Investor Presentation August 2017 1
Safe Harbor This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Examples of forward-looking statements include, but are not limited to, statements about our anticipated growth and growth drivers; our future financial condition and results of operations; our future business, financial and operating performance; our growth strategy and market outlook; our development of new products and product features; our cost estimates and plans, including planned cost savings related to our restructuring plan; and the success and/or market adoption of our products and solutions. We have based these forward-looking statements on our current expectations, assumptions and projections. Our actual results or actions may differ materially from those projected in forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and factors that could cause results to differ materially as described in our filings with the Securities and Exchange Commission, including our annual report on Form 10- K and quarterly reports on Form 10-Q. Except as may be required by law, we undertake no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on August 8, 2017. We are not providing any financial guidance update in this presentation. Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com 2 Proprietary and Confidential
Agenda 1. Calix at a Glance The Coming Wave – Access r E volution 2. The Rising Tide – Infrastructure Investment 3. 4. 4. Financials 5. Supplemental Information 3 Proprietary and Confidential
Calix at a Glance 4
Calix strategic focus: The access network Con Conte tent nt App Appli lica cation tions Dev Device ice-en enab abled led Subsc Sub scribe riber 5 Proprietary and Confidential
Our Customers – Over 1,300 and growing Customer Mix - 2016 9% 21% 15% 54% CenturyLink Windstream Other Medium/Small Domestic International Source: Calix, Inc. 6 Proprietary and Confidential
Our Revenue Growth $ in millions $ in millions Y/Y +25.5% Y/Y +5.6% $550.0 $140.0 Y/Y +17.4% $131.8M Y/Y +7.9% $128.0M Y/Y +19.5% $126.1M Y/Y + $121.2M $117.5M >10% $500.0 $120.0 $458.8 Y/Y $450.0 $100.0 +12.6% CAGR $407.5 $401.2 +7.3% $400.0 $80.0 $382.6 $350.0 $60.0 $330.2 $300.0 $40.0 $250.0 $20.0 $200.0 $0.0 2012 2013 2014 2015 2016 2017E 3Q16 4Q16 1Q17 2Q17 3Q17E Note: 2017 and 3Q17 revenue estimates based on mid-point of guidance provided in First Quarter 2017 Financial Results earnings release issued August 8, 2017 7 Proprietary and Confidential
The Coming Wave 8
Our Place Con Conte tent nt App Appli lica cation tions Dev Device ice-en enab abled led Subsc Sub scribe riber 9 Proprietary and Confidential
Global Device Growth (B) 60 50B 50 Estimated Device units IoT Tablets 40 PCs 30 TVs 16B Non-Smartphones 20 Smartphones 10 Other 0 2015 2016 2017 2018 2019 2020 Source: Cisco VNI and Business Intelligence 10 Proprietary and Confidential
Cloud Growth (M) 700 Total Workloads 600 500 400 Public 300 Private Traditional IT 200 100 - 2006 2011 2016 2021 2026 2031 Source: VMware 11 Proprietary and Confidential
The Opportunity Con Conte tent nt App Appli lica cation tions Dev Device ice-en enab abled led Sub Subsc scribe riber 60 700 IT Workloads Total Devices 50 600 500 40 400 30 300 20 200 10 100 - 0 2006 2011 2016 2021 2026 2031 2015 2016 2017 2018 2019 2020 Source: Cisco VNI and Business Intelligence Source: VMware 12 Proprietary and Confidential
The End State: a Global LAN with Flexible Operating Systems and Robust Analytics Discover Simplify Elevate Con Conte tent nt App Appli lica cation tions Fast Always On Simple Secure 13 Proprietary and Confidential
rEvolution – Software Defined Access Global PLANNING OPERATIONS SUPPORT MARKETING SUBSCRIBER API SDN/NFV Ecosystem Analytics Policy Device & Service Activation Virtual G.fast Applications Data Center GigaCenter NG-PON2 GPON 14 Proprietary and Confidential
rEvolution – Systems E9-2 E5-520 E3-2 E5-308 E7-2 GigaFamily E5-16F E7-20 E3-16F Data Center Outside Plant Premises 15 Proprietary and Confidential
rEvolution – AXOS Always On Simple Fast $10B of Access 60% of TCO related 2 years to certify downtime to Network Operations and activate a service Management REST SNMP NETCONF / YANG CLI OpenFlow Performance Platform Configuration QoS Manager Diagnostics Syslog Monitoring and Upgrade Control & 3 rd Party Timing Layer 3 Protocols OAM Host Services 35 Data Topology & Layer 2 Protocols Multicast Protocols Traffic Management Multi-Service Protocols Discovery Protocols Infrastructure Service Abstraction Layer Hardware Abstraction Layer 16 Proprietary and Confidential
rEvolution – Calix Cloud Next generation cloud services that reveal actionable insights for key business functions and their strategic needs ▪ Discover the path to revenue growth and business efficiency through analytics ▪ Simplify decision making and accelerate time to act through data correlation ▪ Elevate key business functions to be agile and subscriber driven through actionable insights Note: Calix Cloud subscription services introduced in October 2016. Marketing Cloud released in April 2017. Support Cloud released in June 2017. Other cloud services still to be released. 17 Proprietary and Confidential
rEvolution – Disruptive Economics of the AXOS E3-2 E3-2 140 km Before: After: Traditional Network Architecture With AXOS E3-2 Intelligent Node • Master headend and Central office • Distributed Access/Service Management Collapse • Maximum reach of 20km from each office • Extend the reach of data centers by up to 140 km • Branch network serving up to seven hubs • Integrated routing and subscriber management • Many offices, staffed and powered • Up to 80% TCO savings realized after shuttering offices (1) (1) Calix estimates 18 Proprietary and Confidential
rEvolution – Disruptive Economics of the AXOS E9-2 Current Defining the Access Edge ▪ Subscriber facing functions Aggregation OLT ▪ switch Agnostic deployments (DC,CO,HE) ▪ Ride the VNF wave Edge Core Router Router Unbounded Performance ▪ Non-blocking Subscriber Future Management ▪ Lowest power Aggregation ▪ Snaps into Data Center fabrics Open OLT ▪ White Box Fewer to provision and manage Switching ▪ Less rack space, HVAC, power Compute Store 19 Proprietary and Confidential
The Rising Tide 20
Access is Key for Communication Service Providers Q2 Earnings Comments – A Rising Tide “…The key to winning in the communications marketplace is differentiation from our competitors…we will continue to focus on that differentiation through the customer experience and the use of disruptive technology…we are focused on bringing faster broadband speeds to more customers as quickly as possible…There is a tectonic shift occurring in communications today as more applications move to the cloud. New access methods emerge and customers adopt software- defined networking services to improve network resiliency and prioritize the flow of data.” August 3, 2017 " The shift in the wireline revenue trend towards fiber is growing. Organically, fiber-based products grew more than 3%, which supports our plans to further invest in fiber…Fiber is a critical element in transforming both wireless and wireline networks to reduce cost and expand future capabilities. To enhance this strategy, our recent announcements to secure fiber demonstrates our commitment to increase our multiuse fiber footprint and build fiber deeper into the network.” July 27, 2017 “We continue to see higher levels of penetration and growth. We have 40 megabits of higher speeds available. We ended the second quarter with nearly 9.4 million 40 megabits and higher addressable locations, with more than 3.8 million 100 megabits in higher addressable locations, representing an increase of 240,000 and 350,000 addressable locations, respectively, during the quarter… we continue to build on infrastructure and increase the availability of speeds. Where we have 40 megabits or more speed, we're seeing good penetration in the marketplace.” August 2, 2017 Source: Transcript of Q2 2017 earnings calls for respective companies 21 Proprietary and Confidential
Broadband Demand Growth Unrelenting (exponential) Nielsen’s Law (50% annualized Bits per second growth for high- end connections) has proven to be accurate for 35+ years Source: Nielsen Norman Group 22 Proprietary and Confidential
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