Calix Reports Fourth Quarter and 2012 Fiscal Year Results

Marketwired

PETALUMA, CA--(Marketwire - Feb 5, 2013) - Calix, Inc. (NYSE: CALX) today announced financial results for the fourth quarter and fiscal year ended December 31, 2012. Revenue for the fourth quarter of 2012 was $91.4 million, an increase of 12.5% compared to $81.3 million for the third quarter of 2012, and flat compared to $91.6 million for the fourth quarter of 2011.

"Strong fourth quarter results ended 2012 on a positive note," said Carl Russo, Calix president and CEO. "We are carrying this momentum into 2013, with a strengthened organization, an expanded Unified Access portfolio of software, systems and services, and our preferred global reseller agreement with Ericsson providing a solid foundation for growth."

Non-GAAP net income for the fourth quarter of 2012 was $2.9 million, or $0.06 per fully diluted share, an increase of 61.3% compared to non-GAAP net income of $1.8 million, or $0.04 per fully diluted share for the third quarter of 2012, and a decrease of 22.2% compared to non-GAAP net income of $3.7 million, or $0.08 per fully diluted share, in the fourth quarter of 2011.

GAAP net loss for the fourth quarter of 2012 was $6.6 million, or $(0.14) per basic and diluted share, compared to a GAAP net loss of $7.1 million, or $(0.15) per basic and diluted share for the third quarter of 2012, and compared to a GAAP net loss of $5.2 million, or $(0.11) per basic and diluted share reported for the fourth quarter of 2011. A reconciliation of our fourth quarter 2012 operating results from non-GAAP to GAAP is provided below (in thousands, except per share data):

       
    Three Months Ended December 31, 2012  
    Non-GAAP   Acquisition Related Expenses     Gain on Bargain Purchase   Stock-Based Compensation     Amortization of Intangible Assets     GAAP  
Revenue   $ 91,424   $ -     $ -   $ -     $ -     $ 91,424  
Cost of revenue     51,962     -       -     344       2,088       54,394  
Gross profit     39,462     -       -     (344 )     (2,088 )     37,030  
Gross margin     43.2 %   -       -     -0.4 %     -2.3 %     40.5 %
Operating expenses     36,693     1,401       -     4,132       2,552       44,778  
Operating income (loss)     2,769     (1,401 )     -     (4,476 )     (4,640 )     (7,748 )
Interest and other income (expense), net     23     -       1,029     -       -       1,052  
Income (loss) before taxes     2,792     (1,401 )     1,029     (4,476 )     (4,640 )     (6,696 )
Benefit from income taxes     (122 )   -       -     -       -       (122 )
Net income (loss)   $ 2,914   $ (1,401 )   $ 1,029   $ (4,476 )   $ (4,640 )   $ (6,574 )
                                             
Weighted average basic and diluted shares used to compute GAAP net loss per common share                                        
48,538
 
Weighted average diluted shares used to compute non-GAAP net income per common share    
48,836
   
48,836
     
48,836
   
48,836
     
48,836
         
GAAP net loss per common share                                       $ (0.14 )
                                             
Non-GAAP net income (loss) per share   $ 0.06   $ (0.03 )   $ 0.02   $ (0.09 )   $ (0.10 )        
                                             

Conference Call
Calix will host a conference call to discuss its fourth quarter and fiscal year 2012 results at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) today. Interested parties can listen to a live webcast of the conference call by visiting the Calix Investor Relations website at http://investor-relations.calix.com/ or dialing 877-407-4019 within the U.S. or 201-689-8337 outside the U.S. A replay of the conference call will also be available at http://investor-relations.calix.com/ approximately one hour following the completion of the call. 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.

All statements other than statements of historical facts contained in this press release, including statements regarding our future operations and growth opportunities, are forward-looking statements and 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 reports filed with the SEC, including the Company's 2011 Annual Report on Form 10-K and its report on Form 10-Q for the fiscal quarter ended September 29, 2012, available at http://www.sec.gov.

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, amortization of acquisition-related intangible assets, gain from bargain purchase of Ericsson's fiber access assets, and non-recurring acquisition-related expenses, which the Company believes are not indicative of its core operating results. Acquisition-related expenses largely include legal and professional expenses, severance and integration-related expenses associated with our merger with Occam in 2011 and our acquisition of Ericsson's fiber access assets in 2012. In addition, acquisition-related expenses for 2011 include the charge resulting from the required revaluation of Occam inventory to its estimated fair value and inventory-related charges upon the completion of the 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.

   
Calix, Inc.  
Condensed Consolidated Statements of Operations  
(Unaudited, in thousands, except per share data)  
                         
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,     December 31,     December 31,  
    2012     2011     2012     2011  
Revenue   $ 91,424     $ 91,585     $ 330,218     $ 344,669  
Cost of revenue:                                
  Products and services(1)     52,306       52,489       185,103       195,698  
  Acquisition-related expenses     -       -       -       19,966  
  Amortization of intangible assets     2,088       2,042       7,539       9,552  
    Total cost of revenue     54,394       54,531       192,642       225,216  
Gross profit     37,030       37,054       137,576       119,453  
Operating expenses:                                
  Research and development(1)     17,144       17,385       66,748       67,725  
  Sales and marketing(1)     17,249       16,720       62,129       55,551  
  General and administrative(1)     6,432       5,552       26,114       27,002  
  Acquisition-related expenses(1)     1,401       -       1,401       12,927  
  Amortization of intangible assets     2,552       2,553       10,208       8,569  
    Total operating expenses     44,778       42,210       166,600       171,774  
Loss from operations     (7,748 )     (5,156 )     (29,024 )     (52,321 )
Interest and other income (expense), net:                                
  Interest income     1       7       15       87  
  Interest expense     (45 )     (45 )     (185 )     (184 )
  Gain on bargain purchase     1,029       -       1,029       -  
  Other income (expense), net     67       28       (3 )     92  
Loss before provision for (benefit from) income taxes     (6,696 )     (5,166 )     (28,168 )     (52,326 )
Provision for (benefit from) income taxes     (122 )     48       158       224  
Net loss   $ (6,574 )   $ (5,214 )   $ (28,326 )   $ (52,550 )
Net loss per common share:                                
  Basic and diluted   $ (0.14 )   $ (0.11 )   $ (0.59 )   $ (1.15 )
Weighted average number of shares used to compute net loss per common share:                                
  Basic and diluted     48,538       47,398       48,180       45,546  
(1) Includes stock-based compensation as follows:                                
  Cost of revenue   $ 344     $ 362     $ 1,433     $ 1,503  
  Research and development     1,098       1,067       4,227       4,828  
  Sales and marketing     1,320       1,244       5,160       4,500  
  General and administrative     1,714       1,693       6,617       9,538  
  Acquisition-related expenses     -       -       -       1,234  
    $ 4,476     $ 4,366     $ 17,437     $ 21,603  
                                 
   
Calix, Inc.  
Reconciliation of GAAP to Non-GAAP Results  
(Unaudited, in thousands except per share data)  
                         
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,     December 31,     December 31,  
    2012     2011     2012     2011  
                         
GAAP net loss   $ (6,574 )   $ (5,214 )   $ (28,326 )   $ (52,550 )
Adjustments to reconcile GAAP net loss to non-GAAP net income:                                
Stock-based compensation     4,476       4,366       17,437       21,603  
Amortization of intangible assets     4,640       4,595       17,747       18,121  
Acquisition-related expenses     1,401       -       1,401       31,659  
Gain on bargain purchase     (1,029 )     -       (1,029 )     -  
Non-GAAP net income   $ 2,914     $ 3,747     $ 7,230     $ 18,833  
                                 
Non-GAAP net income per common share                                
  Basic   $ 0.06     $ 0.08     $ 0.15     $ 0.41  
  Diluted   $ 0.06     $ 0.08     $ 0.15     $ 0.40  
Weighted average shares used to compute non-GAAP net income per common share - Basic    
48,538
     
47,398
     
48,180
     
45,546
 
Weighted average shares used to compute non-GAAP net income per common share - Diluted (1)    
48,836
     
47,570
     
48,367
     
46,947
 
                                 
(1) Includes the dilutive effect of outstanding stock options and restricted stock units.                  
                   
   
Calix, Inc.  
Condensed Consolidated Balance Sheets  
(Unaudited, in thousands)  
             
    December 31,     December 31,  
    2012     2011  
             
ASSETS                
Current Assets:                
  Cash and cash equivalents   $ 46,995     $ 38,938  
  Restricted cash     -       754  
  Accounts receivable, net     59,519       46,508  
  Inventory     43,282       45,229  
  Deferred cost of revenue     21,077       7,698  
  Prepaid and other current assets     5,677       4,429  
    Total current assets     176,550       143,556  
                 
Property and equipment, net     21,083       16,130  
Goodwill     116,175       116,175  
Intangible assets, net     62,301       80,048  
Other assets     1,788       2,194  
    Total assets   $ 377,897     $ 358,103  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 16,804     $ 14,250  
  Accrued liabilities     36,176       36,214  
  Deferred revenue     39,315       15,347  
    Total current liabilities     92,295       65,811  
Long-term portion of deferred revenue     15,782       13,347  
Other long term liabilities     745       1,528  
    Total liabilities     108,822       80,686  
                 
Stockholders' equity:                
  Common stock     1,222       1,195  
  Additional paid-in capital     760,232       740,309  
  Accumulated other comprehensive income     132       98  
  Accumulated deficit     (492,511 )     (464,185 )
    Total stockholders' equity     269,075       277,417  
    Total liabilities and stockholders' equity   $ 377,897     $ 358,103  
                     
   
Calix, Inc.  
Condensed Consolidated Statements of Cash Flows  
(Unaudited, in thousands)  
             
    Twelve Months Ended  
    December 31,     December 31,  
    2012     2011  
Operating activities:                
  Net loss   $ (28,326 )   $ (52,550 )
  Adjustments to reconcile net loss to net cash provided by operating activities:                
    Amortization of premiums relating to available-for-sale securities     -       244  
    Depreciation and amortization     8,562       7,954  
    Loss on retirement of property and equipment     262       2,449  
    Amortization of intangible assets     17,747       18,121  
    Stock-based compensation     17,437       21,603  
    Gain on bargain purchase     (1,029 )     -  
    Changes in operating assets and liabilities:                
      Restricted cash     754       300  
      Accounts receivable, net     (13,011 )     13,722  
      Inventory     11,308       8,557  
      Deferred cost of revenue     (13,378 )     73  
      Prepaids and other assets     47       (148 )
      Accounts payable     2,553       (7,818 )
      Accrued liabilities     (870 )     (386 )
      Deferred revenue     26,404       2,781  
      Other long-term liabilities     (782 )     (313 )
        Net cash provided by operating activities     27,678       14,589  
                 
Investing activities:                
  Purchase of property and equipment     (10,179 )     (7,355 )
  Maturities of marketable securities     -       31,755  
  Acquisition of Businesses, net of cash acquired     (12,000 )     (60,809 )
        Net cash used in investing activities     (22,179 )     (36,409 )
Financing activities:                
  Proceeds from exercise of stock options and other     194       804  
  Proceeds from employee stock purchase plan     4,063       3,938  
  Taxes withheld upon vesting of restricted stock units and restricted stock awards     (1,744 )     (10,376 )
        Net cash provided by (used in) financing activities     2,513       (5,634 )
Effect of exchange rate changes on cash and cash equivalents     45       88  
Net increase (decrease) in cash and cash equivalents     8,057       (27,366 )
Cash and cash equivalents at beginning of period     38,938       66,304  
Cash and cash equivalents at end of period   $ 46,995     $ 38,938  
                 
Contact:
Investor Inquiries:
David H. Allen
408-474-0080
David.Allen@Calix.com

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