Calix, Inc. (CALX) Q4 2015 Earnings Report, Transcript and Summary

Greetings and welcome to the Calix Fourth Quarter 2015 Earnings 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] Also, as a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Tom Dinges, Director of Investor Relations. Thank you, you may begin.

Thank you, operator, and good afternoon everyone. Today on the call, we have President and CEO, Carl Russo, as well as Executive Vice President and Chief Financial Officer, William Atkins. This conference call will last approximately 60 minutes and will be available for audio replay in the Investor Relations section of the Calix website at www.calix.com. Before we begin, I want to remind you that in this call we refer to forward-looking statements and actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause actual results and trend to differ materially are set forth in today's earnings press release and in our Annual and Quarterly Reports filed with the SEC. Calix assume no obligation to update any forward-looking statements which speak only as of their respective date. Also on this conference call, we will be discussing GAAP and non-GAAP financial measures. We provide non-GAAP financial measures to enhance an understanding of our operating performance excluding certain items which we believe are not indicative of our core operating results. These non-GAAP financial measures are used in addition to and in conjunction with our GAAP results. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release available at our website at www.calix.com. All numbers that are discussed in today's conference call are non-GAAP unless otherwise noted. As a reminder, our earnings press release, supplemental financial data, and an accompanying earnings release presentation are available in the Investor Relations section of the Calix website. At quarter ended December 31, 2015, Calix reported revenues of $105 million and a non-GAAP loss of $0.03 per share. In just a moment, William will take you through the quarter and the year in greater detail. And Carl will conclude his thoughts on Calix strategy and market outlook. This will be followed by questions from analysts. With that, I would now like to turn the call over to Calix's Executive Vice President and Chief Financial Officer, William Atkins. William?

Thank you, Tom. We last provided you with guides regarding Q4 on October 29. And in that guidance recalled for revenue between $102 million and $106 million. Our gross margin are between 47% and 48% and operating expenses in a range of $51.5 million to $52.5 million thus resulting in a net loss per share of between $0.07 and $0.03. Actual revenue for the quarter was $105 million and EPS was a loss of $0.03 per share with revenues near the top end of guidance and the loss per share at the top end of guidance as well. Gross margin was 46.5% and operating expenses came in at $50.6 million. This is our eight consecutive quarter of meeting or beating revenue and EPS guidance. Product and customer mix drove our results at the gross margin level, with the greatest contributor being the higher proportion of international revenues in the quarter. Operating expenses came in below guidance. The major factor leading to lower than anticipated operating expenses was a slower than originally anticipated pace of hiring. We saw timing of revenue being more concentrated towards the later part of Q4 resulting in negative operating cash flows of $4.1 million. This and the share repurchase spend of $16.1 million were the primary drivers in the reduction in our aggregate balance of cash and marketable securities to $73.6 million from $93.9 million in the prior quarter. Getting into a bit more of the detail, our $105 million in revenue for the quarter showed a decrease of $6.6 million or 5.9% from last year's fourth quarter level of $111.6 million. At 14.6% of our Q4 revenues, international revenue was $15.3 million, up from its 10.6% or $11.8 million level in Q4 of last year. We had won 10% for greater customer again this quarter. As I noted earlier, at 46.5% Q4 gross margin was just under the guidance range with the main driver being the higher relative level of international sales in the quarter. This gross margin in Q4 was down from Q4 2014s 48.1% level. Q4 operating expenses at $50.6 million were up $3.6 million from the same quarter a year ago. But this year-over-year increase primarily due to additions in year-over-year head count, particularly in research and development. This higher level of investment in R&D represents our long term stance of positioning ourselves to take advantage of growth opportunities in 2016 and beyond. Our level of investment in platforms, software and services in 2014 and 2015 culminated in 2015 with the highest number of new product and platform releases in the company's history. Expenses related to the Occam litigation amounted to $0.8 million in Q4. Turning now to the balance sheet, as noted earlier, we ended the quarter with total cash and marketable securities of $73.6 million, a decrease of $20.3 million from Q3, and a decrease of $38.1 million from last year's Q4 level. Receivables DSOs were healthy 35 days compared to 37 days in the previous quarter and 34 days in Q4 2014. With the year-over-year comparison reflecting the more backend loaded revenue trend in Q4 of 2015 relative to Mark even distribution of revenues in Q4 of 2014. The quality of our receivables and our collections performance remains strong. Inventory levels increased to $47.7 million in Q4, up from Q3's $43.8 million level and also up from $46.8 in Q4 2014. The sequential increase in inventory reflected the backend loaded nature of the quarter, as well as some incremental inventory to support the network improvement project that we highlighted last quarter. Inventory turns decreased to 4.1X in Q4 from 4.6X in Q3 and from Q4 2014s 4.8X. This close out of Q4 gives us the opportunity to review 2015 in full. As anticipated by us earlier in the year, 2015 was backend loaded with 53% of our revenues booked in the second half, in line with 2014 54% level for the same period. For the full year we reported revenues of $407.5 million, up 1.6% from 2014s $401.2 million level. And we produced gross margins of 49%, up from 2014s 46.7% figure. Revenue growth was broadly balanced between domestic and international customers. With international comprising 12% of revenues in 2015, the same as 2014s 12% level. Our largest customer accounted for $89.6 million in total for 2015, or approximately 22% of our 2015 annual revenues versus $91.2 million or approximately 23% of our 2014 annual revenues. Operating expenses were $193.3 million in 2015, up 12% from 2014s $172.1 million number. With this increase primarily driven by personal related costs, starting from the headcount increases that I refer to earlier. Net income for 2015 reflected these movements in gross margin and operating expenses, and with $6.4 million or $0.12 per share versus 2014s $14.7 million or $0.29 per share. Occam litigation related expenses totaled $3.3 million for the year. We expect to continue to incur these expenses as we head towards trial, currently scheduled for April of 2016. In terms of guidance for the first quarter of 2016, we expect revenues to be above last year's Q1 levels, and to be in a range of between $95 million and $99 million, with a midpoint of $97 million, up 7% from the $91 million level of Q1 of 2015. We are guiding gross margins to a 47% to 48% range from Q1, down from last year's Q1 level of 49.2%. With this difference largely driven by potential increases in international revenues and in turn key network improvement project revenues. Operating expenses are expected to be in the range of $52 million to $53 million, up from last year's Q1 level of $48.1 million. Reflecting some incremental hiring costs, as well as sequentially higher litigation expenses. Occam litigation related expenses for Q1 are expected to be approximately $2.6 million. The expectation that I just finished taking you through results in a guidance range for Q1 of a net loss per share of $0.15 to $0.11 or $0.10 to $0.06 after taking litigation related expenses into account. At this point, let me hand the call over to Carl. Carl?

Thank you, William. Before I speak to what is ahead, I would like to highlight a few items from the quarter and year just completed. First, bookings in Q4 got off to a slow start but finished strongly, and we expect that strength to continue into this year. Second, we have been receiving CAF II related orders since early in Q4, and while there has been some discussion in the market around the CAF II program driving incremental revenue, our view remains unchanged. We see the effect of CAF II as selling a floor underneath our customers' access market CapEx plans. We are reminded of the broadband stimulus program years ago that was expected to be additive. However, in retrospect, it was substitutive. This time it could be different. However, we have no indication that this is the case. Third, I'm encouraged by the progress of our partnership with Ericsson as we are collaborating on significant opportunities in both international and domestic markets. Finally, our AXOS and conference platforms are well and truly in the market, and the solution offerings based on them continue to show good traction throughout the quarter. As for the future, I would like to share my views on what you should expect to see from the market, and from Calix in 2016. In order to have a better understanding of where we are going, it helps to understand where we have come from. The last three years have been challenging in the access market. While many of our peers have actually been shrinking, we have been growing, although that rate has continued to slow from 16% in 2013 to 5% in 2014, to 2% last year. Over the past two years we have made deliberate and significant investments in R&D to position ourselves in front of what we believe could be the biggest shift power market will have ever seen, and that is the shift to software defined access. Our AXOS platform will allow our customers to build an access network that is fast, always on, and simple. And in so doing allow them to dramatically shift to speed and efficiency with which they bring new services to their subscribers. AXOS, our operating system for software defined access, and COMPASS, its complimentary SAS platform positioned us to improve our R&D efficiency as well. With that, the growth in the rate of our investment in R&D will now begin to slow over the course of 2016. And as William mentioned, as a result of this investment, we have a fantastic set of solutions that are growing fast which brings me to my next subject, and that is growth. As I mentioned over these last three years, we have continued to grow. However that growth rate is not what we aspire to. We believe that 2016 will mark a reversal of that trend with stronger growth this year than last. With captive creating a floor under access market CapEx for several of our larger customers. Our expansion will come from new markets and customers driven by our new platforms and products. As an example, our initiative in the unlicensed wireless edge market has resulted in the growth of our combined GigaCenter and COMPASS solution, and I believe we are just scratching the service of what could ultimately be a very large market for Calix. Next generation fiber and copper technologies promise a new set of infrastructure upgrades as our customers stay ahead of the relentless growth in subscriber demand, and lowering the cost of building and operating these networks is a core focus of AXOS and COMPASS. In short, we believe we are well placed to take advantage of the entry points these technology shifts afford us. This all adds up to our primary mission in 2016, establishing the platform for profitable growth. Our focus will be to raise the earnings growth rate while driving our OpEx growth below our revenue growth. However, as we have reset the baseline investment in the business, this will take some time to achieve. That being said, I believe that you will see operating income leverage begin to show over the course of 2016. It is in our hands to execute on the opportunity that is right in front of us. And with that, I will open the call for questions. Operator?

Thank you. [Operator Instructions] Our first question is from James Faucette from Morgan Stanley. Please go ahead. I'm sorry [ph], our first question is from Simon Leopold from Raymond James. Please go ahead.

Thank you for taking my question. A couple of things I wanted to check on. I appreciate in the prepared remarks you gave us some color on your top customer for 2015, so thank you for that, I know Carl remembers. Just want to verify that that's the same customers you had as your top customer in 2014, is that correct?

Yes and we wanted to make sure we fulfilled the commitment to pulse overstaying which I believe was seconded by you last year.

That's correct. So you do keep promises, I appreciate that.

We kept those promise.

Yes, that one for sure. You know I was going to hold you to it also. I want -- I definitely understand and heard you in terms of CAF II and reiterating the view that it's not necessarily additive but could be substitutive CapEx but can you help us understand the timing issues because I recall last quarter you went into some discussion about timing issues while the customers were doing engineering designs and planning. Help us understand where we are in terms of timing?

So as you may be aware, there is a ultimate hurdle that sort of forces the timing which is at the end of two year. So basically at the end of 2017, they have to be 40% complete with their ability. So the easy math is to say that's 20% per year or 5% per quarter. I think we all know that to assume linearity it would be a little silly because these things get off to a little bit slower start, there is always more complexities in them etcetera. Having said that, we are seeing all of our customers actually get up on their plans pretty quickly, the order flows are building. So I don't think it's going to be a wildly non-linear event, i.e. that all of it would be in next year and none of it this year. But I think some portion, less than 20% will be this year, and some portion, more than 20% will be next year. How much those differ, 18% and 22%, 19% and 21%, that's the way I would characterize that from a timing standpoint.

And does this establish essentially a deviation from your past seasonal patterns for 2016, in other words, you've given us a forecast for the first quarter but should we anticipate a better than seasonal ramp in the June quarter?

So the answer is, I don't believe so. Simon, again you have to go back to our operating thesis which we are informed by a lot of experience that we had in broadband stimulus. This feels like it sets a floor and I think the way I look at it, it raises -- should raise our predictability, in other words, our ability to forecast. But I don't think it's going to change the ramp demonstrably from what we think we can do ordinarily. William, do you have any…

No, I think you nailed on that Carl.

Great, and then maybe just more of a big picture question, with all the new technologies coming out between G.fast, next generation G.PON, can you sort of help us understand how investors should think about the comparisons among the participants? In other words, what's your competitive advantage when it comes to building industry standard products?

It's very clear what our advantage is, and that's based upon software defined access. So as we look at where the industry is going, and the demands being placed on the service providers of today and tomorrow which is their ability to keep up with an ever increasing speeded innovation at the device side that's in the hand of the subscriber. And frankly, even at frighteningly faster rate of innovation in the cloud on the cloud scale global players such as Microsoft Azure or Amazon Web Services. They have to somehow move at that rate and obviously the biggest portion of what they do is in the access infrastructure, that's what software defined access is built for and that's why we build AXOS last server these last many years. To your point, the technologies themselves NG-PON2 or G.fast or any of the technologies that are coming nearly afford us entry points into customers that we don't have, just as a technology shift is occurring but the competitive advantage has little to do with the physical layer we believe going forward.

Right. Thank you for taking my questions.

Simon, thank you. I am glad we could meet our commitments from 12 months ago.

[Operator Instructions] Our next question comes from the line of James Faucette from Morgan Stanley. Please go ahead.

Hi, this is Meta for James. Quick question, just wanted an update on some of the turnkey network improvement projects and just how well you said, kind of think of those in terms of gross margins. And then just a second question, if we could just have an update on some of the progress with the G.fast discussions you guys are having?

Sure. I'll take the first half of that question Meta, and good to hear from you by the way. Basically as we do these turnkey network improvement projects, we are going to have a professional services element which I hasten that, it's not a turf business, it's literally working around, getting our equipment into the customer's network. And inherently, our professional services margin is below our corporate average but as we go forward and as we get our equipment installed in these customers' networks to create the platform for gross margin improvements in the years ahead as we build that footprint and products. I don't know Carl, if you want to address some of the other issues that go into the second part of that question.

I mean so, momentarily they could be -- have a slightly depressing effect on gross margins but overtime it fits well within our model because again, it's a lined professional services with our systems. We are not doing professional services or what I'd refer to as turf contracts on other people's equipment or things that we don't produce, we don't have any value added there, or any competitive advantage. On G.fast that I think it was specifically talking about G.fast as a technology, I guess the best way I could characterize that data is there is everything going on out there and a lot of it, right up into deployments. So we're in pre-deployment phases in the market, everything between there and trials and sales opportunities and labs are ongoing.

Great, thank you guys.

You're welcome. Thanks, Meta. Say hello to James please.

Our next question comes from the line of George Notter from Jefferies. Please go ahead.

Thank you very much. I wanted to ask about your international business, the revenue was up a bit, certainly this quarter, from the model you talked about I guess, the Ericsson relationship improving, both internationally and domestically. Obviously, it's been tougher out there for last number of years. I guess I was just curious about why you made those comments and what's changing there? Thanks.

Yes, it's in a continuum of actually what we've been talking about George and you're right, it's been an interesting buy. But what we are seeing it as the relationship, and we've learned more about Ericsson and how they want to work with us and vice versa, it's continue to improve and we're now collaborating globally around the world in different markets, in different customers. So you can think about the effect that has on our business. Secondly, it's becoming increasingly focused on our core products as opposed to products that we acquired from Ericsson. And so as that happens and the whole model starts to align with what is strategically important to us, the whole thing is starting to resonate. So we felt given what we saw in Q4 that it was worth highlighting that we are definitely seeing more than just green chutes. I think I alluded to green chutes last quarter, and so that's the reason for it. So yes, it's encouraging news and it points forward but more than that I would not say.

Thanks.

[Operator Instructions] And our next question is from Paul Silverstein from Cowen & Company. Please go ahead.

Thanks guys, a couple of questions if I may. First of all, any new non-U.S. revenue customers and what is the total count on non-U.S. now? And if I missed this, I do apologize.

I don't know that we disclosed it but there have certainly been quite a few non-U.S. customers added.

I mean what I would say is Paul, I guess we don't have that number but in terms of the non-U.S. customers we won't name them but it's worth highlighting that we're seeing some order flow from what you can call the national former PTTs which is a nice thing to see. So just -- that's just little bit more color around that if that helps you.

Okay. And William, can you tell us the headcount on employee and staffing?

That will be coming out in our 8-K [ph], we don't have the full numbers to give to you yet today.

Alright. And then Carl on visibility, I appreciate that your business visibility is always challenging, and I appreciate your comments. So other thing said, a couple of questions around visibility, first off, do your customers that have access CAF funds, folks like [indiscernible] etcetera. Do they indicate to or do you know whether or not they indicate, which projects are being driven by those CAF funds? Obviously they are filings but are you able to -- if the total relationship is X dollars in terms of the next 90 days are you able to discern what portion of that amount is directly driven by CAF and what portion is non-CAF? To that pregnant question of CAF sitting a floor, is it displacing, does it augment etcetera? And then I've got one or two more follow-ups if I may.

So your question was, do we know and the answer is yes.

Alright. So you have -- alright, so that's said, when you look at the funds that have been awarded and the projects tied to those funds, can you or are you willing to share with us, can you share with us what portion of those awards you're getting? And I understand, I'm not asking you to reveal any individual customer, I understand why you won't want to do that but you're not going to do that. But as a general proposition, can you give us any sense for what share of the pot you're getting off the broadband equipment piece that you address?

So no, I wouldn't comment to it. It probably wouldn't comment to it ever but I would also tell you that you are early in this program to be making -- I think any kind of assumptions on that if you were me. How is that?

Got you, alright, I appreciate that. And then, Carl, I might have misunderstood but if I heard you correctly relative to your historical growth rate when you smooth it out, the peaks and valleys, the relative 4% to 5% we could go back and check the numbers. But when you look forward and I'm not talking about the next quarter or two but when you look out over the next two to three years, obviously you've been constructive in your commentary about both AXOS as a product platform and a game changer as well as market trends. But relative to the bottoming that you're seeing, can you -- are you willing to hazard any thoughts about what the long term growth trajectory looks like for market? I still not, but I got to ask.

No, listen -- well, look I was happy just to make sure we meet our commitment to you from last year and share it with you, these actually meet numbers but the answer truthfully is we perceive the market going forward as going through a significant deconstruction which I spoke to in my prepared comments. We think this represents a C-change in how infrastructure is going to be build and I think the whole thing gets sort of deconstructed or reconstructed, so I don't know the answer to your question from a market size standpoint. Here is the way I would choose to answer it. I think where the market is going and how it's going to look is very clear to see. And I believe because of both, AXOS from an operating system platform, as well as COMPASS from a SAS platform, we built the two right platforms to enable our customers to go transform their business models over top of their access infrastructure. So I think we have an opportunity to grow at a rate much faster than whatever that market is. We currently address -- we have a very dense footprint as you know, but we currently address a very small percentage of what overall will become the access service providers worldwide. So I don't know the growth rates of the markets because I'm not sure that they are relevant in the way you're asking the question.

Alright, I'm going to apologize to my peers on the call, and if I may, if I could ask you two more quick questions. One, are you saying Cisco had been out of this market for a long time, they appear to be back, early days. But are you seeing them show up in bidding for business and winning business?

Actually we don't see Cisco in our market at all. As a matter of fact I believe they had a partnership with a company and they in fact left. So I'm not sure -- you and I would have very different information on that. Furthermore, as we view Cisco and I don't take anything I'm about to say as anything I knew directly from Cisco but Cisco obviously has entered into a partnership with Ericsson and obviously, we have a partnership with Ericsson. So we have -- I haven't seen anything like that. So go to your second question please.

Alright. So finally, again my apologies but if you address this -- I apologize again, but on the gross margin, both through the quarter looking forward what -- remind us what are the key variables impacting gross margin?

Sure. The key variables impacting gross margin for sort of 2016 versus last year, specifically about Q1, and we already saw the beginning of that trend in Q4. So we called out two major drivers when commenting about both quarters is growth of international whereas you know we expand our footprint with customers and we do that with lower margin initial sales to then read the rewards of higher margins later. And then these turnkey network improvement projects where we get our equipment again into customers' premises in larger quantities and what otherwise would have been the case. And in order to do that we have professional services revenues around getting that equipment installed into their networks. So it's those two -- sorry, overly worthy explanation in summary, against international and professional services increasing as portions of our revenues.

Alright, I'll pass it on. Thanks guys.

Thank you.

[Operator Instructions] Our next question is from Tim Savageaux from Northland Capital Markets. Please go ahead.

Hi, good afternoon.

Hi, Tim.

Couple of questions. And following up the previous comments around international which where you have seen some -- I guess modest revenue declines these past couple of years. It sounded like you eroded to forecast the expected international business to grow. Certainly if you look at these last couple of quarters on a run rate basis it would grow quite spectacularly. But I wonder if you could maybe flush that out a bit more in the context of where I guess you put the bar which is you expect revenue growth reaccelerating above '15 levels and '16, how do you look at that sort of from a domestic versus international standpoint? And then I'll have a follow-up.

Yes, so -- good question Tim. So very clearly we are encouraged by what we've seen in international and forward-looking we believe we have a good growth here in front of us. I don't know that I would comment on the relative growth in North America versus international and which will outpace the other, which would speak directly to your mix question. But I think we have growth available in both, and I would almost ask you to come back next quarter and ask that question as we get little deeper into the year and maybe I'll be able to give you some color.

Okay. And maybe I can just get a one-step granular, asking a question you probably won't answer which is why then when you look within the domestic mix there has obviously been a difference in trajectory in terms of what you've been doing with CenturyLink and what you've doing with the balance of your -- we'll call it, Tier2, Tier3 carrier type population which has been acting a bit better. Do you have any comments with regard to any expectations for changes in that relationship or to put more simply, do you expect your business with CenturyLink to grow in 2016?

No. Let me approach it differently. I think we see to your point favorable things happening across the different segments that we have. So let's take an example. We talked about CAF II putting a floor under the access market CapEx. So you can look at the recipients of CAF II. In the smaller service providers, as you may be aware, U.S. CAF is probably going to be negotiated and announced here in the next week or so. And I won't presage what the announcement might be because frankly I don't know, we have some insight but it looks favorable but more importantly, the fact that it gets announced has certainty is what matters and it's been very uncertain over a period of time. Now with that certainty in place I think that will be a positive for our smaller customers. So those are the general trends. William, do you want to add color to that?

Yes, I'll just add little bit of color to the both parts of your question. On international, I take your point as it relates to say 2013 where international was around 14% of our revenues but in the year prior to that it was 8%, admittedly that was the year in which the Ericsson acquisition took place. So post Ericsson we were at 14%, then we were at 12%, and then 12% again. So yes, a decline but fundamentally it's been -- I would suggest largely stable. I take your comments about Q4 trends and revenue share not being indicative necessarily of the future and I would agree with that but then again we have referenced international a little bit more actively in this call than we have in the past indicating that we feel that international could well, do better than it has historically as we go forward. And certainly for Q1 we're indicating international because it will be a larger proportion of revenues but these are choppy and literally the movement or shipments across quarter end can drive your percentage revenue share one way or the other, so I'd caution you on that. And then the other comment I would make on CenturyLink is that if you look at the absolute dollar spend which we've given you in this call, it basically remained the same year-on-year and yet this was the year in which CenturyLink cut their aggregate CapEx, I think that they were originally guiding the 3, and then they guided the 2.8. I think we'll find out tomorrow as to what the exact number is going to be for 2015. But this is a year where as far as we know today, they reduced our CapEx and yet the absolute dollar spend on us remain constant. So we feel very good about our relationship with CenturyLink, can't forecast the specifics going forward but I just wanted to highlight that in a year in which their CapEx numbers did decline.

Understood, much appreciated. I'll pass it on for now, perhaps a follow-up later. Thank you.

Thank you.

Thanks, Tim.

Our next question is from Christian Schwab from Craig-Hallum Capital Group. Please go ahead.

Thanks for taking my question. As we look at this business over the next three to five years, not the next potential 90 days or some revenue growth greater than a small percentage that you accomplished in '14 to '15. Do we have a path or can you help us outline a path, let's pick a whole number. How long it takes to get to become a $500 million business where the model starts showing some semblance of meaningful leverage and earnings potential? That's my question.

Short answer -- yes, I got it. The short answer is as you predict, we don't have guidance that's going to go out to any specific date but as Carl noted in his remarks, 2016 is the year in which we're going to be addressing that difference in the growth curves of OpEx relative to revenues. And so 2016 is a year in which we are aiming to begin to demonstrate the operating leverage in the business model. And obviously as you flagged it, it's going to come mostly from the topline rather than from the bottom-line. Well, essentially it's going to come topline growth driven.

And back to what you said earlier Christian, last year we grew 2%, the year before that 5%, the year before that 15%, so growth rate has slowed but we've been growing nonetheless. Our goal this year has actually changed the direction of that growth rate and started to grow at a rate faster than last year and we believe we have that in front of us.

Alright, that's fair. Thanks guys.

No worry, Christian.

[Operator Instructions] And if there are no further questions, I'll turn it back over to Mr. Dinges for closing remarks.

Thank you, operator. Calix will be reporting first quarter fiscal year 2016 results on May 3 after market close. In addition, Calix will be participating in a number of investor meetings and conferences during the first quarter. And the other thing, it's 2016 Investor Day on the 16th of March in New York. Information about these future investor events is posted on the Events and Presentation Page in the Investor Relations section at calix.com. We remain focused on executing against opportunities ahead of us and we look forward to meeting with you at one of these upcoming events. Once again, thank you for your interest in Calix and thank you for joining us today. Goodbye for now.

This concludes today's teleconference. Thank you. And you may disconnect your lines at this time.