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spk01: Hello, and welcome to the Calix fourth quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Tom Vignes. Please go ahead.
spk06: Thank you, operator, and good morning, everyone. Thank you for joining our fourth quarter 2021 earnings call. Today on the call, we have Chairman and CEO Carl Rousseau, Chief Financial Officer Corey Fidelar, and President and Chief Operating Officer Michael Whedon. As a reminder, yesterday after the close of market, we released our letter to stockholders in an AK 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. Before I turn the call over to Carl for his brief opening remark, I want to remind you that in this call, we refer to forward-looking statements, which include all statements we make about our future financial and operating performance, growth strategy, and market outlook. And actual results may differ materially from those contemplated by those forward-looking statements. Factors that can cause actual results and trends to differ materially are set forth in our fourth quarter 2021 letter to stockholders and in our annual and quarterly reports filed with the SEC. CALEC assumes no obligation to update any forward-looking statements which speak only as of their respective date. Also on this conference call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP and non-GAAP measures is included in our letter to stockholders. Unless otherwise stated, on this call, we will reference non-GAAP measures. With that, let me turn it over to Carl. Carl? Thanks, Tom. The CALEC team executed with excellence in the fourth quarter. just as they have for the entire year. The supply chain team continued to enable our customers to meet their subscriber demand, and that resulted in Calix achieving our second consecutive year of greater than 25% revenue growth. With bookings for our all platform offerings again strong in the quarter, we see the historical seasonality of our business changing. This is clearly evident in our revenue guidance for the first quarter. For the first time in the company's history, we see revenue sequentially up from the fourth quarter. Even though we provide the associated systems, our customer interactions are driven by our platforms, which has dramatically smoothed our order flow. As a further indication, 2021 marked the first time in our history when we did not have a single 10% customer on an annual basis. We expect this trend to a more linear revenue model to continue. More importantly, even as the pandemic slows and economies around the world get back to work, demand for our platforms continues to steepen. It is clear we are perfectly positioned in front of an enormous secular opportunity, and we intend to continue to execute our strategy and capture it. One example of this execution was the addition of 26 new customers in the quarter which brought the total for the year to 131, marking a multi-year high. This speaks directly to our focus on helping innovative broadband service providers who have adopted our platforms to succeed. While supply constraints will persist at least through 2022, we have a high-performing team that is up for the challenge. Our focus strategy is also helping us attract talented people who are on the same mission as us, to help our customers simplify their businesses, excite their subscribers, and grow their value. We look forward to seeing you next month at our Investor Day on Wednesday, the 23rd of February. With that, let's open the call for questions. Operator?
spk01: Thank you. And I'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question today is coming from George Notter from Jefferies. Your line is now live.
spk03: Hi, guys. Thanks very much, and congrats on the good results here. I guess I wanted to ask about the supply chain environment. Obviously, everybody's talking about it these days. There are other companies in the group that are talking about significant decommits that they're seeing from component suppliers just in the last 30 days. I guess I'm wondering if you guys are seeing those issues from your side.
spk06: So, George, the answer is yes. I'm going to ask Corey to give you some details in color. But I want to just frame this for a moment to give you a sense for sort of this, you know, best of times, worst of times environment, because there is significant information out there from different folks as to what they're seeing. Supply is absolutely hard, no doubt about it. And in some cases, it's actually harder, to your point about decommits. On the other side of our equation, our broadband service provider customers are actually growing their subscribers and growing the services to those subscribers. So what we see is subscriber demand, which is what we focus on, is very robust. If you balance those two, given our model, we have obviously a focused product strategy. We also have a high value offering. So we're going to go get the supply. but you're going to pay for it. And I think if you look around the industry, you will see that this is going on in a number of industries. Those companies that have a strong value proposition and are on the upswing are actually figuring out how to outperform on the supply side, but they're also paying for the supply. So with that, Corey, maybe you want to give some details and help George understand what we're seeing. Yeah, George, you can see inside our letter that we commented that In the fourth quarter, we had some decommits from a supplier that had the effect of moving some purchase price variances out of the quarter into a future period. That gave us a little bit of benefit on our gross margin in the fourth quarter. And just more recently, as early as two weeks ago, we had another decommit that we're working through now. So, yes, we're seeing them, but we continue to work through those as we move forward.
spk03: Got it. Okay. And then could you talk then about, you know, if I go back, you guys made a decision, I think, to kind of keep a lid on pricing to your customers. Obviously, there's a lot of inflationary impacts here given the supply chain. Any thoughts to going back and increasing pricing with customers? And, you know, I understand you guys want to focus the customer conversation on the value proposition and um but you know if you look around you know these input costs you know keep going higher and at the same time you know it feels like everybody in the space is is raising price these days and we've even heard from some of your customers that they're raising broadband pricing but does it make sense for you guys to revisit the price discussion i want to know who's raising broadband prices sorry um george's answer is we obviously have those discussions
spk06: We have not raised prices, and there's no news to report today.
spk03: Got it. Okay. And then the last one I wanted to ask, the shareholder letter reiterates the 5% to 10% long-term sales growth guidance, but I didn't see any comment on 2022 sales growth. I think previously you guys talked about the high end of the 5% to 10% range. Any update on sales growth for this year? Thanks a lot.
spk06: So the answer is I think you'll see us continue to stay at the high end of that range, Corey. I don't know if you want to add any thoughts to that, but there's no change to the stance that we had last quarter because that would be driven by subscriber demand, and we continue to see a robust subscriber demand environment. Corey? Yeah, and I invite you to come to the analyst day in February, and maybe we'll provide an update on our long-term outlook.
spk03: Great. Okay. Thank you very much, guys.
spk06: That was a nice teaser to get George to Vegas.
spk01: Thank you. Our next question today is coming from Paul Silverstein from Cowan. Your line is now live.
spk04: It's actually good to hear you say the comment about Vegas. So that said, Carl, you came into last year and you put out the same 5% to 10% long-term model statement. And I think every quarter you increased the guidance for the year by 5% and ended up doing over 25% growth for the year. I recognize that your supply constrained along with everybody else. I appreciate that throughout the year you cautioned, reminded us about the particular challenge for Q4 presented by the extension of lead times to 52 weeks earlier last year. But if we looked at pure demand, and isolated out the impacts on your regular growth from supply chain constraints, what would growth look like?
spk06: Well, the challenge you have with what would growth look like goes back to how we are now managing the business, Paul, which is we're very focused on subscriber demand because we can see it, as opposed to the old model where you would respond to orders and ship product to warehouses, et cetera. I think what you're hearing us say is right now we're comfortable at the high end of that range from a subscriber demand standpoint, and now we're going to go try and figure out on the supply how we get there. If you're asking the question sort of going back in time, right, where you get to an old world model where you were shipping to warehouses or you had distributors, revenue would be higher because you'd be shipping more because there are people out there that are basically going to order ahead of what their subscriber demand is. So the direct answer to your question is, it's not clear to us that it would be higher than 10% right now. We're continuing to model those things out for 2022. So I would say I would stay at the high end of that range today. And I do appreciate going back in time as we raised it. But actually, that really had a lot more to do on the supply side. Now, just to add to that, you heard Corey talk about decommits. Decommits have all sorts of knock-on effects. It's actually a harder thing to deal with, as you might imagine, than just somebody saying we're stretching out lead times or you have to pay more. Now you've got a supply that's planned, and one vendor decommits. And as you know, if one vendor decommits, the other 40 vendors that met their commitments are as good as not having met them because you need that component on the system line card or whatever to actually make it into a SKU. That has all sorts of cascading effects that make this much more challenging. So I don't mean to pile on to the supply chain piece that George asked earlier and sort of what's implicit in your question, but those decommits are quite corrosive.
spk04: Carl, those decommits, in F5's case, They indicated that decommits increased from high 200s to 400. It was a 40% increase. You and Corey just referenced two decommits. Can you give us a sense of how that compares to the last 90 days, the previous 90 days? Were those two up from zero, or how did they compare to previous days?
spk06: Yeah, I would say... interesting aspect here you might remember a year ago we had the push outs to 52 weekly times and we're now hitting that window of when those 52 week lead times are showing up and so we're just at that envelope of where we placed our orders it would be interesting to see how our suppliers actually meet those orders that we've given them or not but to answer your question directly there's been an increase in deke events uh and so what does that mean that means you're going out and having to find the parts on a spot market and you are you know paying up for them if you can get them so you know all it does is certainly create more challenges uh for us and um and for me it's really more about what are we going to see in the next 91 days uh because we did our bit we put the orders in now let's see if a supply the component suppliers will actually meet their their deliveries
spk04: Corey, is it just a matter of the timing, or is it also that the decommits you're seeing are reduction in quantities? I'm not sure I follow that question, Paul. Well, if I go back to F5, they reference the fact that the decommits they're seeing both are suppliers not delivering in the timeframe that they're committed to, suppliers not delivering the same quantities they're committed to, and in some cases, both? Yeah, it's all of the above. All right, you're saying the same thing. But, yeah, so, so, I want to, go ahead.
spk06: So, say, for example, the fourth quarter, if they push out, so it's a timing issue, right? So, we didn't get the parts in the time frame that they said they would deliver. It's not that we aren't getting the parts. And in some cases, we're not getting the parts as well.
spk04: Go ahead, Paul. On the margin front, I assume all of the adverse impact is supply chain driven. You referenced in your stockholder letter that the model continues to shift to software. I think I saw a reference that it continues to shift to software, but that's being washed out and then some by the significant increase in costs. Corey, is it possible to say what gross margin would be at? Would it be higher than the 53.8 you got to in Q1, but for supply chain constraints?
spk06: Yeah. So, Paul, building on where we were, Last quarter, you know, last quarter we gave you the guy, you know, it was between 2% and 5%. Clearly, that stepped down a whole basis point, a whole percentage point of this quarter. You got to throw that in the mix. So I'd give you a range of 3% to 6% for this quarter, the fourth quarter.
spk04: 3% to 6% point impact. Mm-hmm. Got it. One last question for me. I apologize for the sudden cough. You know, actually, I'll pass it on. I'll figure it out. Okay.
spk01: Thanks, Paul. Thank you. Our next call is coming from Michael Genovese from West Park Capital. Your line is now live.
spk06: Thanks a lot. I guess sticking with the same topic, you know, and looking at it another way. So in 2021, the supply chain was – was not a piece of birthday cake. And you guys expanded margins by 170 basis points year over year. So my question is, can you just compare and contrast what you expect the supply chain to be like in 2022 versus 2021? What's the difference in 2022 versus 21 from your perspective? And in the context of being able to expand at the high end of your one to two points of guidance per year in 2021, How should we think about 2022? So let me frame this, and then I'm going to hand it over to Corey to take you through how costs move through the P&L and the balance sheet. The environment is getting more difficult, as we're indicating, but to your point, the environment in 2021 wasn't easy. The challenge you have in understanding the internals of what we do and how the company works there are significant delays in between price, committing to price, worrying for price, getting a bonus. I mean, it's a big, long delta T between cause and effect. So, Corey, all yours. Let's just start off with the lead time. So, you know, we're placing orders today that we're going to receive next year. Those are going to be at the higher prices today. And so even, let's say, if all the supply chain normalized by the middle of the year, And it was back to equilibrium. The costs we've already committed to today are going to run through our P&L well into 2023. Just now, we're starting to see some of the price increases that were implemented in Q3. So when the component guys increased their price in Q3, it doesn't immediately show up in the fourth quarter. It's got to go get built. It's got to go through inventory. It's got to get then sold. And that just takes a significant delay. So what I think you're going to see is you're going to see the expedite fees and the surcharges persist throughout 2022 and well into 2023, even if we got normalization by the summer. And that's a did statement, not a when statement, right? Right. And you see that in the guidance for Q1, right? So, Mike, let me just tie out the concepts. that I actually started with when Paul asked the question. The supply chain is absolutely harder, but the decommiss, et cetera. Our demand is robust, so we're going to go get what we need to make sure we're meeting that subscriber demand. And so you see the linearity of our model coming through because it's being shaped by our software platforms. and by our focus on subscriber demand. So Q1 went up, or it was flat up from Q4. At the same time, we're bracketing margins in the 49 to 51 point range. So that's the best way I can give you numerically the answer to your question as well. That all makes sense. So you answered to Paul that, or Corey did, that in the fourth quarter there was 300 to 600 basis points of gross margin impact. Would you estimate that, as you can tell right now, to be consistent in the first quarter or more or less? Well, more or less the same. Okay. Okay.
spk02: That's good.
spk06: And then my other question, I mean, given everything that Carl just described with the subscribers and the business, that makes sense, but we're also in a very, very strong hardware cycle. We have been in a very strong hardware cycle. The stimulus money is really going to start to flow here. I guess my question is how long do you think this hardware cycle where there's going to be a big chunk of of hardware in the revenue mix going out is going to last. And do you think that we're going to get to a point beyond that where software is a much, much bigger piece in the mix? And then can you imagine when we get there, will you tell us a subscriber number? Those are all my questions. Thank you. Well, so let me work backwards from the last one. Probably not. I'm going to answer your question, but I actually want to take a moment to give you a sense for the value that we're seeing with our customers. And Michael just came back from the sales kickoff. And, Michael, maybe you can give an example or two of the impact we're having with our customers on the value side, and then I'm going to answer the rest of your question. Yeah, so when a piece of hardware goes into a subscriber's home, That represents significant monetization opportunity that has never been realized in the past in our industry. It went in, the service provider then just monetized simply the broadband experience or the pipe. Now we're in this opportunity where they can identify incremental ARPA opportunities through incremental services. And so to your point, there's this long life cycle on what goes on in the home that we are in the process of realizing by enabling the broadband service provider to upsell. And one example would be a customer of ours at BSG used the marketing product to understand their customer. And then they targeted their campaigns at a group of customers, had a significant email open rate. And generally email open rates are 1%, 2%, 3%. You're happy with it. Their email open rate was 32%. They got their first orders. within 10 minutes of the emails hitting, and 90% of that targeted list not only upgraded and added incremental services, which provide ARPU per month in the form of Protect IQ, which is virus protection, and Experience IQ, which is problem controls, they also identified that they needed more bandwidth, and they were able to double their ARPU on that list. So the ability to go through that and identify the customer, understand their needs, and then drive a massive upsell is something that we're enabling through the marketing cloud and the revenue edge. Another example would be a customer who has implemented, and this is more on the cost side, has implemented us from end to end. So they use our intelligent access edge. And they use the revenue edge. So they do everything with us on the edge of the data center. And they're running our revenue edge inside the home And thanks to that, they've seen a massive drop in their call handle times in their call centers, down by 30 seconds, which is significant. But more importantly, they've had a massive jump in close rates on first call, up by 60%. And that just goes straight to the bottom line in the form of operational profitability. And then as they tested with those customers, they saw a 15% increase in NPS. So that customer is now in the mid-70s for NPS in an industry that historically has had an NPS of minus six. So by delighting your subscribers, being operationally efficient, and identifying the tough sell opportunities, there's a huge monetization opportunity ahead. And so I'm going to cover your question, but, Corey, that manifests itself One of the things we have talked about, not subscribers, but I don't remember, RPOs sequentially were up something. What were RPOs up? They were up 20%, Q3, Q4. So you now have RPOs growing 20% on the quarter where we grew a couple of points sequentially on revenue. So now go back and tie that to your hardware question. There's no question that over the next bunch of years, There is an uplift in infrastructure bill being driven by the repurposed ARPA funds, which we've seen first, the RDOF funds, which we're seeing second, and then the broadband portion of the infrastructure bill, which we'll see third. These dollars have spread out over the years, and we're just starting to see them now. So you're correct. We are going to see, quote-unquote, an infrastructure build or a hardware upgrade cycle. Okay. But I wanted to give you a sense for the power of the model that's already going on as we work with our subscribers.
spk03: Thanks a lot. It was very helpful.
spk06: Thanks, Mike.
spk01: Thank you. As a reminder, that's star one to be placed into question Q. Our next question today is coming from Tim Savagell from Northam Capital. Your line is now live.
spk02: Good morning. Good morning, Seth. Good morning. Congrats on the solid results. I look forward to seeing you in Vegas. Kind of wanted to follow on that last discussion a little bit. And, you know, what we've seen, I guess, to date is a number of compelling anecdotes around the impact of Revenue Edge in particular, although not necessarily a lot of, you know, quantification of those, you know, aggregate impacts. So you made a couple of interesting points. releases so far this year, talking about the network side, AXOS and 225 service providers doing 10 gig PON. I imagine there are others who are not yet up to 10 gig, and that's not the entire universe of AXOS. That's kind of question number one. But I guess what I'm trying to do is relate that type of thinking on the network side that you provided us earlier in the year onto the edge side, and if you can give us any more visibility in terms of the number of carriers deploying that or how material that business is getting for you.
spk06: So, Jim, let me make sure I understand. So you're talking about the intelligent access, what we call the intelligent access, that is the network side of what's going on in upgrades?
spk02: Basically, I'm trying to relate what you talked about in Intelligent Edge to revenue, to this more subscriber-oriented stuff. You talked about both in some of these releases, right? The $225,000 XGS pawn I take to be more network-focused, along with sort of anecdotal indications of what's happening on the subscriber-focused network edge. What I'm looking for is more quantification. I'm looking for a $225,000 equivalent. For the subscriber side, just to cut through.
spk06: Right. Okay. So I appreciate your asking. Obviously, if we were going to give it, we would have given it out. Let me give you at least some directional pointers. We've talked before about having hundreds of folks on our cloud. And so you can assume that the number on the cloud and the revenue edge is larger. Beyond that, we have not quantified that in the way we quantified the XGS piece. And you might ask, well, why did you do that? And what's driving us to give that number out actually is to help our customers understand that a lot of our customers are sort of still in the GPON world and are wondering if the XGS world is safe. Meanwhile, we're building 40-gig PON with NG PON 2 with Verizon. So that was intended to help everybody understand that this is a maturing market and get this safe to go. That was what we were doing there. But the direct answer to your question is there are more folks on the revenue edge in one form or another than there are on XGS.
spk02: Great. Outstanding. To follow up, this new model is giving you kind of a – differentiated view on demand. So I know you're not talking about it in kind of the traditional fashion, but is it safe to say, to the extent the supply situation got more difficult in Q4, did you see, you know, did the demand situation improve? Did you see an acceleration of the metrics that you look at for either Q4 or 22, or can you describe the kind of delta in the demand situation throughout the quarter?
spk06: Good question, Tim. And the answer is it continues to sort of curve up. And so part of what you just heard Corey say was sequentially, you know, RPOs are up 20% and revenues are just sitting here in my head. Our overall revenue line was up three and a half, 4% sequentially. And so we're definitely seeing greater growth as we continue to understand the value of what we're doing and what you heard Michael speak to. So, I mean, I dare say coming off the sales kickoff, there's a great deal of excitement on the GR platforms and helping our customers succeed, and that is absolutely driven by the software.
spk02: Great. Thanks a lot.
spk06: See you in Vegas.
spk01: Thank you. Our next question is coming from Chris Howe from Darrington. Your line is now live.
spk04: Good morning, everyone. Good morning.
spk03: I'll go with another question here on the supply chain. Carl, you've explained it in great detail already. That's okay.
spk04: But you mentioned the decommits. There was one that just happened two weeks ago.
spk05: First, can you comment on this recent decommit?
spk04: How profitable was that opportunity and how that may impact gross margin in the quarter? And following up on that, as we look at gross margin as a whole, it seems the most difficult part are these decommits. And perhaps they will have gross margin
spk05: have more variability from quarter to quarter. But excluding that, the environment remains pressured. But are there certain factors in this environment that you're having a better handle on? And it's just these decommits that we have to add an extra layer of caution.
spk06: So a lot of questions there, Chris, and I appreciate the drill down. But I don't want you to get lost in secondary and tertiary data points as you're modeling. I think it's best to keep it at a high level, which is actually to go back to how I framed it with George. There's no question the supply is getting harder and it manifests itself in different ways. There's also no question that we have robust subscriber demand that manifests itself through our broadband service providers that you heard Michael speak to. And there's no question that we're going to pay to go get the supply to make sure we meet that demand. And I think as a general statement, as I watch what's going on in the industry writ large, there are folks that have a high value proposition that are figuring out how to make their revenue numbers healthy and they're under pressure on margins. And then there are folks that are not. And to me, it correlates very much to that value proposition. And so we have very good visibility into our customers and subscriber demand. And what you're going to see is this constant surprise that Corey's talking about, and voila, a new surprise. So the environment is what it is. And I'm not sure I would want to break it down below that, because it's almost impossible to correlate in the way you're asking. And I'm not sure even if we did, it would be meaningful other than actually misleading. So I'll give you another question, obviously. There's no way for me to go tap on that one.
spk05: Okay.
spk04: That's helpful, and I understand that.
spk05: My next question, I just wanted to follow up on the sales and marketing side just to gain some further context beyond the percent of revenue that we expect it to be in this upcoming quarter. Can you kind of describe what you're seeing in the labor market?
spk06: Could we see the labor market become more challenged, or are you continuing to see a healthy supply of resumes for incoming employees?
spk02: And also, how this, how your increase in headcounts is tracking to your internal expectations?
spk06: David Lamont Wilson So, the answer to your question is, I think it's a very challenging labor market. And I think we are doing well, but Michael, why don't you add comments to that, please? Yeah, so we were able to win in Q4. We won another basketball award, which we're really proud of, around the culture that we have. So in the end, when we come to this challenging labor market, people are coming to the end of the year, they get the bonuses, and they're trying to decide, what do I do with my career? And when a company like ourselves has differentiated in the marketplace by building out a great culture, which starts with our employees, the team members that we have today. It attracts other people. And so we're really focused on continuing to expand our culture and make sure that we bring in these diverse people with all kinds of different opinions. And as we've identified over and over again, our strategy is better, better, never best, which is constantly taking these new ideas and improving the environment. gets more people. So yes, it's hard, but at the same time, a great culture attracts great people. And they help us get better, and we continue to go. The second part is that when it comes to what job that you want to do, it has been shown study after study that the people who are purpose-driven are the ones who are happiest. And one of the things that's really clear, again, inside the Cowlitz culture is we have a very, very clear purpose. That is exciting. We are helping even the smallest broadband service provider go and operationalize their business and simplify it, delivering the lowest offering possible. They're exciting their subscribers and they are transforming their communities. And so if you're an employee, that's incredibly exciting, and they can see the results on a daily basis as evidenced by our press releases and the customer success stories. A couple examples on the simplified side is we had a customer this quarter who shared with us that they're able to slash the alarms in their network, which can be very annoying and troublesome, 98%, which led to a 40% reduction in truck rolls, which again goes straight to their profitability that allows them to invest in their community in the form of greater broadband services. We had another customer that used everything we're doing on the revenue edge to massively change their go-to-market strategy so that they had a 99% take rate on their premium Wi-Fi service, which led to a 400% increase in margin. And when you increase the broadband service provider's margin by 400%, you pay, again, have incremental cash that they can reinvest in their community in the form of new services and new capabilities to delight their subscribers. And that mission, you know, and the results that we're driving attracts great employees here and teammates who are helping make it happen. Thanks, Michael.
spk04: Thanks for taking my questions. Appreciate it.
spk01: Good stuff. Thank you. Our next question is coming from Ryan Coons from Needham & Company. Your line is now live.
spk05: good morning uh you've got some great results and an outlook here um with regards to the platform transition um it's some impressive numbers there and i certainly understand the drivers for the transition for customers but can you give us maybe some color or quantitative range and where we are in that transition now and you know what the process looks like to move customers over from the legacy model to platforms
spk06: Yeah, so, Brian, actually, you are asking a question that I will give you a numerical answer for. So, as you know, back in Q2, we talked about the 50-50 bookings crossover point where our new, what we internally call the blue ocean business, but our new all-platform business was greater than 50% of bookings. Actually, in Q4, it crossed over on revenues. So on a revenue basis now, more than 50% of the revenue is on our go-forward platform business. Does that help?
spk05: Sure does. Thank you. And on the pricing front, as you look at your markets, I know you're very focused on the task at hand, but if you look a little broader, are you starting to see any relief in pricing pressure? I know we've had a couple of your – peers in networking comment that the pricing environment's improving in markets where Huawei has moved out. Are you seeing any impact at all in your pricing side?
spk06: Well, great question. You know, we're not price competitors in that way. We're aligned with our customers in value creation, as you heard Michael speak to. Having said that, we are aware, I think... that we're the only company that has not raised prices in this space and in any of the adjacent spaces. We're aware of that. But from a pricing pressure standpoint, as you know, the geopolitical replacement opportunity is not something that we're chasing because it is a price-based buyer typically. So not in the way you're – not in the way – Sure.
spk05: Okay. And just a quick follow-up on the Verizon front, any updates there in terms of where you are in kind of penetrating the accounts geographically or different applications with their energy pontoon?
spk06: They're building their network infrastructure. They continue to make announcements on their intent and percentage coverage in the U.S., and that's all built on their, you know, one-fiber intelligent edge network. So that would be the best.
spk00: And as you know, from a value proposition standpoint, we continue to drive high value, but not necessarily the 10% customer piece.
spk06: But they're doing just fine.
spk05: Great. Thanks a lot.
spk06: Thanks, Ryan.
spk01: Thank you. As a reminder, that's star 1 to be placed into question queue. One moment, please, while we poll for further questions. Our next question today is coming from Christian Schwab from Calum, from Craig Calum. Your line is now live.
spk05: Hey, good morning, guys. So I know the decommits and the push outs and lack of visibility on chips is, you know, something that's kind of come to fruition in the last few weeks for everybody. But as you guys look at that, do you guys have a, you know, talking, you know, to Broadcom about when they think this situation will be fixed for you?
spk06: Well, I'm not going to speak to any given vendor. I'll just give you the sense for the overall market. There isn't a person that I know of that thinks this is going to be fixed in this year. This is going to continue throughout the year. Beyond that, I mean, we're working on this quarter, next quarter, and maybe the one beyond. What happens in 2023 happens in 2023. But this is going to persist through the year, to be clear.
spk05: Right. I guess, I mean, not to be nitpicky, but we're going to have an analyst day, you know, forthcoming, which will be exciting in person. But if, you know, if we don't have an idea of aggregate supply and a return of a more rational margin structure, you know, I don't want to steal the thunder of what's going to happen in a few weeks, but can you tell us what you're all excited about us getting together for?
spk06: No, I think you heard it from the example that Michael was talking about, which is the value proposition that we continue to work on with our subscribers of all types, residential, small, medium, business, enterprise, et cetera.
spk00: So that's what we're excited about. I'm sure you'll be excited at the end of of the day in Vegas. All right.
spk05: Great. No other questions. Thanks, Kyle.
spk01: Thank you. Once again, that's star one to be placed in the question queue. Our next question is a follow-up from Paul Silverstein from Cowan. Your line is now live.
spk04: I'll apologize in advance if these were already answered or if you don't want to answer them. Going back to the point about the impact of this massive amount of government broadband funds that are going to wash through the system, RDOF, CARES Act, new infrastructure bill, et cetera, and allowing that there's timing considerations. I take it the infrastructure bill, you probably won't see dollar one for a couple of years yet. But that said, correct me if I'm wrong, RDOF started to see revenue, CARES Act, you started to see revenue tied to that. Do you have any visibility as to the quantification that in fact this year I would think that greater in 24, still greater as infrastructure starts kicking in. Is there any quantification?
spk06: To your point, I think it's becoming meaningful in 2022 from ARPA and the repurposed funds, which we've talked about, which obviously were not initially built for broadband, but the states were allowed to repurpose their excess funds. That's actually what's closed through first, and we expect to see some of that this year. ARDOP has actually been... much slower. And then obviously, you know, the big bowing is after that. So I think if you go look at the shape of those curves and spread them out over time, you know, this is a 23 event in big form. And I think we'll start to see some of it flowing through in a meaningful and material way in 2022 for sure. It's not anything like what it is in 23 or 24. I just want to make sure I don't miss out your expectations.
spk04: I appreciate that. On the software application take-up, I appreciate you don't want to do granular quantification. Today, given, does it go without saying that as you have these customer testimonials, the couple that you've already cited, the dramatic take-up, that that is increasingly driving pull from other customers. Is there any, again, any quantification or qualitative, potential qualitative color you could provide?
spk06: Well, I mean, qualitative, you heard Michael go through a number of them, so I won't go through more at this point.
spk04: Well, beyond anecdotally. Sorry? Beyond anecdotally. Again, again, Let me let you respond. Go ahead.
spk06: Well, beyond anecdote, you mean numerically?
spk04: Well, I was hoping for numerically, but even not numerically, is it given that you're seeing acceleration in the number of customers from a breadth standpoint that are shifting over to stock?
spk06: Yeah, let me do it. Corey knows the RPO numbers by heart over the last three quarters. I mean, I think, That's the best way to sort of give you a sense for what we're starting to see. And when I say starting, I say starting to see. So what was it this quarter? What was the last quarter? What was the quarter before? Yeah, so for Q4, we're looking at 125, right? 125 million. And Q3 is 105. And Q2 is 92. So 92, 105, 125. So... You know, that gives you a sense for the continued acceleration of what we're seeing, and that's the best number I can point you to. Very clearly, if you go look at the new customer count, you're seeing that to the point of my prepared comments. It's a multi-year high on new customers, and obviously all the new customers we're getting are on our forward-looking platforms. So those are the best numbers I can give you at this point, Paul.
spk04: All right. One last one for me. Again, I apologize if it was already asked and answered. Y'all are not commenting at this time on, and I appreciate it's a very challenging environment and everybody else you're facing from a supply chain standpoint, but the historical 100 to 200 basis point gross margin improvement for the year that you're trying to drive, you didn't state that for this year, correct?
spk06: Correct. All we did was give guidance for Q1.
spk04: All right. And I trust you don't want to get into what the outlook is for your own margins.
spk06: Obviously, we give guidance on the next quarter. And we've given commentary on the supply chain challenges. And we'll get together in Vegas as we have more visibility. Okay.
spk04: Understood. One last question. Can you tell us, relative to you crossing that 50-50 threshold on all-platform revenue this quarter, what was all-platform revenue to Q21 at the time that bookings broke for 50-50? I'm trying to get a sense for the pace of shift. Okay.
spk06: Obviously, Paul, thanks for asking that. No, I won't answer that other than just to give you these milestones. And that may be frustrating, but that's what we've given out.
spk04: No worries. Thanks, guys.
spk06: Thank you.
spk01: Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Tom for any further closing comments.
spk06: Thank you, Operator. Kellogg's leadership will participate in a number of investor meetings during the first quarter of 22. including our Investor Day at the Wynn Resort in Las Vegas. Information about these events, including dates and times for public webcasts and management presentations, will be posted on the Events and Presentations page of the Investor Relations section of Calix.com. Once again, thank you to everyone on this call and on the webcast for your interest in Calix and for joining us today. This concludes our conference call. Goodbye for now.
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