CALIX, INC

Results of Operations

Comparison of the Three Months Ended March 29, 2025 and March 30, 2024

Revenue

The following table sets forth our revenue by customer size (dollars in thousands):

Our revenue decreased by $6.1 million for the three months ended March 29, 2025 as compared to the corresponding period in 2024. As with others in the telecommunication industry, our business went through a period of adjustments following the COVID pandemic, which resulted in fewer purchases in 2024 such that our revenue hit its lowest level since the second quarter of 2022 in the second quarter of 2024. Since then, our quarterly revenue has grown sequentially. The decrease in revenue in the small- and medium-customer segment was primarily due to the industry slowdown in 2024, caused by factors such as order normalization, consideration of the U.S. Department of Commerce National Telecommunications and Information Administration’s, or NTIA’s, Broadband Equity, Access and Deployment, or BEAD, program and evaluation of business models given relatively low subscriber attach rates. The increase in revenue in the large-customer segment was primarily due to a demand pull forward by a customer.

For the three months ended March 29, 2025, United States revenue was $211.2 million, or 96% of our revenue, compared to $210.1 million, or 93% of our revenue for the same period in 2024. International revenue was $9.1 million, or 4% of our revenue, for the three months ended March 29, 2025, as compared to $16.2 million, or 7% of our revenue, for the same period in 2024. The decrease in international revenue for the three months ended March 29, 2025, as compared to the same period in 2024, was mainly due to lower shipments to Europe and to a lesser extent the Americas outside the United States.

No customer accounted for more than 10% of the Company’s revenue for the three months ended March 29, 2025 and March 30, 2024.

Gross Profit and Gross Margin

The following table sets forth our gross profit and gross margin (dollars in thousands):

Gross profit was relatively flat comparing the three months ended March 29, 2025 to the corresponding period in 2024. Our gross margin increased by 150 basis points for the three months ended March 29, 2025, compared to the corresponding period in 2024, primarily related to the continued growth in our platform, cloud and managed services being a greater percentage of our total revenue.

Operating Expenses

Sales and Marketing Expenses

The following table sets forth our sales and marketing expenses (dollars in thousands):

Sales and marketing expenses for the three months ended March 29, 2025 increased by $4.2 million compared with the corresponding period in 2024 primarily due to increases in personnel expenses of $2.8 million, stock-based compensation of $1.6 million and travel expenses of $0.7 million. These increases were partially offset by decreases in outside services of $0.4 million and depreciation and amortization of $0.4 million.

For the three months ended March 29, 2025, sales and marketing expenses as a percentage of revenue increased to 26% from 24% in the same period in 2024 due to lower revenue and the increases described above. We expect our investments in sales and marketing will increase slightly in absolute dollars on a year-over-year basis, but decline as a percentage of revenue, as we continue to land new customers and expand our platform, cloud and managed services.

Research and Development Expenses

The following table sets forth our research and development expenses (dollars in thousands):

Research and development expenses for the three months ended March 29, 2025 decreased by $0.4 million as compared with the corresponding period in 2024 mainly due to decreases in personnel expenses of $1.4 million and outside services of $1.2 million. These decreases were partially offset by increases in prototypes and test equipment expenses of $0.7 million, stock-based compensation of $0.6 million and depreciation and amortization of $0.4 million.

For the three months ended March 29, 2025, research and development expenses as a percentage of revenue was flat compared to the same period in 2024. We expect our investments in research and development to remain relatively flat in absolute dollars in the short term, and decline as a percentage of revenue, as we continue to expand the functionality and capabilities of our platform, cloud and managed services.

General and Administrative Expenses

The following table sets forth our general and administrative expenses (dollars in thousands):

General and administrative expenses for the three months ended March 29, 2025 increased by $0.5 million as compared with the corresponding period in 2024 mainly due to increases in personnel expenses of $1.6 million and stock-based compensation of $0.6 million. These increases were partially offset by decreases in professional services expenses of $1.8 million.

For the three months ended March 29, 2025, general and administrative expenses as a percentage of revenue were flat compared to the same period in 2024. We expect our general and administrative investments to be fairly constant in absolute dollars in the near term, but decline as a percentage of revenue.

Interest and Other Expense, net

The following table sets forth our interest and other expense, net (dollars in thousands):

Interest and other expense, net increased by $0.6 million as compared with the corresponding period in 2024 mainly due to a larger cash and marketable securities balance.

Income Taxes

The following table sets forth our income taxes (dollars in thousands):

For the three ended March 29, 2025, our income tax expense was $1.8 million for an effective tax rate of (60.1)%, which differed from the statutory rate of 21% primarily due to the effect of non-deductible stock-based compensation for executive officers and excess tax expense from stock-based compensation offset by the favorable impact of U.S. federal research tax credits and the U.S. tax impact of foreign operations. The effective tax rates for the three months ended March 29, 2025 are lower than the corresponding period in 2024 primarily as a result of lower pre-tax earnings with a relatively consistent level of non-deductible expenses.

Our income taxes may be subject to fluctuation during the year and in future years as new information is obtained. This may affect the assumptions used to estimate the interim income tax provision, including factors such as actual results differing from our estimates of pre-tax earnings in the various jurisdictions in which we operate, which could impact the recognition of our deferred tax assets, further benefits from stock option exercises, investments in our foreign operations, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where we conduct business.