What changed in this filing

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Item 1. Financial Statements

2021-07-27 compared with 2021-04-27 · 134 added, 93 removed, 354 unchanged (39% of the section changed)

30 unchanged sentences

5,000 shares authorized;

no shares issued and outstanding as of April 3, 2021 and December 31, 2020

no shares issued and outstanding as of July 3, 2021 and December 31, 2020

Common stock, $ 0.025 par value;

100,000 shares authorized;

62,851 shares issued and outstanding as of April 3, 2021, and 62,122 shares issued and outstanding as of December 31, 2020

63,200 shares issued and outstanding as of July 3, 2021, and 62,122 shares issued and outstanding as of December 31, 2020

Additional paid-in capital 972,259 948,055

6 unchanged sentences

(In thousands, except per share data)

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

Systems $ 159,553 $ 110,841 $ 312,855 $ 205,350

10 unchanged sentences

General and administrative 13,664 11,193 26,689 21,862

Restructuring charges — 6,286 — 6,286

Total operating expenses 69,090 59,743 134,530 111,707

Income (loss) from operations 20,529 ( 3,338 ) 41,331 ( 9,678 )

Interest and other income, net:

Interest and other income (expense), net:

Interest expense, net ( 119 ) ( 617 ) ( 244 ) ( 907 )

Other income, net 88 15

Total interest and other income, net ( 37 ) ( 275 )

Other income (expense), net 255 ( 109 ) 343 ( 94 )

Total interest and other income (expense), net 136 ( 726 ) 99 ( 1,001 )

Income (loss) before provision for income taxes 20,665 ( 4,064 ) 41,430 ( 10,679 )

11 unchanged sentences

foreign currency translation adjustments, net

( 35 ) ( 252 )

Comprehensive income (loss) $ 20,502 $ ( 4,209 ) $ 41,082 $ ( 10,907 )

4 unchanged sentences

Shares Amount

Balance at April 3, 2021 62,851 $ 1,572 $ 961,846 $ ( 226 ) $ ( 648,477 ) $ — $ 314,715

Stock-based compensation

— — 6,223 — — — 6,223

Issuance of common stock under equity incentive plans, net of forfeitures 349 8 4,190 — — — 4,198

Net income — — — — 20,458 — 20,458

Other comprehensive income — — — 44 — — 44

Balance at July 3, 2021 63,200 $ 1,580 $ 972,259 $ ( 182 ) $ ( 628,019 ) $ — $ 345,638

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders’ Equity

Shares Amount

Balance at March 28, 2020 56,628 $ 1,549 $ 899,978 $ ( 1,106 ) $ ( 709,520 ) $ ( 39,986 ) $ 150,915

Stock-based compensation

— — 3,241 — — — 3,241

Issuance of common stock under equity incentive plans, net of forfeitures 1,515 38 9,183 — — — 9,221

— — — — ( 4,212 ) — ( 4,212 )

Other comprehensive income — — — 3 — — 3

Balance at June 27, 2020 58,143 $ 1,587 $ 912,402 $ ( 1,103 ) $ ( 713,732 ) $ ( 39,986 ) $ 159,168

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders’ Equity

Shares Amount

Balance at December 31, 2020 62,122 $ 1,553 $ 948,055 $ ( 191 ) $ ( 669,092 ) $ — $ 280,325

3 unchanged sentences

Net income — — — — 41,073 — 41,073

Other comprehensive loss — — — ( 35 ) — — ( 35 )

Balance at April 3, 2021 62,851 $ 1,572 $ 961,846 $ ( 226 ) $ ( 648,477 ) $ — $ 314,715

Other comprehensive income — — — 9 — — 9

Balance at July 3, 2021 63,200 $ 1,580 $ 972,259 $ ( 182 ) $ ( 628,019 ) $ — $ 345,638

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders’ Equity

6 unchanged sentences

Other comprehensive loss — — — ( 249 ) — — ( 249 )

Balance at March 28, 2020 56,628 $ 1,549 $ 899,978 $ ( 1,106 ) $ ( 709,520 ) $ ( 39,986 ) $ 150,915

Balance at June 27, 2020 58,143 $ 1,587 $ 912,402 $ ( 1,103 ) $ ( 713,732 ) $ ( 39,986 ) $ 159,168

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

(In thousands, unaudited)

Three Months Ended

2021 March 28,

Six Months Ended

2021 June 27,

Operating activities:

3 unchanged sentences

Depreciation and amortization 7,737 7,006

Asset retirements and write-downs — 3,749

Changes in operating assets and liabilities:

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Effect of exchange rate changes on cash and cash equivalents 6 ( 238 )

Net increase (decrease) in cash, cash equivalents and restricted cash 5,047 ( 640 )

Cash, cash equivalents and restricted cash at beginning of period 80,807 47,457

Cash, cash equivalents and restricted cash at end of period $ 85,854 $ 46,817

Net increase (decrease) in cash and cash equivalents ( 22,217 ) 3,723

Cash and cash equivalents at beginning of period 80,807 47,457

Cash and cash equivalents at end of period $ 58,590 $ 51,180

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

The Company is the leading global provider of cloud and software platforms, systems and services that focus on the access network, the portion of the network that governs available bandwidth and determines the range and quality of services that can be offered to subscribers.

These cloud and software platforms enable communications service providers (“CSPs”) of all types and sizes to innovate and transform their businesses.

The Company’s CSP customers are empowered to utilize real-time data and insights from Calix platforms to simplify their businesses and deliver experiences that excite their subscribers.

These insights enable CSPs to grow their businesses through increased subscriber acquisition, loyalty and revenue, thereby increasing the value of their businesses and contributions to their communities.

These cloud and software platforms enable broadband service providers (“BSPs”) of all types and sizes to innovate and transform their businesses.

The Company’s BSP customers are empowered to utilize real-time data and insights from Calix platforms to simplify their businesses and deliver experiences that excite their subscribers.

These insights enable BSPs to grow their businesses through increased subscriber acquisition, loyalty and revenue, thereby increasing the value of their businesses and contributions to their communities.

Basis of Presentation

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All intercompany balances and transactions have been eliminated in consolidation.

The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited financial statements at that date.

The Condensed Consolidated Balance Sheet as of December 31, 2020 has been derived from the audited financial statements at that date.

The results of the Company’s operations can vary during each quarter of the year.

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Quarterly periods are based on a 4-4-5 calendar with the first quarter ending on the Saturday closest to March 31 st .

As a result, the Company had five more days in the three months ended April 3, 2021 than for the three months ended March 28, 2020.

As a result, the Company had five more days in the six months ended July 3, 2021 than for the six months ended June 27, 2020.

The preparation of financial statements in conformity with GAAP for interim financial reporting requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.

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The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict as coronavirus continues to spread around the world.

The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, particularly as variants of the coronavirus continue to spread around the world.

Although the availability of vaccines has increased, there are no assurances as to when the pandemic will be fully contained.

Since March 2020, the Company has instituted office closures, travel restrictions and a mandatory work-from-home policy for substantially all of its employees.

The spread of COVID-19 has had a prolonged impact on the Company’s supply chain operations due to restrictions, reduced capacity and limited availability from suppliers whom the Company relies on for sourcing components and materials and from third-party partners whom the Company relies on for manufacturing, warehousing and logistics services.

In March 2020, the Company instituted office closures, travel restrictions and a work-from-anywhere policy for substantially all of its employees due to shelter-in-place mandates.

In July 2021, the Company reopened its U.S.

offices to fully-vaccinated employees who choose to work in the office and visitors and lifted certain travel restrictions.

The spread of COVID-19 has had a prolonged impact on the Company’s supply chain operations due to restrictions, reduced capacity and limited availability from suppliers on whom the Company relies for sourcing components and materials and from third-party partners on whom the Company relies for manufacturing, warehousing and logistics services.

Although demand for the Company’s products has been strong in the short-term as subscribers seek more bandwidth and better Wi-Fi, customers’ purchasing decisions over the long-term may be impacted by the pandemic and its impact on the economy, which could in turn impact the Company’s revenue and results of operations.

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The prolonged impact of COVID-19 could exacerbate these constraints or cause further supply chain disruptions.

As of the issuance date of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020.

The Company’s significant accounting policies did not change during the three months ended April 3, 2021.

The Company’s significant accounting policies did not change during the six months ended July 3, 2021.

Newly Adopted Accounting Standard

The Company did not adopt any new accounting standards during the three months ended April 3, 2021 that were significant to the Company.

The Company did not adopt any new accounting standards during the six months ended July 3, 2021 that were significant to the Company.

Recent Accounting Pronouncements Not Yet Adopted

There have been no additional accounting pronouncements or changes in accounting pronouncements during the three months ended April 3, 2021 as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, that are significant or potentially significant to the Company.

There have been no additional accounting pronouncements or changes in accounting pronouncements during the six months ended July 3, 2021 as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, that are significant or potentially significant to the Company.

Cash, Cash Equivalents and Marketable Securities

The Company has invested its excess cash primarily in money market funds and highly liquid marketable securities such as commercial paper and U.S.

The Company has invested its excess cash primarily in money market funds and highly liquid marketable securities such as commercial paper, corporate debt securities and U.S.

government securities.

The Company considers all investments with maturities of three months or less when purchased to be cash equivalents.

Marketable securities represent highly liquid commercial paper and U.S.

Marketable securities represent highly liquid commercial paper, U.S.

government agency securities and U.S.

government securities with maturities greater than 90 days at date of purchase.

5 unchanged sentences

Realized gains and losses on sales of marketable securities, if any, are determined on the specific identification method and are reclassified from accumulated other comprehensive loss to results of operations as other income (expense), net.

Realized and unrealized gains and losses were de minimis for the period ended April 3, 2021.

Realized and unrealized gains and losses were de minimis for the period ended July 3, 2021.

Cash, cash equivalents and marketable securities consisted of the following (in thousands):

2 unchanged sentences

Cash $ 17,777 $ 30,745

government securities — 39,994

Money market funds 33,904 10,068

Commercial paper 21,399 —

Money market funds 18,263 10,068

Corporate debt securities 1,151 —

government securities — 39,994

Total cash and cash equivalents 58,590 80,807

Marketable securities:

government securities 39,998 52,982

Commercial paper 114,150 —

government agency securities 3,109 —

government securities — 52,982

Total marketable securities 117,259 52,982

4 unchanged sentences

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As such, fair value is a market-based measurement that should be determined based on

assumptions that market participants would use in pricing an asset or liability.

The Company utilizes the following three-tier value hierarchy, which prioritizes the inputs used in measuring fair value:

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The following tables sets forth the Company’s financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):

As of April 3, 2021 Level 1 Level 2 Total

As of July 3, 2021 Level 1 Level 2 Total

Money market funds $ 18,263 $ — $ 18,263

government securities 39,998 — 39,998

Commercial paper — 135,549 135,549

government agency securities — 3,109 3,109

Corporate debt securities — 1,151 1,151

$ 18,263 $ 139,809 $ 158,072

29 unchanged sentences

Intangible Asset Acquisition

In March 2018, the Company entered into an agreement with a vendor to develop certain software product and related enhancements pursuant to which the Company is obligated to make revenue-share payments under the program, subject to aggregate minimum revenue-share payments of $ 15.8 million over the three years following availability for sale.

The payments are based on a revenue-share rate applied to revenue from the developed-product and the corresponding hardware sales subject to a minimum and a maximum aggregate amount over the three-year sales period.

In March 2018, and as amended in December 2020, the Company entered into an agreement with a vendor to develop certain software product and related enhancements pursuant to which the Company is obligated to make revenue-share payments under the program, subject to aggregate fixed revenue-share payments of $ 15.8 million.

The payments are based on a revenue-share rate applied to revenue from the developed-product and the corresponding hardware sales through March 2024.

If the minimum revenue-share payments are not achieved by the end of that period, a true-up payment will be due.

The Company had its first sale in August 2019, and as a result, the Company capitalized an intangible asset with a value of $ 13.2 million in the third quarter of 2019 and also recognized a liability of $ 13.2 million (a non-cash investing activity).

The net present value of the liability is $ 14.0 million of which $ 3.4 million is included in accrued liabilities and $ 10.6 million in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheet as of April 3, 2021.

As of December 31, 2020, the net present value of the liability was $ 13.9 million of which $ 2.9 million was included in accrued liabilities and $ 11.0 million in other long-term liabilities.

The intangible asset has an estimated five-year useful life and is being amortized using the greater of the ratio of current gross revenue for the products to the total of current and anticipated future gross revenue for the products or the straight-line method.

In December 2020, the agreement was amended to increase the revenue-share rate, limit the total revenue-share payments to $ 15.8 million and extend the revenue-share period until March 2024.

As of July 3, 2021, the liability, including accrued interest, was $ 14.0 million of which $ 3.4 million is included in accrued liabilities and $ 10.6 million in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheet.

As of December 31, 2020, the liability, including accrued interest, was $ 13.9 million of which $ 2.9 million was included in accrued liabilities and $ 11.0 million in other long-term liabilities.

Accrued liabilities consisted of the following (in thousands):

3 unchanged sentences

Taxes payable 4,459 3,476

Component inventory held by suppliers 4,213 3,992

Professional and consulting fees 4,347 4,497

Customer advances or rebates 3,704 8,374

Component inventory held by suppliers 4,002 3,992

Current portion of revenue share obligations 3,417 2,925

Customer advances or rebates 3,359 8,374

Operating leases 3,005 2,994

Product returns 2,062 1,888

Operations 1,741 950

Freight 1,543 1,955

Restructuring 323 408

Other 4,056 4,737

1 unchanged sentence

Changes in the Company’s accrued warranty and retrofit liability were as follows (in thousands):

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

Balance at beginning of period $ 9,650 $ 7,430 $ 9,208 $ 7,294

13 unchanged sentences

Cash payments ( 133 ) ( 132 ) ( 265 )

Balance as of April 3, 2021 $ 1,182 $ 48 $ 1,230

Balance as of July 3, 2021 $ 1,111 $ — $ 1,111

Credit Agreements

5 unchanged sentences

The BofA Loan Agreement is secured by substantially all of the Company’s assets, including its intellectual property.

Loans under the credit facility bear interest at a rate per annum equal to either LIBOR (customarily defined) plus an applicable margin between 1.5 % to 2.0 % or Prime Rate (customarily defined) plus an applicable margin between 0.5 % to 1.0 % ( 3.75 % as of April 3, 2021), in each case largely based on a fixed charge coverage ratio measured at the end of each fiscal quarter.

As of April 3, 2021, the Company had no outstanding borrowings and had full availability of borrowings up to $ 35.0 million.

Loans under the credit facility bear interest at a rate per annum equal to either LIBOR (customarily defined) plus an applicable margin between 1.5 % to 2.0 % or Prime Rate (customarily defined) plus an applicable margin between 0.5 % to 1.0 % ( 3.75 % as of July 3, 2021), in each case largely based on a fixed charge coverage ratio measured at the end of each fiscal quarter.

As of July 3, 2021, the Company had no outstanding borrowings and had full availability of borrowings up to $ 35.0 million.

Commitments and Contingencies

2 unchanged sentences

Certain of the Company’s operating leases contain renewal options and rent acceleration clauses.

Future minimum payments under the non-cancelable operating leases consisted of the following as of April 3, 2021 (in thousands):

Future minimum payments under the non-cancelable operating leases consisted of the following as of July 3, 2021 (in thousands):

Period Future Minimum Lease Payments

3 unchanged sentences

Less imputed interest ( 2,299 )

As of April 3, 2021, the operating lease liability consisted of the following (in thousands):

As of July 3, 2021, the operating lease liability consisted of the following (in thousands):

Accrued liabilities - current portion of operating leases $ 3,005

2 unchanged sentences

The future minimum lease payments under the lease are $ 10.7 million and are included in the table above.

The weighted average discount rate for the Company's operating leases as of April 3, 2021 was 6.7 %.

The weighted average remaining lease term as of April 3, 2021 was 4.0 years.

Total rent expense of the Company was $ 1.1 million for the three months ended April 3, 2021 and March 28, 2020 for each respective period.

Cash paid within operating cash flows for operating leases was $ 1.0 million for the three months ended April 3, 2021 and March 28, 2020 for each respective period.

The weighted average discount rate for the Company's operating leases as of July 3, 2021 was 6.6 %.

The weighted average remaining lease term as of July 3, 2021 was 4.3 years.

For the three and six months ended July 3, 2021, total rent expense of the Company was $ 0.9 million and $ 2.1 million, respectively.

For the three and six months ended June 27, 2020, total rent expense of the Company was $ 1.1 million and $ 2.2 million, respectively.

Cash paid within operating cash flows for operating leases was $ 2.0 million and $ 1.7 million for the six months ended July 3, 2021 and June 27, 2020, respectively.

Purchase Commitments

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In the event of termination of services with a manufacturing partner, the Company has purchased, and may be required to purchase in the future, certain of the remaining components inventory held by the CM or ODM as well as any outstanding orders pursuant to the contractual provisions with such CM or ODM.

As of April 3, 2021, the Company had approximately $ 107.8 million of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within one year.

As of July 3, 2021, the Company had approximately $ 140.9 million of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within one year.

The Company has from time to time, and subject to certain conditions, reimbursed certain suppliers for component inventory purchases when this inventory has been rendered excess or obsolete, for example due to manufacturing and engineering change orders resulting from design changes, manufacturing discontinuation of products by its suppliers, or in cases where the Company has committed inventory levels that greatly exceed projected demand.

The estimated excess and obsolete inventory liabilities related to such manufacturing and engineering change orders and other factors, which are included in accrued liabilities in the accompanying balance sheets, were $ 4.2 million and $ 4.0 million as of April 3, 2021 and December 31, 2020, respectively.

The estimated excess and obsolete inventory liabilities related to such manufacturing and engineering change orders and other factors, which are included in accrued liabilities in the accompanying balance sheets, was $ 4.0 million for both of the periods ending July 3, 2021 and December 31, 2020, respectively.

The Company records the related charges in cost of systems revenue in its Condensed Consolidated Statements of Comprehensive Income (Loss).

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The 2019 Plan provides for the grant of stock options, including incentive stock options and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock or cash-based awards and dividend equivalents to eligible individuals.

As of April 3, 2021, there were 3.6 million shares available for issuance under the 2019 Plan.

At the Company’s 2021 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable under the 2019 Plan by 3.8 million shares.

As of July 3, 2021, there were 7.0 million shares available for issuance under the 2019 Plan.

Stock Options

During the three months ended April 3, 2021, stock option awards exercisable for up to an aggregate of 0.1 million shares of common stock were granted with a grant date exercise price of $ 33.20 per share.

During the three months ended July 3, 2021, stock option awards exercisable for up to an aggregate of 0.5 million shares of common stock were granted with a grant date weighted-average exercise price of $ 40.82 per share.

During the six months ended July 3, 2021, stock option awards exercisable for up to an aggregate of 0.6 million shares of common stock were granted with a grant date weighted-average exercise price of $ 39.38 per share.

These stock option awards vest 25 % on the first anniversary of the vesting commencement date and on a quarterly basis thereafter over an additional three years .

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If the non-GAAP net income target is achieved below 80 % of target or the bookings target is achieved below 90 % of target, no shares would be awarded, and the performance-based stock option awards would be forfeited in full.

If both targets are achieved at the minimum threshold of 80 % of target for non-GAAP net income and 90 % of target for bookings, then the shares are awarded at 50 % of the granted shares, with an increasing percentage of shares awarded above the minimum

thresholds up to 100 % of the granted shares if both targets are achieved at 100 % or more of target.

The probability of meeting the performance conditions related to these performance-based stock option awards was assessed to be probable as of April 3, 2021, and stock-based compensation expense of $ 1.0 million was recognized for the three months ended April 3, 2021.

During the three months ended April 3, 2021, 0.5 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 9.36 per share.

As of April 3, 2021, unrecognized stock-based compensation expense of $ 26.1 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.5 years.

The probability of meeting the performance conditions related to these performance-based stock option awards was assessed to be probable as of July 3, 2021, and stock-based compensation expense of $ 1.9 million was recognized for the three months ended July 3, 2021.

For the six months ended July 3, 2021, stock-based compensation expense of $ 2.9 million was recognized.

During the three months ended July 3, 2021, 0.1 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 7.38 per share.

During the six months ended July 3, 2021, 0.6 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 9.17 per share.

As of July 3, 2021, unrecognized stock-based compensation expense of $ 31.7 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.4 years.

Employee Stock Purchase Plans

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The price of common stock purchased under the ESPP is 85 % of the lower of the fair market value of the common stock on the commencement date and the end date of each six-month offering period.

As of April 3, 2021, there were 2.4 million shares available for issuance under the ESPP.

During the three months ended April 3, 2021, 0.2 million shares were purchased under the ESPP.

As of April 3, 2021, unrecognized stock-based compensation expense of $ 0.8 million related to the ESPP is expected to be recognized over a remaining service period of 0.4 years.

Company’s 2021 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable under the ESPP by 1.3 million shares, which will go into effect for the six-month purchase period commencing August 15, 2021 and ending on February 14, 2022.

The total shares authorized for issuance under the ESPP increased from 9.8 million shares to 11.1 million shares.

As of July 3, 2021, there were 2.4 million shares available for issuance under the ESPP.

During the six months ended July 3, 2021, 0.2 million shares were purchased under the ESPP.

As of July 3, 2021, unrecognized stock-based compensation expense of $ 0.3 million related to the ESPP is expected to be recognized over a remaining service period of 0.1 years.

The NQ ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 25 % of their eligible compensation.

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The NQ ESPP provides two six-month offering periods from November 15 th through May 14 th and May 15 th through November 14 th of each year.

As of April 3, 2021, there were 2.3 million shares available for issuance under the NQ ESPP with a maximum of 0.5 million shares allocated per purchase period.

As of April 3, 2021, unrecognized stock-based compensation expense of $ 4.3 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 1.0 year.

At the Company’s 2021 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable under the NQ ESPP by 0.8 million shares.

The maximum number of shares of common stock currently authorized for issuance under the NQ ESPP is 5.5 million shares, with a maximum of 0.5 million shares allocated per purchase period.

As of July 3, 2021, there were 2.9 million shares available for issuance under the NQ ESPP, including the stockholder-approved 0.8 million share increase.

During the three and six months ended July 3, 2021, 0.2 million shares were purchased and issued.

As of July 3, 2021, unrecognized stock-based compensation expense of $ 6.0 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 1.1 year.

Stock-Based Compensation

The following table summarizes stock-based compensation expense (in thousands):

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

Cost of revenue:

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The following is a summary of revenue disaggregated by geographic region based upon the location of the customers (in thousands):

Three Months Ended

April 3, 2021 March 28, 2020

Three Months Ended Six Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

United States $ 133,618 $ 108,198 $ 268,324 $ 196,248

Middle East 7,089 2,301

Canada 7,444 2,868 13,950 6,431

Caribbean 4,763 2,372

Europe 9,844 2,110 13,259 6,231

Middle East 5,172 2,330 12,260 4,631

Caribbean 6,954 2,310 11,717 4,682

Other 5,638 1,207 11,234 2,482

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Amounts are billed in accordance with the agreed-upon contractual terms.

The balance at December 31, 2020 was $ 2.3 million of which $ 1.0 million remained in the Company's Condensed Consolidated Balance Sheet at April 3, 2021.

The closing balance at April 3, 2021 was $ 1.9 million of which the Company expects to bill 73 % of the balance during the remainder of 2020.

The decrease in the contract asset was driven by billings for past services and a reduction in expected cash collections on ongoing projects partially offset by additional unbilled work performed during the three months ended April 3, 2021.

The balance as of December 31, 2020 was $ 2.3 million of which $ 0.7 million remained in the Company's Condensed Consolidated Balance Sheet as of July 3, 2021.

The closing balance as of July 3, 2021 was $ 1.4 million of which the Company expects to bill 66 % of the balance during the remainder of 2020.

Contract Liability

8 unchanged sentences

$ 45,258 $ 39,093

The increase in the deferred revenue balance for the three months ended April 3, 2021 is primarily driven by cash payments received or due in advance of satisfying the Company’s performance obligation offset by $ 8.3 million of revenue recognized that was included in the deferred revenue balance at the beginning of that period.

The increase in the deferred revenue balance for the three and six months ended July 3, 2021 is primarily driven by cash payments received or due in advance of satisfying the Company’s performance obligations offset by $ 6.8 million and $ 11.1 million of revenue recognized that was included in the deferred revenue balance at the beginning of each period, respectively.

Revenue allocated to remaining performance obligations represent contract revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

This amount was $ 75.1 million as of April 3, 2021, and the Company expects to recognize 39 % of such revenue over the next 12 months and the remainder thereafter.

This amount was $ 92.0 million as of July 3, 2021, and the Company expects to recognize 36 % of such revenue over the next 12 months and the remainder thereafter.

Contract Costs

The Company capitalizes certain sales commissions related primarily to multi-year subscriptions and extended warranty support for which the expected amortization period is greater than one year.

As of April 3, 2021, the unamortized balance of deferred commissions was $ 1.4 million.

For the three months ended April 3, 2021, the amount of amortization was $ 0.1 million and there was no impairment loss in relation to the costs capitalized.

As of July 3, 2021, the unamortized balance of deferred commissions was $ 2.3 million.

For the three and six months ended July 3, 2021, the amount of amortization was $ 0.2 million and $ 0.3 million, respectively.

There was no impairment loss in relation to the costs capitalized.

Concentration of Customer Risk

No company accounted for more than 10% of the Company's total revenue for the three months ended April 3, 2021.

No company accounted for more than 10% of the Company's total revenue for the three and six months ended July 3, 2021.

Lumen Technologies, Inc.

(formerly CenturyLink, Inc.) represented 15 % of total revenue for three months ended March 28, 2020.

No other customers accounted for more than 10% of the Company’s total revenue for three months ended March 28, 2020.

No customer represented more than 10% of the Company’s accounts receivable for the periods ended April 3, 2021 or December 31, 2020.

(formerly CenturyLink, Inc.) represented 15 % of total revenue for three and six months ended June 27, 2020.

No other customers accounted for more than 10% of the Company’s total revenue for three and six months ended June 27, 2020.

No customer represented more than 10% of the Company’s accounts receivable as of July 3, 2021 or December 31, 2020.

The following table presents the provision for income taxes from operations and the effective tax rates for the periods indicated (in thousands, except percentages):

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

Provision for income taxes $ 207 $ 148 $ 357 $ 477

Effective tax rate 1.0 % ( 3.6 ) % 0.9 % ( 4.5 ) %

The effective tax rate for the three months ended April 3, 2021 was determined using an estimated annual effective tax rate adjusted for discrete items, if any, that occurred during the respective periods.

The effective tax rate for the three months ended July 3, 2021 was determined using an estimated annual effective tax rate adjusted for discrete items, if any, that occurred during the respective periods.

Deferred tax assets are recognized if realization of such assets is more likely than not.

2 unchanged sentences

While the Company has reported U.S.

pre-tax income in the first quarter of 2021, the Company has not yet been able to establish a sustained level of profitability in the U.S.

pre-tax income for the first half of 2021, the Company has not yet been able to establish a sustained level of profitability in the U.S.

or other sufficient significant positive evidence to conclude that its U.S.

6 unchanged sentences

The following table sets forth the computation of basic and diluted net income (loss) per common share for the periods indicated (in thousands, except per share data):

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

Net income (loss) $ 20,458 $ ( 4,212 ) $ 41,073 $ ( 11,156 )

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements