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Item 2. Management’s Discussion and Analysis

2024-04-23 compared with 2023-10-24 · 80 added, 119 removed, 102 unchanged (66% of the section changed)

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 and Section 21E of the Securities and Exchange Act of 1934, as amended, or the Exchange Act.

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:

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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.

We are the leading global provider of a broadband delivery platform (cloud, software and systems) and managed services that enable service providers of all types and sizes to innovate and transform their businesses.

We develop, market and sell our platform (cloud, software and systems) 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 BSPs 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 Calix platform, which includes Calix Cloud, Revenue EDGE and Intelligent Access EDGE, gathers, analyzes and applies machine learning to deliver real-time insights seamlessly to each key business function.

Our customers utilize these insights and data to simplify network operations, marketing and customer support and deliver experiences that excite their subscribers.

This enables BSPs to grow their brand through increased subscriber acquisition, loyalty and revenue and to reduce their operating costs, creating value for their businesses and the communities they serve.

We market our Calix platform and managed services to communication service providers globally through our direct sales force as well as select resellers.

Our platform, which includes Calix Cloud, Revenue EDGE and Intelligent Access EDGE, 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 SmartLife managed services and experiences.

This enables BSPs 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 enabled approximately 1,900 customers purchasing directly and through partners to deploy passive optical, Active Ethernet and point-to-point Ethernet fiber access networks.

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 WISPs, fiber overbuilders, cable MSOs, 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 the Calix platform and managed services.

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, market, financial or other factors 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.

increases or decreases in customer orders for our products and services, 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.

Our revenue is also dependent upon our customers’ 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.

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.

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 nine months ended September 30, 2023, or that we expect will impact cost of revenue in future periods, also include:

changes in the mix of products delivered, customer location and regional mix, changes in the cost of our inventory, including higher costs due to materials shortages including components, supply constraints, 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, changes in trade policies, allowances for obligations to our suppliers and inventory

In addition, we periodically elect to ship by air versus by ocean in order to meet delivery commitments to our customers, which is more costly.

Factors that have impacted our cost of revenue for the three months ended March 30, 2024, or that we expect may

impact cost of revenue in future periods, also 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, changes in trade policies, allowances for obligations to our suppliers and inventory write-downs.

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.

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Our management evaluates its estimates, assumptions and judgments on an ongoing basis.

Our critical accounting policies and estimates, which are revenue recognition, inventory valuation and supplier purchase commitments and income taxes, 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, 2022.

For the nine months ended September 30, 2023, there have been no significant changes in our critical accounting policies and estimates.

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, 2023.

For the three months ended March 30, 2024, 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 nine months ended September 30, 2023 as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2022 that are significant or expected to be significant to us.

There have been no additional accounting pronouncements or changes in accounting pronouncements during the three months ended March 30, 2024 as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2023 that are significant or expected to be significant to us.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2023 and October 1, 2022

Comparison of the Three Months Ended March 30, 2024 and April 1, 2023

The following table sets forth our revenue (dollars in thousands):

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 Variance

Dollars Variance

Percent September 30,

2023 October 1,

Three Months Ended

2024 April 1,

2023 Variance

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Revenue $ 226,310 $ 250,008 $ (23,698) (9) %

Our revenue increased by $27.5 million and $151.5 million for the three and nine months ended September 30, 2023, respectively, as compared to the corresponding periods in 2022.

The increase in revenue was primarily due to higher revenue from our growing base of small and medium BSP customers and the continuation of BSPs seeking to provide their subscribers a better experience by adopting our platform and managed services.

During the second half of 2022, we added a new medium-

sized customer that began to receive significant shipments during the second half of 2022 and the nine months ended September 30, 2023.

For the three and nine months ended September 30, 2023, United States revenue was $235.1 million and $695.5 million, or 89% and 90% of our revenue, compared to $215.9 million and $565.4 million, or 91% of our revenue for the same periods in 2022.

International revenue was $28.7 million and $79.4 million, or 11% and 10% of our revenue, for the three and nine months ended September 30, 2023, as compared to $20.5 million and $57.9 million, or 9% of our revenue, for the same periods in 2022.

No customer accounted for more than 10% of the Company’s revenue for the three and nine months ended September 30, 2023 and October 1, 2022.

Our revenue decreased by $23.7 million for the three months ended March 30, 2024 as compared to the corresponding period in 2023.

The decrease in revenue was primarily due to what we believe were delayed purchasing decisions of our appliances as our customers evaluate and prepare for various government stimulus programs, the shortening of our lead times to customers and a small set of significant customers that slowed purchases while we believe they reevaluate their investment priorities.

Meanwhile, software, cloud and managed services have continued to grow as our customers add new subscribers over time.

For the three months ended March 30, 2024, United States revenue was $210.1 million, or 93% of our revenue, compared to $227.9 million, or 91% of our revenue for the same period in 2023.

International revenue was $16.2 million, or 7% of our revenue, for the three months ended March 30, 2024, as compared to $22.1 million, or 9% of our revenue, for the same period in 2023.

No customer accounted for more than 10% of the Company’s revenue for the three months ended March 30, 2024 and April 1, 2023.

Gross Profit and Gross Margin

The following table sets forth our gross profit and gross margin (dollars in thousands):

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 Variance

Dollars Variance

Percent September 30,

2023 October 1,

Three Months Ended

2024 April 1,

2023 Variance

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Gross margin 54.2 % 51.2 %

Gross profit increased to $140.5 million and $405.1 million for the three and nine months ended September 30, 2023, from $118.6 million and $310.5 million during the corresponding periods in 2022.

The increase in gross margin of 310 and 250 basis points for the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022, was mainly due to increased contributions from our platform and managed services, a shift in product mix and the sell through of a lower amount of excessively priced components acquired in the secondary market during the supply-chain disruption partially offset by excess and obsolete inventory charges.

Gross profit decreased to $122.6 million for the three months ended March 30, 2024, from $128.1 million during the corresponding period in 2023.

The increase in gross margin of 300 basis points for the three months ended March 30, 2024, respectively, compared to the corresponding period in 2023, was mainly due to the continued growth in our platform, cloud and managed services as well as being a greater percentage of our total revenue, customer mix and the sell through of a lower amount of excessively priced components acquired in the secondary market during the supply-chain disruption partially offset by excess and obsolete inventory charges.

Operating Expenses

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The following table sets forth our sales and marketing expenses (dollars in thousands):

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 Variance

Dollars Variance

Percent September 30,

2023 October 1,

Three Months Ended

2024 April 1,

2023 Variance

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Percent of revenue 24 % 21 %

Sales and marketing expenses for the three months ended September 30, 2023 increased by $6.2 million compared with the corresponding period in 2022 primarily due to increases in personnel expenses of $5.8 million mainly related to sales headcount and higher sales incentive compensation and in stock-based compensation of $1.3 million, partially offset by lower marketing expenses of $1.4 million.

Sales and marketing expenses for the nine months ended September 30, 2023 increased by $35.5 million compared with the corresponding period in 2022 primarily due to increases in personnel expenses of $25.8 million mainly related to sales headcount and higher sales incentive compensation, stock-based compensation of $5.4 million and travel expenses of $2.2 million.

We expect our investments in sales and marketing will increase in absolute dollars, but be relatively consistent as a percentage of revenue, as we extend our market reach and grow our business in support of our key strategic initiatives.

Sales and marketing expenses for the three months ended March 30, 2024 increased by $2.0 million compared with the corresponding period in 2023 primarily due to increases in personnel expenses of $1.1 million, stock-based compensation of $0.4 million, $0.3 million in allocated common costs and marketing expenses of $0.3 million.

Sales and marketing expenses as a percentage of revenue increased to 24% from 21% due to lower revenue in the first quarter of 2024.

We expect our investments in sales and marketing will be relatively flat in absolute dollars in the short-term as we look 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 Nine Months Ended

September 30,

2023 October 1,

2022 Variance

Dollars Variance

Percent September 30,

2023 October 1,

Three Months Ended

2024 April 1,

2023 Variance

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Percentage of gross profit 36 % 34 %

Research and development expenses for the three months ended September 30, 2023 increased by $13.8 million as compared with the corresponding period in 2022 mainly due to increases in personnel expenses of $10.7 million, stock-based compensation of $1.4 million, prototypes and test equipment expenses of $0.9 million, and depreciation and amortization of $0.9 million.

Research and development expenses for the nine months ended September 30, 2023 increased by $42.0 million as compared with the corresponding period in 2022 mainly due to increases in personnel expenses of $27.9 million, stock-based compensation of $4.6 million, prototypes and test equipment expenses of $3.2 million, depreciation and amortization of $2.4 million and outside services of $1.9 million.

We expect our investments in research and development to increase in absolute dollars, but remain relatively consistent as a percentage of gross profit, as we seek to expand the functionality and capabilities of our platforms.

Research and development expenses for the three months ended March 30, 2024 increased by $1.2 million as compared with the corresponding period in 2023 mainly due to increases in personnel expenses of $1.6 million, $0.7 million of depreciation and amortization, $0.7 million in allocated common costs and stock-based compensation of $0.2 million.

These increases were partially offset by decreases in prototypes and test equipment expenses of $1.4 million and outside services of $0.5 million.

Research and development expenses as a percentage of gross profit increased to 36% from 34% due to lower revenue in the first quarter of 2024.

We expect our investments in research and development to remain relatively flat in absolute dollars in the short term as we seek to expand the functionality and capabilities of our platforms.

General and Administrative Expenses

The following table sets forth our general and administrative expenses (dollars in thousands):

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 Variance

Dollars Variance

Percent September 30,

2023 October 1,

Three Months Ended

2024 April 1,

2023 Variance

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Percent of revenue 12 % 9 %

General and administrative expenses for the three months ended September 30, 2023 increased by $6.1 million as compared with the corresponding period in 2022 mainly due to increases in personnel expenses of $3.2 million and stock-based compensation of $2.3 million.

We plan to continue to invest in our information technology infrastructure and headcount due to the growth of our business.

General and administrative expenses for the nine months ended September 30, 2023 increased by $18.9 million as compared with the corresponding period in 2022 mainly due to increases in personnel expenses of $9.0 million, stock-based compensation of $8.2 million and outside services of $1.1 million.

We expect our general and administrative investments to increase in absolute dollars but decline slightly as a percentage of revenue over time in relation to increased revenue.

General and administrative expenses for the three months ended March 30, 2024 increased by $3.2 million as compared with the corresponding period in 2023 mainly due to increases in personnel expenses of $1.8 million, professional services expenses of $0.8 million and stock-based compensation of $0.2 million.

General and administrative expenses as a percentage of revenue increased to 12% from 9% due to lower revenue in the three months ended March 30, 2024.

We expect our general and administrative investments to be fairly constant in absolute dollars in the near term and potentially decline as a percentage of revenue over time in relation to anticipated longer-term increased revenue.

Interest and Other Expense, net

The following table sets forth our interest and other expense, net (dollars in thousands):

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 Variance

Dollars Variance

Percent September 30,

2023 October 1,

Three Months Ended

2024 April 1,

2023 Variance

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Percent of revenue 1 % 1 %

Interest and other expense, net increased by $1.8 million and $5.7 million as compared with the corresponding periods in 2022 mainly due to a higher rate of interest earned on our cash, cash equivalents and marketable securities as well as a larger cash and investments balance year over year.

Interest and other expense, net increased by $1.0 million as compared with the corresponding period in 2023 mainly due to a higher rate of interest earned on our cash, cash equivalents and marketable securities.

The following table sets forth our income taxes (dollars in thousands):

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 Variance

Dollars Variance

Percent September 30,

2023 October 1,

Three Months Ended

2024 April 1,

2023 Variance

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Effective tax rate 78.0 % 15.9 %

For the three and nine months ended September 30, 2023, our income tax expense was $1.2 million and $7.9 million for an effective tax rate of 6.6% and 17.9%, respectively, which differed from the statutory rate of 21% primarily due to state taxes, the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S.

For the three months ended March 30, 2024, our income tax expense was $0.4 million for an effective tax rate of 78.0% which differed from the statutory rate of 21% primarily due to state taxes and 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 nine months ended September 30, 2023 are lower than the similar periods in 2022 primarily as a result of additional U.S.

federal research tax credits and the U.S.

tax impact of foreign operations.

For the three and nine months ended September 30, 2023, we recognized a tax benefit of $3.6 million related to the finalization of our 2022 tax returns.

The effective tax rates for the three months ended March 30, 2024 are higher than the similar period in 2023 primarily as a result of lower pre-tax earnings with a relatively consistent level of non-deductible expenses.

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 annual effective tax rate, 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.

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

Historically, we have funded our operations and investing activities primarily through sales of our common stock, cash flow generated from operations and various borrowing arrangements.

For the past few years, we have generated cash flow from our operations as our business has grown.

As of September 30, 2023, we had cash, cash equivalents and marketable securities of $250.1 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S.

However, for the past few years, we have funded our operations and investing activities from cash flow generated from our operations as our business has grown and became profitable.

As of March 30, 2024, we had cash, cash equivalents and marketable securities of $239.5 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S.

government agency securities and commercial paper.

Operating Activities

Net cash provided by operating activities was $41.3 million for the nine months ended September 30, 2023 and consisted of net income of $35.9 million and non-cash charges of $63.4 million offset by cash flow decreases of $58.0 million reflected in the net change in assets and liabilities.

Net cash provided by operating activities was $14.7 million for the three months ended March 30, 2024 and consisted of net income of $0.1 million and non-cash charges of $17.9 million offset by cash flow decreases of $3.3 million reflected in the net change in assets and liabilities.

Non-cash charges primarily consisted of stock-based compensation of $16.9 million and depreciation and amortization of $4.9 million partially offset by deferred income taxes of $2.4 million and the net accretion of available-for-sale securities of $1.4 million.

Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of a decrease in accrued liabilities of $28.9 million due to the payout of incentive compensation and a decrease in the reserves for inventory held at suppliers, and a decrease in accounts payable of $16.0 million due to the timing of inventory payments.

These changes were partially offset by a decrease in accounts receivable of $25.7 million, due to the timing of customer payments and lower sales in the first quarter of 2024 than the prior quarter, a decrease in inventory of $13.2 million as the supply chain continued to normalize, and an increase in deferred revenue of $2.3 million primarily due to support contract renewals as well as an increase in customer payments received or due in advance of satisfying the related contract’s performance obligation.

Net cash provided by operating activities was $8.1 million for the three months ended April 1, 2023 and consisted of net income of $9.6 million and non-cash charges of $18.6 million offset by cash flow decreases of $20.0 million reflected in the net change in assets and liabilities.

Non-cash charges primarily consisted of stock-based compensation of $16.2 million and depreciation and amortization of $3.7 million.

Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of an increase in prepaid expenses and other assets of $48.5 million mainly due to advanced payments to supply chain partners, an increase in prepaid taxes and reclassification of contract assets from deferred revenue;

a decrease in accounts payable of $19.8 million related to the timing of vendor payments;

and a decrease in accrued liabilities of $3.8 million due to the payout of incentive compensation and payments related to our Calix ConneXions 2022 Customer Success and Innovation conference.

These changes were partially offset by a decrease in accounts receivable of $13.1 million, mainly due to increased linearity of shipments in the third quarter of 2023 resulting in higher collections in the quarter.

Net cash provided by operating activities was $21.1 million for the nine months ended October 1, 2022 and consisted of net income of $29.1 million and non-cash charges of $47.0 million offset by cash flow decreases of $55.0 million reflected in the net change in assets and liabilities.

Non-cash charges primarily consisted of stock-based compensation of $31.5 million, depreciation and amortization of $10.8 million and deferred income taxes of $5.2 million.

Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of an increase in inventory of $52.2 million to improve our responsiveness to customer demand, an increase in prepaid expenses and other assets of $32.9 million mainly due to advanced payments to supply chain partners and an increase in accounts receivable of $15.3 million in line with our revenue growth.

These changes were partially offset by an increase in accounts payable of $36.2 million due to increased inventory purchases and an increase in deferred revenue of $9.1 million due to Calix Cloud and Revenue Edge subscriptions.

Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of a decrease in accrued liabilities of $12.3 million due to the payout of incentive compensation and payments related to our Calix ConneXions 2022 Customer Success and Innovation conference;

an increase in inventory of $7.4 million to improve our responsiveness to our BSPs’ subscriber demand;

a decrease in accounts payable of $5.9 million due to the timing of inventory purchases;

and an increase in prepaid expenses and other assets of $7.1 million mainly due to the renewal of a software contract and reclassification of contract assets from deferred revenue.

These changes were partially offset by a decrease in accounts receivable of $1.6 million due to continued strong shipment linearity and an increase in deferred revenue of $11.0 million primarily due to our platform subscriptions and support contracts and reclassification of contract assets to prepaid expenses and other assets.

Investing Activity

For the nine months ended September 30, 2023, cash used in investing activities of $38.5 million consisted of net purchases of marketable securities of $52.4 million and capital expenditures of $13.9 million, consisting primarily of purchases of test and computer equipment and software.

For the nine months ended October 1, 2022, cash used in investing activities of $17.2 million consisted of net purchases of marketable securities of $8.0 million and capital expenditures of $9.3 million, consisting primarily of purchases of test and computer equipment.

For the three months ended March 30, 2024, cash provided by investing activities of $3.3 million consisted of net maturities of marketable securities of $7.0 million partially offset by capital expenditures of $3.7 million, consisting primarily of purchases of test and computer equipment.

For the three months ended April 1, 2023, cash used in investing activities of $3.3 million consisted of net purchases of marketable securities of $1.3 million and capital expenditures of $4.6 million, consisting primarily of purchases of test and computer equipment.

Financing Activities

Net cash used in financing activities of $23.3 million for the nine months ended September 30, 2023 primarily consisted of purchases of our common stock of $42.4 million and payments related to a financing arrangement of $7.6 million.

This was partially offset by proceeds from the issuance of common stock related to our equity plans of $26.7 million.

Net cash provided by financing activities of $20.5 million for the nine months ended October 1, 2022 primarily consisted of proceeds from the issuance of common stock related to our equity plans of $21.5 million partially offset by payments related to a financing arrangement of $1.0 million.

Net cash provided by financing activities of $7.1 million for the three months ended March 30, 2024 primarily consisted of proceeds from the issuance of common stock related to our equity plans of $10.8 million partially offset by repurchases of our common stock of $3.7 million.

Net cash provided by financing activities of $10.2 million for the three months ended April 1, 2023 primarily consisted of proceeds from the issuance of common stock related to our equity plans of $12.5 million.

This was partially offset by repurchases of common stock of $1.2 million and payments related to a financing arrangement of $1.1 million.

Working Capital and Capital Expenditure Needs

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We believe that our outsourced approach to manufacturing provides us significant flexibility in both managing inventory levels and financing our inventory.

Furthermore, our Board of Directors has authorized a common stock repurchase program for up to $100 million of which $57.6 million remained available as of September 30, 2023.

Furthermore, we have a common stock repurchase program, which had $109.9 million available as of March 30, 2024.

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 terminate our stock repurchase program, limit our development activities, reduce our investment in growth initiatives and institute cost-cutting measures, all of which may adversely impact our business and potential growth.

If we are unable to generate sufficient cash flows or obtain other sources of liquidity, we will be forced to 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 September 30, 2023 consisted of our contractual obligations under non-cancelable outstanding purchase obligations, operating lease obligations for office space and a revenue share obligation.

The following table summarizes our contractual obligations as of September 30, 2023 (in thousands):

Our principal commitments as of March 30, 2024 consisted of our contractual obligations under non-cancelable outstanding purchase obligations and operating lease obligations for office space.

The following table summarizes our contractual obligations as of March 30, 2024 (in thousands):

Payments Due by Period

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12,027 4,708 5,329 1,792 198

Revenue share obligation (3)

$ 203,313 $ 114,560 $ 74,588 $ 10,844 $ 3,321

$ 293,391 $ 187,346 $ 89,663 $ 11,617 $ 4,765

(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,

Item 1 of this Quarterly Report on Form 10-Q for further discussion regarding our outstanding purchase commitments related to our third-party manufacturers.

See Note 6, “ Commitments and Contingencies ” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion regarding our outstanding purchase commitments related to our third-party manufacturers.

(2) Future minimum operating lease obligations in the table above primarily include payments for our office locations, which expire at various dates through 2029.

See Note 6 “ Commitments and Contingencies ” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion regarding our operating leases.

(3) Represents remaining payments related to a revenue-share obligation, including imputed interest associated with developed software product and related enhancements by an engineering service provider.

See Note 5 “Balance Sheet Details” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion regarding our outstanding liability.

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 2. Management’s Discussion and Analysis