Calix Inc.

07/22/2025 | Press release | Distributed by Public on 07/22/2025 14:05

Quarterly Report for Quarter Ending June 28, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenue or other financial items, any statement of or concerning the following: the plans and objectives of management for future operations, proposed new products or licensing, product development, anticipated customer demand or capital expenditures, anticipated growth and trends in our business and industry, future economic and/or market conditions or performance and assumptions underlying any of the above. In some cases, forward-looking statements can be identified by the use of terminology such as "could," "may," "will," "would," "expects," "believes," "intends," "plans," "anticipates," "estimates," "projects," "predicts," "potential" or "continue" or the negative thereof or other comparable terminology. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including those identified in the Risk Factors discussed in Part II, Item 1A, of this Quarterly Report on Form 10-Q, as well as in other sections of this report and in our Annual Report on Form 10-K for the year ended December 31, 2024. All forward-looking statements and reasons why results may differ included in this Quarterly Report on Form 10-Q are made as of the date hereof, and we assume no obligation to update these forward-looking statements or reasons why actual results might differ.
Overview
We develop, market and sell our appliance-based platform, cloud and managed services that enable service providers of all types and sizes to innovate and transform their businesses. For our customers to successfully transform their businesses into the innovative BXPs of the future, they require actionable data for critical business functions such as network operations, customer support and marketing. However, this data is often trapped in disparate systems or departmental silos. Our platform, which includes Calix Cloud, Unlimited Subscriber and Intelligent Access, gathers, analyzes and applies machine learning to deliver real-time insights seamlessly to each key business function. Our customers utilize these insights to simplify network operations, marketing and customer support and innovate for their customers, business and municipal subscribers by delivering a growing portfolio of SmartLifeTMmanaged services and experiences. This enables BXPs to grow their businesses through increased subscriber acquisition, loyalty and revenue and to reduce their operating costs, while creating value for their members, investors and the communities they serve.
We market our platform and managed services to communication service providers globally through our direct sales force as well as select resellers. Our customers range from smaller, regional service providers to some of the world's largest service providers. Customers are defined into small (less than 250,000 subscribers), medium (250,000 to 2.5 million subscribers) or large (greater than 2.5 million subscribers). We have approximately 1,600 active customers that have deployed passive optical, Active Ethernet or point-to-point Ethernet fiber access networks or our subscriber premise systems.
Our revenue and potential revenue growth will depend on our ability to develop, market and sell our platform and managed services to strategically aligned customers of all types such as wireless internet service providers, fiber overbuilders, cable multiple system operators, municipalities and electric cooperatives in the United States and internationally. Our growth is also highly dependent on the speed and willingness of customers to adopt our platform and managed services.
Revenue fluctuations result from many factors, including, but not limited to: increases or decreases in customer orders for our products and services, global economic and geopolitical events and conditions, including tariffs, trade controls, inflation, economic downturns and market, financial or other factors such as government stimulus that may delay or materially impact customer purchasing decisions, non-availability of products due to supply chain challenges, including component and labor shortages and increasing lead times as well as disruptions as a result of pandemics or natural disasters, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers. More specifically, our customers have in the past spent less in the first quarter as they are finalizing their annual budgets, and in certain regions, customers are challenged by winter weather conditions that inhibit fiber deployment in outside infrastructure. In recent years, as our revenue from our large customers decreased, we have experienced less year-end volatility due to capital budgetary spending or freezing. This, combined with an increase in recurring revenue, has resulted in smaller seasonal fluctuations, and we expect this trend to continue. Our revenue is also dependent upon our customers' success in growing their subscribers, timing of purchases, capital expenditure plans and decisions to upgrade their networks or adopt new technologies, including adoption of our software and cloud platform solutions, as well as our ability to grow our customer base.
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Cost of revenue is strongly correlated to revenue and tends to fluctuate due to all of the above factors that may cause revenue fluctuations. Factors that have impacted our cost of revenue for the three and six months ended June 28, 2025 include: changes in the mix of products delivered, customer location and regional mix, changes in the cost of our inventory, investments to support expansion of cloud and customer support offerings as well as our customer success organization, changes in product warranty, incurrence of retrofit costs, amortization of intangibles, support fees for silicon-related development work for our products, allowances for obligations to our suppliers and inventory write-downs. Factors that we expect may impact our cost of revenue in future periods include the same factors in the prior quarter and changes in trade policies. For example, in April 2025, the U.S. President signed an executive order increasing tariffs on imports from numerous countries, including China and other Asian countries where our sole-source or limited-source suppliers are located. Consequently, absent policy changes, these actions will increase our cost of revenue. We are currently evaluating the actions we may be able to take to mitigate such costs as we navigate this challenging and dynamic operating environment. In addition, we periodically ship by air versus by ocean in order to meet delivery commitments to our customers, which is more costly. Cost of revenue also includes fixed expenses related to our internal operations, which could increase our cost of revenue as a percentage of revenue if our revenue declines.
Our gross profit and gross margin fluctuate based on timing of factors such as changes in customer mix and changes in the mix of products demanded and sold (and any related write-downs of existing inventory or accrual for supplier commitments) and have in the past been and may be negatively impacted by increases in mix of revenue from channel sales rather than direct sales or other unfavorable customer or product mix, shipment volumes and any related volume discounts, changes in our product and services costs, pricing decreases or discounts, new product introductions or upgrades to existing products, customer rebates and incentive programs due to competitive pressure or materials shortages, supply constraints, investments to support expansion of cloud and customer support offerings, tariffs or unfavorable changes in trade policies.
Our operating expenses fluctuate based on the following factors among others: changes in headcount and personnel costs, which comprise a significant portion of our operating expenses; variable compensation due to fluctuations in shipment volumes or level of achievement against performance targets; timing of research and development expenses, including investments in innovative solutions and new customer segments, prototype builds and outsourced development resources; investments in marketing programs; asset write-offs; investments in our business and information technology infrastructure; and fluctuations in stock-based compensation expenses due to timing of equity grants or other factors affecting vesting.
Further, as a result of factors contributing to the fluctuations described above among other factors, many of which are outside our control, our quarterly operating results fluctuate from period to period. Comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Management bases its estimates, assumptions and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. To the extent there are material differences between these estimates and actual results, our financial statements may be affected. Our management evaluates its estimates, assumptions and judgments on an ongoing basis.
Our critical accounting policies and estimates, which are revenue recognition and inventory valuation and supplier purchase commitments, are described under "Critical Accounting Policies and Estimates" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2024. For the six months ended June 28, 2025, there have been no significant changes in our critical accounting policies and estimates.
Recent Accounting Pronouncements
There have been no additional accounting pronouncements or changes in accounting pronouncements during the six months ended June 28, 2025 as compared with the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2024 that are significant or expected to be significant to us.
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Results of Operations
Comparison of the Three and Six Months Ended June 28, 2025 and June 29, 2024
Revenue
The following table sets forth our revenue by customer size (dollars in thousands):
Three Months Ended Six Months Ended
June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent 		June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent
Large $ 27,836 $ 11,995 $ 15,841 132 % $ 49,480 $ 28,100 $ 21,380 76 %
Medium 39,251 24,366 14,885 61 % 64,112 52,252 11,860 23 %
Small 174,795 161,778 13,017 8 % 348,532 344,097 4,435 1 %
$ 241,882 $ 198,139 $ 43,743 22 % $ 462,124 $ 424,449 $ 37,675 9 %
Our revenue increased by $43.7 million and $37.7 million for the three and six months ended June 28, 2025, respectively, as compared to the corresponding periods in 2024. After bottoming in the second quarter last year, we have experienced sequential quarterly revenue growth. That growth has been broad based. Specifically, during the second quarter of 2025, the large-customer segment increased $15.8 million primarily due to a North American customer that increased its capital expenditures this year relative to last year and the reclassification of a small customer to the large-customer segment after being acquired by a different large customer. The medium-customer segment increased $14.9 million primarily due to increased shipments to a European customer. The small-customer segment increased by $13.0 million as BXPs focused on adding subscribers.
For the three and six months ended June 28, 2025, United States revenue was $219.0 million and $430.2 million, or 91% and 93% of our revenue, compared to $182.7 million and $392.8 million, or 92% and 93% of our revenue for the same periods in 2024. International revenue was $22.8 million and $31.9 million, or 9% and 7% of our revenue, for the three and six months ended June 28, 2025, as compared to $15.4 million and $31.7 million, or 8% and 7% of our revenue, for the same periods in 2024. The increase in international revenue for the three and six months ended June 28, 2025, as compared to the same periods in 2024, was mainly due to higher shipments to Europe.
No customer accounted for more than 10% of the Company's revenue for the three and six months ended June 28, 2025 and June 29, 2024.
Gross Profit and Gross Margin
The following table sets forth our gross profit and gross margin (dollars in thousands):
Three Months Ended Six Months Ended
June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent 		June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent
Gross profit $ 136,295 $ 107,603 $ 28,692 27 % $ 259,003 $ 230,180 $ 28,823 13 %
Gross margin 56.3 % 54.3 % 56.0 % 54.2 %
Gross profit increased to $136.3 million and $259.0 million for the three and six months ended June 28, 2025, from $107.6 million and $230.2 million during the corresponding periods in 2024. These increases were mainly due to the corresponding increases in revenue. Our gross margin increased by 200 and 180 basis points for the three and six months ended June 28, 2025, respectively, compared to the corresponding periods in 2024, primarily related to the continued growth in our platform, cloud and managed services being a greater percentage of our total revenue.
Operating Expenses
Sales and Marketing Expenses
The following table sets forth our sales and marketing expenses (dollars in thousands):
Three Months Ended Six Months Ended
June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent 		June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent
Sales and marketing expenses $ 63,653 $ 52,238 $ 11,415 22 % $ 121,712 $ 106,135 $ 15,577 15 %
Percent of revenue 26 % 26 % 26 % 25 %
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Sales and marketing expenses for the three months ended June 28, 2025 increased by $11.4 million compared with the corresponding period in 2024 primarily due to increases in stock-based compensation of $6.9 million and personnel expenses of $5.9 million, mostly related to incentive compensation. These increases were partially offset by a decrease in marketing expenses of $1.6 million.
Sales and marketing expenses for the six months ended June 28, 2025 increased by $15.6 million compared with the corresponding period in 2024 primarily due to increases in personnel expenses of $8.7 million, mostly related to incentive compensation, stock-based compensation of $8.5 million and travel expenses of $1.2 million. These increases were partially offset by a decrease in marketing expenses of $1.6 million.
For the three and six months ended June 28, 2025, sales and marketing expenses as a percentage of revenue was flat. We expect our investments in sales and marketing will increase slightly in absolute dollars on a year-over-year basis, but decline as a percentage of revenue, as we continue to land new customers and expand our platform, cloud and managed services.
Research and Development Expenses
The following table sets forth our research and development expenses (dollars in thousands):
Three Months Ended Six Months Ended
June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent 		June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent
Research and development expenses $ 45,787 $ 44,123 $ 1,664 4 % $ 89,767 $ 88,545 $ 1,222 1 %
Percent of revenue 19 % 22 % 19 % 21 %
Percentage of gross profit 34 % 41 % 35 % 38 %
Research and development expenses for the three months ended June 28, 2025 increased by $1.7 million as compared with the corresponding period in 2024 mainly due to increases in stock-based compensation of $1.5 million, depreciation and amortization of $0.5 million and outside services of $0.3 million. These increases were partially offset by a decrease in personnel expenses of $0.8 million.
Research and development expenses for the six months ended June 28, 2025 increased by $1.2 million as compared with the corresponding period in 2024 mainly due to increases in stock-based compensation of $2.1 million, depreciation and amortization of $0.9 million and prototypes and test equipment expenses of $0.9 million. These increases were partially offset by decreases in personnel expenses of $2.2 million and outside services of $0.9 million.
For the three and six months ended June 28, 2025, research and development expenses as a percentage of gross profit decreased to 34% from 41% and 35% from 38%, respectively, due to the increase in revenue and gross margin. We expect our investments in research and development to remain relatively flat in absolute dollars in the short term, and decline as a percentage of revenue and gross profit, as we continue to expand the functionality and capabilities of our platform, cloud and managed services.
General and Administrative Expenses
The following table sets forth our general and administrative expenses (dollars in thousands):
Three Months Ended Six Months Ended
June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent 		June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent
General and administrative expenses $ 26,464 $ 22,598 $ 3,866 17 % $ 53,214 $ 48,888 $ 4,326 9 %
Percent of revenue 11 % 11 % 12 % 12 %
General and administrative expenses for the three months ended June 28, 2025 increased by $3.9 million as compared with the corresponding period in 2024 mainly due to increases in stock-based compensation of $1.7 million, personnel expenses of $1.2 million, mostly related to incentive compensation, and professional services expenses of $0.8 million.
General and administrative expenses for the six months ended June 28, 2025 increased by $4.3 million as compared with the corresponding period in 2024 mainly due to increases in personnel expenses of $2.8 million and stock-based compensation of $2.3 million. These increases were partially offset by a decrease in professional services expenses of $1.0 million.
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For the three and six months ended June 28, 2025, general and administrative expenses as a percentage of revenue were flat compared to the same periods in 2024. We expect our general and administrative investments to be fairly constant in absolute dollars in the near term and decline as a percentage of revenue.
Interest and Other Expense, net
The following table sets forth our interest and other expense, net (dollars in thousands):
Three Months Ended Six Months Ended
June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent 		June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent
Interest and other expense, net $ 3,036 $ 2,674 $ 362 14 % $ 6,127 $ 5,174 $ 953 18 %
Percent of revenue 1 % 1 % 1 % 1 %
Interest and other expense, net increased by $0.4 million and $1.0 million as compared with the corresponding periods in 2024 mainly due to a larger cash and marketable securities balance.
Income Taxes
The following table sets forth our income taxes (dollars in thousands):
Three Months Ended Six Months Ended
June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent 		June 28,
2025 		June 29,
2024 		Variance
in
Dollars 		Variance
in
Percent
Income taxes (benefit) $ 3,626 $ (724) $ 4,350 (601) % $ 5,423 $ (359) $ 5,782 (1,611) %
Effective tax rate 105.8 % 8.3 % 1,241.0 % 4.4 %
For the three and six ended June 28, 2025, our income tax expense was $3.6 million for an effective tax rate of 105.8%, which differed from the statutory rate of 21% primarily due to the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S. federal research tax credits, excess tax benefits from stock-based compensation and the U.S. tax impact of foreign operations. The effective tax rates for the three and six months ended June 28, 2025 are higher than the corresponding periods in 2024 primarily as a result of higher pre-tax earnings with a relatively higher level of non-deductible stock-based compensation for executive officers.
Our income taxes may be subject to fluctuation during the year and in future years as new information is obtained. This may affect the assumptions used to estimate the interim income tax provision, including factors such as actual results differing from our estimates of pre-tax earnings in the various jurisdictions in which we operate, which could impact the recognition of our deferred tax assets, further benefits from stock option exercises, investments in our foreign operations, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where we conduct business.
Liquidity and Capital Resources
We fund our operations and investing activities from cash flow generated from our operations as well as the issuance of common stock under our equity incentive plans. As of June 28, 2025, we had cash, cash equivalents and marketable securities of $299.0 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S. government and its agency securities, corporate debt securities and commercial paper.
Operating Activities
Net cash provided by operating activities was $56.6 million for the six months ended June 28, 2025 and consisted of a net loss of $5.0 million offset by non-cash charges of $50.5 million and cash flow increases of $11.0 million reflected in the net change in assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $45.4 million and depreciation and amortization of $8.6 million partially offset by deferred income taxes of $1.3 million and the net accretion of available-for-sale securities of $2.1 million.
Cash flow increases resulting from the net change in assets and liabilities primarily consisted of a decrease in accounts receivable of $16.2 million due to the linearity of shipments through the quarter and timing of customer payments, a decrease in prepaid expenses and other assets of $13.8 million mainly due to a reduction in our inventory deposits and an increase in accounts payable of $2.3 million due to the timing of inventory receipts. This was partially offset by an increase in inventory of $7.8 million to support increased revenue, a decrease in accrued liabilities of $11.7 million relating to various factors including a decrease in incentive compensation related accruals and a decrease in deferred revenue of $1.7 million.
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Net cash provided by operating activities was $37.0 million for the six months ended June 29, 2024 and consisted of a net loss of $7.9 million offset by non-cash charges of $34.3 million and cash flow increases of $10.6 million reflected in the net change in assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $32.3 million and depreciation and amortization of $10.0 million partially offset by deferred income taxes of $5.3 million and the net accretion of available-for-sale securities of $2.7 million. Cash flow increases resulting from the net change in assets and liabilities primarily consisted of a decrease in accounts receivable of $44.0 million and inventory of $19.5 million, both in line with our revenue decline. These changes were partially offset by a decrease in accrued liabilities of $28.6 million relating to various factors including a decrease in our liability for components, a decrease in incentive compensation related accruals and the settlement of a legal matter; a decrease in accounts payable of $23.4 million due to decreased inventory purchases; and a decrease in deferred revenue of $7.3 million primarily due to the recognition of previously deferred revenue and a trend to move customers to monthly from annual billing arrangements.
Investing Activity
For the six months ended June 28, 2025, cash provided by investing activities of $25.9 million consisted of net maturities and sales of marketable securities of $33.9 million partially offset by capital expenditures of $8.0 million, consisting primarily of purchases of test and computer equipment.
For the six months ended June 29, 2024, cash used in investing activities of $27.0 million consisted of net purchases of marketable securities of $17.4 million and capital expenditures of $9.7 million, consisting primarily of purchases of test and computer equipment.
Financing Activities
Net cash used in financing activities of $49.3 million for the six months ended June 28, 2025 primarily consisted repurchases of our common stock of $73.5 million partially offset by proceeds from the issuance of common stock related to our equity plans of $24.2 million.
Net cash provided by financing activities of $11.1 million for the six months ended June 29, 2024 primarily consisted of proceeds from the issuance of common stock related to our equity plans of $14.8 million partially offset by repurchases of our common stock of $3.7 million.
Working Capital and Capital Expenditure Needs
Our material cash commitments include non-cancelable firm purchase commitments, normal recurring trade payables, compensation-related and expense accruals, operating leases and revenue-share obligations. We believe that our outsourced approach to manufacturing provides us significant flexibility in both managing inventory levels and financing our inventory. Furthermore, we have a common stock repurchase program, which had $129.4 million available as of June 28, 2025. In April 2025, our Board of Directors authorized a $100.0 million increase to this program. Our stock repurchase program does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time.
We believe, based on our current operating plan and expected operating cash flows, that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated cash needs for at least the next twelve months. If we are unable to generate sufficient cash flows or obtain other sources of liquidity, we will be forced to limit or terminate our stock repurchase program, limit our development activities, reduce our investment in growth initiatives and/or institute cost-cutting measures, all of which may adversely impact our business and potential growth.
Contractual Obligations and Commitments
Our principal commitments as of June 28, 2025 consisted of contractual obligations under non-cancelable outstanding purchase obligations and operating lease obligations for office space. The following table summarizes our contractual obligations as of June 28, 2025 (in thousands):
Payments Due by Period
Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years
Non-cancelable purchase commitments (1)
$ 294,285 $ 187,051 $ 79,311 $ 27,187 $ 736
Operating lease obligations (2)
15,158 3,615 4,847 3,190 3,506
$ 309,443 $ 190,666 $ 84,158 $ 30,377 $ 4,242
(1)Represents outstanding purchase commitments to be delivered by our third-party manufacturers or other vendors. See Note 6, "Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements included in Part I,
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Calix Inc. published this content on July 22, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on July 22, 2025 at 20:06 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]