Release Details

Calix Reports Third Quarter 2016 Financial Results

November 1, 2016
PDF Version

PETALUMA, CA -- (Marketwired) -- 11/01/16 -- Calix, Inc. (NYSE: CALX) today announced unaudited financial results for the third quarter ended September 24, 2016. Revenue for the third quarter of 2016 was $121.2 million, an increase of 7.9% compared to $112.3 million for the third quarter of 2015.

"Demand for Software Defined Access (SDA) and Calix AXOS systems, software, and services drove our better than expected 8% year-on-year third quarter revenue growth and produced earnings at the upper end of expectations," said Carl Russo, Calix, Inc. President and CEO. "We continue to see strong interest from new and existing customers both for our established and our recently introduced products, including our AXOS E-Series systems and Compass cloud services," added Russo.

The company's non-GAAP net income for the third quarter of 2016 was $6.1 million, or $0.12 per fully diluted share, compared to a non-GAAP net income of $8.3 million, or $0.16 per fully diluted share, for the third quarter of 2015. A reconciliation of GAAP and non-GAAP results is included as part of this release.

"Our 8% year-on-year revenue growth for the first nine months of 2016 marks Calix's strongest growth for the past three years. Profitability for the third quarter reflected the strong revenue growth offset by investments necessary to support our growth initiatives as well as our on-going turnkey network improvement projects, which we expect to continue over the near-term," said William Atkins, Calix, Inc. Executive Vice President and CFO.

The GAAP net income for the third quarter of 2016 was $0.6 million, or $0.01 per basic and fully diluted share, compared to a GAAP net income of $0.9 million, or $0.02 per basic and fully diluted share, for the third quarter of 2015. A reconciliation of our third quarter 2016 operating results from non-GAAP to GAAP is provided below.

 
Calix, Inc.
(Unaudited, in thousands, except per share data)
Three Months Ended September 24, 2016
                               
                               
      Non-GAAP     Stock-Based Compensation     Amortization of Intangible Assets     Acquisition-Related Costs     GAAP
Revenue   $ 121,187     $ -     $ -     $ -     $ 121,187  
Cost of revenue     66,656       174       813       -       67,643  
Gross profit     54,531       (174 )     (813 )     -       53,544  
Gross margin     45.0 %     (0.1 )%     (0.7 )%     - %     44.2 %
Operating expenses     48,306       4,503       -       -       52,809  
Operating income (loss)     6,225       (4,677 )     (813 )     -       735  
Interest and other income (expense), net     110       -       -       -       110  
Income (loss) before provision for income taxes     6,335       (4,677 )     (813 )     -       845  
Provision for income taxes     209       -       -       -       209  
Net income (loss)   $ 6,126     $ (4,677 )   $ (813 )   $ -     $ 636  
Weighted average diluted shares used to compute net income (loss) per common share     49,309       49,309       49,309       49,309       49,309  
Net income (loss) per diluted share   $ 0.12     $ (0.09 )   $ (0.02 )   $ -     $ 0.01  
                                         

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 2016 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 (SDA) and is a global leader in platform innovations for Access Networks. Its portfolio of access systems and services combines AXOS, the revolutionary platform for access, with Compass cloud, an innovative SDA-based framework 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.

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, amortization of acquisition-related intangible assets, 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 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, statements about potential customer or market opportunities. 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 2015 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   Nine Months Ended
        September 24,   September 26,   September 24,   September 26,
        2016   2015   2016   2015
Revenue   $ 121,187     $ 112,297     $ 326,987     $ 302,464  
Cost of revenue:                        
    Products and services (1)     66,830       57,096       174,665       152,308  
    Amortization of intangible assets     813       2,088       3,290       6,264  
      Total cost of revenue     67,643       59,184       177,955       158,572  
Gross profit     53,544       53,113       149,032       143,892  
Operating expenses:                        
    Research and development (1)     28,119       22,120       75,925       66,885  
    Sales and marketing (1)     20,575       18,424       58,850       57,398  
    General and administrative (1)     8,615       9,140       32,940       28,728  
    Amortization of intangible assets     -       2,552       1,701       7,656  
    Litigation settlement gain     (4,500 )     -       (4,500 )     -  
      Total operating expenses     52,809       52,236       164,916       160,667  
Income (loss) from operations     735       877       (15,884 )     (16,775 )
Interest and other income (expense), net:                        
    Interest income     184       297       611       1,014  
    Interest expense     (155 )     (263 )     (489 )     (921 )
    Other income (expense), net     81       196       297       273  
      Total interest and other income (expense), net     110       230       419       366  
Income (loss) before provision for income taxes     845       1,107       (15,465 )     (16,409 )
Provision for income taxes     209       185       454       378  
Net income (loss)   $ 636     $ 922     $ (15,919 )   $ (16,787 )
Net income (loss) per common share:                        
    Basic   $ 0.01     $ 0.02     $ (0.33 )   $ (0.32 )
    Diluted   $ 0.01     $ 0.02     $ (0.33 )   $ (0.32 )
Weighted average number of shares used to compute net income (loss) per common share:                        
    Basic     48,773       51,756       48,578       51,814  
    Diluted     49,309       52,016       48,578       51,814  
                             
(1)   Includes stock-based compensation as follows:                            
    Cost of revenue   $ 174     $ 163     $ 484     $ 549  
    Research and development     1,573       964       3,719       3,659  
    Sales and marketing     1,661       688       3,323       3,769  
    General and administrative     1,269       775       2,840       2,616  
        $ 4,677     $ 2,590     $ 10,366     $ 10,593  
                                     
 
Calix, Inc.
Reconciliation of GAAP to Non-GAAP Results
(Unaudited, in thousands, except per share data)
                 
                 
    Three Months Ended   Nine Months Ended
    September 24,   September 26,   September 24,   September 26,
    2016   2015   2016   2015
GAAP net income (loss)   $ 636   $ 922   $ (15,919 )     $ (16,787 )  
Adjustments to reconcile GAAP net income (loss) to non-GAAP net income (loss):                        
  Stock-based compensation     4,677     2,590     10,366         10,593    
  Amortization of intangible assets     813     4,640     4,991         13,920    
    Acquisition-related costs     -     106     351         348    
Non-GAAP net income (loss)   $ 6,126   $ 8,258   $ (211 )     $ 8,074    
Non-GAAP net income (loss) per common share:                        
  Basic   $ 0.13   $ 0.16   $ -       $ 0.16    
  Diluted   $ 0.12   $ 0.16   $ -       $ 0.15    
Weighted average number of shares used to compute non-GAAP net income (loss) per common share:                        
  Basic     48,773     51,756     48,578         51,814    
  Diluted (1)     49,309     52,016     48,578         52,344    
(1) Includes the dilutive effect of outstanding stock options, restricted stock units and ESPP.
 
 
Calix, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
         
    September 24,   December 31,
    2016   2015
ASSETS            
Current assets:            
  Cash and cash equivalents   $ 31,764     $ 23,626  
  Marketable securities     29,554       49,964  
  Accounts receivable, net     57,256       47,155  
  Inventory     40,190       47,667  
  Deferred cost of revenue     14,718       4,918  
  Prepaid expenses and other current assets     15,700       9,470  
    Total current assets     189,182       182,800  
  Property and equipment, net     16,017       17,149  
  Goodwill     116,175       116,175  
  Intangible assets, net     1,627       6,618  
  Other assets     937       1,144  
    Total assets   $ 323,938     $ 323,886  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:            
  Accounts payable   $ 19,340     $ 19,603  
  Accrued liabilities     49,019       35,512  
  Deferred revenue     16,226       12,124  
    Total current liabilities     84,585       67,239  
  Long-term portion of deferred revenue     19,850       19,569  
  Other long-term liabilities     979       1,293  
    Total liabilities     105,414       88,101  
Stockholders' equity:            
  Common stock     1,353       1,326  
  Additional paid-in capital     830,225       818,754  
  Accumulated other comprehensive loss     (226 )     (195 )
  Accumulated deficit     (572,842 )     (556,923 )
  Treasury stock     (39,986 )     (27,177 )
    Total stockholders' equity     218,524       235,785  
    Total liabilities and stockholders' equity   $ 323,938     $ 323,886  
                 
 
Calix, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
         
    Nine Months Ended
    September 24,   September 26,
    2016   2015
Operating activities:            
  Net loss   $ (15,919 )   $ (16,787 )
  Adjustments to reconcile net loss to net cash provided by (used in) operating activities:            
    Depreciation and amortization     6,282       7,602  
    Loss on retirement of property and equipment     -       14  
    Amortization of intangible assets     4,991       13,920  
    Amortization of premiums relating to available-for-sale securities     337       743  
    Stock-based compensation     10,366       10,593  
    Changes in operating assets and liabilities:            
      Restricted cash     -       295  
      Accounts receivable, net     (10,104 )     (17,443 )
      Inventory     7,477       2,983  
      Deferred cost of revenue     (9,800 )     2,082  
      Prepaid expenses and other assets     (6,058 )     4,181  
      Accounts payable     (356 )     (6,841 )
      Accrued liabilities     13,974       (1,055 )
      Deferred revenue     4,383       (1,312 )
      Other long-term liabilities     (313 )     (167 )
        Net cash provided by (used in) operating activities     5,260       (1,192 )
Investing activities:            
  Purchases of property and equipment     (5,364 )     (5,943 )
  Purchases of marketable securities     -       (46,750 )
  Maturities of marketable securities     20,170       51,265  
    Net cash provided by (used in) investing activities     14,806       (1,428 )
Financing activities:            
  Proceeds from exercise of stock options     14       625  
  Proceeds from employee stock purchase plan     2,905       2,865  
  Payments for repurchases of common stock     (12,809 )     (11,124 )
  Taxes paid for awards vested under equity incentive plans     (1,787 )     (2,093 )
        Net cash used in financing activities     (11,677 )     (9,727 )
Effect of exchange rate changes on cash and cash equivalents     (251 )     (288 )
Net increase (decrease) in cash and cash equivalents     8,138       (12,635 )
Cash and cash equivalents at beginning of period     23,626       48,829  
Cash and cash equivalents at end of period   $ 31,764     $ 36,194  
                 

Investor Inquiries:

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

Source: Calix, Inc.