Calix : Fourth Quarter 2022 Letter to Stockholders

January 25, 2023

Fellow Calix stockholders:

For the fourth quarter of 2022, the Calix team executed with excellence as we delivered record quarterly revenue, representing 39% year-over-year growth, and completed our third consecutive year of greater than 25% annual revenue growth despite the ongoing global supply challenge. Moreover, the power of our platform and managed services model continued to drive strong demand. Our platform and managed services model comprised more than 90% of bookings in the quarter completing our transformation to a platform company, and going forward, we will no longer cite this percentage.

We continue to see an acceleration of new broadband entrants, progressive broadband investors and legacy minded communication service providers that are becoming Calix platform-based Broadband Service Providers (BSPs) to simplify their business, excite their subscribers and grow their value by growing their subscriber base, revenue, profitability and subscriber satisfaction while improving the BSP's impact on the communities they empower. The number of BSPs using our platform grew 20% year-over-year and serves as evidence of the continued transformation that the Calix platform and managed services model is enabling across the broadband industry.

The transformation of a "dumb pipe" service provider, with broadband speed as the primary go-to- market strategy, to a platform-based broadband service provider continued to gain momentum in the fourth quarter and will continue for the next decade or longer. Our unique platform (consisting of Calix Cloud, Revenue EDGE and Intelligent Access EDGE), a growing ecosystem of managed services and our relentless 91-day cadence of innovation, uniquely positions Calix to help BSPs be the technology and experience leaders in their markets. Broadband speed is a long-term strategy that will not succeed as speed is quickly becoming a low margin commodity. Simplify, in the form of platform-enabled operational simplicity which yields the lowest costs, and excite, in the form of incredible subscriber experiences that yield the highest subscriber loyalty, margin and revenue per user, set the foundation on which a Calix partnered BSP will grow over the long term.

Furthermore, our platform-based product offerings continue to enable the Calix team to outperform in a challenging supply environment due to our focused product set. This allows Revenue EDGE and Intelligent Access EDGE to serve a broader set of use cases with a fraction of the SKUs when compared with legacy Calix. We believe the supply chain unpredictability will persist for the next few quarters, making supply chain management a continued priority as we strive to meet BSPs' strong subscriber demand.

Our mission is to enable our BSP customers to simplify their business, excite their subscribers and grow their value for their members/investors and community. We continued to make progress on this mission in 2022 with 119 new BSP customers leveraging the capabilities of our platform and managed services to grow their business. In addition, our platform and culture continued to be recognized by the industry. Our recent awards included:

• Calix Named Public Company of the Year by Light Reading
• Calix ProtectIQ Wins 2022 Cloud Computing Security Excellence Award From TMC
• Calix's People and Customer Focused Culture Earns Best Company Awards for Culture,
  Women, Diversity and Leadership

As a platform company addressing the disruption sweeping through the communications industry, we are confident our improving financial performance will continue across these four measurable objectives over the long term:

• Deliberate revenue growth
• Gross margin expansion
• Disciplined operating expense investment
• Increased predictability

Examples of our progress made in the quarter were:

• Added 26 new BSP customers in the quarter.
• Record quarter for the Revenue EDGE with revenue up 79% compared with the year ago quarter as both new and existing customers continue to accelerate deployments.
• Record quarter for the Intelligent Access EDGE with revenue increasing by 73% compared with the year ago quarter driven by the technology upgrade cycle to margin improving network virtualization and 10 Gigabit PON.
• Invested fulsomely in operations per our target financial model to capture the opportunity ahead.

Our near-term focus remains on facilitating the success of our BSP customers, team members and partners. Our long-term focus remains on identifying strategically aligned service providers, regardless of their type, size or location, which are ready to transform, and partners that are ready to integrate with our platform to speed the success of our BSP customers. Furthermore, we remain committed to aligning our investments to our mission, vision and strategic plan while maintaining discipline over our operating expenses. Over the long-term, we believe this focus will drive continued financial performance improvement.

Fourth Quarter 2022 Financial Results
	Actual GAAP	Actual Non-GAAP	Guidance Non-GAAP1
Revenue	$244.5m		$244.5m		$237m - $243m
Gross margin	51.1%		51.6%2		49.5%	- 51.5%2
Operating expenses	$111.8m		$99.2m2		$96.0m	- $99.0m2
Net income per diluted	$0.17		$0.342		$0.22	- $0.282
common share

1. Non-GAAPguidance provided on October 24, 2022.
2. Non-GAAPexcludes stock-based compensation and intangible asset amortization as well as the income tax impact of these items. See GAAP to non-GAAP reconciliations beginning on page 16.

The strong demand for our platform and the continued excellence of our supply chain team to overcome the challenging global supply-chain environment led to another quarter of revenue growth. Total revenue was $245 million, increasing 39% compared with the same quarter a year ago. Driven by this demand, systems

revenue in the fourth quarter of 2022 increased 40% compared with the same quarter a year ago. Compared with systems revenue in the third quarter of 2022, which benefited from our ability to increase deliveries late in the quarter, systems revenue increased 3%. Services revenue increased 17% compared with the year-ago quarter as the ramp of our next generation services, that support our BSPs' transformation across network and field operations, marketing and support, continues.

Compared with the prior quarter, services revenue was up 9%. As we discussed in our October 2022 stockholder letter and earnings call, with the ongoing alignment of our services business to our platform model and being less than 10% of total revenue, we will aggregate services and systems going forward and no longer break them out in this chart.

U.S. revenue was 91% of total revenue in the fourth quarter of 2022 and increased 46% compared with the year ago quarter and increased 3% sequentially. This annual increase is primarily due to continued sales and marketing investments in the U.S. to address the significant opportunity ahead. International revenue was 9% of total revenue in the fourth quarter and declined 6% compared with the year ago quarter primarily due to lower shipments to Europe and Africa partially offset by shipments to Canada, reflecting our platform focus on the North American market. International revenue increased sequentially 13% primarily due to shipments to customers in Europe.

Revenue from small customers was 78% of total revenue in the fourth quarter of 2022, down from 84% in the year ago period, but increased 29% in absolute dollars due to higher demand for our platform offerings and offsetting the decrease in purchases of our legacy systems. Revenue from

medium-sized customers was 15% of total revenue in the fourth quarter of 2022, up from 8% in the year ago period, and increased 157% in absolute dollars. The change year-over-year is mostly due to the addition of a new medium-sized customer. Revenue from large customers was 7% of total revenue in the fourth quarter of 2022, down from 8% in the year ago period, and up 20% in absolute dollars. We continue to focus on finding strategically aligned customers of all types and

sizes that recognize the need for business transformation enabled by our platform and managed service offerings.

New for this stockholder letter is a metric that will further illuminate the "land and expand" nature of our business. Our platform consists of Calix Cloud, Revenue EDGE and Intelligent Access EDGE. At the end of 2022, the number of BSPs using one or both of Revenue EDGE and Intelligent Access EDGE grew by

20% year-over-year to 950. Calix Cloud includes Marketing Cloud, Support Cloud and Operations Cloud. At the end of 2022, 844 BSPs adopted one or more of these clouds, representing 13% growth year-over-year. By deploying our Revenue EDGE platform, BSPs can quickly implement and sell managed services, thereby increasing their average revenue per user at the highest possible margin with the greatest levels of subscriber

satisfaction. At the end of 2022, 293 BSPs adopted one or more of our managed services. We are currently offering 7 managed services consisting of Managed Wi-Fi, CommandIQ, ProtectIQ, ExperienceIQ, Arlo Secure, Bark and Servify. Two incremental managed services, SmartTown and SmartBiz, are in pilot with multiple BSPs. We are in the early days of customers adopting one or more of our platform offerings or managed services. Our platform and managed services monetize based on subscriber count, and the growth in subscribers and on-going adoption of our platform and managed services form the "expand" in our "land and expand" strategy. Over time, the recurring revenue from continued platform and managed services adoption will drive higher gross margin.

Remaining performance obligations, or RPOs, result from long-term commitments made by our customers and consist mainly of Calix Cloud, extended warranty, managed services and support agreements while excluding licensed software, usage-based models and true-ups. These

commitments generally have an initial term of three years. In the fourth quarter of 2022, our RPOs were $199.0 million, which is an increase of $73.7 million, or 59%, from the same quarter a year ago. The increase reflects the higher adoption of our platform offerings by an increasing number of our BSP customers. Compared with the prior quarter, RPOs increased $25.9 million, or 15%, representing strong sequential growth and building on the momentum coming out of the Calix ConneXions 2022 Customer

Success and Innovation (ConneXions) conference held in October and the introduction of Calix Marketing Cloud Plus.

In the fourth quarter of 2022, our gross margin continued to move higher after bottoming in the second quarter of 2022 as our supply chain began to normalize and our platform solutions continued to grow. GAAP gross margin decreased 60 basis points year-over-year to 51.1% primarily as we received a U.S. tariff

refund in the year ago period, while non-GAAP gross margin increased 30 basis points to 51.6% reflecting an improving supply chain and was slightly above our guidance range. For the fourth quarter, GAAP systems gross margin decreased 90 basis points to 52.0% compared with the year ago quarter due to higher component and logistics costs but increased 100 basis points sequentially primarily due to an improving supply chain and product mix. On a non-GAAP basis, systems

gross margin of 52.4% was equal with the same quarter last year. Sequentially, non-GAAP systems gross margin increased 90 basis points. Compared with the same quarter a year ago, services gross margin on a GAAP and non-GAAP basis increased 220 and 300 basis points to 33.1% and 35.7%, respectively, primarily due to the continued ramp of services that support of our platform offerings. Sequentially, GAAP and non-GAAP services gross margin increased 160 and 170 basis points, respectively, due to higher revenue. As stated earlier, we will aggregate