Calix's Management Presents At The Deutsche Bank Technology Conference (Transcript)

Calix, Inc. (CALX)

Deutsche Bank Technology Conference

September 11, 2012; 12:30 pm ET

Executives

Michael Ashby - Chief Financial Officer

Dave Allen - Director of Investor Relations

Analysts

Presentation

Unidentified Participant

So, welcome to the Calix presentation. Calix is a leading provider of broadband Access equipment into the second and third tire carriers. They do a lot with regard to rural broadband development. I would, I think given their focus there that they would also have some unique opportunities in some of the emerging markets as well.

So we’re going to do a quick presentation and then we are going to move right on to the Q&A session, so here we go.

Michael Ashby

Thank you Brian and good morning. My name is Michael Ashby. I’m the CFO of Calix and over there is Dave Allen who is the Director of Investor Relations, some of you may know Dave. The aim of this presentation here, which is the high level presentation is to take you through what does Calix do, starting of course with the Safe Harbor statement which I won’t bother reading out.

So Calix is the leader in Access Innovation. When we say leader is Access Innovation, that’s all we do, Access. We only design and make and engineer Access Products. So we are the largest telecommunication system vendor that focuses solely on Access. There are a lot of other people in this business, but they do other things, we only do Access. Our main competitors as you probably know are large companies like Huawei, Alcatel-lucent and closer to them (Inaudible) are the two leaders in the North American market here.

We are the leader in advanced broadband Access and we have the largest market share in North America in fiber to the home and are the largest market share in both the 2-2 and 2-3 space in North America.

Over 1,000 customers, including 18 of the 20 largest US Ilex. We have shipped over 70,000, 75,000 systems, 15 million ports and we are financially a strong country, no debt and even though our revenues have been down in the last couple of quarters, we are able to generate cash each quarter and have no accessing the problems on them as far as the company is concerned.

So our focus is on Access as I mentioned. As you can see with the shape and technology ahead, the first is commerce is going completely global as everybody knows. Second is that communications are becoming mobile and personal and that has been drive of course by the iPad, iPhones, Tablets, all those smaller devices, which are making everything become mobile. The third is that information is becoming digital and as you probably know, only about 10% of the world’s information today is digitized, but that is rapidly increasing and will continue to increase.

And finally the culture is becoming virtual. So the culture is virtual in every aspect, using things like FaceTime, Skype and all sorts of different meetings, which have taken over using video. So all of this has become what we call an old video world. You can’t to a website now which doesn’t have video on it, which doesn’t have a video clip. Everything that you do now demands broadband Access and demands video.

In addition to that, there are a number of things that are impacting the service providers themselves, our customers. The first one is regulatory; that is a trailing indicator. Regulator has always been around and continues to be around. The changing of the present managers us actually affecting us. At the moment our regional carriers are somewhat effected by changes that have taken place in what’s called the USF /ICC reform and so the industry is regulated. We’re becoming less served as time goes on.

And the competition however is intensifying. The competition is intensifying not just within the service providers but from the cable companies, of course from the wireless and from different types of service providers that are coming up in the world. So competition is strongly in this business for our customers.

Most important is the fact that the consumers is now in power and that was a big change that’s happened over the last few years and as we look at this new business model, your going to see that it’s the consumer in fact that is driving the business model.

Then the past networks were driven by voice. So the service providers such as AT&T or Verizon is going to pay by its network and then they sold services. But with the networks facing operation, they felt they told you what strategy you could buy and you bought those services and you are happy to pay for them. That is changed considerably in the new broadband business model.

I mean broadband business model is a much lower margin model, it is a leaner model and it is no longer network facing. It is in fact customer facing. It’s driven by the subscriber, so that triangle is being inverted, whereas the cost used to go into primarily implanting engineering and operations demonstration, those have now had to be reduced considerably and more of the cost reduced considerably and more of the cost is going into customer service and marketing, because it is being driven by a subscriber.

The subscriber is demanding the services and they are no longer just buying services, they are demanding services, in which they want to use Netflix, they want to download videos and they require the services and the service provider provides those services to them.

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