Investor Presentation. May 2017

Transcription

1 Investor Presentation May

2 2 Safe Harbor This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Examples of forward-looking statements include, but are not limited to, statements about our anticipated growth and growth drivers; our future financial condition and results of operations; our future business, financial and operating performance; our growth strategy and market outlook; our development of new products and product features; our estimates and planned cost savings related to our restructuring plan; and the success and/or market adoption of our products and solutions. We have based these forward-looking statements on our current expectations, assumptions and projections. Our actual results or actions may differ materially from those projected in forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and factors that could cause results to differ materially as described in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Except as may be required by law, we undertake no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, We are not providing any financial guidance update in this presentation. Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com

3 Agenda Calix at a Glance The Coming Wave Access revolution The Rising Tide Infrastructure Investment Financials 5. Supplemental Information 3

4 Calix at a Glance 4

5 Calix strategic focus: The access network Content Applications Device-enabled Subscriber 5

6 Our Customers Over 1,300 and growing Customer Mix % 21% 15% 54% CenturyLink Other Medium/Small Domestic Source: Calix, Inc. Windstream International 6

7 $ in millions $ in millions Our Revenue Growth Y/Y +25.5% $550.0 $500.0 Y/Y + >10% $140.0 $120.0 Y/Y +8.4% $107.4M Y/Y +7.9% $121.2M $131.8M Y/Y +19.5% $117.5M Y/Y +15.4% $124.0M $450.0 Y/Y +12.6% $458.8 $100.0 $400.0 $382.6 CAGR +7.3% $401.2 $407.5 $80.0 $350.0 $330.2 $60.0 $300.0 $40.0 $250.0 $20.0 $ E $0.0 2Q16 3Q16 4Q16 1Q17 2Q17E Note: 2017 and 2Q17 revenue estimates based on mid-point of guidance provided in First Quarter 2017 Financial Results earnings release issued May 9,

8 The Coming Wave 8

9 Our Place Content Applications Device-enabled Subscriber 9

10 Devices Globally (B) B IoT B Tablets PCs TVs Non-Smartphones Smartphones Other Source: Cisco VNI and Business Intelligence 10

11 Total Workloads Cloud Growth (M) Public Private Traditional IT Source: VMware 11

12 The Opportunity Content Applications IT Workloads Source: VMware Device-enabled Subscriber Total Devices Source: Cisco VNI and Business Intelligence 12

13 The End State: a Global LAN with Flexible Operating Systems and Robust Analytics Discover Simplify Elevate Content Applications Fast Always On Simple Secure 13

14 API revolution Software Defined Access Global SDN/NFV PLANNING OPERATIONS SUPPORT MARKETING SUBSCRIBER Ecosystem Analytics Policy Device & Service Activation Virtual Applications Data Center G.fast GigaCenter NG-PON2 GPON 14

15 revolution Systems E9-2 E5-520 E3-2 E7-2 E5-308 GigaFamily E7-20 E5-16F E3-16F Data Center Outside Plant Premises 15

16 Fast revolution AXOS Always On Simple 2 years to certify and activate a service $10B of Access downtime 60% of TCO related to Network Operations Management REST SNMP NETCONF / YANG CLI OpenFlow Control & Data QoS Manager Timing Topology & Discovery Protocols Performance Monitoring Platform Configuration and Upgrade Diagnostics Layer 3 Protocols OAM Host Services 3 rd Party Layer 2 Protocols Multicast Protocols Traffic Management Syslog Multi-Service Protocols 35 Infrastructure Service Abstraction Layer Hardware Abstraction Layer 16

17 revolution Calix Cloud Next generation cloud services that reveal actionable insights for key business functions and their strategic needs Discover the path to revenue growth and business efficiency through analytics Simplify decision making and accelerate time to act through data correlation Elevate key business functions to be agile and subscriber driven through actionable insights Note: Calix Cloud subscription services introduced in October Marketing Cloud released in April

18 revolution Disruptive Economics of the AXOS E3-2 E km Before: Traditional Network Architecture Master headend and Central office Maximum reach of 20km from each office Branch network serving up to seven hubs Many offices, staffed and powered After: With AXOS E3-2 Intelligent Node Distributed Access/Service Management Collapse Extend the reach of data centers by up to 140 km Integrated routing and subscriber management Up to 80% TCO savings realized after shuttering offices (1) (1) Calix estimates 18

19 revolution Disruptive Economics of the AXOS E9-2 Defining the Access Edge Subscriber facing functions Agnostic deployments (DC,CO,HE) Ride the VNF wave Unbounded Performance Non-blocking Lowest power Snaps into Data Center fabrics Fewer to provision and manage Less rack space, HVAC, power Current Core Router Future Open White Box Switching Compute Store Edge Router Aggregation switch Subscriber Management Aggregation OLT OLT 19

20 The Rising Tide 20

21 Access is Key for Communication Service Providers Q1 Earnings Comments A Rising Tide We are expanding our broadband capacity throughout our network and migrating more of our traffic on-net but also diversifying away from being solely a connectivity provider With increased availability of premium broadband speeds, enabled by our Project Excel, we have a significant opportunity to migrate customers at faster speeds, which will reduce churn and improve the customer experience. This will position Windstream to take market share and grow revenue and contribution margin. May 4, 2017 " as we look at the networks of the future, they're going to be built with a lot of fiber deep into the network and that network is going to be built for multiuse cases, not for a single-use case. So it's going to deliver consumer to the home application. It's going to deliver small business applications. It's going to light up enterprise buildings. And it's also going to deliver smart cities and IoT solutions, too. April 20, 2017 we believe the trends we are seeing in our business offer strong validation of the rationale for our investment in high-quality, high-bandwidth, broadband network infrastructure.. consumer broadband subscriber trends have been improving the last several quarters and improved again this quarter. The key thing to note here is that in areas where we are investing in higher speeds, we are growing customers and average revenue per user. May 3, 2017 Source: Transcript of Q earnings calls for respective companies 21

22 Bits per second Broadband Demand Growth Unrelenting (exponential) Nielsen s Law (50% annualized growth for highend connections) has proven to be accurate for 35+ years Source: Nielsen Norman Group 22

23 New Technologies Meet the Demand Unified Access Transparent quality of experience Unmatched subscriber experience FTTH DOCSIS 3.1 Remote OLT 5G / Wi-Fi Community Wi-Fi HotSpot 2.0 G.fast A2 NG-PON2 10G-EPON XGS-PON G.hn Bandwidth on demand G.fast A1 Gigabit experience CABLE WIRELESS FIBER COPPER DOCSIS 3.0 CCAP Wi-Fi 4x4 XGPON-1 Unlicensed Spectrum GPON EPON VDSL2 23

24 With the shift toward higher data speeds G XGS/NG-PON2 Gigabit FTTH Gigabit GPON 10G PON XGS/NG-PON2 DOCSIS Bonded DOCSIS 3.1 (initial) 24

25 Lower Operating Costs Estimated Operating Expense Savings $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 High Customer Take Rates 83% 81% 72% 62% 27% Wornall Homestead Countryside Roanoke Central Hyde Park Community College 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Median HH Income Take Rate Source: RVA LLC: North American FTTH Accelerates, (Q4 2014), RVA LLC North America FTTH Progress and Impact 2015 (June 2015), Google Fiber Kansas City, Bernstein Proprietary Census. Survey conducted by Haynes and Company (May 2014) 25

26 leading to higher revenue and penetration rates Source: Cincinnati Bell (September 2014) 26

27 while infrastructure builds lead electronics Electronics represent ~15-25% of the total capex cost per unit served in a fiber deployment after initial build costs 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 Source: Suburban FTTP Network Scenarios, Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors Jefferies Group LLC (May 6, 2015) 27

28 Connect America Fund Repurposed Universal Services Fund Nearly $4B annually now completely focused on universal broadband Multi-year investment (5-year for price cap and 10-year for rate of return) Terms Minimum 10/1 Mbps for all carriers and minimum 25/3 Mbps for many smaller carriers Targeted by state and census block at all uncompetitive areas Milestone-driven buildout requirements with first price cap milestone in 2017 and first rate of return milestone in 2020 Calix Strength Market leader among eligible U.S. carriers Source: FCC 28

29 Financials 29

30 Target Financial Model (1) ($ in millions, except percentage and per share amounts) 2016 Long-Term Target Revenues $458.8 $600.0 Non-GAAP gross margin 44.9% >50% Non-GAAP operating expenses (%) 46.6% 38-42% Non-GAAP operating margin (1.7%) >10% Non-GAAP EPS ($0.14) >$1.25 (1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, We are not providing any financial guidance update in this presentation. Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com 30

31 Bridging the long-term financial model (1) 2016 Base Base business growth driven by existing customer access network investments Increased market penetration with new customers and new market opportunities Innovation driven disruption driven by customer investments in next generation networks Target Revenue (1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, We are not providing any financial guidance update in this presentation. 31

32 Q Financial Results vs. Guidance ($ in millions, except percentages and per share amounts) Actual Non-GAAP Guidance Non- GAAP Actual GAAP Reconciliation of Guidance to GAAP Revenues $117.5M $110 - $114M $117.5M $110 - $114M Gross margin 30.1% % 29.3% % Operating expenses $63.1M (1) $ $63.0M $67.2M $ $66.9M EPS ($0.57) (1) ($0.57) ($0.49) ($0.67) ($0.67) ($0.59) Cash flow from operations ($23.5M) Negative (1) Excludes the impact from Non-GAAP items including restructuring charges Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com 3

33 Q Operating Performance Guidance (1) ($ in millions, except percentages and per share amounts) Reconciliation of Guidance to GAAP Revenues $122 - $126M $122 - $126M Non-GAAP Gross margin % % Non-GAAP Operating expenses $ $61.0M (2) $ $65.8M Non-GAAP EPS ($0.19) ($0.12) (2) ($0.28) ($0.21) Cash flow from operations (GAAP) Positive (1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, We are not providing any financial guidance update in this presentation. (2) Excludes the impact from Non-GAAP items including $1.7 million in estimated restructuring charges for Q Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com 3

34 2017 Full Year Operating Performance Guidance (1) At least 10% year over year revenue growth Lower Non-GAAP net loss than reported in 2016 (2) (1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, We are not providing any financial guidance update in this presentation. (2) Excludes the impact from Non-GAAP items including stock-based compensation, amortization of intangibles and restructuring costs Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com 3

35 Q&A 35

36 Additional Information Additional information available at Stock Information News & Financial Information Events & Presentations Leadership & Governance Investor Resources 36

37 Supplemental Information 37

38 GAAP to Non-GAAP Reconciliation Q Q Cost of Revenue and Gross Margins ($ in thousands, except percentages) (Unaudited) Q Q Q Q Q Q Q Q GAAP Revenues $99,129 $112,297 $104,999 $98,375 $107,425 $121,187 $131,800 $117,518 GAAP Cost of revenue $50,840 $59,184 $58,462 $52,893 $57,419 $67,643 $79,614 $83,141 Stock-Based Compensation (211) (163) (160) (127) (183) (174) (188) (172) Amortization of Intangibles (2,088) (2,088) (2,089) (1,663) (814) (813) (814) (813) Non-GAAP Cost of revenue $48,541 $56,933 $56,213 $51,103 $56,422 $66,656 $53,188 $82,156 GAAP Gross Profit $48,289 $53,113 $46,537 $45,482 $50,006 $53,544 $52,186 $34,377 GAAP Gross Margin 48.7% 47.3% 44.3% 46.2% 46.5% 44.2% 39.6% 29.3% Stock-Based Compensation Amortization of Intangibles 2,088 2,088 2,089 1, Non-GAAP Gross Profit $50,588 $55,364 $48,786 $47,272 $51,003 $54,531 $53,188 $35,362 Non-GAAP Gross Margin 51.0% 49.3% 46.5% 48.1% 47.5% 45.0% 40.4% 30.1% 38

39 GAAP to Non-GAAP Reconciliation Q Q Operating Expenses and Net Income/(Loss) per share ($ in thousands, except per share amounts) Unaudited Q Q Q Q Q Q Q Q GAAP Operating Expenses $54,054 $52,236 $56,272 $56,220 $55,887 $52,809 $64,421 $67,193 Stock-Based Compensation (4,130) (2,427) (3,052) (2,594) (2,785) (4,503) (3.731) (3,368) Restructuring charges (699) Amortization of Intangibles (2,552) (2,552) (2,552) (1,701) Acquisition-Related Costs (52) (106) (24) (275) (76) Non-GAAP Operating Expenses $47,320 $47,151 $50,644 $51,650 $53,026 $48,306 $60,690 $63,126 GAAP Net Income/(Loss) ($5,779) $922 ($9,546) ($10,729) ($5,826) $636 ($11,483) ($33,325) Stock-Based Compensation 4,341 2,590 3,212 2,721 2,968 4,677 3,919 3,540 Restructuring charges Amortization of Intangibles 4,640 4,640 4,641 3, Acquisition-Related Costs Non-GAAP Net Income/(Loss) $3,254 $8,258 ($1,669) ($4,369) ($1,968) $6,126 ($6,750) ($28,273) Basic Shares 51,950 51, ,578 48,591 48,371 48,773 49,146 49,525 Diluted Shares 52,455 52,016 50,578 48,591 48,371 49,309 49,146 49,525 GAAP Income/(Loss) per share ($0.11) $0.02 ($0.19) ($0.22) ($0.12) $0.01 ($0.23) ($0.67) Stock-Based Compensation Restructuring charges Amortization of Intangibles Acquisition-Related Costs Non-GAAP Income/(Loss) per share $0.06 $0.16 ($0.03) ($0.09) ($0.04) $0.12 ($0.14) ($0.57) 39

40 GAAP to Non-GAAP Reconciliation Q Q Systems and Services Gross Margin Unaudited Q Q Q Q Q Q Q Q GAAP Gross Margin Systems 48.7% 47.5% 44.8% 48.0% 48.6% 46.8% 43.7% 37.4% Stock-Based Compensation 0.2% 0.1% 0.1% 0.1% 0.7% 0.1% 0.1% 0.1% Amortization of Intangibles 2.3% 1.9% 2.1% 1.8% 0.8% 0.7% 0.7% 0.9% Non-GAAP Gross Margin - Systems 51.1% 49.6% 47.1% 49.9% 49.5% 47.6% 44.4% 38.4% GAAP Gross Margin Services 49.4% 40.6% 34.5% 22.3% 18.7% 2.5% -15.7% 0.6% Stock-Based Compensation 0.5% 0.7% 0.6% 0.6% 0.8% 0.8% 0.7% 0.2% Non-GAAP Gross Margin Services 49.9% 41.3% 35.1% 22.9% 19.5% 3.2% -15.0% 0.8% 40

41 GAAP to Non-GAAP Reconciliation Q Operating Performance Outlook (1) ($ in thousands, except percentages and per share amounts) Three Months Ending Outlook July 1, 2017 GAAP Gross Margin 40.4% % Stock-Based Compensation 0.00%-0.01% Non-GAAP Gross Margin 40.5% 43.5% GAAP Operating Expenses $ 63,800 - $ 65,800 Stock-Based Compensation (3,100) Restructuring charges (1,700) Non-GAAP Operating Expenses $59,000 - $61,000 GAAP net loss per diluted share ($0.28) ($0.21) Stock-Based Compensation 0.06 Restructuring charges 0.03 Non-GAAP net loss per diluted share ($0.19) ($0.12) (1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, We are not providing any financial guidance update in this presentation. 41

42 GAAP to Non-GAAP Reconciliation 2017 Net Loss Outlook (1) Twelve Months Ending Outlook December 31, 2017 Estimated per common share adjustments for: Stock-Based Compensation $0.25 Amortization of Intangibles 0.02 Restructuring charges 0.13 Total GAAP to non-gaap net loss per common share adjustments $0.40 (1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, We are not providing any financial guidance update in this presentation. 42

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