Calix Investor Presentation

Transcription

1 Calix Investor Presentation ACCESS INNOVATION July 31,

2 Safe Harbor All statements other than statements of historical facts contained in this presentation, including statements regarding our future operations and financial position, business strategy and plans and objectives of management for future operations, are forwardlooking statements. In some cases, forward-looking statements can be identified by terminology such as believe, may, estimate, continue, anticipate, intend, should, plan, expect, predict, potential, or the negative of these terms or other similar expressions. This presentation includes forward-looking statements regarding future events, including but not limited to, our Non-GAAP second quarter 2015 financial guidance; the growth of internet traffic and the requirements for enhanced telecommunication networks; capital spending on telecommunication and broadband products; our ability to develop products and services to help our customers transform their networks, including our B-, C-, and E-Series, BLM platform, P- and T-Series ONTs and GigaCenters, Compass suite of products, such as Service Verify, Open Link Cable, and Consulting services; the acceleration of the adoption of gigabit services; our growth drivers; the ongoing expansion of our total addressable market; and our future business and financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those set forth in our filings with the Securities and Exchange Commission ( SEC ), especially in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Annual Report on Form 10-K for fiscal year 2014, and various other SEC filings including our Form 10-Q for the first fiscal quarter of You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or will occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assume responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason to conform these statements to actual results or to changes in our expectations. You should read our SEC filings and the documents that we have filed with the SEC as exhibits to those filings, with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. 2

3 Agenda Calix: Access Innovation The Access market opportunity New product momentum Latest financial update Appendix 3

4 4 Calix: Access Innovation

5 Company History 2015: Over 300 customers to-date have placed orders for GigaCenters 2014: Launched Open Link Cable and GigaCenter solutions 2012: Ericsson fiber access products and sales channel acquired 2011: Occam acquired; expanded into EMEA and Australian markets 2010: IPO on NYSE; Expansion into Latin American market 2008: Expanded into MSO market 2007: Introduced first E-Series products 2006: OSI acquisition added subscriber edge 2005: Expanded into Caribbean market 2002: Carl Russo appointed CEO; Expansion into Tier 2 carriers 2001: Shipped first product - C7 1999: Calix founded 5

6 Customer Base with 1,200+ Service Providers Broad North American Customer Base with Growth Internationally IOCs 6

7 7 The Broadband Market Opportunity

8 the clear global leader in gigabit broadband services deployments. BroadbandTrends, February

9 Gigabit Speeds Provide Powerful Differentiation Gigabit Fiber Mbps G.fast for local loops < 500 m and speeds from 150Mb/s to 1 Gb/s DOCSIS 3.0 with 4 channel bonding with speeds up to >100Mb/s Vectored and Bonded Copper Technologies with speeds from <50Mb/s to >300Mb/s Distance (ft) 9

10 Accelerating Gigabit Deployment Trend 10 Source: Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors Jefferies Group LLC May 6, 2015

11 Leveraged to Key Growth Markets Calix-Enabled Residential Gigabit Deployment Announcements* Q Q Q Q Q Q *Additional customer deployments from Calix customers have been secured but not yet announced. 11

12 Fiber Deployment Cost Model Electronics represent ~15-25% of the total capex cost per unit served in a fiber deployment 50% Aerial/50% MDU 50% Aerial/0% MDU 100% Aerial/20% MDU 100% Aerial/0% MDU 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Non-Electronics/Sub Electronics/Sub 12 Source: Suburban FTTP Network Scenarios, Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors Jefferies Group LLC May 6, 2015

13 Fiber Benefits Customers and Vendors Higher customer satisfaction with fiber Reliability, picture quality and faster speeds for over 90% of users Fewer customer calls compared to DSL and Cable Best value for consumers compared to DSL Copper, or Cable Service providers take rates for FTTH reach 46% FCC Challenge for 2015: Gigabit deployments in all 50 states Calix-enabled Gigabit deployments in 40 states today Over 100 announced customer deployments through early July Source: RVA LLC: North American FTTH Accelerates, Q

14 Fiber Drives Higher ARPU $142 $110 Source: RVA LLC: Average Cost of All Services Reported by Consumers by Broadband Type, Q

15 FFTH Reduces Service Provider Costs Estimated Opex Savings 42% 35% 23% 0-9% 10-19% 20% or greater Source: RVA LLC: Estimated OpEx Savings Among Those With Active FTTH Customers, Q

16 Fiber Drives High Consumer Take Rates $140,000 90% $120,000 83% 81% 80% 72% 70% $100,000 62% 60% $80,000 50% $60,000 40% $40,000 27% 30% 20% $20,000 10% $0 Wornall Homestead Countryside Roanoke Cental Hyde Park Community College 0% Median HH Income Take Rate 16 Source: Google Fiber Kansas City, Bernstein Proprietary Census. Survey conducted by Haynes and Company, May 2014.

17 Economics Favor Fiber Solutions We think fiber is better than cable and the execution that we have where we have a lot of momentum. There's a lot of positive vibe in the community about our product and we're executing very well. So, we're offering very competitive offers and all that combined is leading the continued growth. July 30, 2015 We are planning on spending an additional $100 million in capital next year on fiber. It is a superior asset; it enables us to remain relevant with our customer base. Sept. 24, 2014 In the consumer business, FiOS continues to be the driver of our positive revenue trends, resulting in revenue growth of 4.5%. Mass markets, which includes small business, grew 3.2%. FiOS now represents 79% of consumer revenue. In the second quarter, FiOS consumer revenue grew 9.8%... July 21, Broadband net adds were positive for the first time in nine quarters. Our continued investments to push fiber deeper into the network and shorten loop lengths have improved our capacity and broadband speed availability and are producing improving results from our broadband franchise. May 7, 2015 The [REIT] positions Windstream to accelerate broadband investments and transition to an IP centric network faster July 29, 2014

18 Fiber is a Bright Spot in Wireline 50% Fioptics availability 40% Latest Quarter Wireline revenues -1% y/y Fioptics revenues +32% y/y $29 $31 $34 $37 $40 $42 $45 30% 20% 10% 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Fioptics Rev ($M) 0% 1Q14 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Fios Internet Penetration Fios Video Penetration Latest Quarter Wireline revenues -2% y/y Fios revenues +10% y/y $2,965 $3,041 $3,125 $3,200 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Fios Rev ($M) $3,308 $3,352 $3,438 42% 40% 38% 36% 34% 32% 30% 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Latest Quarter Wireline revenues -1% y/y Strategic revenues +5% y/y Prism subscribers +25% y/y $683 $702 $709 $712 $727 $738 6,150 6,100 6,050 6,000 5,950 Broadband Subscribers ('000s) - LHS Prism Subscribers ('000s) - RHS Q13 1Q14 2Q14 3Q14 4Q14 1Q15 5,900 4Q13 1Q14 2Q14 3Q14 4Q14 1Q Source: Company reports Strategic Rev ($M)

19 Operators Focus on Increasing Uptake The Importance of Subscriber Penetration Rates on FTTP Economics (5-Year NPV and IRR) 19 Source: Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors Jefferies Group LLC, May 6, 2015

20 Solutions Leveraged to Broadband Growth Fiber-based deployments Copper-based deployments Subscriber Edge Equipment 20

21 21 New Product Momentum

22 Access Networks: Datacenter to Subscriber 22 Source: Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors Jefferies Group LLC, May 6, 2015

23 Calix Solutions from Datacenter to Subscriber Edge Data Center Outside Plant Premises Fiber Optimized Pay-as-you-grow architecture Service optimized E7-20 E5-48 E7-2 E E 854G 23

24 BPON to GPON upgrade: The Conventional Way Central Office BPON OLTs GPON OLTs Generic + 1 GPON system + 32 GPON ONTs + 2 CO techs (day) + 32 techs in field (simultaneously) 1:32 split BPON ONTs GPON ONTs CAPEX $25K CAPEX $8K OPEX $1K OPEX $32K 20 Mbps Home MDU Total cash spend = $66K -- or $2,063 per home 24

25 BPON to GPON upgrade: The Calix Way Central Office GPON BPON OLTs 1:32 split Autodetect GPON ONTs 80 Mbps to 1Gbps Home + 1 GPON line card + 1 GPON OIM - 1 BPON trade-in + 1 CO tech (2 hrs) + 0 techs in field (no truck roll) CAPEX $4K OPEX $120 MDU Total cash spend = $4.12K -- or $128 per home 25

26 Cable Networks: The Conventional Way Cable operators challenged to offer gigabit speeds over existing HFC plant Next gen DOCSIS 3.1 scheduled for initial deployments late 2015 at the earliest Largest unanswered question is the cost per household threshold that forces the switch to fiber-based systems 26

27 Calix Networks: Calix GPON over DOCSIS Today Calix Open Link Cable software translates GPON into DOCSIS for a seamless transition No change to back office OSS or DOCSIS provisioning No change to service turn-up procedures 27

28 GigaCenter: Strong traction with Service Providers Integrated GigaCenter and Compass Consumer Connect Industry s First Carrier-Class Wi-Fi Premises Solution Remote activation of new broadband devices and management of home networks Gigacenter now with more than 300 service provider customers since its launch in late

29 Calix Customers Report Higher ROIC Before switching to Calix, one service provider s average DSLAM life was 2 ½ years: I repurchased these assets 3 times before the end of their depreciable life. After 10 years, same Calix C7s that initially delivered ADSL services are delivering advanced VDSL2 and GPON services 29

30 G.fast brings gigabit experience to brownfield MDUs G.fast solutions are ideally suited for short loops < 500 m and speeds from 150Mb/s to 1 Gb/s Per U.S. Census data there are over 34 million multi-tenant housing units in the U.S. (per 2013 ACS) with an estimated more than 50% of these units built before 1980 Aged residential and commercial units are characterized by difficulties in riser access and restricted building access G.fast provides high speed when fiber is not available On June 2, 2015 Calix announced a trio of new products which will leverage standardsbased G.fast technology to bring a gigabit experience to subscribers located in multidwelling unit (MDU), multi-tenant unit (MTU), and high-density single family unit (SFU) dwellings GPON/AE Living Units MDU Tower Riser 870 G.Fast node 30

31 31 Latest Financial Update

32 Q2 2015: Key Developments Revenues of $99.1M, +1.1% y/y Slightly above the high-end of $94-$98M guidance led by strength in Tier 2/Tier 3 accounts Sixth consecutive quarter at or above revenue guidance range First half revenues +3.5% y/y Non-GAAP Gross margins increase to 51.0%, +330bps y/y Highest non-gaap gross margins as a public company Near-term favorable product and geographic mix as well as long-term shift to software-centric platform offerings Positive operating profits on margins and operating expense leverage Improved product mix and leverage off higher revenues Offset operating expense increase of 14% y/y 32

33 New product momentum continues GigaCenter momentum continues Service provider customer count increased to over 300 at quarter end Customer orders and deployments remain strong with solid initial feedback Calix-enabled gigabit residential deployments increase to 100 Deployments up 30% q/q and 3x from year ago levels Service provider customers accelerating deployment plans as end customer demand remains robust Two next-generation products announced during the quarter G.fast solutions for MDU and high-density single family unit applications NG-PON2 cards enabling the ability for our E-Series customers to deliver a multi-gigabit experience to their subscribers 33

34 Q Financial Results vs. Guidance ($ in millions, except per share amounts) Actual Guidance Revenues $99.1 $94.0-$98.0 Non-GAAP gross margin 51.0% 48%-49% Non-GAAP operating expenses $47.3 $48.0-$49.0 Non-GAAP EPS $0.06 ($0.06) ($0.02) Cash flow from operations $5.0 Positive 34

35 Q Income Statement Highlights Gross margins of 51.0% Well above 48%-49% guidance due to favorable product and regional mix Highest level of non-gaap gross margins as a public company Long-term non-gaap gross margin target remains >50% $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $0.0 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q % 51.0% 50.0% 49.0% 48.0% 47.0% 46.0% 45.0% 44.0% 43.0% 42.0% 41.0% Revenue Gross Margin (%) Operating expenses decrease as a percentage of revenues $60.0 $ % 50.0% Operating expenses relative to quarterly revenues peaked in Q1-15 Continued R&D investment to support next generation products $40.0 $30.0 $20.0 $ % 40.0% 35.0% Sales, Marketing and General expenses decline relative to revenues $0.0 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q % Operating Expenses Percent of Revenue 35

36 1H 2015 Income Statement Highlights $200.0 $ H 2015 revenues +3.5% y/y Strength in domestic markets with Tier 2/Tier 3 customers Timing and program shifts in International markets gated results $M $160.0 $140.0 $120.0 $100.0 $80.0 $ % y/y $183.8 $190.2 New product momentum with key platform products gaining traction with customers $40.0 $20.0 $0.0 1H14 1H15 Gross margins increase on mix and platform investments 60.0% 50.0% 44.9% 45.2% 47.9% 46.9% 50.1% 1H15 gross margins +320bps y/y and +970bps since 1H10 Favorable product and geographic mix in 1H15 relative to 1H14 $M 40.0% 30.0% 20.0% Long-term trend reflective of investments in Unified Access architecture platform 10.0% 0.0% 1H11 1H12 1H13 1H14 1H15 36

37 Improving Consistency Relative to Guidance $115 Six consecutive quarters of reported revenues in-line or better than guidance Despite challenging visibility and uneven customer order patterns New product momentum remains strong with increasing customer acceptance of platform offering Expanding gross margins drive Non-GAAP EPS at or above guidance for six consecutive quarters Focused planning process drives strategic investments in platform offering On going benefits from shift to softwarecentric platform and product-specific momentum REVENUES IN $M NON-GAAP EPS $110 $105 $100 $95 $90 $85 $80 $75 $0.20 $0.15 $0.10 $0.05 $0.00 ($0.05) ($0.10) ($0.15) Q Q Q Q Q Q Q Q Q Q Q Q

38 Focused on Profitable Growth 1H15 revenues +3.5% y/y Including mid-point of guidance for Q3-15 and consensus estimates for Q4-15, 2H15 revenues +5.5% y/y Strong momentum with key new products such as Gigacenter and steady demand from Tier 2/Tier 3 customers Consistent improvement in non- GAAP gross margins Continuing benefits from shift to software-centric platform offering as opposed to single-point solutions Calix value proposition validated as key new products drive lower total cost of ownership $M $450.0 $400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $ % 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% $232.9 Revenue for 2015 includes Guidance mid-point and Consensus estimate for Q $287.0 $344.7 $330.2 $382.6 $401.2 $ E 2015 gross margins include Q Guidance midpoint and consensus Q estimate 47.3% 46.7% 43.7% 44.4% 41.8% 35.5% 49.8% E 38

39 Balance Sheet & Cash Flows Highlights $120.0M $112.0M Cash and equivalents of $99.5M $3.4M used to buyback 435K shares of CALX common shares with more than $36.6M left on remaining authorization $1.9M spent on capital expenditures $100.0M $80.0M $60.0M $40.0M $20.0M $69.4M $80.1M $83.0M $75.5M $79.3M $88.1M $97.8M $99.5M Operating cycle of 128 days Inventory days decreased q/q to 91 days from 102 days in the prior quarter and 93 days in the year ago quarter due to shipment linearity DSOs flat q/q at 37 days and down slightly from 38 days in the year ago quarter $0.0M Q2-13 Q3-13 Q4-13 Q1-14 Q Days 150 Days 140 Days 140 Days 130 Days 131 Days 119 Days 120 Days 100 Days 80 Days 60 Days 40 Days 20 Days Q3-14 Q Days 111 Days Q1-15 Q Days 128 Days 0 Days Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q

40 Q Operating Performance Guidance Revenues $107-$111M Gross margin 49-50% Operating expenses $50-$51M Non-GAAP EPS $0.05 $0.09 Cash flow from operations Positive 40

41 41 Appendix

42 Non-GAAP to GAAP Reconciliation The Company uses certain non-gaap financial measures in this press release to supplement its consolidated financial statements, which are presented in accordance with GAAP. These non-gaap measures include non- GAAP net income (loss) and non-gaap basic and diluted income (loss) per share. These non-gaap measures are provided to enhance the reader's understanding of the Company's operating performance as they primarily exclude certain non-cash charges for stock-based compensation and amortization of acquisition-related intangible assets, and non-recurring acquisition-related and other expenses, which the Company believes are not indicative of its core operating results. Management believes that the non-gaap measures used in this presentation provide investors with important perspectives into the Company's ongoing business performance and management uses these non-gaap measures to evaluate financial results and to establish operational goals. The presentation of these non-gaap measures is not meant to be a substitute for results presented in accordance with GAAP, but rather should be evaluated in conjunction with those GAAP results. A reconciliation of the non-gaap results to the most directly comparable GAAP results is provided in this presentation. The non-gaap financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. 42

43 Non-GAAP to GAAP Q Reconciliation (Unaudited in thousands, except earnings per share data) Non-GAAP Stock-Based Compensation Amortization of Intangible Assets Acquisition- Related Costs Revenue $ 99,129 $ $ $ $ 99,129 Cost of revenue 48, ,088 50,840 Gross profit 50,588 (211) (2,088) 48,289 Gross margin 51.0% (0.2 )% (2.1 )% % 48.7 Operating expenses 47,320 4,130 2, ,054 Operating income (loss) 3,268 (4,341) (4,640) (52) (5,765) Interest and other income (expense), net Income (loss) before taxes 3,356 (4,341) (4,640) (52) (5,677) Provision for income taxes Net income (loss) $ 3,254 $ (4,341) $ (4,640) $ (52) $ (5,779) Weighted average diluted shares used to compute non-gaap net income (loss) per common share 52,455 52,455 52,455 52,455 Non-GAAP net income (loss) per diluted share $ 0.06 $ (0.08) $ (0.09) $ Weighted average basic and diluted shares used to compute GAAP net loss per common share: 51,950 GAAP net loss per share $ (0.11) GAAP 43

44 Non-GAAP to GAAP Q Reconciliation (Unaudited in thousands, except earnings per share data) Non-GAAP Stock-Based Compensation Amortization of Intangible Assets Acquisition- Related Costs Revenue $ 91,038 $ $ $ $ 91,038 Cost of revenue 46, ,088 48,548 Gross profit 44,753 (175) (2,088) 42,490 Gross margin 49.2% (0.2 )% (2.3)% % 46.7% Operating expenses 48,148 3,487 2, ,377 Operating loss (3,395) (3,662) (4,640) (190) (11,887) Interest and other income (expense), net Loss before taxes (3,347) (3,662) (4,640) (190) (11,839) Provision for income taxes Net loss $ (3,438) $ (3,662) $ (4,640) $ (190) $ (11,930) Weighted average shares used to compute net loss per common share: Basic and diluted 51,732 51,732 51,732 51,732 51,732 Net loss per common share: Basic and diluted $ (0.07) $ (0.07) $ (0.09) $ $ (0.23) GAAP 44

45 Non-GAAP to GAAP Q Reconciliation (Unaudited in thousands, except earnings per share data) Non-GAAP Stock-Based Compensation Amortization of Intangible Assets Revenue $ 98,005 $ $ $ 98,005 Cost of revenue 51, ,088 53,663 Gross profit 46,784 (354) (2,088) 44,342 Gross margin 47.7% 45.2% Operating expenses 41,630 4,050 2,552 48,232 Operating income (loss) 5,154 (4,404) (4,640) (3,890) Interest and other income (expense), net Income (loss) before taxes 5,196 (4,404) (4,640) (3,848) Provision for income taxes Net income (loss) $ 5,093 $ (4,404) $ (4,640) $ (3,951) Weighted average diluted shares used to compute non-gaap net income (loss) per common share 50,961 50,961 50,961 Non-GAAP net income (loss) per diluted share $ 0.10 $ (0.09) $ (0.09) Weighted average basic and diluted shares used to compute GAAP net loss per common share 50,573 GAAP net loss per share $ (0.08) GAAP 45

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