Calix, Inc (CALX) Q1 2024 Earnings Call Transcript

Greetings, everyone and welcome to the Calix First Quarter 2024 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 call is being recorded. It is now my pleasure to introduce your host, Jim Fanucchi, Vice President of Investor Relations. Sir, please go ahead.

Thank you, Melissa and good morning, everyone. Thank you for joining our first quarter 2024 earnings call. Today on the call, we have President and CEO, Michael Weening; and Chief Financial Officer, Cory Sindelar. As a reminder, yesterday after the market closed, Calix issued a news release which was furnished on our Form 8-K along with our stockholder letter, and was also posted in the Investor Relations Section of the Calix website. Today's conference call will be available for webcast replay in the Investor Relations Section of our website. Before I turn the call over to Michael for his opening remarks, I want to remind everyone on this call, we will refer to forward-looking statements, including all statements the company will make about its future financial and operating performance, growth strategy, and market outlook; and 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 first quarter 2024 letter to stockholders, and in the 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 the GAAP to non-GAAP measures is included in the first quarter 2024 letter to stockholders. Unless otherwise stated, all financial information referenced in this call will be non-GAAP. With that, it is my pleasure to turn the call over to Michael. Michael, please go ahead.

Thank you, Jim. Our results in the first quarter demonstrated the continued execution and strength of our strategy. Our platform, cloud, and managed services are enabling our broadband customers to succeed against their competitors every day. Their success delivers value to their stakeholders and in turn to Calix. Our unique broadband business model delivered record gross margins as BSPs deployment of the Calix platform, cloud, and managed services continued unabated. However, our clients' business remains challenged in the same way the market is, with larger customers re-evaluating their CapEx plans; this trend continued into the second quarter, which we did not forecast. Now that we understand this larger customer dynamic, we have adjusted our expectations accordingly. At the same time, however, it highlighted the ongoing strength of our smaller BSP customers. While growth in this set of customers is muted by new builds and decisions around BEAD, the business as usual part of their operations, completing existing network builds and filling those networks by winning new subscribers remains robust. Leading indicators from infrastructure vendors that deploy fiber combined with green shoots in our customer base lead us to forecast that the second quarter will be the path of our appliance revenue. Regarding BEAD and as we have said, we believe revenue will begin in early 2025 and we will lead. Working with customers to help them win government funds is something that we have done for 15 years. Recently, you saw us create a partnership with industry-leading funding solution provider, Ready.net. This partnership enables us to leverage Ready.net’s tools as part of our existing Funding Console Program, connecting our more than 1600 Calix customers with a streamlined portal to apply for and win grant funds, secure capital, and adhere to public funding requirements. Earlier this month, we announced that 74% of federally funded BSPs use Calix for their broadband speed test. This is a significant indicator of future success, as any BSP that receives government stimulus must routinely report back on the speeds they are delivering to their customers. This is a complicated undertaking that we've made simple via our platform, cloud, and managed solutions; we expect that 74% figure to grow. While the largest government stimulus program is soon to be here, we've been actively landing new footprints as our consolidated network delivers the lowest cost per bit per mile infrastructure, and up to 80% a month reduction in operating expense, as demonstrated at Verizon. Unlike in times past, when many new accounts were start-ups, the 10 new accounts recorded in the first quarter all came from existing service providers. We intend to maintain our aggressive stance in the market at this critical time. Finally, and most importantly, the wave of disruption is speeding up. Larger service providers are engaging in conversations with Calix to help them build a more valuable business by avoiding commoditization. Two examples from the first weeks of Q2 include signing the largest cloud deal in our history, and a larger service provider selecting SmartBiz; both are indicative that we are crossing the chasm in this disruption. With that, I'd like to turn it over to Cory to review our financial results for the quarter.

Thank you, Michael. The first quarter represented another quarter of deliberate and disciplined execution. We delivered revenue of $226.3 million, which was within the guidance range we provided in January. Against the crosswinds prevalent in our industry, the continued growth in our platform, cloud, and managed services drove record non-GAAP gross margins of 54.9%. In the first quarter, we saw platform adoption with 18 customers beginning their platform journey with us, and 27 customers deploying a managed service for the first time. In the first quarter of 2024, non-GAAP operating expenses were $108.4 million, down $1.6 million from the prior quarter. The decrease is attributed to our Connections Event, which occurs each year in the fourth quarter. As we talked about in our last call, our plan is to keep 2024 operating expense investments relatively consistent with 2023 as we continue to believe that this level of investment represents a great opportunity for us to grow our footprint ahead of the US Government broadband investment. Our debt-free balance sheet remains strong. At the end of the first quarter, cash and investments were nearly $240 million, representing a sequential increase of $19 million. This was our fourth consecutive quarter of double-digit free cash flow. During the first quarter, our supply chain continued to normalize. We exited Q1 with purchase commitments falling another $29 million from year-end to $147 million. Inventory deposits declined by $2 million, and our inventory turns were 3.1%, down from 3.3% last quarter as our component inventory increased. Excluding component inventory, our inventory turns would have been greater than 4%. Furthermore, we expect these reductions in working capital requirements combined with continued profitability will result in consistent quarterly double-digit operating and free cash flow. During the first quarter, we repurchased $4 million of our common stock, bringing our total common stock repurchases over the last year to $89 million. Our repurchase program remains in place with approximately $110 million available at the end of the first quarter. Now, let's discuss our revenue guidance for the second quarter. As Michael has discussed, there currently are several crosswinds in our industry. As a result of these factors, our second quarter of 2024 outlook is for revenue to be between $197 million and $203 million. The forecasted decline in revenue from the first quarter is mostly due to the continued delay of purchasing decisions at a few of our medium and large customers. Looking out a bit further, we believe the June quarter will set the bottom for revenue as revenue from a few significant customers will have diminished to a point where there is limited downside risk. When you combine the green shoots from our smaller customer base with footprint expansion, we believe we will return to revenue growth. In summary, while crosswinds affect our top line in the near term, our platform, cloud, and managed services will continue to grow unabated and drive gross margin expansion. And with the industry's strongest balance sheet, we have the financial resources to invest in our operations and grow our footprint in advance of the US Government broadband investments. Michael, back to you.

Thank you, Cory. As I have shared, I meet with broadband customers and their investors constantly. It is clear they are understanding the disruption that faces legacy network operators, which is critical to our Crossing the Chasm, from early adopters to winning an early majority. With more than 1000 customers deploying our platform, it is no surprise that we are engaging with ever larger prospects who are interested in how our BSP customers are achieving their incredible revenue, margin, cash flow, and customer satisfaction results. The entire Calix team remains energized by the opportunity to expand our platform, cloud, and managed services business. At the same time, with more than 16 million new fiber connections forecasted in the next 5 years, we have a once in a generation opportunity to land new network footprints and enable our BSP customers to win new subscribers, thereby filling those networks with an expanding portfolio of managed services. This will be supercharged by the BEAD funds that begin in 2025. While only one state has completed all 10 steps in the BEAD process, 42 other states have completed 9 of the 10 steps to begin funding. In closing, I want to reiterate that we are confident in our long-term outlook. We have a talented and motivated team executing our strategy every day. We have unique technology that positions us to surf this wave and take advantage of new network builds. We have the financial strength and balance sheet that allows us to avoid any distractions. Therefore, we intend to keep a steady and disciplined hand on our operating expense investments as we maximize this opportunity and help our customers win. Jim, let's open the call for questions.

Thank you, Michael. Melissa, please open the call for questions at this time.

Our first question comes from Ryan Koontz with Needham & Company. Please go ahead with your question.

Thanks for the question. Just unpacking your customer segments there a bit, it looks like your Tier 3 customers are the smaller customers relatively stable here but the medium and large are really hurting you. How should we think about the trajectory of those segments going forward here and into Q2? And then, how do you think about them in the second half at this kind of early stage shipping from a high level? Thanks.

Thanks, Ryan, for the question. As mentioned in our letter, we are observing some positive signs from our smaller customer base. The decline from the first to the second quarter primarily affects the medium and large customers. Specifically, in the fourth quarter, those segments generated $77 million in revenue, which dropped to about $43 million in the first quarter. We did not anticipate further declines a quarter ago, but it seems they are still navigating their capital planning processes. We now expect it to be challenging to move beyond the $43 million mark for these segments. Therefore, we believe Q2 will be the lowest point, and we are optimistic about our ability to grow from here.

Got it. Thanks. Thanks, Cory. And quick follow-up if I could. Please on your product mix here in terms of Revenue EDGE, Intelligent Access EDGE, should we think of that Intelligent Access EDGE as the trajectory for your new footprint gain? I actually thought it might be a little worse than that and might see a kind of more of a mix towards sell-in and Revenue EDGE. But how should we interpret those two product segments?

The Intelligent Access EDGE involves a combination of new network acquisitions and our existing customers enhancing their current network builds. We have observed notable strength among our rural customers in the smaller segment who continue to successfully expand their networks, which contributes to this underlying strength. Moving forward, as we begin to see the rollout of the 60 million fiber lines, we can expect a significant increase in the Intelligent Access EDGE. The Revenue EDGE represents the routine operations of our business, focusing on acquiring new subscribers. This trend is expected to persist. Additionally, last quarter we acquired 10 customers, primarily those seeking to expand and grow while differentiating themselves in their markets with our solutions, as they have existing fiber networks and are concerned about commoditization.

Got it, Michael. So it's fair to say that Intelligent Access EDGE number includes a healthy component of sell-in, fill-in, edge out from existing networks, but entirely new footprint is down much more than that?

Absolutely. This ties back to the uncertainty surrounding decision-making, as companies consider whether to invest their available capital in new network builds or to utilize funding that is projected to be available in six to eight months, particularly from BEAD funding. Moving forward, we can certainly expect an increase in network development as these BEAD funds are deployed, allowing us to expand our reach.

Got it. Great. I'll pass it on from here. Thank you.

Thank you. Our next question comes from the line of George Notter with Jefferies. Please proceed with your question.

Hi, everyone. Thank you very much. I wanted to ask about the BEAD program. I believe you mentioned it would take about 6 to 8 months. I understand that the BEAD program has faced some controversy regarding the process and potential delays. Can you provide any insight into the BEAD process? Do you genuinely believe that the funds will start to flow by the end of the year within that 6 to 8-month timeframe, or is there a chance the program might experience setbacks?

It's a good question and many people are asking it. Over the last three years, others have claimed it would arrive sooner, but we have consistently believed it would take much longer. When it eventually does arrive, we expect it to be significantly larger than many anticipate. Our perspective is that we see it happening in 2025. We believe that in early 2025, you'll start to see initial signs, and then it will progress from there; 2025 is the expected year.

Ryan, you can see from the NTIA website that they made significant progress in getting states approved through the Volume 1 or the challenge process. Including the territories, the number rose from 29 last quarter to 47. I expect the NTIA will begin focusing more on Volume 2 and approving additional states. However, you're correct that until those states receive approval, it could continue to slip. So, as with any government funds, I’m keeping a close eye on that. I’m encouraged by what I observed in the last 90 days, and we’ll see what the next 91 days bring.

Got it. As a follow-up, you mentioned the overhang related to BEAD. How many network planners have gone offline due to the wait for BEAD's effects? You indicated that there is strength in your smaller customers. Are you currently observing this in the smaller customer base, or is it something you anticipate as the year progresses? How do you view this effect in terms of its timing within your business? Thanks.

We recognized this issue in January of this year and indicated that the first half would be significantly affected. We observed this in the first quarter and now in the second quarter. There is a notable impact on some of our larger customers as they navigate this situation. Our existing customer base is still in the process of making decisions. While none have declined to apply for BEAD, some are still actively pursuing it. Consequently, there is ongoing indecision, which is less evident among smaller customers but more pronounced among medium and large ones.

Thank you. Our next question comes from line of Samik Chatterjee with JPMorgan. Please proceed with your question.

Hi, good morning and thank you for taking my questions. I joined a bit late, so I apologize if this has already been addressed. You mentioned in the first quarter that certain significant customers were pausing their spending, and you've highlighted this as a headwind in your current release as well. I'm curious about whether the number of customers pausing their spending is growing as we move into the latter part of the year. Is this becoming a more noticeable trend, or is it still limited to a few customers? I remember you mentioned three key customers last quarter that had paused. Is it still limited to those customers? I have a follow-up. Thank you.

Cory, that's a great question for you to answer and identify the shift from Q4 to Q2, and how we did not anticipate it continuing in the second quarter.

Yes, there are primarily two customers that are still experiencing delays in their capital decisions. This issue isn't widespread; it mainly affects these two clients. Comparing performance, we had $77 million in revenue in Q4 of last year, which has now dropped to $43 million for the current quarter, and we expect it to be about half of that in Q2. So, to clarify, the situation is not expanding; it remains largely concentrated on those two customers.

We are confident in stating that we have reached the bottom. The small segment remains quite strong. We have shown this, and although there may be some hesitation in decision-making, they continue to grow their initial or existing network builds and attract new subscribers. We have observed positive signs in all our efforts. Last year, as inventory turns decreased, our funnel also declined; however, we have seen a turnaround. Our funnel is now expanding, and there are positive indicators from fiber builders who have noted that they are beginning to see positive developments and are also expanding. This is why we are comfortable stating that we have reached the bottom, and in the second half, we expect to see further expansion.

Good. For my follow-up, one of the interesting points you mentioned in the shareholder letter is that while customers are pausing some of their new network builds, they are shifting their focus towards subscriber trends and monetization. This suggests there could be increased interest in your cloud platforms overall. You indicated that you will continue to grow them in Q2, but what trends are you observing? Are there any accelerating trends due to customers increasingly relying on you for those services while network builds are on hold? I would think this could have a counterbalancing effect on your service or cloud platforms. Thank you.

That's a great question, Samik, and a good insight. And in fact, it's exactly like that. I actually had a prospect who's never done business with us last week used the following term. He stated, “We did not have the time over the last three years for the pandemic to pour a cup of coffee, let alone consider a different business strategy. But through this pause, and some of the challenges that are going on in the industry, we actually took a step back. We started to look at you as an alternative, and through our conversation, we realized that you're not an alternative, but you're the choice that we should be making. Because you're not coming to us talking about building a dumb fiber network, what you're actually talking about is building out a diversified business strategy that is very comprehensive for the consumer, expand into small business, and there's a vision to go into medium. And then at the same time differentiates the local brand with the community through assets like SmartCap.” And so in this type of scenario where they did not have that breathing room to even consider it, they now do. And this represents what we've been stating in Q2, Q4, and now in Q2 again, that this represents a massive opportunity to surge through that, demonstrate the value that we can have to their business, and set ourselves up for a decade to come. And so that's why we're so enthusiastic about the pause that's happening in the market right now. It creates an opportunity with those customers to actually take the time to think and recognize that there is a big shift happening, and they have an opportunity to partner with Calix.

Thank you. Thanks for taking my questions.

Thank you. Our next question comes from line of Scott Wallace with ROTH MKM. Please proceed with your question.

Hey, good morning. Thanks for taking my questions. Mike, maybe just to quickly clarify a couple of items; looking at the down quarter into June and the weakness in the medium and large customers, are they entirely the cause of the downward sequential move from the first quarter to the second quarter? Would imply another, you know, 40%, 50% sequential decline similar to what we saw in the current March quarter? Or are you seeing some softening as well on the small business front? And as we look into the second half of this year wanted to clarify, that recovery; is it all small business driven? And when you say, BEAD, in early 2025, I'm assuming that's the initial spending that you're talking about as opposed to watch; I just wanted to clarify that. And then I had a follow-up.

So, Cory clearly stated that when revenue has declined from $77 million to $43 million in the medium-large, and then we're anticipating it halving again in second quarter, that we fully attribute what's happening to that segment. And then, as we stated in the investor letter, our small segment continues to be strong. And then we look at as they're going through this decision-making process, as I just stated, as a significant opportunity for us to actually surge in where they have the mind share and the time to think, where they can consider us as an alternative. And our business model, which in the end is, is Crossing the Chasm from us moving from the really innovative folks who really get it and have already deployed and recognize that they want to build a different business to differentiate in their markets. So the network operators are now starting to see the challenges and looking to fill that network. So yes, it's attributed to medium and large. No, we do not see a shortfall in the small; in fact, we see them continuing to invest and grow. And that will lead to strengthen the second half.

I think I addressed his question, and regarding your last inquiry, Scott, we are discussing not only awards but also revenue starting in 2025.

Okay, great. And if I could just on the BEAD front; look, you're working with multiple customers right now, and in terms of facilitating their process, and obviously engaging with them. Is there a number in terms of the amount of requests that your customers have put in or some sort of magnitude; help us understand what that dollar amount could actually look like? And I was wondering if you would clarify trickle in 2025 and where you think this could peak out in terms of annual contribution from BEAD funding as we get into 2026, 2027 and beyond? Thanks?

We don't have a specific number to share at this time. However, we've engaged in well over 500 consultations with customers to help them understand the various funding opportunities available, including BEAD, state level, tribal, and other groups we've been working with. Recently, I attended the Tribal Summit where numerous tribes were considering government funding aimed at their markets. I want to emphasize our active role, which I also mentioned in the shareholder letter. We've partnered with Ready.net, who assists our customers in navigating BEAD funding and its related resources. We believe there is additional value beyond just funding, as we look to support our customers in maintaining long-term compliance through testing. Currently, 74% of federally funded customers in the U.S. rely on us for speed tests, which reflects our capabilities as a broadband service provider involved in government funding and highlights our role in making the process straightforward and effective.

Thank you. Our next question comes from line of Michael with Rosenblatt Securities. Please proceed with your question.

Great, thanks. Thanks for the call. Thanks for all the points you're making, which are good. I just want to check first on a couple of more bear thesis points and just get your view on them. First of all, you know, at OFC, Cisco was talking about basically going after the medium customer market with Pawn Technology, you know, with a pawn card hanging off a router, similar to the Sienna solution. So just wanted to check if there's anything market share-wise going on in the Tier 3 market, or if this is all just customer evaluation delays as you spoke about?

There is a competitive thing going on; we're taking footprint. So that's what's going on. And so that being said, our acquisition of that footprint, like the 10 customers that we won in Q1, it takes time for them to actually burn through their previous inventory and make the transitions, all those different elements. And so those are the green shoots that we've been referring to. With regards to other people coming into our market, bring it on.

Great. Okay. There is a question regarding customer tiers related to BEAD. Some people are predicting that, ultimately, BEAD may focus more on large and medium customers rather than small customers. I'm unsure how they arrived at that conclusion. Considering you work with a variety of customers, how confident are you that your small customers, who account for 80% of your revenues, will succeed in the BEAD process? Could you provide some insights on the basis for that confidence? Any data points you could share would be appreciated. Thanks.

To clarify, we did not state that BEAD will only serve small customers; rather, BEAD is intended for the entire market, including small, medium, and large customers. Our medium and large segments are currently experiencing a decline as they navigate their decision-making processes, but we expect this to rebound as they secure funding. All three segments will compete earnestly for this funding. Importantly, BEAD is dedicated to serving truly rural and underserved customers. I've engaged with the NTIA, which is actively ensuring that small service providers are included and that the funding does not solely benefit larger companies. If small providers are excluded from BEAD, it would be detrimental for America because they have long invested in lesser-served areas, motivated by their commitment to their communities, often without government aid. The NTIA depends on these providers to maintain a community-focused approach to succeed in very rural areas. Therefore, anyone suggesting it will only favor one segment is mistaken. We believe all three segments will take part to varying extents, and we have solid relationships with each, allowing us to support them effectively.

Okay, great. And then finally for me, just looking past this; as we get to 2025, I know it's early to give an outlook for beyond one quarter or one year, but do you think that we could achieve a growth rate of 10% to 15% in 2025? Or do you think we'll be progressing toward that in the first half of 2025 and maybe not reach it until 2026 on a full-year basis? Just considering the long-term annual growth rate starting in 2025, how are you thinking about it?

We maintained that consistently for four years, and we anticipate that once we navigate through this unusual indecision phase, we will return to that. As I mentioned in my opening remarks, the foundation of our business—our platform, cloud, and managed services—remains robust. This is clearly evidenced by our cash flow and growing margins, which our customers recognize. This indecision period allows them to pause, reflect on their future, and consider their plans for the next 5 to 10 years rather than focusing solely on immediate concerns. This creates the chance for us to have a more meaningful discussion on how to develop a higher value business for stakeholders, whether they are members of a cooperative or shareholders of a profit-driven entity. This represents an opportunity for us to expand our footprint, which we expect will yield results in 2025.

Great. Thanks very much.

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

Hi, good morning. Couple of questions. And maybe you hit on this briefly, but I want to go back to your green shoot commentary and see whether you had any more color on that. And I had another question about revisiting kind of the share gain efforts that were discussed on the last call; you seem to conflate those two. And are there any other signs of positive activity throughout the customer base; small, medium or large, that you would refer to as green shoots? Or is it really your efforts to gain share?

During the pandemic, our lead times reached 18 months. During that period, we gained significant insight into what a BSP was doing since they had to provide us with their orders, which influenced our pipeline. Over the past few years, we've seen lead times decrease from six quarters to essentially one quarter. Logically, this meant our pipeline also shifted. We have now stabilized, and from a positive perspective, we're experiencing substantial pipeline growth, which boosts our confidence for the second half of the year. Additionally, we continue to expand our reach, as demonstrated by larger customers choosing us with Smart business, marking a significant new opportunity. Moreover, in the first few weeks of Q2, we secured our largest cloud deal ever. All these factors—the growing pipeline, the record cloud deal, and new customers selecting us for the small business market—represent a major opportunity and reinforce our confidence for the second half.

Great. Following up on that, what's been notable over the last couple of quarters is that gross margins have continued to improve, and I assume there's a mix aspect related to the appliance business. As it potentially recovers in the second half, what impact do you anticipate on gross margins? Will this hinder the sequential growth as hardware returns, or do you expect to see steady increases in gross margin for the year from higher software and service revenue?

Great question, Tim. As we mentioned, our cloud and managed services business is still growing as our customers expand their market share and gain new subscribers. This trend is expected to persist. As new network builds resume, we anticipate a shift back to more access products, which have higher gross margins. Therefore, we do not foresee a decline in gross margins but rather a continued progression. The rate of change from quarter to quarter will depend on the product mix. For instance, in the second quarter, margin expansion was less than in the first quarter due to a significant swing back to on-premises products. Nonetheless, we believe margins will keep progressing and expect that new network builds will not halt this growth.

Thank you. Our next question comes from a line of Christian Schwab with Craig-Hallum Capital Group. Please proceed with your question.

Great. Hey Cory, how long before the two large customers get back to $77 million from $20 million?

That's a great question. I'm not going to make a prediction on that. Last quarter, I was surprised because I thought they would reach a decision point. I wasn't expecting the decline we experienced, so I can't confidently say when that will recover. We know it will recover eventually; I just don't know when.

Okay. So, I mean, we haven't done $200 million in revenue in over two years, right. And we're going to keep spending, almost $100 million.

No. We didn't shoot $55 million in the fourth quarter.

We did generate $25 million to $26 million in Q1.

Yes. Q1 of 2022, you had $202 million, and this quarter, you're guiding to $200 million at the midpoint? It doesn’t matter...

No, we don't know when.

No, we haven't done $200 million; it goes back two years.

Okay, roughly. You can look at it. The point is your operating expenses are significantly higher. I know we are going to invest for growth, but we mentioned a trickle of BEADs starting in early 2025, and we have no idea when the larger customers will return. How long do you hold on a quarterly basis?

We understand that there is 60 million new fiber coming into play. We recognize, as we've highlighted, that the fundamental business model is growing margins and is therefore strong. Customers are, for the first time, delaying their decision-making, and they now have the time for these discussions. At this moment, we will continue our operational expenditure investment because this is our chance to expand our footprint like never before, ahead of one of the largest government investments in history. To do anything other than what we're currently doing would be misguided. With the support of our Board, our Chairman, and our leadership team, we are confident in the opportunity for growth, which will lead to significant returns. We are investing to win.

Understood. Thank you. My last question is, with recent expectations were 2024 and a once in a generational lifetime in BEAD, and large customers who are significantly under spending; shouldn't the target growth rate for fiscal year 2025 be 20% or substantially higher than that, on the top line?

Possibly. That's why we're comfortable setting the target at 20%. We see 2024 as unusual. Over the past four years, we've achieved 20% growth each year, and we anticipate a return to growth in 2025. We're currently working on that and noticing positive signs, but we're not ready to commit to 2025 just yet. However, in response to the previous question, we do see a potential return to growth rates of 10% to 15%.

Okay, great. No other questions. Thank you.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Fanucchi for any final comments.

Thank you, Melissa. We will participate in several investor events during the second quarter and information about these events, including the dates and times and publicly available webcast, will be posted on the Events and Presentations page on our Investor Relations section of calix.com. Once again, we want to thank everyone on this call and webcast for your interest in Calix, and for joining us. And this concludes our conference call. Have a great day.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.