What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-21 compared with 2024-02-23 · 185 added, 146 removed, 656 unchanged (34% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets, As of December 31, 202 4 and 20 2 3

Consolidated Statements of Comprehensive Income, Years Ended December 31, 202 3 , 202 2 and 202 1

Consolidated Statements of Comprehensive Income (Loss ) , Years Ended December 31, 202 4 , 202 3 and 20 2 2

Consolidated Statements of Stockholders’ Equity, Years Ended December 31, 202 4 , 202 3 and 20 2 2

5 unchanged sentences

We have audited the accompanying consolidated balance sheets of Calix, Inc.

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2024 and December 31, 2023, the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

24 unchanged sentences

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of net realizable value of raw material and finished goods inventory and excess and obsolete component liabilities

As discussed in Notes 1, 4 and 5 to the consolidated financial statements, the Company has raw material and finished goods inventories with a carrying value of $133.0 million and excess and obsolete component liabilities of $32.2 million as of December 31, 2023.

Evaluation of net realizable value of components and finished goods inventory and excess and obsolete component liabilities

As discussed in Notes 1, 4 and 5 to the consolidated financial statements, the Company has components and finished goods inventories with a carrying value of $102.7 million and excess and obsolete component liabilities of $27.5 million as of December 31, 2024.

The Company adjusts the inventory carrying value for excess or obsolete inventory based on assumptions about future demand for products, potential obsolescence of technology, product life cycle, and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds the estimated selling price.

1 unchanged sentence

The Company also records a liability and a charge to cost of revenue for estimated losses on components the Company is obligated to purchase from its manufacturers when the components have been rendered excess and obsolete 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 component levels that greatly exceed projected demand.

During the fourth quarter of 2023, the Company took charges of $28.7 million to write down excess and obsolete inventory and accrue a liability for components at suppliers primarily associated with the Company’s legacy product family.

We identified the evaluation of net realizable value of inventory and excess and obsolete component liabilities as a critical audit matter.

2 unchanged sentences

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s inventory process.

This included controls over the reviews of the estimates of the net realizable value of excess or obsolete raw material and finished goods inventory and liabilities for losses on components the Company is obligated to purchase from its manufacturers.

For a selection of inventory items owned by the Company, we (1) reperformed the analysis provided by the Company to assess the accuracy of the net realizable value of inventory by comparing historical sales activity, customer order backlog, or demand forecasts to the inventory on hand quantities, and (2) performed inquiries of Company’s personnel and inspected documents regarding product end of life announcements, technology and design changes, and new product introductions.

For a selection of components subject to the Company’s purchase commitments, we (1) evaluated the reasonableness of management’s assumptions used to estimate the excess and obsolete component liabilities by considering historical sales activity, customer order backlog, or demand forecasts of the related finished products and (2) performed inquiries of Company’s personnel and inspected documents regarding product end of life announcements, technology and design changes, new product introductions, and historical reimbursements to suppliers for excess and obsolete components.

This included controls over the reviews of the estimates of the net realizable value of excess or obsolete components and finished goods inventory and liabilities for losses on components the Company is obligated to purchase from its manufacturers.

For a selection of inventory items owned by the Company, we (1) reperformed the analysis provided by the Company to assess the accuracy of the net realizable value of inventory by comparing historical sales activity, customer order backlog, or demand forecasts to the inventory on hand quantities, and (2) performed inquiries of Company’s personnel or inspected documents regarding product end of life announcements, technology and design changes, and new product introductions.

For a selection of components subject to the Company’s purchase commitments, we (1) evaluated the reasonableness of management’s assumptions used to estimate the excess and obsolete component liabilities by considering historical sales activity, customer order backlog, or demand forecasts of the related finished products and (2) performed inquiries of Company’s personnel or inspected documents regarding product end of life announcements, technology and design changes, new product introductions, and historical reimbursements to suppliers for excess and obsolete components.

We have served as the Company’s auditor since 2016.

40 unchanged sentences

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

8 unchanged sentences

General and administrative 98,879 100,395 76,275

Restructuring benefit — — ( 786 )

Total operating expenses 496,628 492,731 382,818

Operating income 25,585 52,610 73,938

Interest and other income (expense), net:

Interest income (expense), net 9,704 2,009 ( 402 )

Operating income (loss) ( 43,034 ) 25,585 52,610

Interest income and other expense, net:

Interest income, net 12,343 9,704 2,009

Other expense, net ( 955 ) ( 532 ) ( 577 )

Total interest and other income (expense), net 9,172 1,432 ( 1,284 )

Income before income taxes 34,757 54,042 72,654

Total interest income and other expense, net 11,388 9,172 1,432

Income (loss) before income taxes ( 31,646 ) 34,757 54,042

Income taxes ( 1,899 ) 5,432 13,032

Net income $ 29,325 $ 41,010 $ 238,378

Net income per common share:

Net income (loss) $ ( 29,747 ) $ 29,325 $ 41,010

Net income (loss) per common share:

Basic $ ( 0.45 ) $ 0.44 $ 0.63

Diluted $ ( 0.45 ) $ 0.42 $ 0.60

Weighted-average number of shares used to compute net income per common share:

Weighted-average number of shares used to compute net income (loss) per common share:

Basic 65,879 65,980 65,058

Diluted 65,879 69,320 68,911

Net income $ 29,325 $ 41,010 $ 238,378

Net income (loss) $ ( 29,747 ) $ 29,325 $ 41,010

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Total other comprehensive income (loss), net of tax 47 1,814 ( 2,153 )

Comprehensive income $ 31,139 $ 38,857 $ 238,249

Comprehensive income (loss) $ ( 29,700 ) $ 31,139 $ 38,857

See accompanying notes to consolidated financial statements.

12 unchanged sentences

Issuance of common stock under equity incentive plans, net of forfeitures 1,527 38 32,111 — — 32,149

Repurchase of common stock including excise tax ( 2,210 ) ( 55 ) ( 86,589 ) — — ( 86,644 )

Net income — — — — 29,325 29,325

Other comprehensive loss — — — ( 2,153 ) — ( 2,153 )

Other comprehensive income — — — 1,814 — 1,814

Balance as of December 31, 2023 65,052 1,627 1,078,393 ( 659 ) ( 360,379 ) 718,982

2 unchanged sentences

Repurchase of common stock including excise tax ( 342 ) ( 9 ) ( 10,686 ) — — ( 10,695 )

Net income — — — — 29,325 29,325

Net loss — — — — ( 29,747 ) ( 29,747 )

Other comprehensive income — — — 47 — 47

6 unchanged sentences

Operating activities:

Net income $ 29,325 $ 41,010 $ 238,378

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ ( 29,747 ) $ 29,325 $ 41,010

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Stock-based compensation 70,761 62,771 44,826

14 unchanged sentences

Purchases of marketable securities ( 301,677 ) ( 216,193 ) ( 191,403 )

Sales of marketable securities 49,902 — —

Maturities of marketable securities 160,299 227,803 181,388

18 unchanged sentences

(together with its subsidiaries, “Calix” or the “Company”) was incorporated in August 1999 and is a Delaware corporation.

The Company is the leading global provider of a platform (cloud, software and systems) and managed services that focus on the subscriber-facing network, the portion of the network that governs available bandwidth and determines the range and quality of services that can be offered to subscribers.

This platform and managed services enable broadband service providers (“BSPs”) of all sizes to innovate and transform their businesses.

The Company’s BSP customers are empowered to utilize real-time data and insights from the Calix platform 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.

The Company develops, markets and sells an appliance-based platform, cloud and managed services that focus on the subscriber-facing network, the portion of the network that governs available bandwidth and determines the range and quality of services that can be offered to subscribers.

This platform, cloud and managed services enable broadband experience providers (“BEPs”) of all sizes to innovate and transform their businesses.

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

These insights enable BEPs 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 and Accounting Guidance

8 unchanged sentences

GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

For the Company, these estimates include, but are not limited to:

allowances for doubtful accounts and sales returns, excess and obsolete inventory, allowances for obligations to its contract manufacturers, valuation of stock-based compensation, useful lives assigned to long-lived assets, standard and extended warranty costs, realizability of deferred tax assets and uncertain tax positions and contingencies.

For the Company, these estimates include, but are not limited to, allowances for doubtful accounts and sales returns, excess and obsolete inventory, allowances for obligations to its contract manufacturers, valuation of stock-based compensation, useful lives assigned to long-lived assets, standard and extended warranty costs, realizability of deferred tax assets and uncertain tax positions and contingencies.

Actual results could differ from those estimates, and such differences could be material to the Company’s financial position and results of operations.

2 unchanged sentences

Revenue from sales of access and premises systems is recognized when control is transferred to the customer, which is generally when the products are shipped.

Revenue from software platform licenses, which provides the customer with a right to use the software as it exists, is generally recognized upfront when made available to the customer.

Revenue from software platform licenses, which provides the customer with a right to use the software as it exists, is generally recognized upfront when the license is made available to the customer.

Revenue from cloud-based software subscriptions, customer support, maintenance, extended warranty subscriptions and managed services is generally recognized ratably over the contract term.

5 unchanged sentences

To the extent that minimum committed usage level each year varies, the Company has concluded that each year represents a distinct stand-ready performance obligation and the transaction price allocated to each performance obligation is recognized as revenue ratably over each annual period.

The Company’s contracts may include multiple performance obligations.

The Company’s contracts generally include multiple performance obligations.

For such arrangements, the Company allocates the contract’s transaction price to each performance obligation using the relative stand-alone selling price of each distinct good or service in the contract.

The Company generally determines stand-alone selling prices based on the prices charged to customers or its best estimate of stand-alone selling price.

The Company’s estimate of stand-alone selling price is established considering multiple factors including, but not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives, characteristics of targeted customers and pricing practices.

The determination of estimated stand-alone selling price is made through consultation with and formal approval by management, taking into consideration the go-to-market strategy.

Observable prices of a product or service when the Company sells them separately based on stratification by classes of customers and products are the best estimate of stand-alone selling prices.

However, when stand-alone selling prices are not directly observable, they are estimated, and judgment is required in their determination.

In these instances, the Company determines stand-alone selling prices using all other available information, which may include pricing

practices relative to geographies, market conditions, competitive landscape, characteristics of targeted customers for hardware products, internal costs and gross margin objectives for services and internal costs and value assessments for subscriptions.

Cost of Revenue

2 unchanged sentences

Warranty and Retrofit

The Company offers limited warranties for its hardware products for a period of one , three or five years , depending on the product type.

The Company offers limited warranties for its hardware products for a period of one or five years , depending on the product type.

The Company recognizes estimated costs related to warranty activities as a component of cost of revenue upon product shipment or upon identification of a specific product failure.

15 unchanged sentences

Loss Contingencies

From time to time, the Company is involved in legal proceedings arising from the normal course of business activities.

The Company evaluates the likelihood of an unfavorable outcome of legal proceedings to which it is a party and accrues a loss contingency when the loss is probable and reasonably estimable.

Assessing legal contingencies involves significant judgment and estimates, and the outcome of litigation is inherently uncertain and subject to numerous factors outside the Company’s control.

Significant judgment is required when the Company assesses the likelihood of any adverse judgments or outcomes, including the potential range of possible losses, and whether losses are probable and reasonably estimable.

Because of uncertainties related to these matters, the Company bases its estimates of whether a loss contingency is probable or reasonably possible, as well as the reasonable range of possible losses associated with each loss contingency, only on the information available at the time.

As additional information becomes available, and at least quarterly, the Company reassesses the potential liability on each significant matter and may revise its estimates.

These revisions could have a material impact on the Company’s business, operating results or financial condition.

The actual outcome of these legal proceedings may materially differ from the Company’s estimates of potential liability, which could have a material adverse effect on the Company’s business, operating results or financial condition.

The Company occasionally faces legal proceedings from business activities.

It evaluates the likelihood of an unfavorable outcome and records a loss contingency when the loss is probable and reasonably estimable.

This assessment involves significant judgment and uncertainty, influenced by factors beyond the Company’s control.

The Company estimates potential losses based on available information and reassesses these estimates quarterly.

Changes in estimates could impact the Company’s business, operating results, or financial condition.

Actual outcomes may differ from these estimates, potentially affecting the Company materially.

Credit Risk and Inventory Supplier Concentrations

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable.

Cash equivalents consist of money market funds and marketable securities with a maturity at the date of purchase of ninety days or less, which are invested through financial institutions in the United States.

Cash equivalents consist of money market funds and marketable securities with a maturity at the date of purchase of ninety days or less, which are invested through financial

institutions in the United States.

Deposits in and investments held by these financial institutions may, at times, exceed federally insured limits.

34 unchanged sentences

Inventory Valuation and Supplier Purchase Commitments

Inventory, which primarily consists of finished goods purchased from CMs or ODMs, is stated at the lower of cost (determined by the first-in, first-out method) or market value.

Shipments from suppliers before the Company receives them are recorded as

in-transit inventory when title and the significant risks and rewards of ownership have passed to the Company.

Inbound shipping costs and U.S.

tariffs are included in cost of inventory.

In addition, from time to time, the Company procures component inventory primarily as a result of manufacturing discontinuation of critical components by suppliers.

The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based on the Company’s estimate of demand for its products, potential obsolescence of technology, product life cycles and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds its estimated selling price.

The Company also evaluates its supplier purchase commitments, which remain elevated due to the extended lead-times during the global pandemic-induced supply chain challenges, and records a liability for excess and obsolete components based on its estimated demand of our products, potential obsolescence of technology and product life cycles.

These factors are impacted by market and economic conditions, competitive dynamics, technology changes and new product introductions and require significant estimates that may include elements that are uncertain.

Inventory, which primarily consists of finished goods purchased from CMs or ODMs, is stated at the lower of cost (determined by the first-in, first-out method) and net realizable value.

Inbound shipping costs and tariffs are included in the cost of inventory.

In addition, from time to time, the Company procures component inventory primarily as a result of manufacturing discontinuation of critical components by suppliers or a change in suppliers.

Furthermore, as a result of the global pandemic-induced supply chain challenges and supply assurance plans, the Company has purchased, and may continue to purchase,

excess components from its suppliers and consign components back to its suppliers to be consumed on future finished good builds.

The Company regularly monitors inventory on-hand and record write-downs for excess and obsolete inventory.

The Company also evaluates its supplier purchase commitments and records a liability for excess and obsolete components consistent with the valuation of the Company’s excess and obsolete inventory and future production requirements.

These write-downs and accruals are based on the Company’s assumptions of demand for our products and requires significant judgement of relevant factors including a comparison of the quantity and cost of inventory on hand to the Company’s estimated forecast of customer demand, current levels of orders and backlog, market conditions, potential obsolescence of technology, product life cycles and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds the Company’s estimated selling price.

Factors that could influence management’s assumptions and judgements include changes in economic conditions, competitive dynamics, winning or losing a key customer, changes in the Company’s customers’ capital expenditures, government investment programs, technology changes, new product introductions and supply-chain lead times.

Actual demand may differ from forecasted demand and may have a material effect on gross profit.

If inventory is written down, a new cost basis is established that cannot be increased in future periods.

For example, during the fourth quarter of 2023, the Company took charges of $ 28.7 million to write down excess and obsolete inventory and accrue a liability for components at suppliers primarily associated with the Company’s legacy product family that existed before its shift to an all-platform model.

During 2023, customers moved to the Company’s platform model at a faster rate than originally anticipated, leaving the Company with excess finished goods and related components at suppliers.

Contract Costs

12 unchanged sentences

Goodwill was recorded as a result of the Company’s acquisitions of Occam Networks, Inc.

in February 2011 and Optical Solutions, Inc.

in February 2006.

in 2011 and Optical Solutions, Inc.

The Company records goodwill when consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired.

10 unchanged sentences

Payment terms to customers typically range from net 30 to net 90 days and vary by the size and location of customer and the products or services offered.

The period between the transfer of control of the promised good or service to a customer and when payment is due is not significant.

The period between the transfer of control of the promised good or service to a customer and when payment is due is not a significant financing component.

The Company evaluates its tax positions and estimates its current tax exposure along with assessing temporary differences that result from different book to tax treatment of items not currently deductible for tax purposes.

These differences result in deferred tax assets and liabilities on the Company’s Consolidated Balance Sheets, which are estimated based upon the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates that will be in effect when these differences reverse.

In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s Consolidated Statements of Comprehensive Income become deductible expenses under applicable income tax laws or loss or credit carryforwards are utilized.

In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s Consolidated Statements of Comprehensive Income (Loss) become deductible expenses under applicable income tax laws or loss or credit carryforwards are utilized.

Accordingly, realization of the Company’s deferred tax assets is dependent on future taxable income against which these deductions, losses and credits can be utilized.

2 unchanged sentences

Newly Adopted Accounting Standards

The Company did not adopt any new accounting standards in 2023 that were significant to the Company.

Segment Reporting

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting, which expanded annual and interim disclosure requirements for reportable segments.

The Company adopted the new standard effective January 1, 2025.

See Footnote 12 Segment Information.

Recent Accounting Pronouncements Not Yet Adopted

There have been no accounting pronouncements or changes in accounting pronouncements that are significant or potentially significant to the Company.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes, which prescribes standardized categories and disaggregation of information in the reconciliation of provision for income taxes, requires disclosure of disaggregated income taxes paid and modifies other income tax-related disclosure requirements.

The updated standard is effective for the Company beginning with its 2025 annual reporting period.

Early adoption is permitted.

The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires additional disclosure of certain costs and expenses within the notes to the financial statements.

The updated standard is effective for the Company’s annual periods beginning in 2027 and interim periods beginning in the first quarter of 2028.

Early adoption is permitted.

The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

There have been no other accounting pronouncements or changes in accounting pronouncements that are significant or potentially significant to the Company.

Cash, Cash Equivalents and Marketable Securities

5 unchanged sentences

Money market funds 4,890 2,563

Corporate debt securities — 140

Total cash and cash equivalents 43,162 63,409

Marketable securities:

Corporate debt securities 123,701 7,000

government securities 66,582 92,277

1 unchanged sentence

Commercial paper 22,715 14,139

Corporate debt securities 7,000 3,168

Municipal securities — 100

Certificates of deposit 16,520 —

Total marketable securities 253,929 156,937

3 unchanged sentences

The amortized cost and fair value of marketable securities as of December 31, 2024 were as follows (in thousands):

Amortized Cost Gross Unrealized Gains (Losses) Fair Value

Amortized Cost Gross Unrealized Gains, net Fair Value

Corporate debt securities $ 123,519 $ 182 $ 123,701

government securities 74,118 14 74,132

Commercial paper 47,003 ( 28 ) 46,975

government agency securities 24,380 31 24,411

Corporate debt securities 6,999 1 7,000

Certificates of deposit 16,505 15 16,520

Commercial paper 32,766 7 32,773

$ 271,288 $ 249 $ 271,537

The amortized cost and fair value of marketable securities as of December 31, 2023 were as follows (in thousands):

Amortized Cost Gross Unrealized Losses Fair Value

Amortized Cost Gross Unrealized Gains (Losses), net Fair Value

government securities $ 102,167 $ 80 $ 102,247

2 unchanged sentences

Corporate debt securities 6,999 1 7,000

Municipal securities 101 ( 1 ) 100

$ 199,742 $ 1 $ 199,743

12 unchanged sentences

government securities 74,132 — 74,132

Corporate debt securities — 123,701 123,701

Commercial paper — 32,773 32,773

government agency securities — 24,411 24,411

Corporate debt securities — 7,000 7,000

Certificates of deposit — 16,520 16,520

$ 79,022 $ 197,405 $ 276,427

5 unchanged sentences

Corporate debt securities — 7,000 7,000

Municipal securities — 100 100

$ 104,809 $ 97,497 $ 202,306

16 unchanged sentences

Inventory consisted of the following (in thousands):

Raw materials $ 22,119 $ 640

Components $ 21,735 $ 22,119

Finished goods 80,992 110,866

18 unchanged sentences

Professional and consulting fees 5,385 7,717

Customer advances or rebates 5,967 5,653

Current portion of warranty and retrofit 5,288 5,655

Taxes payable 5,048 4,317

Customer advances or rebates 4,882 5,967

Operating leases 4,303 4,142

Litigation settlement 3,250 —

Business events 2,938 3,167

Product returns 2,428 2,897

Insurance 2,019 2,107

Operations 1,735 1,080

Freight 1,640 1,510

Current portion of revenue-share payments — 7,210

Litigation settlement — 3,250

Other 6,580 8,662

11 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 December 31, 2023 (in thousands):

Future minimum payments under the non-cancelable operating leases for leases that have commenced consisted of the following as of December 31, 2024 (in thousands):

Year Ending December 31, Future Minimum Lease Payments

7 unchanged sentences

The future minimum lease payments under the lease are $ 2.5 million as of December 31, 2024 and are included in the tables above.

In December 2024, the Company entered into a new headquarters office lease agreement for 23,000 square feet in San Jose, California.

The lease is expected to commence in August 2025 for a term of 90 months.

The future minimum lease payments of $ 8.9 million are not included in the table above.

The above tables also include future minimum lease payments for the Company's office facilities in Petaluma, California;

2 unchanged sentences

Bangalore, India;

Nanjing, China;

and West Jordan, Utah, which expire at various dates through 2029.

and Nanjing, China, which expire at various dates through 2029.

In November 2021, the Company entered into a sublease for a portion of the San Jose headquarters office space that was previously abandoned.

The sublease commenced in August 2022 for a term of 39 months.

The Company received $ 0.8 million and $ 0.3 million in sublease income in 2023 and 2022, respectively.

Future minimum payments consisted of the following as of December 31, 2023 (in thousands):

Year Ending December 31, Future Minimum Sublease Payments

Total future minimum sublease payments $ 1,434

The Company received $ 0.8 million, $ 0.8 million and $ 0.3 million in sublease income in 2024, 2023 and 2022, respectively.

Future minimum sublease payments were $ 0.7 million for 2025 as of December 31, 2024.

The weighted average discount rate for the Company’s operating leases as of December 31, 2024 was 4.8 %.

1 unchanged sentence

For the years ended December 31, 2024, 2023 and 2022, total rent expense of the Company was $ 5.1 million, $ 4.8 million and $ 4.6 million, respectively.

Cash paid within operating cash flows for operating leases was $ 4.5 million, $ 4.5 million and $ 3.9 million for years ended December 31, 2023, 2022 and 2021, respectively.

Cash paid within operating cash flows for operating leases was $ 4.5 million for each of the years ended December 31, 2024, 2023 and 2022.

Purchase Commitments

2 unchanged sentences

The Company generally does not take ownership of the components held by CMs and ODMs.

The Company places purchase orders with its CMs and ODMs in order to fulfill its monthly finished product inventory requirements.

The Company places purchase orders with its CMs and ODMs in order to fulfill its monthly finished product

inventory requirements.

The Company incurs a liability when the CMs and ODMs convert the component inventory to a finished product and takes ownership of the finished goods inventory.

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 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 exceed projected demand.

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.

The estimated excess and obsolete component liabilities related to manufacturing and engineering change orders, termination of manufacturing partners and other factors are included in “Accrued liabilities” in the accompanying Consolidated Balance Sheets, because the corresponding component parts have not been received by the Company.

The estimated excess and obsolete component liabilities related to manufacturing and engineering change orders, termination of manufacturing partners and other factors are recorded against Supplier Deposits in “Prepaid expenses and other current assets” or included in “Accrued liabilities” in the accompanying Consolidated Balance Sheets, because the corresponding component parts have not been received by the Company.

The amounts were $ 27.5 million and $ 32.2 million as of December 31, 2024 and 2023, respectively.

The Company records the related charges in “Cost of revenue” in its Consolidated Statements of Comprehensive Income.

The Company records the related charges in “Cost of revenue” in its Consolidated Statements of Comprehensive Income (Loss).

As of December 31, 2024 and 2023, the Company had approximately $ 138.8 million and $ 176.3 million, respectively, of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs.

19 unchanged sentences

The specific timing, price and size of the purchases depends on prevailing stock prices, general economic and market conditions, and other considerations consistent with the Company’s capital allocation strategy.

The repurchase program does not obligate the Company to acquire a particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the

Company’s discretion.

The repurchase program does not obligate the Company to acquire a particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion.

During the year ended December 31, 2024, the Company purchased 0.3 million shares of common stock for $ 10.7 million at an average price per share of $ 31.31 .

9 unchanged sentences

The options have a maximum term of ten years .

At the Company’s 2023 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable under the 2019 Plan by 1.5 million shares.

As of December 31, 2024, there were 2.8 million shares available for issuance under the 2019 Plan.

In February 2022, PSOs covering an aggregate of 0.7 million shares of common stock were awarded to certain executives with a grant date exercise price of $ 55.96 per share.

The actual number of shares underlying the PSOs that could become eligible to vest and become exercisable, or earned, was contingent upon achievement of annual corporate financial targets for bookings and non-GAAP operating income for 2022 (together, the “2022 Performance Targets”) during the one-year performance period.

In February 2023, PSOs covering an aggregate of 1.2 million shares of common stock were awarded to certain executives with a grant date average exercise price of $ 51.57 per share.

The actual number of shares underlying the PSOs that could become earned was contingent upon achievement of annual financial targets for bookings and non-GAAP operating income for 2023 (together, the “2023 Performance Targets”) during the one-year performance period, with equal weighting for each measure.

In February 2024, the Compensation Committee of the Board of Directors certified achievement of the 2023 Performance Targets and determined that 54.5 % of the shares underlying the PSOs were earned, subject to the four-year service condition.

As such, 25 % of the awarded shares underlying the PSOs were vested and became exercisable on the first anniversary of the grant date, and the remaining 75 % of the shares of common stock will vest and become exercisable in substantially equal quarterly installments over the subsequent three years, subject to the executive’s continued service with the Company through the respective vesting dates.

Pursuant to the grant, 25 % of the earned PSOs were vested and became exercisable on the first anniversary of the grant date, and the remaining 75 % of the shares of common stock will vest and become exercisable in substantially equal quarterly installments over the subsequent three years , subject to the executive’s continued service with the Company through the respective vesting dates.

Stock-based compensation expense of $ 5.5 million and $ 9.2 million was recognized for the years ended December 31, 2024 and 2023, respectively, related to these awards.

In February 2023, PSOs covering an aggregate of 1.2 million shares of common stock were awarded to certain executives with a grant date average exercise price of $ 51.57 per share.

The actual number of shares underlying the PSOs that could become earned is contingent upon achievement of annual corporate financial targets for bookings and non-GAAP operating income for 2023 (together, the “2023 Performance Targets”) during the one-year performance period, with equal weighting for each measure.

If either of the 2023 Performance Targets are achieved below 80 % of target, no shares will be deemed earned for that measure and the corresponding PSOs will be forfeited.

If both 2023 Performance Targets are achieved at or above the minimum threshold of 80 %, then 50 % of the shares allocable to each 2023 Performance Target will be deemed earned, with an increasing percentage of shares being earned for achievement above the minimum threshold, up to 125 % of the shares allocable to the target.

Each 2023 Performance Target result is then weighted by 50 %, and the combined total determines the number of shares underlying the PSOs that are deemed earned, up to a maximum of 100 % of the shares underlying the PSOs.

During June 2023, the Compensation Committee approved an adjustment to the 2023 Performance Targets, resulting in incremental compensation cost of $ 4.9 million that is recognized over the vesting period of the awards.

Upon certification of achievement, any shares underlying the PSOs that are not deemed earned are immediately forfeited, and 25 % of the shares underlying the PSOs that are deemed earned immediately vest and become exercisable upon the first anniversary of the grant date, with the remaining 75 % of the earned shares vesting and becoming exercisable in substantially equal quarterly installments over the subsequent three years, in each case, subject to the executive’s continued service with the Company through the respective vesting dates.

In February 2024, the Compensation Committee certified the achievement related to the adjusted 2023 Performance Targets and determined that 54.5 % of shares underlying the PSOs were earned, subject to the on-going service condition.

As such, 45.5 % of the shares underlying the PSOs were immediately forfeited, 25 % of the earned shares underlying the PSOs became vested and exercisable on the first anniversary of the grant date, and the remaining 75 % of the earned shares underlying the PSOs will vest in substantially equal quarterly installments over the subsequent three years, subject to the executive’s continued service with the Company through the respective vesting dates.

Stock-based compensation expense of $ 9.2 million was recognized for the year ended December 31, 2023 related to the PSOs.

In February 2024, PSO awards exercisable for up to an aggregate of 2.4 million shares of common stock were granted to certain Company executives with a grant date exercise price of $ 34.26 per share and divided into two plans, with the first plan accounting for 75 % of the total shares granted and the second plan accounting for 25 % of the total shares granted.

The actual number of shares earned is contingent upon achievement of annual financial targets for bookings and non-GAAP net operating income for 2024 (collectively, the “2024 Performance Targets”) during the one-year performance period.

These PSO awards will vest, subject to certification by the Compensation Committee of the Company’s Board of Directors upon the achievement of the 2024 Performance Targets, as to 25 % of the PSOs earned on the one year anniversary of the date of grant, and as to the remaining 75 % of the PSOs earned, in substantially equal quarterly installments over the subsequent three years , subject to the executive’s continuous service with the Company through the respective vesting dates.

For the first plan, if the non-GAAP net operating income target and the bookings target are each achieved below 80 % of target, no shares would be awarded, and the PSO awards would be forfeited in full.

If either target is achieved at the minimum threshold of 80 % of target, then the shares are awarded at 75 % of the granted shares, with an increasing percentage of shares awarded above the minimum thresholds up to 120 % of the granted shares for each target.

Each target result is then equally weighted, and the combined total determines the percent of target shares earned.

The maximum combined award is 100 %.

For the second plan, if the annual bookings target is achieved below 90 % of target, the PSO awards would be forfeited in full.

If the target is achieved at the minimum threshold of 90 % of target, then the shares are awarded at 75 % with an increasing percentage of shares awarded above the minimum thresholds up to 100 % of the granted shares.

The maximum award is 100 %.

In January 2025, the Compensation Committee certified the achievement related to the 2024 Performance Targets and determined that 58.9 % of shares underlying the PSOs were earned, subject to the on-going service condition, and 41.1 % of the shares underlying the PSOs were immediately forfeited.

Stock-based compensation expense of $ 13.1 million was recognized for the year ended December 31, 2024 related to these PSOs.

The following table summarizes the stock option activity under the Company’s equity incentive plans (in thousands, except per share data):

2 unchanged sentences

Number of Exercise Price Life Intrinsic

Stock Options Shares Per Share (in years) Value (1)

Shares Per Share (in years) Value (1)

Outstanding as of December 31, 2023 10,323 $ 34.37

20 unchanged sentences

The NQ ESPP provides quarterly offering periods from February 8 th through May 7 th , May 8 th through August 7 th , August 8 th through November 7 th and November 8 th through February 7 th of each year, with a maximum of 0.35 million shares allocated per purchase period.

At the Company’s 2023 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable under the NQ ESPP by 1.2 million shares.

The maximum number of shares of common stock currently authorized for issuance under the NQ ESPP is 7.5 million shares.

65 unchanged sentences

Balance as of December 31, 2022 $ ( 1,700 ) $ ( 773 ) $ ( 2,473 )

Other comprehensive loss ( 1,521 ) ( 632 ) ( 2,153 )

Balance as of December 31, 2022 ( 1,700 ) ( 773 ) ( 2,473 )

Other comprehensive income 1,701 113 1,814

Balance as of December 31, 2023 1 ( 660 ) ( 659 )

Other comprehensive income (loss) 187 ( 140 ) 47

Balance as of December 31, 2024 $ 188 $ ( 800 ) $ ( 612 )

Assets and liabilities of the Company’s wholly owned foreign subsidiaries are translated from their respective functional currencies at exchange rates in effect at the balance sheet date, and revenue and expenses are translated at the monthly average exchanges rates.

These translations result in differences called foreign currency translation adjustments.

Realized foreign currency transaction gains or losses were not significant during the years ended December 31, 2023, 2022 and 2021 and are recorded in “Other expense, net” in the Company's Consolidated Statements of Comprehensive Income.

Realized gains and losses on sales of available-for-sale marketable securities, if any, are reclassified from accumulated other comprehensive loss to “Other expense, net” in our Consolidated Statements of Comprehensive Income.

Realized foreign currency transaction gains or losses were not significant during the years ended December 31, 2024, 2023 or 2022 and were recorded in “Other expense, net” in the Company's Consolidated Statements of Comprehensive Income (Loss).

The domestic and foreign components of income before incomes taxes were as follows (in thousands):

41 unchanged sentences

Capitalized R&D 114,050 93,340

Other 383 144

Gross deferred tax assets 214,148 203,953

11 unchanged sentences

The Company’s periodic assessments take into consideration both positive evidence (future profitability projections for example and recent financial performance) and negative evidence (historical financial performance for example) as it relates to evaluating the future recoverability of its deferred tax assets.

During 2021, the Company released its valuation allowance for federal and state (with the exception of California) deferred tax assets that are more likely than not to be realized, primarily as a result of actual and projected increases in U.S.

profitability in the current and future periods.

In performing its analysis, the Company used the most updated plans and estimates that it currently uses to manage the underlying business and calculated the ability to utilize its deferred tax assets.

The valuation allowance decreased by less than $ 0.1 million from 2022 to 2023.

The valuation allowance increased by $ 0.7 million from 2023 to 2024.

During the twelve months ended December 31, 2024, the Company released a valuation allowance of $ 0.6 million related to federal foreign tax credits that the Company expects to utilize prior to expiration.

The Company continues to maintain a valuation allowance of $ 30.6 million on certain U.S.

federal and state deferred tax assets that the Company believes are not more likely than not to be realized in future periods.

state deferred tax assets that the Company believes are not more likely than not to be realized in future periods.

As of December 31, 2024, the Company had U.S.

11 unchanged sentences

The standard requires the Company to recognize the financial statement effects of an uncertain tax position when it is more likely than not that such position will be sustained upon audit.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as interest expense and income tax expense, respectively, in its Consolidated Statements of Comprehensive Income.

T he Company’s unrecognized tax benefits were as follows (in thousands):

The Company’s unrecognized tax benefits were as follows (in thousands):

Years Ended December 31,

8 unchanged sentences

The tax years 2000 through 2024 remain open and subject to examination by the appropriate governmental agencies due to tax attribute carryforwards.

Net Income Per Common Share

The computation of basic and diluted net income per common share for the periods indicated was as follows (in thousands, except per share data):

In December 2021, the Organization for Economic Cooperation and Development enacted model rules for a new global minimum tax framework (“Pillar Two”), and certain governments in countries which the Company operates have enacted local Pillar Two legislation, with an effective date from January 1, 2024.

The Company currently does not expect Pillar Two to have a material impact on its financial statements.

Net Income (Loss) Per Common Share

The computation of basic and diluted net income (loss) per common share for the periods indicated was as follows (in thousands, except per share data):

Years Ended December 31,

2024 2023 2022

Net income $ 29,325 $ 41,010 $ 238,378

Net income (loss) $ ( 29,747 ) $ 29,325 $ 41,010

Weighted-average common shares — basic 65,879 65,980 65,058

1 unchanged sentence

Weighted-average common shares — diluted 65,879 69,320 68,911

Basic net income per common share $ 0.44 $ 0.63 $ 3.77

Diluted net income per common share $ 0.42 $ 0.60 $ 3.51

Basic net income (loss) per common share $ ( 0.45 ) $ 0.44 $ 0.63

Diluted net income (loss) per common share $ ( 0.45 ) $ 0.42 $ 0.60

Potentially dilutive shares excluded, weighted-average 12,057 4,688 1,758

Unvested restricted stock awards are included in the calculation of basic weighted-average shares because such shares are participating securities;

Unvested restricted stock awards are included in the calculation of basic weighted-average shares for all periods presented with net income because such shares are participating securities;

however, the impact was immaterial.

2 unchanged sentences

Revenue from Contracts with Customers

The Company develops, markets and sells a broadband platform and managed services, and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the Company unit level.

Contract Asset

Contract assets include amounts recognized as revenue prior to the Company’s contractual right to bill the customer.

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

The balance as of December 31, 2024 was $ 2.8 million of which the Company expects to bill 34 % of the balance during 2025.

Contract Liability

Deferred revenue was $ 47.6 million and $ 61.5 million as of December 31, 2024 and 2023, respectively.

The decrease in deferred revenue of $ 13.9 million is primarily driven by revenue recognized of $ 31.3 million that was included in the deferred revenue balance at the beginning of the year and a trend to move to monthly from annual billing arrangements.

This was partially offset by cash payments received or due in advance of satisfying the Company’s performance obligations.

Revenue allocated to remaining performance obligations (“RPOs”) represents 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 but excludes variable consideration where the monthly invoicing is based on usage or where actual usage exceeds the minimum commitment.

RPOs were $ 325.8 million as of December 31, 2024, and the Company expects to recognize as revenue 37 % of this amount over the next 12 months and a large majority of the remainder over the two years 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 December 31, 2024 and 2023, the unamortized balance of deferred commissions was $ 17.9 million and $ 12.0 million, respectively.

For the years ended December 31, 2024, 2023 and 2022, the amount of amortization was $ 8.9 million, $ 6.5 million and $ 4.0 million, respectively.

There was no impairment loss in relation to the costs capitalized for these respective periods.

Concentration of Customer Risk

No customer accounted for more than 10% of the Company’s revenue for the years ended December 31, 2024, 2023 and 2022.

One customer represented 23 % and 19 % of the Company’s accounts receivable as of December 31, 2024 and 2023, respectively.

Another customer represented 14 % of the Company’s accounts receivable as of December 31, 2023.

Segment Information

The Company develops, markets and sells an appliance-based broadband platform, cloud and managed services, and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the Company unit level.

Accordingly, the Company is considered to be in a single reporting segment and operating unit structure.

The Company’s chief operating decision maker is the Company’s Chief Executive Officer, who reviews financial information presented on a Company-wide basis, for purposes of allocating resources and evaluating financial performance.

The Company’s chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer, who reviews financial information presented on a Company-wide basis, for purposes of allocating resources and evaluating financial performance.

The CODM assesses the performance of the single segment and allocates resources based on revenue and measures derived from gross margin and operating income (loss) that is reported in the Consolidated Statements of Comprehensive Income (Loss).

In addition, the CODM uses a measure derived from operating expenses in the Consolidated Statements of Comprehensive Income (Loss) to monitor budget versus actual results to determine the Company’s and management’s performance.

The Company does not have intra-entity sales or transfers.

The measure of the single segment assets is the consolidated assets in the Consolidated Balance Sheet.

The accounting policies of the single segment are the same as described in the significant accounting policies.

Geographic Information:

14 unchanged sentences

$ 31,153 $ 29,461

Contract Asset

Contract assets include amounts recognized as revenue prior to the Company’s contractual right to bill the customer.

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

The balance as of December 31, 2023 was $ 4.7 million of which the Company expects to bill 67 % of the balance during 2024.

Contract Liability

Deferred revenue was $ 61.5 million and $ 58.6 million as of December 31, 2023 and 2022, respectively.

The increase in deferred revenue of $ 2.9 million is primarily driven by cash payments received or due in advance of satisfying the Company's performance obligations and balances reclassified to contract assets during the year being greater than the $ 29.2 million of revenue recognized that was included in the deferred revenue balance at the beginning of the year.

RPOs were $ 242.5 million as of December 31, 2023, and the Company expects to recognize as revenue 39 % of this amount over the next 12 months and a majority of the remainder over the two years 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 December 31, 2023 and 2022, the unamortized balance of deferred commissions was $ 12.0 million and $ 11.2 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, the amount of amortization was $ 6.5 million, $ 4.0 million and $ 1.4 million, respectively.

There was no impairment loss in relation to the costs capitalized for these respective periods.

Concentration of Customer Risk

No customer accounted for more than 10% of the Company’s revenue for the years ended December 31, 2023, 2022 and 2021.

One customer represented 19 % and 11 % of the Company’s accounts receivable as of December 31, 2023 and 2022, respectively.

Another customer represented 14 % of the Company’s accounts receivable as of December 31, 2023.

Selected Financial Information:

The following table presents selected financial information with respect to the Company’s single operating segment (in thousands):

Years Ended December 31,

2024 2023 2022

Revenue $ 831,518 $ 1,039,593 $ 867,827

Adjusted cost of revenue (1)

( 372,177 ) ( 515,633 ) ( 427,708 )

Adjusted sales and marketing operating expenses (2)

( 197,069 ) ( 197,671 ) ( 162,548 )

Adjusted research and development operating expenses (3)

( 160,787 ) ( 160,772 ) ( 119,829 )

Adjusted general and administrative operating expenses (4)

( 70,944 ) ( 71,180 ) ( 58,315 )

Other segment items (5)

( 73,575 ) ( 68,752 ) ( 46,817 )

Interest income and other expenses, net 11,388 9,172 1,432

Income taxes 1,899 ( 5,432 ) ( 13,032 )

Net income (loss) $ ( 29,747 ) $ 29,325 $ 41,010

(1) GAAP cost of revenue adjusted for stock-based compensation, intangible asset amortization and tariff refund (2022 only).

(2) GAAP sales and marketing operating expenses adjusted for stock-based compensation.

(3) GAAP research and development operating expenses adjusted for stock-based compensation.

(4) GAAP general and administrative operating expenses adjusted for stock-based compensation and litigation settlement (2023 only).

(5) Other segment items consisted of stock-based compensation expense, tariff refund (2022 only) and litigation settlement (2023 only).

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data