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Calix Reports Third Quarter 2011 Financial Results

(October 20, 2011)

PETALUMA, CA -- (Marketwire) -- 10/20/11 -- 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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