Greetings and welcome to the Calix third quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A Question-and-Answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David 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 conference call contains forward-looking statements regarding future events, including but not limited to our pending acquisition of a fiber access assets from Ericsson and the global reseller agreement between the two companies. Our development of new products that will continue to help our customers transform their network, the ongoing expansion of the total addressable market, 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 upon our expectations, estimates, and judgments and current trends and market conditions 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 reports on Form 10-Q for the quarter ended March 31, 2012 and the quarter ended June 30, 2012 available on 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 our 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 press release has been posted to our website along with supplemental financial data on Calix Investor Relations website, which you may want to review in conjunction with our press release and conference call remarks. I'd 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 you are aware from reports by other companies in our industry, the third quarter of 2012 was a challenging one. Macroeconomic concerns have impacted capital projects in the Tier 1 service providers and at some of the Tier 2 service providers. In the case of our Tier 3 U.S. customers. There were increasing concerns over the USF/ICC reforms and the implementation of the Connect America Fund. Despite these issues, Calix had a solid quarter and we believe that we are well positioned to grow the business. On August 22, we announced the signing of a definitive agreement with Ericsson under which Calix will acquire certain fiber access assets from Ericsson and enter into a global resale agreement under which Calix becomes Ericsson's preferred supplier for access products. We expect this transaction to be finalized in the coming weeks and we are pleased with cooperation to date. I will provide some forward-looking comments after Michael discusses our Q3 results in more detail. Michael?

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 an overview of financials and the related business trend. I will close by providing guidance of the fourth quarter of 2012. As a reminder, the guidance we provided in July for the third quarter, called for revenue of $79 million, gross margin of around 44%, operating expenses the $35 million range and EPS between $0.01 to $0.02 shares. We also expected to be slightly cash flow positive. Actual revenue for the quarter was $81.3 million, gross margin was 44.2%, operating expenses came in at $34.1 million and EPS was $0.04 per fully diluted share. We were cash flow positive for the quarter generating $4.3 million and ending the quarter with $57.4 million of cash on hand. During our investor conferences and meetings following a second quarter, we talked about the fact that believe revenue would not drop any further and that at an $80 million level we can run the business profitably and generate cash. The third quarter demonstrated that fact and our revenues earning grew slightly at 3%. I think it is fair to say the third quarter was across the board stronger than our second quarter. We saw good momentum from our Tier 1 and Tier 2 customers and the turmoil the in U.S. Tier 3 accounts continues it is not worsening. Unlike in our second quarter, orders this quarter were tended to a more normal monthly pattern. Macroeconomic concerns remain that we talked about last quarter and the regulatory changes to USF continue to be a source of concern to our…

Thank you, Michael. I am pleased by what we accomplished during the quarter, particularly in light of the continuing macroeconomic environment and uncertainty among our Tier 3 US customer base. Our existing customer relationships are strong. Our competitive position continues to strengthen and we have several market expansion opportunities now within our reach. Over the past few quarters we ran the business profitably even under difficult circumstances and I believe that we'll see business slowly pickup over the next few quarters. We are investing and developing new products that will continue to help our customers transform their networks into the networks of the future and next week we get to share some of those new products with our customers as we host our Annual User Group conference that will again be attended by more customers than ever before as they look to Calix to help them transform their networks. At this point I'd like to turn the call over for questions. Operator?

Thank you. (Operator Instructions) Our first question comes from the line of George Notter of Jefferies & Company. Please proceed with your question.

Hi, thanks very much guys. I guess I wanted to ask about, you know all the turmoil we have seen among your Tier 3 customers in the last few quarters. As you dig in and talk with folks, where you think the net impact is here for ICC reform and the move from USF to CAF, are customers saying that they are better off net-net or they worse of net-net neutral, you know what's the perspective there? - Jefferies & Company: Hi, thanks very much guys. I guess I wanted to ask about, you know all the turmoil we have seen among your Tier 3 customers in the last few quarters. As you dig in and talk with folks, where you think the net impact is here for ICC reform and the move from USF to CAF, are customers saying that they are better off net-net or they worse of net-net neutral, you know what's the perspective there?

Michael, don't mind if I take that and you can add some color.

Yeah, that's fine.

So George actually this morning I was keynoting Telco TV in Las Vegas and had a chance to chat with some of our customers directly and it's the same. I think net/net right now they view it as a net negative, because they are transitioning their business models. But, with a number of the panelists that were up on stage I mean for example Derrick Bulawa from BEK was up there and I mean basically went through his transformational business model. They are viewing this as an opportunity to go, in his words win or die and we're going to win. So it's really separating folks from an attitude standpoint. So it depends on who you speak with. Many view it as a great opportunity to go expand the transformation of their business models over more and more subscribers, either through competitive footprint expansion or acquisition. There are others that are viewing it as the end of their old model and they are not quite sure what to do. Did I answer your question?

I guess I was just looking for, I mean the anecdote of the Telco TV example is certainly interesting. I would imagine that people will certainly put their best foot forward in terms of talking about the net effects of this. I guess, I am just trying to think of more longer term, when this thing finally shakes out you get 2, 3, 4 quarters down the line even from here. Do you think the funding per Operators will be net-net the same worse. You know any perspective there, are there certain buckets of customers that will come out ahead given the geographies that they serve versus other buckets of customers that will come out behind in terms of funding and I guess I am just trying to get the next level of detail? - Jefferies & Company: I guess I was just looking for, I mean the anecdote of the Telco TV example is certainly interesting. I would imagine that people will certainly put their best foot forward in terms of talking about the net effects of this. I guess, I am just trying to think of more longer term, when this thing finally shakes out you get 2, 3, 4 quarters down the line even from here. Do you think the funding per Operators will be net-net the same worse. You know any perspective there, are there certain buckets of customers that will come out ahead given the geographies that they serve versus other buckets of customers that will come out behind in terms of funding and I guess I am just trying to get the next level of detail?

Okay and I am going ask Michael to comment from a planning standpoint, but let me see if I can put it in different terms. Any time you shake up an industry like this, you get into different statistical sets, right. So in aggregate we believe that the way to look at it is by subscriber and the aggregate number of subscribers isn't going to go down. So I think in total the spending to us will look relatively flat to maybe modestly up, but I think the worst is behind us. Having said that, be clear that there are going to be winners and losers based upon business models and one of the things that I believe you could state certainly is there are going to be less Tier-3 service provides in the future than there are today, because of consolidation acquisition etcetera.

Okay, and then just as a quick follow-up, you know the second wave of the Connect America Fund, you know any perspective on how the rules are going to operate for funding access lines in this Phase 2 and when do you think that the uncertainty around that will be finally behind us? Thanks. - Jefferies & Company: Okay, and then just as a quick follow-up, you know the second wave of the Connect America Fund, you know any perspective on how the rules are going to operate for funding access lines in this Phase 2 and when do you think that the uncertainty around that will be finally behind us? Thanks.

No perspective on it today from me. Jeff Gardner who is the CEO Windstream was on stage just performing this morning. In fact to question there is no way round one is going to be done before year end. So look I think it's going to be much like the other programs that we have seen, it will probably take a little bit longer than everybody expects. But no perspective other than there is going to be obviously the next round. It will be interesting to see what the take rate is. I would suspect the take rate will be higher because obviously the rules and math is going to be re-jiggered a little bit, but I would not make comment beyond that George. Michael any comment from you?

No, I think for the next round Carl you mean there will be another round of $300 million that goes out there to be applied for.

Okay great, thanks very much guys. - Jefferies & Company: Okay great, thanks very much guys.

Thank you our next question comes from the line of Ehud Gelblum of Morgan Stanley. Please proceed with your question.

Hi, good afternoon. It's actually Jeremy David calling in for Ehud. Guys, I was wondering if you could give us an update on pipeline for the broadband stimulus awards. I think you had mentioned $180 million last quarter. Was wondering if that had changed. Obviously you recognized some revenue this quarter, about $7 million, and some customers might have walked away from these funds. Would you have any update for us?

So really quickly, Mike I'll let you add color. There is no significant change from what we have seen and what we shared with you last quarter. As you know there have been a few accounts that have walked away and therefore there is some shrinkage, but other than that at this point of time it's actually sort of rolling along of its tempo. As to the effect on the number Michael.

There is no change in the numbers going forward. I think all of the broadband stimulus awards have been awarded to vendors chosen and so and then we've already turned it down some time ago. So in the last quarter or so there is no change and we are at the stage now of implementing the broadband stimulus and actually installing broadband against broadband stimulus orders and that's going to continue for the next few quarters.

When do you expect is a peak quarter for deployments or at some point next year or…

I think it continues to spread out. I don't think it gets nay much larger or much smaller. It continues over the next three or four quarters at about the same rate.

Okay, great. Then AT&T recently made some comments that they would potential upgrade their rural lines and increase broadband speeds. How do you think about that opportunity for Calix?

No comment. So I mean as we have said we are addressing in recent times Verizon and AT&T as accounts, but beyond that we would make no comment.

Okay and my last question is on the upside this quarter. It seems it was broad based. Any -- still it was nice beat on the top line. Anything in particular is that that helped you have good results, strong results this quarter?

Nothing I would highlight Michael.

No, I think it was, as we said, across the board a fairly strong quarter in each of our different areas of the business, and we saw some strength and we said in the Tier 3, we are starting to see some buying returning in some of the smaller Tier 3 accounts. So, across the board, it was a fairly stronger and even quarter.

Great, thank you very much.

Thank you, our next question comes from the line of Amitabh Passi of UBS. Please proceed with your question.

Michael, just first question for you, the 7% sequential guidance, can you give us some sense whether there is any initial revenues from cost and if so how should we expect Qwest to ramp as we move into 2013?

I think what we've always said is that we do expect to get some small revenues from Qwest in Q4. The -- we are continuing through the internal Qwest IT integration, the first products get through that internal Qwest certification actually in November, so next month, so we expect there to be some small revenue from Qwest in Q4, and we do expect, obviously, that that will continue to ramp as we go through 2013. So, we think we're well-positioned in that account, we're pleased with the way that's going, there's no change in our timing and no change in our outlook there.

I think you recently talked about $80 million being the potential floor. Any cost to know where that flow as we move into the first calendar quarter which tends to be seasonally down and excluding the Ericsson deal?

The answer is yes. I think as we talked about before, I think the, I don't see our revenue dropping below that $80 million number and I think mainly as we demonstrated this quarter we can just grow it from there and I don't see it going down at all. Well obviously we're seeing Tier-1, 2 and 3 accounts and we expect that to continue going through 2013.

Michael thank you. Appreciate it.

Our next question comes from the line of Simon Leopold of Raymond James.

Great, thank you. Just a quick clarification before I get into my question. On the third quarter you had guided the gross margin being down by about 1 percentage point. Could you remind us whether that's driven by product mix, customer mix, if there is some waiting to think about what were the influencing factors behind that?

Now that was actually driven by the professional services content revenue with a number of our broadband stimulus orders we have, they include professional services. We outsource a lot of that professional service, which means it has a lower margin and so as the percentage of professional service increases in any one quarter that can have negative impact on the gross margin and that guidance in Q3 was strictly related to that. As far as mix is concerned, mix is advantageous to us particularly as we start to sell more of the E-series products going forward.

Then just following up on your prepared remarks on the Connect America Fund status, I think just to paraphrase to make sure we understand this situation, it sounds as if it's in a process of being resolved but Tier 3 carriers are still somewhat hesitant to spend money at this point but it's really a kind of slow release as opposed to a step function return to "normalcy" is that a fair way to paraphrase it?

Carl, do you want me to take that one?

One answer I'll give you, again, my view. I have to continue to encourage everyone to think sort of across the statistical sample that is starting to shake out meaning there are folks that are moving, there are folks that aren't. So to the extent that you average that, which is a dangerous thing to do. The words that you just used, Simon, are words that make sense. But it's not that way for each company it's that way as a segment. Michael?

To see that getting back to a more normal level and beginning to slowly start growing that Yeah, I think the way we sort of analyze it is that there's really sort of three segments. About a third of the Tier 3 accounts are just growing their business and doing well, and not really concerned about the reform and the regulatory changes. About a third are sort of in the middle, and then there's a third at the bottom who are very concerned, and who have certainly cut back on or put off and delayed their plans. That will slowly right itself. The FCC are due to issue final regulations by December. It may not be finished by then, at which point they will come out with another round of incentives, but it is -- over the next three to four quarters, we think it will slowly correct itself, and, as Carl mentioned, there would be some consolidation among the bottom third of those service providers, and over the next -- by the middle of next summer, we expect to see that getting back to a more normal level and beginning to slowly start growing their business again.

Great. And then last thing I wanted to talk about was this emerging trend in the industry on small cell sites and clearly those small cell site you need to connect back to networks which I presume presents an opportunity for your company and I just like to see if you could comment on – both timing and materiality of this opportunity. Whether it's something worth pursuing as analyst to reflecting in a model for Calix, or whether it's more in the noise?

So we agree as an opportunity, I don't know that I would separate it out from a model perspective, Simon that's a longer conversation about architecture, so I have to get you to the whiteboard help me understand why I don't think it separates out that way. But it is clearly an opportunity and inexorably as I spoke this morning at talk TV, the only way that you're going to deal with the wireless demand supply in equity is to get to smaller and smaller antennas, i.e. less devices on a given Antenna on smaller radius. So it is definitely an opportunity.

So I guess, even though we can maybe explicitly break it out, we can at least regard this is as a positive driver for growth beyond consumer broadband.

No question.

Great, thank you very much.

Thank you. Our next question comes from the line of Sanjiv Wadhwani of Stifel Nicolaus. Please go ahead. Sanjiv Wadhwani – Stifel Nicolaus: Thanks. Just a clarification before the question, Michael I wanted to clarify that you've said in relation to a question that you expect broadband access revenues to kind of – be pretty similar to where they are today for the next three or four quarters?

Yes, correct. Sanjiv Wadhwani – Stifel Nicolaus: Okay. So you've kind of have bobbing around at around these levels, which looks like might have been slightly below, $8-ishmillion or so for the quarter?

Yes, yes, I think they've only increased slightly and decreased slightly but they're going to be around that level for the next three quarters. Sanjiv Wadhwani – Stifel Nicolaus: Okay, that's helpful. Carl, any updates on Frontier, I know you've spoke a little about Qwest, but any updates on frontier and what we should expect over the next few quarters there?

The only update would be continued to work what we said last which is – we believe we have good relationships and it's growing stronger. And that we're able to go compete in all the properties and compete we will do. Sanjiv Wadhwani – Stifel Nicolaus: (Inaudible)

And so the business trends continue to I think look positive to us. But other than that I don't know that I would make any other comment. Sanjiv Wadhwani – Stifel Nicolaus: Got it. You haven't seen necessarily a slowdown and they are spending irrespective of your ability to penetrate more areas within that account?

Not that I may comment on, (inaudible) no. Sanjiv Wadhwani – Stifel Nicolaus: Okay, got it. And then last question, Carl, when you look at the Connect America fund can you remind us as far as phase I is concerned what the take rate is and you're expecting that to expand in Phase II but just remind us what the take rate was in phase 1?

Yeah, and by the way Sanjiv I just called you Simon, because apparently I'm losing my mind. I don't know which of you should be flattered. And apparently I'm just losing my mind, so I don't remember the exact numbers, Michael, do you have them there, I think.

It was the $115 million out of the $300 million was taken up.

Right. Sanjiv Wadhwani – Stifel Nicolaus: Got it so less than half basically.

Yes.

May expect the second round might be – it's possibly going to be another $300 million in cost save, we expect to take rate and that to be higher. And that's certainly for – that relates to the Tier 1 and Tier 2 accounts. Sanjiv Wadhwani – Stifel Nicolaus: Got it, okay. That's helpful, thank guys.

Thank you. Our next question comes from the line of will come from Simona Jankowski with Goldman Sachs. Please proceed with your question. Doug Clark – Goldman Sachs: Hi, thanks this is actually Doug Clark for Simona. I just wanted to dig a little bit deeper on Qwest, longer term opportunity. Do you continue to believe that you can gain 30% to 40% within that customer?

So, the answer is, we believe we will continue to slowly but surely deploy our model and gain share in the customer. I wouldn't quote any number. Doug Clark – Goldman Sachs: Okay. Also you mentioned, Tier 1, and good momentum at customers, within the Tier 1 segment. Can you give any more detail on who you may be referring to or perhaps if these are existing Ericson customers and related to that?

So let me go back and understand, when you say good momentum in Tier 1, to which are you referring? Doug Clark – Goldman Sachs: Well, that's been a comment that you made kind of several times throughout the call. So I just wanted to get more clarity?

So I just want to make sure I understood what you were trying to – so by the way, CenturyLink Qwest is a Tier 1. Also as we call on the Tier 1s in North America, we've been encouraged by the interest in the response. And also obviously as we move towards a partnership with Ericson on a global basis, we think that affords us those opportunities as well. So that's what we are speaking about when we say that. Doug Clark – Goldman Sachs: Thanks for the clarification.

Yep, appreciate the questions.

Thank you. (Operator Instructions) Our next question comes from the line of Mark McKechnie of Evercore. Please proceed with your question. Mark McKechnie – Evercore: Great. Thanks and congrats on a good quarter in a tough environment here, three lines of question, first is - on the Ericson deal I know you're going to give us full official guidance, but when you close it in a month or so, but I mean can you refresh us of your guidance and kind of any update on how things are going how the customers are reacting to this merger?

Yeah. The only comment I would make, Mark, is that because obviously we're going to come back out with numbers and things of that nature so I wouldn't speak any guidance. I would tell you in my prepared remarks. I said that we are quite pleased with the cooperation today, what we didn't speak to as the feedback. All the feedback from the market that we were seeing that's been neutral to positive, I've heard no negatives. Mark McKechnie – Evercore: Okay, good enough. Then just housekeeping question, I don't' know if you guys share this, but your mix – if you can of copper versus fiber of our systems, are you able to break that out?

I won't share it. And if Michael does, I'll be very surprised. Michael?

No comment. Mark McKechnie – Evercore: Crickets are chirping..So last question is on the visibility for this $87 million, guide that's a nice uptick, sounds like some of the Qwest kicking in, and but how much of that – did you go over how much of that would be from broadband stimulus come out of deferred revenue and how much you feel like you've got in backlog? And you know, what some of the variables are going to be in this environment for hitting those numbers?

So, here's what I would say at the front end and then Michael you can please echo or. I will tell you one item that we are focused on and I am pleased with the progress on, has been our approach to again as the forecasting and demand funneling process? I think we've made great strides this quarter and continue to improve that process. So I feel better about it, statistically from that approach. To the specifics, Michael if you want to make comment, please do.

Yes, Mark, I think the as a separate business was pretty strong in the Tier 1 to Tier 2 and Tier 3s in Q3. We expect that to continue in Q4, and then into 2013. So the answer is – we are not looking at growing revenues on of backlog or the deferred revenue it is just continued to strengthen the business and a backlog and deferred revenue. We expect will continue to grow as we move forward. Mark McKechnie – Evercore: Okay, great. Thanks.

Thank you. (Operator Instructions) It appears there are no further questions at this time. I would like to turn the floor back over to Mr. Allen for any closing remarks.

Thank you, Operator. And thank everyone for joining us today. We hope you can join us at one of our upcoming investment conferences at which we're participating in this quarter including the Goldman Sachs Small Cap Technology One-on-One Summit in San Francisco on November 7th, the UBS Global Technology Conference in New York, on November 14th and the Credit Suisse Conference in Scottsdale, Arizona on November 28. Information about these events have been posted on our investor relations section of our website. Thank you again for joining us today, we remain focused on executing against the opportunities ahead of us. And we look forward to speaking to you on one of these forums. Good bye for now.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time, thank you for your participation.