(: It is now my pleasure to introduce your host, David H. Allen, Director of Investor Relations and Treasurer for Calix. Thank you Mr. Allen, you may begin. ): It is now my pleasure to introduce your host, David H. Allen, Director of Investor Relations and Treasurer for Calix. Thank you Mr. Allen, you may begin.

Thank you, operator, and good afternoon, everyone. Before we begin the call, I want to remind you that this call contains forward-looking statements regarding future events, including the future business and financial performance of the company and our expectations of revenue, gross margins, earnings per share, stock-based compensation and amortization of intangibles. These forward-looking statements are based on management’s expectations, estimates, and judgments, and current trends and market conditions that involve risks and uncertainties that may cause the actual results to differ materially from those contained in the forward-looking statements. I would encourage you to review the company’s various SEC reports, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and our quarterly report on Form 10-Q for the quarter ended March 31, 2012 available at www.sec.gov in which we discuss these risk factors. All forward-looking statements are made as of the date of this conference call and except as required by law, we do not intend to update this information. Also on this conference call, we will be discussing GAAP and non-GAAP results. We are providing the non-GAAP estimates to enable interested parties to evaluate our performance in the same manner in which we evaluate our own operations. These non-GAAP measures exclude certain charges and benefits, which we do not consider to be part of our ongoing activities or meaningful in evaluating our financial performance, including stock-based compensation expense and the amortization of acquisition-related intangible assets. To help you better understand those results, we have included a reconciliation of our GAAP and non-GAAP results in the earnings press release. All numbers that are discussed in today’s conference call are non-GAAP unless otherwise noted. This conference call will be available for audio replay in the Investor Relations section of the Calix website at www.calix.com. In addition, our earnings press release has been posted on our website along with supplemental data, which you may want to review in conjunction with our press release and conference call remarks. I would now like to turn the call over to Calix President and CEO, Carl Russo. Carl?

Thank you, Dave. Good afternoon, everyone. Joining me on the call today is Michael Ashby, our Executive Vice President and Chief Financial Officer. Before I turn the call over to Michael, I would like to give a brief review. As we indicated in our pre-announcement on July 11, we saw weakness across nearly all parts of our customer base in Q2. As you are aware from reports by other companies in our industry, macroeconomic concerns have had the effect of slowing down capital projects in the Tier 1 service providers and we have experienced that same effect at some of the Tier 2 service providers as well. In the case of our Tier 3 customers, however, there were increasing concerns over the USF/ICC reform and the implementation of the Connect America Fund and those concerns led to an unexpected slowdown in ordering during the second quarter. I will provide additional commentary after Michael discusses our Q2 results in more detail. With that, I would like to turn it over to Michael Ashby.

Thank you, Carl, and good afternoon, everyone. If you’ve not already done so, I would encourage you to go to the Investor portion of our website and download the financial slides that we posted concurrent with our press release earlier today. My prepared remarks will provide a financial overview and the related business trends and I’ll provide guidance for the third quarter of 2012. As a reminder, the guidance we provided in May for the second quarter included revenue of $93 million to $97 million, gross margin to be at around 45%, operating expenses to be just over $38 million and EPS of between $0.07 to $0.11 a share. We also expected to be cash flow positive. On July 11, we provided preliminary estimates for Q2 for revenue of $79 million and EPS of $0.04 per share. Our Q2 actual results are consistent with our July 11 estimates. Actual revenue for the quarter was $78.9 million, gross margin was 45.2%, operating expenses came in at $33.5 million and EPS was $0.04 per fully diluted share. We were cash flow positive the quarter and ended the quarter at $53.1 million of cash on hand. I will now provide some color on the shortfall in revenue experienced in Q2. While our major accounts, national accounts and regional accounts were all under our internal targets for the quarter, the biggest shortfall was in the smaller Tier 3, or regional accounts, who historically account for more than half of our business. The quarter actually started off as expected, but the middle of the quarter was weak. We anticipated being able to make up the middle of the quarter weakness in the last month, but while June was a strong month for us, it was not sufficiently strong to make up the shortfall in revenue…

Thank you, Michael. While I am concerned about any slowdown in our market and how long it might last, I remain optimistic about our growth prospects and opportunities. Our product portfolio is well positioned to meet the needs of our customers. The pressure for service providers to upgrade their networks to meet the ever-increasing demand for broadband services remains real. Up to now, we have addressed only around 10% to 15% of the global access market, and I believe we are on course to significantly expand our total addressable market over the next few quarters. Most importantly, our ability to maintain our margins and positive cash flow, even during a soft revenue period, speaks both to the viability of our operational model as well as our ability to continue to be strategic in our execution and investments. As Michael said, our market expansion opportunities are still all ahead of us. I am confident that we will take advantage of these opportunities. However, the current demand uncertainties in the marketplace will keep us mindful in the near term. At this point, I’d like to turn the call over for questions.

(: Our first question comes from line of Blair King with Avondale Partners. Please proceed with your question. ): Our first question comes from line of Blair King with Avondale Partners. Please proceed with your question. Blair King – Avondale Partners: Questions, just a couple, maybe Carl, this one can revert back to you on just an update relative to the rate of return carriers and what the process there might be once they enter the mix on the Connect America Fund distribution? And what is that process like, how are they looking at it? And I guess you’re – any view you have on whether or not they’re re-evaluating their fiber builds given the seemingly lower subsidies that they may be receiving off of those funds at some point in time?

Is there a second question, Blair or is that the one? Blair King – Avondale Partners: I guess that’s – I’ll leave it at that. That’s probably adequate.

So look. I know you’ve followed us pretty closely and so you know that if I answered your question to the depth that we might want to answer it, we’ll be here for an hour and a half. So let me go at it at a surface level and let me make sure that I invite you to set up a separate call with Jeff Burke who handles the details of these for us. So you can get into that detail off this call. Blair King – Avondale Partners: Sure.

But suffice it to say, let me answer by answering the following. We are clearly seeing customers re-evaluate how they’re looking at their business models based upon the whole USF/ICC and CAF reform. And clearly the rate of return, folks, you might say, most of all. We are seeing folks that were formally looking at projects that might have fiber-to-the-prem, for example, slowing that down and thinking about it, only to return and then, in fact, go forward with the project, but perhaps more on a VDSL 2 approach. So we are certainly seeing changes in thinking, but as you know, from looking at the math, it varies greatly from customer to customer. So in a general sense, it has clearly injected an uncertainty into the marketplace that Michael alluded to in his comments, and I did in mine. But to break it down further than that, really requires almost an analysis of each segment and each customer by where they fit in the quantile analysis. So if you’re okay with that, I would actually ask that you set up a separate call with Jeff. Blair King – Avondale Partners: Yeah. Okay, I’ll do that. Thank you very much, Carl.

You bet, Blair. Other questions for you? Blair King – Avondale Partners: No, no, that will do it. Thank you very much.

Okay. You’re welcome.

Thank you. Our next question comes from the line of Simon Leopold with Raymond James. Please proceed with your question. Simon Leopold – Raymond James: Thank you. Wanted to see if we could delve a little bit more into trying to get a sense of how this year wraps up in terms of resending the full-year guidance, I don’t know that that really tells us much new. I guess what I’d like to try to understand is, you typically had some pretty strong seasonality in the fourth quarter. And it doesn’t sound like you’re painting a picture that says you expect even your normal seasonal pattern in December. So I’d like to try to get some sense of how you’re thinking about the year wrapping up. And maybe just related to that question, you did talk about expectations, you finished the integration testing at the Qwest footprint in November. Does that mean that you expect to see that ramp begin in December and you’d be able to provide some update by year end on that?

Simon, this is Michael. Thanks for the question. As far as the year is concerned, the comment – we only really commented on Q3, and their only going to comment on one quarter at a time. And what we’re saying is that we expect Q3 to be essentially flat. That does not necessarily mean that there isn’t going to seasonality in Q4. We’re just not prepared to comment on Q4 until we get closer to that point in time. As you’re aware, traditionally it is a seasonally strong quarter; that may be the case, but this at this moment in time, we’re going to wait and see how Q3 works out. And if the in particular, regional customers, how their buying pattern is drawing this quarter before we comment on the remainder of the year. As far as the Qwest question is concerned, we – the products complete mid-November. So it is fair to say that we would expect to receive some business in December, but it’s obviously going to be fairly small, and the majority of that is going to come in 2013. Simon Leopold – Raymond James: Okay. And then just one follow-up, in terms of what’s going on with the Stimulus programs and the series of delays and as well as the CAF program. Is there an increasing possibility that carriers essentially who were considering it get to the point where they simply say no, we don’t want to be anywhere involved with this program, it’s just not worth the trouble?

Let’s talk Broadband Stimulus separately from CAF because I’m not sure that’s the case with CAF. But in terms of BBS, we certainly have seen customers turn down the funds and I think that is a risk that the longer this goes on, it is possible that some other customers may decide not to go through with it. And we have and I think we’ve talked about this number before; we’ve had about $50 million of awards to our customers that they have turned down, that’s $50 million of Access business. So it’s fairly considerable. That number could grow depending upon – overtime. So Broadband Stimulus has certainly continued to slip and being affected by people deciding whether or not to take those funds or not. In CAF, I don’t think there’s the same issue there because that’s really a question of funds money that is being redirected from voice to broadband. So it’s a smaller business transformational project that moves – incentives service providers to roll out broadband as opposed to simply voice. And so I don’t expect the people are going to turn that down. I think that’s going to be a means of funding that they’re going to use over the next few years. And as you know that, for the rate of return carriers, I believe its $1.8 billion a year for the next number of years, so five years. So it’s pretty significant. Simon Leopold – Raymond James: Just one clarification please. On the Broadband Stimulus, you talked about some being turned down. So what’s your total view, multi-year view, on how much money is available to you from the Broadband Stimulus funds?

Over the whole period of Broadband Stimulus? Simon Leopold – Raymond James: Yep.

I think the total amount that we expect to get in terms of access equipment is about $180 million. Simon Leopold – Raymond James: Thank you.

Thank you. Our next question comes from the line Sanjiv Wadhwani. Please proceed with your – with Stifel, Nicolaus. Please proceed with your question. Sanjiv Wadhwani – Stifel Nicolaus: Thanks. One clarification and a question. Michael, on the 10% customer, safe to say that it’s somebody that’s contributed 10% in the past, or is it sort of a new customer that we should be thinking about?

No, I think it’s pretty safe to say that’s someone that we know well. Sanjiv Wadhwani – Stifel Nicolaus: Got it, okay. And then just, Carl, I want to just get some clarity on this USF reform, I think a couple of weeks ago, we had sort of major telcos collectively accepting, I think, $115 million of the $300 million that USF allotted to them. So I’m just curious what’s going on there. Clearly there are carriers accepting these funds. But at the same time, you’re seeing a lot of pause from your Tier 3 carriers and I’m just trying to parse through all this information maybe get some clarity on what exactly Tier 3 carriers are telling you and what we should be expecting in 2013 because it looks like over the next couple of quarters they’re not going to be spending much, I guess?

Well, to Michael’s point, these are things that – these funds are going to get distributed. And as you know, there’s a whole gaming approach to whether or not I choose to take them as an individual carrier. Perhaps back to Blair’s question earlier, the mathematics are a little bit complicated, and so to the extent that a primer is required and you want to dig into the details, I would ask again that I’ll get you to together with Jeff and he can take you through the details. What’s going on simply is everybody is looking at these things they have their consultants working with them, their cost consultants and they’re trying to figure out do they bid, don’t they bid, should they go after the funds, if they do go after the funds, what does it mean, what’s the rate of return and so you’ve got a lot of people trying to work through their models to figure out whether or not they want to take the funds. If they do, what does their business model look like going forward. And it literally varies from customer to customer. Sanjiv Wadhwani – Stifel Nicolaus: Got it, okay. And I guess the question as a follow-up over there. I think Frontier and – Frontier actually did accept some funds, $72 million or something. Is that going to sort of flow through the – on top of what they’re already doing with sort of the Verizon properties? Is that sort of additive to that? Is it sort of not additive to -any sort of help with that situation?

So let me echo Michael’s comments and, Michael, if you want to add some color, please do. What we are finding as we look at these programs is for service providers that have a certain amount of capacity to do things, if they go take these funds, they are basically going to be able to do what they had capacity for and they won’t do additional. So it’s a source of funding, not necessarily a source of incremental funding. For customers that have more capacity, they have a shot at taking on things in addition to, but it’s not clear to us that they will. Michael?

Yeah, I agree with the comments. The majority of our customers have their business plans and their capital expenditure plans and they look on things like BBS or Connect America Fund or other means of raising money as just ways of funding their plans. So I think in general, these tend not to be additive, they just tend to be a way for them to fund the plans that they have in place. Sanjiv Wadhwani – Stifel Nicolaus: Got it. That’s helpful. Thanks.

Thank you. Our next question comes from line of George Notter with Jefferies & Company. Please proceed with your question. George Notter – Jefferies & Company: Hi. Thanks. If memory serves, you guys were talking about the Connect America Fund and all the changes going on in the regulatory environment as being an incremental positive for your business that some uncertainty that was out there would start to clear up. And I certainly understand that there was uncertainty in the marketplace prior to all this going down. I guess I’m trying to better understand what changed from your perspective from a few months ago?

Maybe I’ll start with that, George, and then Carl can comment. I don’t think anything’s changed. I think what we said is positive, positive for the industry, not specifically for just the Calix. I think what we believe is that this is very positive, because it does move monies from an operating subsidy for voice to an incentive for broadband build-out. So we think that is very positive for the industry as a whole going forward. And I don’t think our position has changed on that. Carl, do you want to go into some more detail?

Well, just briefly to add, George, to your point, it is a positive. We have certainly looked at this over time as being more or less of a positive for us. If I were to add any concern to it, related to us, it’s how people use it inside of their budget versus as incremental to budget. Clearly any funds that go into building out broadband are beneficial and put a base underneath the marketplace. But again, I want to echo, we’ve continued to try and understand the timing of it, the implications of it, how much our customers can take on. To Michael’s point in a macro sense, we think it’s a great positive to be shifting from a subsidy on voice OpEx to an incentive on broadband CapEx. But how it boils down into each different customer turns out to be a lot more complicated than, I think, one might have imagined at the start. George Notter – Jefferies & Company: And the other question I had, are you seeing anything new in the competitive environment? I mean, I heard you said earlier about not losing market share, but it just seems to me that the competitive environment could intensify if some of your competitors are struggling and looking for other markets, adjacent markets to kind of back into and get more aggressive on. Is that something that you’re seeing? Is that something that is a possibility looking forward? I’m speaking specifically about ad trend.

Well, I mean, any competitor always possible, always wary of it, not seeing any change in the competitive dynamic and the markets that we serve. George Notter – Jefferies & Company: Got it. Okay, thanks.

Thank you. Our next question comes from the line of Ehud Gelblum with Morgan Stanley. Please proceed with your question. Ehud Gelblum – Morgan Stanley: Hey, guys. Thanks. It’s Ehud. Couple of questions. First, Carl, if I got this right with what you said before you got OSMINE approval last November, and you’re getting qual and being able to ship into Frontier this November. Is that – because I think you said it was a year later. A) Did I get that right? B) Is that the normal timing or did something happen to delay after the OSMINE approval?

So, by the way, Michael said it, but we - Ehud Gelblum – Morgan Stanley: You guys tend to sound alike sometimes. The accent’s very similar.

Right.

It’s Qwest, not Frontier, by the way. Ehud Gelblum – Morgan Stanley: I’m sorry, you’re right.

It’s CenturyLink-Qwest, and so let me go through it. That’s exactly right. And I don’t know that that’s the normal process. I think what we have to look at is CenturyLink and Qwest are going through their own integration process. And I think if there was anything that we learned was going through the OSMINE process, took ex amount of time. That amount of time wasn’t too different from what we thought. But then the back-end IT integration from that point into the combined CenturyLink-Qwest IT organization, as they’re going through their own integration it took longer than we thought. I think now we’re getting a better sense for how long it takes and we’ll probably be a little more predictable, but that was what, in fact, Michael said and that is correct. Ehud Gelblum – Morgan Stanley: And do you think that’s been true of everything that Qwest has been doing as part of CenturyLink? Or is it just -?

Yeah, I can’t comment because I can only look at the project tracks that we’re looking at. Look, this is a huge integration that they’re going through. Ehud Gelblum – Morgan Stanley: Right.

I think it would be very unfair, unwise and frankly, I’d be throwing a dart into a very dark area, to say that that’s true for everything. They have all sorts of integration, things that they’re doing that has nothing to do with us or access or anything else. Ehud Gelblum – Morgan Stanley: Okay. If we slide over to the other side of that Tier 1, and you may have said this before, I understand the regulatory issues, and we’ll talk about that as well. On the Tier 3 side, with the Tier 1 that you’re involved with, how did that business fair quarter to quarter? And how are you seeing that in the next quarter as a primary part of CenturyLink?

Business in the sort of the legacy CenturyLink continues much the same as it has in the past without any major changes. It can vary somewhat from quarter to quarter. But generally speaking, it’s pretty consistent and I think we have a good relationship on that side of CenturyLink. So no change in outlook as far as that’s concerned. Ehud Gelblum – Morgan Stanley: So in three quarters in a row they’re going to be roughly flat, Q1, Q2 and your guidance for Q3, would you say that CenturyLink is essentially flat as well, the core legacy part of it, your margin?

Yes, I think CenturyLink flat because they have continued to put their emphasis and more money onto the Qwest side of the network which – because they needed to sort of quickly try and bring that – strengthen that side of the network as opposed to the CenturyLink one which is already fairly robust. Ehud Gelblum – Morgan Stanley: Okay, that’s helpful. With everything that’s going on the Tier 3 side, what gives you confidence or is there anything you can hang your hat on that when you get into 2013, some of the regulatory uncertainty around CAF and USF actually frees up?

Well, I think part of that the SEC is supposed to come out with more clarity between now and the end of the year. And as that happens, that will obviously calm things down somewhat. Plus, I think we’ve seen the trade associations of the regional service providers lobbying to try and change things. We’ve seen some of them actually filing lawsuits to try and get changes made; those haven’t succeeded. I think the lobbying has not been terribly successful, there were some changes made, but the SEC are now basically holding the line. So I think slowly the regional service providers are going to realize that it is what it is. And it’s not going to change very much, and they’re going to have to get on with their business. So I think over the next few months that becomes clearer to them and the SEC assume more final regulations and then – and it will slowly just sort itself out.

Yeah, it’s not – its incremental clarity to Michael’s point and it is not some milestone driven like aha, the veil will be lifted. Ehud Gelblum – Morgan Stanley: Right. Well, one of the issues that I’ve understood because there has been about $100 million of CAF funding that’s been turned down and the issue that, as I understood it was that the SEC is allowing $775 of expense per household. And several carriers are saying that’s not economic if that’s all you’re going to pay me to build out to those households. You’ve seen leverage or any changes in those numbers? Because with that number staying solid, I don’t know, if it’s going to a change in carrier behavior.

No, you’re actually talking about the Tier 2 service providers, they’re not the regional service providers they’re the ones who have this initial CAF. And there is some posturing going on amongst them the $775 per line is the fixed amount that they are entitled to get if they choose to go after it. Clearly of the $775 line they have to try and make a business case that works. So that depends on which part of the network it is as to whether or not that can make sense for them, how much they would normally invest and how much they will get in subsidy to decide on whether they got the right business case. And I think, as I said this in posturing, that they’re trying to – look to try and get additional funding, they’re trying to get that amount changed. And they’re trying to see if they can build out in areas where there is some wireless competition today, which so far the SEC have said no. So that’s all again going to sort itself out over the next few months. And so the funds that have not been accepted to-date doesn’t necessarily mean that they’re not actual going to come back and be accepted later on. And then there’s this reverse auction that will happen eventually when these lines are not taken. So it’s all going to change over the next couple of quarters. Ehud Gelblum – Morgan Stanley: I appreciate it, thanks so much for your answers.

(: ): Amitabh Passi – UBS Securities: Hi. Thank you. Michael, first question to you. How do we think about the variable component in your OpEx? I’m just wondering if revenues were to recover in 2013, any guidance you can give us in terms of how we should think about the leverage in the model and how OpEx scales as we look out into 2013?

Yeah, the – in general, our operating expenses are – the majority of them are somewhat fixed. The variable portion of our operating expenses is relatively small and relates primarily on the sales side of the business. So we have pretty good control over our operating expenses. And basically – obviously because we’re seeing some weakness in revenue, we are holding operating expenses essentially flat and will not allow them to increase unless until we start to see the revenue increase going forward. From a longer-term point of view, and I think you’re aware of this, our model is to get operating expenses down to the low 30% of revenue. And I think I’ve said this before at different meetings that in order to get to that point then we need revenues to be at least in excess of $100 million a quarter, probably about $120 million a quarter and then we start to see OpEx getting down to the low 30%. Amitabh Passi – UBS Securities: Great. I appreciate it. And then just as a quick follow-up, would you expect international sales to be up sequentially in the third quarter? And then maybe any insight in terms of where you’re seeing the most interesting opportunities overseas?

Sure. As far as the international revenues in the third quarter, we do expect them to be up sequentially from the second quarter. Again, it’s starting obviously from a relatively small base, but we do expect them to grow each quarter actually and as we look out. As far as where the opportunities are, I have to ask Carl to comment on that a little bit.

Yeah, we are actually seeing them around the world. As Michael commented earlier, we had 10 new accounts open up and that’s the leading indicator that we focus most on as we penetrated territory. But we’re actually seeing a very clear set of opportunities amongst the smaller service providers that we use to build the business in the first place here in North America. And we see those opportunities literally spread out in Europe, in Asia, in the Middle East, in South America. So we’re seeing them where we expected to see them. Amitabh Passi – UBS Securities: Okay. Thanks.

(: ): Simon Leopold – Raymond James: Thanks. When you think about the trends towards 2013, do you see other customers within Century opportunity of breaking into that 10% customer rank other than the traditional customer you’ve had in that area?

So are you saying in the year of 2013, do we think there may be other large customers available to us? Simon Leopold – Raymond James: And not necessary for the full year, but are there quarters where you think you could have enough diversity that you’d have a second 10% customer or an alternate 10% customer?

We do. Simon Leopold – Raymond James: Any color on how to think about that?

So the answer is yes, we do. And I don’t know that I would give you any more color, Simon. Simon Leopold – Raymond James: Maybe just domestic as opposed to international?

Nope, I won’t. Suffice it to say that we believe we will have the opportunity to have a greater than 10% customer addition, I wouldn’t specify where at this point. Simon Leopold – Raymond James: Okay. Thank you.

You’re welcome.

Thank you. Ladies and gentlemen, at this time there are no further questions. I would like to turn the floor over to David Allen for closing remarks.

Thank you, operator, and thank you for joining us today. We hope you can join us at one of our upcoming investment conferences, which we are participating in this quarter, including the Jefferies Semiconductor and Hardware Midwest Corporate Access Day in Chicago on August 28, the Deutsche Bank DB Access 2012 Technology Conference in Las Vegas on September 11, the ThinkEquity 9th Annual Growth Conference in New York on September 13. Information about these events is posted on the Investor Relations section of our website. Thank you for joining us today. Despite the challenges associated with the current environment, we remain focused on executing against the opportunities ahead of us and we look forward to speaking with you at one of these forums. Good bye for now.

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.