x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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68-0438710
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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1035 N. McDowell Blvd.
Petaluma, California
(Address of Principal Executive Offices) |
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94954
(Zip Code)
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Registrant’s telephone number, including area code (707) 766-3000
Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.025 par value
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The New York Stock Exchange
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Securities registered pursuant to section 12(g) of the Act:
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None
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(Title of class)
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Large Accelerated Filer
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o
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Accelerated Filer
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x
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Non-accelerated filer
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o
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(Do not check if a smaller reporting company)
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Smaller Reporting Company
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o
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Emerging Growth Company
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o
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Item 16.
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•
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our ability to predict our revenue and reduce and control costs related to our products or service offerings, including larger scale turnkey network improvement projects that may span several quarters;
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•
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our ability to increase our sales to larger communications service providers, or CSPs, globally;
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the capital spending patterns of CSPs, and any decrease or delay in capital spending by CSPs due to macro-economic conditions, regulatory uncertainties, or other reasons;
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the impact of government-sponsored programs on our customers;
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intense competition;
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our ability to develop new products or enhancements that support technological advances and meet changing CSP requirements;
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•
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our ability to achieve market acceptance of our products and CSPs’ willingness to deploy our new products;
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•
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the concentration of our customer base as well as our dependence on a limited number of key customers;
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•
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the length and unpredictability of our sales cycles and timing of orders;
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•
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our lack of long-term, committed-volume purchase contracts with our customers;
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•
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our exposure to the credit risks of our customers;
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•
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fluctuations in our gross margin;
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•
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the interoperability of our products with CSP networks;
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•
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our dependence on sole-, single- and limited-source suppliers;
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our ability to manage our relationships with our third-party, including contract manufacturers, ODMs, logistics providers, component suppliers and development partners;
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our ability to forecast our manufacturing requirements and manage our inventory;
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our products’ compliance with industry standards;
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our ability to expand our international operations;
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our ability to protect our intellectual property and the cost of doing so;
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the quality of our products, including any undetected hardware defects or bugs in our software;
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our ability to estimate future warranty obligations due to product failure rates;
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our ability to obtain necessary third-party technology licenses at reasonable costs;
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the regulatory and physical impacts of climate change and other natural events;
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the attraction and retention of qualified employees and key management personnel;
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our ability to build and sustain an adequate and secure information technology infrastructure; and
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•
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our ability to maintain proper and effective internal controls.
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ITEM 1.
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Business
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Limited capacity of outdated access architectures – Network architectures have physical limitations in their ability to scale bandwidth, avoid latency issues and deliver the advanced broadband services subscribers demand today and are expected to increasingly demand in the future.
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Inflexible networks that constrain subscriber offerings – Networks were designed to support a narrow range of services, and as a result, they limit the ability of CSPs to deploy the advanced broadband services increasingly demanded by their subscribers.
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Expensive to deploy and operate – With a wide variety of equipment installed, networks require significant downtime and labor for maintenance and upgrades, thereby placing a significant and recurring capital and operating expense burden on CSPs.
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Back-office systems slow deployment of new services – Traditional methods for operationalizing new products and services often require significant testing and lengthy back-office integration activities. This often places CSPs at a competitive disadvantage relative to emerging service providers that are leveraging agile management practices.
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Calix Cloud is a cloud analytics platform that leverages network data and subscriber behavioral data to deliver analytics and intelligence to communications professionals via role specific dashboards. Calix Cloud provides the subscriber analytics to deliver the targeted services and experiences to build customer intimacy and loyalty.
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EXOS is a carrier class premises operating system that supports residential, business and mobile subscribers. EXOS, coupled with our market leading GigaFamily premises systems, provides a unique platform for mastering and monetizing the complexity of the smart home and business.
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AXOS is an operating system for access networks that allows a service provider to deliver all services on a single, elastic, converged access network that is always on. AXOS, coupled with our eSeries systems, provides a unique platform for the software defined access network that enables CSPs to transform their business processes and deliver new services at DevOps speed.
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Analyze:
Calix Cloud allows CSPs a deeper understanding of their subscribers and their satisfaction. As a result, CSPs can directly address churn risk and improve marketing campaigns.
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Engage:
Calix Cloud provides CSPs real-time insights into network issues, allowing CSPs to be responsive in resolving issues and offering solutions.
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Grow:
Calix Cloud analytics combine multiple information sources to build a full picture of subscribers, which can enable higher marketing success rates.
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Connect:
Leverage the ecosystems, applications, cloud services and devices that deliver services to subscribers.
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Manage:
Control the total subscriber experience while adapting to new technologies that are introduced into the home or business network.
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Secure:
Provide software-enabled security with the ability to integrate with a global ecosystem of partners.
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Analyze:
Improve the delivery of services by converting subscriber, device and network data into actionable insight.
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Compass Cloud
– Consists of Flow Analyze Plus (a tool that provides an in-depth view of the traffic in CSP networks on a real-time basis) and Consumer Connect Plus (a tool that enables service providers to remotely activate new broadband devices and manage home networks, creating new revenue sources, improved customer satisfaction and reduced service delivery costs) and Service Verify (a tool that gives service providers the tools to comprehensively validate quality of service commitments for their business subscribers).
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Non-AXOS E-Series Access Systems and Nodes:
A small subset of
our E-Series access systems and access nodes that are designed to support an array of advanced IP-based service and run our EXA operating system. These systems are not supported by AXOS.
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Calix C-Series Multiservice Access Systems
: Designed to support a wide array of basic voice and data services offered by CSPs while also supporting advanced, high-speed, packet-based services such as Gigabit Ethernet, GPON, digital subscriber line, or DSL, (including very high-speed DSL 2, or VDSL2) and advanced applications.
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Calix B-Series Access Nodes –
Consist of chassis-based nodes that are designed to support an array of advanced IP-based services offered by CSPs, including Ethernet transport and aggregation, as well as voice, data and video services over both fiber- and copper-based network architectures.
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P-Series Optical Network Terminals and Residential Gateways
: A broad range of non-EXOS customer premises solutions, including optical network terminals, or ONTs, and residential gateways for residential and business use in conjunction with our E-Series, C-Series and B-Series systems.
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Calix Professional Services
utilizes defined service packages to accelerate network design and deployment, optimize performance and scalability and apply field-proven best practices, processes and tools. Use Cases for Calix Professional Services includes the collapse of multiple network silos into a single software defined access architecture, the seamless migration to next-generation PON architectures, the deployment of managed whole home Wi-Fi services and facilitated OSS/BSS integration services.
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Calix Support and Managed Services:
These offerings optimize CSP end-to-end processes, from operations to technology deployment to service lifecycle management. On our new platform-based products, Calix offers three tiers of support services that focus on software updates, the agility of operational workflows, service uptime and customer experience. Calix support tiers are designed to provide optimal support to our customers who are adopting our strategic platforms – Calix Cloud, EXOS and AXOS. On our traditional systems and cloud products, we continue to offer Calix Advantage support. Calix Managed Services focus on transitioning CSPs from reactive break-fix problem solving to a proactive analytics-driven approach. Calix technical and managed support options include technical support, remote monitoring and managed services.
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Calix Education Services
: Calix offers an array of self-service and instructor-led, remote and onsite learning and certifications solutions to help CSPs build the skills required to successfully execute deployments and effectively run next generation networks.
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price;
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functionality;
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existing business and customer relationships;
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the ability of products and services, including turnkey professional services capabilities, to meet customers’ immediate and future network requirements;
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product quality;
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installation capability;
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service and support;
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scalability; and
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manufacturing capability.
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ITEM 1A.
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Risk Factors
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•
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our ability to predict our revenue and reduce and control product costs, including larger scale turnkey network improvement projects that may span several quarters;
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•
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our ability to increase our sales to larger CSPs globally;
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•
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the capital spending patterns of CSPs and any decrease or delay in capital spending by CSPs due to macro-economic conditions, regulatory uncertainties or other reasons;
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•
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the impact of government-sponsored programs on our customers;
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•
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intense competition;
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•
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our ability to develop new products or enhancements that support technological advances and meet changing CSP requirements;
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•
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our ability to achieve market acceptance of our products and CSPs’ willingness to deploy our new products;
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•
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the concentration of our customer base as well as our dependence on a limited number of key customers;
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•
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the length and unpredictability of our sales cycles and timing of orders;
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•
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our lack of long-term, committed-volume purchase contracts with our customers;
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•
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our exposure to the credit risks of our customers;
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•
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fluctuations in our gross margin;
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•
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the interoperability of our products with CSP networks;
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our dependence on sole-, single- and limited-source suppliers;
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•
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our ability to manage our relationships with our third-party vendors, including contract manufacturers, ODMs, logistics providers, component suppliers and development partners;
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our ability to forecast our manufacturing requirements and manage our inventory;
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our products’ compliance with industry standards;
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our ability to expand our international operations;
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our ability to protect our intellectual property and the cost of doing so;
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the quality of our products, including any undetected hardware defects or bugs in our software;
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our ability to estimate future warranty obligations due to product failure rates;
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•
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our ability to obtain necessary third-party technology licenses at reasonable costs;
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the regulatory and physical impacts of climate change and other natural events;
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the attraction and retention of qualified employees and key management personnel;
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•
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our ability to build and sustain an adequate and secure information technology infrastructure; and
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our ability to maintain proper and effective internal controls.
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changes in customer, geographic or product mix, including the mix of configurations within each product group;
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the pursuit or addition of new large customers;
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increased price competition, including the impact of customer discounts and rebates;
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our ability to reduce and control product costs;
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an increase in revenue mix toward services, which typically have lower margin;
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changes in component pricing;
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changes in contract manufacturer rates;
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charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand;
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introduction of new products and new technologies, which may involve higher component costs;
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our ability to scale our services business in order to gain desired efficiencies;
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changes in shipment volume;
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changes in or increased reliance on distribution channels;
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potential liabilities associated with increased reliance on third-party vendors;
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increased expansion efforts into new or emerging markets;
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increased warranty costs;
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excess and obsolete inventory and inventory holding charges;
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expediting costs incurred to meet customer delivery requirements; and
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potential costs associated with contractual liquidated damages obligations.
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the successful development of new products;
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our ability to anticipate CSP and market requirements and changes in technology and industry standards;
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our ability to differentiate our products from our competitors’ offerings based on performance, cost-effectiveness or other factors;
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our ongoing ability to successfully integrate acquired product lines and customer bases into our business;
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our ability to meet increased customer demand for professional services associated with network improvement projects;
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our ability to gain customer acceptance of our products; and
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our ability to market and sell our products.
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cost associated with fixing software or hardware defects;
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high service and warranty expenses;
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high inventory obsolescence expense;
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delays in collecting accounts receivable;
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payment of liquidated damages for performance failures; and
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declining sales to existing customers.
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differing regulatory requirements, including tax laws, trade laws, data privacy laws, labor regulations, tariffs, export quotas, custom duties or other trade restrictions;
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liability or damage to our reputation resulting from corruption or unethical business practices in some countries;
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exposure to effects of fluctuations in currency exchange rates if, over time, international customer contracts are increasingly denominated in local currencies;
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longer collection periods and difficulties in collecting accounts receivable;
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greater difficulty supporting and localizing our products;
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different or unique competitive pressures as a result of, among other things, the presence of local equipment suppliers;
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challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies and compensation, benefits and compliance programs;
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limited or unfavorable intellectual property protection;
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risk of change in international political or economic conditions, terrorist attacks or acts of war; and
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restrictions on the repatriation of earnings.
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manage organizational change;
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manage a larger organization;
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accelerate and/or refocus research and development activities;
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expand our manufacturing, supply chain and distribution capacity;
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increase our sales and marketing efforts;
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broaden our customer-support and services capabilities;
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maintain or increase operational efficiencies;
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scale support operations in a cost-effective manner;
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implement appropriate operational and financial systems; and
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maintain effective financial disclosure controls and procedures.
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expenses and distractions, including diversion of management time related to litigation;
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expenses and distractions related to potential claims resulting from any possible future acquisitions, whether or not they are completed;
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retaining and integrating employees from acquired businesses;
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issuance of dilutive equity securities or incurrence of debt;
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integrating various accounting, management, information, human resource and other systems to permit effective management;
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incurring possible write-offs, impairment charges, contingent liabilities, amortization expense of intangible assets or impairment of goodwill and intangible assets with finite useful lives;
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difficulties integrating and supporting acquired products or technologies;
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unexpected capital expenditure requirements;
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insufficient revenue to offset increased expenses associated with acquisitions; and
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opportunity costs associated with committing capital to such acquisitions.
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difficulty hiring and retaining appropriate engineering resources due to intense competition for such resources and resulting wage inflation;
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the knowledge transfer related to our technology and exposure to misappropriation of intellectual property or confidential information, including information that is proprietary to us, our customers and third parties;
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heightened exposure to changes in the economic, security and political conditions of China;
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fluctuation in currency exchange rates and tax risks associated with international operations;
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development efforts that do not meet our requirements because of language, cultural or other differences associated with international operations, resulting in errors or delays; and
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uncertainty with regards to actions the Trump administration may take with respect to international trade agreements and U.S. tax provisions related to international commerce that could adversely affect our international operations.
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quarterly variations in our results of operations or those of our competitors;
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failure to meet any guidance that we have previously provided regarding our anticipated results;
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changes in earnings estimates or recommendations by securities analysts;
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failure to meet securities analysts’ estimates;
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announcements by us or our competitors of new products, significant contracts, commercial relationships, acquisitions or capital commitments;
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developments with respect to intellectual property rights;
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our ability to develop and market new and enhanced products on a timely basis;
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our commencement of, or involvement in, litigation and developments relating to such litigation;
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changes in governmental regulations; and
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a slowdown in the communications industry or the general economy.
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a classified Board of Directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our Board of Directors;
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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
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the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors;
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the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
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the requirement that a special meeting of stockholders may be called only by the chairman of the Board of Directors, the chief executive officer or the Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
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advance notice procedures that stockholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
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ITEM 1B.
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Unresolved Staff Comments
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ITEM 2.
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Properties
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Location
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Principal Use
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Square
Footage
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Lease
Expiration Date
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Petaluma, California
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Corporate headquarters, sales, marketing, product design, service and repair engineering, distribution, research and development
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82,100
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February 2019
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San Jose, California
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Product design, research and development, administration
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46,100
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August 2018
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Nanjing, China
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Research and development
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42,800
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February 2021
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Minneapolis, Minnesota
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Product design, research and development, service and repair engineering
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28,500
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March 2019
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Richardson, Texas
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Service and test engineering
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14,400
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January 2022
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Santa Barbara, California
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Research and development
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12,400
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June 2019
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ITEM 3.
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Legal Proceedings
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ITEM 4.
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Mine Safety Disclosures
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ITEM 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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High
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Low
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Fiscal Year 2017
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First Quarter
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$
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7.76
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$
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6.15
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Second Quarter
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7.35
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6.30
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Third Quarter
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7.10
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4.65
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Fourth Quarter
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7.20
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5.05
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High
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Low
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Fiscal Year 2016
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First Quarter
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$
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7.87
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$
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5.64
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Second Quarter
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7.76
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6.24
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Third Quarter
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8.20
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6.30
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Fourth Quarter
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8.10
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6.15
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ITEM 6.
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Selected Financial Data
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|
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Years Ended December 31,
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||||||||||||||||||
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2017
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2016
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2015
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2014
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2013
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(In thousands, except per share data)
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||||||||||||||||||
Statement of Operations Data:
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||||||||||
Revenue
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$
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510,367
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$
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458,787
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$
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407,463
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$
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401,227
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$
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382,618
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Cost of revenue
(1)
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337,477
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257,569
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217,034
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223,438
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211,544
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|||||
Gross profit
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172,890
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201,218
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190,429
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177,789
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171,074
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|||||
Operating expenses:
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|
|
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||||||||||
Research and development
(1)
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127,541
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106,869
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89,714
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80,311
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79,299
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|||||
Sales and marketing
(1)
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82,781
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83,675
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78,563
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76,283
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68,075
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|||||
General and administrative
(1)
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39,875
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41,592
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38,454
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31,371
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|
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31,945
|
|
|||||
Restructuring charges
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4,249
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|
|
—
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|
|
—
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|
|
—
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|
|
—
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|
|||||
Amortization of intangible assets
|
|
—
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|
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1,701
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|
|
10,208
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|
|
10,208
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|
|
10,208
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|
|||||
Litigation settlement gain
|
|
—
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|
|
(4,500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total operating expenses
|
|
254,446
|
|
|
229,337
|
|
|
216,939
|
|
|
198,173
|
|
|
189,527
|
|
|||||
Loss from operations
|
|
(81,556
|
)
|
|
(28,119
|
)
|
|
(26,510
|
)
|
|
(20,384
|
)
|
|
(18,453
|
)
|
|||||
Interest and other income (expense), net
(2)
|
|
(233
|
)
|
|
1,064
|
|
|
712
|
|
|
151
|
|
|
1,174
|
|
|||||
Loss before provision for (benefit from) income taxes
|
|
(81,789
|
)
|
|
(27,055
|
)
|
|
(25,798
|
)
|
|
(20,233
|
)
|
|
(17,279
|
)
|
|||||
Provision for (benefit from) income taxes
|
|
1,243
|
|
|
347
|
|
|
535
|
|
|
581
|
|
|
(14
|
)
|
|||||
Net loss
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
|
$
|
(26,333
|
)
|
|
$
|
(20,814
|
)
|
|
$
|
(17,265
|
)
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic and diluted
|
|
$
|
(1.66
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(0.35
|
)
|
Weighted-average number of shares used to compute net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic and diluted
|
|
50,155
|
|
|
48,730
|
|
|
51,489
|
|
|
50,808
|
|
|
49,419
|
|
|||||
(1)
Includes stock-based compensation as follows:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of revenue
|
|
$
|
749
|
|
|
$
|
672
|
|
|
$
|
709
|
|
|
$
|
1,120
|
|
|
$
|
1,468
|
|
Research and development
|
|
4,869
|
|
|
5,125
|
|
|
4,797
|
|
|
5,056
|
|
|
4,896
|
|
|||||
Sales and marketing
|
|
3,433
|
|
|
4,586
|
|
|
4,712
|
|
|
5,601
|
|
|
5,577
|
|
|||||
General and administrative
|
|
3,317
|
|
|
3,902
|
|
|
3,587
|
|
|
4,240
|
|
|
7,980
|
|
|||||
Total
|
|
$
|
12,368
|
|
|
$
|
14,285
|
|
|
$
|
13,805
|
|
|
$
|
16,017
|
|
|
$
|
19,921
|
|
(2)
2013 includes $1.7 million of gain from utilization of inventory credit.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and marketable securities
|
|
$
|
39,775
|
|
|
$
|
78,107
|
|
|
$
|
73,590
|
|
|
$
|
111,679
|
|
|
$
|
82,747
|
|
Working capital
|
|
34,123
|
|
|
97,926
|
|
|
115,561
|
|
|
131,693
|
|
|
114,366
|
|
|||||
Total assets
|
|
295,070
|
|
|
355,475
|
|
|
323,886
|
|
|
370,221
|
|
|
383,599
|
|
|||||
Common stock and additional paid-in capital
|
|
852,475
|
|
|
837,931
|
|
|
820,080
|
|
|
803,101
|
|
|
783,509
|
|
|||||
Total stockholders’ equity
|
|
144,963
|
|
|
212,964
|
|
|
235,785
|
|
|
272,591
|
|
|
273,923
|
|
ITEM 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Persuasive evidence of an arrangement exists. We generally rely upon sales agreements and customer purchase orders as evidence of an arrangement.
|
•
|
Delivery has occurred. We use the shipping terms of the arrangement or evidence of customer acceptance to verify delivery or performance.
|
•
|
Sales price is fixed or determinable. We assess whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment. Payment terms to customers can range from net 30 up to net 180 days.
|
•
|
Collectability is reasonably assured. We assess collectability based primarily on creditworthiness of customers and their payment histories.
|
•
|
For stand-alone purchase orders, while the allocation of revenue to deliverables between products and services may change due to new methodologies under the standard, we expect that the impact of this adjustment will not be significant.
|
•
|
For products sold with our turnkey network improvement projects, the recognition of revenue under current GAAP was often delayed until project completion as a result of our not meeting certain recognition criteria. Under the new standard, revenue from these arrangements may be accelerated as revenue on products may be recognized upon delivery and services may be recognized over time as the services are performed. As there were minimal open projects under turnkey arrangements as of December 31, 2017, the impact of this change on our accumulated deficit is not expected to be significant although it could have a material impact on the timing of revenue recognition in the future.
|
•
|
Revenue from our Cloud product offerings is not expected to be impacted by the adoption of the new standard.
|
•
|
Under current GAAP, revenue from software licenses is recognized ratably over the term of the related post-contract support, or PCS, as we did not have VSOE for PCS for the licenses sold to date. Under the new standard, revenue allocated to the licenses is expected to be recognized upon delivery while the revenue allocated to PCS is expected to be recognized ratably. The impact of this change was not material to our accumulated deficit upon adoption as we only began selling software licenses in 2017.
|
•
|
Products – includes revenue from the sale of access and premises systems, platform software licenses and cloud-based software subscriptions.
|
•
|
Services – includes revenue from professional services, customer support, software and cloud-based maintenance, extended warranty subscriptions, training and managed services.
|
|
Years Ended December 31,
|
|
2017 vs 2016 Change
|
|
2016 vs 2015 Change
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
$
|
421,890
|
|
|
$
|
428,584
|
|
|
$
|
385,679
|
|
|
$
|
(6,694
|
)
|
|
(2
|
)%
|
|
$
|
42,905
|
|
|
11
|
%
|
Services
|
88,477
|
|
|
30,203
|
|
|
21,784
|
|
|
58,274
|
|
|
193
|
%
|
|
8,419
|
|
|
39
|
%
|
|||||
|
$
|
510,367
|
|
|
$
|
458,787
|
|
|
$
|
407,463
|
|
|
$
|
51,580
|
|
|
11
|
%
|
|
$
|
51,324
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Percent of total revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
83
|
%
|
|
93
|
%
|
|
95
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Services
|
17
|
%
|
|
7
|
%
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|||||||||
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017 vs 2016 Change
|
|
2016 vs 2015 Change
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
$
|
185,753
|
|
|
$
|
199,608
|
|
|
$
|
180,953
|
|
|
$
|
(13,855
|
)
|
|
(7
|
)%
|
|
$
|
18,655
|
|
|
10
|
%
|
Services
|
(12,863
|
)
|
|
1,610
|
|
|
9,476
|
|
|
(14,473
|
)
|
|
(899
|
)%
|
|
(7,866
|
)
|
|
(83
|
)%
|
|||||
Total gross profit
|
$
|
172,890
|
|
|
$
|
201,218
|
|
|
$
|
190,429
|
|
|
$
|
(28,328
|
)
|
|
(14
|
)%
|
|
$
|
10,789
|
|
|
6
|
%
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
44
|
|
%
|
47
|
%
|
47
|
%
|
|
|
|
|
|
|
|
|||||||||||
Services
|
(15
|
)
|
%
|
5
|
%
|
43
|
%
|
|
|
|
|
|
|
|
|||||||||||
Total gross margin
|
34
|
|
%
|
44
|
%
|
47
|
%
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017 vs 2016 Change
|
|
2016 vs 2015 Change
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Research and development
|
$
|
127,541
|
|
|
$
|
106,869
|
|
|
$
|
89,714
|
|
|
$
|
20,672
|
|
|
19
|
%
|
|
$
|
17,155
|
|
|
19
|
%
|
Percent of total revenue
|
25
|
%
|
|
23
|
%
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017 vs 2016 Change
|
|
2016 vs 2015 Change
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Sales and marketing
|
$
|
82,781
|
|
|
$
|
83,675
|
|
|
$
|
78,563
|
|
|
$
|
(894
|
)
|
|
(1
|
)%
|
|
$
|
5,112
|
|
|
7
|
%
|
Percent of total revenue
|
16
|
%
|
|
18
|
%
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017 vs 2016 Change
|
|
2016 vs 2015 Change
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
General and administrative
|
$
|
39,875
|
|
|
$
|
41,592
|
|
|
$
|
38,454
|
|
|
$
|
(1,717
|
)
|
|
(4
|
)%
|
|
$
|
3,138
|
|
|
8
|
%
|
Percent of total revenue
|
8
|
%
|
|
9
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017 vs 2016 Change
|
|
2016 vs 2015 Change
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Interest and other income (expense), net
|
$
|
(233
|
)
|
|
$
|
1,064
|
|
|
$
|
712
|
|
|
$
|
(1,297
|
)
|
|
(122
|
)%
|
|
$
|
352
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017 vs 2016 Change
|
|
2016 vs 2015 Change
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Provision for income taxes
|
$
|
1,243
|
|
|
$
|
347
|
|
|
$
|
535
|
|
|
$
|
896
|
|
|
258
|
%
|
|
$
|
(188
|
)
|
|
(35
|
)%
|
Effective tax rate
|
(1.5
|
)%
|
|
(1.3
|
)%
|
|
(2.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net cash provided by (used in) operating activities
|
|
$
|
(62,772
|
)
|
|
$
|
24,419
|
|
|
$
|
(5,341
|
)
|
Net cash provided by investing activities
|
|
19,734
|
|
|
12,083
|
|
|
4,665
|
|
|||
Net cash provided by (used in) financing activities
|
|
31,990
|
|
|
(9,243
|
)
|
|
(24,141
|
)
|
|
|
Payments Due by Period
|
|
|
||||||||||||||||
|
|
Total
|
|
Less Than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More Than 5 Years
|
||||||||||
Line of credit, including interest
(1)
|
|
$
|
32,760
|
|
|
$
|
31,725
|
|
|
$
|
1,035
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating lease obligations
(2)
|
|
4,956
|
|
|
2,805
|
|
|
1,845
|
|
|
306
|
|
|
—
|
|
|||||
Non-cancelable purchase commitments
(3)
|
|
60,505
|
|
|
60,505
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
|
$
|
98,221
|
|
|
$
|
95,035
|
|
|
$
|
2,880
|
|
|
$
|
306
|
|
|
$
|
—
|
|
ITEM 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
ITEM 8.
|
Financial Statements and Supplementary Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenue:
|
|
|
|
|
|
|
||||||
Products
|
|
$
|
421,890
|
|
|
$
|
428,584
|
|
|
$
|
385,679
|
|
Services
|
|
88,477
|
|
|
30,203
|
|
|
21,784
|
|
|||
Total revenue
|
|
510,367
|
|
|
458,787
|
|
|
407,463
|
|
|||
Cost of revenue:
|
|
|
|
|
|
|
||||||
Products
(1)
|
|
236,137
|
|
|
228,976
|
|
|
204,726
|
|
|||
Services
(1)
|
|
101,340
|
|
|
28,593
|
|
|
12,308
|
|
|||
Total cost of revenue
|
|
337,477
|
|
|
257,569
|
|
|
217,034
|
|
|||
Gross profit
|
|
172,890
|
|
|
201,218
|
|
|
190,429
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
Research and development
(1)
|
|
127,541
|
|
|
106,869
|
|
|
89,714
|
|
|||
Sales and marketing
(1)
|
|
82,781
|
|
|
83,675
|
|
|
78,563
|
|
|||
General and administrative
(1)
|
|
39,875
|
|
|
41,592
|
|
|
38,454
|
|
|||
Restructuring charges
|
|
4,249
|
|
|
—
|
|
|
—
|
|
|||
Amortization of intangible assets
|
|
—
|
|
|
1,701
|
|
|
10,208
|
|
|||
Litigation settlement gain
|
|
—
|
|
|
(4,500
|
)
|
|
—
|
|
|||
Total operating expenses
|
|
254,446
|
|
|
229,337
|
|
|
216,939
|
|
|||
Loss from operations
|
|
(81,556
|
)
|
|
(28,119
|
)
|
|
(26,510
|
)
|
|||
Interest and other income (expense), net:
|
|
|
|
|
|
|
||||||
Interest income (expense), net
|
|
(160
|
)
|
|
152
|
|
|
141
|
|
|||
Other income (expense), net
|
|
(73
|
)
|
|
912
|
|
|
571
|
|
|||
Total interest and other income (expense), net
|
|
(233
|
)
|
|
1,064
|
|
|
712
|
|
|||
Loss before provision for income taxes
|
|
(81,789
|
)
|
|
(27,055
|
)
|
|
(25,798
|
)
|
|||
Provision for income taxes
|
|
1,243
|
|
|
347
|
|
|
535
|
|
|||
Net loss
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
|
$
|
(26,333
|
)
|
Net loss per common share:
|
|
|
|
|
|
|
||||||
Basic and diluted
|
|
$
|
(1.66
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(0.51
|
)
|
Weighted-average number of shares used to compute net loss per common share:
|
|
|
|
|
|
|
||||||
Basic and diluted
|
|
50,155
|
|
|
48,730
|
|
|
51,489
|
|
|||
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
|
$
|
(26,333
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||||||
Unrealized gain (loss) on available-for-sale
|
|
|
|
|
|
|
||||||
marketable securities, net
|
|
6
|
|
|
88
|
|
|
(36
|
)
|
|||
Foreign currency translation adjustments, net
|
|
481
|
|
|
(549
|
)
|
|
(239
|
)
|
|||
Total other comprehensive income (loss), net of tax
|
|
487
|
|
|
(461
|
)
|
|
(275
|
)
|
|||
Comprehensive loss
|
|
$
|
(82,545
|
)
|
|
$
|
(27,863
|
)
|
|
$
|
(26,608
|
)
|
|
|
|
|
|
|
|
||||||
(1) Includes stock-based compensation as follows:
|
|
|
|
|
|
|
||||||
Cost of revenue:
|
|
|
|
|
|
|
||||||
Products
|
|
$
|
473
|
|
|
$
|
465
|
|
|
$
|
595
|
|
Services
|
|
276
|
|
|
207
|
|
|
114
|
|
|||
Research and development
|
|
4,869
|
|
|
5,125
|
|
|
4,797
|
|
|||
Sales and marketing
|
|
3,433
|
|
|
4,586
|
|
|
4,712
|
|
|||
General and administrative
|
|
3,317
|
|
|
3,902
|
|
|
3,587
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
Additional
|
|
Other
|
|
|
|
|
|
Total
|
|||||||||||||||
|
|
Common Stock
|
|
Paid-in
|
|
Comprehensive
|
|
Accumulated
|
|
Treasury
|
|
Stockholders’
|
|||||||||||||||
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Income (Loss)
|
|
Deficit
|
|
Stock
|
|
Equity
|
|||||||||||||
Balance at December 31, 2014
|
|
51,628
|
|
|
$
|
1,291
|
|
|
$
|
801,810
|
|
|
$
|
80
|
|
|
$
|
(530,590
|
)
|
|
$
|
—
|
|
|
$
|
272,591
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
13,805
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,805
|
|
||||||
Exercise of stock options
|
|
97
|
|
|
2
|
|
|
636
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
638
|
|
||||||
Issuance of vested performance restricted stock units and restricted stock units, net of taxes withheld
|
|
583
|
|
|
14
|
|
|
(2,206
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,192
|
)
|
||||||
Stock issued under employee stock purchase plan
|
|
762
|
|
|
19
|
|
|
4,869
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,888
|
|
||||||
Shares withheld for taxes for vested restricted stock awards
|
|
(20
|
)
|
|
—
|
|
|
(160
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(160
|
)
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,333
|
)
|
|
—
|
|
|
(26,333
|
)
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(275
|
)
|
|
—
|
|
|
—
|
|
|
(275
|
)
|
||||||
Repurchases of common stock
|
|
(3,541
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,177
|
)
|
|
(27,177
|
)
|
||||||
Balance at December 31, 2015
|
|
49,509
|
|
|
1,326
|
|
|
818,754
|
|
|
(195
|
)
|
|
(556,923
|
)
|
|
(27,177
|
)
|
|
235,785
|
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
14,285
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,285
|
|
||||||
Exercise of stock options
|
|
3
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||||
Issuance of vested performance restricted stock units and restricted stock units, net of taxes withheld
|
|
659
|
|
|
17
|
|
|
(2,118
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,101
|
)
|
||||||
Stock issued under employee stock purchase plan
|
|
1,010
|
|
|
25
|
|
|
5,625
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,650
|
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,402
|
)
|
|
—
|
|
|
(27,402
|
)
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(461
|
)
|
|
—
|
|
|
—
|
|
|
(461
|
)
|
||||||
Repurchases of common stock
|
|
(1,789
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,809
|
)
|
|
(12,809
|
)
|
||||||
Balance at December 31, 2016
|
|
49,392
|
|
|
1,368
|
|
|
836,563
|
|
|
(656
|
)
|
|
(584,325
|
)
|
|
(39,986
|
)
|
|
212,964
|
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
12,368
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,368
|
|
||||||
Exercise of stock options
|
|
11
|
|
|
—
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62
|
|
||||||
Issuance of vested performance restricted stock units and restricted stock units, net of taxes withheld
|
|
994
|
|
|
24
|
|
|
(2,788
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,764
|
)
|
||||||
Stock issued under employee stock purchase plans
|
|
1,112
|
|
|
29
|
|
|
4,849
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,878
|
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(83,032
|
)
|
|
—
|
|
|
(83,032
|
)
|
||||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
487
|
|
|
—
|
|
|
—
|
|
|
487
|
|
||||||
Balance at December 31, 2017
|
|
51,509
|
|
|
$
|
1,421
|
|
|
$
|
851,054
|
|
|
$
|
(169
|
)
|
|
$
|
(667,357
|
)
|
|
$
|
(39,986
|
)
|
|
$
|
144,963
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Operating activities:
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
|
$
|
(26,333
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
||||||
Stock-based compensation
|
|
12,368
|
|
|
14,285
|
|
|
13,805
|
|
|||
Depreciation and amortization
|
|
10,178
|
|
|
8,319
|
|
|
10,262
|
|
|||
Amortization of intangible assets
|
|
813
|
|
|
5,805
|
|
|
18,561
|
|
|||
Loss on retirement of property and equipment
|
|
280
|
|
|
—
|
|
|
24
|
|
|||
Amortization of premium (discount) relating to available-for-sale securities
|
|
(6
|
)
|
|
382
|
|
|
907
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Restricted cash
|
|
—
|
|
|
—
|
|
|
295
|
|
|||
Accounts receivable, net
|
|
(29,056
|
)
|
|
(4,185
|
)
|
|
(16,411
|
)
|
|||
Inventory
|
|
13,016
|
|
|
3,122
|
|
|
(915
|
)
|
|||
Deferred cost of revenue
|
|
32,368
|
|
|
(29,845
|
)
|
|
162
|
|
|||
Prepaid expenses and other assets
|
|
2,842
|
|
|
(1,197
|
)
|
|
2,889
|
|
|||
Accounts payable
|
|
11,759
|
|
|
4,236
|
|
|
(4,021
|
)
|
|||
Accrued liabilities
|
|
(20,184
|
)
|
|
34,913
|
|
|
(3,781
|
)
|
|||
Deferred revenue
|
|
(14,370
|
)
|
|
16,398
|
|
|
(422
|
)
|
|||
Other long-term liabilities
|
|
252
|
|
|
(412
|
)
|
|
(363
|
)
|
|||
Net cash provided by (used in) operating activities
|
|
(62,772
|
)
|
|
24,419
|
|
|
(5,341
|
)
|
|||
Investing activities:
|
|
|
|
|
|
|
||||||
Purchases of property and equipment
|
|
(8,026
|
)
|
|
(9,839
|
)
|
|
(7,278
|
)
|
|||
Purchases of marketable securities
|
|
(8,732
|
)
|
|
(16,478
|
)
|
|
(60,002
|
)
|
|||
Sales of marketable securities
|
|
5,051
|
|
|
—
|
|
|
—
|
|
|||
Maturities of marketable securities
|
|
31,441
|
|
|
38,400
|
|
|
71,945
|
|
|||
Net cash provided by investing activities
|
|
19,734
|
|
|
12,083
|
|
|
4,665
|
|
|||
Financing activities:
|
|
|
|
|
|
|
||||||
Proceeds from exercise of stock options
|
|
62
|
|
|
17
|
|
|
638
|
|
|||
Proceeds from employee stock purchase plans
|
|
4,878
|
|
|
5,650
|
|
|
4,888
|
|
|||
Payments for repurchases of common stock
|
|
—
|
|
|
(12,809
|
)
|
|
(27,177
|
)
|
|||
Taxes paid for awards vested under equity incentive plan
|
|
(2,764
|
)
|
|
(2,101
|
)
|
|
(2,352
|
)
|
|||
Proceeds from line of credit
|
|
171,268
|
|
|
—
|
|
|
—
|
|
|||
Repayments of line of credit
|
|
(141,268
|
)
|
|
—
|
|
|
—
|
|
|||
Payments to originate the line of credit
|
|
(186
|
)
|
|
—
|
|
|
(138
|
)
|
|||
Net cash provided by (used in) financing activities
|
|
31,990
|
|
|
(9,243
|
)
|
|
(24,141
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
|
464
|
|
|
(526
|
)
|
|
(386
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
(10,584
|
)
|
|
26,733
|
|
|
(25,203
|
)
|
|||
Cash and cash equivalents at beginning of year
|
|
50,359
|
|
|
23,626
|
|
|
48,829
|
|
|||
Cash and cash equivalents at end of year
|
|
$
|
39,775
|
|
|
$
|
50,359
|
|
|
$
|
23,626
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
||||||
Interest paid
|
|
$
|
313
|
|
|
$
|
127
|
|
|
$
|
127
|
|
Income taxes paid
|
|
915
|
|
|
965
|
|
|
483
|
|
|||
Non-cash investing activities:
|
|
|
|
|
|
|
||||||
Changes in accounts payable and accrued liabilities related to purchases of property and equipment
|
|
$
|
(55
|
)
|
|
$
|
(478
|
)
|
|
$
|
—
|
|
•
|
Persuasive evidence of an arrangement exists. The Company generally relies upon sales agreements and customer purchase orders as evidence of an arrangement.
|
•
|
Delivery has occurred. The Company uses the shipping terms of the arrangement or evidence of customer acceptance to verify delivery or performance.
|
•
|
Sales price is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment. Payment terms to customers can range from net
30
to net
180
days.
|
•
|
Collectability is reasonably assured. The Company assesses collectability based primarily on creditworthiness of customers and their payment histories.
|
a.
|
Accounting for Income Taxes – The primary impact of the adoption was the recognition of excess tax benefits and tax deficiencies through the statement of operations when the awards vest or are settled rather than through paid-in capital. The new guidance eliminates the requirement to delay the recognition of excess tax benefits until it reduces current taxes payable and requires the recognition of excess tax benefits and tax deficiencies in the period they arise. The Company adopted this guidance on a modified retrospective basis beginning on January 1, 2017, and the adoption had a cumulative-effect adjustment to the beginning balance of deferred tax asset and was fully offset by the corresponding valuation allowance as of January 1, 2017. The adoption had no cumulative-effect adjustment on January 1, 2017 accumulated deficit as the Company’s net operating loss carryforwards are offset by a full valuation allowance.
|
b.
|
Classification of Excess Tax Benefits on the Statement of Cash Flows – ASU 2016-09 requires all tax-related cash flows resulting from share-based payments to be reported as operating activities on the statement of cash flows, a change from the previous requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. The Company adopted this guidance prospectively beginning on January 1, 2017. The adoption of ASU 2016-09 as it relates to this matter had no impact to the Company’s consolidated financial statements.
|
c.
|
Forfeitures – The Company has historically recognized stock-based compensation expense net of estimated forfeitures on all unvested awards and elected to continuously do so with the adoption of this new guidance. Hence, the adoption of ASU 2016-09 as it relates to this matter had no impact to the Company’s consolidated financial statements.
|
d.
|
Minimum Statutory Tax Withholding Requirements – ASU 2016-09 allows companies to withhold an amount up to the employee’s maximum individual tax rate in the relevant jurisdiction without resulting in liability classification of the award. The Company adopted this guidance using a modified retrospective approach. The adoption had no impact on the January 1, 2017 accumulated deficit as the Company had no outstanding liability awards that would otherwise qualify for equity classification under this new guidance.
|
e.
|
Classification of Employee Taxes Paid on the Statement of Cash Flows When an Employer Withholds Shares for Tax-Withholding Purposes – ASU 2016-09 clarifies that all cash payments made to taxing authorities on the employees’ behalf for withheld shares should be presented as financing activities on the statement of cash flows. The Company has historically presented the taxes paid related to net share settlement of equity awards as a financing activity on the statements of cash flows. Hence, the adoption of ASU 2016-09 as it relates to this matter had no impact to the Company’s consolidated financial statements.
|
•
|
For stand-alone purchase orders, while the allocation of revenue to deliverables between products and services may change due to new methodologies under the standard, the Company expects that the impact of this adjustment will not be significant.
|
•
|
For products sold with the Company’s turnkey network improvement projects, the recognition of revenue under current GAAP was often delayed until project completion as a result of the Company not meeting certain recognition criteria. Under the new standard, revenue from these arrangements may be accelerated as revenue on products may be recognized upon delivery and services may be recognized over time as the services are performed. As there were minimal open projects under turnkey arrangements as of December 31, 2017, the impact of this change on the Company’s accumulated deficit is not expected to be significant although it could have a material impact on the timing of revenue recognition in the future.
|
•
|
Revenue from the Company’s Cloud product offerings is not expected to be impacted by the adoption of the new standard.
|
•
|
Under current GAAP, revenue from software licenses is recognized ratably over the term of the related post-contract support (“PCS”) as the Company did not have VSOE for PCS for the licenses sold to date. Under the new standard, revenue allocated to the licenses is expected to be recognized upon delivery while the revenue allocated to PCS is expected to be recognized ratably. The impact of this change was not material to the Company’s accumulated deficit upon adoption as the Company only began selling software licenses in 2017.
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Cash and cash equivalents:
|
|
|
|
|
||||
Cash
|
|
$
|
35,999
|
|
|
$
|
34,340
|
|
Money market funds
|
|
3,776
|
|
|
15,020
|
|
||
Commercial paper
|
|
—
|
|
|
999
|
|
||
Total cash and cash equivalents
|
|
39,775
|
|
|
50,359
|
|
||
Marketable securities:
|
|
|
|
|
||||
Corporate debt securities
|
|
—
|
|
|
17,272
|
|
||
Commercial paper
|
|
—
|
|
|
6,275
|
|
||
U.S. government agency securities
|
|
—
|
|
|
4,201
|
|
||
Total marketable securities
|
|
—
|
|
|
27,748
|
|
||
Total cash, cash equivalents and marketable securities
|
|
$
|
39,775
|
|
|
$
|
78,107
|
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
||||||||
Corporate debt securities
|
|
$
|
17,279
|
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
|
$
|
17,272
|
|
Commercial paper
|
|
6,275
|
|
|
—
|
|
|
—
|
|
|
6,275
|
|
||||
U.S. government agency securities
|
|
4,200
|
|
|
1
|
|
|
—
|
|
|
4,201
|
|
||||
Total marketable securities
|
|
$
|
27,754
|
|
|
$
|
2
|
|
|
$
|
(8
|
)
|
|
$
|
27,748
|
|
As of December 31, 2017
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Money market funds
|
|
$
|
3,776
|
|
|
$
|
—
|
|
|
$
|
3,776
|
|
Commercial paper
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
U.S. government agency securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
|
$
|
3,776
|
|
|
$
|
—
|
|
|
$
|
3,776
|
|
As of December 31, 2016
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Money market funds
|
|
$
|
15,020
|
|
|
$
|
—
|
|
|
$
|
15,020
|
|
Corporate debt securities
|
|
—
|
|
|
17,272
|
|
|
17,272
|
|
|||
Commercial paper
|
|
—
|
|
|
7,274
|
|
|
7,274
|
|
|||
U.S. government agency securities
|
|
—
|
|
|
4,201
|
|
|
4,201
|
|
|||
Total
|
|
$
|
15,020
|
|
|
$
|
28,747
|
|
|
$
|
43,767
|
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Accounts receivable
|
|
$
|
81,793
|
|
|
$
|
52,792
|
|
Allowance for doubtful accounts
|
|
(579
|
)
|
|
(518
|
)
|
||
Product return reserve
|
|
(822
|
)
|
|
(938
|
)
|
||
|
|
$
|
80,392
|
|
|
$
|
51,336
|
|
|
|
Balance at Beginning of Year
|
|
Additions Charged to Costs or Expenses or Revenue
|
|
Deductions and Write Offs
|
|
Balance at
End of Year
|
||||||||
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
518
|
|
|
$
|
103
|
|
|
$
|
(42
|
)
|
|
$
|
579
|
|
Product return reserve
|
|
938
|
|
|
3,682
|
|
|
(3,798
|
)
|
|
822
|
|
||||
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
501
|
|
|
$
|
232
|
|
|
$
|
(215
|
)
|
|
$
|
518
|
|
Product return reserve
|
|
663
|
|
|
3,679
|
|
|
(3,404
|
)
|
|
938
|
|
||||
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
241
|
|
|
$
|
405
|
|
|
$
|
(145
|
)
|
|
$
|
501
|
|
Product return reserve
|
|
508
|
|
|
4,224
|
|
|
(4,069
|
)
|
|
663
|
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Test equipment
|
|
$
|
39,952
|
|
|
$
|
43,580
|
|
Computer equipment and purchased software
|
|
32,175
|
|
|
30,306
|
|
||
Furniture and fixtures
|
|
2,714
|
|
|
2,831
|
|
||
Leasehold improvements
|
|
6,029
|
|
|
6,898
|
|
||
|
|
80,870
|
|
|
83,615
|
|
||
Accumulated depreciation and amortization
|
|
(65,189
|
)
|
|
(65,631
|
)
|
||
|
|
$
|
15,681
|
|
|
$
|
17,984
|
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Accrued compensation and related benefits
|
|
$
|
15,563
|
|
|
$
|
19,541
|
|
Accrued professional and consulting fees
|
|
9,604
|
|
|
8,205
|
|
||
Accrued warranty and retrofit
|
|
8,708
|
|
|
12,214
|
|
||
Accrued excess and obsolete inventory at contract manufacturers
|
|
2,430
|
|
|
1,327
|
|
||
Accrued non-income related taxes
|
|
1,778
|
|
|
699
|
|
||
Accrued restructuring charges
|
|
1,417
|
|
|
—
|
|
||
Accrued business events
|
|
1,272
|
|
|
—
|
|
||
Advance customer payments
|
|
1,050
|
|
|
20,726
|
|
||
Accrued insurance
|
|
827
|
|
|
804
|
|
||
Accrued freight
|
|
593
|
|
|
1,198
|
|
||
Accrued customer rebates
|
|
382
|
|
|
1,931
|
|
||
Accrued other
|
|
5,655
|
|
|
3,070
|
|
||
|
|
$
|
49,279
|
|
|
$
|
69,715
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Balance at beginning of period
|
|
$
|
12,214
|
|
|
$
|
9,564
|
|
|
$
|
9,553
|
|
Provision for warranty and retrofit charged to cost of revenue
|
|
8,720
|
|
|
9,898
|
|
|
4,661
|
|
|||
Utilization of reserve
|
|
(12,226
|
)
|
|
(6,816
|
)
|
|
(4,115
|
)
|
|||
Adjustments to pre-existing reserve
|
|
—
|
|
|
(432
|
)
|
|
(535
|
)
|
|||
Balance at end of period
|
|
$
|
8,708
|
|
|
$
|
12,214
|
|
|
$
|
9,564
|
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Current:
|
|
|
|
|
||||
Product and services
|
|
$
|
9,125
|
|
|
$
|
24,472
|
|
Extended warranty
|
|
3,951
|
|
|
3,382
|
|
||
|
|
13,076
|
|
|
27,854
|
|
||
Non-current:
|
|
|
|
|
||||
Product and services
|
|
18
|
|
|
22
|
|
||
Extended warranty
|
|
20,627
|
|
|
20,215
|
|
||
|
|
20,645
|
|
|
20,237
|
|
||
|
|
$
|
33,721
|
|
|
$
|
48,091
|
|
|
|
RSUs
|
|
PRSUs
|
||||||||||
|
|
|
|
Weighted-
|
|
|
|
Weighted-
|
||||||
|
|
|
|
Average
|
|
|
|
Average
|
||||||
|
|
|
|
Grant Date
|
|
|
|
Grant Date
|
||||||
|
|
Number of
|
|
Fair Value
|
|
Number of
|
|
Fair Value
|
||||||
|
|
Shares
|
|
Per Share
|
|
Shares
|
|
Per Share
|
||||||
Outstanding at December 31, 2016
|
|
2,598
|
|
|
$
|
7.86
|
|
|
565
|
|
|
$
|
7.51
|
|
Granted
|
|
505
|
|
|
6.75
|
|
|
—
|
|
|
—
|
|
||
Vested
|
|
(1,072
|
)
|
|
7.92
|
|
|
(325
|
)
|
|
7.42
|
|
||
Canceled
|
|
(305
|
)
|
|
7.70
|
|
|
(90
|
)
|
|
8.01
|
|
||
Outstanding at December 31, 2017
|
|
1,726
|
|
|
$
|
7.53
|
|
|
150
|
|
|
$
|
7.42
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Stock options
|
|
$
|
3.19
|
|
|
$
|
3.58
|
|
|
$
|
4.56
|
|
RSUs
|
|
$
|
6.75
|
|
|
$
|
6.91
|
|
|
$
|
8.59
|
|
PRSUs
|
|
N/A
|
|
|
$
|
7.42
|
|
|
N/A
|
|
||
ESPP
|
|
$
|
1.76
|
|
|
$
|
1.92
|
|
|
$
|
2.03
|
|
Nonqualified ESPP
|
|
$
|
6.90
|
|
|
N/A
|
|
|
N/A
|
|
(i)
|
Expected volatility of the Company’s common stock – The Company computes its expected volatility assumption based on a blended volatility (
50%
historical volatility and
50%
implied volatility from traded options on the Company’s common stock). The selection of a blended volatility assumption was based upon the Company’s assessment that a blended volatility is more representative of the Company’s future stock price trend as it weighs the historical volatility with the future implied volatility.
|
(ii)
|
Expected life of the option award – Represents the weighted-average period that the stock options are expected to remain outstanding. The Company’s computation of expected life utilizes the simplified method in accordance with Staff Accounting Bulletin No. 110 (“SAB 110”) due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The mid-point between the vesting date and the expiration date is used as the expected term under this method.
|
(iii)
|
Expected dividend yield – Assumption is based on the Company’s history of not paying dividends and no future expectations of dividend payouts.
|
(iv)
|
Risk-free interest rate – Based on the U.S. Treasury yield curve in effect at the time of grant with maturities approximating the grant’s expected life.
|
|
|
Years Ended December 31,
|
|||||||
Stock Options
|
|
2017
|
|
2016
|
|
2015
|
|||
Expected volatility
|
|
52
|
%
|
|
53
|
%
|
|
52
|
%
|
Expected life (years)
|
|
5.88
|
|
|
6.25
|
|
|
6.25
|
|
Expected dividend yield
|
|
—
|
|
|
—
|
|
|
—
|
|
Risk-free interest rate
|
|
2.10
|
%
|
|
1.60
|
%
|
|
1.56
|
%
|
|
|
Years Ended December 31,
|
|||||||
ESPP
|
|
2017
|
|
2016
|
|
2015
|
|||
Expected volatility
|
|
45
|
%
|
|
46
|
%
|
|
46
|
%
|
Expected life (years)
|
|
0.49
|
|
|
0.52
|
|
|
0.46
|
|
Expected dividend yield
|
|
—
|
|
|
—
|
|
|
—
|
|
Risk-free interest rate
|
|
1.24
|
%
|
|
0.47
|
%
|
|
0.18
|
%
|
|
|
December 31, 2017
|
||||||||||||||
|
|
Stock Option
|
|
RSU
|
|
PRSU
|
|
ESPP Plans
|
||||||||
Unrecognized stock-based compensation expense
|
|
$
|
3,766
|
|
|
$
|
8,431
|
|
|
$
|
222
|
|
|
$
|
1,689
|
|
Weighted-average amortization period (in years)
|
|
2.8
|
|
|
1.9
|
|
|
0.7
|
|
|
0.7
|
|
|
|
December 31,
|
||||
|
|
2017
|
|
2016
|
||
Stock options outstanding
|
|
5,756
|
|
|
3,209
|
|
Restricted stock units outstanding
|
|
1,726
|
|
|
2,598
|
|
Performance restricted stock units outstanding
|
|
150
|
|
|
565
|
|
Shares available for future grant under 2010 Plan
|
|
281
|
|
|
1,603
|
|
Shares available for future issuance under ESPP
|
|
2,456
|
|
|
119
|
|
Shares available for future issuance under Nonqualified ESPP
|
|
551
|
|
|
—
|
|
Common stock warrants
|
|
—
|
|
|
15
|
|
|
|
10,920
|
|
|
8,109
|
|
|
|
Unrealized Gains and Losses on Available-for-Sale Marketable Securities
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
||||||
Balance at December 31, 2015
|
|
(94
|
)
|
|
(101
|
)
|
|
(195
|
)
|
|||
Other comprehensive income (loss)
|
|
88
|
|
|
(549
|
)
|
|
(461
|
)
|
|||
Balance at December 31, 2016
|
|
(6
|
)
|
|
(650
|
)
|
|
(656
|
)
|
|||
Other comprehensive income
|
|
6
|
|
|
481
|
|
|
487
|
|
|||
Balance at December 31, 2017
|
|
$
|
—
|
|
|
$
|
(169
|
)
|
|
$
|
(169
|
)
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Current:
|
|
|
|
|
|
|
||||||
State
|
|
$
|
115
|
|
|
$
|
102
|
|
|
$
|
90
|
|
Foreign
|
|
577
|
|
|
673
|
|
|
493
|
|
|||
Current income tax
|
|
692
|
|
|
775
|
|
|
583
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
Foreign
|
|
551
|
|
|
(428
|
)
|
|
(48
|
)
|
|||
Deferred income tax
|
|
551
|
|
|
(428
|
)
|
|
(48
|
)
|
|||
|
|
$
|
1,243
|
|
|
$
|
347
|
|
|
$
|
535
|
|
|
|
Years Ended December 31,
|
|||||||
|
|
2017
|
|
2016
|
|
2015
|
|||
Federal statutory rate
|
|
34.0
|
%
|
|
34.0
|
%
|
|
34.0
|
%
|
State statutory rate
|
|
4.5
|
%
|
|
6.1
|
%
|
|
2.6
|
%
|
Foreign operations
|
|
0.5
|
%
|
|
0.6
|
%
|
|
1.1
|
%
|
R&D tax credits
|
|
2.7
|
%
|
|
6.4
|
%
|
|
11.2
|
%
|
Foreign income inclusion
|
|
(0.1
|
)%
|
|
(0.7
|
)%
|
|
(2.4
|
)%
|
Non-deductible stock compensation
|
|
(3.7
|
)%
|
|
(5.1
|
)%
|
|
(1.9
|
)%
|
Other permanent items
|
|
(0.4
|
)%
|
|
(1.4
|
)%
|
|
(2.0
|
)%
|
Tax true-up
|
|
(1.7
|
)%
|
|
21.0
|
%
|
|
(1.3
|
)%
|
Valuation allowance
|
|
67.3
|
%
|
|
(62.2
|
)%
|
|
(43.4
|
)%
|
Tax reform
|
|
(104.6
|
)%
|
|
—
|
%
|
|
—
|
%
|
Effective tax rate
|
|
(1.5
|
)%
|
|
(1.3
|
)%
|
|
(2.1
|
)%
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Net operating loss carryforwards
|
|
$
|
134,731
|
|
|
$
|
167,668
|
|
Tax credit carryforwards
|
|
43,095
|
|
|
36,026
|
|
||
Depreciation and amortization
|
|
1,892
|
|
|
2,538
|
|
||
Accruals and reserves
|
|
7,933
|
|
|
13,462
|
|
||
Deferred revenue
|
|
7,928
|
|
|
12,954
|
|
||
Stock-based compensation
|
|
3,100
|
|
|
6,159
|
|
||
Intangible assets
|
|
64
|
|
|
—
|
|
||
Other
|
|
23
|
|
|
1,124
|
|
||
Gross deferred tax assets
|
|
198,766
|
|
|
239,931
|
|
||
Valuation allowance
|
|
(198,746
|
)
|
|
(239,238
|
)
|
||
Net deferred tax assets
|
|
20
|
|
|
693
|
|
||
Deferred tax liability - intangible assets
|
|
—
|
|
|
(157
|
)
|
||
|
|
$
|
20
|
|
|
$
|
536
|
|
|
|
Years Ended December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Balance at beginning of year
|
|
$
|
18,349
|
|
|
$
|
16,597
|
|
Additions for tax positions related to prior year
|
|
—
|
|
|
420
|
|
||
Reductions for tax positions related to prior year
|
|
—
|
|
|
(145
|
)
|
||
Additions for tax positions related to current year
|
|
1,940
|
|
|
1,477
|
|
||
Balance at end of year
|
|
$
|
20,289
|
|
|
$
|
18,349
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Numerator:
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
|
$
|
(26,333
|
)
|
Denominator:
|
|
|
|
|
|
|
||||||
Weighted-average common shares outstanding
|
|
50,155
|
|
|
48,730
|
|
|
51,489
|
|
|||
Basic and diluted net loss per common share
|
|
$
|
(1.66
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(0.51
|
)
|
Potentially dilutive shares, weighted-average
|
|
3,446
|
|
|
5,890
|
|
|
6,120
|
|
|
|
Severance and Related Benefits
|
|
Facilities
|
|
Total
|
||||||
Balance at December 31, 2016
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restructuring charges for the year
|
|
3,807
|
|
|
442
|
|
|
4,249
|
|
|||
Cash payments
|
|
(2,832
|
)
|
|
—
|
|
|
(2,832
|
)
|
|||
Balance at December 31, 2017
|
|
$
|
975
|
|
|
$
|
442
|
|
|
$
|
1,417
|
|
|
|
Fiscal Year 2017 Quarter Ended
|
||||||||||||||
|
|
April 1
|
|
July 1
|
|
September 30
|
|
December 31
|
||||||||
Revenue
|
|
$
|
117,518
|
|
|
$
|
126,123
|
|
|
$
|
128,827
|
|
|
$
|
137,899
|
|
Gross profit
|
|
34,377
|
|
|
43,323
|
|
|
44,633
|
|
|
50,557
|
|
||||
Operating loss
|
|
(32,816
|
)
|
|
(18,714
|
)
|
|
(17,263
|
)
|
|
(12,763
|
)
|
||||
Net loss
|
|
(33,325
|
)
|
|
(18,988
|
)
|
|
(17,853
|
)
|
|
(12,866
|
)
|
||||
Net loss per common share, basic
|
|
$
|
(0.67
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
(0.25
|
)
|
Net loss per common share, diluted
|
|
$
|
(0.67
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
(0.25
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Fiscal Year 2016 Quarter Ended
|
||||||||||||||
|
|
March 26
|
|
June 25
|
|
September 24
|
|
December 31
|
||||||||
Revenue
|
|
$
|
98,375
|
|
|
$
|
107,425
|
|
|
$
|
121,187
|
|
|
$
|
131,800
|
|
Gross profit
|
|
45,482
|
|
|
50,006
|
|
|
53,544
|
|
|
52,186
|
|
||||
Operating income (loss)
|
|
(10,738
|
)
|
|
(5,881
|
)
|
|
735
|
|
|
(12,235
|
)
|
||||
Net income (loss)
|
|
(10,729
|
)
|
|
(5,826
|
)
|
|
636
|
|
|
(11,483
|
)
|
||||
Net income (loss) per common share, basic
|
|
$
|
(0.22
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.23
|
)
|
Net income (loss) per common share, diluted
|
|
$
|
(0.22
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.23
|
)
|
ITEM 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
ITEM 9A.
|
Controls and Procedures
|
ITEM 9B.
|
Other Information
|
ITEM 10.
|
Directors, Executive Officers and Corporate Governance
|
ITEM 11.
|
Executive Compensation
|
ITEM 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
ITEM 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
ITEM 14.
|
Principal Accountant Fees and Services
|
ITEM 15.
|
Exhibits, Financial Statement Schedules
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
2.1
|
|
|
3.1
|
|
|
3.2
|
|
|
4.1
|
|
|
10.1*
|
|
|
10.2*
|
|
|
10.3
|
|
|
10.4
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8*
|
|
|
10.9*
|
|
|
10.10†
|
|
|
10.11*
|
|
|
10.12*
|
|
|
10.13*
|
|
|
10.14*
|
|
|
10.15*
|
|
|
10.16*
|
|
|
10.17*
|
|
|
10.18*
|
|
|
10.19*
|
|
|
10.20*
|
|
|
10.21*
|
|
|
10.22*
|
|
|
10.23†
|
|
|
10.24††
|
|
|
10.25*
|
|
|
10.26*
|
|
|
10.27*
|
|
|
10.28*
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
21.1
|
|
|
23.1
|
|
|
23.2
|
|
|
24.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
101.INS
|
|
XBRL Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
*
|
|
Indicates management contract or compensatory plan or arrangement.
|
†
|
|
Confidential treatment has been granted as to certain portions of this agreement.
|
††
|
|
Confidential treatment has been requested as to certain portions of this agreement.
|
ITEM 16.
|
Form 10-K Summary
|
|
|
CALIX, INC.
(Registrant)
|
||
|
|
|
||
Dated:
|
March 13, 2018
|
By:
|
|
/s/ Carl Russo
|
|
|
|
|
Carl Russo
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
||
Dated:
|
March 13, 2018
|
By:
|
|
/s/ Cory Sindelar
|
|
|
|
|
Cory Sindelar
|
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
||
Dated:
|
March 13, 2018
|
By:
|
|
/s/ Sheila Cheung
|
|
|
|
|
Sheila Cheung
|
|
|
|
|
Vice President, Finance and Accounting
(Principal Accounting Officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
||
/s/ Carl Russo
|
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
March 13, 2018
|
Carl Russo
|
|
|
|
|
|
|
|
||
/s/ Cory Sindelar
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
March 13, 2018
|
Cory Sindelar
|
|
|
|
|
|
|
|
|
|
/s/ Sheila Cheung
|
|
Vice President, Finance and Accounting
(Principal Accounting Officer)
|
|
March 13, 2018
|
Sheila Cheung
|
|
|
|
|
|
|
|
||
/s/ Don Listwin
|
|
Chairman of the Board of Directors
|
|
March 13, 2018
|
Don Listwin
|
|
|
|
|
|
|
|
||
/s/ Christopher Bowick
|
|
Director
|
|
March 13, 2018
|
Christopher Bowick
|
|
|
|
|
|
|
|
|
|
/s/ Kathy Crusco
|
|
Director
|
|
March 13, 2018
|
Kathy Crusco
|
|
|
|
|
|
|
|
|
|
/s/ Kevin DeNuccio
|
|
Director
|
|
March 13, 2018
|
Kevin DeNuccio
|
|
|
|
|
|
|
|
||
/s/ Michael Everett
|
|
Director
|
|
March 13, 2018
|
Michael Everett
|
|
|
|
|
|
|
|
||
/s/ Michael Flynn
|
|
Director
|
|
March 13, 2018
|
Michael Flynn
|
|
|
|
|
|
|
|
|
|
/s/ Kira Makagon
|
|
Director
|
|
March 13, 2018
|
Kira Makagon
|
|
|
|
|
|
|
|
||
/s/ Michael Matthews
|
|
Director
|
|
March 13, 2018
|
Michael Matthews
|
|
|
|
|
|
|
|
|
|
/s/ Kevin Peters
|
|
Director
|
|
March 13, 2018
|
Kevin Peters
|
|
|
|
|
A.
|
Section 3(b) of the Employment Letter is hereby replaced in its entirety with the following:
|
(b)
|
Performance Bonus/Variable Compensation
. You shall be eligible to receive variable compensation for 2017 targeted at 55% of your Base Salary (the “Variable Compensation”). Variable Compensation shall be based on the achievement of the performance objectives and funding requirements as established under the Company’s Executive Cash Bonus Plan. In addition, eleven months after your Employment Commencement Date, you shall be eligible for a one-time variable compensation lump-sum bonus payment at a minimum of $85,000.00 to a maximum amount of $100,000.00, less applicable deductions and withholdings. This one-time variable compensation lump-sum bonus will be based on performance targets and objectives established within the first thirty-days after your Employment Commencement Date and will be paid (if at all) within 30 days following the eleventh-month anniversary of your Employment Commencement Date.
|
B.
|
Section 3(d) of the Employment Letter is hereby replaced in its entirety with the following:
|
(d)
|
Stock Option Individual Performance Grant
. The Company will recommend that the Committee grant you an option under the Plan to purchase a minimum of 50,000 shares (the “Shares”) of the Company’s Common Stock (the “Option”) in November 2017. The Option will have an exercise price per share equal to the fair
|
Very truly yours,
|
|
|
Calix, Inc.
|
|
ACCEPTED AND AGREED:
|
|
|
|
/s/ Carl Russo
|
|
/s/ Gregory Billings
|
Carl Russo
President and Chief Executive Officer
|
|
Gregory Billings
Senior Vice President, Services
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
Fiscal Month Ending
|
Adjusted Quick Ratio
|
January 31, 2018
|
At least [***]
|
February 28, 2018
|
At least [***]
|
March 31, 2018
|
At least [***]
|
April 30, 2018
|
At least [***]
|
May 31, 2018
|
At least [***]
|
June 30, 2018
|
At least [***]
|
July 31, 2018
|
At least [***]
|
August 31, 2018
|
At least [***]
|
September 30, 2018
|
At least [***]
|
October 31, 2018 and each month thereafter
|
At least [***]
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
Financial Covenants
|
Required
|
Actual
|
Complies
|
|
|
|
|
Maintain as indicated:
|
|
|
|
Adjusted Quick Ratio (tested monthly)
|
See attached schedule
|
See attached schedule
|
Yes No
|
Performance Pricing
|
|
|
|
|
|
|
Interest Rate
|
Applies
|
AQR
>
[***]
|
LIBOR + 2.00% or Prime + 0.50%
|
Yes No
|
AQR
>
[***] and [***]
|
LIBOR + 2.50% or Prime + 1.00
|
Yes No
|
AQR < [***]
|
LIBOR + 3.00% or Prime + 1.50%
|
Yes No
|
|
Unused Line Fee
|
Applies
|
AQR
>
[***]
|
0.25%
|
Yes No
|
AQR < [***]
|
0.375%
|
Yes No
|
Streamline Period
|
Applies
|
|
|
|
|
(i) AQR
>
[***] from the Effective Date through December 31, 2017, or (ii) AQR
>
[***] from January 1, 2018 and at all times thereafter
|
Yes
|
Yes No
|
(i) AQR < [***] from the Effective Date through December 31, 2017, or (ii) AQR < [***] from January 1, 2018 and at all times thereafter
|
No
|
Yes No
|
CALIX, INC.
By:
Name:
Title:
|
BANK USE ONLY
Received by: _____________________
AUTHORIZED SIGNER
Date: _________________________
Verified: ________________________
AUTHORIZED SIGNER
Date: _________________________
Compliance Status: Yes No
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
Fiscal Month Ending
|
Adjusted Quick Ratio
|
January 31, 2018
|
At least [***]
|
February 28, 2018
|
At least [***]
|
March 31, 2018
|
At least [***]
|
April 30, 2018
|
At least [***]
|
May 31, 2018
|
At least [***]
|
June 30, 2018
|
At least [***]
|
July 31, 2018
|
At least [***]
|
August 31, 2018
|
At least [***]
|
September 30, 2018
|
At least [***]
|
October 31, 2018 and each month thereafter
|
At least [***]
|
A.
|
Aggregate value of the unrestricted and unencumbered cash and Cash Equivalents of Borrower at Bank and Bank’s Affiliates, or held in accounts subject to Control Agreements as permitted under the Agreement
|
$
|
B.
|
Aggregate value of net billed accounts receivable of Borrower
|
$
|
C.
|
Quick Assets (the sum of lines A and B)
|
$
|
D.
|
Aggregate value of liabilities of Borrower on its consolidated balance sheet including all Indebtedness and current portion of Subordinated Debt permitted by Bank to be paid by Borrower (but excluding (i) all other Subordinated Debt, (ii) Obligations to Bank, and (iii) any Indebtedness that is cash secured or is otherwise collateralized pursuant to terms acceptable to Bank in its sole discretion), that matures within one (1) year
|
$
|
E.
|
Aggregate value of Obligations to Bank
|
$
|
F.
|
The sum of lines D and E
|
$
|
G.
|
Aggregate value of the current portion of all amounts received or invoiced by Borrower in advance of performance under contracts and not yet recognized as revenue
|
$
|
H.
|
Line F minus line G
|
$______
|
I.
|
Adjusted Quick Ratio (line C divided by line H)
|
:1.00
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
Fiscal Quarter Ending
|
Adjusted EBITDA
|
March 31, 2018
|
($[***])
|
June 30, 2018
|
($[***])
|
September 30, 2018
|
$[***]
|
December 31, 2018
|
$[***]
|
A.
|
Net Income of Borrower
|
$_________
|
B.
|
To the extent included in the determination of Net Income
|
|
|
1. The provision for income taxes
|
$_________
|
|
2. Depreciation expense
|
$_________
|
|
3. Amortization expense
|
$_________
|
|
4. Interest Expense
|
$_________
|
C.
|
EBITDA (line A plus lines B.1-B.4)
|
$_________
|
D.
|
Non-cash stock compensation expense
|
$_________
|
E.
|
Other non-cash items approved by Bank in writing on a case-by-case basis
|
$_________
|
F.
|
One-time non-recurring restructuring expenses actually incurred by Borrower in the fiscal quarter ending March 31, 2018 not to exceed $3,000,000 in the aggregate
|
$_________
|
G.
|
Adjusted EBITDA (line C plus lines D-F
|
$_________
|
[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to portions of this agreement.
|
Entity Name
|
|
Jurisdiction
|
Calix Networks Canada, Inc.
|
|
Canada
|
Calix Network Technology Development (Nanjing) Co. Ltd.
|
|
China
|
Calix Networks UK, Ltd
|
|
England, UK
|
Calix Brasil Servicos Ltda
|
|
Brazil
|
1.
|
I have reviewed this annual report on Form 10-K of Calix, Inc. for the year ended
December 31, 2017
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: March 13, 2018
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/s/ Carl Russo
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Carl Russo
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Chief Executive Officer
(Principal Executive Officer)
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1.
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I have reviewed this annual report on Form 10-K of Calix, Inc. for the year ended
December 31, 2017
;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: March 13, 2018
|
|
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/s/ Cory Sindelar
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Cory Sindelar
|
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Chief Financial Officer
(Principal Financial Officer) |
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|
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Date: March 13, 2018
|
|
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/s/ Carl Russo
|
|
|
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Carl Russo
|
|
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Chief Executive Officer
(Principal Executive Officer)
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Date: March 13, 2018
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/s/ Cory Sindelar
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Cory Sindelar
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Chief Financial Officer
(Principal Financial Officer) |
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