CALIX, INC

Previous wording

We market our platform and managed services to communication service providers globally through our direct sales force as well as select resellers. Our customers range from smaller, regional service providers to some of the world’s largest service providers. Customers are defined into small (less than 250,000 subscribers), medium (250,000 to 2.5 million subscribers) or large (greater than 2.5 million subscribers). We have approximately 1,600 active customers that have deployed passive optical, Active Ethernet or point-to-point Ethernet fiber access networks or our subscriber premise systems.

Current wording

We market our platform, cloud and managed services to CSPs globally through our direct sales force as well as select resellers. Our customers range from smaller, regional service providers to some of the world’s largest service providers. We have approximately 1,600 active customers that have deployed passive optical, Active Ethernet or point-to-point Ethernet fiber access networks or our subscriber premise appliances.

Previous wording

Our revenue and potential revenue growth will depend on our ability to develop, market and sell our platform and managed services to strategically aligned customers of all types such as WISPs, fiber overbuilders, cable MSOs, municipalities and electric cooperatives in the U.S. and internationally. Our growth is also highly dependent on the speed and willingness of customers to adopt our platform and managed services.

Current wording

Our revenue and potential revenue growth will depend on, among other things, our ability to develop, market and sell our platform and managed services to strategically aligned customers of all types such as MSPs, local and competitive exchange carriers, cable MSOs, WISPs, fiber overbuilders such as municipalities, electric cooperatives, tribal communities, multiple dwelling units (“MDU”) and hospitality providers in the U.S. and internationally. Our growth is also highly dependent on the speed and willingness of customers to adopt our platform and managed services.

Previous wording

Revenue fluctuations result from many factors, including, but not limited to: increases or decreases in customer orders for our products and services, market, financial or other factors such as government stimulus that may delay or materially impact customer purchasing decisions, non-availability of products due to supply chain challenges, including component and labor shortages and increasing lead times as well as disruptions as a result of pandemics or natural disasters, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers. More specifically, our customers have in the past spent less in the first quarter as they are finalizing their annual budgets, and in certain regions, customers are challenged by winter weather conditions that inhibit fiber deployment in outside infrastructure. In recent years, as our revenue from our large customers decreased, we have experienced less year-end volatility due to capital budgetary spending or freezing. This, combined with an increase in recurring revenue, has resulted in smaller seasonal fluctuations, and we expect this trend to continue. Our revenue is also dependent upon our customers’ success in growing their subscribers, timing of purchases, capital expenditure plans and decisions to upgrade their networks or adopt new technologies, including adoption of our software and cloud platform solutions, as well as our ability to grow our customer base.

Current wording

Revenue fluctuations result from many factors, including, but not limited to: increases or decreases in customer orders for our products and services, global economic and geopolitical events and conditions, including tariffs, trade controls, inflation, economic downturns and market, financial or other factors such as government stimulus or shutdowns that may delay or materially impact customer purchasing decisions, non-availability of products due to supply chain challenges, including component and labor shortages and increasing lead times as well as disruptions as a result of pandemics or natural disasters, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers. More specifically, our customers have in the past spent less in the first quarter as they are finalizing their annual budgets, and in certain regions, customers are challenged by winter weather conditions that inhibit fiber deployment in outside infrastructure. Our revenue is also dependent upon our customers’ success in growing their subscribers, timing of purchases, capital expenditure plans and decisions to upgrade their networks or adopt new technologies, including adoption of our software and cloud platform solutions, as well as our ability to grow our customer base.

Previous wording

Cost of revenue is strongly correlated to revenue and tends to fluctuate due to all of the above factors that may cause revenue fluctuations. Factors that have impacted our cost of revenue, or that we expect may impact cost of revenue in future periods, also include: changes in the mix of products delivered, customer location and regional mix, changes in the cost of our inventory, investments to support expansion of cloud and customer support offerings as well as our customer success organization, changes in product warranty, incurrence of retrofit costs, amortization of intangibles, support fees for silicon-related development work for our products, changes in trade policies, allowances for obligations to our suppliers and inventory write-downs. In addition, we periodically ship by air versus by ocean in order to meet delivery commitments to our customers, which is more costly. Cost of revenue also includes fixed expenses related to our internal operations, which could increase our cost of revenue as a percentage of revenue if our revenue declines.

Current wording

Cost of revenue is strongly correlated to revenue and tends to fluctuate due to all of the above factors that may cause revenue fluctuations. Factors that have impacted our cost of revenue, or that we expect may impact cost of revenue in future periods, also include: changes in the mix of products delivered, customer location and regional mix, changes in the cost of our inventory, investments to support expansion of cloud and customer support offerings as well as our customer success organization, changes in product warranty, incurrence of retrofit costs, amortization of intangibles, allowances for obligations to our suppliers and inventory write-downs. Factors that we expect may impact our cost of revenue in future periods include the same factors in the prior quarter, changes in trade policies and the transition from DDR4 to DDR5 memory. Regarding trade policies, in April 2025, the U.S. President signed an executive order increasing tariffs on imports from numerous countries, including China and other Asian countries where our sole-source or limited-source suppliers are located. Currently, the majority of our finished goods are exempt from tariffs. For imported components for domestic manufacturing and certain finished goods, these actions increased our cost of revenue. We continue to evaluate the actions we may be able to take to mitigate such costs as we monitor and navigate this challenging and dynamic operating environment. Regarding the DDR4 to DDR5 transition, the reduction in manufacturing capacity of DDR4 memory has resulted in increased DDR4 memory prices and will increase the cost of our products. In addition, we periodically ship by air versus by ocean in order to meet delivery commitments to our customers, which is more costly. Cost of revenue also includes fixed expenses related to our internal operations, which could increase our cost of revenue as a percentage of revenue if our revenue declines.

Previous wording

Revenue is recognized when a performance obligation is satisfied, which occurs when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenue from sales of access and premises systems is recognized when control is transferred to the customer, which is generally when the products are shipped. Revenue from software platform licenses, which provides the customer with a right to use the software as it exists, is generally recognized upfront when the license is made available to the customer. Revenue from cloud-based software subscriptions, customer support, maintenance, extended warranty subscriptions and managed services is generally recognized ratably over the contract term. Revenue from professional services and training is recognized as the services are delivered.

Current wording

Revenue is recognized when a performance obligation is satisfied, which occurs when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenue from sales of access and premises appliances is recognized when control is transferred to the customer, which is generally when the products are shipped. Revenue from software platform licenses, which provides the customer with a right to use the software as it exists, is generally recognized upfront when the license is made available to the customer. Revenue from cloud-based software subscriptions, customer support, maintenance, extended warranty subscriptions and managed services is generally recognized ratably over the contract term. Revenue from professional services and training is recognized as the services are delivered.

Previous wording

Inventory, which primarily consists of finished goods purchased from CMs or ODMs, is stated at the lower of cost (determined by the first-in, first-out method) and net realizable value. Inbound shipping costs and tariffs are included in the cost of inventory. In addition, from time to time, we procure component inventory primarily as a result of manufacturing discontinuation of critical components by suppliers or a change in suppliers. Furthermore, as a result of the global pandemic-induced supply chain challenges and supply assurance plans, we have purchased, and may continue to purchase, excess components from our suppliers and consign components back to our suppliers to be consumed on future finished good builds.

Current wording

Inventory, which primarily consists of finished goods purchased from CMs or ODMs, is stated at the lower of cost (determined by the first-in, first-out method) and net realizable value. Inbound shipping costs and tariffs are included in the cost of inventory. In addition, from time to time, we procure component inventory primarily due to the discontinuation of critical components by suppliers, a change in suppliers or in connection with our supply assurance plans. This component inventory is then consigned back to our suppliers to be consumed on future finished good builds.

Previous wording

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires additional disclosure of certain costs and expenses within the notes to the financial statements. The updated standard is effective for our annual periods beginning in 2027 and interim periods beginning in the first quarter of 2028. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

Current wording

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires additional disclosure of certain costs and expenses within the notes to the financial statements. The updated standard is effective for our annual periods beginning in 2027 and interim periods beginning in the first quarter of 2028. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

Previous wording

Our revenue is principally derived in the U.S. Revenue generated in the U.S. represented 92% of revenue in 2024 and 91% in 2023. Our primary focus has been, and in the near term will continue to be, the U.S. and Canada given our large, direct sales and marketing presence and the amount of government stimulus being invested into underserved and not-served areas of these countries. The decrease in international revenue for 2024, as compared to 2023, was mainly due to lower shipments to Europe and to a lesser extent the Americas outside the U.S.

Current wording

Our revenue is principally derived in the U.S., which represented 93% of revenue in 2025 and 92% in 2024. Our primary focus has been, and in the near term will continue to be, the U.S. and Canada given our large, direct sales and marketing presence and the amount of government stimulus being invested into underserved and not-served areas of these countries. With the introduction of our third-generation platform, we will increase our attention on international markets.

Previous wording

Sales and marketing expenses increased by $3.3 million during 2024 compared to 2023 primarily due to increases in stock-based compensation of $3.9 million, marketing expenses of $0.8 million and travel expenses of $0.6 million. These increases were partially offset by decreases of outside services of $1.2 million and personnel expenses of $0.7 million.

Current wording

Sales and marketing expenses increased by $30.8 million during 2025 compared to 2024 primarily due to increases in personnel expenses of $20.6 million, mostly related to incentive compensation and increased headcount, stock-based compensation of $9.9 million and travel expenses of $2.3 million. These increases were partially offset by a decrease in marketing expenses of $1.7 million.

Previous wording

During 2024, sales and marketing expenses as a percentage of revenue increased to 26% from 21% due to lower revenue compared to 2023. We expect our investments in sales and marketing will be relatively flat in absolute dollars in the near term.

Current wording

During 2025, sales and marketing expenses as a percentage of revenue decreased to 25% from 26% due to higher revenue compared to 2024. We expect our investments in sales and marketing will increase 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.

Previous wording

The increase in research and development expenses of $2.1 million during 2024 compared with 2023 was mainly due to increases in depreciation and amortization of $3.0 million, stock-based compensation of $2.1 million, software subscriptions of $1.9 million and personnel expenses of $1.2 million. These increases were partially offset by decreases in prototypes and test equipment expenses of $3.7 million and outside services of $3.5 million as we transition projects from consultants to our own employees.

Current wording

The increase in research and development expenses of $10.5 million during 2025 compared with 2024 was mainly due to increases in stock-based compensation of $4.3 million, outside services of $3.7 million, depreciation and amortization of $1.9 million and prototypes and test equipment expenses of $1.7 million. These increases were partially offset by decreases in facility expenses of $1.2 million.

Previous wording

During 2024, research and development expenses as a percentage of revenue increased to 22% from 17% due to lower revenue compared to 2023. We expect our investments in research and development to remain relatively flat in absolute dollars in the short term as we seek to expand the functionality and capabilities of our platform, cloud and managed services.

Current wording

During 2025, research and development expenses as a percentage of revenue decreased to 19% from 22% due to the increase in revenue, and research and development expenses as a percentage of gross profit decreased to 33% from 40% due to the increase in gross profit. We expect our investments in research and development to increase in absolute dollars and as a percentage of gross profit in the short term as we accelerate the development of AI functionality and capabilities of our platform, cloud and managed services.

Previous wording

The decrease in general and administrative expenses of $1.5 million in 2024 compared to 2023 was mainly due to a decrease in legal costs due to a settlement in 2023 of $3.3 million and lower outside services expenses of $2.9 million. These decreases were partially offset by increases in stock-based compensation of $2.0 million and personnel expenses of $1.6 million.

Current wording

The increase in general and administrative expenses of $9.5 million in 2025 compared to 2024 was mainly due to increases in personnel expenses of $6.1 million and stock-based compensation of $2.9 million.

Previous wording

During 2024, general and administrative expenses as a percentage of revenue increased to 12% from 10% due to lower revenue compared to 2023. We expect our general and administrative investments to be fairly constant in absolute dollars in the near term and potentially decline as a percentage of revenue over time in relation to anticipated longer-term increased revenue.

Current wording

During 2025, general and administrative expenses as a percentage of revenue decreased to 11% from 12% due to higher revenue compared to 2024. We expect our general and administrative investments to increase in absolute dollars but decline as a percentage of revenue.

Previous wording

Interest income and other expense, net increased by $2.2 million in 2024 compared with 2023 mainly due to a higher rate of interest earned on our cash, cash equivalents and marketable securities as well as a larger cash and marketable securities balance.

Current wording

Interest income and other expense, net increased by $1.8 million in 2025 compared with 2024 mainly due to a larger average cash balance offset partially by a decrease in interest rates.

Previous wording

During 2023, our current tax expense was $6.1 million, and our deferred tax benefit was $0.7 million. Our effective tax rate was lower than the federal statutory rate of 21% primarily due to research and development tax credits and provision to return adjustments, partially offset by the impact of stock-based compensation and uncertain tax positions.

Current wording

During 2025, our current tax expense was $3.4 million, and our deferred tax expense was $12.9 million. Our effective tax rate was higher than the federal statutory rate of 21% primarily due to the impact of non-deductible stock-based compensation offset by the favorable impact of U.S. federal research tax credits.

Previous wording

We continue to maintain a valuation allowance of $30.6 million on certain U.S. federal and California state deferred tax assets that we believe are not more likely than not to be realized in future periods.

Current wording

We continue to maintain a valuation allowance of $32.3 million on certain state deferred tax assets that we believe are not more likely than not to be realized in future periods.

Previous wording

We fund our operations and investing activities primarily through cash flow generated from operations and sales of our common stock. As of December 31, 2024, we had cash, cash equivalents and marketable securities of $297.1 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S. government securities and commercial paper. This includes $9.1 million of cash primarily held by our foreign subsidiaries. As of December 31, 2024, our liability for taxes that would be payable because of repatriation of undistributed earnings of our foreign subsidiaries to the U.S. was not significant and limited to withholding taxes considering our existing net operating loss carryovers.

Current wording

We fund our operations and investing activities primarily through cash flow generated from operations and sales of our common stock. As of December 31, 2025, we had cash, cash equivalents and marketable securities of $388.1 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S. government securities and commercial paper. This includes $12.4 million of cash primarily held by our foreign subsidiaries. As of December 31, 2025, our liability for taxes that would be payable because of repatriation of undistributed earnings of our foreign subsidiaries was limited to foreign withholding taxes as the future distribution is not expected to be taxable in the U.S.

Previous wording

Our operating activities provided cash of $68.4 million in 2024 and $56.3 million in 2023. The increase in net cash provided by operating activities during 2024 as compared to 2023 was due primarily to an increase in our net cash inflow resulting from changes in operating assets and liabilities of $70.7 million partially offset by a decrease in our net operating results after adjustment of non-cash charges of $58.6 million. Non-cash charges consisted of stock-based compensation of $70.8 million and depreciation and amortization of $19.6 million partially offset by deferred income taxes of $10.0 million and net accretion of available-for-sale securities of $5.3 million.

Current wording

Our operating activities provided cash of $135.0 million in 2025 and $68.4 million in 2024. The increase in net cash provided by operating activities during 2025 as compared to 2024 was due primarily to an increase in our net operating results after adjustment of non-cash charges of $87.4 million partially offset by a decrease in our net cash inflow resulting from changes in operating assets and liabilities of $20.9 million. Non-cash charges consisted of stock-based compensation of $87.9 million, depreciation and amortization of $17.7 million and deferred income taxes of $12.9 million partially offset by net accretion of available-for-sale securities of $3.7 million.

Previous wording

In 2024, cash inflows from changes in operating assets and liabilities primarily consisted of decreases in accounts receivable of $46.7 million and inventory of $30.3 million, both due to lower revenue, and a decrease in prepaid expenses and other assets of $11.2 million. These changes were partially offset by a decrease in accrued liabilities of $36.0 million, a decrease in accounts payable of $15.1 million due to the lower inventory purchases and a decrease in deferred revenue of $13.9 million due to a change in billing practices towards monthly versus annual.

Current wording

In 2025, cash inflows from changes in operating assets and liabilities primarily consisted of an increase in accounts payable of $21.5 million due to increased inventory purchases, a decrease in prepaid expenses and other assets of $17.3 million due to a reduction in our inventory deposits, an increase in accrued liabilities of $11.8 million mainly due to incentive compensation related accruals and an increase in deferred revenue of $2.6 million. These changes were partially offset by increases in inventory of $31.0 million and accounts receivable of $20.0 million to support increased revenue.

Previous wording

In 2024, net cash used in investing activities of $109.5 million consisted of net purchases of marketable securities of $91.4 million and capital expenditures of $18.1 million, primarily consisting of purchases of test and computer equipment.

Current wording

In 2025, net cash used in investing activities of $6.4 million consisted capital expenditures of $19.4 million, primarily consisting of purchases of test and computer equipment, partially offset by net maturities and sales of marketable securities of $13.0 million.

Previous wording

In 2024, net cash provided by financing activities of $20.9 million consisted of the issuance of common stock related to our equity plans of $31.6 million partially offset by purchases of our common stock of $10.7 million.

Current wording

In 2025, net cash used in financing activities of $28.4 million consisted of purchases of our common stock of $93.6 million partially offset by the issuance of common stock related to our equity plans of $65.2 million.

Previous wording

Our material cash commitments include non-cancelable firm purchase commitments, normal recurring trade payables, compensation-related and expense accruals and operating leases. We believe that our outsourced approach to manufacturing provides us significant flexibility in both managing inventory levels and financing our inventory. Furthermore, we maintain a common stock repurchase program of which $102.9 million was available as of December 31, 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.

Current wording

Our material cash commitments include non-cancelable firm purchase commitments, normal recurring trade payables, compensation-related and expense accruals and operating leases. 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 $109.3 million available as of December 31, 2025. In January 2026, our Board of Directors authorized a $125.0 million increase to this program. In 2026 to date, we repurchased $148.7 million of our common stock. 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.

Previous wording

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 institute cost-cutting measures, all of which may adversely impact our business and potential growth.

Current wording

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 limit or 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.

Previous wording

(1) Represents outstanding purchase commitments to be delivered by our third-party manufacturers or other vendors. See Note 5 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our outstanding purchase commitments related to our third-party manufacturers.

Current wording

(1) Represents outstanding purchase commitments to be delivered by our third-party manufacturers and other vendors such as enterprise software vendors. See Note 5 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our outstanding purchase commitments.

Previous wording

(2) Future minimum operating lease obligations in the table above primarily include payments for our office locations, which expire at various dates through 2033, including our new San Jose headquarters lease that will commence in August 2025. See Note 5 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our operating leases.

Current wording

(2) Future minimum operating lease obligations in the table above primarily include payments for our office locations, which expire at various dates through 2033. See Note 5 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our operating leases.