What changed in this filing

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Item 1. Business

2021-02-22 compared with 2020-02-21 · 164 added, 486 removed, 39 unchanged (94% of the section changed)

Company Overview

(together with its subsidiaries, “Calix,” “we,” “our” or “us”) was incorporated in August 1999 and is a Delaware corporation.

Calix is a leading global provider of cloud and software platforms, systems and services required to realize the unified access network and the smart, connected premises of tomorrow.

Our mission is to connect everyone and everything.

Calix platforms empower our customers to build new business models, rapidly deploy new services and make the promise of the smart, connected home and business a reality.

Innovative CSPs rely on Calix platforms to help them master and monetize the complex infrastructure between their subscribers and the cloud.

Our platforms and services help our customers build next generation networks by embracing a DevOps operating model, optimizing the subscriber experience by leveraging big data analytics and turning the increasing complexity of the subscriber edge into new revenue streams.

We are delivering software platforms that help CSPs meet emerging threats from web-scale players and reinvent how they serve their device-enabled subscribers.

Our solutions enable CSPs to launch entirely new business models that capitalize on the opportunities that are being generated by the increase of new applications and devices such as streaming services, smart phones, Internet of Things, or IoT, augmented and virtual reality applications and autonomous technologies.

Our customers, who are embracing our strategic platforms, recognize that providing a sensational subscriber experience enables them to compete today and in the future.

We also provide cloud analytics designed to help CSPs identify subscriber needs by using network and behavioral data.

The insights generated from these analytics enable CSPs to create and market new offerings that monetize their investments in their networks.

Finally, we strive to put our customers and their brands first to ensure that they will always have a central place in their subscribers’ lives.

Our solution strategy is intended to help our customers build and reinforce their brand presence within their subscribers’ premises.

We believe this must be an element of their strategy for sustaining and growing their businesses.

Our current customers include CSPs of almost every size and type.

Our solutions may be used by any entity providing communications services to a subscriber.

This universe includes local and competitive exchange carriers, cable multiple system operators, or cable MSOs, wireless internet service providers, or WISPs, fiber overbuilders such as municipalities and electric cooperatives and hospitality providers.

We market and sell our portfolio to CSPs globally through our direct sales force as well as in partnership with a number of resellers.

We have enabled over 1,600 customers to deploy passive optical, Active Ethernet and point-to-point Ethernet fiber access networks.

Our premises systems and cloud solutions enable these CSPs to provide industry leading managed Wi-Fi and a growing portfolio of subscriber services to millions of their customers.

Industry Background and Trends

CSPs compete in a rapidly changing market to deliver a range of services to their residential and business subscribers.

Subscribers purchase an array of services from a variety of CSPs, starting with basic voice and data through advanced broadband services such as high-speed Internet, Internet protocol television, or IPTV, mobile broadband, high-definition, ultra-high-definition and over-the-top video and online gaming.

Consumers are also rapidly adding devices that require high bandwidth, low latency services such as virtual and augmented reality as well as IoT devices that bring significant complexity to the premises network.

It is likely that adoption of autonomous technologies such as self-driving cars will dramatically increase demand and complexity.

Leading CSPs are deploying new capabilities and offerings such as mobile applications, network security, parental controls and Quality of Service, or QoS, that help subscribers master the complexity introduced by new devices, applications and services.

We believe that the CSP is uniquely positioned to manage these capabilities and offerings on behalf of subscribers, and this position presents the greatest potential source of differentiable value for CSPs.

The rapid growth in new technologies is generating increased network traffic and putting pressure on CSPs to cost effectively upgrade and enhance their networks to meet demand.

For example, Cisco Systems, Inc.

estimates that global Internet Protocol, or IP, traffic on a monthly basis will increase from 122 exabytes in 2017 to 396 exabytes in 2022, representing a compound annual growth rate of 26%.

In addition, Cisco Systems, Inc.

estimates by 2022, the number of devices connected to IP networks will be more than three times the global population.

As the corresponding smart home applications become more sophisticated, they will shift from being useful to essential.

This proliferation of new devices (and usage patterns) creates a tremendous opportunity and increases the pressure on CSPs to offer new services and create revenue streams by mastering the complexity of the smart, connected home and business for their subscribers.

Web-Scale Players Have Become a Competitive Force

The level of competition among CSPs - wireline and wireless service providers, cable MSOs and other CSPs - has increased over the last decade as traditional service boundaries have fallen.

All providers are now competing for the same residential and

business subscribers using similar types of IP-based services.

The expansion of new technologies in the subscriber premises creates significant new opportunities for all CSPs.

Technology innovators of all types and sizes are moving aggressively to seize that opportunity, and we are now seeing web-scale players aggressively enter subscribers’ homes and businesses via interactive smart home hubs and devices.

These entrants, such as Amazon.com, Inc., or Amazon, Alphabet Inc., or Google and Microsoft Corporation, are extending their current platforms (e.g., data driven search, e-commerce) into subscriber premises with new devices and services that are helping to reshape the home environment.

The simplicity of operating these devices, as well as their use of easily accessible data, enables these web-scale players to rapidly deploy new services and command a central place in the subscriber’s daily life.

The level of insight that they generate by mining user data, coupled with their DevOps business model, positions them to offer and deploy services to subscribers at a pace that traditional CSP operating and business models cannot match.

IoT, virtual reality and other connected devices have become mainstream, and they will continue to become more and more prevalent in subscriber homes in 2020.

According to Statista, household penetration of smart devices is 32.4% and is expected to hit 52.4% by 2024.

Mordor Intelligence has estimated the smart home market at $64.60 billion in 2019, and it is expected to reach $246.42 billion by 2025 (a compounded annual growth rate of 25%).

Companies such as Amazon, Google and Apple Inc.

have recognized this business opportunity, and they have created and acquired significant new smart premises offerings.

To address this challenge and establish control of the device-enabled subscriber, we believe CSPs must respond by leveraging analytical tools that utilize network data and subscriber behavioral data to tailor services that meet the individual subscribers’ needs.

These services include high-bandwidth packages, managed and whole home Wi-Fi as well as advanced applications such as security and parental controls.

We believe these new services represent the CSP’s greatest opportunity to create new revenue streams and higher average revenue per user, or ARPU, while reducing subscriber churn.

CSPs must also leverage network and subscriber data to streamline and automate subscriber facing functions such as customer service.

These data-driven approaches can significantly reduce service costs, improve profitability and support investment in new services and technologies.

Increasingly, companies in the communications space will embrace strategies that apply machine learning and artificial intelligence technologies that promise to dramatically improve the subscriber experience, build subscriber intimacy and loyalty, while increasing ARPU.

By leveraging data to build a tighter bond with their subscribers and deliver high-value services, CSPs can more effectively meet the challenge presented by web-scale players.

The Experience Economy

In the 2020 Data-Driven Marketing & Advertising Outlook Study, over 80% of marketers said delivering a consistent customer experience is extremely or very important to their companies.

Customer experience has become the most important means for many brands to differentiate themselves in today’s data-driven marketplace.

Using data and insights to identify the customer’s unique path to purchase the optimal experience, companies are able to customize and personalize their interactions, removing friction, and improve effectiveness.

This is driving the need for tools that continually and automatically refine segments based on changing behaviors.

Leading CSPs recognize that high operating margins rely on the experiences that connectivity enables.

High performing Wi-Fi is the starting point, enabling the modern applications that subscribers expect, whether it is a low-latency gaming session or a video call with smooth frame rate.

Thousands of networked products and services make our lives more convenient, entertain us or keep us safe.

Delivering a market leading, connected experience requires more than a high-bandwidth service.

When subscribers complain that ‘the internet isn’t working,’ they often mean the Wi-Fi is not working and blame their CSP.

On one level, owning the subscriber “experience” means ensuring that high speed data connections are not undermined by underpowered Wi-Fi hardware and that CSPs have the tools they need to manage and service subscribers cost-effectively.

At the next level, it is about creating new revenue and margin opportunities for new applications.

CSPs are moving beyond commodity hardware and adding meaningful value to everyday connected experiences - whether it is providing necessities like network security and parental controls or enabling progressive services like voice controls or cloud gaming.

Subscribers want a simple, safe and functional connected experience, and CSPs are perfectly positioned to lead in the experience economy.

The Shift to a DevOps Business Model

Access networks are the “life blood” of delivering the connected experience by directly and physically connecting the residential or business subscriber to the CSP’s data center, central office or similar facility, creating the on-ramp to the Internet.

The access network is critical for service delivery as it governs the bandwidth capacity, service quality available to subscribers and ultimately the services and experience CSPs can provide to subscribers.

Providing differentiated, high-quality, high-speed connectivity has become increasingly critical for CSPs to retain and expand their subscriber base, launch new revenue-generating services and deliver a value-added experience.

To meet the demands of device-enabled subscribers, CSPs have already begun to deploy access technologies that are software defined and leverage next generation Passive Optical Network,

or PON, architectures such as NG-PON2, XGS-PON and 10G EPON.

In doing so, they are addressing many of limitations of legacy access systems:

Limited capacity of outdated access architectures – Network architectures have physical limitations in their ability to scale bandwidth, avoid latency issues and deliver the advanced broadband services subscribers demand today and are expected to increasingly demand in the future.

Inflexible networks that constrain subscriber offerings – Networks were designed to support a narrow range of services, and as a result, they limit the ability of CSPs to deploy the advanced broadband services increasingly demanded by their subscribers.

Expensive to deploy and operate – With a wide variety of equipment installed, networks require significant downtime and labor for maintenance and upgrades, thereby placing a significant and recurring capital and operating expense burden on CSPs.

Back-office systems that inhibit deployment of new services – Traditional methods for operationalizing new products and services often require significant testing and lengthy back-office integration activities.

This often places CSPs at a competitive disadvantage relative to emerging service providers that are leveraging agile management practices.

By replacing traditional hardware functions with software defined access, or SDA, as well as software defined networking, or SDN, CSPs can overcome these operational challenges and bring new products and services to market faster.

Many CSPs are embracing SDA and SDN to help accelerate innovation, deploy automation, bring agility to their networks and significantly reduce service disruptions.

By embracing standards-based, modular software platforms that abstract software functions from hardware, CSPs can free themselves from a dependence on specific hardware technologies and upgrade their access network to enable a DevOps business model.

The winning service providers of the future will embrace SDA platforms and transform their access networks into a competitive advantage.

Ultimately, this new model will enable CSPs to manage a range of access systems across every deployment scenario (e.g., central office, head-end, cabinet or mounted on a pole) in a consistent manner.

With this shift they will introduce services at a pace that can then match the speed of the web-scale players.

The Imperative to Develop Lean Operating Models

We believe CSPs face a dual challenge in the coming years – mounting competitive pressure and the requirement to increase their investments in technologies that can deliver the new services that their subscribers demand.

Most will need to make shifts in their operating models to thrive in the coming decade.

They must implement a lean operating model that reduces the overall operating cost to run the network and deliver services to subscribers at an accelerated pace as well as at a significantly lowered cost.

The adoption of new technologies that provide automation and intelligence, such as SDA, will help service providers adopt agile operating models and reduce the burden of network and back-office operations.

10 Gigabit Services Gain Momentum

The adoption of data-intensive applications like cloud gaming and remote worker high-definition video conferencing are driving the demand for 10 gigabit, or Gb, services.

Many industry experts claim that CSPs are already facing ever-increasing bandwidth demand from their subscribers, and upcoming applications such as cloud-based gaming and streaming platforms are going to increase demand further.

They also highlight that the move to 10 Gb services will come at a cost and one size will not fit every subscriber scenario.

CSPs must have visibility and analytics to monitor and meet the evolving behaviors and usage patterns of their subscribers.

As a result, we are seeing CSPs of all sizes looking to identify subscribers who would benefit from multi-gigabit services and deploy the PON technologies of their choice on a single system or network to meet subscriber demand.

In fact, Ovum estimates that purchases of 10 Gb capable access systems may surpass GPON system purchases by 2021.

Ideally, CSPs will embrace a network built for all PON technology such as GPON, XGS-PON, 10G EPON and NG-PON2, so they are not limited to choosing a specific PON technology to deliver 10 Gb services.

We believe leading CSPs are planning to future-proof their fiber networks and deploy the right technology at the right time to optimize their capital investments.

The Rapid Emergence of Wi-Fi 6

Consumer dependence on Wi-Fi continues to increase, with 75% of people in the U.S.

reporting that Wi-Fi is their primary method of connecting to the Internet, according to Parks Associates.

By 2022, it is expected that most households will have as many as 50 Wi-Fi connected devices, more than double the 2017 average, according to Cisco VNI.

The trends are clear:

more wireless devices, higher bandwidth applications and a greater dependence on a reliable, wall-to-wall Wi-Fi.

However, this is a challenge for many CSPs that have concentrated their investment on bringing faster speeds to the home, but not connectivity inside the home.

According to a 2019 Calix sponsored report by John Kendall, Associate Director, Research & Analysis at IHS Markit, consumers may have fast speeds to the house but do not find these access speeds available wirelessly

around the home.

As a result, the Wi-Fi 6 standard (also known as IEEE 802.11ax) is fast becoming the new wireless foundation for a whole host of CSP-managed subscriber experiences:

trouble-free wireless connectivity, content filtering and parental control, network security, smart home automation and more.

Altogether, the Wi-Fi 6 standard defines more than 50 features beyond the Wi-Fi 5 standard.

One of the largest trends from the 2020 Consumer Electronics Show, or CES, was the emergence of Wi-Fi 6 routers and devices.

Consumer brand companies such as Netgear, TPLink, D-Link and Asus have announced new products, each claiming to offer some combination of the highest Wi-Fi 6 throughput, lowest latency or greatest coverage.

Similarly, other manufacturers at CES announced a number of Wi-Fi 6 enabled devices to capture the consumers’ imaginations.

The Deployment of 5th Generation, or 5G, Networks

As subscribers adopt next generation mobile applications and technologies, the demand for higher bandwidth, lower latency and dramatically higher device densities is accelerating.

Because existing LTE mobile networks are increasingly challenged to meet these demands, many CSPs are announcing and moving to deploy 5G mobile networks that promise dramatically greater performance and capabilities for mobile and fixed broadband services.

5G is significantly different from previous generations in the mobile evolution, because it delivers higher bandwidth (10 Gbps per radio), lower latency (less than 1 msec) and supports a dramatically greater number of connections (1 million devices per km 2 ).

By leveraging higher frequency spectrum and more efficient data encoding, 5G offers CSPs a path to differentiate their services and shift the competitive landscape.

CSPs are pursuing two major strategies to deploy 5G capabilities across their networks:

Upgrading existing LTE infrastructure – By upgrading their existing LTE wireless networks with 5G radios, CSPs will realize 10 to 20% higher bandwidth for 5G mobile devices.

This approach will offer a quick path to 5G services for some CSPs and may differentiate their mobile broadband services.

However, this incremental strategy offers relatively limited improvements in wireless capacity.

Leveraging millimeter wavelength technology – Leading CSPs will deploy thousands of millimeter wave 5G small cells to realize a 5- to 10-fold increase in capacity across their mobile and fixed broadband networks.

This approach will enable CSPs to support virtually any next generation mobile, augmented or virtual reality, IoT or autonomous vehicle or device application.

This will open up tremendous new business opportunities for early adopters.

Due to the inherent range limitations of millimeter wave technology, 5G small cells must be deployed in very close proximity to subscriber devices.

This will require the deployment of thousands of 5G small cells throughout a CSPs network to deliver services to subscribers.

With the adoption of 5G millimeter wavelength technology, CSPs will require transport that is both very capable and economically efficient.

CSP cell networks will ultimately come to resemble high-density broadband access networks that leverage high-bandwidth, reliable fiber transport.

To make the economics work, CSPs will ultimately need to embrace fiber efficient point-to-multi-point capabilities offered by NG-PON2 that include:

Aggregated 10 Gb services delivered over a single wavelength;

Channel bonding to increase capacity delivered for a single service;

Multiple wave lengths over a single PON to provide unmatched resiliency and low latency operations.

While 5G networks will be significantly more capable, the deployment of thousands of radio stations will introduce significant operational complexity for CSPs.

As a result, 5G will accelerate the imperative for CSPs to adopt SDA technologies that simplify network operations and architectures.

CSPs will also need to embrace advanced premises systems that exploit the capabilities delivered by 5G fixed wireless access networks to deliver an exceptional subscriber experience.

The Role of Governments in Supporting Technology Investment

As CSPs face increasing competitive pressure, they must accelerate their investments to upgrade their access networks and deploy new subscriber facing technologies.

Governments around the world recognize the importance of expanding broadband networks and delivering advanced broadband services to more people and businesses.

As a result, many governments have established stimulus programs or other incentives for broadband investment.

In the United States, programs like the Connect America Fund, or CAF, E-Rate and ReConnect provide billions of dollars each year to CSPs in the form of capital investment incentives and grants and loans to encourage broadband network investment in unserved or underserved communities.

For example, in 2015, the CAF program was authorized to distribute $2.0 billion per year through the end of 2020 to offset the costs of installing and operating CSP operated broadband and voice networks for large service providers in the United States.

Between 2016 and 2018, this program was extended to smaller service providers to distribute over $1.5 billion annually over the next 10 years to offset the costs of installing and operating CSP operated broadband and voice networks.

In order to promote greater accountability, in 2019 the Federal Communications Commission,

or FCC, established a uniform framework for measuring the speed and latency performance for recipients of CAF.

CSPs who wish to continue leveraging this program must seek new solutions that enable them to report and demonstrate their ability to meet the requirements established by this new framework.

In addition, the E-Rate program was authorized to offer $1.5 billion in grants to build gigabit capable network connections to schools.

The E-Rate program is funded at its current level indefinitely.

Finally, in 2018, the U.S.

Department of Agriculture announced a new broadband loan and grant pilot program, now called the ReConnect Program providing $1.15 billion to facilitate high speed broadband to the farms, which will allow them to increase productivity.

Dedicated to its long-term goal to close the digital divide, the FCC approved a new rural broadband fund called the Rural Digital Opportunity Fund, or RDOF, in January 2020.

RDOF auctions will award over $20 billion for new broadband network and service development.

The deployment of these funds will be spread across a ten-year period starting in 2021.

Given the competitive nature of the reverse auction, we anticipate that many greenfield service providers will compete and likely take a portion of these funds from the larger traditional service providers, which have typically received them in the past.

Calix was founded in 1999.

We develop and market cloud and software platforms, systems and services to enable CSPs of all types and sizes to innovate and transform their businesses.

These platforms empower our CSP customers to utilize real-time data and insights to simplify their businesses and deliver an increasing array of services to excite their subscribers.

We believe these insights enable CSPs to grow their businesses through increased subscriber acquisition, loyalty and revenue, thereby increasing the value of their businesses and contributions to their communities.

This is our mission – to enable CSPs of all sizes to simplify, excite and grow.

We believe our platforms offer a competitive edge to CSPs at a critical time of increasing competition from over-the-top device providers as they expand their reach and focus on owning the connected home experience.

For example, these device providers are entering the home by offering Wi-Fi enabled devices, and then leveraging the behavioral insights to expand their direct relationship and brand with the subscriber by offering additional consumer services.

Over time, we expect this competition can erode a CSP’s brand and relationship with their subscribers, by reducing broadband to an easy-to-replace commodity, which can increase churn and reduce revenue.

Our platforms enable CSPs to compete with higher value managed services offerings for their subscribers.

Innovative CSPs, who are embracing our platforms, understand this competitive threat and that their brand’s central position in the home is a strategic ground they must protect and expand continually.

Our Intelligent Access EDGE network solution and Revenue EDGE subscriber solution are designed to allow the CSP to simplify their business and reduce operating expenses, or OpEx, while launching exciting new services in weeks instead of years.

Our role-based clouds enable CSP teams, such as operations, marketing and support, to leverage real-time behavioral analytics to anticipate the subscriber’s needs, whether that is optimized broadband speed or a new service offering.

The CSP’s teams can then utilize these insights to offer new and innovative services to those subscribers who have the propensity to buy, thereby growing revenue as they deliver a connected home experience at significantly lower OpEx.

To expand our reach in the market, w e will continue to pursue strategic technology and distribution relationships that align with CSPs’ strategic priorities.

At the same time, we offer our Calix Customer Success and Support Services that provide the CSP with best practices and programs to strengthen and grow their brand with their subscribers, thereby increasing subscriber loyalty and opportunities to grow their subscriber base.

Strategy Overview

We believe that many CSPs can and will evolve to provide the most relevant services and experience to their subscribers.

Today, many CSPs command a privileged and strategic position in their subscribers’ premises.

They provide a service that is becoming a necessity for most subscribers.

With significant new technologies coming into the marketplace, the opportunities to differentiate based on the subscriber experience and generate new revenue streams are manifold.

However, the journey from connectivity provider to essential provider of high bandwidth Wi-Fi and experiences for the smart, connected home and business will require significant transformation for most CSPs.

Our strategy is to position Calix as the essential provider of platforms and services that enable this transformation.

Our strategy is to position Calix as the key partner providing cloud and software platforms, systems and services to enable and facilitate the transformation of CSP networks into networks that utilize real-time data generated in the access network and subscriber home network in order to provide an exceptional broadband experience for their subscribers.

Most CSPs will require significant transformation of their business and operations in order to become an essential provider of data-driven, high value managed services to their subscribers.

The principal elements of our strategy are:

Focus on Our Strategic Platforms and Solutions – O ur strategy centers on increasing the market adoption of our three strategic platforms - Calix Cloud ® , EXOS ® (Experience eXtensible Operating System) and AXOS ® (Access eXtensible Operating System).

Calix Cloud is a role-based analytics platform that leverages network data and subscriber behavioral data to deliver analytics and intelligence to communications professionals via role-specific dashboards.

Calix Cloud provides the subscriber analytics that enable a CSP to deliver targeted marketing, services and experiences to build customer intimacy and loyalty.

Calix Cloud currently includes Calix Marketing Cloud for CSP marketing teams and Calix Support Cloud for CSP customer support teams.

EXOS is a carrier class smart home and business operating system that supports residential, business and mobile subscribers.

EXOS, coupled with our market leading GigaSpire ® premises systems, provides a unique “service enablement platform” that is designed for mastering and monetizing the complexity of the subscriber edge.

EXOS enables CSPs to elevate every aspect of their business by deploying smart home and business services and generate new revenue streams.

AXOS is an operating system for access networks that allows a service provider to deliver all services on a single, elastic, converged access network that is always on, simple to operate and quick to deploy.

AXOS, coupled with our E-Series systems, provides a unique platform for the SDA network that enables CSPs to transform their business processes and deliver new services at DevOps speed.

Armed with AXOS, CSPs can simplify their network operations, their network architectures and their business models.

Extend Portfolio of Calix Services – Our services team helps CSPs define their transformation strategy, build new skills, implement new technologies and deploy new subscriber services.

Calix Services address a CSP’s entire network and service delivery lifecycle.

Our service offerings include managed services for Remote Network Monitoring, or RMS, as well as deployment enablement services to help CSPs accelerate and streamline network and premises implementation projects.

We also offer customer success and professional services that are critical for driving adoption of our strategic platforms.

These services allow CSPs to benefit directly from our experience working with over a thousand service providers to optimize their operations and leverage our advanced analytics to improve the operational efficiency of their teams.

Engage Directly with Customers – Calix continues to invest in our direct sales capabilities to ensure that we engage deeply with our customers to help them understand the differentiable value that our platforms provide.

As an innovator and a market leader, it is important that our sales and solution engineering resources continually drive the adoption of our strategic platforms.

As we deploy new solutions, we are building the expertise of our team by adding specialized resources with deep expertise in areas such as marketing, cloud platforms and network operations.

Our direct model is complemented with selective programs for Calix channel partners who have established local market expertise, demonstrated the ability to generate new market opportunities and support sales of cutting-edge technologies.

Expand Customer Footprint Across Our Expanded Total Addressable Market – In 2019, we added over 100 new customers spanning CSPs of all types.

Our diverse and growing customer footprint is a critical source of our growth as we expand our portfolio and sell additional platforms to both new and existing customers.

Our platforms are dramatically expanding our total addressable market, and as such, we intend to continue to engage emerging providers that are creating entirely new customer segments, including fiber overbuilders, utilities and municipalities.

We will also build on our recent momentum in penetrating service provider segments where our current share is relatively low such as cable MSOs, large CSPs and international markets.

Pursue Strategic Relationships – We expect to continue to pursue strategic technology and distribution relationships, alliances and acquisitions that help us align with CSPs’ strategic priorities.

We continue to invest to ensure interoperability across the ecosystems that support our customers’ most critical business processes through our partner programs.

We continue to work with current ecosystem partners while exploring a range of new partnerships to expand the services available on our platforms.

By adding new solutions to our platform ecosystem, Calix is significantly enhancing the value that our platforms deliver to CSPs and their subscribers.

Portfolio Overview

By embracing open, modular, standards-based strategies, we provide intelligence and flexibility across a CSP’s entire network – from their data centers to their subscribers’ connected devices.

Calix platforms are designed to provide our customers the agility that they need to offer the managed services that their subscribers demand.

While we continue to support our non-AXOS and non-EXOS systems and our traditional cloud and software products, we are focused on driving the evolution and market penetration of our strategic platforms and services.

In 2019 we introduced two strategic solutions to make it easier for CSPs to quickly adopt the Calix platforms, systems and services:

The Revenue EDGE is a subscriber experience solution designed to transform CSP business models.

The Revenue EDGE builds on the powerful EXOS platform and GigaSpire family by integrating real-time subscriber insights via Calix Cloud to enable CSPs to deploy new revenue-generating services and applications .

The Intelligent Access EDGE is an SDA solution that consolidates edge routing, subscriber management, aggregation, and Optical Line Terminal, or OLT, functionality, dramatically simplifying network architectures and operations.

By incorporating AXOS, CSPs can future proof their fiber networks and deploy the right technology at the right time to optimize their capital investments.

The Calix portfolio allows for a broad range of subscriber services to be provisioned and delivered over a single unified network.

These systems can deliver voice and data services, advanced broadband services, mobile broadband as well as high-definition video and online gaming.

Our goal is to help CSPs simplify their network operations, network architectures and business operations while enabling them to offer new services.

Our premises systems allow CSPs to master the complexity of the smart, connected home and offer new services to differentiate through the delivery of an amazing subscriber experience.

Furthermore, our goal is to help CSPs elevate every aspect of their business – their brand, their service quality, their subscriber experience and their revenue streams.

Representation of how Calix platforms and services support a CSP’s entire network:

Building and evolving our platforms – Our product strategy centers on our strategic platforms.

These platforms simplify CSPs’ businesses by delivering intelligence and automation across the entire subscriber facing network – from the data center edge to the subscriber’s devices.

Our platforms also enable critical functions within a CSP’s business, such as marketing, support and operations, to leverage real-time data to continually understand and optimize the experience for their subscribers.

Our strategy is to continually augment and extend these platforms with features and services directly or through partners to allow our customers to deliver cutting-edge services to their subscribers.

Engage Directly with Customers – We continue to invest in our direct sales capabilities so that we can engage deeply with our customers to help them understand the differentiable value that our platforms provide.

As we deploy new solutions, we are building the expertise of our team by adding specialized resources in areas such as marketing, cloud platforms and network operations.

Our direct model is complemented with selective programs for our channel partners, who have established local market expertise and have demonstrated the ability to generate new market opportunities and support sales of cutting-edge technologies for CSPs.

Expand Customer Footprint Across Our Total Addressable Market – Our total addressable market includes CSPs of any type and size, including local and competitive exchange carriers, cable multiple system operators, or cable MSOs, wireless internet service providers, or WISPs, fiber overbuilders such as municipalities and electric cooperatives and hospitality providers.

In 2020, despite limited face-to-face interaction, we added 87 CSP customers purchasing directly or through our partners.

diverse and growing customer footprint is a critical source of our future growth as we expand our portfolio and sell additional platforms to both new and existing customers.

Our platforms expand our total addressable market and recurring revenue streams by allowing us to address the needs of not only traditional wireline-focused CSPs, but also emerging service providers.

As such, we intend to continue to engage emerging providers that are creating entirely new customer segments, including fiber overbuilders, utilities and municipalities.

We will also continue to pursue service provider segments where our current share is relatively low, such as cable MSOs, large CSPs and international markets.

Extend Portfolio of Calix Services – Our services team, Calix Services, support our CSPs as they define their transformation strategies, build new skills, implement new technologies and deploy new subscriber services.

Calix Services’ capabilities address a CSP’s entire network and service delivery lifecycle.

These services allow CSPs to benefit directly from our deep expertise working with service providers to optimize their operations and leverage our advanced analytics to improve the operational efficiency of their teams.

Pursue Strategic Relationships – We will continue to pursue strategic technology and distribution relationships that help us align with CSPs’ strategic priorities.

We continue to invest to provide interoperability across the ecosystems that support our customers’ most critical business processes through our partner programs.

By adding new solutions to our platform ecosystem, we significantly enhance the value that our platforms deliver to CSPs.

Product Overview

Our product strategy centers on increasing the market adoption of our three product platforms - Calix Cloud ® , which comes in three role-base editions:

Calix Marketing Cloud, Calix Support Cloud and Calix Operations Cloud;

EXOS ® , which is marketed as the Experience Innovation Platform;

and AXOS ® , which is marketed as the Network Innovation Platform.

These platforms are sold independently and are also offered as two strategic solutions that make CSP adoption simple and quick:

the “Revenue EDGE” and the “Intelligent Access EDGE.”

The Revenue EDGE

Calix understands that CSPs need to create and maintain a unique brand image and generate revenue streams that build on their strategic position as the preferred home connectivity provider.

The growing complexity at the “subscriber edge” represents a significant opportunity for CSPs to create new revenue streams.

The Revenue EDGE is an end-to-end solution that encompasses the capabilities that a CSP needs to offer new services that monetize the complexity of the subscriber edge.

Successful CSPs recognize that subscribers are not all the same and leverage data-driven insights to match services with specific subscriber needs.

Because CSPs can deliver and manage every Revenue EDGE service and application for the subscriber, they can eliminate the complexity and performance issues that typically impact services such as Wi-Fi, network security, parental controls and home automation.

In short, with the Revenue EDGE, CSPs can now offer a value proposition that “over-the-top” players and consumer solutions simply cannot match.

Representation that depicts the components of the Revenue EDGE Solution (Foundation and Suites):

Revenue EDGE Insights

We believe that the company with the best data and insights will win in their market.

Calix Support Cloud and Calix Marketing Cloud deliver real-time analytics and insights to enable CSPs to provide a seamless experience tailored to the ever evolving needs of their subscribers.

The ability to deliver these experiences is increasingly a critical success factor for CSPs.

Calix Support Cloud – Calix Support Cloud provides customer support/care teams with data and analytics that take the guess work out of the broadband and Wi-Fi performance troubleshooting process.

With Calix Support Cloud, customer support professionals can analyze a subscriber’s in-home experience to identify broadband and Wi-Fi issues and address many issues without requiring field technician intervention.

With Calix Support Cloud, leading CSPs are leveraging machine learning and predictive analytics to proactively address issues before they impact the subscriber experience and reduce support call volumes, call times, “truck rolls” and operational costs.

Calix Marketing Cloud – Calix Marketing Cloud is designed for service provider marketing teams who want to leverage real-time data and analytics to be more effective and efficient in their marketing efforts.

Calix Marketing Cloud includes role-based dashboards and analytics that provide insights that help marketing teams understand and target subscribers based on their needs and behaviors.

CSPs who leverage Calix Marketing Cloud have experienced dramatic improvements in marketing return on investment, or ROI, and revenue growth.

EXOS Platform and Revenue EDGE Systems

EXOS Platform – EXOS is a carrier class premises operating system and software platform that supports residential, business and mobile subscribers.

EXOS is the first premises operating system that is designed to help CSPs elevate every aspect of their business by rapidly deploying new services for the smart, connected home and business.

All GigaSpire and GigaMesh ® systems are powered by EXOS.

EXOS incorporates a software model that is standards-based, fully abstracted from the hardware and always-on.

Thanks to the unique architecture of EXOS, CSPs can offer new subscriber services and master the complexity of the subscriber edge.

Armed with EXOS, CSPs can select and rapidly deploy services such as cloud-enabled voice services, network security and parental controls.

When combined with these capabilities, EXOS offers a unique and powerful services enablement platform.

Representation that summarizes the primary benefits delivered by EXOS:

EXOS is architected to abstract software functionality from the underlying system-on-chip in premises gateways.

This architecture simplifies software updates and streamlines operational processes.

The EXOS abstraction layer also ensures the delivery of a consistent subscriber experience regardless of the specific hardware deployed to subscribers.

EXOS leverages Linux containers that provide flexibility to CSPs when they deploy application packages to create new revenue streams.

This “containerized” architecture also ensures that new applications may be deployed without the requirement to regression test the entire applications portfolio running on the system.

This approach accelerates time to market for new services.

The EXOS management plane is decoupled and centralized, enabling CSPs to manage all applications simultaneously, even if applications are installed independently.

The EXOS architecture ensures that subscribers receive an “always on” service and benefit from application updates without the need to “re-boot” their premises systems or schedule service visits.

Microservices Aggregation Platform that supports EXOS captures data from every system or activity across a subscriber base.

As CSPs deploy EXOS they can leverage this data for performance analytics, subscriber experience insights, marketing, maintenance and the application of artificial intelligence for predictive modeling.

Revenue EDGE Systems

GigaSpire BLAST Systems – GigaSpire BLAST systems are powered by EXOS and provide industry leading Wi-Fi coverage and enable industry leading application scalability.

With GigaSpire BLAST systems, CSPs can elevate their brand and offer new revenue generating experiences.

The Calix GigaSpire BLAST systems offer:

Industry leading Wi-Fi performance and coverage with the latest Wi-Fi 6 technology

Always-on operation, that reduces service disruptions

Advanced instrumentation and analytics to enable optimal performance for all connected devices

GigaSpire BLAST systems are available in a range of models that provide optimal performance across a range of subscriber use-cases.

CSPs can choose from multiple Wi-Fi antenna configurations and form factors that offer cost and performance profiles that address differences in home size and subscriber device usage.

Calix will continue to evolve this portfolio to ensure that CSPs can meet changing subscriber requirements.

GigaMesh – The Calix GigaMesh is a high-performance Wi-Fi satellite that enables ubiquitous Wi-Fi in every part of the home.

The GigaMesh is powered by EXOS and optimized for interoperability with GigaSpire BLAST Systems.

Representation of the GigaSpire BLAST systems:

EDGE Services

Every Revenue EDGE system provides foundational services that elevate the subscriber experience.

Foundational managed services and applications include managed Wi-Fi, Alexa Voice Services, Broadband Performance Testing and Marketing Campaign Delivery.

The intuitive CommandIQ™ mobile application puts control of the home experience directly in the hands of subscribers.

CommandIQ – CommandIQ is a mobile application that provides the subscriber with a comprehensive view of all smart devices installed in their network.

CommandIQ features a menu of useful options that enable the end subscriber to manage and tune their home experience by running speed tests, enabling guest Wi-Fi, adjusting parental controls and enabling network security.

CSPs can also elevate their brand by skinning the application with their brand colors and logo.

Alexa Voice Services – The GigaSpire family includes Alexa-enabled systems that enable the use of any standard Alexa skill as well as Calix custom skills that provide information on network speed, device count, bandwidth-intensive devices, device performance and recently connected devices.

Advanced Managed Wi-Fi – CSPs can move ahead of their competition by being first to their market with Wi-Fi 6.

More importantly, they can ensure the delivery of an amazing experience by leveraging Calix Cloud to manage and optimize the experience of every subscriber.

Broadband Performance Testing – CSPs can ensure that their network is delivering advertised performance levels with the Calix Broadband Performance testing solution that is delivered via EXOS-powered GigaSpire and Calix Support Cloud.

CSPs can also leverage these capabilities to ensure compliance with FCC testing requirements.

Marketing Campaign Delivery – CSPs can utilize the marketing campaign delivery capability included with Calix Marketing Cloud to deliver targeted messages directly to the CommandIQ mobile application.

This capability opens up an entirely new channel for communicating with subscribers regarding new services, customer service updates and special promotions.

Revenue EDGE Enablement

Revenue EDGE Enablement resources are designed to ensure that CSP teams are fully enabled to deploy, manage and monetize the services that they provide to subscribers.

EDGE Enablement resources help CSPs minimize time to market and maximize ROI.

These resources include marketing content, training programs, success services and professional services.

Each component of the EDGE Enablement resources addresses an aspect of CSP readiness to deliver an exceptional subscriber experience.

Revenue EDGE Suites

ProtectIQ™ and ExperienceIQ™ are the first two application suites developed specifically for the Revenue EDGE Solution.

The EXOS scalable architecture allows for applications to be independently developed, tested and released.

This approach gives CSPs a simple way to introduce new services to subscribers and a consistent, repeatable approach to deploy and manage these applications.

These solutions enable CSPs to build their brand, generate new revenue and manage and secure the smart, connected home.

More importantly, the Revenue EDGE Solution enables a CSP to offer new services that they can actively manage for the subscriber.

By offering capabilities such as parental controls and home network security as a managed service, the CSPs can reduce the complexity of the subscriber experience and expand the value that they are delivering to the subscriber.

ProtectIQ – ProtectIQ allows CSPs to protect and manage subscriber networks from a host of threats such as viruses, malware, intrusion and phishing, hijacking, spyware, adware and malware websites and to alert subscribers when unwanted visitors try to enter the home network.

As viruses and malware become increasingly sophisticated, home networks require an equally innovative security solution.

ProtectIQ enables the CSP to not only deploy the latest security software but actively manage it on behalf of a subscriber.

ExperienceIQ – ExperienceIQ provides industry leading parental controls, allowing subscribers to manage screen time, content and access from the CommandIQ application.

As new applications and devices proliferate, many subscribers demand deeper control over who can access the content delivered to the people who are accessing their home networks.

ExperienceIQ enables the CSP to guide the subscriber and ensure that the control settings are optimized to meet the subscriber’s objectives.

The Revenue EDGE is a subscriber experience solution designed to enable CSPs to rapidly deploy new subscriber services to grow their business.

The solution is built on EXOS, our carrier class premises operating system, and fully integrated with our GigaSpire ® family of systems to be ready for deployment as a complete subscriber experience solution for a CSP’s residential and business subscribers.

The Revenue EDGE also integrates real-time subscriber insights via our Calix Marketing Cloud, Calix Support Cloud and Calix Operations Cloud offerings, which are configurable to display role-based insights.

These insights enable CSPs to anticipate and target new revenue-generating services and applications through our mobile application, CommandIQ ® , and expanding EDGE Suites offerings.

We offer additional cloud-based services with the Revenue EDGE, which we refer to as EDGE Suites.

Today they include features for network security and parental controls.

We will continue to expand these services with integrated third-party cloud offerings from our ecosystem Revenue EDGE partners such as Arlo Technologies, Inc., or Arlo, and Service Lee Technologies Private Limited, or Servify.

Finally, we offer Revenue EDGE Enablement resources to provide CSP teams with resources to quickly deploy, manage and monetize the services that they provide to subscribers.

These resources include marketing content that can be easily customized with on-line tools, training programs, success services and professional services.

The Intelligent Access EDGE

The Intelligent Access EDGE solution redefines the access edge of the network by simplifying its architecture and operations.

By collapsing multiple network elements into a single system in the access network and using specialized software modules to add and remove functionality, the solution dramatically reduces the total cost of ownership, or TCO, and the time to market for new services.

From a single point in the network, the Intelligent Access EDGE solution enables CSPs to maintain all of their services and manage their entire network with one common service model, while reducing network operational expenses by as much as 40%.

Enhanced platform analytics and automation help to optimize network planning, automate critical tasks and accommodate future capabilities and services.

The Intelligent Access EDGE solution is built on the award-winning Calix AXOS software platform.

Representation of the Intelligent Access EDGE solution:

Access EDGE Insights

The Intelligent Access EDGE Insights enable CSPs to more effectively monitor network performance and more efficiently address performance issues.

Access EDGE Insights are delivered through the Calix Remote Monitoring Service, which is a cloud-based managed service offering that provides CSPs with better visibility and analytics to rapidly solve network problems that can impact subscriber experience.

This cloud-based platform automatically associates and correlates disparate alarms, reducing the number of incidents that an operations team needs to analyze.

The service provides continuous network alarm monitoring using the Calix Intelligent Remote Monitoring Platform and enables rapid isolation and repair through automated analysis and notification with triage and root cause of incidents affecting subscribers.

AXOS Platform and Access EDGE Systems

AXOS Platform – AXOS is a software platform built for the specific needs of the access network.

The AXOS platform is an architecture built to leverage the best of data center software design and network virtualization across the challenging and variable environment of the access network.

With an always-on architecture and consistent provisioning services, a CSP can leverage AXOS to deliver all services on a single, elastic, converged access network that is always on.

AXOS is the only access platform with a portfolio of systems that will power networks built on all PON technologies - GPON, XGS-PON, 10G EPON and NG-PON2.

With our everyPON strategy, service providers are not limited to choosing a specific PON technology to deliver the services that run on their networks.

With AXOS, they can future proof their fiber networks and deploy the right technology at the right time to optimize their capital investments.

Over 250 Calix customers are already deploying AXOS to simplify their operations, network and business models.

Representation that summarizes the primary benefits delivered by AXOS:

We believe AXOS offers a revolutionary way for CSPs to operate their access networks and accelerate their business transformation.

AXOS achieves this because it is architected with discrete software modules that operate on top of a unique hardware abstraction layer that preserves software independence from the underlying hardware.

This architecture simplifies upgrades to non-events, supports stateful, self-healing operation and facilitates virtualization of processes and services.

All components within AXOS utilize standards-based YANG data models to represent the operational functions and the NETCONF protocol that enable AXOS-powered systems to fit into any open SDN orchestration and control framework.

Open, published APIs also allow customers to directly program unique network applications and services.

The AXOS platform removes the complexity of network deployments by reducing the need to utilize middleware to integrate costly hardware and software.

AXOS offers CSPs a path to the simplified, intelligent, unified access network that can accelerate time-to-revenue, increase service velocity, eliminate service disruptions and reduce total cost of ownership.

As a result, CSPs can simplify their business models and focus investment and resources on revenue generating services and functions.

Access EDGE Systems – AXOS is implemented in our E-Series family of modular, non-blocking systems including the E9-2™, E7-2 ® , E3-2 ® , E3-16F ® and E5-16F ® .

By offering AXOS on the entire E-Series family of systems, Calix enables our customers to meet a wide variety of deployment scenarios.

The Calix Access system portfolio is designed for high availability and purpose-built for the demands of access network deployments.

Our access systems are built and tested to meet or exceed network equipment-building system standards, which are a set of safety, spatial and environmental design guidelines for communications equipment.

Our products are highly compatible and designed to be easily integrated into the existing operational and management infrastructure of CSP access networks.

AXOS E-Series systems are capable of supporting both centralized and decentralized network architectures that range from the data center edge, central office or headend to the remote cabinet or multiple dwelling unit.

Representation of the Intelligent Access EDGE Systems:

Access EDGE Tools

The AXOS Access EDGE tools are a set of foundational capabilities that enable a network operations team to continuously evolve and efficiently manage their network.

AXOS Sandbox, Services Management Connector, or SMx, DOCSIS Provisioning Connector, or DPx, and the AXOS Diagnostic Toolbox provide all of the core functionality that an operations team requires to add new services, improve operational efficiency and assess network performance.

Armed with this tools set, an operations team can manage the full life cycle of their network services.

AXOS Sandbox – AXOS Sandbox is a virtual testing environment that improves service introduction by eliminating the need for physical lab systems.

Service providers can accelerate service delivery by reducing the time needed for lab testing, Business Support System, or BSS, and Operations Support System, or OSS, integration and software certification by deploying virtual instances of AXOS systems.

AXOS Sandbox runs the actual production software release of each AXOS system.

Services Management Connector – The SMx connector is a network services domain manager that provides subscriber and services provisioning via a GUI interface.

SMx provides REST/JSON northbound interface with integrated tools like SWAGGER for rapid back-office integration.

DOCSIS Provisioning Connector – The DPx connector is a virtualized DOCSIS Connector for PON networks that enables seamless SDN transition.

DPx implements a microservices architecture designed to automate service delivery and management on anyPON and anyPHY into DOCSIS back office systems.

DPx eliminates the need for custom OSS integration.

AXOS Diagnostics Toolbox – The AXOS Diagnostic Toolbox is an integrated set of network diagnostic tools such as Wireshark, TCP Dump and Video Channel Analyzer that enables remote management and troubleshooting of the access network.

These tools help to reduce or eliminate costly truck rolls and enable network operations teams to ensure or restore high-quality services as quickly as possible.

Access EDGE Enablement

Access EDGE Enablement services are designed to ensure CSP teams are fully enabled to deploy and manage next generation networks.

Calix offers a range of training courses and success and professional services to assist CSPs in every domain of network management from strategy to deployment and management.

Access EDGE Software

The AXOS modular architecture allows service providers to choose from a traditional Layer 2 network architecture or to build simplified layer 3 network architectures by consolidating key subscriber-related functions into a single solution with optional AXOS modules:

AXOS Routing Protocol Module (RPm) – RPm is designed for CSPs who are seeking to bring Layer 3 intelligence to their access network, but already have an MPLS solution or do not need an MPLS solution.

RPm provides the benefits of a routed network including the security and ability to move caching and other edge compute closer to the subscriber without impacting

other functions in the network.

CSPs can reduce provisioning overhead costs, failure groups, transport costs and simplify service and subscriber turn up.

AXOS Advanced Routing Module (ARm) – ARm is designed for CSPs seeking to bring to bring Layer 3 intelligence to their access network including MPLS capabilities.

ARm provides the benefits of a routed network including the security and ability to move caching and other edge compute closer to the subscriber without impacting other functions in the network.

CSPs can reduce provisioning overhead costs, failure groups, transport costs and simplify service and subscriber turn up.

AXOS Subscriber Management Module (SMm) – SMm is a software module that brings subscriber management capabilities to the access network such as authentication, authorization, accounting of subscriber sessions, address assignment, policy management and Lawful Intercept, which is short for Lawfully Authorized Electronic Surveillance for Internet Access and Services.

With SMm, CSPs get unprecedented visibility into the traffic entering the network, enabling subscriber management and the use of policy and filters to prevent network attacks.

The Intelligent Access EDGE solution is built on the award-winning Calix AXOS software platform and redefines the access edge of the network by simplifying its architecture and operations.

AXOS is implemented in our E-Series family of modular, non-blocking systems, enabling our customers to meet a wide variety of deployment scenarios.

The Intelligent Access Edge allows customers to collapse multiple network elements in the access network into a single system and by using specialized software modules to add functionality and remove complexity, the solution reduces the total cost of ownership and the time to market for new services.

In addition, Intelligent Access EDGE Insights enable CSPs to more effectively monitor network performance and more efficiently address performance issues.

Intelligent Access EDGE Enablement services are designed to ensure CSP teams are fully enabled to deploy and manage next generation networks.

We offer a range of training, professional and success services to assist CSPs in every domain of network management from strategy to deployment and management.

Traditional Products

Calix continues to support and sell our portfolio of non-AXOS and non-EXOS systems as well as traditional software and Compass ® Cloud products that are widely deployed in customer networks.

For many CSPs, the process of operationalizing new systems and transitioning to new products can be lengthy.

We continue to support and offer customers our traditional family of EXA and GigaCenter ® Systems that are widely deployed in customer networks, primarily in North America.

We expect that these products will continue to be utilized in our customers’ networks for many years to come.

These products include:

Calix GigaFamily – The Calix GigaFamily includes our first generation of carrier-class Wi-Fi gateways.

It includes the Calix GigaCenter ® and 804 mesh systems.

These systems provide 802.11ac Wi-Fi and whole home Wi-Fi services.

When deployed in conjunction with the Calix Cloud, the GigaFamily systems provide the capabilities required for a managed Wi-Fi offering that delivers optimized Wi-Fi services to subscribers.

Non-AXOS E-Series Access Systems and Nodes – E-Series access systems and access nodes that are designed to support an array of advanced IP-based service and run our EXA operating system.

These systems are not supported by AXOS.

Calix C-Series Multiservice Access Systems – Designed to support a wide array of basic voice and data services offered by CSPs while also supporting advanced, high-speed, packet-based services such as Gigabit Ethernet, GPON, digital subscriber line, or DSL (including very high-speed DSL 2, or VDSL2) and advanced applications.

Calix B-Series Access Nodes – Consist of chassis-based nodes that are designed to support an array of advanced IP-based services offered by CSPs, including Ethernet transport and aggregation, as well as voice, data and video services over both fiber- and copper-based network architectures.

P-Series Optical Network Terminals and Residential Gateways – A broad range of non-EXOS customer premises solutions, including optical network terminals, or ONTs, and residential gateways for residential and business use in conjunction with our E-Series, C-Series and B-Series systems.

Calix Services

The Calix Services team helps CSPs define their strategy, implement new solutions and manage their networks.

CSPs choose Calix platforms because of their ability to simplify network management and support an agile service delivery model.

Calix Services spans the entirety of the network and service delivery lifecycle.

Our expertise, developed over many years of building cutting-edge software platforms and providing critical services to our customers, positions us to be the vendor of choice.

Today, the Calix Services team delivers services to CSPs of every size and every type.

We are continually expanding our portfolio of service offerings to ensure that our customers realize the full potential of our platforms.

Calix Professional Services – Calix offers defined service packages to accelerate network design and deployment, optimize performance and scalability and apply field-proven best practices, processes and tools.

Use cases for Calix Professional Services include the collapse of multiple network silos into a single software defined access architecture, the seamless migration to next-generation PON architectures, the deployment of managed whole home Wi-Fi services and smart home services and facilitated OSS/BSS integration services.

These offerings optimize CSP end-to-end processes from operations to technology deployment to service lifecycle management.

Calix Managed Services – Our managed services feature a cloud-based remote monitoring service that monitors a CSP’s end-to-end access network (24 hours a day, 7 days a week) to ensure issues are automatically identified and assessed.

This service leverages machine learning technology developed through thousands of Calix Support Services engagements with CSPs to correlate alarms, filter extraneous events and identify critical issues.

The service provides incident notifications to CSP team members that include the nature, location and severity of events to help reduce mean time-to-repair.

Calix Support Services – Calix offers three tiers of support services – Standard, Essential and Vantage - that ensure software updates, the agility of operational workflows, service uptime and customer experience.

Calix support tiers are designed to

provide optimal support to our customers who are adopting our strategic platforms - Calix Cloud, EXOS, and AXOS.

Our highest support tier, Vantage, includes our Remote Monitoring service and support from a Calix service director who partners with customers to implement strategies that ensure delivery of an exceptional subscriber experience.

Calix Education Services – Calix offers an array of self-service and instructor-led, remote and onsite learning and certifications solutions to help CSPs build the skills required to successfully execute deployments and effectively run next generation networks.

Calix offers specific learning paths that are designed to help CSPs enhance the skills of their teams and maximize the value that they derive when they deploy our strategic platforms.

Calix Success Services – To ensure that our customers maximize the return on their investments in our software solutions, we offer Calix Success Services.

The primary focus of the Success Services engagements is the use of the data and analytics delivered through our Calix Cloud Platform to transform our customers’ business processes.

Our Success Services team members leverage their domain expertise in marketing, customer support and operations to help our customers achieve their business objectives.

These engagements are typically multi-year (aligned to our cloud subscription terms).

Representation of the Calix Services portfolio:

We operate a differentiated customer engagement model that focuses on direct alignment with our customers through sales, service and support.

In order to allocate our product development and sales efforts efficiently, we believe that it is critical to target markets, customers and applications deliberately.

We have traditionally targeted CSPs, which own, build and upgrade their own access networks and value strong relationships with their systems and software suppliers.

We classify CSPs into large, medium and small based on the number of their broadband subscribers.

Large CSPs are those with wide geographic footprints and broadband subscribers of 2.5 million or more.

Medium CSPs also operate typically within a wide geographic footprint but are smaller in scale with broadband subscribers that range from 250,000 to 2.5 million.

Small CSPs consist primarily of over 1,000 predominantly local independent operating companies, or IOCs, typically focused on a single community or a cluster of communities.

They include a growing number of municipalities, electric cooperatives, fiber overbuilders and wireless ISPs.

These entities range in size from a few hundred to 250,000 broadband subscribers.

We market and sell our cloud and software platforms, systems and services to CSPs of all types and sizes.

To date, we have focused primarily on CSPs in the North American market.

Our existing customers’ networks serve over 100 million subscriber lines.

Our customers span all sizes of broadband subscriber count from a few hundred to more than six million.

A small sample of our customers includes Allo Communications;

CenturyLink, Inc., or CenturyLink;

Our customers include:

Allo Communications;

CityFibre Holdings Limited;

3 unchanged sentences

Gibson Connect, LLC;

Lumen Technologies, Inc.

(formerly known as CenturyLink, Inc.), or Lumen;

Sky Cable Corporation;

2 unchanged sentences

and Verizon Communications, Inc.

We have a few large customers who have represented a significant portion of our sales in any given period.

CenturyLink accounted for 15% of total revenue in 2019, 18% in 2018 and 31% in 2017.

We classify CSPs into large, medium and small based on the number of broadband subscribers they serve.

Large CSPs are those with wide geographic footprints and broadband subscribers of 2.5 million or more.

Medium CSPs also operate typically within a wide geographic footprint but are smaller in scale with broadband subscribers that range from 250,000 to 2.5 million.

Small CSPs consist primarily of over 1,000 predominantly local independent operating companies, or IOCs, typically focused on a single community or a cluster of communities.

They include a growing number of municipalities, electric cooperatives, fiber overbuilders and WISPs.

These entities range in size from a few hundred to 250,000 broadband subscribers.

Historically, Lumen has accounted for more than 10% of total revenue, representing 18% of total revenue in 2018 and 15% in 2019.

Our efforts to grow our product platforms, add new CSP customers and shift away from low value deployment services have all contributed to Lumen representing 11% of our total revenue in 2020.

No other customer represented more than 10% of total revenue in 2020, 2019 and 2018.

In addition, our large customers represented 22% of total revenue in 2019 while our medium and small customers represented 8% and 70%, respectively.

Sales to customers outside the United States represented approximately 14% of our total revenue in 2019 , 12% in 2018 and 11% in 2017 .

Historically, our sales outside the United States were predominantly to customers in the Middle East, Canada, Europe and Caribbean.

Sales to customers outside the United States represented 13% of our revenue in 2020, 14% of our total revenue in 2019 and 12% in 2018.

Our sales outside the United States have been and are currently predominantly to customers in Canada, the Caribbean, Europe and the Middle East.

Customer Engagement Model

We design, market and sell our Calix Cloud and software platforms, systems and Calix Services predominantly through our direct sales force, supported by marketing and product management personnel.

We have expanded this model to include a small number of select channel partners in North America and dozens of international channel partners, who are part of our Fiber Forward™ Partner Program.

Our sales effort is organized either by named accounts or regional responsibilities.

Account teams comprise sales managers, supported by solution engineers and account managers, who work to target and sell to existing and prospective CSPs.

The sales process includes analyzing CSPs’ existing networks and identifying how they can utilize our products and services within their networks.

Even in circumstances where a channel partner is involved, our sales and marketing personnel are often selling side-by-side with the channel partner.

We believe that our direct customer engagement approach provides us with significant differentiation in the customer sales process by aligning us more closely with our customers’ changing needs.

We market, sell and support the success of our cloud and software platforms, systems and services predominantly through our direct sales force, supported by marketing, product management and customer success personnel.

We have expanded this model to include select channel partners in North America and more than a dozen international channel partners.

Even in circumstances where a channel partner is involved, our sales and marketing personnel are generally selling side-by-side with the channel partner.

We believe that our direct customer engagement approach provides us with significant differentiation in the customer sales process and customer engagement programs by aligning us more closely with our customers’ changing needs and successful implementation of our solutions.

Research and Development

Continued investment in research and development is critical to our business.

Our research and development team is composed of engineers with expertise in software and cloud platforms, optics, wireless and hardware.

Increasingly, our engineers are focused on enhancements to our platforms.

Our teams of engineers are located in our San Jose and Petaluma facilities located in California;

our Minneapolis, Minnesota facility and our Nanjing, China facility.

We also outsource a portion of our software development to domestic and international third parties.

Our research and development efforts are also extended by our co-development partnerships with third-party developers such as Infosys whereby we are able to utilize their substantially larger product development teams to bring cutting edge, software-based products to market while creating new revenue opportunities for both parties.

We have made significant investments in our product portfolio, and we intend to continue to dedicate significant resources to research and development to develop, enhance and deliver new platform features and capabilities, including investments in innovative technologies that support our business strategy.

Our research and development team is composed of engineers with expertise in software and cloud platforms, optics, wireless technologies and systems engineering.

Our research and development team is responsible for designing, developing and enhancing our cloud and software platforms and systems, performing product and quality assurance testing and ensuring the compatibility of our products with third-party hardware and software products.

We have made significant investments in the Calix portfolio.

We intend to continue to dedicate significant resources to research and development to develop, enhance and deliver new platform features and capabilities, including investment in innovative technologies that support our business strategy.

Manufacturing

We rely substantially on CMs, ODMs and other third-party partners for the supply and distribution of our products.

We work closely with these third parties to provide hardware system design, source and procure materials, manufacture and deliver our products.

Our manufacturing organization consists primarily of supply chain managers, new product introduction personnel and test engineers.

Increasingly, our engineers are focused on enhancements to our cloud and software platforms.

Our teams of engineers currently remain concentrated in San Jose and Petaluma, California;

Minneapolis, Minnesota;

Nanjing, China;

and Richardson, Texas.

We also outsource a portion of our software and cloud development to domestic and international third parties, and we depend on these partners to meet our development plans.

In particular, certain of our research and development efforts may be extended by co-development partnerships with third-party developers such as Infosys whereby we can utilize their substantially larger product development teams to bring cutting edge, software-based products to market while creating new revenue opportunities for both parties.

Manufacturing and Supply Chain

We rely substantially on CMs, ODMs and logistics and other third-party partners for the supply and distribution of our products.

We work closely with these third parties to source and procure materials, manufacture and deliver our products and, increasingly, provide hardware system design.

Our global supply chain management organization consists primarily of supply chain managers, new product introduction personnel and test engineers.

We tightly integrate our supply chain management and new product introduction activities with the activities outsourced to these third parties.

We have made significant changes to our supply chain to align to our platform strategy and through 2019 the changes were accelerated by the imposition by the U.S.

We believe that our relationships with and our reliance on our CMs, ODMs and order fulfillment partners allow us to decrease new product introduction time, conserve working capital, reduce product costs and minimize delivery lead times while maintaining high product quality as well

as the ability to scale quickly to handle increased order volume.

Over the past two years, we have reorganized our global supply chain to better align with our platform strategy as well as to reduce the impact from the imposition by the U.S.

government of tariffs on goods imported from China.

Such changes include the transition of manufacturing previously conducted in China to three different manufacturing partners outside China, increased leveraging of ODM partners for hardware systems design and management of raw materials used for manufacture and transition of global supply chain operations and activities to geographies outside of China, including Taiwan and Vietnam, to mitigate the impact of the U.S.

Our relationships with our CMs and ODMs allow us to decrease new product introduction time, conserve working capital, reduce product costs and minimize delivery lead times while maintaining high product quality.

Order fulfillment is performed by Pegasus Logistics Group, Inc.

located in Texas.

We also qualify and utilize other vendors for various portions of our supply chain from time to time, including order fulfillment of our circuit boards, optics and cabinets.

This model allows us to operate with lower inventory levels while maintaining the ability to scale quickly to handle increased order volume.

Product reliability is essential for our customers, who place a premium on continuity of service for their subscribers.

We perform rigorous quality control testing to help ensure the reliability of our systems.

Our internal manufacturing organization designs, develops and implements complex test processes to help ensure the quality and reliability of our products.

Such changes include the transition of manufacturing previously conducted in China to different manufacturing partners outside China in Taiwan and Vietnam as well as shifting a higher proportion of hardware systems design, management of raw materials used for manufacture and transition of global supply chain operations to our ODM partners.

Order fulfillment is performed primarily by our logistics provider located in Texas.

We continue to qualify and utilize other vendors for various portions of our supply chain from time to time, including order fulfillment of our circuit boards, optics and cabinets.

As a result of global restrictions and uncertainty related to the COVID-19 pandemic, we have experienced product supply delays as we and our supply chain partners experience longer lead times and shortages of components and materials.

We believe the impact of the COVID-19 pandemic and government responses to the pandemic will continue to impact the ability of our third-party manufacturers to supply products to us at the cost and in the time frames and volumes required by us.

Fluctuations in our revenue occur due to many factors, including the varying budget cycles and seasonal buying patterns of our customers.

More specifically, our customers tend to spend less in the first fiscal quarter as they are finalizing their annual capital spending budgets, and in certain regions, customers are also challenged by winter weather conditions that inhibit outside fiber deployment.

Intellectual Property

Our success depends upon our ability to protect our core technology and intellectual property.

To accomplish this, we rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks as well as customary contractual protections.

In addition, we generally control access to and the use of our proprietary technology and other confidential information.

This protection is accomplished through a combination of internal and external controls, including contractual protections with employees, contractors, customers and partners, and through a combination of U.S.

and international intellectual property laws.

As of December 31, 2019 , we held 125 U.S.

patents and had three pending U.S.

patent applications.

One of the U.S.

patents is also covered by granted international patents in three countries.

As of December 31, 2019, we had no pending international patent applications.

patents generally have a term of twenty years from filing.

We have added to our patent portfolio since our inception.

The remaining terms on the individual patents vary from five months to 17 years.

We rely on intellectual property laws as well as nondisclosure agreements, licensing arrangements and confidentiality provisions to establish and protect our proprietary rights.

patent, copyright and trade secret laws afford us only limited protection, and the laws of some foreign countries do not protect proprietary rights to the same extent.

Our pending patent applications may not result in issued patents, and the issued patents may not be enforceable.

Any infringement of proprietary rights could result in significant litigation costs.

Further, any failure by us to adequately protect our proprietary rights could result in competitors offering similar products, resulting in the loss of our competitive advantage and decreased sales.

We believe that the frequency of assertions of patent infringement continues to increase in our industry.

In particular, patent holders, including entities and organizations that purchase or hold patents to monetize such rights, assert patent infringement claims as a competitive tactic as well as a source of revenue.

Any claim of infringement from a third party, even claims without merit, could cause us to incur substantial costs defending against such claims and could distract our management from operating our business.

Furthermore, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages.

A judgment could also include an injunction or other court order that could prevent us from selling our products.

In addition, we might be required to seek a license for the use of such intellectual property, which may not be available on commercially reasonable terms or at all.

Alternatively, we may be required to develop non-infringing technology, which would require significant effort and expense and may ultimately not be successful.

The communications equipment market is highly competitive.

Competition in this market is based on any one or a combination of the following factors:

functionality;

existing business and customer relationships;

the ability of products and services, including turnkey professional services capabilities, to meet customers’ immediate and future network requirements;

product quality;

installation capability;

service and support;

manufacturing capability.

We compete with a number of companies within markets that we serve, and we anticipate that competition will intensify.

Suppliers with which we compete include ADTRAN, Inc., or ADTRAN;

Casa Systems;

Furthermore, we believe our customer deployments have benefited to some extent from higher demand for our products and solutions as a result of an increased reliance on CSP services due to the restrictions and uncertainty associated with the COVID-19 pandemic.

The communications software and systems equipment markets are highly competitive.

Competition is largely based on any one or a combination of the following factors:

functionality and features, price, existing business and customer relationships, product quality, installation capability, service and support, long-term returns, scalability, development and manufacturing capability.

We compete with several companies within the markets that we serve, and we anticipate that competition will intensify.

Vendors with which we compete include ADTRAN, Inc.;

Casa Systems, Inc.;

Ciena Corporation;

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CommScope Inc.;

DASAN Zhone Solutions, Inc.;

Huawei Technologies Co.

eero (an Amazon company);

Huawei Technologies Co., Ltd.;

Juniper Networks, Inc.;

Nokia Corporation;

nest (a Google company);

Plume Design, Inc.;

and ZTE Corporation.

There are also a number of smaller companies with which we compete in various geographic or vertical markets.

While most of these smaller competitors lack broad national scale and product portfolios, they can offer strong competition on a deal-by-deal basis.

Nokia Corporation and ZTE Corporation.

In various geographic or vertical markets, there are also several smaller companies with which we compete.

As we expand into adjacent markets, we expect to encounter new competitors.

Many of our competitors have substantially greater name recognition, manufacturing capacity and technical, financial and marketing resources as well as better established relationships with CSPs than we do.

Many of our competitors have greater resources to develop products or pursue acquisitions and more experience in developing or acquiring new products and technologies and in creating market awareness for their products and technologies.

In addition, a number of

our competitors have the financial resources to offer competitive products at below market pricing levels that could prevent us from competing effectively.

As of December 31, 2019 , we employed a total of 763 employees, of which 557 employees were located in the United States.

Our employees are not represented by a labor union with respect to their employment with us, except for our French employee who is subject to a collective bargaining arrangement.

We have not experienced any work stoppages, and we consider our relations with our employees to be good.

Many of our competitors have the financial resources to offer competitive products at a below market price, which could prevent us from competing effectively.

Intellectual Property

We rely on a combination of IP rights, including patents, trade secrets, copyrights and trademarks as well as customary contractual protections.

These rights and protections are accomplished through a combination of internal and external controls, including contractual protections with employees, contractors, customers and partners, and through a combination of U.S.

and international IP laws.

As of December 31, 2020, we held 125 U.S.

patents and had four pending U.S.

patent applications.

As of December 31, 2020, we had no pending international patent applications.

patents generally have a term of twenty years from filing.

The remaining terms on our individual patents vary from two months to 17 years.

patent, copyright and trade secret laws afford us only limited protection, and the laws of some foreign countries do not protect proprietary rights to the same extent.

We believe that the frequency of assertions of patent infringement has and continues to increase in our industry.

Any claim of infringement from a third party, even claims without merit, could cause us to incur substantial costs defending against such claims, could require us to pay substantial damages or include an injunction or other court order that could prevent us from selling our products.

In addition, we might be required to seek a license which may not be available on commercially reasonable terms or at all.

Alternatively, we may be required to develop non-infringing technology, which would require significant effort and expense.

Human Capital

We employ 785 employees globally as of December 31, 2020, with 74% employees located in the United States and 24% primarily in Canada and Nanjing, China.

Except for one employee located in France and subject to customarily local collective bargaining arrangements, we do not have any employees represented by a labor union with respect to their employment with us.

We have not experienced any work stoppages and consider our relations with our employees to be good.

We consider our talent to be very important to our operations and execution on our business strategy as well as the overall success of our business.

As such, we invest significant management attention, time and resources to attract, engage, develop and retain our talent.

Our talent strategy focuses on our culture and core values, our talent programs and the overall wellbeing and safety of our talent.

Our culture and core values.

We believe that by nurturing a strong culture based on our core values we are able to attract, hire and retain a highly engaged team.

Our cultural pillars – to collaborate, create and communicate – reflect the way we lead and work with one another internally as well as externally with our customers, partners, suppliers and other stakeholders.

We seek to embed our core values to act responsibly and with integrity, to instill a sense of individual role and purpose at Calix, to communicate openly and honestly and to “take care of our own” in how we lead and conduct our business.

Our culture of collaboration creates an inclusive working environment and inclusive engagement with our stakeholders;

our culture to create encourages innovation from a diversity of experiences, backgrounds and characteristics;

and our culture to communicate encourages open and honest discussion.

Our talent programs.

We invest in talent programs to identify and hire candidates who embody our culture and core values and will further our mission.

Our compensation and rewards programs are designed to foster a happy, engaged and high-performing workforce.

We hire and compensate our talent based on their role, experiences, contributions and performance, regardless of their gender, race or ethnic background or other personal characteristics.

For example, our current programs include cash incentive bonuses designed to reward corporate and individual performance and cash bonus opportunities for internal promotions to leadership roles.

We offer two employee stock purchase plans, because we believe stock ownership rewards employees for corporate performance aligned to our stockholders’ interests.

Our programs are regularly reviewed and adjusted based on benchmarks against competitive industry programs.

We encourage open communications with our teams and conduct both internal and third-party run surveys to improve how we engage with and support our talent.

Our wellness, safety and health programs.

A centerpiece of our culture is “taking care of our own,” which means we foster a collaborative and supportive environment so that every member of our team has the opportunity to thrive.

This mindset starts with our CEO and is embedded in how we lead as well as in our wellness, safety and health programs.

Our programs seek to support wellbeing broadly, with comprehensive health benefit offerings, a 401(k) plan for retirement savings available upon hire and with employer match in the U.S.

and pension programs for most of our non-U.S.

locations, sick leave days and leave programs, unlimited time off, disability benefits and reimbursements under our wellness fund and remote office program.

At the outset of the COVID-19 pandemic, we increased support and attention for our team in Nanjing, China, closely monitoring wellbeing and providing flexibility and tools to enable business continuity, while keeping our team safe.

With the global onset of the pandemic, we initiated CEO-led bi-weekly sessions in an open forum with all employees addressing the impact of the pandemic and our response to support our workforce and business.

We host a communications hub to provide and to enable our teams to share, resources and information such as public health and safety updates, resources for self-care, managing education and school-related challenges and leading remote teams, as well as interesting articles related to the pandemic.

We implemented work and safety protocols that put the health and safety of our team first and transitioned our remote work program to apply to all employees in the U.S.

While our U.S.

facilities remained closed, we reconfigured our offices and adjusted our office and health screening protocols to create a safe place to conduct essential tasks.

We supplemented our wellness fund to cover broader health and wellness services, including in-home programs and child/family care, and expanded our home office program with ergonomic furniture, collaboration tools, virtual learning resources and telecommunications services to enable our teams.

Corporate Information

Calix, Inc., a Delaware corporation, was founded in August 1999.

Our principal executive offices are located at 2777 Orchard Parkway, San Jose, California 95134, and our telephone number is (408) 514-3000.

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We do not incorporate the information on or accessible through our website into this Annual Report on Form 10-K, and you should not consider any information on, or that can be accessed through, our website as part of this Annual Report on Form 10-K.

Calix ® , the Calix logo design, AXOS ® , Calix Cloud ® , CommandIQ™, Compass ® , Consumer Connect ® , E3 ® , E5 ® , E7 ® , E9™, EXOS ® , ExperienceIQ™, Fiber Forward ® , GigaCenter ® , GigaMesh ® , GigaSpire ® , ProtectIQ TM and other trademarks or service marks of Calix appearing in this Annual Report on Form 10-K are the property of Calix.

Calix ® , the Calix logo design, AXOS ® , Calix Cloud ® , CommandIQ ® , EXOS ® , GigaCenter ® , GigaSpire ® and other trademarks or service marks of Calix appearing in this Annual Report on Form 10-K are the property of Calix.

Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 10-K are the property of the respective holders.

The SEC maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC.

The Securities and Exchange Commission, or SEC, maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC.

We post on the Investor Relations page of our website, www.calix.com, a link to our filings with the SEC free of charge, as soon as reasonably practical after they are filed electronically with the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business