CALIX INC

Results of Operations

Comparison of the Three Months Ended March 30, 2024 and April 1, 2023

Revenue

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

Our revenue decreased by $23.7 million for the three months ended March 30, 2024 as compared to the corresponding period in 2023. The decrease in revenue was primarily due to what we believe were delayed purchasing decisions of our appliances as our customers evaluate and prepare for various government stimulus programs, the shortening of our lead times to customers and a small set of significant customers that slowed purchases while we believe they reevaluate their investment priorities. Meanwhile, software, cloud and managed services have continued to grow as our customers add new subscribers over time.

For the three months ended March 30, 2024, United States revenue was $210.1 million, or 93% of our revenue, compared to $227.9 million, or 91% of our revenue for the same period in 2023. International revenue was $16.2 million, or 7% of our revenue, for the three months ended March 30, 2024, as compared to $22.1 million, or 9% of our revenue, for the same period in 2023.

No customer accounted for more than 10% of the Company’s revenue for the three months ended March 30, 2024 and April 1, 2023.

Gross Profit and Gross Margin

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

Gross profit decreased to $122.6 million for the three months ended March 30, 2024, from $128.1 million during the corresponding period in 2023. The increase in gross margin of 300 basis points for the three months ended March 30, 2024, respectively, compared to the corresponding period in 2023, was mainly due to the continued growth in our platform, cloud and managed services as well as being a greater percentage of our total revenue, customer mix and the sell through of a lower amount of excessively priced components acquired in the secondary market during the supply-chain disruption partially offset by excess and obsolete inventory charges.

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 30, 2024 increased by $2.0 million compared with the corresponding period in 2023 primarily due to increases in personnel expenses of $1.1 million, stock-based compensation of $0.4 million, $0.3 million in allocated common costs and marketing expenses of $0.3 million.

Sales and marketing expenses as a percentage of revenue increased to 24% from 21% due to lower revenue in the first quarter of 2024. We expect our investments in sales and marketing will be relatively flat in absolute dollars in the short-term as we look 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 30, 2024 increased by $1.2 million as compared with the corresponding period in 2023 mainly due to increases in personnel expenses of $1.6 million, $0.7 million of depreciation and amortization, $0.7 million in allocated common costs and stock-based compensation of $0.2 million. These increases were partially offset by decreases in prototypes and test equipment expenses of $1.4 million and outside services of $0.5 million.

Research and development expenses as a percentage of gross profit increased to 36% from 34% due to lower revenue in the first quarter of 2024. 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 platforms.

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 30, 2024 increased by $3.2 million as compared with the corresponding period in 2023 mainly due to increases in personnel expenses of $1.8 million, professional services expenses of $0.8 million and stock-based compensation of $0.2 million.

General and administrative expenses as a percentage of revenue increased to 12% from 9% due to lower revenue in the three months ended March 30, 2024. 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.

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 $1.0 million as compared with the corresponding period in 2023 mainly due to a higher rate of interest earned on our cash, cash equivalents and marketable securities.

Income Taxes

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

For the three months ended March 30, 2024, our income tax expense was $0.4 million for an effective tax rate of 78.0% which differed from the statutory rate of 21% primarily due to state taxes and the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S. federal research tax credits, excess tax benefits from stock-based compensation and the U.S. tax impact of foreign operations. The effective tax rates for the three months ended March 30, 2024 are higher than the similar period in 2023 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.