Greetings, and welcome to the Calix second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the brief prepared remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Fanucchi of Darrow Associates. Sir, please go ahead.
Thank you, operator, and good morning, everyone. Thank you for joining our second quarter 2022 earnings call. Today on the call we have Calix Chairman and CEO, Carl Russo, Chief Financial Officer, Cory Sindelar, and President and Chief Operating Officer, Michael Weening. As a reminder, yesterday after the market closed, Calix distributed its letter to stockholders in a news release, an 8-K filing, and posted in the investor relations section of the Calix website. This conference call will be available for webcast 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 on this call we will refer to forward-looking statements, which include all statements the company will make about its future financial and operating performance, growth strategy and market outlook.
Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause actual results and trends to differ materially are set forth in the second quarter of 2022 letter to stockholders and in their annual and quarterly reports filed with the SEC. Calix assumes no obligation to update any forward-looking statements which speak only as of their respective dates. Also in this conference call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the second quarter of 2022 letter to stockholders. Unless otherwise stated, all numbers referenced in this call will be non-GAAP measures. With that, I will now turn the call over to Carl. Carl.
Thank you, Jim. Robust demand continued in our second quarter, which resulted in a 9% sequential increase in revenue. More than 80% of our bookings came from our all-platform software associated systems and services. This is up from 70% just last quarter. This sequential growth was driven by BSPs that are providing broadband as a service rather than just a dumb pipe, and we expect this trend to continue. A 77% year-over-year increase in revenue performance obligations was further evidence that our BSP customers are winning in their markets and growing their subscriber share. Furthermore, we see evidence that our most aggressive BSP customers are using the recent economic slowdown as an opportunity to gain share by delivering an exceptional subscriber experience to those who have never received one.
On the supply front, the Calix team again outperformed, which helped us achieve better than expected results in the quarter. Furthermore, it raises our visibility, allowing us to forecast year-over-year revenue growth of roughly 25% for the third quarter. While we expect the supply chain challenges to continue for the foreseeable future, our confidence is growing that we can exceed our revenue growth model shared at our 2022 Investor Day held in February. Our operational and financial performance in this uncertain market has been exceptional. We are profitable. Our balance sheet is strong. We consistently generate cash, and we expect this trend to continue. Based on our expected performance, we are confident we will create significant shareholder value over the long term. However, in the near term, the market downturn has presented us with an opportunity to purchase our own shares.
To that end, our board of directors has authorized a one-year repurchase plan, allowing us to invest up to $100 million in our common stock on an opportunistic basis. In closing, the enormous secular opportunity we are capitalizing on grows every day, and the Calix team is committed to executing with excellence to help our customers simplify their businesses, excite their subscribers and grow their value. With that, let's open the call for questions. Daryl?
Thank you. We will now be conducting a question and answer session. If you would 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 would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first question comes from the line of George Notter with Jefferies. Please proceed with your question.
Hi, guys. Thanks very much, and, congratulations on all the traction in the business, both on the hardware side and the software side. I guess I wanted to ask about the progress with AXOS and EXOS. Obviously those are attached to hardware sales, but, you know, lots and lots of growth here. I know you guys have been working to move EXOS from a perpetual software license model to a subscription model. I think that transition started about a year ago. Could you kind of walk us through, like, where you are in that transition? I'd love to know what, you know, what the mix of new wins would look like in terms of subscription versus perpetual software license, and I think on the AXOS side, you're also looking at making that transition.
Can you talk about where you are in terms of progress there? Then maybe tie in some of the revenue growth rates you're seeing on AXOS and EXOS. I think you said 129% year-over-year on EXOS and 73% on AXOS. You know, kind of walk through that transition. Thanks a lot.
Thanks, George, for the question. The transition is pretty simple. With our Revenue EDGE offerings, almost all of the EXOS today is in a subscription form. With our AXOS offerings, it is still a licensed operating system, so it's literally 100% on one and 0% on the other, to answer your question directly. As for progress, there's a number of examples, but let's just say that obviously AXOS is tied to network investment, which you're seeing more and more investments going into the network in fiber and XGS-PON. Obviously on the Revenue EDGE side, you know that we're focused on what's going on with our customers and their success. Michael, maybe you've got an example or two you want to share on the Revenue EDGE side as an example.
Yeah. I'm actually gonna tie the two together.
Please do.
Is that we've reached a tipping point where we're finding the broadband service providers who are looking at the different technologies are now looking to Calix for a complete end-to-end because of the fact that we tie the two together. We tie the network to the prem. For example, Brightspeed is looking to us to elevate and speed their business, by looking to Calix for an end-to-end solution, which covers everything they do on the network to what they're doing on the prem, and then tying it together with Support Cloud, Operations Cloud, and everything we're doing from Marketing Cloud point of view. That's really the big pivot point for us, and that's why you're seeing that growth because they're seeing the value, like never before.
I guess I'd also ask about progress on the cloud modules. You mentioned Operations Cloud and Marketing Cloud. I saw that RPOs jumped up about $25 million sequentially. It looks like really good progress in selling the cloud modules. Maybe it's coming from, you know, selling longer term contracts, but can you just give us a sense for, you know, why that number seems to be inflecting in terms of sequential improvement?
Michael, why don't you take that?
Again, this comes down to as we reach the tipping point where the promise of what we're doing in the cloud has always been that they're platforms, and those platforms allow us to integrate incremental solutions, which makes it even more attractive. You start by buying the cloud to do one function, for example, support or operations or marketing. When you look to Calix for is, "How do I expand my broadband business through a wide range of ecosystem partners to ensure that I have the most robust operational and go-to-market solutions?" This quarter we added Bark. If you haven't looked at Bark is a social media listening platform for parents, which has had an incredible impact on millions of children in North America with regards to cyberbullying and, a bunch of other elements to protect them.
The second one we added on marketing cloud was our fifth social platform, which is Constant Contact. That gives a small or medium service provider the ability to really integrate and engage with their customer on a day-to-day basis. I'd say that's what's really driving the clouds, as we pivot in this next stage of ecosystem.
Great. Okay. Thank you, guys, very much.
Thanks, George.
Thank you. Our next question has come from the line of Ryan Koontz with Needham & Company. Please proceed with your questions.
Hi. Good morning. Nice quarter. Great to see the visibility driving the raise in the year for Q3 anyway. Can you walk us through puts and takes on the gross margin front here? Are we mostly dealing with past price increases now? Are you seeing any relief on logistics and expedites? Can you comment on the kind of trend on decommits, which sounds like that's improving? Thanks a lot.
Ryan, let me just shape it, and then we're gonna hand it over to Cory. The shift in the model, you know, as we spoke, going from 70%-80% of bookings, which is obviously a leading indicator, the transformation of the business continues unrelentingly. Having said that, on the other side of it, the supply chain continues to be just a war every day. So Cory, maybe you want to answer the puts and takes on the supply side. Thanks, Ryan.
Yeah. Ryan, I would characterize it when you're going through a lot of pain, just a relief from the pain makes you feel like things are better. So generally across the board, you have a general sense that things are getting better, but we're still in a troughing phase. You got to remember, in order to avoid supply hiccups, everybody needs to perform in your supply chain. It only takes one. So the good news in the last 90 days, you know, we haven't had any significant surprises, so that's a plus. But we are still seeing decommits. We are obviously still have extended lead times. Those haven't contracted any. We're being notified of upcoming price increases at the first of the year, so that's a trend that's continuing.
On the logistics piece, we are seeing improvements both on air and ocean.
That's improved over the last 91 days, that's a little bit of a bright spot. All in all, you know, we're still a long way from, you know, solving those large problems that were identified earlier in the year, you know, where they relate to, redesigns of some of our products. That takes a while for it to complete. We're still working our way through it. Albeit it feels better, there's still a lot of work to do.
let me ask you just to give Brian a little more color. First quarter to second quarter, numbers of decommits, did it change or?
They're fewer.
Okay.
It's improved from the decommits, but they are still decommitting.
Helpful. Thanks, thanks so much. If I could just do a quick follow-up on the flow of subsidies. Sounds like we're seeing some nice ARPA allocations from the states. You know, how do you see ARPA playing into some of the smaller rural operators versus, you know, the tier ones that are getting some of the headlines out there? Thanks a lot.
Yeah, as we've spoken about before, ARPA funds have started to flow through in the states. It's a state-by-state thing. We're definitely seeing an impact from that. I don't know that I would say that it's material, but we're seeing it. Michael, any additional comments?
I would just say our message remains the same quarter- on- quarter for us. That's all upside, and that's. The government funding is slow to flow, and we really see it in 2023 versus right now. We're seeing bits and drabs, but that's yet to come.
Helpful. Thanks a lot. I'll pass it.
Thank you. Our next question has come from the line of Paul Silverstein with Cowen. Please proceed with your questions.
Thanks. Guys, can you hear me?
We can.
Awesome. Couple questions. One, your response regarding ARPA just now, that also applied to RDOF, that you're seeing some funds, but it's a trickle, and that should increase 2023, and any visibility to the degree of increase?
Yeah, Michael, you want to take that?
We don't have visibility into the degree of increase, but we have a significant direct sales organization that's very actively involved with all of our customers. As it arrives, we're involved with them both from the submitting phase through you know, planning for those funds when they show up. Not at this point. As I stated before, the growth that you're currently seeing right now is organic growth, us taking market share and growing our business with the 34 new VSPs that we had this quarter, and that's all upside into 2023.
Cory, returning to your response regarding supply chain, what was the degree, the quantification of the impact on revenue and on gross margin?
On revenue, Paul, I would say it's nil. Remember we are supplying our customers to their subscriber demand. We don't believe it has an impact on revenue per se. On the margin side, it's consistent with prior quarters. It's at the gross level, somewhere between 400-700 basis points from pre-pandemic levels. As we said before, it's important to realize that a lot of those price increases are not gonna actually be reversed. It's kind of a moot point. That's not gonna be the new normal. We're not gonna revert back to that old level. That gives you kind of just a sense of where it is relative to, you know, the aggregate headwinds.
Cory, just to be clear, you think your gross margin, but for logistics, freight, SIMs, ICs, et cetera, would have been somewhere between 54%-57%?
Correct.
How much of that is freight and logistics that I assume you do expect to recover?
Wait, wait a minute. Say that again, Paul.
How much of the impact has been freight and logistics as opposed to increased costs on SIMs and ICs?
That varies from quarter- to- quarter. We don't, I mean, again, to Corey's point, we don't know what's gonna stay baked in. We don't know what's gonna get recovered. As this normalizes, I think it's best that we do it almost retrospectively. Because I think you're gonna see a lot of vendors in the supply chain attempt to hold on to price increases for as long as they can, and they're gonna, you know, yield balance and do other things to do so.
Have your price increases started to impact yet, or that's still ahead?
Yeah, Paul, they've started, but remember we said when we raised prices, it was on new orders.
Yeah.
Consequently, you know, while it's just small, but you'll see more of it as we progress through time, greater impact on foreign. Certainly, as you move into 2023. Now mind you, part of that price increase was to ensure that we maintain that 50% gross margin for the current year. Right? You know, we obviously have visibility into some of the PPVs that are coming, and it's also measured. The price increase should not be thought as a margin recovery piece. The margin recovery piece in 2023 is really due to continued product mix as we continue to sell more software, more platforms.
The 100-200 basis points of a margin improvement next year.
an assumption that the supply chain is no longer getting materially worse.
Right.
Cory, have you now on top of the supply chain impact that you and everybody else have been experiencing over the last year plus, you've now got it sounds like inflation is starting to hit over and above supply chain. I'm hearing other companies cite a 10% type increases in labor costs on average with it varying depending on region. Is that what you're starting to see?
No, we're not seeing that level of wage inflation.
Are you seeing some degree of inflation that, or is that already baked in?
Are you talking about on the margin line or on the OpEx line?
Well, I guess it would be largely on the OpEx line, but I suspect it would also be, to some extent, should appear in COGS.
Well, on the COGS side, I think the answer is it's minimal. As far as in the OpEx environment and how we're competing for talent, maybe Michael, you wanna spend a moment and give some color on that?
Yeah. The majority of the people that we're hiring, and we had another record quarter for hiring people across the company, it comes down to speaking to them about, first of all, what's the purpose of the company. They really, really wanna hear that story, and so it's exciting for them. The second part of it is making sure that everything that we do as a culture is represented properly. We're fortunate that in this quarter, we won several other awards. Fortune, for the first time, recognized us with Workplace Awards for Bay Area and for Best Place to Work for Millennials. Then we won four additional awards from Comparably, which we're super proud of because of the fact that those are based upon the interviews and the feedback from our employees.
We won for career growth, which is incredibly important for someone as they're considering a change, diversity, women, and our leadership team. All of those come into play much more than compensation. Compensation is important, sure, but it's actually about, am I going somewhere with a purpose? That's something that our new employees are really gravitating towards.
Michael, did you just say that inflation is not meaningful yet to the company in terms of labor costs?
Yes, it's not.
One last question. I'll apologize to others in the queue, but one last quick question. I appreciate that it sounds like you've got your hands full with demand in the U.S., and you need to focus your investments on addressing that U.S. demand. I assume that's that you haven't yet poured meaningful investment into outside of the U.S., and U.K., and Europe, et cetera. What's going on with respect to your non-US revenue? I see that it dipped. I think you attributed it to two specific customers, but can you give us any more insight?
Your premise is correct. Our focus is on North America. The team in international has been focused on our platform business going forward. It is not an area where we are pouring resources into it, so it's still very opportunistic, and it will move around accordingly quarter- on- quarter.
Carl, given the level of demand in the U.S., you don't have a view yet as to when you will have the resources to invest more overseas?
Not at this time. Keep in mind that as we stated last quarter, we did take our first cloud offerings into the U.K. That is the only news to report, same as 91 days ago.
Regarding CityFibre specifically, the announcement the other day that they've selected you and Nokia for a 10 gig XGS-PON upgrade starting in April 2023, any incremental insight you could offer on that? Obviously, that's a big planned deployment.
Well, I mean, I think from their start, they've always wanted to be a dual vendor. They just for years never got around to it, and I think they're finally getting around to it. But Michael, if I got that right?
Yes.
There you go. That's the shortest answer I've gotten from Michael since we've worked together.
Thanks, guys. Appreciate it.
Thanks, Paul.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Christian Schwab with Craig-Hallum. Please proceed with your questions.
I'll also give my congrats on great execution. I just have one question that hasn't been asked. The two large customers that you highlighted that kinda drove the large customer base up, you know, I know from a percentage of revenue the same, but up 14%, are those, you know, your historical large customers? The follow-up on that, is there anything new or dynamic that's going on that's creating that demand, or is that just the CapEx cycle of those companies?
Yeah. It's literally quarter-to-quarter noise. I don't mean that as in the deleterious sense. It's just simply in any given quarter, depending upon timing. As you look forward, Christian, Michael spoke earlier about Brightspeed. That will be something that will become a part of this as we look into 2023, but they have as yet not closed their spinoff.
Okay, great. No other questions. Thanks, guys.
Thank you, Christian.
Thank you. Our next question has come from the line of Timothy Savageaux with Northland Capital Markets. Please proceed with your questions.
Hi, good morning, and congrats on the good results. Maybe that's where I'll start, Carl, if we can update, you know, a couple of topics that were discussed last quarter, and get your current views. The results speak to this to some degree, but, you know, I guess the overall topic is Calix's performance relative to a weakening macro environment. Doesn't really seem to be having an impact yet, and I think you had some comments on that last quarter.
Secondly, I don't know that we're seeing this right now, but the potential benefits of, or from a supply and availability and maybe even pricing standpoint, a weakening demand in places like consumer and auto tech, in terms of its impact on, you know, a more favorable supply environment in the communications technology world, is that, you know, demand remains strong. Are you starting to see anything along those lines? Kind of seeing that according a little bit this morning with the display versus optical comm. But I'd be interested in your comments or updated comments on both topics. I have a follow-up.
Okay. First of all, Tim, I'm gonna take them in reverse order, and I'm gonna ask Cory and Michael to add color. Before I do, I do wanna offer a congratulations to our operator, Daryl, who I believe is rare amongst the group in pronouncing your last name correctly this time. I thought that was noteworthy.
That was impressive. As a caveat.
I think.
I did end up on the investment bank call to start here, so I joined in late first thing. I don't know if that happened to anybody else.
Well, listen, I just wanna point out that it was pronounced correctly. All jocularity aside, your question about slackening of demand in the consumer side bleeding over into availability for components that we might see in networking silicon, this is something that we're continuing to look at. As you understand lead times, to the extent that occurs, it will take a couple of quarters. My comment on this is I think in my chats with folks that I know in the industry, that we are seeing the early signs that will happen in the future. It is not affecting us yet. Let me just stop there. Cory, anything you want to add to that?
I think that's about right. We're seeing some evidence, not a lot at this point. I think that's right.
I do think, you know, I would almost encourage you to ask the same question in 91 days and see if we have more visibility into that. I do believe there is an opportunity for that to occur if consumer demand continues to slacken. It just takes a while for that freeing up of wafers to be redirected to silicon that we might use. Hopefully, that makes sense to you. On the weakening macro side with our service providers, our BSPs, as you heard in my prepared comments, from our perspective, this is their opportunity to take advantage. As you know, the BSPs that support our platforms are the hallmark as an outstanding subscriber experience with no churn. That sets them up to take share. I'll say no more.
Michael, maybe you have an example or two of that going on that you might want to relate from our customers.
We're seeing incredible growth from across the board from our broadband service providers. You know, we press released this quarter OTTC who had 25% year-on-year growth by deploying end-to-end with the Revenue EDGE. We announced that Shenandoah Valley and ALLO have gone all in on the Revenue EDGE with ProtectIQ and ExperienceIQ to strengthen their offerings, and that's having a huge impact on NPS. ALLO right now has an NPS of 71. An NPS of 71 is cultish in the love of it. That's significantly higher than Apple even. What's that doing is it's driving significant growth. Across the board, we're seeing our customers who deploy our platforms end to end winning.
Their take rates in their footprint go up, and they also have cash flow to go overbuild other areas. We're continuing to see this, and in a downturn, as you know, winners separate from losers, and our BSPs are winners. We're very happy to be in the boat and help them win.
All right. That's a good setup for my follow-up as well, which has to do with, well, I guess end market growth versus Calix growth. You've seen, you know, in terms of what you're guiding to, pretty nice acceleration in growth throughout the year, I think at a high level, kind of 15, 20, 25%. You know, I guess how much of that is kind of, you know, specific to the, you know, quarter-to-quarter variations in your business? Or to what extent can you point to accelerating end market growth?
I mean, I know you're taking share, but maybe you can kind of discern between those two factors and, you know, whether you expect that to continue in terms of accelerating growth or if you can, you know, maybe take a stab at an overall market growth rate right now and where you expect that to go.
Yeah, I don't think in terms of market growth rate. We're focused on subscribers and helping our BSPs succeed. Let me just take the two dimensions the way I think about your question, and I'm gonna ask Michael to add some color. Ours is a land and expand model, as you've heard Michael speak to the platform model. You saw in the quarter that we added 34 new customers on top of last quarter, adding 33 new customers. The land part is a relentless focus of what we're doing. We always want to be landing new customers. That being said, our growth is always gonna be dominated by the expansion of our existing customers and working with them to succeed. Michael, maybe you've got some examples to talk to around expansion and customer success. It's all yours.
Sure. If I go back to where we were six years ago, we were an access company, and we were dominating in the network component. Now with everything that we're doing on the prem side, we have the ability to, again, back to my point on ecosystems, work with these BSPs not only in their ability to acquire new customers, which they're using Marketing Cloud and all of our behavioral insights to do at a highly effective level, but then also add incremental services on top of it that allow them to grow their revenue per subscriber. Not only as Carl stated, are we expanding by all these new broadband service providers selecting us end-to-end because we give them the lowest operating costs and the highest opportunity for success with subscribers, but once we're in that account, we're expanding radically, and this won't stop.
It is our goal on a quarterly basis to release a new service that they can monetize over and over again to constantly expand our addressable market inside the customer. I would say it doesn't stop.
Got it. Thanks very much.
Thanks, Tim.
Thank you. Our next question has come from the line of Fahad Najam with Loop Capital. Please proceed with your questions.
Good morning. Thank you for taking my question. It seems like most of my questions have already been answered, so let me ask you a big picture question, Carl. Telecom has historically been a very cyclical business. Your largest customers tend to invest in CapEx, and then after the investment phase, they go through a prolonged period of a nuclear winter where they're trying to maximize their return on their CapEx investments. Historically, companies, your peers have said that, you know, that's true, but all their customers are upgrading at different times, so it gives them relatively smoother revenue trajectory. COVID-19 seems to have disrupted everything. Everybody is now forced to upgrade at the same time. Stimulus funds, which everybody's chasing, is forcing everybody to upgrade essentially at the same time.
We kind of have this super cycle and then maybe followed by a deep nuclear winter. How are you thinking about your competitive position? I know you said about land and expand, and you seem to be investing a lot in the land portion of it. How long do you sustain that land, investment cycle, assuming that there is a potential prolonged nuclear winter following this, massive investment phase?
Yeah. What you just highlighted is the correct statement for 60 years of the service provider space. The reason it's the way to think about the service provider space is because you're focusing on the service provider space being a pipe infrastructure business. What we are doing is two things. Obviously, we build networks, but the services that we are so focused on and our customers' success, when you hear us say, "Simplify your businesses, excite your subscribers," the excite your subscribers is all about the services layer, which is an unrelenting go-forward business model that we're focused on. From time to time, there'll be stimulus money, there'll be CapEx. Those are things that, in essence, are investments in period. We're focused on the ongoing success of our customers with their subscribers.
The CapEx investment, and you've heard me speak to this for many years now, is nice, but it's where we begin, not where our revenue ends. The end period CapEx is sort of the ante to the game. We're focused on the subscriber experience, our customers' success, growing their revenues. Actually, our whole business model, as you heard Michael earlier say organically, is about the ongoing everyday revenue success, cost reduction of our customers. Underneath that, there are CapEx investments that go on. If it was Calix 1.0, then your question would be 100% correct. But in what we are doing today, it's almost irrelevant.
Carl, my question was really about your investment cycle. You're investing in sales and marketing and R&D as you're trying to land new customers. What I'm trying to get from you is if it is not entirely focused on landing new customers, then how should we be thinking about your intensity of OpEx as
Our investment cycle is all tied to the services. Therefore, you see our OpEx model is giving you those parameters based upon our revenue. When we say 17%-19% of revenue, we're gonna continue to invest in that because we're constantly focused on expanding with our customers and expanding not only new customers, but expanding with our existing customers. Our OpEx intensity will remain as per model, and we are in that model today. Say we're a little low on G&A and just a tick low on R&D.
Appreciate the answer. Thank you. That was very helpful.
Yeah.
Thank you. Our next questions come from the line of Chris Howe with Barrington. Please proceed with your questions.
Good morning, Carl. Good morning, Michael, and good morning, Cory. Most of my questions here have been taken, but I'll perhaps kinda move through the questions that have been asked and ask it a different way.
Okay.
Just to affirm this statement, it seems like you're at a place or a phase, given the increasing percentage of all-platform as a percentage of bookings, the continuation of that trend, you're at 80%. We also have an environment, a challenged environment, which is hopefully at a trough and will improve to some extent as we move through the duration of this year and into 2023, although it will still remain. It seems like with the different puts and takes in the business that you're at a point beyond fiscal 2022 at which you can sustain the 100-200 basis points of gross margin improvement. Anything else that would indicate an improving environment could lead to moving towards the higher end of this range or we can revisit that discussion later.
Is that a fair statement?
That is phrased precisely, correctly, and a fair statement. In 2023, that is what we see.
Okay. As we think about the 50% for the duration of this year, given the different buckets within the supply chain challenges, some of which may be improving, some of which may not be improving, is there any early indication that the first half of 2023 could be a little bit better than what we expect, maybe show some sequential improvement in gross margin? Or should we still think of that as perhaps being more back half weighted in nature?
Yeah. For the balance of 2022, we again will reiterate that we'll be close to $50, right?
Yeah
I think that's our jumping off point for next year. I think that throughout 2023, that 100-200 basis points improvement for the year will start to show, slightly. I don't think it's gonna be completely
Mm-hmm
Back-end loaded. I think there will be a slight ramp. It'll slightly improve throughout the year.
Each quarter.
Each quarter, there should be improvement.
Okay.
Okay, perfect. All right. Thank you. That's all I have for right now. Thanks for answering my questions.
Chris, thank you.
Thank you. Our next questions come from the line of Mike Genovese with Rosenblatt Securities. Please proceed with your questions.
Wow, first to last. I must have offended you somehow, Carl. Nonetheless, I will also say that, you know, in this series of fireside chats here that most of the questions have been asked, so I'm just gonna stick to one topic. Do you want to quantify the new guide at all? I mean, you're saying above 10-15, but does that mean 15-20, or it just means above 10-15?
Yeah. First of all, Mike, let me point out that cleanup hitter is a position of honor. When the bases are loaded, we're bringing up the big wood. Now let's go from there. Directly to your question, I think as we sit here today, Cory would tell you that Q4 is gonna look, we think, something like Q3. If you do the math, it puts us basically right at 20% year-over-year growth. You'll notice that inventories are down quarter-over-quarter. We feel good about what's in the pipeline, but they are down quarter-over-quarter. The supply work continues every hour of every day.
I am quite happy that we've arrived at a place where we can start to see 20% growth year-over-year on the back of two years of 25% growth. You know, keep in mind that it's the end of July, and we're finally here. It's just the nature of the supply chain. 20% year-over-year, I think is what Cory would say, not to put words in his mouth.
That's what I would say, Carl.
That's what Cory would say.
Yep. Makes sense. Well, that leads right to my next question, which is, as you said, two years at about 25%, a year at 20%, your guidance on the top line going forward is 10%-15%. We have-
Yeah
... more RDOF, more ARPA, and we have BEAD coming. Is 10-15 correct for beyond this year or, I mean, how do you think about that?
We have not changed our model, and we won't change our model until we have a reason to change it. The reason to not change it today is. In spite of what Cory said, which is, you know, if you get your head banged against the wall long enough, somebody stops. It feels like everything's funny. The supply chain is in a relief from discomfort mode right now, and it's not in a high-performance mode. We need a lot more visibility on the supply chain and a lot more stability to change that model today. If you watch what's happened during the year as the visibility improves, we will let you know. Right now, to look out over six quarters and change that, I'm happy that we can stand on 10-15 as we sit here today.
Okay. Maybe just one other topic then. Now, have you thought about. I'm trying to think of numbers that you may be able to give us that maybe wouldn't give away too much to your competition, but would be helpful. I'm thinking of things like ARR or, you know, SaaS bookings, SaaS growth rates. I mean, I think the revenue performance obligations are supposed to approximate that, but I'm thinking of something more directly. Have you thought about things like ARR as metrics to give us?
Have we thought about it? Sure. Will we do it? No. RPOs will remain the best proxy for what we're doing. To your point, and as Cory has said, it is an incomplete metric, but as you've also heard us say directionally, it gives you the best sense for what's going on. I would leave you with this. Our sequential growth rate on revenue was 9% in the quarter. Our sequential growth rate on RPOs was double that. As you simply look at the business, you get a sense for the rate of evolution. Beyond that, we will not go at this time.
Okay. Do you have any metrics that you can share? I think Michael kind of touched on this a little bit, but just about anything about total number of cloud customers or numbers of customers who take one cloud versus numbers of customers who take more than one cloud product at this point? Is there any color you can give us there?
I can. We have in conferences been asked that question, and we've said that the number of customers that are deploying one cloud or more is over 800.
Okay. No breakout between one cloud and multiple clouds?
No. That data, you know, obviously is available in the company, and you are welcome to apply for any number of jobs that we have open. Mike?
All right. Well, let's leave it on that note then. Thanks a lot. Congratulations. Keep up the good work. Thanks for putting me, I guess, ninth in the order. With such a strong rally, it's like the new cleanup hitter. I agree. Thank you.
Thanks, Mike.
Thanks, Mike.
Thank you. We have reached the end of our question and answer session, and I would now like to turn the call back over to Mr. Fanucchi for closing comments.
Thank you, Daryl. Calix leadership will participate in a number of investor meetings during the third quarter. Information about these events, including dates and times for public webcasts of management presentations, will be posted in the Events and Presentations page of the Investor Relations section of the Calix website. 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, and have a great day.
Thank you. That does conclude today's conference call. You may disconnect your lines at this time.