of my takeaway from ConneXions, what I talked about on the last earnings call is that where the CEOs a year before, you definitely had just this small tranche of CEOs who were those innovators and early adopters, but they were kind of alone.

Everybody else was saying, they're still saying, golly, I sure wish that the market would stay the same way, and I didn't have to do this hard stuff, but I could just dig a ditch, put fiber in it, have a great managed WiFi service, do a great job of managing my network and rolling trucks and then that's good enough to succeed.

Well, this year, everybody was talking about the fact that, that isn't good enough. Yes, you've got to do that well, but that's the basics. Like that's -- to be in the market, you have to do those things. You really need to think about what you do. And this is, frankly, this is what we've been talking about for a real long time.

This is why I joined the company nine years ago and why we've made such massive investments to really make this happen and make it simple because this is the key thing is we do make it simple.

And I would go back to the Brightspeed press release and what we put on the earnings call -- sorry, on earnings call, we talked about the last earnings call, but we also put up a ConneXions.

You heard Tom Maguire from Brightspeed say, there -- if you look at Brightspeed, when Apollo acquired that asset and brought it from Lumen, Lumen's back office that they acquired is very old, decades old. And for them to do anything has significant IT costs, which frankly is the story of every large carrier.

I always joke back about my time at Bell Canada, if I use the word Amdocs, it cost me $1 million, let alone do a project, and it was two years to do an IT integration. And Brightspeed was able to launch a new service, a multi-gig service and add a new router in 30 days, which is unheard of. And so it's unheard of for everybody else.

That's the promise in what we do as a broadband platform. That's what we do every single day. So their ability to launch new services is really not an IT constraint. It's not a technology constraint. In fact, IT and the CTO team have nothing to do. They have some base testing to do because it just works because of the platform.

The real work, and this is where we have been investing in our customer success organization, Matt Collins, our COO; and John Durocher, our Head of Customer Success and myself, we spend all of our time teaching customers that actually the hard work is to become a great marketing and sales company. And this, frankly, is what the chasm is.

We have to go from, I have a really great service, I have -- I'm really good operationally to I am the best sales and marketing organization in the markets that I serve and I understand brand. And that's everything that we've done.

And I'm proud to say that I think we're doing a really good job of demonstrating to our customers how to build a great brand, as evidenced by the Digiday Award that we won up against companies like Sony PlayStation, that are the advertising that we provide our customers so that they can put their brand on it and do the advertising in their market is kind of best-in-class regardless of industry.

And we'll continue to lead there, and that's where our focus is. Sorry, long answer to a short question..

That's okay. There are no short questions. And just -- Mike, just to clarify, in terms of Tier 2 and Tier 3 customers outside of one customer graduating, it sounds like channel and customer inventory has normalized and there shouldn't be any big digestion periods as we're looking into 2025.

And real quick on the competitive takeaway front, it sounds like a lot of your new wins came from competitive takeaways. Anything to note there? Is it [indiscernible] on? Is it otherwise and anything of note? Thanks..

Yes, Scott. So here we are 91 days further along on this process and our visibility has improved. And it looks like the normalization is completed. We don't expect any anomalies associated with inventory at customer level like customers..

Yes. And then on the competitive takeaway, so what we identified is I believe that all but one of the net new customers are competitive takeaways, but I don't really think of it like a competitive takeaway. I actually think of it as the customer is deciding on a new business strategy. And it's not -- those are not about the network.

Those are -- the majority of them are actually customers saying, I have an existing network, and I need to change my go-to-market model, and I'm going to, for the first time, partner with Calix around what they're doing in their cloud, what they're doing in go-to-market strategy, behavioral analytics, which is Engagement Cloud.

How do I change my business model? So I think you could say that as competitive takeaway. Obviously, we're displacing someone else's Wi-Fi router. But it's really about -- every single one of those is a march down the path of helping customers cross the chasm and transform their business for the long-term.

And I think that also -- like I don't think, I know we're unique with regards to this. Everyone else is just selling a bunch of thumb boxes. And as one customer said to me, it's fascinating to me on the WiFi side that how many people still run their business based upon can I save $20 on a router.

And they're making like a seven-year decision and for that capital gain of like a couple of bucks, they're giving up all of the incremental revenue, all of the NPS gains and then the incremental opportunities such as SmartTown, which allows them to solidify their brand and support the community around education, [indiscernible] for ambulance, their subscriber roaming around the town and then future monetization opportunities.

And so -- and I think the more customers who are strategically minded versus short-term what's my CapEx, the more we can actually educate them on how to do that, that's the key thing. Again, I go back to my time at when I was running a business at a large telco, I actually had this conversation with my procurement team.

I'd like, go away, we'll never cut our way to growth. We're going to invest in the right choices, and we're going to grow ARPU. We're going to drop down churn, we're going to grow ARPU and then we're going to shift our brand and win these subs. And that's what we did.

When I was there, we went -- we had a 25% increase in ARPU over three years after five years of decline. And that's exactly the mindset that we bring to our customers and everything that we've done over the last decade and the investments that we're making..

Great, thanks so much..

Thanks..

Thank you. We have reached the end of our question-and-answer session. And I'd like to now turn the call back over to Nancy Fazioli for closing remarks..

Thank you, Latanya. Calix will participate in several investor events during the first quarter. Information about these events, including dates and times and publicly available webcast, will be posted on the Events and Presentations page of our Investor Relations section of calix.com.

Once again, thank you, everyone on this call and the webcast for your interest in Calix and for joining us. This concludes our conference call. Have a good day..

Thank you. This does concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day..