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Calix Reports Fourth Quarter and Fiscal Year 2013 Results

PETALUMA, CA -- (Marketwired) -- 02/11/14 -- Calix, Inc. (NYSE: CALX) today announced unaudited financial results for the fourth quarter and fiscal year ended December 31, 2013. Revenue for the fourth quarter of 2013 was $94.0 million, an increase of 3% compared to $91.4 million for the fourth quarter of 2012 and in line with the company's preliminary results announced on January 8, 2014.

"During 2013 we took important steps to expand our customer footprint and strengthen our business," said Carl Russo, president and CEO of Calix. "Our 16 percent revenue growth and improved margins in 2013 continue to reflect the increasing value Calix customers place on transforming their access networks. The alignment of the Calix Unified Access portfolio with the strategic goals of our customers is strong, and we look forward to embracing this opportunity in 2014."

Non-GAAP net income for the fourth quarter of 2013 was $1.5 million, or $0.03 per fully diluted share, in line with the company's preliminary results announced on January 8, 2014. Non-GAAP net income was $2.9 million, or $0.06 per fully diluted share, for the fourth quarter of 2012. A reconciliation of GAAP and non-GAAP results is included as part of this release.

GAAP net loss for the fourth quarter of 2013 was $6.5 million, or $(0.13) per basic and diluted share, compared to a GAAP net loss of $6.6 million, or $(0.14) per basic and diluted share for the fourth quarter of 2012. A reconciliation of our fourth quarter 2013 operating results from non-GAAP to GAAP is provided below:

                                Calix, Inc.
              (Unaudited, in thousands, except per share data)
                    Three Months Ended December 31, 2013

                         Utilization                Amortization
                              of                         of
                          Inventory    Stock-Based   Intangible
               Non-GAAP     Credit    Compensation     Assets        GAAP
              ---------  -----------  ------------  ------------  ---------
Revenue       $  94,003  $        --  $         --  $         --  $  94,003
Cost of
 revenue         51,490           --           378         2,088     53,956
              ---------  -----------  ------------  ------------  ---------
Gross profit     42,513           --          (378)       (2,088)    40,047
Gross margin       45.2%          --%         -0.4%         -2.2%      42.6%
Operating
 expenses        40,973           --         4,578         2,552     48,103
              ---------  -----------  ------------  ------------  ---------
Operating
 income
 (loss)           1,540           --        (4,956)       (4,640)    (8,056)
Interest and
 other income
 (expense),
 net                (69)       1,651            --            --      1,582
              ---------  -----------  ------------  ------------  ---------
Income (loss)
 before
 benefit from
 income taxes     1,471        1,651        (4,956)       (4,640)    (6,474)
Benefit from
 income taxes       (21)          --            --            --        (21)
              ---------  -----------  ------------  ------------  ---------
Net income
 (loss)       $   1,492  $     1,651  $     (4,956) $     (4,640) $  (6,453)
              =========  ===========  ============  ============  ==========
Weighted
 average
 shares used
 to compute
net income
 (loss) per
 common
 share:
  Basic          49,892       49,892        49,892        49,892     49,892
              =========  ===========  ============  ============  =========
  Diluted        51,068       51,068        51,068        51,068     49,892
              =========  ===========  ============  ============  =========
Net income
 (loss) per
 common
 share:
  Basic       $    0.03  $      0.03  $      (0.10) $      (0.09) $   (0.13)
              =========  ===========  ============  ============  =========
  Diluted     $    0.03  $      0.03  $      (0.10) $      (0.09) $   (0.13)
              =========  ===========  ============  ============  =========



Conference Call

In conjunction with this announcement, Calix will host a conference call at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) today to discuss its fourth quarter 2013 financial results. A live audio webcast and replay of the call will be available in the Investor Relations section of the Calix web site at http://investor-relations.calix.com/.

Live call access information: Dial-in number: (877) 407-4019 (U.S.) or (201) 689-8337 (outside the U.S.)

The conference call and webcast will include forward-looking information.

About Calix

Calix (NYSE: CALX) is a global leader in access innovation. Its Unified Access portfolio of broadband communications access systems and software enables communications service providers worldwide to transform their copper- and fiber-based networks and become the broadband provider of choice to their subscribers. For more information, visit the Calix website at www.calix.com.

Use of Non-GAAP Financial Information

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 and non-GAAP basic and diluted income per share. These non-GAAP measures are provided to enhance the reader's understanding of the Company's operating performance as they exclude certain non-cash or non-recurring charges for stock-based compensation, amortization of acquisition-related intangible assets, utilization of inventory credit, gain from bargain purchase of Ericsson's fiber access assets, and acquisition-related expenses, which the Company believes are not indicative of its core operating results. Management believes that the non-GAAP measures used in this press release 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 press release. The diluted weighted average shares used to compute non-GAAP net income per share include the dilutive effect of outstanding stock options, restricted stock units, performance restricted stock units, and ESPP, which have been calculated under the treasury stock method. 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.

                                Calix, Inc.
              Condensed Consolidated Statements of Operations
              (Unaudited, in thousands, except per share data)

                         Three Months Ended          Twelve Months Ended
                     --------------------------  --------------------------
                     December 31,  December 31,  December 31,  December 31,
                         2013          2012          2013          2012
                     ------------  ------------  ------------  ------------
Revenue              $     94,003  $     91,424  $    382,618  $    330,218
Cost of revenue:
  Products and
   services (1)            51,868        52,306       203,191       185,103
  Amortization of
   intangible assets        2,088         2,088         8,353         7,539
                     ------------  ------------  ------------  ------------
    Total cost of
     revenue               53,956        54,394       211,544       192,642
                     ------------  ------------  ------------  ------------
Gross profit               40,047        37,030       171,074       137,576
Operating expenses:
  Research and
   development (1)         19,316        17,144        79,299        66,748
  Sales and
   marketing (1)           18,583        17,249        68,075        62,129
  General and
   administrative
   (1)                      7,652         6,432        31,945        26,114
  Amortization of
   intangible assets        2,552         2,552        10,208        10,208
  Acquisition-
   related expenses            --         1,401            --         1,401
                     ------------  ------------  ------------  ------------
    Total operating
     expenses              48,103        44,778       189,527       166,600
                     ------------  ------------  ------------  ------------
Loss from operations       (8,056)       (7,748)      (18,453)      (29,024)
Interest and other
 income (expense),
 net:
Interest income                 3             1             7            15
  Interest expense            (73)          (45)         (167)         (185)
  Utilization of
   inventory credit         1,651            --         1,651            --
  Gain on bargain
   purchase                    --         1,029            --         1,029
  Other income
   (expense), net               1            67          (317)           (3)
                     ------------  ------------  ------------  ------------
    Total interest
     and other
     income
     (expense), net         1,582         1,052         1,174           856
                     ------------  ------------  ------------  ------------
Loss before
 provision for
 (benefit from)
 income taxes              (6,474)       (6,696)      (17,279)      (28,168)
Provision for
 (benefit from)
 income taxes                 (21)         (122)          (14)          158
                     ------------  ------------  ------------  ------------
Net loss             $     (6,453) $     (6,574) $    (17,265) $    (28,326)
                     ============  ============  ============  ============
Net loss per common
 share:
  Basic and diluted  $      (0.13) $      (0.14) $      (0.35) $      (0.59)
                     ============  ============  ============  ============
Weighted average
 shares used to
 compute net loss
 per common share:
  Basic and diluted        49,892        48,538        49,419        48,180
                     ============  ============  ============  ============

--------------------

(1) Includes stock-based compensation as follows:
  Cost of revenue    $        378  $        344  $      1,468  $      1,433
  Research and
   development              1,231         1,098         4,896         4,227
  Sales and
   marketing                1,439         1,320         5,577         5,160
  General and
   administrative           1,908         1,714         7,980         6,617
                     ------------  ------------  ------------  ------------
                     $      4,956  $      4,476  $     19,921  $     17,437
                     ============  ============  ============  ============



                                Calix, Inc.
                 Reconciliation of GAAP to Non-GAAP Results
              (Unaudited, in thousands, except per share data)

                         Three Months Ended          Twelve Months Ended
                     --------------------------  --------------------------
                     December 31,  December 31,  December 31,  December 31,
                         2013          2012          2013          2012
                     ------------  ------------  ------------  ------------
GAAP net loss        $     (6,453) $     (6,574) $    (17,265) $    (28,326)
Adjustments to
 reconcile GAAP net
 loss to non-GAAP
 net income:
  Stock-based
   compensation             4,956         4,476        19,921        17,437
  Amortization of
   intangible assets        4,640         4,640        18,561        17,747
  Utilization of
   inventory credit        (1,651)           --        (1,651)           --
  Acquisition-
   related expenses            --         1,401            --         1,401
  Gain on bargain
   purchase                    --        (1,029)           --        (1,029)
                     ------------  ------------  ------------  ------------
Non-GAAP net income  $      1,492  $      2,914  $     19,566  $      7,230
                     ============  ============  ============  ============
Non-GAAP net income
 per common share:
  Basic              $       0.03  $       0.06  $       0.40  $       0.15
                     ============  ============  ============  ============
  Diluted            $       0.03  $       0.06  $       0.39  $       0.15
                     ============  ============  ============  ============
Weighted average
 shares used to
 compute non-GAAP
 net income per
 common share:
  Basic                    49,892        48,538        49,419        48,180
                     ============  ============  ============  ============
  Diluted                  51,068        48,836        50,437        48,367
                     ============  ============  ============  ============



                                Calix, Inc.
                   Condensed Consolidated Balance Sheets
                         (Unaudited, in thousands)

                                                  December 31, December 31,
                                                      2013         2012
                                                  ------------ ------------
ASSETS
Current assets:
  Cash and cash equivalents                       $     82,747 $     46,995
  Restricted cash                                          295           --
  Accounts receivable, net                              43,520       59,519
  Inventory                                             51,071       43,282
  Deferred cost of revenue                              21,076       21,077
  Prepaid expenses and other current assets              5,757        5,677
                                                  ------------ ------------
    Total current assets                               204,466      176,550
 Property and equipment, net                            17,473       21,083
 Goodwill                                              116,175      116,175
 Intangible assets, net                                 43,740       62,301
 Other assets                                            1,745        1,788
                                                  ------------ ------------
    Total assets                                  $    383,599 $    377,897
                                                  ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                $     23,163 $     16,804
  Accrued liabilities                                   32,075       36,176
  Deferred revenue                                      34,862       39,315
                                                  ------------ ------------
    Total current liabilities                           90,100       92,295
Long-term portion of deferred revenue                   18,431       15,782
Other long-term liabilities                              1,145          745
                                                  ------------ ------------
    Total liabilities                                  109,676      108,822
                                                  ------------ ------------
Stockholders' equity:
  Common stock                                           1,256        1,222
  Additional paid-in capital                           782,253      760,232
  Accumulated other comprehensive income                   190          132
  Accumulated deficit                                 (509,776)    (492,511)
                                                  ------------ ------------
    Total stockholders' equity                         273,923      269,075
                                                  ------------ ------------
    Total liabilities and stockholders' equity    $    383,599 $    377,897
                                                  ============ ============



                                Calix, Inc.
              Condensed Consolidated Statements of Cash Flows
                         (Unaudited, in thousands)

                                                     Twelve Months Ended
                                                 --------------------------
                                                 December 31,  December 31,
                                                     2013          2012
                                                 ------------  ------------
Operating activities:
Net loss                                         $    (17,265) $    (28,326)
Adjustments to reconcile net loss to net cash
 provided by operating activities:
  Depreciation and amortization                        10,181         8,562
  Loss on retirement of property and equipment            569           262
  Amortization of intangible assets                    18,561        17,747
  Stock-based compensation                             19,921        17,437
  Utilization of inventory credit                      (1,651)           --
  Gain on bargain purchase                                 --        (1,029)
Changes in operating assets and liabilities:
  Restricted cash                                        (295)          754
  Accounts receivable, net                             15,999       (13,011)
  Inventory                                            (6,138)       11,308
  Deferred cost of revenue                                  1       (13,379)
  Prepaid expenses and other assets                       535            47
  Accounts payable                                      6,359         2,554
  Accrued liabilities                                  (4,217)         (869)
  Deferred revenue                                     (1,804)       26,403
  Other long-term liabilities                              62          (782)
                                                 ------------  ------------
    Net cash provided by operating activities          40,818        27,678
                                                 ------------  ------------
Investing activities:
  Purchase of property and equipment                   (6,987)      (10,179)
  Acquisition, net of cash acquired                        --       (12,000)
                                                 ------------  ------------
    Net cash used in investing activities              (6,987)      (22,179)
                                                 ------------  ------------
Financing activities:
  Proceeds from exercise of stock options                 747           194
  Proceeds from employee stock purchase plan            4,828         4,063
  Taxes withheld upon vesting of restricted
   stock units and restricted stock awards             (3,441)       (1,744)
  Payments for debt issuance costs                       (316)           --
                                                 ------------  ------------
    Net cash provided by financing activities           1,818         2,513
                                                 ------------  ------------
Effect of exchange rate changes on cash and cash
 equivalents                                              103            45
Net increase in cash and cash equivalents              35,752         8,057
Cash and cash equivalents at beginning of period       46,995        38,938
                                                 ------------  ------------
Cash and cash equivalents at end of period       $     82,747  $     46,995
                                                 ============  ============

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