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Calix Reports Third Quarter 2011 Financial Results

October 20, 2011

PETALUMA, CA, Oct 20, 2011 (MARKETWIRE via COMTEX) --

Calix Inc. (NYSE: CALX) today announced unaudited financial results for the third quarter ended September 24, 2011. Revenue for the third quarter of 2011 was $83.7 million, an increase of 11% compared to $75.5 million for the third quarter of 2010. The company reported preliminary estimates for its third quarter results on September 27, 2011 of revenue between $83 and $85 million and non-GAAP earnings per share of $0.07 to $0.09 per share.

"While we are clearly disappointed with our Q3 results, we remain focused on bringing industry leading broadband access solutions to our existing and expanding base of customers," said Carl Russo, president and CEO of Calix. "After what we anticipate will be a pause in our growth, we are looking ahead and building a stronger company to address the secular growth drivers in front of us."

Non-GAAP net income for the third quarter of 2011 was $3.6 million, or $0.07 per fully diluted share, a decrease of 39% compared to non-GAAP net income of $5.8 million, or $0.15 per fully diluted share, for the third quarter of 2010. A reconciliation of GAAP and non-GAAP results is included as part of this release.

GAAP net loss for the third quarter of 2011 was $6.9 million, or $(0.15) 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. A reconciliation of our third quarter 2011 operating results from non-GAAP to GAAP is provided below:

                              Merger
                              Related                Amortization
                                and                       of
                               Other    Stock-Based   Intangible
                   Non-GAAP  Expenses  Compensation     Assets       GAAP
                   --------  --------  ------------  ------------  --------
Revenue            $ 83,655  $      -  $          -  $          -  $ 83,655

Cost of revenue      48,696         -           306         2,806    51,808
                   --------  --------  ------------  ------------  --------
Gross profit         34,959         -          (306)       (2,806)   31,847

Operating expenses   31,365     1,334         3,490         2,552    38,741
                   --------  --------  ------------  ------------  --------
Operating income
 (loss)               3,594    (1,334)       (3,796)       (5,358)   (6,894)

Other
 income/(expense),
 net                     (2)        -             -             -        (2)
                   --------  --------  ------------  ------------  --------
Income (loss)
 before taxes         3,592    (1,334)       (3,796)       (5,358)   (6,896)
Provision for
 income taxes            38         -             -             -        38
                   --------  --------  ------------  ------------  --------
Net income (loss)  $  3,554  $ (1,334) $     (3,796) $     (5,358) $ (6,934)
                   ========  ========  ============  ============  ========

Weighted average
 basic and diluted
 shares used to
 compute GAAP net
 loss per common
 share                                                               47,128
                                                                   ========

Weighted average
 diluted shares
 used to compute
 non-GAAP net
 income per common
 share               48,092    48,092        48,092        48,092
                   ========  ========  ============  ============

GAAP net loss per
 common share                                                      $  (0.15)
                                                                   ========

Non-GAAP net
 income (loss) per
 share             $   0.07  $  (0.03) $      (0.08) $      (0.11)
                   ========  ========  ============  ============


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 third 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://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 enable communications service providers worldwide to be 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 income 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. 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 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.

This press release contains forward-looking statements, including a resumption of growth, that are based upon management's current expectations and are inherently uncertain. Forward-looking statements are based upon information available to us as of the date of this release, and we assume no obligation to revise or update any such forward-looking statement to reflect any event or circumstance after the date of this release, except as required by law. Actual results and the timing of events could differ materially from current expectations based on risks and uncertainties affecting the Company's business. The reader is cautioned not to unduly rely on the forward-looking statements contained in this press release. Additional information on potential factors that could affect Calix's results and other risks and uncertainties are detailed in its various SEC reports, including its Form 10-Q for the fiscal quarter ended June 25, 2011, filed with the SEC on July 22, 2011, available at http://www.sec.gov.

              Condensed Consolidated Statements of Operations
                               (in thousands)

                         Three Months Ended           Nine Months Ended
                     --------------------------  --------------------------
                       September     September     September     September
                          24,           25,           24,           25,
                         2011          2010          2011          2010
                     ------------  ------------  ------------  ------------
                             (unaudited)                 (unaudited)
Revenue              $     83,655  $     75,492  $    253,084  $    195,348
Cost of revenue:
  Products and
   services(1)             49,002        45,168       143,209       117,194
  Merger-related
   expenses                     -             -        19,966             -
  Amortization of
   intangible assets        2,806         1,360         7,510         4,080
                     ------------  ------------  ------------  ------------
Total cost of
 revenue                   51,808        46,528       170,685       121,274
                     ------------  ------------  ------------  ------------
  Gross profit             31,847        28,964        82,399        74,074

Operating expenses:
  Research and
   development(1)          16,717        14,299        50,340        39,232
  Sales and
   marketing(1)            12,593        10,408        38,831        29,014
  General and
   administrative(1)        5,475         7,344        21,450        19,515
  Merger-related and
   other expenses(1)        1,404         2,137        12,927         2,137
  Amortization of
   intangible assets        2,552           185         6,016           555
                     ------------  ------------  ------------  ------------
Total operating
 expenses                  38,741        34,373       129,564        90,453
                     ------------  ------------  ------------  ------------
Loss from operations       (6,894)       (5,409)      (47,165)      (16,379)

Other income
 (expense):
  Interest income              11           120            80           297
  Interest expense            (48)          (45)         (139)       (1,138)
  Change in fair
   value of
   preferred stock
   warrants                     -             -             -          (173)
  Other income                 35             4            64            13
                     ------------  ------------  ------------  ------------
Net loss before
 provision for
 income taxes              (6,896)       (5,330)      (47,160)      (17,380)
Provision for income
 taxes                         38            21           176           435
                     ------------  ------------  ------------  ------------
Net loss                   (6,934)       (5,351)      (47,336)      (17,815)
Preferred stock
 dividends                      -             -             -           900
                     ------------  ------------  ------------  ------------
Net loss
 attributable to
 common stockholders $     (6,934) $     (5,351) $    (47,336) $    (18,715)
                     ============  ============  ============  ============

Net loss per common
 share:
  Basic and diluted  $      (0.15) $      (0.14) $      (1.06) $      (0.70)
                     ============  ============  ============  ============
  Pro forma basic
   and diluted       $      (0.15) $      (0.14) $      (1.06) $      (0.50)
                     ============  ============  ============  ============

Weighted average
 number of shares
 used to compute net
 loss per common
 share:
  Basic and diluted        47,128        37,341        44,866        26,751
                     ============  ============  ============  ============
  Pro forma basic
   and diluted (2)         47,128        37,341        44,866        35,540
                     ============  ============  ============  ============


(1) Includes stock-
 based compensation
 as follows:              Three Months Ended          Nine Months Ended
                     --------------------------  --------------------------
                       September     September     September     September
                          24,           25,           24,           25,
                          2011          2010          2011          2010
                     ------------  ------------  ------------  ------------
                             (unaudited)                 (unaudited)
Cost of revenue      $        306  $        528  $      1,141  $      1,152
Research and
 development                  886         1,758         3,761         4,014
Sales and marketing         1,127         1,353         3,256         3,034
General and
 administrative             1,407         3,855         7,845         9,282
Merger-related                 70             -         1,234             -
                     ------------  ------------  ------------  ------------
                     $      3,796  $      7,494  $     17,237  $     17,482
                     ============  ============  ============  ============

(2) For the nine months ended September 25, 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             Nine Months Ended
                 ----------------------------  ----------------------------
                 September 24,  September 25,  September 24,  September 25,
                      2011           2010           2011           2010
                 -------------  -------------  -------------  -------------


GAAP net loss    $      (6,934) $      (5,351) $     (47,336) $     (18,715)
Adjustments to
 reconcile GAAP
 net loss to
 non-GAAP net
 income (loss):
Stock-based
 compensation            3,726          7,494         16,003         17,482
Stock-based
 compensation
 (MRE)                      70              -          1,234              -
Amortization of
 intangible
 assets                  5,358          1,545         13,526          4,635
Merger-related
 expenses (COGS)             -              -         19,966              -
Merger-related
 and other
 expenses (OPEX)         1,334          2,137         11,693          2,137
Change in fair
 value of
 preferred stock
 warrants                    -              -              -            173
Preferred stock
 dividends                   -              -              -            900
                 -------------  -------------  -------------  -------------
Non-GAAP net
 income          $       3,554  $       5,825  $      15,086  $       6,612
                 =============  =============  =============  =============


Non-GAAP net
 income per
 common share
  Basic          $        0.08  $        0.16  $        0.34  $        0.19
                 =============  =============  =============  =============

  Diluted        $        0.07  $        0.15  $        0.32  $        0.18
                 =============  =============  =============  =============

Weighted average
 shares used to
 compute non-
 GAAP net income
 per common
 share - Basic
 (1)                    47,128         37,341         44,866         35,540
                 =============  =============  =============  =============

Weighted average
 shares used to
 compute non-
 GAAP net income
 per common
 share - Diluted
 (1)(2)                 48,092         39,976         46,718         37,619
                 =============  =============  =============  =============


(1) For the nine months ended September 25, 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 all periods presented.

                      Three Months Ended            Nine Months Ended
                 ----------------------------  ----------------------------
                 September 24,  September 25,  September 24,  September 25,
                     2011           2010           2011           2010
                 -------------  -------------  -------------  -------------

GAAP gross
 profit and
 gross margin    $ 31,847 38.1% $ 28,964 38.4% $ 82,399 32.6% $ 74,074 37.9%
Adjustments to
 reconcile GAAP
 gross profit
 and gross
margin to non-
 GAAP gross
 profit and
 gross margin:
Stock-based
 compensation         306            528          1,141          1,152
Amortization of
 intangible
 assets             2,806          1,360          7,510          4,080
Merger-related
 expenses               -              -         19,966              -
                 --------       --------       --------       --------
Non-GAAP gross
 profit and
 gross margin    $ 34,959 41.8% $ 30,852 40.9% $111,016 43.9% $ 79,306 40.6%
                 ========       ========       ========       ========

                   Condensed Consolidated Balance Sheets
                               (In thousands)

                                              September 24,   December 31,
                                                  2011            2010
                                             --------------  --------------
ASSETS                                         (unaudited)
Current Assets:
  Cash and cash equivalents                  $       30,249  $       66,304
  Marketable securities                               2,014          32,020
  Restricted cash                                     1,054               -
  Accounts receivable, net                           47,901          43,377
  Inventory                                          44,152          24,557
  Deferred cost of revenue                            8,932           7,771
  Prepaid and other current assets                    6,493           3,245
                                             --------------  --------------
Total current assets                                140,795         177,274

Property and equipment, net                          17,222          11,815
Goodwill                                            116,175          65,576
Intangible assets, net                               84,643             515
Other assets                                          2,273           2,376
                                             --------------  --------------
Total assets                                 $      361,108  $      257,556
                                             ==============  ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                           $       11,942  $       10,268
  Accrued liabilities                                39,450          25,987
  Deferred revenue                                   19,448          14,062
                                             --------------  --------------
Total current liabilities                            70,840          50,317

Long-term portion of deferred revenue                12,265          10,985
Other long term liabilities                           1,662             951
                                             --------------  --------------
Total liabilities                                    84,767          62,253
                                             --------------  --------------

Stockholders' equity:
  Common stock                                        1,182             968
  Additional paid-in capital                        734,045         605,939
  Other comprehensive income                             85              31
  Accumulated deficit                              (458,971)       (411,635)
                                             --------------  --------------
Total stockholders' equity                          276,341         195,303

                                             --------------  --------------
Total liabilities and stockholders' equity   $      361,108  $      257,556
                                             ==============  ==============

              Condensed Consolidated Statements of Cash Flows
                               (in thousands)
                                                    Nine Months Ended
                                             ------------------------------
                                              September 24,   September 25,
                                                  2011            2010
                                             --------------  --------------
                                                       (unaudited)
Operating activities
Net loss                                     $      (47,336) $      (17,815)
Adjustments to reconcile net loss to net
 cash provided by operating activities:
  Amortization of premiums relating to
   available-for-sale securities                        229             740
  Depreciation and amortization                       5,949           3,692
  Loss on retirement of property and
   equipment                                          2,278               -
  Amortization of intangible assets                  13,526           4,635
  Revaluation of warranty liabilities                     -             173
  Stock-based compensation                           17,237          17,482
Changes in operating assets and liabilities:
  Change in restricted cash                               -             629
  Accounts receivable, net                           12,329          14,111
  Inventory                                           9,634          (6,364)
  Deferred cost of revenue                           (1,161)          6,041
  Prepaids and other assets                          (2,291)          1,423
  Accounts payable                                  (10,126)         (5,850)
  Accrued liabilities                                 2,850          (2,663)
  Deferred revenue                                    5,800          (7,939)
  Other long-term liabilities                          (179)             82
                                             --------------  --------------
  Net cash provided by operating activities           8,739           8,377
                                             --------------  --------------

Investing activities
  Purchase of property and equipment                 (6,271)         (3,923)
  Acquisition of Occam Networks, net of cash
   assumed                                          (60,809)              -
  Purchase of marketable securities                       -         (74,577)
  Sales and maturities of marketable
   securities                                        29,755          36,060
                                             --------------  --------------
  Net cash used in investing activities             (37,325)        (42,440)
                                             --------------  --------------

Financing activities
  Proceeds from exercise of stock options
   and other                                            766              72
  Proceeds from issuance of common stock
   under employee stock purchase plan                 2,062               -
  Taxes withheld upon vesting of restricted
   stock units                                      (10,373)              -
  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                                        (7,545)         37,383
                                             --------------  --------------

  Effect of exchange rate changes on cash
   and cash equivalents                                  76               -

Net (decrease) increase in cash and cash
 equivalents                                        (36,055)          3,320
Cash and cash equivalents at beginning of
 period                                              66,304          31,821
                                             --------------  --------------
Cash and cash equivalents at end of period   $       30,249  $       35,141
                                             ==============  ==============

Non-cash investing activities
  Value of common stock issued in
   acquisition                               $      117,258  $            -
  Fair value of equity awards assumed        $        1,370  $            -

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