SOURCE: Calix, Inc.

February 07, 2012 16:02 ET

Calix Reports Fourth Quarter and Fiscal Year 2011 Financial Results

Revenue Increases 9.5% Sequentially in Q4 2011; Up 20.1% Over Fiscal Year 2010 to $344.7 Million

PETALUMA, CA--(Marketwire - Feb 7, 2012) - Calix, Inc. (NYSE: CALX) today announced unaudited financial results for the fourth quarter ended December 31, 2011. Revenue for the fourth quarter of 2011 was $91.6 million, an increase of 9.5% compared to $83.7 million for the third quarter of 2011, and flat compared to $91.7 million for the fourth quarter of 2010.

"2011 ended on a strong note as a result of increasing demand and solid execution in all areas of the business," said Carl Russo, Calix president and CEO. "Looking back on the year, we were pleased with the progress we made strengthening our organization, expanding our Unified Access portfolio, and delivering on our vision of network transformation to our over 1000 communications service provider customers worldwide."

Non-GAAP net income for the fourth quarter of 2011 was $3.7 million, or $0.08 per fully diluted share, an increase of 5.4% compared to non-GAAP net income of $3.6 million, or $0.07 per fully diluted share for the third quarter of 2011, and a decrease of 65.0% compared to non-GAAP net income of $10.7 million, or $0.26 per fully diluted share, in the fourth quarter of 2010.

GAAP net loss for the fourth quarter of 2011 was $5.2 million, or $(0.11) per basic and diluted share, compared to a GAAP net loss of $6.9 million, or $(0.15) per basic and diluted share for the third quarter of 2011, and compared to a GAAP net loss of $0.7 million, or $(0.02) per basic and diluted share reported for the fourth quarter of 2010. A reconciliation of our fourth quarter 2011 operating results from non-GAAP to GAAP is provided below (in thousands, except per share data):

Non-GAAP Stock-Based Compensation Amortization of Intangible Assets GAAP
Revenue $ 91,585 $ - $ - $ 91,585
Cost of revenue 52,127 362 2,042 54,531
Gross profit 39,458 (362 ) (2,042 ) 37,054
Operating expense 35,653 4,004 2,553 42,210
Operating income (loss) 3,805 (4,366 ) (4,595 ) (5,156 )
Other income/(expense), net (10 ) - - (10 )
Income (loss) before taxes 3,795 (4,366 ) (4,595 ) (5,166 )
Provision for income taxes 48 - - 48
Net income (loss) $ 3,747 $ (4,366 ) $ (4,595 ) $ (5,214 )
Weighted average basic and diluted shares used to compute GAAP net loss per common share 47,398
Weighted average diluted shares used to compute non-GAAP net income per common share 47,570 47,570 47,570
GAAP net loss per common share $ (0.11 )
Non-GAAP net income (loss) per share $ 0.08 $ (0.09 ) $ (0.10 )

Conference Call

In conjunction with this announcement, Calix will host a conference call to discuss its fourth quarter and fiscal year 2011 results at 1:30 p.m. PST (4:30 p.m. EST) today. Interested parties can listen to a live webcast of the conference call by visiting the Calix Investor Relations website at http://investor-relations.calix.com. To access the live webcast, please log in 10 minutes prior to the start of the call to download and install any necessary audio software. Interested parties may also dial into the live conference call at (877) 407-4019 (U.S.) or (201) 689-8337 (outside the U.S.). The conference call and webcast will include forward-looking information. A replay of the conference call will be available approximately one hour after the live call concludes on the company's web site at http://investor-relations.calix.com.

Prior to the conference call, Calix will also post supplemental financial data on the Calix Investor Relations website at http://investor-relations.calix.com in order to provide the investment community additional time to analyze the company's results and prepare for the call with management.

About Calix

Calix (NYSE: CALX) is a global leader in access innovation. Its Unified Access portfolio of broadband communications access systems and software enable communications service providers worldwide to transform their networks and become the broadband provider of choice to their subscribers. For more information, visit the Calix website at www.calix.com.

Use of Non-GAAP Financial Information

The Company uses certain non-GAAP financial measures in this press release to supplement its consolidated financial statements, which are presented in accordance with GAAP. These non-GAAP measures include non-GAAP net income and non-GAAP basic and diluted net income per common share. These non-GAAP measures are provided to enhance the reader's understanding of the Company's operating performance as they primarily exclude certain non-cash charges for stock-based compensation and amortization of acquisition-related intangible assets, and non-recurring merger-related and other expenses, which the Company believes are not indicative of its core operating results. Merger-related and other expenses largely include the charge resulting from the required revaluation of Occam inventory to its estimated fair value, legal and professional expenses, and severance and integration-related expenses and inventory-related charges associated with our merger with Occam. Management believes that the non-GAAP measures used in this press release provide investors with important perspective into the Company's ongoing business performance and management uses these non-GAAP measures to evaluate financial results and to establish operational goals. The presentation of these non-GAAP measures is not meant to be a substitute for results presented in accordance with GAAP, but rather should be evaluated in conjunction with those GAAP results. A reconciliation of the non-GAAP results to the most directly comparable GAAP results is provided in the financial schedules portion of this press release. The non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

CALIX, INC.
Condensed Statement of Operations
(In thousands, except per share data)
Three Months Ended
December 31, September
24,
December 31, Years Ended December 31,
2011 2011 2010 2011 2010
(unaudited) (unaudited)
Revenue $ 91,585 $ 83,655 $ 91,695 $ 344,669 $ 287,043
Cost of revenue:
Products and services(1) 52,489 49,002 51,679 195,698 168,873
Merger-related expenses - - - 19,966 -
Amortization of intangible assets 2,042 2,806 1,360 9,552 5,440
Total cost of revenue 54,531 51,808 53,039 225,216 174,313
Gross profit 37,054 31,847 38,656 119,453 112,730
Operating expenses:
Research and development(1) 17,385 16,717 16,180 67,725 55,412
Sales and marketing(1) 16,720 12,593 13,107 55,551 42,121
General and administrative(1) 5,552 5,475 8,483 27,002 27,998
Merger-related and other expenses - 1,404 1,805 12,927 3,942
Amortization of intangible assets 2,553 2,552 185 8,569 740
Total operating expenses 42,210 38,741 39,760 171,774 130,213
Loss from operations (5,156 ) (6,894 ) (1,104 ) (52,321 ) (17,483 )
Other income (expense):
Interest income 7 11 88 87 384
Interest expense (45 ) (48 ) (50 ) (184 ) (1,188 )
Change in fair value of preferred stock warrants - - - - (173 )
Other income 28 35 (25 ) 92 (12 )
Loss before provision (benefit) for income taxes (5,166 ) (6,896 ) (1,091 ) (52,326 ) (18,472 )
Provision (benefit) for income taxes 48 38 (354 ) 224 81
Net loss (5,214 ) (6,934 ) (737 ) (52,550 ) (18,553 )
Preferred stock dividends - - - - 900
Net loss attributable to common stockholders $ (5,214 ) $ (6,934 ) $ (737 ) $ (52,550 ) $ (19,453 )
Net loss per common share:
Basic and diluted $ (0.11 ) $ (0.15 ) $ (0.02 ) $ (1.15 ) $ (0.65 )
Pro forma basic and diluted $ (0.11 ) $ (0.15 ) $ (0.02 ) $ (1.15 ) $ (0.51 )
Weighted average number of shares used to compute net loss per common share:
Basic and diluted 47,398 47,128 38,144 45,546 29,778
Pro forma basic and diluted(2) 47,398 47,128 38,144 45,546 36,232
(1) Includes stock-based compensation as follows: Three Months Ended
December 31, September
24,
December 31, Years Ended December 31,
2011 2011 2010 2011 2010
(unaudited) (unaudited)
Cost of revenue $ 362 $ 306 $ 593 $ 1,503 $ 1,745
Research and development 1,067 886 1,952 4,828 5,966
Sales and marketing 1,244 1,127 1,521 4,500 4,555
General and administrative 1,693 1,407 4,027 9,538 13,309
Merger-related expenses - 70 - 1,234 -
$ 4,366 $ 3,796 $ 8,093 $ 21,603 $ 25,575
(2) For the year ended December 31, 2010, includes outstanding common shares and common shares resulting from the assumed conversion of preferred shares as if conversion occurred at the beginning of the year ended December 31, 2010.

CALIX, INC.
Reconciliation of GAAP to Non-GAAP Results
(Unaudited, in thousands except per share data)
Three Months Ended
December 31, September
24,
December 31, Years Ended December 31,
2011 2011 2010 2011 2010
GAAP net loss attributable to common stockholders $ (5,214 ) $ (6,934 ) $ (737 ) $ (52,550 ) $ (19,453 )
Adjustments to reconcile GAAP net loss to non-GAAP net loss:
Stock-based compensation 4,366 3,726 8,093 20,369 25,575
Stock-based compensation (merger-related) - 70 - 1,234 -
Amortization of intangible assets 4,595 5,358 1,545 18,121 6,180
Merger-related expenses (cost of revenue) - - - 19,966 -
Merger-related and other expenses (operating expense) - 1,334 1,805 11,693 3,942
Change in fair value of preferred stock warrants - - - - 173
Preferred stock dividends - - - - 900
Non-GAAP net income $ 3,747 $ 3,554 $ 10,706 $ 18,833 $ 17,317
Non-GAAP net income per common share
Basic $ 0.08 $ 0.08 $ 0.28 $ 0.41 $ 0.48
Diluted $ 0.08 $ 0.07 $ 0.26 $ 0.40 $ 0.45
Weighted average shares used to compute non-GAAP
Net income per common share - Basic(1) 47,398 47,128 38,144 45,546 36,232
Net income per common share - Diluted(1)(2) 47,570 48,092 40,943 46,947 38,502
(1) For the year ended December 31, 2010, includes outstanding common shares and common shares resulting from the assumed conversion of preferred shares as if conversion occurred at the beginning of the year ended December 31, 2010.
(2) Includes the dilutive effect of outstanding stock options, warrants and restricted stock units for all periods presented.

Calix, Inc.
Condensed Balance Sheets
(In thousands)
December 31,
2011 2010
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 38,938 $ 66,304
Marketable securities - 32,020
Restricted cash 754 -
Accounts receivable, net 47,943 43,377
Inventory 44,604 24,557
Deferred cost of revenue 8,324 7,771
Prepaid and other current assets 4,429 3,245
Total current assets 144,992 177,274
Property and equipment, net 16,130 11,815
Goodwill 116,175 65,576
Intangible assets, net 80,048 515
Other assets 2,194 2,376
Total assets $ 359,539 $ 257,556
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,250 $ 10,268
Accrued liabilities 36,214 25,987
Deferred revenue 16,783 14,062
Total current liabilities 67,247 50,317
Long-term portion of deferred revenue 13,347 10,985
Other long term liabilities 1,528 951
Total liabilities 82,122 62,253
Stockholders' equity:
Common stock 1,195 968
Additional paid-in capital 740,309 605,939
Other comprehensive income 98 31
Accumulated deficit (464,185 ) (411,635 )
Total stockholders' equity 277,417 195,303
Total liabilities and stockholders' equity $ 359,539 $ 257,556

Condensed Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31,
2011 2010
(unaudited)
OPERATING ACTIVITIES
Net loss $ (52,550 ) $ (18,553 )
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of premiums relating to available-for-sale securities 244 967
Depreciation and amortization 7,954 5,015
Loss on retirement of property and equipment 2,449 77
Amortization of intangible assets 18,121 6,180
Revaluation of warrant liability - 173
Stock-based compensation 21,603 25,575
Net gains on investments - (37 )
Changes in operating assets and liabilities:
Change in restricted cash 300 629
Accounts receivable, net 12,287 3,615
Inventory 9,182 (6,001 )
Deferred cost of revenue (553 ) 8,697
Prepaid and other assets (148 ) 1,237
Accounts payable (7,818 ) (4,367 )
Accrued liabilities (386 ) (2,642 )
Deferred revenue 4,217 (11,430 )
Other long-term liabilities (313 ) 41
Net cash provided by operating activities 14,589 9,176
INVESTING ACTIVITIES
Purchase of property and equipment (7,355 ) (5,614 )
Acquisition of Occam Networks, net of cash assumed (60,809 ) -
Purchases of marketable securities - (79,190 )
Sales of marketable securities - 29,214
Maturities of marketable securities 31,755 53,302
Net cash used in investing activities (36,409 ) (2,288 )
FINANCING ACTIVITIES
Proceeds from exercise of stock options and other 804 288
Proceeds from employee stock purchase plan 3,938 -
Taxes paid upon the vesting of restricted stock units (10,376 ) (10,004 )
Principal payment on loans - (20,000 )
Proceeds from initial public offering of common stock, net of issuance costs - 57,311
Net cash (used in) provided by financing activities (5,634 ) 27,595
Effect of exchange rate changes on cash and cash equivalents 88 -
Net (decrease) increase in cash and cash equivalents $ (27,366 ) $ 34,483
Cash and cash equivalents at beginning of year 66,304 31,821
Cash and cash equivalents at end of year $ 38,938 $ 66,304

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