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Calix Reports Second Quarter 2015 Financial Results

July 28, 2015

PETALUMA, CA -- (Marketwired) -- 07/28/15 -- Calix, Inc. (NYSE: CALX) today announced unaudited financial results for the second quarter ended June 27, 2015. Revenue for the second quarter of 2015 was $99.1 million, an increase of 1.1% compared to $98.0 million for the second quarter of 2014.

"Our second quarter results were above our guidance, reflecting better than expected overall operating performance," said Carl Russo, Calix President and CEO. "Led by the GigaCenter, which at quarter-end surpassed the 300 service provider customer mark, this performance contributed to revenues in the first half of 2015 increasing 3.5% compared to the first half of 2014. In addition, first half non-GAAP gross margins improved to 50.1% compared to 46.9% in the same period last year," added Russo.

"During the second quarter, Calix announced a number of innovative new product offerings, including our G.fast solutions for multiple dwelling unit and high density single family unit applications, and our new NG-PON2 cards. These introduce the next generation of standards-based fiber access technology into our E-Series portfolio and give our customers the ability to deliver a multi-gigabit experience to their subscribers. These new solutions demonstrate our continued drive towards our Unified Access vision and strengthened our leadership in the broadband access market," added Russo.

The company's non-GAAP net income for the second quarter of 2015 was $3.3 million, or $0.06 per fully diluted share, compared to a non-GAAP net income of $5.1 million, or $0.10 per fully diluted share, for the second quarter of 2014. A reconciliation of GAAP and non-GAAP results is included as part of this release.

"During the quarter, we returned $3.4 million to shareholders via our previously announced $40 million stock buyback authorization," said William Atkins, Executive Vice President and CFO. "We remain committed to returning capital to shareholders, while at the same time investing in the company to build a strong foundation for future growth," added Atkins.

The GAAP net loss for the second quarter of 2015 was $5.8 million, or $(0.11) per basic and diluted share, compared to a GAAP net loss of $4.0 million, or $(0.08) per basic and diluted share, for the second quarter of 2014. A reconciliation of our second quarter 2015 operating results from non-GAAP to GAAP is provided below:

 
Calix, Inc.
(Unaudited, in thousands, except per share data)
Three Months Ended June 27, 2015
                     
    Non-GAAP   Stock-Based Compensation   Amortization of Intangible Assets   Acquisition-Related Costs   GAAP
Revenue   $ 99,129     $ -     $ -     $ -     $ 99,129  
Cost of revenue     48,541       211       2,088       -       50,840  
Gross profit     50,588       (211)
    (2,088)
    -       48,289  
Gross margin     51.0%
    (0.2)%
    (2.1)%
    -%
    48.7%
Operating expenses     47,320       4,130       2,552       52       54,054  
Operating income (loss)     3,268       (4,341)
    (4,640)
    (52)
    (5,765)
Interest and other income (expense), net     88       -       -       -       88  
Income (loss) before taxes     3,356       (4,341)
    (4,640)
    (52)
    (5,677)
Provision for income taxes     102       -       -       -       102  
Net income (loss)   $ 3,254     $ (4,341)
  $ (4,640)
  $ (52)
  $ (5,779)
Weighted average diluted shares used to compute non-GAAP net income (loss) per common share     52,455       52,455       52,455       52,455        
Non-GAAP net income (loss) per diluted share   $ 0.06     $ (0.08)
  $ (0.09)
  $ -        
Weighted average basic and diluted shares used to compute GAAP net loss per common share:                             51,950  
GAAP net loss per share                           $ (0.11)
                                 

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 second 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   Six Months Ended
      June 27,   June 28,   June 27,   June 28,
      2015   2014   2015   2014
Revenue   $ 99,129     $ 98,005     $ 190,167     $ 183,825  
Cost of revenue:                        
  Products and services (1)     48,752       51,575       95,212       98,381  
  Amortization of intangible assets     2,088       2,088       4,176       4,176  
    Total cost of revenue     50,840       53,663       99,388       102,557  
Gross profit     48,289       44,342       90,779       81,268  
Operating expenses:                        
  Research and development (1)     22,851       19,544       44,765       39,174  
  Sales and marketing (1)     19,215       18,455       38,974       35,845  
  General and administrative (1)     9,436       7,681       19,588       14,932  
  Amortization of intangible assets     2,552       2,552       5,104       5,104  
    Total operating expenses     54,054       48,232       108,431       95,055  
Loss from operations     (5,765)
    (3,890)
    (17,652)
    (13,787)
Interest and other income (expense), net:                        
  Interest income     338       30       717       34  
  Interest expense     (279)
    (58)
    (658)
    (115)
  Other income (expense), net     29       70       77       103  
    Total interest and other income (expense), net     88       42       136       22  
Loss before provision for income taxes     (5,677)
    (3,848)
    (17,516)
    (13,765)
Provision for income taxes     102       103       193       213  
Net loss   $ (5,779)
  $ (3,951)
  $ (17,709)
  $ (13,978)
Net loss per common share:                        
    Basic and diluted   $ (0.11)
  $ (0.08)
  $ (0.34)
  $ (0.28)
Weighted average number of shares used to compute net loss per common share:                        
    Basic and diluted     51,950       50,573       51,843       50,425  
                           
(1) Includes stock-based compensation as follows:                            
    Cost of revenue   $ 211     $ 354     $ 386     $ 708  
    Research and development     1,483       1,306       2,695       2,486  
    Sales and marketing     1,656       1,462       3,081       2,830  
    General and administrative     991       1,282       1,841       2,282  
      $ 4,341     $ 4,404     $ 8,003     $ 8,306  
                                   
                                   
 
Calix, Inc.
Reconciliation of GAAP to Non-GAAP Results
(Unaudited, in thousands, except per share data)
                 
    Three Months Ended   Six Months Ended
    June 27,   June 28,   June 27,   June 28,
    2015   2014   2015   2014
GAAP net loss   $ (5,779)
  $ (3,951)
  $ (17,709)
  $ (13,978)
Adjustments to reconcile GAAP net loss to non-GAAP net income (loss):                        
  Stock-based compensation     4,341       4,404       8,003       8,306  
  Amortization of intangible assets     4,640       4,640       9,280       9,280  
  Acquisition-related costs     52       -       242       -  
Non-GAAP net income (loss)   $ 3,254     $ 5,093     $ (184)
  $ 3,608  
Non-GAAP net income (loss) per common share:                        
  Basic   $ 0.06     $ 0.10     $ -     $ 0.07  
  Diluted   $ 0.06     $ 0.10     $ -     $ 0.07  
Weighted average shares used to compute non-GAAP net income (loss) per common share:                        
    Basic     51,950       50,573       51,843       50,425  
    Diluted (1)     52,455       50,961       51,843       50,904  
(1) Includes the dilutive effect of outstanding stock options, restricted stock units and ESPP.
 
 
Calix, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
         
    June 27,   December 31,
    2015   2014
ASSETS            
Current assets:            
  Cash and cash equivalents   $ 39,672     $ 48,829  
  Marketable securities     59,785       62,850  
  Restricted cash     -       295  
  Accounts receivable, net     41,985       30,744  
  Inventory     40,710       46,753  
  Deferred cost of revenue     1,284       5,080  
  Prepaid expenses and other current assets     11,457       12,936  
    Total current assets     194,893       207,487  
  Property and equipment, net     18,790       20,144  
  Goodwill     116,175       116,175  
  Intangible assets, net     15,899       25,179  
  Other assets     1,241       1,236  
    Total assets   $ 346,998     $ 370,221  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:            
  Accounts payable   $ 18,538     $ 23,629  
  Accrued liabilities     36,545       39,443  
  Deferred revenue     9,132       12,722  
    Total current liabilities     64,215       75,794  
  Long-term portion of deferred revenue     19,371       19,393  
  Other long-term liabilities     1,903       2,443  
    Total liabilities     85,489       97,630  
Stockholders' equity:            
  Common stock     1,313       1,291  
  Additional paid-in capital     811,737       801,810  
  Accumulated other comprehensive income     135       80  
  Accumulated deficit     (548,299)
    (530,590)
  Treasury stock     (3,377)
    -  
    Total stockholders' equity     261,509       272,591  
    Total liabilities and stockholders' equity   $ 346,998     $ 370,221  
                 
                 
 
Calix, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
         
    Six Months Ended
    June 27,   June 28,
    2015   2014
Operating activities:            
  Net loss   $ (17,709)
  $ (13,978)
  Adjustments to reconcile net loss to net cash used in operating activities:            
    Depreciation and amortization     4,978       4,522  
    Loss on retirement of property and equipment     5       -  
    Amortization of intangible assets     9,280       9,280  
    Amortization of premiums related to available-for-sale securities     541       108  
    Stock-based compensation     8,003       8,306  
    Changes in operating assets and liabilities:            
      Restricted cash     295       -  
      Accounts receivable, net     (11,240)
    (3,809)
      Inventory     6,042       5,183  
      Deferred cost of revenue     3,796       5,119  
      Prepaid expenses and other assets     1,065       960  
      Accounts payable     (5,091)
    (10,313)
      Accrued liabilities     (2,889)
    2,601  
      Deferred revenue     (3,612)
    (8,307)
      Other long-term liabilities     (135)
    (188)
        Net cash used in operating activities     (6,671)
    (516)
Investing activities:            
  Purchases of property and equipment     (3,618)
    (4,328)
  Purchases of marketable securities     (25,271)
    (46,572)
  Maturities of marketable securities     27,832       -  
        Net cash used in investing activities     (1,057)
    (50,900)
Financing activities:            
  Proceeds from exercise of stock options     590       139  
  Proceeds from employee stock purchase plan     2,865       2,453  
  Purchases of treasury stock     (3,377)
    -  
  Taxes paid for awards vested under equity incentive plans     (1,510)
    (1,377)
        Net cash provided by (used in) financing activities     (1,432)
    1,215  
Effect of exchange rate changes on cash and cash equivalents     3       (3)
Net decrease in cash and cash equivalents     (9,157)
    (50,204)
Cash and cash equivalents at beginning of period     48,829       82,747  
Cash and cash equivalents at end of period   $ 39,672     $ 32,543  
                 
                 

Investor Inquiries:

William J. Atkins
408-474-0052
William.Atkins@calix.com

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

Source: Calix, Inc.

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