SOURCE: Calix, Inc.

Calix, Inc.

October 29, 2015 16:00 ET

Calix Reports Third Quarter 2015 Financial Results

PETALUMA, CA--(Marketwired - October 29, 2015) - Calix, Inc. (NYSE: CALX) today announced unaudited financial results for the third quarter ended September 26, 2015. Revenue for the third quarter of 2015 was $112.3 million, an increase of 6.2% compared to $105.8 million for the third quarter of 2014.

"Our third quarter results were above our guidance, reflecting strong performance in our customer base for the quarter," said Carl Russo, Calix President and CEO. "This performance contributed to revenues in the first nine months of 2015 increasing 4.4% compared to the first nine months of 2014. In addition, solid execution and favorable product mix led non-GAAP gross margins for the first nine months to increase to 49.8% compared to 46.1% in the same period last year," added Russo.

"Earlier this week the era of Software Defined Access began. During our Calix User Group, we introduced AXOS, the most important launch in our company's history. AXOS is a Linux-based network operating system and software application platform. AXOS was built from the ground up to mesh with the coming shift to Software Defined Networking and Network Function Virtualization across all communications networks. Most importantly, AXOS enables our customers with a 'fast,' 'always-on' and 'simple' access infrastructure over which the flexible, real-time deployment of services to their subscribers becomes a reality. This is a watershed event in our industry and we are extremely excited by the benefits AXOS brings to our customers as well as to Calix," added Russo.

The company's non-GAAP net income for the third quarter of 2015 was $8.3 million, or $0.16 per fully diluted share, compared to a non-GAAP net income of $4.6 million, or $0.09 per fully diluted share, for the third quarter of 2014. A reconciliation of GAAP and non-GAAP results is included as part of this release.

"During the quarter, we repurchased $7.7 million worth of common stock via our previously announced $40 million stock buyback authorization," said William Atkins, Executive Vice President and CFO. "Given our long-term outlook for the company, we continue to view share repurchases as an attractive investment at current levels," added Atkins.

The GAAP net income for the third quarter of 2015 was $0.9 million, or $0.02 per basic and diluted share, compared to a GAAP net loss of $3.8 million, or $(0.08) per basic and diluted share, for the third quarter of 2014. A reconciliation of our third quarter 2015 operating results from non-GAAP to GAAP is provided below:

  
  
Calix, Inc.  
(Unaudited, in thousands, except per share data)  
Three Months Ended September 26, 2015  
                      
   Non-GAAP   Stock-Based Compensation   Amortization of Intangible Assets   Acquisition-Related Costs   GAAP  
Revenue  $112,297   $-   $-   $-   $112,297  
Cost of revenue   56,933    163    2,088    -    59,184  
Gross profit   55,364    (163 )  (2,088 )  -    53,113  
Gross margin   49.3 %  (0.1 )%  (1.9 )%  - %  47.3 %
Operating expenses   47,151    2,427    2,552    106    52,236  
Operating income (loss)   8,213    (2,590 )  (4,640 )  (106 )  877  
Interest and other income (expense), net   230    -    -    -    230  
Income (loss) before taxes   8,443    (2,590 )  (4,640 )  (106 )  1,107  
Provision for income taxes   185    -    -    -    185  
Net income (loss)  $8,258   $(2,590 ) $(4,640 ) $(106 ) $922  
Weighted average diluted shares used to compute net income (loss) per common share   52,016    52,016    52,016    52,016    52,016  
Net income (loss) per diluted share  $0.16   $(0.05 ) $(0.09 ) $-   $0.02  
                     
                     

Conference Call

In conjunction with this announcement, Calix will host a conference call at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) today to discuss its third quarter 2015 financial results. A live audio webcast and replay of the call will be available in the Investor Relations section of the Calix web site at http://investor-relations.calix.com.

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

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

About Calix

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

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 (loss) and non-GAAP basic and diluted income (loss) per 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 acquisition-related costs, which the Company believes are not indicative of its core operating results. Acquisition-related costs include legal fees and associated expenses incurred under a pre-existing contract between Occam and its retained advisor in connection with the Occam acquisition. Management believes that the non-GAAP measures used in this press release provide investors with important perspectives into the Company's ongoing business performance and management uses these non-GAAP measures to evaluate financial results and to establish operational goals. The presentation of these non-GAAP measures is not meant to be a substitute for results presented in accordance with GAAP, but rather should be evaluated in conjunction with those GAAP results. A reconciliation of the non-GAAP results to the most directly comparable GAAP results is provided in this 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.

Forward-Looking Statements

Statements made in this press release and the earnings call referencing the press release that are not statements of historical fact are forward-looking statements. Forward-looking statements are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to, but are not limited to, the execution of a stock repurchase program. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, including but not limited to the risks described in our 2014 Form 10-K and our quarterly reports on Form 10-Q, each as filed with the SEC and available at www.sec.gov, particularly in the sections titled "Risk Factors." Forward-looking statements speak only as of the date the statements are made and are based on information available to us at the time those statements are made and/or management's good faith belief as of that time with respect to future events. We assume no obligation to update forward-looking statements to reflect actual performance or results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. Accordingly, investors should not place undue reliance on any forward-looking statements.

  
  
Calix, Inc.  
Condensed Consolidated Statements of Operations  
(Unaudited, in thousands, except per share data)  
                  
   Three Months Ended   Nine Months Ended  
   September 26,   September 27,   September 26,   September 27,  
   2015   2014   2015   2014  
Revenue  $112,297   $105,769   $302,464   $289,594  
Cost of revenue:                     
 Products and services (1)   57,096    58,600    152,308    156,981  
 Amortization of intangible assets   2,088    2,089    6,264    6,265  
  Total cost of revenue   59,184    60,689    158,572    163,246  
Gross profit   53,113    45,080    143,892    126,348  
Operating expenses:                     
 Research and development (1)   22,120    19,930    66,885    59,104  
 Sales and marketing (1)   18,424    18,717    57,398    54,562  
 General and administrative (1)   9,140    7,625    28,728    22,557  
 Amortization of intangible assets   2,552    2,552    7,656    7,656  
  Total operating expenses   52,236    48,824    160,667    143,879  
Income (loss) from operations   877    (3,744 )  (16,775 )  (17,531 )
Interest and other income (expense), net:                     
 Interest income   297    52    1,014    86  
 Interest expense   (263 )  (59 )  (921 )  (174 )
 Other income (expense), net   196    18    273    121  
  Total interest and other income (expense), net   230    11    366    33  
Income (loss) before provision for income taxes   1,107    (3,733 )  (16,409 )  (17,498 )
Provision for income taxes   185    115    378    328  
Net income (loss)  $922   $(3,848 ) $(16,787 ) $(17,826 )
Net income (loss) per common share:                     
  Basic  $0.02   $(0.08 ) $(0.32 ) $(0.35 )
  Diluted  $0.02   $(0.08 ) $(0.32 ) $(0.35 )
Weighted average number of shares used to compute net income (loss) per common share:                     
  Basic   51,756    51,048    51,814    50,635  
  Diluted   52,016    51,048    51,814    50,635  
                      
(1) Includes stock-based compensation as follows:                    
 Cost of revenue  $163   $206   $549   $914  
 Research and development   964    1,207    3,659    3,693  
 Sales and marketing   688    1,316    3,769    4,146  
 General and administrative   775    1,084    2,616    3,366  
   $2,590   $3,813   $10,593   $12,119  
                 
  
  
Calix, Inc.  
Reconciliation of GAAP to Non-GAAP Results  
(Unaudited, in thousands, except per share data)  
                 
   Three Months Ended   Nine Months Ended  
   September 26,  September 27,   September 26,   September 27,  
   2015  2014   2015   2014  
GAAP net income (loss)  $922  $(3,848 ) $(16,787 ) $(17,826 )
Adjustments to reconcile GAAP net income (loss) to non-GAAP net income:                    
 Stock-based compensation   2,590   3,813    10,593    12,119  
 Amortization of intangible assets   4,640   4,641    13,920    13,921  
 Acquisition-related costs   106   -    348    -  
Non-GAAP net income  $8,258  $4,606   $8,074   $8,214  
Non-GAAP net income per common share:                    
 Basic  $0.16  $0.09   $0.16   $0.16  
 Diluted  $0.16  $0.09   $0.15   $0.16  
Weighted average shares used to compute non-GAAP net income per common share:                    
 Basic   51,756   51,048    51,814    50,635  
 Diluted (1)   52,016   51,552    52,344    51,122  
                
(1) Includes the dilutive effect of outstanding stock options, restricted stock units and ESPP.
   
  
Calix, Inc.  
Condensed Consolidated Balance Sheets  
(Unaudited, in thousands)  
          
   September 26,   December 31,  
   2015   2014  
ASSETS           
Current assets:           
 Cash and cash equivalents  $36,194   $48,829  
 Marketable securities   57,659    62,850  
 Restricted cash   -    295  
 Accounts receivable, net   48,188    30,744  
 Inventory   43,769    46,753  
 Deferred cost of revenue   2,998    5,080  
 Prepaid expenses and other current assets   8,311    12,936  
  Total current assets   197,119    207,487  
 Property and equipment, net   18,484    20,144  
 Goodwill   116,175    116,175  
 Intangible assets, net   11,259    25,179  
 Other assets   1,091    1,236  
  Total assets  $344,128   $370,221  
LIABILITIES AND STOCKHOLDERS' EQUITY         
Current liabilities:           
 Accounts payable  $16,784   $23,629  
 Accrued liabilities   38,280    39,443  
 Deferred revenue   11,414    12,722  
  Total current liabilities   66,478    75,794  
 Long-term portion of deferred revenue   19,390    19,393  
 Other long-term liabilities   1,700    2,443  
  Total liabilities   87,568    97,630  
Stockholders' equity:           
 Common stock   1,316    1,291  
 Additional paid-in capital   813,776    801,810  
 Accumulated other comprehensive income   (31 )  80  
 Accumulated deficit   (547,377 )  (530,590 )
 Treasury stock   (11,124 )  -  
  Total stockholders' equity   256,560    272,591  
  Total liabilities and stockholders' equity  $344,128   $370,221  
         
  
  
Calix, Inc.  
Condensed Consolidated Statements of Cash Flows  
(Unaudited, in thousands)  
          
   Nine Months Ended  
   September 26,   September 27,  
   2015   2014  
Operating activities:           
 Net loss  $(16,787 ) $(17,826 )
 Adjustments to reconcile net loss to net cash provided by (used in) operating activities:           
  Depreciation and amortization   7,602    6,772  
  Loss on retirement of property and equipment   14    41  
  Amortization of intangible assets   13,920    13,921  
  Amortization of premiums related to available-for-sale securities   743    302  
  Gain on sale of available-for-sale securities   -    (1 )
  Stock-based compensation   10,593    12,119  
  Changes in operating assets and liabilities:           
   Restricted cash   295    -  
   Accounts receivable, net   (17,443 )  739  
   Inventory   2,983    7,226  
   Deferred cost of revenue   2,082    9,742  
   Prepaid expenses and other assets   4,181    (315 )
   Accounts payable   (6,841 )  (9,904 )
   Accrued liabilities   (1,055 )  5,520  
   Deferred revenue   (1,312 )  (14,391 )
   Other long-term liabilities   (167 )  597  
    Net cash provided by (used in) operating activities   (1,192 )  14,542  
Investing activities:           
 Purchases of property and equipment   (5,943 )  (9,481 )
 Purchases of marketable securities   (46,750 )  (49,356 )
 Sales of marketable securities   -    615  
 Maturities of marketable securities   51,265    -  
    Net cash used in investing activities   (1,428 )  (58,222 )
Financing activities:           
 Proceeds from exercise of stock options   625    429  
 Proceeds from employee stock purchase plan   2,865    2,453  
 Payments for repurchases of common stock   (11,124 )  -  
 Taxes paid for awards vested under equity incentive plans   (2,093 )  (2,505 )
    Net cash provided by (used in) financing activities   (9,727 )  377  
Effect of exchange rate changes on cash and cash equivalents   (288 )  (45 )
Net decrease in cash and cash equivalents   (12,635 )  (43,348 )
Cash and cash equivalents at beginning of period   48,829    82,747  
Cash and cash equivalents at end of period  $36,194   $39,399  

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