What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-22 compared with 2024-10-29 · 81 added, 148 removed, 109 unchanged (68% of the section changed)

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Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements.

Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including those identified in the Risk Factors discussed in Part II, Item 1A, of this report on Form 10-Q, as well as in other sections of this report and in our Annual Report on Form 10-K for the year ended December 31, 2023.

Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including those identified in the Risk Factors discussed in Part II, Item 1A, of this Quarterly Report on Form 10-Q, as well as in other sections of this report and in our Annual Report on Form 10-K for the year ended December 31, 2024.

All forward-looking statements and reasons why results may differ included in this Quarterly Report on Form 10-Q are made as of the date hereof, and we assume no obligation to update these forward-looking statements or reasons why actual results might differ.

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.

We develop, market and sell our appliance-based platform, cloud and managed services that enable service providers of all types and sizes to innovate and transform their businesses.

For our customers to successfully transform their businesses into the innovative BXPs of the future, they require actionable data for critical business functions such as network operations, customer support and marketing.

However, this data is often trapped in disparate systems or departmental silos.

Our platform, which includes Calix Cloud, 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.

Our platform, which includes Calix Cloud, Unlimited Subscriber and Intelligent Access, gathers, analyzes and applies machine learning to deliver real-time insights seamlessly to each key business function.

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

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

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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 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.

increases or decreases in customer orders for our products and services, global economic and geopolitical events and conditions, including tariffs, trade controls, inflation, economic downturns and market, financial or other factors such as government stimulus that may delay or materially impact customer purchasing decisions, non-availability of products due to supply chain challenges, including component and labor shortages and increasing lead times as well as disruptions as a result of pandemics or natural disasters, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers.

More specifically, our customers have in the past spent less in the first quarter as they are finalizing their annual budgets, and in certain regions, customers are challenged by winter weather conditions that inhibit fiber deployment in outside infrastructure.

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Cost of revenue is strongly correlated to revenue and tends to fluctuate due to all of the above factors that may cause revenue fluctuations.

Factors that have impacted our cost of revenue for the nine months ended September 28, 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.

Factors that have impacted our cost of revenue for the three months ended March 29, 2025 include:

changes in the mix of products delivered, customer location and regional mix, changes in the cost of our inventory, investments to support expansion of cloud and customer support offerings as well as our customer success organization, changes in product warranty, incurrence of retrofit costs, amortization of intangibles, support fees for silicon-related development work for our products, allowances for obligations to our suppliers, and inventory write-downs.

Factors that we expect may impact our cost of revenue in future periods include the same as in the prior quarter and changes in trade policies.

For example, in April 2025, the U.S.

President signed an executive order increasing tariffs on imports from numerous countries, including China and other Asian countries where our sole-source or limited-source suppliers are located.

Consequently, absent policy changes, these actions will increase our cost of revenue.

We are currently evaluating the actions we may be able to take to mitigate such costs as we navigate this challenging and dynamic operating environment.

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

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

We believe the following critical accounting policies affect our significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Revenue is recognized when a performance obligation is satisfied, which occurs when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

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 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.

Revenue from professional services and training is recognized as the services are delivered.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

Our hardware products contain both software and non-software components that function together to deliver the products’ essential functionality and therefore constitutes a single performance obligation as the promise to transfer the individual software and non-software components is not separately identifiable and, therefore, not distinct.

Cloud-based software subscriptions can include multi-year agreements with a fixed annual fee for a minimum committed usage level.

To the extent that minimum committed usage level each year varies, we have 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.

Our contracts generally include multiple performance obligations.

For such arrangements, we allocate 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.

Observable prices of a product or service when we sell 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, we determine 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.

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) and net realizable value.

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

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

Furthermore, as a result of the global pandemic-induced supply chain challenges and supply assurance plans, we have purchased, and may continue to purchase, excess components from our suppliers and consign components back to our suppliers to be consumed on future finished good builds.

We regularly monitor inventory on-hand and record write-downs for excess and obsolete inventory.

These write-downs are based on our 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 our 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 our 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 our customers’ capital expenditures, government investment programs, technology changes, new product introductions and supply-chain lead times.

We also evaluate our supplier purchase commitments and record a liability for excess and obsolete components consistent with the valuation of our excess and obsolete inventory and future production requirements.

For example, during the fourth quarter of 2023, we wrote down excess and obsolete inventory and accrued a liability for components at suppliers primarily related to a pivot in customer demand to our newer all-platform model from our older legacy product family.

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.

Our critical accounting policies and estimates, which are revenue recognition and inventory valuation and supplier purchase commitments, are described under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024.

For the three months ended March 29, 2025, there have been no significant changes in our critical accounting policies and estimates.

Recent Accounting Pronouncements

There have been no additional accounting pronouncements or changes in accounting pronouncements during the nine months ended September 28, 2024 as compared with 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.

There have been no additional accounting pronouncements or changes in accounting pronouncements during the three months ended March 29, 2025 as compared with the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2024 that are significant or expected to be significant to us.

Results of Operations

Comparison of the Three and Nine Months Ended September 28, 2024 and September 30, 2023

Comparison of the Three Months Ended March 29, 2025 and March 30, 2024

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 Variance

Dollars Variance

Percent September 28,

2024 September 30,

Three Months Ended

2025 March 30,

2024 Variance

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$ 220,242 $ 226,310 $ (6,068) (3) %

Our revenue decreased by $62.9 million and $149.5 million for the three and nine months ended September 28, 2024, respectively, as compared to the corresponding periods in 2023.

The decrease in revenue in the large- and medium-customer segment was primarily due to a small set of significant customers that slowed purchases while we believe they reevaluate their investment priorities.

The decrease in revenue in the small-customer segment was primarily due to what we believe were delayed purchasing decisions of our appliances as our customers evaluated and prepared for various government stimulus programs and customers adjusting their purchases due to our shortened lead times.

For the three and nine months ended September 28, 2024, United States revenue was $187.1 million and $579.9 million, or 93% and 93% of our revenue, compared to $235.1 million and $695.5 million, or 89% and 90% of our revenue for the same periods in 2023.

International revenue was $13.9 million and $45.5 million, or 7% of our revenue, for both the three and nine months ended September 28, 2024, as compared to $28.7 million and $79.4 million, or 11% and 10% of our revenue, for the same periods in 2023.

The decrease in international revenue for the three and nine months ended September 28, 2024, as compared to the same periods in 2023, was mainly due to lower shipments to Europe and to a lesser extent the Americas outside the United States.

No customer accounted for more than 10% of the Company’s revenue for the three and nine months ended September 28, 2024 and September 30, 2023.

Our revenue decreased by $6.1 million for the three months ended March 29, 2025 as compared to the corresponding period in 2024.

As with others in the telecommunication industry, our business went through a period of adjustments following the COVID pandemic, which resulted in fewer purchases in 2024 such that our revenue hit its lowest level since the second quarter of 2022 in the second quarter of 2024.

Since then, our quarterly revenue has grown sequentially.

The decrease in revenue in the small- and medium-customer segment was primarily due to the industry slowdown in 2024, caused by factors such as order normalization, consideration of the U.S.

Department of Commerce National Telecommunications and Information Administration’s, or NTIA’s, Broadband Equity, Access and Deployment, or BEAD, program and evaluation of business models given relatively low subscriber attach rates.

The increase in revenue in the large-customer segment was primarily due to a demand pull forward by a customer.

For the three months ended March 29, 2025, United States revenue was $211.2 million, or 96% of our revenue, compared to $210.1 million, or 93% of our revenue for the same period in 2024.

International revenue was $9.1 million, or 4% of our revenue, for the three months ended March 29, 2025, as compared to $16.2 million, or 7% of our revenue, for the same period in 2024.

The decrease in international revenue for the three months ended March 29, 2025, as compared to the same period in 2024, was mainly due to lower shipments to Europe and to a lesser extent the Americas outside the United States.

No customer accounted for more than 10% of the Company’s revenue for the three months ended March 29, 2025 and March 30, 2024.

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 28,

2024 September 30,

2023 Variance

Dollars Variance

Percent September 28,

2024 September 30,

Three Months Ended

2025 March 30,

2024 Variance

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Gross margin 55.7 % 54.2 %

Gross profit decreased to $110.0 million and $340.2 million for the three and nine months ended September 28, 2024, from $140.5 million and $405.1 million during the corresponding periods in 2023.

These decreases were mainly due to the corresponding decreases in revenue.

The increase in gross margin of 150 and 210 basis points for the three and nine months ended September 28, 2024, respectively, compared to the corresponding periods in 2023, was primarily related to a mix shift of hardware sales towards small customers, which generally have higher gross margins, from large- and medium-sized customers and to the continued growth in our licenses, cloud and managed services as well as being a greater percentage of our total revenue.

Gross profit was relatively flat comparing the three months ended March 29, 2025 to the corresponding period in 2024.

Our gross margin increased by 150 basis points for the three months ended March 29, 2025, compared to the corresponding period in 2024, primarily related to the continued growth in our platform, cloud and managed services being a greater percentage of our total revenue.

Operating Expenses

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 Variance

Dollars Variance

Percent September 28,

2024 September 30,

Three Months Ended

2025 March 30,

2024 Variance

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Percent of revenue 26 % 24 %

Sales and marketing expenses for the three months ended September 28, 2024 decreased by $0.1 million compared with the corresponding period in 2023 primarily due to decreases in personnel expenses of $1.0 million and outside services of $0.4 million.

These decreases were partially offset by increases in marketing expenses of $0.7 million, travel expenses of $0.4 million and stock-based compensation of $0.3 million.

Sales and marketing expenses for the nine months ended September 28, 2024 decreased by $0.4 million compared with the corresponding period in 2023 primarily due to decreases in personnel expenses of $1.9 million and outside services of $0.8 million.

These decreases were partially offset by increases of marketing expenses of $1.9 million and depreciation and amortization of $0.6 million.

For the three and nine months ended September 28, 2024, sales and marketing expenses as a percentage of revenue increased to 26% from 20% and 25% from 20%, respectively, due to lower revenue compared to the same periods in 2023.

We expect our investments in sales and marketing will be relatively flat in absolute dollars, except for our annual Calix ConneXions Innovation and Customer Success conference held during the fourth quarter, in the short-term as we look to land new customers and expand our platform, cloud and managed services.

Sales and marketing expenses for the three months ended March 29, 2025 increased by $4.2 million compared with the corresponding period in 2024 primarily due to increases in personnel expenses of $2.8 million, stock-based compensation of $1.6 million and travel expenses of $0.7 million.

These increases were partially offset by decreases in outside services of $0.4 million and depreciation and amortization of $0.4 million.

For the three months ended March 29, 2025, sales and marketing expenses as a percentage of revenue increased to 26% from 24% in the same period in 2024 due to lower revenue and the increases described above.

We expect our investments in sales and marketing will increase slightly in absolute dollars on a year-over-year basis, but decline as a percentage of revenue, as we continue to land new customers and expand our platform, cloud and managed services.

Research and Development Expenses

The following table sets forth our research and development expenses (dollars in thousands):

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 Variance

Dollars Variance

Percent September 28,

2024 September 30,

Three Months Ended

2025 March 30,

2024 Variance

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Percentage of gross profit 36 % 36 %

Research and development expenses for the three months ended September 28, 2024 decreased by $1.5 million as compared with the corresponding period in 2023 mainly due to decreases in personnel expenses of $2.2 million, prototypes and test equipment expenses of $1.2 million and outside services of $0.3 million.

These decreases were partially offset by increases in depreciation and amortization of $1.2 million and stock-based compensation of $0.5 million.

Research and development expenses for the nine months ended September 28, 2024 decreased by $1.5 million as compared with the corresponding period in 2023 mainly due to decreases in prototypes and test equipment expenses of $3.6 million, outside services of $1.7 million and personnel expenses of $0.5 million.

These decreases were partially offset by increases in depreciation and amortization of $3.2 million and stock-based compensation of $0.3 million.

For the three and nine months ended September 28, 2024, research and development expenses as a percentage of revenue increased to 41% from 33% and 39% from 33%, respectively, due to lower revenue compared to the same periods in 2023.

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 platform, cloud and managed services.

Research and development expenses for the three months ended March 29, 2025 decreased by $0.4 million as compared with the corresponding period in 2024 mainly due to decreases in personnel expenses of $1.4 million and outside services of $1.2 million.

These decreases were partially offset by increases in prototypes and test equipment expenses of $0.7 million, stock-based compensation of $0.6 million and depreciation and amortization of $0.4 million.

For the three months ended March 29, 2025, research and development expenses as a percentage of revenue was flat compared to the same period in 2024.

We expect our investments in research and development to remain relatively flat in absolute dollars in the short term, and decline as a percentage of revenue, as we continue to expand the functionality and capabilities of our platform, cloud and managed services.

General and Administrative Expenses

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 Variance

Dollars Variance

Percent September 28,

2024 September 30,

Three Months Ended

2025 March 30,

2024 Variance

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Percent of revenue 12 % 12 %

General and administrative expenses for the three months ended September 28, 2024 decreased by $2.1 million as compared with the corresponding period in 2023 mainly due to decreases in professional services expenses of $1.2 million, stock-based compensation of $0.5 million and personnel expenses of $0.4 million.

General and administrative expenses for the nine months ended September 28, 2024 decreased by $1.0 million as compared with the corresponding period in 2023 mainly due to decreases in professional services expenses of $2.0 million and stock-based compensation of $1.3 million.

These decreases were partially offset by an increase in personnel expenses of $1.7 million.

For the three and nine months ended September 28, 2024, general and administrative expenses as a percentage of revenue increased to 12% from 10% and 12% from 9%, respectively, due to lower revenue compared to the same periods in 2023.

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.

General and administrative expenses for the three months ended March 29, 2025 increased by $0.5 million as compared with the corresponding period in 2024 mainly due to increases in personnel expenses of $1.6 million and stock-based compensation of $0.6 million.

These increases were partially offset by decreases in professional services expenses of $1.8 million.

For the three months ended March 29, 2025, general and administrative expenses as a percentage of revenue were flat compared to the same period in 2024.

We expect our general and administrative investments to be fairly constant in absolute dollars in the near term, but decline as a percentage of revenue.

Interest and Other Expense, net

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 Variance

Dollars Variance

Percent September 28,

2024 September 30,

Three Months Ended

2025 March 30,

2024 Variance

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Percent of revenue 1 % 1 %

Interest and other expense, net increased by $0.9 million and $2.2 million as compared with the corresponding periods in 2023 mainly due to a higher rate of interest earned on our cash, cash equivalents and marketable securities as well as a larger cash and marketable securities balance.

Interest and other expense, net increased by $0.6 million as compared with the corresponding period in 2024 mainly due to a larger cash and marketable securities balance.

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 Variance

Dollars Variance

Percent September 28,

2024 September 30,

Three Months Ended

2025 March 30,

2024 Variance

Dollars Variance

Income taxes (benefit) $ (3,824) $ 1,190 $ (5,014) (421) % $ (4,183) $ 7,857 $ (12,040) (153) %

Income taxes $ 1,797 $ 365 $ 1,432 392 %

Effective tax rate (60.1) % 78.0 %

For the three and nine months ended September 28, 2024, our income tax benefit was $3.8 million and $4.2 million for an effective tax rate of 49.1% and 26.1%, respectively, which differed from the statutory rate of 21% primarily due to the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S.

federal research tax credits, excess tax benefits from stock-based compensation and the U.S.

For the three ended March 29, 2025, our income tax expense was $1.8 million for an effective tax rate of (60.1)%, which differed from the statutory rate of 21% primarily due to the effect of non-deductible stock-based compensation for executive officers and excess tax expense from stock-based compensation offset by the favorable impact of U.S.

federal research tax credits and the U.S.

tax impact of foreign operations.

The effective tax rates for the three and nine months ended September 28, 2024 are lower than the similar periods in 2023 primarily as a result of negative pre-tax earnings with a relatively consistent level of non-deductible expenses offset by lower excess tax benefits from stock-based compensation.

The effective tax rates for the three months ended March 29, 2025 are lower than the corresponding period in 2024 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.

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Liquidity and Capital Resources

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 and issuance of common stock under our equity incentive plans.

As of September 28, 2024, we had cash, cash equivalents and marketable securities of $287.6 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S.

For the past few years as our business grew and was profitable, we have funded our operations and investing activities from cash flow generated from our operations as well as the issuance of common stock under our equity incentive plans.

As of March 29, 2025, we had cash, cash equivalents and marketable securities of $282.3 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S.

government and its agency securities, corporate debt securities and commercial paper.

Operating Activities

Net cash provided by operating activities was $53.0 million for the nine months ended September 28, 2024 and consisted of a net loss of $11.8 million offset by non-cash charges of $49.1 million and cash flow increases of $15.7 million reflected in the net change in assets and liabilities.

Net cash provided by operating activities was $17.2 million for the three months ended March 29, 2025 and consisted of a net loss of $4.8 million offset by non-cash charges of $21.4 million and cash flow increases of $0.6 million reflected in the net change in assets and liabilities.

Non-cash charges primarily consisted of stock-based compensation of $19.7 million and depreciation and amortization of $4.3 million partially offset by deferred income taxes of $1.5 million and the net accretion of available-for-sale securities of $1.1 million.

Cash flow increases resulting from the net change in assets and liabilities primarily consisted of a decrease in accounts receivable of $40.8 million and inventory of $32.4 million, both in line with our revenue decline, and a decrease in prepaid expenses and other assets of $7.7 million mainly due to a decrease in supplier deposits.

These changes were partially offset by a decrease in accrued liabilities of $42.6 million relating to various factors including a decrease in our liability for components, a decrease in incentive compensation related accruals and the settlement of a legal matter;

a decrease in accounts payable of $11.8 million due to decreased inventory purchases;

and a decrease in deferred revenue of $10.6 million primarily due to the recognition of previously deferred revenue and a trend to move customers to monthly from annual billing arrangements.

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.

Non-cash charges primarily consisted of stock-based compensation of $50.1 million and depreciation and amortization of $12.2 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 2023 Calix ConneXions Innovation and Customer Success 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.

Cash flow increases resulting from the net change in assets and liabilities primarily consisted of a decrease in accounts receivable of $3.8 million due to the timing of customer payments, an increase in deferred revenue of $3.2 million driven by support contract renewals, a decrease in prepaid expenses and other assets of $2.8 million mainly due to a reduction in our inventory deposits and an increase in accounts payable of $3.5 million due to the timing of inventory receipts.

This was partially offset by a decrease in accrued liabilities of $14.6 million relating to various factors including a decrease in incentive compensation related accruals.

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.

Investing Activity

For the nine months ended September 28, 2024, cash used in investing activities of $75.9 million consisted of net purchases of marketable securities of $63.0 million and capital expenditures of $12.9 million, consisting primarily of purchases of test and computer equipment.

For the nine months ended September 30, 2023, cash provided by investing activities of $38.5 million consisted of net maturities 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 three months ended March 29, 2025, cash provided by investing activities of $11.0 million consisted of net purchases of marketable securities of $15.3 million and partially offset by capital expenditures of $4.3 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.

Financing Activities

Net cash provided by financing activities of $21.7 million for the nine months ended September 28, 2024 primarily consisted of proceeds from the issuance of common stock related to our equity plans of $25.4 million partially offset by repurchases of our common stock of $3.7 million.

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 used in financing activities of $29.1 million for the three months ended March 29, 2025 primarily consisted repurchases of our common stock of $40.0 million partially offset by proceeds from the issuance of common stock related to our equity plans of $10.8 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.

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, we have a common stock repurchase program, which had $109.9 million available as of September 28, 2024.

Furthermore, we have a common stock repurchase program, which had $62.9 million available as of March 29, 2025.

In April 2025, our Board of Directors authorized a $100.0 million increase to this program.

Our stock repurchase program does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time.

We believe, based on our current operating plan and expected operating cash flows, that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated cash needs for at least the next twelve months.

If we are unable to generate sufficient cash flows or obtain other sources of liquidity, we will be forced to 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.

If we are unable to generate sufficient cash flows or obtain other sources of liquidity, we will be forced to limit or terminate our stock repurchase program, limit our development activities, reduce our investment in growth initiatives and/or institute cost-cutting measures, all of which may adversely impact our business and potential growth.

Contractual Obligations and Commitments

Our principal commitments as of September 28, 2024 consisted of contractual obligations under non-cancelable outstanding purchase obligations and operating lease obligations for office space.

The following table summarizes our contractual obligations as of September 28, 2024 (in thousands):

Our principal commitments as of March 29, 2025 consisted of contractual obligations under non-cancelable outstanding purchase obligations and operating lease obligations for office space.

The following table summarizes our contractual obligations as of March 29, 2025 (in thousands):

Payments Due by Period

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(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.

(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 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 2033, including our new San Jose headquarters lease that will commence in August 2025.

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.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis