CALIX INC

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. 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. Non-cash charges primarily consisted of stock-based compensation of $48.7 million and depreciation and amortization of $14.8 million partially offset by deferred income taxes of $10.4 million and the net accretion of available-for-sale securities of $4.0 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.

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.

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.

Working Capital and Capital Expenditure Needs

Our material cash commitments include non-cancelable firm purchase commitments, normal recurring trade payables, compensation-related and expense accruals, operating leases and revenue-share obligations. 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. 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.

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):

(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 operating leases.