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Calix Reports First Quarter 2011 Financial Results

April 28, 2011

PETALUMA, Calif., Apr 28, 2011 (BUSINESS WIRE) --Calix, Inc. (NYSE:CALX) today announced unaudited financial results for the first quarter ended March 26, 2011. Revenue for the first quarter of 2011 was $71.5 million, an increase of 48.3% compared to $48.2 million for the first quarter of 2010.

"Q1 was a record-setting quarter for Calix, and represented a strong start to fiscal year 2011," said Carl Russo, Calix president and CEO. "We executed well across all segments of our business, and reported results that were ahead of expectations. Our integration of Occam Networks is progressing quickly and smoothly, resulting in accelerating innovation across our Unified Access portfolio and deeper relationships with our over 900 customers."

Non-GAAP net income for the first quarter of 2011 was $3.8 million, or $0.09 per fully diluted share, an increase of 179.2% compared to non-GAAP net loss of $4.7 million, or $(0.15) per fully diluted share, for the first quarter of 2010. A reconciliation of GAAP and non-GAAP results is included as part of this release.

GAAP net loss for the first quarter of 2011 was $22.8 million, or $(0.55) per basic and diluted share, compared to a GAAP net loss of $10.2 million, or $(0.32) per basic and diluted share for the first quarter of 2010 assuming the conversion of preferred stock into common stock as of the beginning of the first quarter of 2010. A reconciliation of our Q1 2011 operating results from non-GAAP to GAAP is provided below:



Non-GAAP

Merger
Related and
Other
Expenses


Stock-Based
Compensation


Amortization
of Intangible
Assets


GAAP
Revenue
$ 71,470

-


-


-

$ 71,470










Cost of revenue

38,804

10,257


504


1,516


51,081
Gross profit

32,666

(10,257)


(504)



(1,516)


20,389











Operating expense

28,890

5,951


7,613


669


43,123
Operating income (loss)

3,776

(16,208)


(8,117)


(2,185)


(22,734)











Other income/(expense), net

2

-


-


-


2
Income (loss) before taxes

3,778

(16,208)


(8,117)


(2,185)


(22,732)
Provision for income taxes

24

-


-


-


24
Net income (loss)
$ 3,754
$ (16,208)

$ (8,117)

$ (2,185)

$ (22,756)











Weighted average basic and diluted shares used to compute GAAP net loss per common share











41,177











Weighted average diluted shares used to compute non-GAAP net income per common share



43,728

43,728


43,728


43,728













GAAP net loss per common share








$ (0.55)











Non-GAAP net income per share
$ 0.09
$ (0.37)

$ (0.19)

$ (0.05)




















Conference Call

In conjunction with this announcement, Calix will host a conference call at 1:30 p.m. PDT (4:30 p.m. EDT) today to discuss its first quarter 2011 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://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Finvestor-relations.calix.com&esheet=6700490&lan=en-US&anchor=http%3A%2F%2Finvestor-relations.calix.com&index=2&md5=4fa4c9809f105e0758173bd24d334df3.

Live call access information:

  • Dial-in number: (866) 788-0542 (U.S.) or (857) 350-1680 (outside the U.S.)
  • Passcode: 67453797

Replay call access information:

  • Replay call dial-in: (888) 286-8010 (U.S.) or (617) 801-6888 (outside the U.S.)
  • Passcode: 92801418

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 enable communications service providers worldwide to be the broadband provider of choice to their subscribers. For more information, visit the Calix website at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.calix.com&esheet=6700490&lan=en-US&anchor=www.calix.com&index=3&md5=05f4842cdffd8ca172807be122e36a08.

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 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 and to a lesser extent the settlement of litigation. 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 these 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.

Condensed Consolidated Statement of Operations

(in thousands)









Three Months Ended


March 26,
March 27,


2011
2010


(unaudited)
Revenue
$ 71,470

$ 48,203
Cost of revenue:





Products and services(1)

39,308


30,171
Merger-related expenses

10,257


-
Amortization of intangible assets

1,516


1,360
Total cost of revenue

51,081


31,531
Gross profit

20,389


16,672







Operating expenses:





Research and development(1)

15,039


11,847
Sales and marketing(1)

12,066


8,422
General and administrative(1)

9,308


4,748
Merger-related and other expenses(1)

6,041


-
Amortization of intangible assets

669


185
Total operating expenses

43,123


25,202
Loss from operations

(22,734)


(8,530)







Other income (expense):





Interest income

43


74
Interest expense

(46)


(473)
Change in fair value of preferred stock warrants

-


(173)
Other income

5


11
Loss before provision for income taxes

(22,732)


(9,091)
Provision for income taxes

24


171
Net loss

(22,756)


(9,262)
Preferred stock dividends

-


900
Net loss attributable to common stockholders
$ (22,756)

$ (10,162)







Net loss per common share:





Basic and diluted
$ (0.55)

$ (2.27)
Pro forma basic and diluted
$ (0.55)

$

(0.32)









Weighted average number of shares used to compute net loss per common share:





Basic and diluted

41,177


4,474

Pro forma basic and diluted (2)



41,177


31,865
















(1) Includes stock-based compensation as follows:


Three Months Ended



March 26,
March 27,



2011
2010



(unaudited)

Cost of revenue
$ 504

$ 140
Research and development

1,642


570
Sales and marketing

1,298


434
General and administrative

4,583


1,663
Merger-related

90


-


$ 8,117

$ 2,807







(2) For the first quarter ended March 27, 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 first quarter of 2010.






Reconciliation of GAAP to Non-GAAP Results
(Unaudited, in thousands except per share data)












Three Months Ended




March 26,


March 27,




2011


2010






















GAAP net loss
$ (22,756)



$ (10,162)


Adjustments to reconcile GAAP net loss to non-GAAP net income (loss):










Stock-based compensation

8,027




2,807


Stock-based compensation (MRE)

90




-


Amortization of intangible assets

2,185




1,545


Merger-related expenses (COGS)

10,257




-


Merger-related and other expenses (OPEX)

5,951



-




Change in fair value of preferred stock warrants

-




173


Preferred stock dividends

-




900


Non-GAAP net income (loss)
$ 3,754



$ (4,737)






















Non-GAAP net income (loss) per common share








Basic
$ 0.09



$ (0.15)












Diluted
$ 0.09



$ (0.15)












Weighted average shares used to compute non-GAAP net income (loss) per common share - Basic (1)



41,177




31,865












Weighted average shares used to compute non-GAAP net income (loss) per common share - Diluted (1)(2)



43,728




31,865






















(1) For the first quarter ended March 27, 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 first quarter of 2010.











(2) Includes the dilutive effect of outstanding stock options, warrants and restricted stock units for the first quarter of 2011.























Three Months Ended


March 26,
March 27,


2011
2010










GAAP gross profit and gross margin
$ 20,389

28.5%

$ 16,672

34.6%

Adjustments to reconcile GAAP gross profit and gross margin to non-GAAP gross profit and gross margin:










Stock-based compensation

504




140


Amortization of intangible assets

1,516




1,360


Merger-related expenses

10,257




-


Non-GAAP gross profit and gross margin
$ 32,666

45.7 %

$ 18,172

37.7%















Condensed Consolidated Balance Sheets

(In thousands)







March 26,
December 31,


2011
2010
ASSETS
(unaudited)

Current Assets:



Cash and cash equivalents
$ 29,547

$ 66,304
Marketable securities

8,999


32,020
Restricted cash

1,054


-
Accounts receivable, net

54,342


43,377
Inventory

49,380


24,557
Deferred cost of goods sold

9,854


7,771
Prepaid and other current assets

2,838


3,245
Total current assets

156,014


177,274





Property and equipment, net

19,283


11,815
Goodwill

118,552


65,576
Intangible assets, net

95,984


515
Other assets

2,491


2,376
Total assets
$ 392,324

$ 257,556





LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:



Accounts payable
$ 16,000

$ 10,268
Accrued liabilities

44,668


25,987
Deferred revenue

18,076


14,062
Total current liabilities

78,744


50,317





Long-term portion of deferred revenue

11,609


10,985
Other long term liabilities

1,833


951
Total liabilities

92,186


62,253





Stockholders' equity:



Common stock

1,133


968
Additional paid-in capital

733,360


605,939
Other comprehensive income

36


31
Accumulated deficit

(434,391)


(411,635)
Total stockholders' equity

300,138


195,303





Total liabilities and stockholders' equity
$ 392,324

$ 257,556









Condensed Consolidated Statement of Cash Flows

(in thousands)


Three Months Ended


March 26,
March 27,


2011
2010


(unaudited)
Operating activities



Net loss
$ (22,756)

$ (9,262)
Adjustments to reconcile net loss to net cash used in operating activities:



Amortization of premiums relating to available-for-sale securities

108


133
Depreciation and amortization

1,617


1,183
Amortization of intangible assets

2,185


1,545
Revaluation of warrant liability

-


173
Stock-based compensation

8,117


2,807
Changes in operating assets and liabilities:



Change in restricted cash

-


629
Accounts receivable, net

4,177


21,814
Inventory

4,406


(7,711)

Deferred cost of revenue



(2,083)


2,622
Prepaids and other assets

1,159


2,435
Accounts payable

(6,068)


(7,149)
Accrued liabilities

8,068


179
Other long-term liabilities

(8)


179
Deferred revenue

3,772


(4,519)
Net cash provided by operating activities

2,694


5,058





Investing activities



Acquisition of property and equipment

(1,722)


(1,481)
Purchase of marketable securities

-


(7,434)
Sales of marketable securities

-


6,708
Maturities of marketable securities

22,905


-
Acquisition of Occam Networks, net of cash assumed

(60,788)


-
Net cash used in investing activities

(39,605)


(2,207)





Financing activities



Proceeds from exercise of stock options and other

154


62
Proceeds from initial public offering of common stock, net of issuance costs

-


46,229
Net cash provided by financing activities

154


46,291





Net increase (decrease) in cash and cash equivalents

(36,757)


49,142
Cash and cash equivalents at beginning of year

66,304


31,821
Cash and cash equivalents at end of year
$ 29,547

$ 80,963









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