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Calix Reports Fourth Quarter 2010 Financial Results

February 03, 2011

PETALUMA, Calif., Feb 03, 2011 (BUSINESS WIRE) --

Calix, Inc. (NYSE:CALX) today announced unaudited financial results for the fourth quarter ended December 31, 2010. Revenue for the fourth quarter of 2010 was $91.7 million, an increase of 21.5% compared to $75.5 million for the third quarter of 2010, and an increase of 3.8% compared to $88.4 million for the fourth quarter of 2009.

"We are pleased with our strong performance in the fourth quarter, having achieved revenues and margins that were the highest in company history," said Calix president and CEO Carl Russo. "Our business continued to accelerate throughout Q4, with a growing number of new customer wins, Broadband Stimulus vendor selections, as well as wide adoption of our new platforms."

Non-GAAP net income for the fourth quarter of 2010 was $10.7 million, or $0.26 per fully diluted share, an increase of 83.8% compared to non-GAAP net income of $5.8 million, or $0.15 per fully diluted share, for the third quarter of 2010, and an increase of 54.5% compared to non-GAAP net income of $6.9 million, or $0.21 per fully diluted share, in the fourth quarter of 2009. Non-GAAP net income excludes non-cash items of stock-based compensation and amortization of acquisition-related intangible assets, non-cash and non-recurring changes in the fair market value of preferred stock warrants and preferred stock dividends, and non-recurring acquisition-related costs.

GAAP net loss for the fourth quarter of 2010 was $0.7 million, or $(0.02) per basic and diluted share, compared to a GAAP net loss of $5.4 million, or $(0.14) per basic and diluted share for the third quarter of 2010, and compared to a GAAP net income of $2.1 million, or $0.09 per basic and diluted share reported for the fourth quarter of 2009 assuming the conversion of preferred stock into common stock as of the beginning of the fourth quarter of 2009. A reconciliation of GAAP and non-GAAP results is included as part of this release.

Non-GAAP Results



Q4 2010

Q3 2010

Vs. Q3 2010

Q4 2009

Vs. Q4 2009
Revenue

$91.7 million

$75.5 million

+21.5%

$88.4 million

+3.8%
Net Income

$10.7 million

$5.8 million

+83.8%

$6.9 million

+54.5%
Diluted Income per Share(1)(2)

$0.26

$0.15

+80.0%

$0.21

+23.8%

GAAP Results



Q4 2010

Q3 2010

Vs. Q3 2010

Q4 2009

Vs. Q4 2009
Revenue

$91.7 million

$75.5 million

+21.5%

$88.4 million

+ 3.8%
Net Income (Loss)

$(0.7) million

$(5.4) million

+86.2%

$2.1 million

-134.5%

Income (Loss) per Basic Share



$(0.02)

$(0.14)

+85.7%

$0.53

-103.8%
Income (Loss) per Diluted Share(3)

$(0.02)

$(0.14)

+85.7%

$0.50

-104.0%
Pro Forma Income (Loss) per Basic and Diluted Share(1)(3)

$(0.02)

$(0.14)

+85.7%

$0.09

-122.2%




















(1) Includes outstanding common shares and common shares resulting from the assumed conversion of preferred shares as if conversion occurred at the beginning of the fourth quarter of 2009.




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




(3)

Includes the dilutive effect of outstanding stock options and warrants for the fourth quarter of 2009.







Conference Call

In conjunction with this announcement, Calix will host a conference call at 1:30 p.m. PST (4:30 p.m. EST) today to discuss its fourth quarter 2010 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=6596937&lan=en-US&anchor=http%3A%2F%2Finvestor-relations.calix.com&index=2&md5=d5af55ec0b09c19a6f6a22535e4f8291.

Live call access information:

  • Dial-in number: (800) 561-2813 (U.S.) or (617) 614-3529 (outside the U.S.)
  • Passcode: 55658958

Replay call access information:

  • Replay call dial-in: (888) 286-8010 (U.S.) or (617) 801-6888 (outside the U.S.)
  • Passcode: 95656553

The conference call and webcast will include forward looking information.

About Calix

Calix is a leading North American provider of broadband communications access systems and software for fiber- and copper- based network architectures that enable communications service providers to connect to their residential and business subscribers. Calix enables communications service providers to provide a wide range of revenue-generating services, from basic voice and data to advanced broadband services, over legacy and next-generation access networks. The Calix Unified Access Portfolio helps these companies to transform their legacy and mixed protocol access networks to fiber and Ethernet. Calix has shipped over eight million ports of its Unified Access Infrastructure portfolio to more than 600 North American and international customers, whose networks serve over 40 million subscriber lines in total. For more information, visit the Calix website at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.calix.com&esheet=6596937&lan=en-US&anchor=www.calix.com&index=3&md5=080dd48c7b90825a795594db0b5d3a9b.

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 exclude certain non-cash charges and non-recurring 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 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.

The Company makes adjustments for the following items in analyzing its operating results as it does not consider these items to part of the Company's ongoing operating activities or meaningful in evaluating the Company's financial performance:

Stock-based Compensation

A non-cash expense incurred in accordance with SFAS 123R using the modified prospective transition method.

Amortization of Intangible Assets

A non-cash expense resulting from intangible assets acquired in the acquisition of Optical Solutions, Inc. (OSI) in February 2006. The Company is required to amortize these assets over their expected useful lives.

Change in Fair Value of Preferred Stock Warrants

A non-cash expense or benefit resulting from the revaluation of the Company's preferred stock warrant liability. Upon completion of the Company's initial public offering, the preferred warrant liability was reclassified as a component of stockholders' equity, and the Company is no longer required to revalue the warrants.

Preferred Stock Dividends

Preferred stock dividends represent Series I preferred stock dividends paid to the Company's Series I shareholders prior to the conversion of preferred stock in connection with the Company's initial public offering.

Acquisition-related Costs

Acquisition-related costs represent legal and professional services associated with our intended merger with Occam Networks Inc.

Condensed Statement of Operations
(in thousands)













Three Months Ended December 31,


Years Ended December 31,




2010
2009
2010
2009



(unaudited)
(unaudited)
Revenue

$ 91,695

$ 88,359

$ 287,043

$ 232,947
Cost of revenue:








Products and services(1)


51,679


57,279


168,873


150,863
Amortization of existing technologies


1,360


1,360


5,440


5,440
Total cost of revenue


53,039


58,639


174,313


156,303
Gross profit


38,656


29,720


112,730


76,644










Operating expenses:








Research and development(1)


16,180


12,945


55,412


46,132
Sales and marketing(1)


13,107


9,795


42,121


33,486
General and administrative(1)


8,483


3,984


27,998


15,613
Acquisition-related costs


1,805


-


3,942


-
Amortization of intangible assets


185


185


740


740
Total operating expenses


39,760


26,909


130,213


95,971
Income/(loss) from operations


(1,104)


2,811


(17,483)


(19,327)










Other income (expense):








Interest income


88


101


384


245
Interest expense


(50)


(441)


(1,188)


(3,867)
Change in fair value of preferred stock warrants


-


(35)


(173)


37
Other income


(25)


6


(12)


119
Income/(loss) before provision (benefit) for income taxes


(1,091)


2,442


(18,472)


(22,793)
Provision (benefit) for income taxes


(354)


(403)


81


(352
Net income/(loss)


(737)


2,845


(18,553)


(22,441)
Preferred stock dividends


-


706


900


3,747
Net income/(loss) attributable to common stockholders

$ (737)

$ 2,139

$ (19,453)

$ (26,188)










Net income/(loss) per common share:








Basic

$ (0.02)

$ 0.53

$ (0.65)

$ (6.48)
Diluted

$ (0.02)

$ 0.50

$ (0.65) 

$ (6.48)
Pro forma basic

$ (0.02)

$ 0.09

$ (0.51)

$ (0.77)
Pro forma diluted

$ (0.02)

$ 0.09

$ (0.51)

$ (0.77)










Weighted average number of shares used to compute net income/(loss) per common share:










Basic


38,144


4,072


29,778


4,040
Diluted


38,144


4,309


29,778


4,040
Pro forma basic(2)


38,144


32,057


36,232


28,991
Pro forma diluted (2)


38,144


32,294


36,232


28,991




















(1) Includes stock-based compensation as follows:



Three Months Ended December 31,
Years Ended December 31,



2010
2009
2010
2009



(unaudited)
(unaudited)
Cost of revenue

$ 593

$ 166

$ 1,745

$ 682
Research and development


1,952


688


5,966


2,657
Sales and marketing


1,521


452


4,555


1,739
General and administrative


4,027


1,200


13,309


4,118



$ 8,093

$ 2,506

$ 25,575

$ 9,196










(2) Includes outstanding common shares and common shares resulting from the assumed conversion of preferred shares as if conversion occurred at the beginning of the fourth quarter of 2009 and the beginning of the twelve month periods ended December 31, 2010 and December 31, 2009.


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



















Three Months Ended December 31,


Years Ended December 31,



2010


2009


2010


2009



































GAAP net loss attributable to common stockholders
$ (737)



$ 2,139


$ (19,453)



$ (26,188)


Adjustments to reconcile GAAP net loss to non-GAAP net loss:

















Stock-based compensation

8,093




2,506



25,575




9,196


Amortization of intangible assets

1,545




1,545



6,180




6,180


Acquisition-related costs

1,805




-



3,942




-


Change in fair value of preferred stock warrants

-




35



173




(37)


Preferred stock dividends

-




706



900




3,747


Non-GAAP net income (loss)
$ 10,706



$ 6,931


$ 17,317



$ (7,102)




































Non-GAAP net income (loss) per common share















Basic
$ 0.28



$ 0.22


$ 0.48



$ (0.24)



















Diluted
$ 0.26



$ 0.21


$ 0.45



$ (0.24)



















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



38,144




32,057



36,232




28,991



















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



40,943




32,294



38,502




28,991



















(1) Includes outstanding common shares and common shares resulting from the assumed conversion of preferred shares as if conversion occurred at the beginning of the fourth quarter ended December 31, 2009 and the beginning of the twelve month periods ended December 31, 2010 and December 31, 2009.


















(2) Includes the dilutive effect of outstanding stock options, warrants and restricted stock units for the three and twelve months ended December 31, 2010.





































Three Months Ended December 31,
Years Ended December 31,


2010
2009
2010
2009

















GAAP gross profit and gross margin
$ 38,656

42.2%

$ 29,720
33.6%

$ 112,730

39.3%

$ 76,644

32.9%

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

















Stock-based compensation

593




166



1,745




682


Amortization of intangible assets

1,360




1,360



5,440




5,440


Non-GAAP gross profit and gross margin
$ 40,609

44.3%

$ 31,246
35.4%

$ 119,915

41.8%

$ 82,766

35.5%

















Condensed Balance Sheets
(In thousands)







December 31,


2010
2009
ASSETS
(unaudited)

Current Assets:



Cash and cash equivalents
$ 66,304

$ 31,821
Marketable securities

32,020


36,228
Restricted cash

-


629
Accounts receivable, net

43,377


46,992
Inventory

24,557


18,556
Deferred cost of goods sold

7,771


16,468
Prepaid and other current assets

3,245


4,018
Total current assets

177,274


154,712





Property and equipment, net

11,815


11,293
Goodwill

65,576


65,576
Intangible assets, net

515


6,695
Other assets

2,376


2,840
Total assets
$ 257,556

$ 241,116





LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)





Current liabilities:



Accounts payable
$ 10,268

$ 14,635
Accrued liabilities

25,987


28,629
Preferred stock warrant liabilities

-


195
Loans payable

-


3,333
Deferred revenue

14,062


29,921
Total current liabilities

50,317


76,713





Loans payable

-


16,667
Long-term portion of deferred revenue

10,985


6,556
Other long term liabilities

951


910
Total liabilities

62,253


100,846





Convertible preferred stock

-


479,628





Stockholders' equity (deficit):



Common stock

968


102
Additional paid-in capital

605,939


52,739
Other comprehensive income (loss)

31


(17)
Accumulated deficit

(411,635)


(392,182)
Total stockholders' equity (deficit)

195,303


(339,358)

Total liabilities, convertible preferred stock and stockholders' equity (deficit)


$ 257,556

$ 241,116





Condensed Statement of Cash Flows
(in thousands)


Years Ended December 31,


2010
2009


(unaudited)
Operating activities



Net loss

(18,553) )
$ (22,441) )

Adjustments to reconcile net loss to net cash used in operating activities:





Amortization of premiums relating to available-for-sale securities

967


-
Depreciation and amortization

5,015


4,942
Amortization of intangible assets

6,180


6,180
Revaluation of warrant liability

173


(37)
Stock-based compensation

25,575


9,196
Net gains on investments

(37)


-
Loss on disposal of property and equipment

77


-
Changes in operating assets and liabilities:



Change in restricted cash

629


4,227
Accounts receivable, net

3,615


(14,209)
Inventory

(6,001)


4,841
Deferred cost of goods sold

8,697


(2,260)
Prepaid and other assets

1,237


(4,252)
Accounts payable

(4,367)


(3,855)
Accrued liabilities

(2,642)


12,138
Deferred revenue

(11,430)


7,664
Other long-term liabilities

41


(744)
Net cash provided by (used in) operating activities
$ 9,176

$ 1,390





Investing activities



Acquisition of property and equipment

(5,614)


(5,064)
Purchase of marketable securities

(79,190)


(36,245)
Sales and maturities of marketable securities

82,516


-
Net cash used in investing activities

(2,288)


(41,309)





Financing activities



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

57,311


-
Proceeds from loans

-


20,000
Principal payments on loans

(20,000)


(21,000)
Taxes payable on vesting of restricted stock units

(10,004)


Proceeds from issuance of Series J preferred stock

-


49,478
Proceeds from exercise of stock options and warrants and other

288


60
Repurchase of common and preferred stock

-


(12)
Net cash provided by financing activities

27,595


48,526





Net increase in cash and cash equivalents

34,483


8,607
Cash and cash equivalents at beginning of year

31,821


23,214
Cash and cash equivalents at end of year
$ 66,304

$ 31,821

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