Calix Reports Third Quarter 2017 Financial Results

11.07.17

PETALUMA, Calif., Nov. 07, 2017 (GLOBE NEWSWIRE) -- Calix, Inc. (NYSE:CALX) today announced unaudited financial results for the third quarter ended September 30, 2017. Revenue for the third quarter of 2017 was a third quarter record $128.8 million, an increase of 6.3% compared to $121.2 million for the third quarter of 2016.

“Revenue was a third quarter record, increasing by more than 6 percent compared to last year. This marks our seventh consecutive quarter of year-over-year revenue growth, led by solid expansion in services revenue and continued strong momentum in our AXOS and Calix Cloud product offerings,” said Calix Inc. President and CEO Carl Russo. “With last week’s introduction of EXOS - the Experience OS - at our ConneXions annual conference, Calix announced the first carrier class premises operating system designed specifically to help service providers deliver a managed experience for the smart home and business, opening significant potential new revenue streams for our customers,” added Russo.

The GAAP net loss for the third quarter of 2017 was $17.9 million, or ($0.35) per basic and fully diluted share, compared to a GAAP net income of $0.6 million, or $0.01 per basic and fully diluted share, for the third quarter of 2016.

“Demonstrating the increased value our next generation products provide to our customers, we saw another quarter of sequential improvement in product gross margin,” said Cory Sindelar, Calix, Inc. CFO. “However, our overall gross margin was impacted by stronger than expected services revenue as the team completed more projects than anticipated during the quarter. Looking ahead, we expect our services gross margin to improve in the fourth quarter,” added Sindelar.

The Company’s non-GAAP net loss for the third quarter of 2017 was $14.2 million, or ($0.28) per fully diluted share, compared to a non-GAAP net income of $6.1 million, or $0.12 per fully diluted share, for the third quarter of 2016. Reconciliations of our operating results and income (loss) per diluted share from GAAP to non-GAAP are provided in this release.

Outlook

Calix is providing forward-looking estimates for fourth quarter and full year 2017 results as follows:

Fourth quarter 2017 
  
Revenue$140.0 - $145.0 million, representing growth of 6.2% - 10.0% year-over-year
Non-GAAP Gross Margin36.5% - 38.5%
Non-GAAP Operating Expense$59.0 - $61.0 million
Non-GAAP Net Loss Per Share($0.15) - ($0.10)
  
Full year 2017 
  
Revenue$512.0 - $517.0 million, representing growth of 11.7% - 12.8% year-over-year

The Company estimates that GAAP EPS will be approximately $0.09 lower for fourth quarter of 2017 due to the inclusion of stock-based compensation and restructuring charges. A reconciliation of the GAAP to non-GAAP outlook is provided in this release.

Restructuring Plan

In March 2017, the Company adopted a restructuring plan that seeks to realign the Company’s business to increase its focus towards its investments in innovative Software Defined Access and cloud products, while reducing its cost structure in the traditional systems business. The Company has recognized restructuring charges of approximately $2.3 million for the nine months ended September 30, 2017, consisting primarily of severance and other one-time termination benefits. During the fourth quarter of 2017, the Company intends to take further actions under this plan and expects to incur revised total pretax estimated charges of up to $4.0 million for the full year related to this plan. As a result of these charges in fiscal 2017, the Company expects to see additional expense reduction benefits in fiscal 2018.

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 2017 financial results. A live audio webcast and replay of the call will be available in the Investor Relations section of the Calix website at http://investor-relations.calix.com.

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

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

About Calix

Calix, Inc. (NYSE:CALX) pioneered Software Defined Access and cloud products focused on access networks and the subscriber. Its portfolio of Intelligent Access systems and software combines AXOS, the revolutionary platform for access, and EXOS, the experience OS, with Calix Cloud, innovative cloud products for network data analytics and subscriber experience assurance. Together, they enable communications service providers to transform their businesses and be the winning service providers of tomorrow. For more information, visit the Calix website at www.calix.com.

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, statements about potential customer or market opportunities, opportunities with existing and prospective customers, estimates and planned cost savings related to its restructuring plan and future financial performance (including the outlook for fourth quarter of fiscal 2017 and full year of 2017). Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, including but not limited to fluctuations in the Company’s financial and operating results, the capital spending decisions of its customers, changes in regulations and/or government sponsored programs, competition, its ability to achieve market acceptance of new products and solutions, its ability to grow its customer base, fluctuations in costs associated with its products and services including higher costs due to project delays and changes, cost overruns and other unanticipated factors, as well as the risks and uncertainties described in its annual reports on Form 10-K and its 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 the Company at the time those statements are made and/or management’s good faith belief as of that time with respect to future events. Calix assumes no obligation to update forward-looking statements to reflect actual performance or results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. Accordingly, investors should not place undue reliance on any forward-looking statements.

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 gross margin, non-GAAP operating expenses, 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, amortization of acquisition-related intangible assets, restructuring charges and acquisition-related costs, which the Company believes are not indicative of its core operating results. 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.


 
Calix, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
         
  Three Months Ended Nine Months Ended
  September 30, September 24, September 30, September 24,
  2017 2016 2017 2016
Revenue:      
Products $106,442  $114,029  $305,395  $305,853 
Services 22,385  7,158  67,073  21,134 
Total revenue 128,827  121,187  372,468  326,987 
Cost of revenue:        
Products (1) 55,494  60,662  171,166  159,856 
Services (1) 28,700  6,981  78,969  18,099 
Total cost of revenue 84,194  67,643  250,135  177,955 
Gross profit 44,633  53,544  122,333  149,032 
Operating expenses:        
Research and development (1) 32,633  28,119  99,391  75,925 
Sales and marketing (1) 18,448  20,575  59,306  58,850 
General and administrative (1) 10,203  8,615  30,161  32,940 
Amortization of intangible assets       1,701 
Restructuring charges 612    2,268   
Litigation settlement gain   (4,500)   (4,500)
Total operating expenses 61,896  52,809  191,126  164,916 
Income (loss) from operations (17,263) 735  (68,793) (15,884)
Interest and other income (expense), net:        
Interest income (expense), net (60) 80  88  274 
Other income (expense), net (305) 30  (386) 145 
Total interest and other income (expense), net (365) 110  (298) 419 
Income (loss) before provision for income taxes (17,628) 845  (69,091) (15,465)
Provision for income taxes 225  209  1,075  454 
Net income (loss) $(17,853) $636  $(70,166) $(15,919)
Net income (loss) per common share:        
Basic $(0.35) $0.01  $(1.40) $(0.33)
Diluted $(0.35) $0.01  $(1.40) $(0.33)
Weighted average number of shares used to compute        
net income (loss) per common share:        
Basic 50,336  48,773  49,960  48,578 
Diluted 50,336  49,309  49,960  48,578 
         
(1) Includes stock-based compensation as follows:        
Cost of revenue:        
Products $137  $120  $349  $338 
Services 69  54  200  146 
Research and development 1,215  1,573  3,663  3,719 
Sales and marketing 816  1,661  2,581  3,323 
General and administrative 759  1,269  2,521  2,840 
  $2,996  $4,677  $9,314  $10,366 
 


 
Calix, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
     
  September 30, December 31,
  2017 2016
ASSETS
Current assets:    
Cash and cash equivalents $64,184  $50,359 
Marketable securities 6,598  27,748 
Accounts receivable, net 44,227  51,336 
Inventory 36,321  44,545 
Deferred cost of revenue 22,859  34,763 
Prepaid expenses and other current assets 11,504  10,571 
Total current assets 185,693  219,322 
Property and equipment, net 16,997  17,984 
Goodwill 116,175  116,175 
Other assets 777  1,994 
  $319,642  $355,475 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:    
Accounts payable $29,576  $23,827 
Accrued liabilities 59,401  69,715 
Deferred revenue 28,228  27,854 
Line of credit 30,000   
Total current liabilities 147,205  121,396 
Long-term portion of deferred revenue 21,173  20,237 
Other long-term liabilities 881  878 
Total liabilities 169,259  142,511 
Stockholders’ equity:    
Common stock 1,393  1,368 
Additional paid-in capital 843,811  836,563 
Accumulated other comprehensive loss (344) (656)
Accumulated deficit (654,491) (584,325)
Treasury stock (39,986) (39,986)
Total stockholders’ equity 150,383  212,964 
  $319,642  $355,475 
 


 
Calix, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
     
  Nine Months Ended
  September 30, September 24,
  2017 2016
Operating activities:    
Net loss $(70,166) $(15,919)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Stock-based compensation 9,314  10,366 
Depreciation and amortization 7,632  6,282 
Amortization of intangible assets 813  4,991 
Loss on retirement of property and equipment 148   
Amortization of premium (discount) relating to available-for-sale securities (7) 337 
Changes in operating assets and liabilities:    
Accounts receivable, net 7,109  (10,104)
Inventory 8,224  7,477 
Deferred cost of revenue 11,904  (9,800)
Prepaid expenses and other assets (320) (6,058)
Accounts payable 5,543  (356)
Accrued liabilities (10,132) 13,974 
Deferred revenue 1,310  4,383 
Other long-term liabilities 3  (313)
Net cash provided by (used in) operating activities (28,625) 5,260 
Investing activities:    
Purchases of property and equipment (6,786) (5,364)
Purchases of marketable securities (8,732)  
Sales of marketable securities 5,051   
Maturities of marketable securities 24,841  20,170 
Net cash provided by investing activities 14,374  14,806 
Financing activities:    
Proceeds from exercise of stock options 29  14 
Proceeds from employee stock purchase plan 673  2,905 
Payments for repurchases of common stock   (12,809)
Taxes paid for awards vested under equity incentive plan (2,743) (1,787)
Proceeds from line of credit 68,534   
Repayment of line of credit (38,534)  
Payments to originate the line of credit (186)  
Net cash provided by (used in) financing activities 27,773  (11,677)
Effect of exchange rate changes on cash and cash equivalents 303  (251)
Net increase in cash and cash equivalents 13,825  8,138 
Cash and cash equivalents at beginning of period 50,359  23,626 
Cash and cash equivalents at end of period $64,184  $31,764 
 


 
Calix, Inc.
Reconciliation of GAAP to Non-GAAP Results
(Unaudited, in thousands, except per share data)
         
  Three Months Ended Nine Months Ended
  September 30, September 24, September 30, September 24,
  2017 2016 2017 2016
GAAP net income (loss) $(17,853) $636  $(70,166) $(15,919)
Adjustments to reconcile GAAP net income (loss) to        
non-GAAP net income (loss):        
Stock-based compensation 2,996  4,677  9,314  10,366 
Amortization of intangible assets   813  813  4,991 
Restructuring charges 612    2,268   
Acquisition-related costs       351 
Non-GAAP net income (loss) $(14,245) $6,126  $(57,771) $(211)
 


 
Calix, Inc.
Reconciliation of GAAP to Non-GAAP Net Income (Loss) per Diluted Common Share
(Unaudited)
         
  Three Months Ended Nine Months Ended
  September 30, September 24, September 30, September 24,
  2017 2016 2017 2016
GAAP net income (loss) per diluted common share $(0.35) $0.01  $(1.40) $(0.33)
Per diluted common share adjustments for:        
Stock-based compensation 0.06  0.09  0.18  0.22 
Amortization of intangible assets   0.02  0.02  0.10 
Restructuring charges 0.01    0.04   
Acquisition-related costs       0.01 
Non-GAAP net income (loss) per diluted common share $(0.28) $0.12  $(1.16) $ 
Weighted average number of shares used to compute        
non-GAAP net income (loss) per diluted common share (1) 50,336  49,309  49,960  48,578 
(1) Includes the dilutive effect of outstanding stock options, restricted stock units and ESPP.
 


 
Calix, Inc.
Reconciliation of GAAP to Non-GAAP Outlook
(Unaudited, in thousands, except per share data)
Three Months Ending December 31, 2017
         
Outlook GAAP Stock-Based
Compensation
 Restructuring
Charges
 Non-GAAP
Gross margin 36.4% - 38.4%  0.14%  0.00% 36.5% - 38.5%
Operating expenses $ 63,400 - $ 65,400 $  (2,900) $  (1,500) $ 59,000 - $ 61,000
Net loss per diluted share $ (0.24) - $ (0.19) $0.06  $0.03  $ (0.15) - $ (0.10)
             


Investor Inquiries:

Thomas J. Dinges, CFA
408-474-0080
Tom.Dinges@calix.com

Source: Calix, Inc.

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Calix Investor Relations
Contact: Thomas J. Dinges, CFA
Director of Investor Relations
Phone: 408-474-0080
Email: InvestorRelations@calix.com