Hi, good morning. Welcome everyone, and I have the pleasure of hosting the next fireside chat with the Calix management team. We have with us Michael Weening, the President and CEO, and Cory Sindelar, who's the Chief Financial Officer. Thank you both for making it to the conference. Thank you, Jim, as well. Okay, let's start off with a question we're asking all of our companies to share their thoughts on, which is: when you look at your customers, and we all know how they're spending right now, 12 months from today, what do you think where we will be? And talk about it maybe both including and excluding BEAD.
Sure. So I think 12 months from now, what you're going to see is that, you'll have seen a significant pivot in the mindset of the leaders of these businesses. The conversations that I'm having most frequently with them is, you know, contextually is around, "How do I differentiate?" And I think that that's, that is the, it's a conversation that we've embraced. It's one that we had, in the past, have been pushing. And so let's just say, in the past, we were pushing that conversation, saying, "You need to differentiate. There's a commoditization of broadband coming. You need to think about how do you diversify your business, build a complete business model, and succeed?" And I think 12 months from now, what you see is that, that those who have, who have embraced that will be very successful. Those who haven't will be actually in significant turmoil.
We see that happening everywhere, and I get this question all the time. The number of customers, as I said on our investor calls, was that are prospects who have never spoken to us before, but are actually coming to us with that question, is something that we're embracing and very happy about. It's everybody's asking that question. So I think that's the first one. With regards to, you know, the BEAD versus not BEAD, I, you know, I think, Cory, you can talk about where we are with BEAD, but in, in Q1, we expect it to start flowing in Q1 2025, and you're even starting to see some speed-ups over the last couple of weeks. So, Cory, you may wanna... You contextualize some of the BEAD implications.
Yeah, I mean, I think we've been pretty constant in our view that BEAD would start in 2025, and I think a lot of folks are questioning what that ramp looks like. And my view at the last earnings call was to say: You don't need all 50 states to be approved to start seeing a meaningful impact in terms of vendor spending. And so I was hoping that at least by the end of the second quarter, you would see 10-15 states approved through the last step, such that they could begin the bidding process and get to a point where funds are being awarded. And since our earnings call, you know, at our earnings call, there was only 1 state approved, and now we're sitting here with seven states and the District of Columbia.
So the NTIA is making a big push to get this approved, and, you know, that seven states and one in the District of Columbia represents about $6 billion of the $42 billion. So it's a meaningful amount of the BEAD funds being moving along. And so I think it's gonna play out like we thought. It'll start in 2025, and it'll ramp obviously through 2026, 2027, and it'll last for 5-7 years.
Okay, got it. I mean, I guess you referenced this, which is the NTIA recently, sort of starting to make a bigger push around this, but, what are you... I mean, more broadly, what are you seeing in terms of support and trying to accelerate this process from the NTIA? What, what are you seeing in terms of the engagement with the states, and is there a further acceleration that can be, that can be hoped for in that sort of overall process itself?
So our conversations with the NTIA have been very positive. They, one of the things is that by pushing the decision-making down to a state level, you actually have people who are in each of the broadband offices who are very motivated to make their state successful. So that means they have the governor and all these other local politicians are really pushing, and the word from them all the time is, and this is why I think you see some, you know, different alterations state by state, is that they are...
You know, one of the things I'm happy about is that they're actually very collaborative, and they're very open to dialogue, and they are aggressively going out to broadband providers and saying, "This is a huge thing that's really important to the United States for the long-term success and vitality of the country, to get to those, that kind of last mile, so to speak, or, or most remote, and what do I gotta do to, to get you to, to participate?" And so I think that mindset, you know, if you go a year ago, it was kind of bedlam because they didn't have... People weren't in the state offices, all those kind of things. Now, the state offices are doing their job, and they're aggressively trying to partner.
Then, you know, I'm in D.C. next week, and there's a lot of conversations around how do we actually strengthen those partnerships, but it's state by state. The good thing is that that's our strength because we're state by state, too. So I don't know, Cory, if you want to add anything?
It's also why we partnered with a company called Ready.net.
Yeah.
They're working with all the state offices, helping to provide some of the infrastructure around the program. And so having that interaction with them and the state offices, you know, it's clear what we see what NTIA is trying to do. They're trying to solicit our smaller service providers to participate in the BEAD program, and so we, Calix, is, are looking to do everything we can to help them. Part of that's with consultations with them, helping the small service providers work through it, and our support of Ready.net is another aspect of helping them go after those BEAD funds.
The concern that I hear from investors in general is, this one being an election year, when we have to sort of see all this process move ahead and come to a, sort of get all the states through, do you at all worry about that?
Absolutely not. This is so, this is very bipartisan, and so anyone who would be foolish enough to go against it from either party is gonna get their head handed to them. So I don't think so at all. I think, as, you know, and even if you- so let's go and say that the Republicans get back in power. Well, a large percentage of their base is, you know-
Rural
... Republican, is rural, and therefore, there's no way they're gonna go against their constituents and pull back. So actually, we don't see... And it's far enough down the path, like, it's not like it's the first year into the program, and there's a lot of changes to be made, all those kind of things. So absolutely not. That's not a concern, and I haven't heard anyone voicing that concern.
Okay, got it. Focusing on BEAD, $40 billion-plus program, how should we think about the dollar flow that will reach your customers and eventually Calix? Just maybe work that algorithm for us. How much goes through your, probably your customers, eventually flowing into the equipment that you support?
Mm-hmm.
How to think about timing, like, the customers buy quite a bit ahead of their deployment plan, so then automatically you start to see more of a early 2025 pull in?
Let me just talk about the total, and then you can talk about process. So the $42 billion is actually, then you have to add 25% of what they have to put in place, so we're really talking roughly around, what, $55 billion or something like that. And you can expect that it's, you know, 8, 8-ish%, maybe 8-10%, that flows to Calix. And so, yes, there'll be some customers who are purchasing ahead. We've heard many of them... You know, it's still funny to me when I have customers coming up to me and saying, "Will you have enough supply to deal with it?" And the answer is 100% yes. Again, you know, when you look at the type of company we were going into the pandemic, we were still this hybrid company.
We had our Red Ocean business, which was our legacy Calix was, and then we had this new business model, the platform model that we've deployed. And in the... We've now basically turned off all the old business model. In that old business model, we had 3,200 SKUs. In this new business model, we have around 200 SKUs. Therefore, our optimization to meet their needs will be, is, you know, we're very optimized to do that.
Mm-hmm.
And then from a process point of view on the flows, Cory?
Yeah, so you know, the one thing that we know about these large government programs is that they take, 1, longer to get started, 2, last longer than anyone anticipates, and then 3, because the co-investment that goes with it have a larger impact than the funds. So we're well along that process. In terms of timing, one of the questions we get, obviously, is: When do you expect to see order flow from it? Every state is different, and they're gonna have their own process. But let's take the state of Louisiana, who was the first one approved in December. You know, they're looking to complete their bidding process by November. They have until December to get back to NTIA with the funds being awarded.
So in November, when they submit their preliminary proposal to NTIA, it's at that point we think, vendors that have been or BSPs that have been awarded funds will actually start placing orders. This is gonna go on for five, six years, seven years. They're gonna start placing out what they think they will build in the next 12 months, and so the expectation is, so for example, in the state of Louisiana-
Mm-hmm.
... we would expect to start seeing orders in November, December. Because it's a southern state, and they're not having to deal with weather and frost, you know, construction can start shortly thereafter. So you can actually start seeing, you know, equipment deliveries in early 2025.
Whereas Montana, not so much.
Yes.
Great. So moving to a bit more specifics about customers. You have around 1,600 active customers, the majority of which you describe as, like, small in, in your characterization, with less than 250,000 subscribers. How have you been able to expand this footprint? Clearly, a lot of other companies that are peers have had much more challenging sort of revenue profiles here. So what are you seeing in terms of being able to expand the customer footprint, and what's driving that as well?
Well, the first thing is it goes back to what is the conversation I'm having with GMs and CEOs regularly, which is the expansion of the existing base. So we currently have 1,050, according to our last quarter, customers on our platform. And with those customers, it's all about how do you actually... We have a significant amount of TAM expansion with them because of the fact that so many of them are just a consumer-only go-to-market. We have ways to expand the consumer through the managed services. A simple one is also we're the only ones who have outdoor Wi-Fi, which is very peculiar to me that no one else has figured this out. But, you know, we have three outdoor routers.
We have launched a 1-mile one, we have a hardened one, we have a low-cost one, and we have a ton of customers going into this spring who have finally, as they have embraced differentiation, which they haven't in the past, or they've been too busy. As one CEO said to me, "I didn't have time to get a cup of coffee, let alone think about my, you know, how do I grow my revenue?" And so now they're all embracing this, "Okay, I've got to think about my business model in a different way." Not just the innovators and the early adopters, but the early majority and some of the laggards, right? And so that then expands out into, what are we doing in MDU? What are we doing in small business? How do we expand into medium business?
There's a wide range of applications for us to expand in. And then with regards to what do we do with the other segments, there are the larger segments are ones who, frankly, have not been listening in the past. Again, they had this philosophy of, "If I build it, they will come," and that has been proven out to be not a successful model. And so or they have thought they could build it themselves. And they are now starting to embrace and actively speak to us around, "Okay, your business model demonstrates that it can scale, your technology is mature, your platform is mature, you're innovating at a pace that is probably ten times what we've ever seen in the industry before." These people, again, to get a single router out, it takes them two years, right?
And we're putting out new technology every 91 days, and so we're having lots of those conversations. And I will tell you, there was a medium customer who was on the path to go build all of their own technology. That didn't work out so well, and they brought in one of our new appliances, looked at a service that they could launch, and realized from the moment they put it into their labs to launching of service was gonna be 5 weeks. And it was so incomprehensible from them from an IT point of view, because there's no IT integration, all those different elements, and all of a sudden then they flipped, and they said, "Okay, we just gotta go and do everything here.
We're gonna need to drop some of this, build our own stuff." And so, and this will, you know, again, this becomes... We're in the early stages in, in medium and large, and we're having a lot of those conversations right now. And because the time is ripe, they all have a big problem coming. None of them wants to be like the mobile market.
You talked about essentially the customer coming in on the platform. You have the cloud offering, the managed services. Just help us more in terms of how you're thinking about where the growth comes from for the business over the next few years. Obviously, the base in terms of cloud and managed services will be much lower than the platforms, but in terms of the majority of the growth and what you see in terms of growth trajectory for these businesses as well, just help us think about that.
So the small customers, again, a small customer can have up to a $300 million business. So if they have a $100 ARPU and a, you know, 250,000 subs, that's roughly $300 million in revenue. And so with those, we just see it as, you know, significant. We, we look at that as a very solid base, and you see that in the margin growth. We continue to have margin growth as they adopt more services, and they, and they adopt more of our appliances, and they do the right things to actually build out a, a subscriber base that is monetizable in new ways at a higher level, right? So we think of that as—think of that as the, the strong foundation upon which we grow.
And then the next step is, we are now actively speaking in the medium space and large. And while we have Verizon, what we've never done is actually actively win a large customer on the go-to-market side. It's a very different business model. It's software only, and that is something that I am spending significant time on. It's always been in our plan, but it was, you know, to some extent, it was the same thing as what the general manager said to me, which was, "Didn't have time to take a cup of coffee." For us, it was, the timing had to be right, our platform had to be mature enough where we could entertain those conversations, and we're now in a place where we can, we can, 'cause the platform is mature enough.
It'll be a different business model, so think of those—the higher, the larger the customer gets, the more it's impactful on margin because much of the appliances will not be sold by us. It'll be a software sale and cloud, right? And so I think of those as, you know, big contributors to margin growth.
Got it. Okay, great. In the past, or I guess I shouldn't say in the past, more recently as well, this year, you've talked about the spending environment being a bit more muted from your medium, larger customers, some pauses, delays that you've talked about. There's been obviously the macro being a bit more challenging, higher interest rates. You've talked about A-CAM as well, and obviously, BEAD coming up.
Yep.
Just help us parse through all those pieces, and how do you think about individually the impact of those on what's driving the pause and delay right now?
So first of all, you know, and I know this is a hard thing to say. Some people, you know, I'm empathetic to what's been going on, and obviously, we, you know, we want it to go faster too, but these are all very good things. Because what happens is that when everything is good, people have no impetus to change. And the, let's start out with interest rates. So if you had a pulse, you could raise $50 million three years ago, right? 'Cause money was free, investors were throwing cash around like crazy, and if you used the word fiber, you could get $50 million. Didn't mean you know how to run a business, didn't know you were any good at it, but...
And you see that, you know, a lot of those assets are now in distress, and we're gonna see a lot of bankruptcies, which are great 'cause our good customers are gonna snap those up, for pennies on the dollar. But in this new interest environment, all of a sudden, you know, and I literally flew here from Prospect, where they, they were talking about this. Competition is higher 'cause now you have multiple, two or three competitors in every single market at a minimum, which we didn't have before. You have interest rates are higher, therefore, the cost of capital. I have to be a lot more pragmatic with regards to my expansion. But most importantly, all their investors are saying, "Hey, where's my monetization on the money I already put in the ground," right?
How are you gonna win subscribers faster? How are you gonna grow the ARPU per subscriber?" And this is literally what we've been saying for three years. I've been- you know, I almost got tomatoed off the stage three years ago when I talked about speed is gonna lead to monetization. And so everything that we predicted is coming true, which means that, again, people who have never spoken to us in the past are speaking to us. So I see this as the greatest opportunity. It has also led to, because we have a very strong financial- you know, balance sheet, thanks to, you know, my partner here, Cory, and, and our chairman, and, you know, I'd say the broader team, we've all been very focused on how do you build a great balance sheet. You know, through this tumultuous time, you've also seen a bunch of bankruptcies.
Casa going bankrupt and others who are, you know, just box companies, but still, they kind of clear the way for more conversations, right? And so in this distressing time, we are the solid one plowing through and expanding footprint at a rapid rate, and so this is a huge opportunity. With regards to where does it go for the long time on the BEAD expansion and all the other components? We've already spoke to that, is that we see those continuing to grow. But it's for me, it's that macro environment of interest rates and, you know, show me the money, that is the biggest impact on our business, and we're embracing it. It's great.
That's why, you know, I've been spending all of my time meeting prospects who in the past, like I said, I can list a huge number of them who have never had the time to speak to us in the past, and now are. And I'll give you one story, which was that general manager who said, "I didn't have the time to consider you." There was a... You know, he's got a vendor who's in distress, and so in December they started to do, they reached out to us and said, "Let's have a conversation." But it was more of a, "I'm thinking about de-risking my business because that vendor could go bankrupt," right?
And so we started in the conversation, but it opened up into, "Okay, well, what's the most important things to you?" And they started to talk about they're in for the long term, they support their customers, all those different element. And they were really, again, they started to say the conversation about, "Oh, but we're also thinking about diversification." So they were starting to just talk to us about fiber. We're like: "Well, no, no, what's your business problems?" "Oh, diversification." And in January, I had that conversation with their CTO, which led to... And about a month ago, I got on a call with their CEO, CTO, and COO, and at the end of it, the CEO said to me, he goes, "We started this as a de-risking conversation.
Through the 4 months of due diligence we've done with you, we've actually come to a conclusion that this is actually gonna de-risk our business in a radically different way because you provide us a new business model, and instead of actually just using you in part of your business, we've realized we need to use you end-to-end, and we're gonna start that transition." And so again, that conversation never would've happened during the craziness of the pandemic, because again, if you had a pulse, you could make money. And so when it gets tough, that represents the best opportunities. I keep going back to the Harvard Business article around, you know, which talks about who succeeds through a recession.
A disruption and a recession are very similar, and the company that is strong from a brand, and execution, and investment point of view, when all of this clears out and, you know, the indecision in regards to BEAD and interest rates start going down, 'cause they will start going down through political pressure, and it starts exploding again, we will have expanded our base of customers at a very rapid rate, and as they go faster, we'll just go, you know, pick up and go faster. And so I keep telling my team, "This is the year." You know, we've all worked hard for the last eight years to rebuild this company. This is the year we actually have to work the hardest. And I'm exhausted.
Like, I'm already 140,000 miles into this year, but it's all with prospects, and that's the right thing to do because this is the year we expand footprint. Long answer to a short question.
Yeah. That's fine. Then let's move forward to talking a bit more financials. With BEAD coming and obviously some of the, hopefully, some of the macro pressures, interest rates coming down, how do we think about the return of the company to the long-term growth rate of 10-15 in terms of timing?
We said last, you know, at our last earnings call, that we believe Q2 is the bottom. So at this point, you know, we'll return to revenue growth. It'll probably be, you know, more anemic this year as we come off the bottom, as we're bottoming. But as we move into next year and you start seeing funds flow, we'll return to being a double-digit grower. I'm sure there's quite a wide range of it, is how fast we'll ultimately see where that ends up being, but I don't see an issue with us being a double-digit grower and particularly with the BEAD funds getting back to what we have done in the past.
And then, through that entire period, while we go back to that, margins will continue to expand, which is the testament to our business model is different.
Maybe to take that long-term growth guide, and obviously, double-digit growth is what you're comfortable with for next year, but that next year we do have BEAD. When you think about BEAD running its course-
Mm
... why is 10-15 the right run rate for the company? And more so in terms of investors being able to have a more bottoms-up view of why 10-15 is the right number and not something higher or lower for the company in a normal state of macro.
Yeah, I mean, where we're at is, at this point, don't need to go put a bigger number out there. If you look at what we've done in the past, we'll start off with the 10%-15% growth, and if we actually see it in the funnel build and the backlog build, we'll call the numbers up. So if you go look at our, you know, track record, you'd see that we'd started years past with, you know, a 0%-5% growth and did 25, 5%-10% growth and did 25. Then we said 10%-15%, and we did, you know, 28% growth. So, you know, as our visibility improves, we'll call a different trajectory. There is no doubt there's an inflection point somewhere out there on the horizon.
As I sit here today, I can't call what quarter that's gonna be, right? I know it's there, it's gonna come, and as we get better visibility to it, we'll then change our long-term guidance or our guidance around what that growth rate looks like.
The peculiarity is the one that you called out, is that it's, we've never had so many factors in play for our customers to make decisions on, and they're, they're. You know, a lot of them in rural America are a very conservative lot, right? And so, them having to deal with, you know, A-CAM, BEAD, all the different things that are going on, high interest rates, et cetera, et cetera, has just been something that, you know, the safer thing to do is put everything on hold, you know. And I had one, a customer, a good long-term customer, who, you know, two months ago, when I spoke to him, he was talking about how he was really concerned about A-CAM, you know, the next version of A-CAM. What are the implications on his business?
So he put something on hold while—'cause he was worried about, that he was gonna go into the red, which I didn't fathom, but he's like: "It's just easier, just in case." And I talked to him a week ago, and he's like: "Okay, well, we're not gonna be in the red. Things are gonna be good. The, you know, our margin's a little, you know, a couple points lower, but, you know, so we're back on track," right? And so I think that's—it's, there's more variables than they've ever had before.
The question that we're getting quite a bit after your last earnings report is, what's driving the confidence in 2Q revenues being the trough for the company after you've done a couple of revisions already?
Yeah. So, I've had that question quite a bit since our earnings call. First and foremost, if you take a look at that medium and large segment, it's kind of de-risked itself, right? So that large and medium segment was $77 million in the fourth quarter, $43 million in this first quarter, and we're thinking it'll probably halve again in the second quarter. So you've got a group of 15-18 companies that, you know, are now doing about $20 million in revenue. It would be difficult for me to say that that group going to zero at this point, 'cause a lot of it's just normal recurring revenue. Second, and more importantly, we're seeing the signs of our small customer base getting comfortable with the new inventory lead times, right?
So supply chain, we reset the lead times. Their ordering patterns have now adjusted accordingly to that, so we're seeing funnel build. We're seeing more rapid and predictable, repeatable ordering patterns going on, so that's a positive sign. And then the third piece is, as Michael's been on the road since January, we're starting to see some of that work that's being done in terms of footprint expansion taking hold, and so we're seeing some activity and ordering from, from that as well. So when you kind of put that together, it's how we think and feel confident that Q2 is the bottom.
In the past, you've talked about visibility into your customer networks being pretty high for Calix relative to some of your competitors, just given the business model you have through your appliances.
Mm-hmm.
You did eventually see the headwind in relation to inventory digestion with some of your customers. And so maybe talk about what you could have done differently in managing customers to overall smooth out the inventory issues a lot more than-
It wasn't inventory. It was actually they stopped. What stopped us in the first half, we've been very clear on, is actually that this- we couldn't factor into our decision-making the indecision that basically stopped things. You know, I gave you the example of that customer with A-CAM. They stopped everything just because they were worried about, you know, while the program, you know, the program was $X per year, it got reduced but lengthened out for 15 years, and in their conservative mindset, they decided to stop everything. You know, you can't predict that, right?
You can't predict that your customers had programs, and as one of the stories I've shared many times is I had a very good customer who I talk to their CEO at least once a month, and through last year in August, he's, like, not doing BEAD, September, not doing BEAD, October, not doing BEAD, November, not doing BEAD. And then in the middle of December, he says, he calls me and says: "I'm gonna take my entire planning team, and I'm actually deciding I'm gonna go after a huge amount of BEAD." How do you predict that?
That's because the planning teams are the ones who actually are the ones who are doing the bills, working with all the different to rolling out, and by taking them and putting them into BEAD, you basically stop and essentially what we're gonna be the new builds that we had predicted. And so it was this indecision and this shift in mindset that really happened as a cliff. And Carl has actually talked to a bunch of folks about this, and he said to me, he goes: "I should have predicted that," 'cause he's been through it, like, four different times. And, and that's not fair. I take full responsibility for it, to be really clear, I'm the CEO of the company. But he said, "Hey, I could have coached you on that because I've...
This, actually, in hindsight, yeah, I should have seen this coming 'cause it's happened three other times, where you get within the window of the BEAD program, and they say, "No, no, no, no, no, no, no, no. Interest rates stay high." 'Cause we all thought interest rates were gonna go down in the second half, too, right? And so interest rates stay high, and then you come in within the window of BEAD, and they're going: "I put $25 in, and I get $100 back? You know, I... Money isn't free anymore. You know what? It's only 12 months out. It's actually real. It's not, you know, gonna take another four years. I gotta go for it." And that's, that was what led to all the changes.
We've been managing the inventory issues and the cycle times as they reduced very aggressively. Did we have some of them? Sure. But for the most part, we, every single day, we see how many units a customer deploys every single day, 'cause it calls into our cloud, and all of those are going up, and they still are. But it was this future build thing that we didn't, you know, and those different things coming together, perfect storm. So myself and Cory take responsibility for that. Our chairman, you know, does, too, we, all three of us in our leadership team. In hindsight, what would we do different? We couldn't have predicted that.
Now, let's just say if I'm in this chair 10 years from now, which I won't be, 'cause I'll be really old, and if I was to go through this again, then, yeah, I'd be able to say, "Hey, you have a perfect storm of high interest rates, $60 billion worth of money, and all the other things. Yeah, okay, here's how that plays out," right?
Well, let me check if anyone in the audience has any questions they want to ask.... Okay, let me then move on, and let me try to get the question that you get probably pretty often, which is to try and figure out the monetization of the cloud-
Yep
-and the managed services. Maybe just talk about the process of where do you see customers typically come in, in terms of your portfolio? What's the entry point? How do they expand within the portfolio, and what-- any sense you can give us of the-
Well, that, that's fascinating, and there's a segment element to this too now. So we just had a medium customer who, to a large extent, has stopped buying from us over the last five years, and they just selected us to do our SmartBiz product, which is small biz. And so what happens is... And we—this was of interesting learning for us because they have—they built some of their own stuff, some low-cost, questionable stuff, that some low-cost stuff that they have for their consumer go-to-market. But they had a real problem in small business, and they have a lot of small businesses, right? And that alone almost makes them a medium customer just on their small business footprint. And they selected us there because they wanted to—they needed a great platform play around what we've done with SmartBiz.
Our SmartBiz product, if you don't know what it is, it's basically our Ubiquiti killer. All of our customers said to us, "I buy Ubiquiti. I can't stand them because it's an IT solution, not a managed service. Replace Ubiquiti." And that's what we built, and it is going like gangbusters. And so they selected us to put into their base and use as a go-to-market strategy. What are the implications to that? In that scenario, now that medium customer has put the entire platform in, because when you put SmartBiz in, you put in all of our clouds, and you put in our platform. So now we can have a very interesting conversation with them around, "Hey, you know what you're doing on the consumer side?
If you actually use our appliance model and our platform, here's how you can grow revenue, differentiate in the market, all those different components. Oh, by the way, you know what, Mr. Customer? You've already put the platform in. You know what it's gonna take you to actually get, launch our services in consumer? About five weeks, and no IT work. Because in the end, medium and large customers, their biggest challenge, every single one of them, is IT. Everything costs a fortune, is really complex, takes a long time. And so that is, you know, as we look into medium and large, that becomes a very interesting beachhead opportunity.
You know, with our existing customers, or if I'm a regional customer, they generally start on the consumer side, although there will be some that, you know, I've got a small business problem, solve that, and then, oh my gosh, their eyes open up. So we are very advantaged in that because our platform has so many segments to it, we can actually go into the customer and have, start having conversations, like I did yesterday with this prospect. I said, "Here's the whole thing. Now, where would you like to start?" But by starting, they put the whole thing in, and then it's just what else do they want to turn on?
I'll try to see if I can get much more quantification on that. Let's say you have $100 of a customer wallet running across your portfolio. What would you expect, maybe in 5 years, that to look across platforms, cloud, managed services?
Well, we've always said that per subscriber, it's $1-$10 per subscriber, right? But, you know, the managed, the small business product is, you know, the MSRP on that product is $20, right? Now, if I have 1,000 subscribers as a broadband provider, generally, 10% of them are
Business
... are small businesses, right? And so you're gonna have a weighted average element to it. So, you know, we're still focused on the $1-$10 out of each of your subscriber. We haven't got there yet, like to $10. I'd like to get, you know, an average of $10 and then take it higher, right? The key thing, though, is that, you know, again, we're very confident with regards to the business model because our margins keep going up. That is a demonstration that we're actually continuing to expand on behalf of our customers, monetization of that end subscriber. And ultimately, this is the big shift that's going on in the market.
If I have to, because the GMs are saying, "I got to win more subscribers, and I differentiate, but I'm also under a ton of pressure to grow revenue and profit." And the great thing is, with all of those services, these are not CapEx implementations. These are us sitting beside them with our customer success team, winning subscribers and growing revenue, and then we just get a share of that. And they're much more open to sharing a percentage of revenue than they... You know, it's a lot easier sale. A revenue sale, growth of revenue sale is a heck of a lot easier sale than a CapEx, you know, how do I keep-
Cost savings.
... my cost savings sale, right? And so, and, you know, that prospect was kind of shocked by how much we're doing with them, or how much we can offer to help them win revenue, which no one else is doing that. He goes, "It's fascinating. No one else is doing what you're doing, coming to me and talking to the COO and CEO and saying, 'Here's how we help you make more money.'
Great. I'll wrap it up there. Thank you for coming to the conference. Thank you to the audience as well. Thank you.
Thanks a lot. Appreciate it.