Hello, and welcome to the Calix Q4 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 Dinges. Please go ahead.
Thank you, operator, and good morning, everyone. Thank you for joining our Q4 2021 earnings call. Today on the call we have 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 market, we released our 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. Before I turn the call over to Carl for his brief opening remarks, 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.
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 Q4 2021 letter to stockholders and in our 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 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 Calix team executed with excellence in the Q4, 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 Q1. For the first time in the company's history, we see revenue sequentially up from the Q4. 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 20 [crosstalk] in the quarter, which brought the total for the year to 131, marking a multiyear 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 focused 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 twenty-third of February. With that, let's open the call for questions. Operator?
Thank you. We'll now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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 one. One moment please while we poll for questions. Our first question today is coming from George Notter from Jefferies. Your line is now live.
Hi, guys. Thanks very much and congrats on the good results here. I guess I wanted to ask about the supply chain environment. Obviously, you know, 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.
George, let me preface. The answer is yes. I'm gonna ask Cory to give you some details and color. I wanna 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. 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.
We're going to go get the supply. You're gonna pay for it. 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. With that, Cory, 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 Q4 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 Q4. Just more recently, you know, 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, you know, as we move forward.
Got it. Okay. 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. You know, any thoughts to going back and increasing pricing with customers? You know, I understand you guys want to focus the customer conversation on the value proposition and, 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 raising price these days. We've even heard from some of your customers that they're raising broadband pricing. Does it make sense for you guys to revisit the price discussion?
I want to know who's raising broadband pricing. Sorry. George, the answer is we obviously have those discussions. We have not raised prices, and there's no news to report today.
Got it. Okay. The last one I wanted to ask, the shareholder letter reiterates the 5%-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%-10% range. Any update on sales growth for this year? Thanks a lot.
The answer is, I think you'll see us continue to stay at the high end of that range. Cory, 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. Cory?
Yeah. I invite you to come to the analyst day in February, and maybe we'll provide an update on our long-term outlook.
Great. Okay. Thank you very much, guys.
That was a nice teaser to get George to Vegas.
Thank you. Our next question today is coming from Paul Silverstein from Cowen. Your line is now live.
Thanks. It's actually good to hear you say the comment about Vegas. That said, Carl, you came into last year, and you put out the same 5%-10% long-term model statement. I think every quarter you increased the guidance for the year by 5%, and you ended up doing over 25% growth for the year. I recognize that you're supply constrained along with everybody else. I appreciate that throughout the year, your caution reminded us about the particular challenge for Q4 presented by the extension of lead times to 52 weeks earlier last year. If we looked at pure demand and isolated out the impacts on your revenue growth from supply chain constraints, what would growth look like?
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 gonna 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. The direct answer to your question is, it's not clear to us that, you know, it would be higher than 10% right now. We're continuing to model those things out for 2022. I would say I would stay at the high end of that range today. I do appreciate going back in time as we raised it. Actually that really had a lot more to do on the supply side.
Now, just to add to that, you heard Cory 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 you know supply that's planned and one vendor decommits. 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. 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.
Those decommits are quite corrosive.
Carl, those decommits, in F5's case, they indicated that decommits increased from high 200s to 400. It was a 40% increase. You and Cory just referenced 2 decommits. Can you give us a sense of how that compares to the last 90 days or previous 90 days? I mean, those are 2 decommits. Were those 2 up from zero, or how do they compare to previous period?
I would say interesting aspect here. You might remember a year ago, we had the pushouts to 52-week lead times. We're now hitting that window of when those 52-week lead times are showing up. 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. To answer your question directly, there's been an increase in decommits. 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. You know, all it does is certainly create more challenges for us.
For me, it's really more about what are we gonna see in the next 91 days, 'cause we did our bit. We put the orders in. Now let's see if the supply, the component suppliers will actually meet their deliveries.
Cory, is it just a matter of the timing, or is it also that the decommits you're seeing are a reduction in quantities?
I'm not sure I follow that question, Paul.
Well, if I go back to F5, they referenced 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 committed to, and in some cases, both.
Yeah. It's all of the above.
All right. You're seeing the same thing.
Yeah.
I wanna co-
To say, for example, the Q4, if they push out, so it's a timing issue, right? We didn't get the parts in the timeframe that they said they would deliver. It's not that we aren't getting the parts. In some cases, we're not getting the parts as well. Go ahead, Paul.
Got it. 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, but that's been washed out and then some by the significant increase in costs. What, Cory, 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?
Yeah. Paul, building on where we were last quarter. You know, last quarter, we gave you the guidance that, you know, it's between 2% and 5%. Clearly, we had to step it down a whole percentage point of this quarter. You gotta throw that into the mix. I'd give you a range of 3%-6% for this quarter, the Q4.
3-6 percentage point impact?
Mm-hmm.
Got it. One last question from me. I apologize to others in the call. You know what? Actually, I'll pass it on. I'll take it offline.
Okay. Thanks, Paul.
Thank you. Our next call is coming from Michael Genovese from WestPark Capital. Your line is now live.
Oh, thanks a lot. I guess sticking with the same topic, you know, and looking at it another way. In 2021, the supply chain was not a piece of birthday cake, and you guys expanded margins by 170 basis points year-over-year. 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 2021 from your perspective? In the context of being able to expand at the high end of your 1-2 points of guidance per year in 2021, how should we think about 2022?
Let me frame this phenomenon and hand it over to Cory to take you through how costs move through the P&L on the balance sheet. The environment's 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 is there are significant delays in between price, committing to price, working for price, getting components and support. I mean, it's a big, long delta T between cause and effect. Cory, all yours.
Let's just start off with lead time. You know, we're placing orders today that we're gonna receive next year. Those are gonna be at the higher prices today. Even let's say if all the supply chain normalized by middle of the year and it was back to equilibrium, the costs we've already committed to today are gonna 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. When the component guys increased their price in Q3.
It doesn't immediately show up in the Q4. It's got to go get built. It's got to go through inventory. It's got to get then sold. That just takes a significant delay. What I think you're gonna see is the expedite fees and the surcharges persist throughout 2022 and well into 2023, even if we got normalization by the summer. That's an if statement, not a when statement. Right?
Right. You see that in the guidance for Q1. Right? Mike, let me just tie out the concepts that I actually started with when Paul asked the question. The supply chain is absolutely harder with the decommits, et cetera. Our demand is robust, so we're gonna go get what we need to make sure we're meeting that subscriber demand. 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. Q1 went up, or well, it's flat to up from Q4. At the same time, we're bracketing margins in the 49%-51% range. That's the best way I can give you numerically the answer to your question as well.
Yep. That all makes sense. You answered to Paul that or Cory did that in the Q4, there was 300-600 basis points of gross margin impact. Would you estimate that, as you can tell right now, to be consistent in the Q1, or more or less?
Well, more or less the same.
Okay. That's good. My other question, I mean, you know, given everything that Carl just described with the subscribers and the business, you know, that makes sense. We're also in a very strong hardware cycle. We have been in a very strong hardware cycle. The stimulus money is really gonna start to flow here. I guess my question is, how long do you think this hardware cycle where there's gonna be a big chunk of hardware in the revenue mix going out is going to last? Do you think that we're gonna get to a point beyond that, where software is a much bigger piece in the mix?
Can you imagine when we get there, will you tell us a subscriber number? Those are all my questions. Thank you.
Let me work backwards from the last one. Probably not. I actually, I'm gonna 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. Michael just came back from the sales kickoff. 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, Mike.
Yeah. 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, they did it. The service provider then just monetized simply the broadband experience or sorry, the pipe. Now we're in this opportunity where they can identify incremental ARPU opportunities through incremental services. 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. One example would be a customer of ours, a BSP, used the Marketing Cloud to understand their customer, and then they targeted their campaigns at a group of customers, had a significant email open rate. Generally, email open rates are, you know, 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. 90% of that targeted list not only upgraded and added incremental services which provide ARPU per month in the form of ProtectIQ, which is virus protection, and ExperienceIQ, which is parental controls. They also identified that they needed more bandwidth, and they were able to double their ARPU on that list. 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 us from end to end, and this is more on the cost side. They use our Intelligent Access EDGE, and they use the Revenue EDGE.
They do everything with us on the edge of the data center out, and they're running our Revenue EDGE inside the home. 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 had a massive jump in close rates on first call, up by 60%. That just goes straight to the bottom line in the form of operational profitability. Then as they tested with those customers, they saw a 15% increase in NPS. That customer is now in the mid-70s for NPS in an industry that historically has had an NPS of -6.
The delight by delighting your subscribers, being operationally efficient, and identifying these upsell opportunities is a huge monetization opportunity ahead.
I'm gonna come to your question, but Cory, that manifests itself, one of the things we have talked about, not subscribers, but I don't remember. ARPUs sequentially were up something. What were ARPUs up?
They were up 20% Q3 to Q4.
You now have RPOs growing 20% on the quarter where we grew a couple of points sequentially on revenue. 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 build 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 will spread out over years, and we're just starting to see them now. You're correct. We are gonna see quote-unquote, "an infrastructure build or a hardware upgrade cycle." 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.
Thanks a lot. You're very helpful.
Thanks, Mike.
Thank you. As a reminder, that's star one to be placed into question queue. Our next question today is coming from Tim Savageaux from Northland Capital Markets. Your line is now live.
Good morning.
Morning, Tim.
Good morning. Congrats on the solid results. Look forward to seeing you in Vegas. Kinda wanted to follow on that last discussion a little bit. 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. You made a couple of interesting releases so far this year, talking about the network side and 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 kinda question number one.
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. 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. I'll follow up.
Tim, let me make sure I understand. You're talking about the Intelligent Access, what we call the Intelligent Access EDGE, the network side of what's going on in upgrades?
Basically, I'm trying to relate what you talked about in Intelligent Access EDGE to Revenue EDGE to the more subscriber-oriented stuff. You talked about both in some of these releases, right? The 225 carriers-
Yeah.
XGS-PON, 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 equivalent for the subscriber side, just to cut to it.
Right. Okay. I appreciate your asking. Obviously, if we were gonna 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. 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. You might ask, "Well, why did you do that?" 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. You know, meanwhile, we're building 40 gig PON with NG-PON2 with Verizon.
That was intended to help everybody understand that this is a maturing market and it's safe to go. That was what we were doing there. 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.
Great. Outstanding. To follow up, in this new model is giving you a 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? Did the demand situation improve? Did you see an acceleration of the metrics that you look at for either Q4 or 2022? Or can you describe the kind of delta in the demand situation throughout the quarter? Thanks.
Good question, Tim. The answer is it continues to sort of curve up. Part of what you just heard Cory say was sequentially, you know, RPOs are up 20% and revenues. I'm just sitting here in my head, our overall revenue line was up 3.5%-4% sequentially. 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. I mean, I dare say coming off the sales kickoff, there's a great deal of excitement on the, I'll say, general platforms and helping our customers succeed, and that is absolutely driven by the software.
Great. Thanks a lot.
Ian Angus.
Thank you. Our next question is coming from Chris Howe from Barrington. Your line is now live.
Good morning, everyone.
Good morning.
I'll go with another question here on the supply chain. Carl has explained it in great detail already, so I have much-
That's okay.
You mentioned the decommits. There was one that just happened two weeks ago. First, can you comment on this recent decommit? How profitable was that opportunity, and how that may impact gross margin in the quarter? 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 more variability from quarter to quarter. Excluding that, the environment remains pressured. 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?
A lot of questions there, Chris, and I appreciate the drill down. 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 that 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. There's no question that we're gonna pay to go get the supply to make sure we meet that demand.
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. There are folks that are not. To me, it correlates very much to that value proposition. We have very good visibility into our customers and subscriber demand. What you're gonna see is this constant surprise that Cory's talking about and voila, a new surprise. The environment is what it is. 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. I'm not sure even if we did, it would be meaningful other than actually misleading.
I'll give you another question, obviously, but there's no way for me to go tap on that one.
Okay. That's helpful. I understand that. 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. Could we see the labor market become more challenged, or are you continuing to see a healthy supply of resumes for incoming employees, and also how your increase in head counts is tracking to your internal expectations?
The answer to your question is, I think it's a very challenging labor market. I think we are doing well. Michael, why don't you add comments to that, please?
Yeah. We were able to win in Q4. We won another Glassdoor award, which we're really proud of, around the culture that we have. In the end, when you come to this challenging labor market, people are coming to the end of the year, they get their bonuses, and they're trying to decide, "What do I do with my career?" 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. 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.
As we've identified over and over again, our strategy is better and never best, which is constantly taking these new ideas and improving the environment. That gets more people. 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. One of the things that's really clear, again, inside the Calix 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 OPEX possible.
They're exciting their subscribers, and they are transforming their communities. If you're an employee, that's incredibly exciting. 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 simplify side is we had a customer this quarter who shared with us that they were able to slash the alarms in their network, which can be very noisy and troublesome by 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 use 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. When you increase the broadband service provider's margin by 400%, they, again, have incremental cash that they can reinvest in their community in the form of new services and new capabilities to delight their subscribers. That mission, you know, and the results that we're driving attracts great employees and teammates who are helping make it happen.
Thanks, Michael.
Thanks for taking my questions. Appreciate it.
Thanks, Chris.
Thank you. Next question is coming from Ryan Koontz from Needham & Company. Your line is now live.
Hey, good morning. Congrats on your great results and outlook here. With regards to the platform transition, 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 in 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? Thanks.
Yeah. Ryan, actually, you are asking a question that I will give you a numerical answer for. 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 revenue. On a revenue basis now, more than 50% of the revenue is on our go-forward platform business. Does that help?
Sure does. Thank you. On the pricing front, as you look at your markets, I know you're very focused on the task at hand. 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?
Well, great question. You know, we're not price competitors in that way.
Right.
Where 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 to date. We are aware of that. From a pricing pressure standpoint, as you know, the geopolitical replacement opportunity is not something that we're chasing 'cause it is a price-based buyer, typically. Not in the way you're asking.
Sure. Okay. Just 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 NG-PON2?
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. That would be the best I can do. As you know, from a value proposition standpoint, we continue to drive high value, but not necessarily the 10% customer piece. They're doing just fine.
Great. Thanks a lot.
Thanks, Ryan.
Thank you. As a reminder, that's star one 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 Craig-Hallum. Your line is now live.
Hey, good morning, guys. I know the decommits and the pushouts and lack of visibility on chips is, you know, something that's kinda come to fruition in the last few weeks for everybody. As you guys look at that, do you guys have a timeframe, you know, to Broadcom about when they think this situation will be fixed?
I'm gonna 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 gonna be fixed in this year. This is gonna 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 gonna persist through the year, to be clear.
Right. I guess, I mean, not to be nitpicky, but we're gonna have an analyst day, you know, forthcoming, which will be exciting in person. 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 wanna steal the thunder of what's gonna happen in a few weeks, but can you tell us what you're all excited about us getting together for?
I think you heard it from the examples that Michael was talking about, which is the value proposition that we continue to work on with our customers and help them build much more valuable broadband service providers as they continue to serve their subscribers of all types, residential, small, medium business, enterprise, et cetera. That's what we're excited about. I'm sure you'll be excited at the end of the day in Vegas.
Lovely. All right, great. No other questions. Thanks.
They're gonna wash through the system, ARPA, 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. That said, correct me if I'm wrong, you started to see revenue. CARES Act, you started to see revenue tied to that. Do you have any visibility. Is there any quantification you can provide in 2022 from ARPA?
The repurposed funds, which we've talked about, which obviously we're not. That's actually what's flowing through first, and we expect to see some of that this year. ARPA has actually been much slower. Obviously, you know, the big buildout is after that.
I think if you go look at the shape of those curves and spread them out over time, you know, this is a 2023, 2024, 2025, 2026 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.
All right.
It's not anything like what it is in 2023 or 2024. I just want to make sure I don't mis-set your expectations.
I appreciate that. On the software application uptake, I appreciate you don't want to give granular quantification, but is it a given, does it go without saying that as you have these customer testimonials, the couple that you've already cited, the dramatic uptake, that is increasingly driving pull from other customers? Is there any, again, any quantification or?
Michael go through a number of them, so I won't go through more at this point.
Well, beyond anecdote.
Sorry?
Beyond anecdote. I mean, again, let me leave this one . Go ahead.
Well, beyond anecdote, you mean numerically?
Well, I was hoping for numerical. Even not numerically, is it a given that you're seeing acceleration in the number of customers from a breadth standpoint?
Sorry.
That are shifting over to
Yeah, let me do it. Cory 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. When I say starting to see. What was it this quarter? What was it last quarter? What was the quarter before?
Yeah. For Q4, we're looking at $125.
Right. $125 million.
Q3 is $105. Q2 is $92.
92, 105, 125. 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 due to the point in my prepared comments, it's a multi-year high of new customers, and obviously all the new customers we're getting are on our forward-looking platforms. Those are the best numbers I can give you at this point, Paul.
All right. One last one from me. Again, I'll 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 for you and everybody else you're facing from a supply chain standpoint. The historical 100-200 basis points gross margin improvement for the year that you're trying to drive, you didn't state that for this year, correct? To what the outlook is for the earnings.
Yeah. Obviously, we give guidance on the next quarter, and we've given commentary on the supply chain challenges. We'll get together in Vegas as we have more visibility.
Understood. One last question. Can you tell us relative to your crossing that 50/50 threshold on all platform revenue this quarter, what was all platform revenue through Q2 2021 at the time that bookings broke for 50/50? I'm trying to get a sense for-
That's what we've given out.
No worries. Thanks, guys.
Thank you.
Closing comments.
Thank you, operator. Leadership will participate in a number of investor meetings during the Q1 of 2022, including our Investor Day at the Wynn Resort in Las Vegas. Information about these events, including dates and times for public webcasts with 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.