Calix (CALX) 8-KCalix Releases Second Quarter 2024 Financial Results

Exhibit 99.2

July 22, 2024

Fellow Calix stockholders:

The second quarter of fiscal 2024 reflected the continued strength of our appliance-based platform, cloud and managed services model. We believe revenue of $198.1 million in the second quarter of 2024 represents the low point for revenue in 2024. We delivered record gross margin as our broadband service provider (BSP) customers continued to gain subscribers due to the outstanding services and value they are providing their subscribers. Our operational excellence remained evident in our strong balance sheet metrics and our fifth consecutive quarter of double-digit free cash flow.

Moreover, as the market is beginning to “Cross the Chasm,” our new customer performance is accelerating. We added 24 new BSP customers in the quarter, up from 10 in the prior quarter. Our new BSP customers are partnering with Calix to differentiate themselves in an increasingly competitive market by transforming their business models with our unique platform, cloud and managed services offering. Unlike in previous quarters when many of our new customers were newly formed entities, nearly all of our new customers came from existing service providers that were served by legacy box manufacturers…a trend we expect will continue. As our appliance footprint grows, it opens new expansion opportunities for our platform, cloud and managed services.

As we have highlighted in recent letters, the network and Wi-Fi appliance portion of our business has been challenged in 2024 by decision making delays on BEAD and government funding, customer purchase adjustments related to our shortened lead-times, and persistently high interest rates, which have BSP customers balancing new subscriber acquisition on existing networks versus incremental builds. As our customers’ clarity with regards to their business needs improves and demand continues to grow, we believe that the third quarter of 2024 will mark our return to sequential quarterly revenue growth.

At Calix, “better, better, never best” is ingrained in our company culture. Calix gains consistent acclaim inside and outside the industry as customers differentiate to win consumer, community and business markets with the Calix broadband platform including:

As always, our leadership team remains focused on improving our financial performance over the long-term across four measurable objectives:

We remain committed to enabling our BSP customers to transform their businesses and succeed in their markets. As the only end-to-end platform company enabling BSPs to capitalize on the multi-decade disruption of the legacy broadband industry by transforming into a comprehensive business model that enables differentiation in an increasingly competitive market, we are expanding our footprint in 2024 as we assist service providers to “Cross the Chasm.” We will continue to align our strategy and investments to support our customers, which in turn we believe will deliver improved long-term financial performance over many years.

For the second quarter of 2024, revenue was $198.1 million, representing a decrease of 12% from the prior quarter and 24% compared with the same quarter a year ago.

Revenue EDGE revenue decreased by 7% from the prior quarter as BSP customers continued to adjust their purchases to our shortened supply lead times and was down 12% compared with the year ago quarter as a couple of significant customers reevaluated their capital priorities and as customers more broadly adjusted their purchases to our shortened supply lead times.

Intelligent Access EDGE revenue was down 28% from the prior quarter and 32% compared with the year ago quarter as a few significant customers slowed their network builds as they reevaluate capital priorities and continuing indecision by customers in general on new network builds as they consider or pursue government stimulus. The market continues to be driven by the technology upgrade cycle to consolidated networks and 10 Gigabit PON.

RPOs result from long-term commitments made by our customers and consist mainly of Calix Cloud, managed services, extended warranties and support/maintenance agreements and exclude platform licenses, month-to-month usage-based models and true-ups. These commitments generally have an initial term of three years. As of the end of the second quarter of 2024, our RPOs were $266.9 million, which is an increase of $21.7 million, or 9%, from the prior quarter and an increase of $53.9 million, or 25%, from the same quarter a year ago. Meanwhile, current RPO was $103.0 million, up 4% from $99.1 million at the end of the prior quarter and up 28% from $80.4 million at the quarter end a year ago. The increases reflect the continued adoption of our platform offerings by our BSP customers. We expect quarterly RPOs will continue to grow.

Expanded customer adoption of our platform, cloud and managed services was again evidenced by the

We added 17 new Revenue EDGE and/or Intelligent Access EDGE customer deployments in the second quarter of 2024. By deploying the Revenue EDGE, BSPs can quickly implement and sell managed services, thereby enabling them to improve their average revenue per user at high margins with the greatest levels of subscriber satisfaction.

Our managed services showed continued growth as 22 additional customers began deploying a managed service. We currently offer the following SmartLife managed services: SmartHome (which includes Wi-FiIQ, CommandIQ, ProtectIQ and ExperienceIQ), Arlo Secure, Bark, SmartBiz and SmartTown.

As we have discussed previously, technology disruptions start with small customers and eventually work their way up to large customers. While we expect this trend will continue in the future, there remain a few customers in the large and medium category that have reduced their level of appliance purchases in the near term as they reevaluate their priorities and requirements. The decline in the large and medium category in the second quarter of 2024 was less than we had anticipated, which points to the start of stabilization for these customers. We also had one small customer grow its subscriber base such that it is now a medium-sized customer. Overall, large and medium customer revenue declined 17% in absolute dollars. Revenue from small customers accounted for 82% of revenue for the second quarter of 2024, up from 81% for the prior quarter, and decreased 11% in absolute dollars.

U.S. revenue was 92% of total revenue for the second quarter of 2024, down from 93% in the first quarter of 2023, and up from 89% of revenue for the year ago quarter. U.S. revenue declined 13% in absolute dollars sequentially and declined 21% compared with the year ago quarter. International revenue was 8% of revenue in the second quarter of 2024, down $0.8 million, or 5%, from the prior quarter due mostly to lower shipments to the Middle East and Africa. International revenue was down 46% compared with the year ago period primarily due to lower shipments to Europe and to a lesser extent the Americas outside the United States.

Our GAAP gross margin for the second quarter of 2024 was a record 54.3%, an increase of 10 basis points sequentially and 200 basis points year-over-year. Included in GAAP gross margin was stock-based compensation and intangible asset amortization. Excluding these items, our non-GAAP gross margin for the second quarter of 2024 was a record 55.1%, representing an increase of 20 basis points sequentially and 230 basis points from the year ago period. The continued improvement is primarily due to platform, cloud and managed services revenue as it continues to grow as well as being a greater mix of total revenue as our appliance revenue was down in the second quarter of 2024. We expect that gross margin will continue to increase each quarter; however, the amount of increase may vary from quarter to quarter.

Our GAAP and non-GAAP operating expenses for the second quarter of 2024 were $119.0 million and $104.2 million, representing 60.0% and 52.6% of revenue, respectively. Sequentially, GAAP operating expenses decreased by $5.6 million. Excluding the stock-based compensation, non-GAAP operating expenses decreased by $4.2 million from the prior quarter primarily from lower professional fees, personnel expenses and outside services. Compared with the year ago quarter, GAAP and non-GAAP operating expenses decreased by $5.7 million and $3.4 million, respectively. The decline in non-GAAP operating expenses is primarily due to outside services and professional fees. Non-GAAP sales and marketing investments were 24.2% of revenue, which is above our Target Financial Model range of 18% to 20%. Non-GAAP research and development investments were 36.4% of gross profit, which is above our Target Financial Model of 29%. Non-GAAP general and administrative investments were 8.3% of revenue, which is above our Target Financial Model of 7%. We continue to plan our 2024 operating expense investments to be consistent with the level of investment in 2023 as we believe 2024 represents

an opportunity to grow our footprint ahead of the anticipated U.S. government broadband investment in 2025.

GAAP net loss of $8.0 million for the second quarter of 2024 decreased approximately $8.1 million sequentially and decreased approximately $17.3 million compared with the same quarter a year ago. These declines were primarily related to the lower revenue compared with each of these periods. GAAP net loss for the second quarter of 2024 included stock-based compensation of $15.5 million and intangible asset amortization of $1.0 million, partially offset by the income tax effect for these items of $2.3 million. Our non-GAAP net income for the second quarter of 2024 was $6.1 million, a decrease of $8.3 million when compared with $14.4 million in the prior quarter. The change was mainly due to the lower revenue and was partially offset by higher gross margin and lower operating expenses and income taxes. Non-GAAP net income decreased approximately $19.1 million when compared with $25.2 million from the same quarter last year primarily due to lower revenue and partially offset by higher gross margin and lower income taxes.

Our balance sheet remains strong. Our Days Sales Outstanding (DSO) at the end of the second quarter 2024 was 38 days, down 2 days from the prior quarter and up 4 days from the same quarter a year ago. Our Target Financial Model for DSO remains between 35 and 45 days. Inventory turns were 2.8, down from 3.1 in the prior quarter and down from 3.0 in the second quarter a year ago. The decrease in inventory turns relate to an increase in component inventory and lower shipments. Inventory turns based on finished goods inventory only was 3.7. Inventory turns for the second quarter of 2024 were below our Target Financial Model of 3 to 4 turns. We expect to be below our Target Financial Model for a few

quarters while we consume these components. In the second quarter of 2024, our inventory deposits decreased by $5.8 million, bringing our total inventory deposits to $70.3 million. Days payable outstanding (DPO) at the end of the second quarter was 10 days, down 12 days from the prior quarter and down 15 days from the year ago quarter. Our Target Financial Model for DPO is between 25 and 35 days. Our cash conversion cycle was 158 days compared with 134 days in the prior quarter and 131 days in the same quarter last year. Our Target Financial Model for our cash conversion cycle remains to be between 100 and 130 days.

We ended the second quarter of 2024 with cash and investments of $261.2 million, which was a sequential increase of $21.7 million. The increase was primarily due to positive non-GAAP free cash flow of $16.4 million and proceeds from equity-based employee benefit plans of $4.0 million. Compared with the second quarter a year ago, our cash and investments decreased by $2.9 million primarily due to our common stock repurchases of $80.1 million over the last four quarters partially offset by positive non-GAAP free cash flow of $50.3 million and proceeds from equity-based employee benefit plans of $28.7 million. At the end of the second quarter of 2024, we had $109.9 million available under our stock repurchase program. We continue to expect both GAAP operating and non-GAAP free cash flow to remain strong due to continued non-GAAP profitability and cash conversion cycle improvements.

Our guidance for the third quarter of 2024, ending September 28, 2024, reflects our expectations as of the date of this letter.

Our revenue guidance for the third quarter of 2024 is for revenue to be between $198 million and $204 million, representing an increase of $3 million (at the midpoint) from the prior quarter. We expect our platform, cloud and managed services will continue to grow; and while we continue to increase our sales activity and footprint expansion, we are taking a cautious view on appliance shipments.

Due to the continued expansion of our platform, cloud and managed services, our non-GAAP gross margin guidance for the third quarter of 2024 of 55.25% (at the midpoint) would be up 15 basis points from the prior quarter.

Our non-GAAP operating expense guidance for the third quarter of 2024 remains higher than our Target Financial Model as a percentage of revenue due to the current revenue outlook. Throughout 2024, we plan to keep our operating expenses relatively constant with the prior year as we execute on the opportunity to land new footprint prior to the anticipated arrival of the U.S. government stimulus starting in 2025.

We expect our 2024 non-GAAP effective tax rate 2024 to be in a range of 20% to 22%.

We remain in the early stages in this once-in-a-generation disruption of the broadband industry. Our BSP customers are thriving in this disruptive market as the Calix model enables a simple path to a comprehensive business model that differentiates to win consumer, business and municipal subscribers at an ever-increasing pace. We expect further footprint gains as we continue to convert legacy network operators who are struggling with commoditization, margin declines and slowing growth while Calix partnered BSPs innovate at a faster and faster pace.

Our BSP customers’ success remains the foundation for our long-term growth and will continue to expand across three vectors:

We remain confident in the multi-year outlook for our business. Each quarter we grow our footprint by adding to our BSP customer base and expand the reach of our platform, cloud and managed services across our 1,065 BSPs and their subscribers. With the expected market upturn closer and broadband stimulus funds poised to make their way to our BSP customers starting in 2025, we are in an enviable position to maximize on these positive trends and return to predictable growth that should last for many years.

We sincerely thank our employees, customers, partners, vendors and stockholders for their continued support.

Sincerely,

In conjunction with this announcement, Calix will host a conference call tomorrow, July 23, 2024, at 5:30 a.m. Pacific Time / 8:30 a.m. Eastern Time to answer questions regarding our second quarter 2024 financial results. A live audio webcast and replay of the call will be available in the Investor Relations section of the Calix website at http://investor-relations.calix.com.

Live call access information: Dial-in number: (877) 407-4019 (U.S.) or (201) 689-8337 (outside the U.S.) ID# 13747128.

The conference call and webcast will include forward-looking information.

Jim Fanucchi

VP, Investor Relations

InvestorRelations@calix.com

(408) 404-5400

Calix, Inc. (NYSE: CALX) — Calix is an appliance-based platform, cloud and managed services company. Broadband service providers leverage the Calix broadband platform, cloud and managed services to simplify operations, engagement and service; innovate for their consumer, business and municipal subscribers; and grow their business and the communities they serve.

Our end-to-end platform, cloud and managed services democratize the use of data—enabling our customers of any size to operate efficiently, acquire subscribers and deliver exceptional experiences. Calix is dedicated to driving continuous improvement in partnership with our growing ecosystem to support the transformation of our BSP customers and their communities.

Statements made in this stockholder letter and the earnings call referencing the stockholder letter that are not statements of historical fact are forward-looking statements. Forward-looking statements are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to, but are not limited to, component and logistics costs, potential customer or market opportunities, growth and future opportunities, customer demand or the sustainability of continued demand, anticipated customer purchase trends, anticipated government funding, expected customer and product mix or anticipated adoption or deployment of our appliances, platform, cloud or managed services, industry, market and customer trends, opportunities with existing and prospective customers, the timing of BEAD/BABA shipments, free cash flow and liquidity, continuation of our stock repurchase program and future financial performance (including the outlook for the third quarter of 2024, full year and future periods and performance against our Target Financial Model). Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, including but not limited to fluctuations in our financial and operating results, the capital spending decisions of our customers, changes and disruptions in the market and industry, availability of capital in the market, potential for growth in our business driven by government funds, changes in and impacts of regulations and/or government sponsored programs, competition, our ability to achieve market acceptance of our appliances, platform, cloud or managed services, our ability to grow our customer base, fluctuations in costs associated with our appliances and services including higher costs, dependence on third-parties for production and resource management associated with our global supply chain that may cause delays in production, inventory write-offs or component liabilities, cost overruns, disruptions in global trade and relations, social unrest and political uncertainties and other unanticipated factors, as well as the risks and uncertainties described in our annual reports on Form 10-K and our quarterly reports on Form 10-Q, each as filed with the SEC and available at www.sec.gov, particularly in

the sections titled “Risk Factors.” Forward-looking statements speak only as of the date the statements are made and are based on information available to us at the time those statements are made and/or management’s good faith belief as of that time with respect to future events. Calix assumes no obligation to update forward-looking statements to reflect actual performance or results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. Accordingly, investors should not place undue reliance on any forward-looking statements.

The Company uses certain non-GAAP financial measures in this stockholder letter to supplement its consolidated financial statements, which are presented in accordance with U.S. GAAP. These non-GAAP measures include non-GAAP gross margin, non-GAAP operating expenses, non-GAAP sales and marketing investments, non-GAAP research and development investments, non-GAAP general and administrative investments, non-GAAP effective income tax rate, non-GAAP net income, non-GAAP net income per diluted common share and non-GAAP free cash flow. These non-GAAP measures are provided to enhance the reader’s understanding of the Company’s operating performance as they primarily exclude non-cash stock-based compensation, intangible asset amortization, litigation settlement and the impact from changes in income taxes, which the Company believes are not indicative of its core operating results. Management believes that the non-GAAP measures used in this stockholder letter provide investors with important perspectives into the Company’s ongoing business performance and management uses these non-GAAP measures to evaluate financial results and to establish operational goals. The presentation of these non-GAAP measures is not meant to be a substitute for results presented in accordance with GAAP, but rather should be evaluated in conjunction with those GAAP results. A reconciliation of the non-GAAP results to the most directly comparable GAAP results is provided in this stockholder letter. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.