Calix, Inc (CALX) Q2 2022 Earnings Call Transcript

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. 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's 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 and 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 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 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.

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. The sequential growth was driven by BSPs that are providing broadband-as-a-service rather than just a basic pipe and we expect this trend to continue. A 77% year-over-year increase in revenue performance obligations is 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.

Thank you. We will now be conducting the question-and-answer session. Our first questions come 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 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 where you are in that transition? I'd love to 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? And then maybe tie in some of the revenue growth rates you're seeing on AXOS and EXOS. I think you said 129% in year-on-year on EXOS and 73% in AXOS 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 AXOS today is in a subscription form. With our AXOS offerings it is still a licensed operating system. So it's literally a 100% on one and zero percent on the other to answer your question directly. As for progress, there are a number of examples. But let's just say that obviously AXOS is tied to network investments. What you're seeing is more-and-more investments going into the network and fiber and XGS-PON. And 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 going to tie the two together. BSPs that we 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 tied a network to the FAN. So, for example, Brightspeed looking to us to elevate and speed their business, by looking Calix for an end-to-end solution which covers everything to do on the network to what they're doing on the premise and then tying it together with Support Cloud, Operations Cloud and everything we're doing for Marketing Cloud. So 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.

Got it. And then, I guess, I'd also ask about progress on the cloud module. You mentioned Operations Cloud and Marketing Cloud. I saw the RPOs jumped up about $25 million sequentially. It looks like really good progress in selling the cloud modules. Maybe it's coming from selling longer-term contracts. But can you just give us a sense for why that number seems to be inflecting in terms of the sequential improvement?

Michael, why don't you take that?

Again this comes down to as we reached the tipping point where the promise of what we're doing in the cloud has always been at their 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. And then when you look at the Calix for it, 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. And if you haven't looked at a Bark, 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. And then the second one we added on Marketing Cloud was our fifth social platform which is Constant Contact that gives us a smaller-medium service provider the ability to really integrate and engage with their customer on a day-to-day basis. So, I'd say that what we love in the cloud is that we pivoted this next stage of the ecosystem.

Okay. Thank you guys very much.

Thanks, George.

Thank you. Our next questions come from the line of Ryan Koontz with Needham & Company. Please proceed with your question.

Good morning. Nice quarter and 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? And can you comment on the kind of trend on de-commits which sounds like that's improving? Thanks a lot.

Ryan let me just shape it and then I'm going to hand it over to Cory. The shift in the model as we spoke going from 70% to 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.

Yes. Ryan, I would characterize it when you're going through a lot of pain just start to rule 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 on 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, we haven't had any significant surprises, so that's a plus. But we are still seeing de-commits. 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. So that's improved over the last 90 days. So that's a little bit of a bright spot. But all in all, we're still a long way from solving those large problems that were identified earlier in the year, where they relate to redesign of some of our products. That takes a while for it to complete. So, we're still working our way through it, albeit it feels better. There's still a lot of work to do.

So let me ask you just to give Ryan a little more color. First quarter to second quarter numbers of de-commits did it change or?

They're fewer. So it's improved from the de-commits but they are still de-committing.

Helpful. Thanks so much. If I could just do a quick follow-up on the flow of subsidies. It sounds like we're seeing some nice RF allocations from the states. How do you see ARPA playing into some of the smaller rural operators versus the Tier 1s that are some of the headlines out there? Thanks a lot.

Yes. As we've spoken about before ARPA funds have started to flow through in the states, it's a state-by-state thing and 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, ARPA remains the same quarter-on-quarter for us. That's all upside. The government funding is slow to flow and we really see it in '23 versus right now, so we're seeing bits and drives they actually yet to come.

Helpful. Thanks a lot.

Our next questions come from the line of Paul Silverstein with Cowen. Please proceed with your question.

Guys can you hear me?

We can.

A couple of questions. One, your response regarding ARPA just now, that also pertained off that you're seeing some funds, but it's a trickle and that should increase in 2023. Any visibility to a degree of increase?

Michael, do 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. So, as it arrives, we're involved with them both from the submitting phase through planning for those funds when they show up. So not at this point. But as I stated before the growth that you're currently seeing right now is organic growth from us taking market share and growing our business with the 34 new BSPs that we had this quarter and that's all upside into 2023.

And Cory, returning to your response regarding supply chain, what was the degree of the quantification of the impact on revenue and on gross margin?

So, on revenue Paul, I would say it's nil. Remember, we are supplying our customers to their subscriber demand. So 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 and 700 basis points from pre-pandemic levels. But as we said before, it's important to realize that a lot of those price increases are not going to actually be revamped, can be reversed. So it's kind of a moot point. That's not going to be the new normal. We're not going to revert back to that full level. And so, that gives you kind of just a sense of where it is relative to the aggregate headwinds.

Cory, just to be clear, you think your gross margin but for logistics, freight, semis, ICs, et cetera, would have been somewhere between 54% to 57%?

Correct.

And how much of that is freight, logistics that I assume you do expect to recover?

We can't hear that. Say that again, Paul?

How much of the impact has been freight and logistics as opposed to increased costs on semis and ICs?

That varies from quarter to quarter. We don't know what will remain consistent, and we can't predict what will be recovered. As the situation normalizes, it makes sense to analyze it retrospectively, as many vendors in the supply chain will likely try to maintain price increases for as long as possible, and they will adapt to achieve that.

Have your price increases started to impact yet, or that's still ahead?

Yes, Paul, they've started. But remember, we said when we raised prices, it was on new orders.

Yes.

And so consequently, while it's just small, you'll see more of it as we progress through time. So, greater impact in the future certainly as you move into 2023. Now, I'll remind you, part of that price increase was to ensure that we maintain that 50% gross margin for the current year, right? So, we obviously have visibility into some of the PPVs that are coming and it's also measured. So, 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 and more platforms, and that's where we'll get to the 100 to 200 basis points of the margin improvement next year.

And an assumption that the supply chain is no longer getting materially worse.

Right.

Cory, in addition to the supply chain challenges that you and others have faced over the past year, inflation appears to be escalating beyond just those supply chain issues. I've heard reports from other companies mentioning an average increase of about 10% in labor costs, although this can vary significantly by region. Is that something you’re beginning to observe as well?

No. No, we're not seeing that level of wage inflation.

Are you seeing some degree of inflation in 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 appear in COGS to some extent.

Well so 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 want to spend a moment and give some color on that?

Yes. 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 want to 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. And 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 the Best Place to Work for Millennials. And then we won four additional awards from comparable which we're super proud of, because of the fact that those are based upon the interviews and the feedback from our employees, and we won for career growth, which is incredibly important for someone who is looking for a change, diversity women and our leadership team. And so all of those come into play much more than compensation, compensation to the parts sure, but it's actually about am I going somewhere with the purpose and that's something that our new employees are really gravitating towards.

So Michael, did you just say that inflation is not meaningful yet for the company in terms of labor?

Yeah. It's not. It’s not.

Okay. I have one last question and I apologize to those waiting, but it's a quick one. It seems you're very busy with demand in the US and need to prioritize your investments there. I assume that you haven't made substantial investments outside of the US, such as in the UK or Europe. However, what can you tell us about your non-US revenue? I noticed it has decreased, and I believe you mentioned it was due to two specific customers. Can you provide more insight on that?

Paul, your premise is correct. And so our focus is on North America. The team in international has been focused on our platform business going forward. But 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.

And Carl, given the level of demand in the US, do you have a timeline for 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 offering into the UK. So that is the only news to report same as 91 days ago.

And regarding CityFibre specifically the announcement the other day that they selected you and Nokia for 10G XGS-PON upgrade starting in April 2023. Any incremental insight you could offer on that? Obviously, that's a big plan deployment.

Well, yeah, I mean I think from their start they've always wanted to be a new 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 for Michael since we've worked together.

Thanks guys. Appreciate it.

Thanks Paul.

Thanks Paul.

Thank you. Our next questions come from Christian Schwab with Craig-Hallum. Please go ahead 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 drove the large customer base, I know from a percentage of revenue the same, but up 14%. Are those your historical large customers? And 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 and I don't mean that in the deleterious sense. It's just that in any given quarter depending upon timing. As you look forward Christian, Michael spoke earlier about price that will be something that will become a part of this as we look into 2023 but they have as yet not closed their spin-off.

Okay, great. No other questions. Thanks guys.

Thank you Christian.

Thank you. Our next question is come from the line of Tim Savageaux with Northland Capital Markets. Please proceed with your question.

Hi, good morning and congrats on the good results. And maybe that's where I'll start Carl. If we can update a couple of topics that were discussed last quarter and get your current views and the results speak to this to some degree, but I guess the overall topic is Calix's performance relative to a weakening macro environment. It doesn't really seem like it's having an impact yet. And I think you had some comments on that last quarter? And secondly, and I don't know that we're seeing this right now, but the potential benefits of 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 a more favorable supply environment in the communications technology world is that demand remains strong? Are you starting to see anything along those lines kind of seeing that coming a little bit this morning with 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 going to address your points in reverse order and I'll ask Cory and Michael to provide additional insights. Before that, I want to congratulate our operator Darryl for correctly pronouncing your last name this time. I found that impressive. I also attended the Independent Bank call earlier this morning, though I'm not sure if anyone else did. I want to point out that it was pronounced correctly. All jokes aside, regarding your question about the decrease in consumer demand affecting the availability of components we might see in networking silicon, this is something we're continuing to monitor. As you know, lead times will be impacted if this trend continues, and it will take a couple of quarters to see the effects. From my discussions with industry contacts, we are observing early signs that this could happen in the future, but it is not impacting us yet. Cory, do you have anything to add?

I think that's about right. We're seeing some evidence not a lot at this point. So I think that's right.

I encourage you to ask the same question in 91 days to see if we have more visibility into that. I believe there is an opportunity for change if consumer demand continues to decrease. It takes time for the release of wafers to be redirected to the silicon we may use. I hope that makes sense. Regarding the weakening macro environment with our service providers, this is an opportunity for them to capitalize on. The BSPs that have acquired platforms are recognized for providing an excellent subscriber experience with no churn, which positions them to gain market share. Michael, do you have any examples from our customers that you would like to share?

We're seeing incredible growth from across the board from our broadband service providers. We press released this quarter OTTC had 25% year-on-year growth by deploying end-to-end with the Revenue EDGE. We announced that Chariton 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 and in love of it that's significantly higher than Apple even. And what's that doing is it's driving significant growth. So across the board, we're seeing our customers who deploy our platforms and winning.

So their take rates in their footprint go up and they also have cash flow to go overbuild other areas. So we're continuing to see this. And in a downturn as you know, winners separate from losers and our BSPs are winners. And so, we're very happy to be in the boat and help them win.

That's a good setup for my follow-up regarding end market growth compared to Calix growth. You've mentioned guidance indicating strong acceleration in growth throughout the year, estimating around 15%, 20%, and 25%. How much of this growth is due to quarter-to-quarter variations in your business, and to what extent can you attribute it to accelerating end market growth? I understand you're gaining market share, but could you clarify the distinction between these two factors and share your expectations for ongoing acceleration in growth? Additionally, could you provide an estimate of the overall market growth rate right now and your forecast for its trajectory?

Yeah. We don't – I don't think in terms of market growth rate. We're focused on subscribers and helping our BSPs succeed. But let me just take the two dimensions, the way I think about your question. I'm going to 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. So the land part is a relentless focus of what we're doing. That being said, our growth is always going to be dominated by the expansion of our existing customers and working with them to succeed. Michael maybe you've got some examples that 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. But now with everything that we're doing on the premise 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 will allow them to grow their revenue per subscriber. So 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 cost, and the highest opportunity for successful subscribers. But once we're in that account we're expanding radically and this won't stop. It is our goal on early basis to release a new service that they can monetize over and over again to constantly expand our addressable market inside the customers. So, we say, it doesn’t stop.

Got it. Thanks very much.

Thank you, Tim.

Our next question is come from the line of Fahad Najam with Loop Capital.

Good morning. Thank you for taking my questions. 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 media winter where they're trying to maximize their return on their CapEx investments. So historically, comping your peers have said that, that's true, but all the customers are upgrading at different times. So it gives them relatively smoother revenue trajectory. But COVID-19 seems to have disrupted everything. Everybody is now forced to upgrade at the same time, seamless funds, which everybody is chasing you're supporting everybody to update essentially at the same time. So we kind of have the super cycle, and then maybe followed by a deep nuclear winter. So 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. But how long do you sustain that land investment cycle? Assuming that, there is a potential prolonged nuclear winter following this massive investment phase?

What you've pointed out accurately reflects the service provider space over the last 60 years. It's important to view this sector as a pipe infrastructure business. Our focus is on two main areas: building networks and prioritizing the success of our customers. When we emphasize simplifying businesses and exciting subscribers, we mean enhancing services, which is a long-term business model we are committed to. While there may be instances of stimulus funding and capital expenditures, our main concern is ensuring our customers succeed with their subscribers. The capital expenditures we discuss are just the starting point, not the endpoint for our revenue. These investments are merely the ante in the game, as we concentrate on improving subscriber experiences and driving revenue growth for our customers. Our business model, as Michael mentioned, is centered on sustainable revenue success and cost reductions for our clients. While past models, like Calix 1.0, might have made your question valid, the current approach we're taking renders that almost irrelevant.

Carl, my question was really about your investment cycle. You're investing in sales and marketing as well as R&D to attract new customers. What I'm trying to understand is if your focus isn't solely on acquiring new customers, how should we view your operational expenditure in terms of growth and profitability?

Our investment cycle is all tied to the services. And therefore, you see our OpEx model, is giving you those parameters based upon our revenue. So when we say 17% to 19% of revenue, we're going to 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. So our OpEx intensity will remain as per model and we are in that model today. They were a little low on G&A and just tick low on R&D.

Appreciate the answer. Thank you. That was very helpful.

Thank you. Our next question is come from the line of Chris Howe with Barrington. Please proceed with your questions.

Good morning, Carl, Michael, and Cory. Most of my questions have already been addressed, but I’d like to reframe some of them. To clarify, it looks like you are at a stage where the increasing percentage of ATP as part of bookings is reaching 80%. We are also experiencing a challenging environment that we hope has hit its lowest point and will improve as we progress through this year and into 2023, although challenges will persist. Given the various factors at play in the business, it appears that you are at a point beyond fiscal 2022 where you can maintain the 100 to 200 basis points of gross margin improvement. Any additional signs of an improving environment could lead to reaching the higher end of this range, or we could revisit this topic later. Is that an accurate assessment?

That is precisely correct in a fair statement. In 2023, that is what we see.

As we consider the 50% for this year, we recognize the various aspects of supply chain challenges, some of which may be improving while others may not. Is there any early indication that the first half of 2023 could perform better than we anticipate, potentially showing some sequential improvement in gross margin, or should we expect that to be more centered in the latter half of the year?

Yes. So for the balance of 2022, we again will reiterate that we'll be close to 50%, right?

Yes.

And so I think it's where we that's our jumping off point for next year. I think that throughout 2023, that 100 to 200 basis point improvement for the year will start to show slightly. So, I don't think it's going to be completely back-end quoted. I think there will be a slight ramp, it will slightly improve throughout the year. So each quarter, there should be improvement.

Okay. Perfect. All right. Thank you. That’s all I have for right now. Thanks for answering my questions.

Okay. Thank you.

Thank you. Our next question is come from the line of Michael Genovese with Rosenblatt Securities. Please proceed with your questions.

Well, first and last, I must have offended you somehow, Carl. But nevertheless, I will also say that, in the series of fireside chats here that most of the questions have been asked. So I'm just going to stick to one topic. Do you want to quantify the new guide at all? I mean, you're saying above 10% to 15%, but does that mean 15% to 20% or it just means above 10% to 15%?

Yes. First of all, let me highlight that cleanup jitter is an important task for us, as we work towards significant improvements. Now, regarding your question, I believe Cory would indicate that Q4 will likely resemble Q3. So, doing the math suggests we are aiming for around 20% year-over-year growth. You'll notice that our inventories have decreased from the previous quarter. We are optimistic about what we have lined up, but indeed, they are lower than last quarter. Our supply efforts are ongoing every hour of every day. I am quite pleased that we can project a 20% growth year-over-year following two years of 25% growth. It's important to note that we are at the end of July and are finally reaching this point, which reflects the nature of our supply chain. Therefore, I believe 20% year-over-year is what Cory would say, though I don't mean to speak for him.

That's what I would say, Carl.

Yes, that makes sense. So, that brings me to my next question. You mentioned a growth of about 25% in 2020, and now your guidance for the upcoming period is between 10% and 15%. Considering the additional support from RDOF, ARPA, and BEAD, is the 10% to 15% guidance accurate for the future beyond this year? How do you view that?

We have not changed our model and we will not change it until there is a reason to do so. Currently, the supply chain is experiencing relief from discomfort but is not operating at a high-performance level. We need greater visibility and stability in the supply chain before we can modify our model. As visibility improves throughout the year, we will keep you informed. For now, we are focused on the next six quarters and I am confident that we can maintain a growth rate of 10% to 15% as we sit here today.

Okay. I have one more topic to discuss. Have you considered sharing any numbers that could be helpful without revealing too much to your competition? I'm thinking about metrics like ARR, SaaS bookings, or SaaS growth rates. While revenue performance obligations might approximate those figures, I'm looking for something more direct. Have you thought about providing ARR as a metric?

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. And so 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. And so as you definitely look at the business, you get a sense for the rate of evolution, but beyond that we will not go at this time.

Do you have any metrics that you can share? I think Michael touched on this a little, but could you provide any information about the total number of cloud customers or how many customers use one cloud product versus those who use multiple cloud products at this point? Is there anything you can share on that?

I can, we have in conferences they have been asked that question, and we've said that the number of customers that are deploying on cloud or more is over 800.

Okay. But no breakout between one cloud and multiple clouds?

No. But that data obviously is available in the company and you are welcome to apply for any number of jobs that we have opened.

All right. Well, let's leave it. Let's leave it on that note then. Best of luck. Congratulations keep up the good work. Thanks for putting me, I guess, ninth in the order. But with such a strong rally it's like the new clean off here I agree. Thank you.

Thanks, Mike.

Thanks, Mike.

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

Thank you, Darryl. Calix leadership will participate in a number of investor meetings during the third quarter. Information about these events, including dates and times for public webcast 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 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.