2017 may calix investor presentation
TRANSCRIPT
Investor PresentationMay 2017
1
© 2017 Calix | All Rights Reserved© 2017 Calix | All Rights Reserved
Safe Harbor
This presentation includes forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. 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, 2017. We are not providing any financial guidance update in this presentation.
2
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
© 2017 Calix | All Rights Reserved© 2017 Calix | All Rights Reserved
1.
2.
3.
4.
Calix at a Glance
The Coming Wave – Access rEvolution
The Rising Tide – Infrastructure Investment
Financials4.
5. Supplemental Information
Agenda
3
Calix at a Glance
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© 2017 Calix | All Rights Reserved
Calix strategic focus: The access network
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Content
Applications
Device-enabled
Subscriber
© 2017 Calix | All Rights Reserved
Our Customers – Over 1,300 and growing
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21%
15%
54%
9%
Customer Mix - 2016
CenturyLink Windstream
Other Medium/Small Domestic International
Source: Calix, Inc.
© 2017 Calix | All Rights Reserved
$107.4M
$121.2M
$131.8M
$117.5M
$124.0M
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
2Q16 3Q16 4Q16 1Q17 2Q17E
$ in m
illio
ns
Our Revenue Growth
7
$330.2
$382.6
$401.2 $407.5
$458.8
$200.0
$250.0
$300.0
$350.0
$400.0
$450.0
$500.0
$550.0
2012 2013 2014 2015 2016 2017E
$ in m
illio
ns
CAGR
+7.3%
Y/Y
+12.6%
Y/Y +
>10%
Y/Y +15.4%
Y/Y +8.4%
Y/Y +7.9%
Note: 2017 and 2Q17 revenue estimates based on mid-point of guidance provided in First Quarter 2017 Financial Results earnings release issued May 9, 2017
Y/Y +25.5%
Y/Y +19.5%
The Coming Wave
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© 2017 Calix | All Rights Reserved
Our Place
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Content
Applications
Device-enabled
Subscriber
© 2017 Calix | All Rights Reserved
Devices Globally
0
10
20
30
40
50
60
2015 2016 2017 2018 2019 2020
IoT
Tablets
PCs
TVs
Non-Smartphones
Smartphones
Other
50B
16B
(B)
Source: Cisco VNI and Business Intelligence
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© 2017 Calix | All Rights Reserved
Cloud Growth
-
100
200
300
400
500
600
700
2006 2011 2016 2021 2026 2031
Public
Private
Traditional IT
To
tal W
ork
load
s
(M)
Source: VMware
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© 2017 Calix | All Rights Reserved
The Opportunity
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Content
Applications
Device-enabled
Subscriber
-
100
200
300
400
500
600
700
2006 2011 2016 2021 2026 2031
0
10
20
30
40
50
60
2015 2016 2017 2018 2019 2020
IT Workloads Total Devices
Source: VMware Source: Cisco VNI and Business Intelligence
© 2017 Calix | All Rights Reserved
The End State: a Global LAN with Flexible Operating Systems and Robust Analytics
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Content
Applications
SimpleAlways OnFast Secure
ElevateSimplifyDiscover
© 2017 Calix | All Rights Reserved
Global
SDN/NFV
Ecosystem Policy Device & Service ActivationAnalytics
AP
I PLANNING OPERATIONS SUPPORT MARKETING SUBSCRIBER
Virtual
Applications
Data
Center
G.fast
NG-PON2
GigaCenter
GPON
rEvolution – Software Defined Access
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E7-2
E7-20 E3-16FE5-16F
GigaFamily
E3-2
E9-2
E5-308
E5-520
rEvolution – Systems
Data Center Outside Plant Premises
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60% of TCO related
to Network Operations
SimpleAlways On
$10B of Access
downtime
Management REST SNMP NETCONF / YANG CLI OpenFlow
Infrastructure
Hardware Abstraction Layer
Service Abstraction Layer
Control & Data
Multi-Service Protocols
Layer 3 Protocols OAM Host Services 3rd Party
Topology & Discovery Protocols
Layer 2 Protocols Multicast Protocols Traffic Management
Performance Monitoring
QoS ManagerPlatform Configuration
and UpgradeDiagnostics Syslog
Timing
rEvolution – AXOS
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Fast
2 years to certify
and activate a service
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© 2017 Calix | All Rights Reserved
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 2016. Marketing Cloud released in
April 2017.
rEvolution – Calix Cloud
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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)
140 km
rEvolution – Disruptive Economics of the AXOS E3-2
E3-2
18(1) Calix estimates
© 2017 Calix | All Rights Reserved
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
Aggregation
Subscriber
Management
OLT
Aggregation
switchOLT
Core
Router
Edge
Router
Open
White Box
Switching
Compute
Store
Current
Future
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The Rising Tide
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© 2017 Calix | All Rights Reserved
“…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
Access is Key for Communication Service ProvidersQ1 Earnings Comments – A Rising Tide
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Source: Transcript of Q1 2017 earnings calls for respective companies
© 2017 Calix | All Rights Reserved
Broadband Demand Growth Unrelenting (exponential)
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Nielsen’s Law
(50% annualized
growth for high-
end connections)
has proven to be
accurate for 35+
years
Source: Nielsen Norman Group
Bits p
er
se
co
nd
© 2017 Calix | All Rights Reserved
COPPERFIBERWIRELESSCABLE
Unified Access
Bandwidth on
demand
Transparent
quality of
experience
VDSL2
Unlicensed Spectrum
Wi-Fi 4x4
5G /
Wi-Fi
GPONEPON
XGPON-1
NG-PON2
DOCSIS 3.0
CCAP
G.fast A2Unmatched
subscriber
experienceG.hn
XGS-PON
Community
Wi-Fi
G.fast A1HotSpot 2.0Remote OLT
DOCSIS 3.1
FTTH
Gigabit
experience
New Technologies Meet the Demand
10G-EPON
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With the shift toward higher data speeds…
DOCSIS 3.0
24 BondedGigabit GPON
DOCSIS 3.1
(initial)
10000
Gigabit FTTH
10G PON
XGS/NG-PON2
…
10G XGS/NG-PON2
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© 2017 Calix | All Rights Reserved
Lower Operating Costs
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)
Estimated Operating Expense Savings
High Customer Take Rates
25
83%
62%
81%
72%
27%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Wornall Homestead Countryside Roanoke Central Hyde Park Community College
Median HH Income Take Rate
© 2017 Calix | All Rights Reserved
…leading to higher revenue and penetration rates…
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Source: Cincinnati Bell (September 2014)
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
100% Aerial/0% MDU
100% Aerial/20% MDU
50% Aerial/0% MDU
50% Aerial/50% MDU
Non-Electronics/Sub Electronics/Sub
…while infrastructure builds lead electronics
Source: Suburban FTTP Network Scenarios, Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors – Jefferies Group LLC (May 6, 2015)
Electronics represent ~15-25% of the total capex cost per unit served in a fiber deployment after initial build
costs
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© 2017 Calix | All Rights Reserved
Connect America FundRepurposed Universal Services Fund
▪ Nearly $4B annually now completely focused on universal broadband
▪ Multi-year investment (5-year for price cap and 10-year for rate of return)
Terms
▪ Minimum 10/1 Mbps for all carriers and minimum 25/3 Mbps for many smaller carriers
▪ Targeted by state and census block at all “uncompetitive” areas
▪ Milestone-driven buildout requirements with first price cap milestone in 2017 and first rate of return milestone in 2020
Calix Strength
▪ Market leader among eligible U.S. carriers
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Source: FCC
Financials
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© 2017 Calix | All Rights Reserved
Target Financial Model (1)
($ 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) >$1.25
30
Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com
(1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, 2017. We are not providing any financial guidance
update in this presentation.
© 2017 Calix | All Rights Reserved
Bridging the long-term financial model (1)
2016 Base
Target
RevenueBase business
growth driven by
existing customer
access network
investments
Increased market
penetration with
new customers and
new market
opportunities
Innovation driven
disruption driven by
customer
investments in next
generation networks
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(1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, 2017. We are not providing any financial guidance
update in this presentation.
© 2017 Calix | All Rights Reserved© 2017 Calix | All Rights Reserved
Q1 2017 Financial Results vs. Guidance
Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com
($ 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% 30.0 – 34.0% 29.3% 29.3 – 33.2%
Operating expenses $63.1M(1) $61.0 - $63.0M $67.2M $64.9 - $66.9M
EPS ($0.57) (1) ($0.57) – ($0.49) ($0.67) ($0.67) – ($0.59)
Cash flow from
operations
($23.5M) Negative
(1) Excludes the impact from Non-GAAP items including restructuring charges
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2
© 2017 Calix | All Rights Reserved© 2017 Calix | All Rights Reserved
Q2 2017 Operating Performance Guidance(1)
($ in millions, except percentages and per share amounts) Reconciliation of
Guidance to GAAP
Revenues $122 - $126M $122 - $126M
Non-GAAP Gross margin 40.5 – 43.5% 40.5 – 43.5%
Non-GAAP Operating expenses $59.0 - $61.0M(2) $63.8 - $65.8M
Non-GAAP EPS ($0.19) – ($0.12)(2) ($0.28) – ($0.21)
Cash flow from operations (GAAP) Positive
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
(1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, 2017. We are not providing any financial guidance update
in this presentation.
(2) Excludes the impact from Non-GAAP items including $1.7 million in estimated restructuring charges for Q2 2017
3
3
© 2017 Calix | All Rights Reserved© 2017 Calix | All Rights Reserved
2017 Full Year Operating Performance Guidance(1)
At least 10% year over year revenue growth
Lower Non-GAAP net loss than reported in 2016(2)
Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com
(1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, 2017. We are not providing any financial guidance
update in this presentation.
(2) Excludes the impact from Non-GAAP items including stock-based compensation, amortization of intangibles and restructuring costs
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4
Q&A
35
© 2017 Calix | All Rights Reserved© 2017 Calix | All Rights Reserved
Additional Information
• Additional information available at http://investor-relations.calix.com/ • Stock Information
• News & Financial Information
• Events & Presentations
• Leadership & Governance
• Investor Resources
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Supplemental Information
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© 2017 Calix | All Rights Reserved
GAAP to Non-GAAP Reconciliation
($ in thousands, except percentages)
(Unaudited) Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
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 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 Gross Profit $50,588 $55,364 $48,786 $47,272 $51,003 $54,531 $53,188 $35,362
Non-GAAP Gross Margin 51.0% 49.3% 46.5% 48.1% 47.5% 45.0% 40.4% 30.1%
Q2 2015 – Q1 2017 Cost of Revenue and Gross Margins
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© 2017 Calix | All Rights Reserved
($ in thousands, except per share amounts)
Unaudited Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
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 0 0 0 0 0 0 0 (699)
Amortization of Intangibles (2,552) (2,552) (2,552) (1,701) 0 0 0 0
Acquisition-Related Costs (52) (106) (24) (275) (76) 0 0 0
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 0 0 0 0 0 0 0 699
Amortization of Intangibles 4,640 4,640 4,641 3,364 814 813 814 813
Acquisition-Related Costs 52 106 24 275 76 0 0 0
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, 756 50,578 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 0.08 0.05 0.06 0.06 0.06 0.09 0.08 0.07
Restructuring charges 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01
Amortization of Intangibles 0.09 0.09 0.09 0.07 0.02 0.02 0.02 0.02
Acquisition-Related Costs 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00
Non-GAAP Income/(Loss) per share $0.06 $0.16 ($0.03) ($0.09) ($0.04) $0.12 ($0.14) ($0.57)
GAAP to Non-GAAP ReconciliationQ2 2015 – Q1 2017 Operating Expenses and Net Income/(Loss) per share
39
© 2017 Calix | All Rights Reserved
Unaudited Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
GAAP Gross Margin – Systems 48.7% 47.5% 44.8% 48.0% 48.6% 46.8% 43.7% 37.4%
Stock-Based Compensation 0.2% 0.1% 0.1% 0.1% 0.7% 0.1% 0.1% 0.1%
Amortization of Intangibles 2.3% 1.9% 2.1% 1.8% 0.8% 0.7% 0.7% 0.9%
Non-GAAP Gross Margin - Systems 51.1% 49.6% 47.1% 49.9% 49.5% 47.6% 44.4% 38.4%
GAAP Gross Margin – Services 49.4% 40.6% 34.5% 22.3% 18.7% 2.5% -15.7% 0.6%
Stock-Based Compensation 0.5% 0.7% 0.6% 0.6% 0.8% 0.8% 0.7% 0.2%
Non-GAAP Gross Margin – Services 49.9% 41.3% 35.1% 22.9% 19.5% 3.2% -15.0% 0.8%
GAAP to Non-GAAP ReconciliationQ2 2015 – Q1 2017 Systems and Services Gross Margin
40
© 2017 Calix | All Rights Reserved
($ in thousands, except percentages and per share amounts)
Outlook
Three Months Ending
July 1, 2017
GAAP Gross Margin 40.4% - 43.5%
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)
GAAP to Non-GAAP ReconciliationQ2 2017 Operating Performance Outlook (1)
41
(1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, 2017. We are not providing any financial guidance update
in this presentation.
© 2017 Calix | All Rights Reserved
Outlook
Twelve Months
Ending
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
GAAP to Non-GAAP Reconciliation2017 Net Loss Outlook (1)
42
(1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, 2017. We are not providing any financial guidance update
in this presentation.
43