Calix Investor Presentation ACCESS INNOVATION July 31, 2015 1 - PowerPoint PPT Presentation

Calix Investor Presentation ACCESS INNOVATION July 31, 2015 1

Safe Harbor All statements other than statements of historical facts contained in this presentation, including statements regarding our future operations and financial position, business strategy and plans and objectives of management for future operations, are forward- looking statements. In some cases, forward-looking statements can be identified by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. This presentation includes forward-looking statements regarding future events, including but not limited to, our Non-GAAP second quarter 2015 financial guidance; the growth of internet traffic and the requirements for enhanced telecommunication networks; capital spending on telecommunication and broadband products; our ability to develop products and services to help our customers transform their networks, including our B-, C-, and E-Series, BLM platform, P- and T-Series ONTs and GigaCenters, Compass suite of products, such as Service Verify, Open Link Cable, and Consulting services; the acceleration of the adoption of gigabit services; our growth drivers; the ongoing expansion of our total addressable market; and our future business and financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those set forth in our filings with the Securities and Exchange Commission (“SEC”), especially in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Annual Report on Form 10-K for fiscal year 2014, and various other SEC filings including our Form 10-Q for the first fiscal quarter of 2015. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or will occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assume responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason to conform these statements to actual results or to changes in our expectations. You should read our SEC filings and the documents that we have filed with the SEC as exhibits to those filings, with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. 2

Agenda Calix: Access Innovation The Access market opportunity New product momentum Latest financial update Appendix 3

Calix: Access Innovation 4

Company History 2015: Over 300 customers to-date have placed orders for GigaCenters 2014: Launched Open Link Cable and GigaCenter solutions 2012: Ericsson fiber access products and sales channel acquired 2011: Occam acquired; expanded into EMEA and Australian markets 2010: IPO on NYSE; Expansion into Latin American market 2008: Expanded into MSO market 2007: Introduced first E-Series products 2006: OSI acquisition added subscriber edge 2005: Expanded into Caribbean market 2002: Carl Russo appointed CEO; Expansion into Tier 2 carriers 2001: Shipped first product - C7 1999: Calix founded 5

Customer Base with 1,200+ Service Providers Broad North American Customer Base with Growth Internationally IOCs 6

The Broadband Market Opportunity 7

“…the clear global leader in gigabit broadband services deployments.” BroadbandTrends, February 2015. 8

Gigabit Speeds Provide Powerful Differentiation 1200 Gigabit Fiber 1000 1000 … 800 G.fast for local loops < 500 m and Mbps … speeds from 150Mb/s to 1 Gb/s 600 DOCSIS 3.0 with 4 400 500 channel bonding with speeds up to >100Mb/s 100 200 Vectored and Bonded Copper Technologies with speeds from <50Mb/s to >300Mb/s 0 Distance (ft) 9

Accelerating Gigabit Deployment Trend Source: Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors – Jefferies Group LLC May 6, 2015 10

Leveraged to Key Growth Markets Calix-Enabled Residential Gigabit Deployment Announcements * 120 100 100 76 80 65 60 43 40 31 20 14 0 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 *Additional customer deployments from Calix customers have been secured but not yet announced. 11

Fiber Deployment Cost Model Electronics represent ~15-25% of the total capex cost per unit served in a fiber deployment 50% Aerial/50% MDU 50% Aerial/0% MDU 100% Aerial/20% MDU 100% Aerial/0% MDU 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Non-Electronics/Sub Electronics/Sub Source: Suburban FTTP Network Scenarios, Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors – Jefferies Group LLC May 6, 2015 12

Fiber Benefits Customers and Vendors Higher customer satisfaction with fiber Reliability, picture quality and faster speeds for over 90% of users Fewer customer calls compared to DSL and Cable Best value for consumers compared to DSL Copper, or Cable Service providers’ take rates for FTTH reach 46% FCC Challenge for 2015: Gigabit deployments in all 50 states Calix-enabled Gigabit deployments in 40 states today Over 100 announced customer deployments through early July Source: RVA LLC: North American FTTH Accelerates, Q4 2014. 13

Fiber Drives Higher ARPU $142 $110 Source: RVA LLC: Average Cost of All Services Reported by Consumers by Broadband Type, Q4 2014. 14

FFTH Reduces Service Provider Costs Estimated Opex Savings 35% 42% 23% 0-9% 10-19% 20% or greater Source: RVA LLC: Estimated OpEx Savings Among Those With Active FTTH Customers, Q4 2014. 15

Fiber Drives High Consumer Take Rates $140,000 90% 83% 81% 80% $120,000 72% 70% $100,000 62% 60% $80,000 50% 40% $60,000 30% 27% $40,000 20% $20,000 10% $0 0% Wornall Homestead Countryside Roanoke Cental Hyde Park Community College Median HH Income Take Rate Source: Google Fiber Kansas City, Bernstein Proprietary Census. Survey conducted by Haynes and Company, May 2014. 16

Economics Favor Fiber Solutions “We think fiber is better than cable and the execution that we have where we have a lot of momentum. There's a lot of positive vibe in the community about our product and we're executing very well. So, we're offering very competitive offers and all that combined is leading the continued growth.” July 30, 2015 “We are planning on spending an additional $100 million in capital next year on fiber. It is a superior asset; it enables us to remain relevant with our customer base.” Sept. 24, 2014 “In the consumer business, FiOS continues to be the driver of our positive revenue trends, resulting in revenue growth of 4.5%. Mass markets, which includes small business, grew 3.2%. FiOS now represents 79% of consumer revenue. In the second quarter, FiOS consumer revenue grew 9.8%...” July 21, 2015 “ Broadband net adds were positive for the first time in nine quarters. Our continued investments to push fiber deeper into the network and shorten loop lengths have improved our capacity and broadband speed availability and are producing improving results from our broadband franchise.” May 7, 2015 “The [REIT] …positions Windstream to accelerate broadband investments and transition to an IP centric network faster…” July 29, 2014 17

Fiber is a Bright Spot in Wireline 50% Fioptics availability 40% 30% $45 $42 Latest Quarter $40 $37 $34 Wireline revenues -1% y/y $31 $29 20% Fioptics revenues +32% y/y 10% 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 0% 1Q14 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Fioptics Rev ($M) Fios Internet Penetration Fios Video Penetration 42% 40% $3,438 $3,352 38% $3,308 $3,200 Latest Quarter $3,125 36% $3,041 Wireline revenues -2% y/y $2,965 Fios revenues +10% y/y 34% 32% 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 30% Fios Rev ($M) 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Broadband Subscribers ('000s) - LHS 6,150 300 Prism Subscribers ('000s) - RHS 6,100 $738 $727 200 6,050 $712 Latest Quarter $709 $702 Wireline revenues -1% y/y 6,000 Strategic revenues +5% y/y 100 $683 Prism subscribers +25% y/y 5,950 5,900 0 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Strategic Rev ($M) Source: Company reports 18

Operators Focus on Increasing Uptake The Importance of Subscriber Penetration Rates on FTTP Economics (5-Year NPV and IRR) Source: Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors – Jefferies Group LLC, May 6, 2015 19

Solutions Leveraged to Broadband Growth Fiber-based deployments Copper-based deployments Subscriber Edge Equipment 20

New Product Momentum 21