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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2777 Orchard Parkway
San Jose, California
(Address of Principal Executive Offices) |
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95134
(Zip Code)
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Registrant’s telephone number, including area code (408) 514-3000
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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Accelerated Filer
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x
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Non-accelerated filer
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o
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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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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 and the impact to our customers of the recent U.S. government shutdown;
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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 ramp sales and achieve market acceptance of new our products and CSPs’ willingness to deploy our new products;
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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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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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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, or CMs, original design manufacturers, or 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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our ability to maintain proper and effective internal controls.
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ITEM 1.
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Business
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•
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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 that inhibit 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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Upgrading existing LTE infrastructure
-
By upgrading their existing LTE wireless networks with 5G radios, CSPs will realize 10 to 20 percent higher bandwidth for 5G mobile devices. This approach will offer a quick path to 5G services for some CSPs and may differentiate their mobile broadband services. However, this incremental strategy offers relatively limited improvements in wireless capacity.
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Leveraging millimeter wavelength technology -
Leading CSPs will deploy thousands of millimeter wave 5G small cells to realize a 5- to 10-fold increase in capacity across their mobile and fixed broadband networks. This approach will enable CSPs to support virtually any next generation mobile, augmented or virtual reality, IoT or autonomous vehicle or device application. This will open up tremendous new business opportunities for early adopters. Due to the inherent range limitations of millimeter wave technology, 5G small cells must be deployed in very close proximity to subscriber devices. This will require the deployment of thousands of 5G small cells throughout a CSPs network to deliver services to subscribers.
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Aggregated 10 gigabit services delivered over a single wave length;
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Channel bonding to increase capacity delivered for a single service; and
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Multiple wave lengths over a single PON to provide unmatched resiliency and low latency operations.
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•
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Calix Cloud is a role-based 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 that enable a CSP to deliver targeted marketing, services and experiences to build customer intimacy and loyalty. Calix Cloud currently includes Calix Marketing Cloud for CSP marketing teams and Calix Support Cloud for CSP customer support teams.
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EXOS is a carrier class smart home and business operating system that supports residential, business and mobile subscribers. EXOS, coupled with our market leading GigaSpire premises systems, provides a unique “service enablement platform” that is designed for mastering and monetizing the complexity of the subscriber edge. EXOS enables CSPs to elevate every aspect of their business by deploying smart home and business services and generate new revenue streams.
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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, simple to operate and quick to deploy. AXOS, coupled with our E-Series 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. Armed with AXOS, CSPs can radically simplify their network operations, their network architectures and their business models.
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•
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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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•
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Calix GigaFamily
– The Calix GigaFamily includes our first generation of carrier-class Wi-Fi gateways. It includes the Calix GigaCenter and 804 mesh systems. These systems provide 802.11ac Wi-Fi and whole home Wi-Fi services. When deployed in conjunction with the Calix Cloud, the GigaFamily systems provide the complete set of capabilities required for a fully managed Wi-Fi offering that delivers optimized Wi-Fi services to subscribers.
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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), 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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•
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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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•
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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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•
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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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•
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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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•
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Calix Professional Services
– Calix offers 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 include 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 smart home services and facilitated OSS/BSS integration services. These offerings optimize CSP end-to-end processes from operations to technology deployment to service lifecycle management.
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•
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Calix Managed Services
– Our managed services feature a cloud-based remote monitoring service that monitors a CSP’s end-to-end access network (24 hours a day, 7 days a week) to ensure issues are automatically identified and assessed. This service leverages machine learning technology developed through thousands of Calix Support Services engagements with CSPs to correlate alarms, filter extraneous events and identify critical issues. The service provides incident notifications to CSP team members that include the nature, location and severity of events to help reduce mean time-to-repair.
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•
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Calix Support Services
– Calix offers three tiers of support services - Standard, Essential, and Vantage - that ensure 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. Our highest support tier, Vantage, includes our Remote Monitoring service and support from a Calix service director who partners with customers to implement strategies that ensure delivery of an exceptional subscriber experience.
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•
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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. Calix offers specific learning paths that are designed to help CSPs enhance the skills of their teams and maximize the value that they derive when they deploy our strategic platforms.
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•
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Calix Success Services
– To ensure that our customers maximize the return on their investments in our software solutions, we offer Calix Success Services. The primary focus of the Success Services engagements is the use of the data and analytics delivered through our Calix Cloud Platform to transform our customers’ business processes. Our Success Services team members leverage their domain expertise in marketing, customer support and operations to help our customers achieve their business objectives. These engagements are typically multi-year (aligned to our cloud subscription terms).
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functionality;
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price;
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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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•
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scalability; and
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•
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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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the impact of global economic conditions;
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•
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the impact of current and future tariffs that may impact our products, including the U.S. tariffs on goods imported from China;
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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 and the impact to our customers of the recent U.S. government shutdown on such programs;
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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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our ability to ramp sales and achieve market acceptance of our new products and CSPs’ willingness to deploy our new products;
|
•
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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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our lack of long-term, committed-volume purchase contracts with our customers;
|
•
|
our exposure to the credit risks of our customers;
|
•
|
fluctuations in our gross margin;
|
•
|
the interoperability of our products with CSP networks;
|
•
|
our dependence on sole-, single- and limited-source suppliers;
|
•
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our ability to manage our relationships with our third-party vendors, including CMs, ODMs, logistics providers, component suppliers and development partners;
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•
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our ability to forecast our manufacturing requirements and manage our inventory;
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•
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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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•
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our ability to protect our intellectual property and the cost of doing so;
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•
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the quality of our products, including any undetected hardware defects or bugs in our software;
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•
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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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•
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the regulatory and physical impacts of climate change and other natural events;
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•
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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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•
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our ability to maintain proper and effective internal controls.
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•
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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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the impact of current and future tariffs that may impact our products, including the U.S. tariffs on goods imported from China;
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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 margins;
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changes in component pricing;
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changes in pricing with our third-party manufacturing partners;
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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 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 tariffs imposed by the federal government on products imported from China and future actions the federal government 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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•
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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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•
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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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•
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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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|
|
|
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San Jose, California
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Corporate headquarters, product design, research and development, administration
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65,000
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December 2025
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Petaluma, California
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Sales, marketing, product design, service and repair engineering, distribution, research and development
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58,000
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March 2019
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Nanjing, China
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Research and development
|
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40,000
|
|
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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
|
|
|
January 2022
|
ITEM 3.
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Legal Proceedings
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ITEM 4.
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Mine Safety Disclosures
|
ITEM 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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ITEM 6.
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Selected Financial Data
|
|
|
Years Ended December 31,
|
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2018
|
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2017
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2016
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2015
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2014
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||||||||||
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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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441,320
|
|
|
$
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510,367
|
|
|
$
|
458,787
|
|
|
$
|
407,163
|
|
|
$
|
401,227
|
|
Cost of revenue
(1)
|
|
243,938
|
|
|
337,477
|
|
|
257,569
|
|
|
217,034
|
|
|
223,438
|
|
|||||
Gross profit
|
|
197,382
|
|
|
172,890
|
|
|
201,218
|
|
|
190,129
|
|
|
177,789
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Research and development
(1)
|
|
89,963
|
|
|
127,541
|
|
|
106,869
|
|
|
89,714
|
|
|
80,311
|
|
|||||
Sales and marketing
(1)
|
|
86,432
|
|
|
82,781
|
|
|
83,675
|
|
|
78,563
|
|
|
76,283
|
|
|||||
General and administrative
(1)
|
|
40,500
|
|
|
39,875
|
|
|
41,592
|
|
|
38,454
|
|
|
31,371
|
|
|||||
Restructuring charges
|
|
5,705
|
|
|
4,249
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
1,701
|
|
|
10,208
|
|
|
10,208
|
|
|||||
Gain on sale of product line
|
|
(6,704
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Litigation settlement gain
|
|
—
|
|
|
—
|
|
|
(4,500
|
)
|
|
—
|
|
|
—
|
|
|||||
Total operating expenses
|
|
215,896
|
|
|
254,446
|
|
|
229,337
|
|
|
216,939
|
|
|
198,173
|
|
|||||
Loss from operations
|
|
(18,514
|
)
|
|
(81,556
|
)
|
|
(28,119
|
)
|
|
(26,810
|
)
|
|
(20,384
|
)
|
|||||
Interest and other income (expense), net
|
|
(254
|
)
|
|
(233
|
)
|
|
1,064
|
|
|
712
|
|
|
151
|
|
|||||
Loss before provision for income taxes
|
|
(18,768
|
)
|
|
(81,789
|
)
|
|
(27,055
|
)
|
|
(26,098
|
)
|
|
(20,233
|
)
|
|||||
Provision for income taxes
|
|
530
|
|
|
1,243
|
|
|
347
|
|
|
535
|
|
|
581
|
|
|||||
Net loss
|
|
$
|
(19,298
|
)
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
|
$
|
(26,633
|
)
|
|
$
|
(20,814
|
)
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic and diluted
|
|
$
|
(0.37
|
)
|
|
$
|
(1.66
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(0.52
|
)
|
|
$
|
(0.41
|
)
|
Weighted-average number of shares used to compute net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic and diluted
|
|
52,609
|
|
|
50,155
|
|
|
48,730
|
|
|
51,489
|
|
|
50,808
|
|
|||||
(1)
Includes stock-based compensation as follows:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of revenue
|
|
$
|
1,248
|
|
|
$
|
749
|
|
|
$
|
672
|
|
|
$
|
709
|
|
|
$
|
1,120
|
|
Research and development
|
|
5,969
|
|
|
4,869
|
|
|
5,125
|
|
|
4,797
|
|
|
5,056
|
|
|||||
Sales and marketing
|
|
5,787
|
|
|
3,433
|
|
|
4,586
|
|
|
4,712
|
|
|
5,601
|
|
|||||
General and administrative
|
|
4,469
|
|
|
3,317
|
|
|
3,902
|
|
|
3,587
|
|
|
4,240
|
|
|||||
|
|
$
|
17,473
|
|
|
$
|
12,368
|
|
|
$
|
14,285
|
|
|
$
|
13,805
|
|
|
$
|
16,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents, restricted cash and marketable securities
|
|
$
|
50,274
|
|
|
$
|
39,775
|
|
|
$
|
78,107
|
|
|
$
|
73,590
|
|
|
$
|
111,679
|
|
Working capital
|
|
31,079
|
|
|
34,123
|
|
|
97,926
|
|
|
115,561
|
|
|
131,693
|
|
|||||
Total assets
|
|
317,080
|
|
|
295,070
|
|
|
355,475
|
|
|
323,886
|
|
|
370,221
|
|
|||||
Common stock and additional paid-in capital
|
|
877,555
|
|
|
852,475
|
|
|
837,931
|
|
|
820,080
|
|
|
803,101
|
|
|||||
Total stockholders’ equity
|
|
151,934
|
|
|
144,963
|
|
|
212,964
|
|
|
235,785
|
|
|
272,591
|
|
ITEM 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Systems – includes revenue from the sale of access and premises systems, software platform 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,
|
|
2018 vs 2017 Change
|
|
2017 vs 2016 Change
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Systems
|
$
|
405,923
|
|
|
$
|
421,890
|
|
|
$
|
428,584
|
|
|
$
|
(15,967
|
)
|
|
(4
|
)%
|
|
$
|
(6,694
|
)
|
|
(2
|
)%
|
Services
|
35,397
|
|
|
88,477
|
|
|
30,203
|
|
|
(53,080
|
)
|
|
(60
|
)%
|
|
58,274
|
|
|
193
|
%
|
|||||
|
$
|
441,320
|
|
|
$
|
510,367
|
|
|
$
|
458,787
|
|
|
$
|
(69,047
|
)
|
|
(14
|
)%
|
|
$
|
51,580
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Percent of total revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Systems
|
92
|
%
|
|
83
|
%
|
|
93
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Services
|
8
|
%
|
|
17
|
%
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|||||||||
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018 vs 2017 Change
|
|
2017 vs 2016 Change
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Systems
|
$
|
189,394
|
|
|
$
|
185,753
|
|
|
$
|
199,608
|
|
|
$
|
3,641
|
|
|
2
|
%
|
|
$
|
(13,855
|
)
|
|
(7
|
)%
|
Services
|
7,988
|
|
|
(12,863
|
)
|
|
1,610
|
|
|
20,851
|
|
|
(162
|
)%
|
|
(14,473
|
)
|
|
(899
|
)%
|
|||||
|
$
|
197,382
|
|
|
$
|
172,890
|
|
|
$
|
201,218
|
|
|
$
|
24,492
|
|
|
14
|
%
|
|
$
|
(28,328
|
)
|
|
(14
|
)%
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Systems
|
47
|
|
%
|
44
|
%
|
47
|
%
|
|
|
|
|
|
|
|
|||||||||||
Services
|
23
|
|
%
|
(15)
|
%
|
5
|
%
|
|
|
|
|
|
|
|
|||||||||||
|
45
|
|
%
|
34
|
%
|
44
|
%
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018 vs 2017 Change
|
|
2017 vs 2016 Change
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Research and development
|
$
|
89,963
|
|
|
$
|
127,541
|
|
|
$
|
106,869
|
|
|
$
|
(37,578
|
)
|
|
(29
|
)%
|
|
$
|
20,672
|
|
|
19
|
%
|
Percent of total revenue
|
20
|
%
|
|
25
|
%
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018 vs 2017 Change
|
|
2017 vs 2016 Change
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Sales and marketing
|
$
|
86,432
|
|
|
$
|
82,781
|
|
|
$
|
83,675
|
|
|
$
|
3,651
|
|
|
4
|
%
|
|
$
|
(894
|
)
|
|
(1
|
)%
|
Percent of total revenue
|
20
|
%
|
|
16
|
%
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018 vs 2017 Change
|
|
2017 vs 2016 Change
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
General and administrative
|
$
|
40,500
|
|
|
$
|
39,875
|
|
|
$
|
41,592
|
|
|
$
|
625
|
|
|
2
|
%
|
|
$
|
(1,717
|
)
|
|
(4
|
)%
|
Percent of total revenue
|
9
|
%
|
|
8
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018 vs 2017 Change
|
|
2017 vs 2016 Change
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Interest and other income (expense), net
|
$
|
(254
|
)
|
|
$
|
(233
|
)
|
|
$
|
1,064
|
|
|
$
|
(21
|
)
|
|
9
|
%
|
|
$
|
(1,297
|
)
|
|
(122
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018 vs 2017 Change
|
|
2017 vs 2016 Change
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Provision for income taxes
|
$
|
530
|
|
|
$
|
1,243
|
|
|
$
|
347
|
|
|
$
|
(713
|
)
|
|
(57
|
)%
|
|
$
|
896
|
|
|
258
|
%
|
Effective tax rate
|
(2.8
|
)%
|
|
(1.5
|
)%
|
|
(1.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net cash provided by (used in) operating activities
|
|
$
|
3,560
|
|
|
$
|
(62,772
|
)
|
|
$
|
24,419
|
|
Net cash provided by (used in) investing activities
|
|
(76
|
)
|
|
19,734
|
|
|
12,083
|
|
|||
Net cash provided by (used in) financing activities
|
|
7,492
|
|
|
31,990
|
|
|
(9,243
|
)
|
|
|
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)
|
|
$
|
33,366
|
|
|
$
|
2,100
|
|
|
$
|
31,266
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equipment financing arrangements
(2)
|
|
4,987
|
|
|
1,863
|
|
|
3,124
|
|
|
—
|
|
|
—
|
|
|||||
Operating lease obligations
(3)
|
|
23,799
|
|
|
3,750
|
|
|
7,286
|
|
|
6,712
|
|
|
6,051
|
|
|||||
Non-cancelable purchase commitments
(4)
|
|
57,770
|
|
|
41,955
|
|
|
8,390
|
|
|
7,425
|
|
|
—
|
|
|||||
Total
|
|
$
|
119,922
|
|
|
$
|
49,668
|
|
|
$
|
50,066
|
|
|
$
|
14,137
|
|
|
$
|
6,051
|
|
ITEM 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
ITEM 8.
|
Financial Statements and Supplementary Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue:
|
|
|
|
|
|
|
||||||
Systems
|
|
$
|
405,923
|
|
|
$
|
421,890
|
|
|
$
|
428,584
|
|
Services
|
|
35,397
|
|
|
88,477
|
|
|
30,203
|
|
|||
Total revenue
|
|
441,320
|
|
|
510,367
|
|
|
458,787
|
|
|||
Cost of revenue:
|
|
|
|
|
|
|
||||||
Systems
(1)
|
|
216,529
|
|
|
236,137
|
|
|
228,976
|
|
|||
Services
(1)
|
|
27,409
|
|
|
101,340
|
|
|
28,593
|
|
|||
Total cost of revenue
|
|
243,938
|
|
|
337,477
|
|
|
257,569
|
|
|||
Gross profit
|
|
197,382
|
|
|
172,890
|
|
|
201,218
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
Research and development
(1)
|
|
89,963
|
|
|
127,541
|
|
|
106,869
|
|
|||
Sales and marketing
(1)
|
|
86,432
|
|
|
82,781
|
|
|
83,675
|
|
|||
General and administrative
(1)
|
|
40,500
|
|
|
39,875
|
|
|
41,592
|
|
|||
Restructuring charges
|
|
5,705
|
|
|
4,249
|
|
|
—
|
|
|||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
1,701
|
|
|||
Gain on sale of product line
|
|
(6,704
|
)
|
|
—
|
|
|
—
|
|
|||
Litigation settlement gain
|
|
—
|
|
|
—
|
|
|
(4,500
|
)
|
|||
Total operating expenses
|
|
215,896
|
|
|
254,446
|
|
|
229,337
|
|
|||
Loss from operations
|
|
(18,514
|
)
|
|
(81,556
|
)
|
|
(28,119
|
)
|
|||
Interest and other income (expense), net:
|
|
|
|
|
|
|
||||||
Interest income (expense), net
|
|
(632
|
)
|
|
(160
|
)
|
|
152
|
|
|||
Other income (expense), net
|
|
378
|
|
|
(73
|
)
|
|
912
|
|
|||
Total interest and other income (expense), net
|
|
(254
|
)
|
|
(233
|
)
|
|
1,064
|
|
|||
Loss before provision for income taxes
|
|
(18,768
|
)
|
|
(81,789
|
)
|
|
(27,055
|
)
|
|||
Provision for income taxes
|
|
530
|
|
|
1,243
|
|
|
347
|
|
|||
Net loss
|
|
$
|
(19,298
|
)
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
Net loss per common share:
|
|
|
|
|
|
|
||||||
Basic and diluted
|
|
$
|
(0.37
|
)
|
|
$
|
(1.66
|
)
|
|
$
|
(0.56
|
)
|
Weighted-average number of shares used to compute net loss per common share:
|
|
|
|
|
|
|
||||||
Basic and diluted
|
|
52,609
|
|
|
50,155
|
|
|
48,730
|
|
|||
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(19,298
|
)
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||||||
Unrealized gain on available-for-sale marketable securities, net
|
|
—
|
|
|
6
|
|
|
88
|
|
|||
Foreign currency translation adjustments, net
|
|
(584
|
)
|
|
481
|
|
|
(549
|
)
|
|||
Total other comprehensive income (loss), net of tax
|
|
(584
|
)
|
|
487
|
|
|
(461
|
)
|
|||
Comprehensive loss
|
|
$
|
(19,882
|
)
|
|
$
|
(82,545
|
)
|
|
$
|
(27,863
|
)
|
|
|
|
|
|
|
|
||||||
(1) Includes stock-based compensation as follows:
|
|
|
|
|
|
|
||||||
Cost of revenue:
|
|
|
|
|
|
|
||||||
Systems
|
|
$
|
885
|
|
|
$
|
473
|
|
|
$
|
465
|
|
Services
|
|
363
|
|
|
276
|
|
|
207
|
|
|||
Research and development
|
|
5,969
|
|
|
4,869
|
|
|
5,125
|
|
|||
Sales and marketing
|
|
5,787
|
|
|
3,433
|
|
|
4,586
|
|
|||
General and administrative
|
|
4,469
|
|
|
3,317
|
|
|
3,902
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
Additional
|
|
Other
|
|
|
|
|
|
Total
|
|||||||||||||||
|
|
Common Stock
|
|
Paid-in
|
|
Comprehensive
|
|
Accumulated
|
|
Treasury
|
|
Stockholders’
|
|||||||||||||||
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Loss
|
|
Deficit
|
|
Stock
|
|
Equity
|
|||||||||||||
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
|
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
17,473
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,473
|
|
||||||
Exercise of stock options
|
|
57
|
|
|
1
|
|
|
383
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
384
|
|
||||||
Issuance of vested performance restricted stock units and restricted stock units, net of taxes withheld
|
|
913
|
|
|
22
|
|
|
(96
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
||||||
Stock issued under employee stock purchase plans
|
|
1,476
|
|
|
38
|
|
|
7,259
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,297
|
|
||||||
Cumulative effect of accounting change
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,773
|
|
|
—
|
|
|
1,773
|
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,298
|
)
|
|
—
|
|
|
(19,298
|
)
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(584
|
)
|
|
—
|
|
|
—
|
|
|
(584
|
)
|
||||||
Balance at December 31, 2018
|
|
53,955
|
|
|
$
|
1,482
|
|
|
$
|
876,073
|
|
|
$
|
(753
|
)
|
|
$
|
(684,882
|
)
|
|
$
|
(39,986
|
)
|
|
$
|
151,934
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Operating activities:
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(19,298
|
)
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
||||||
Stock-based compensation
|
|
17,473
|
|
|
12,368
|
|
|
14,285
|
|
|||
Depreciation and amortization
|
|
9,187
|
|
|
10,178
|
|
|
8,319
|
|
|||
Loss on retirement of property and equipment
|
|
326
|
|
|
280
|
|
|
—
|
|
|||
Amortization of intangible assets
|
|
—
|
|
|
813
|
|
|
5,805
|
|
|||
Amortization of premium (discount) relating to available-for-sale securities
|
|
—
|
|
|
(6
|
)
|
|
382
|
|
|||
Gain on sale of product line
|
|
(6,704
|
)
|
|
—
|
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts receivable, net
|
|
13,858
|
|
|
(29,056
|
)
|
|
(4,185
|
)
|
|||
Inventory
|
|
(20,639
|
)
|
|
13,016
|
|
|
3,122
|
|
|||
Prepaid expenses and other assets
|
|
3,579
|
|
|
35,210
|
|
|
(31,042
|
)
|
|||
Accounts payable
|
|
4,596
|
|
|
11,759
|
|
|
4,236
|
|
|||
Accrued liabilities
|
|
2,791
|
|
|
(20,184
|
)
|
|
34,913
|
|
|||
Deferred revenue
|
|
(1,426
|
)
|
|
(14,370
|
)
|
|
16,398
|
|
|||
Other long-term liabilities
|
|
(183
|
)
|
|
252
|
|
|
(412
|
)
|
|||
Net cash provided by (used in) operating activities
|
|
3,560
|
|
|
(62,772
|
)
|
|
24,419
|
|
|||
Investing activities:
|
|
|
|
|
|
|
||||||
Purchases of property and equipment
|
|
(10,426
|
)
|
|
(8,026
|
)
|
|
(9,839
|
)
|
|||
Purchases of marketable securities
|
|
—
|
|
|
(8,732
|
)
|
|
(16,478
|
)
|
|||
Sales of marketable securities
|
|
—
|
|
|
5,051
|
|
|
—
|
|
|||
Maturities of marketable securities
|
|
—
|
|
|
31,441
|
|
|
38,400
|
|
|||
Proceeds from sale of product line
|
|
10,350
|
|
|
—
|
|
|
—
|
|
|||
Net cash provided by (used in) investing activities
|
|
(76
|
)
|
|
19,734
|
|
|
12,083
|
|
|||
Financing activities:
|
|
|
|
|
|
|
||||||
Proceeds from exercise of stock options
|
|
384
|
|
|
62
|
|
|
17
|
|
|||
Proceeds from employee stock purchase plans
|
|
7,297
|
|
|
4,878
|
|
|
5,650
|
|
|||
Payments for repurchases of common stock
|
|
—
|
|
|
—
|
|
|
(12,809
|
)
|
|||
Taxes paid for awards vested under equity incentive plan
|
|
(74
|
)
|
|
(2,764
|
)
|
|
(2,101
|
)
|
|||
Proceeds from line of credit
|
|
557,915
|
|
|
171,268
|
|
|
—
|
|
|||
Repayments of line of credit
|
|
(557,915
|
)
|
|
(141,268
|
)
|
|
—
|
|
|||
Payments to originate the line of credit
|
|
(115
|
)
|
|
(186
|
)
|
|
—
|
|
|||
Net cash provided by (used in) financing activities
|
|
7,492
|
|
|
31,990
|
|
|
(9,243
|
)
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
|
(477
|
)
|
|
464
|
|
|
(526
|
)
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
10,499
|
|
|
(10,584
|
)
|
|
26,733
|
|
|||
Cash, cash equivalents and restricted cash at beginning of period
|
|
39,775
|
|
|
50,359
|
|
|
23,626
|
|
|||
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
50,274
|
|
|
$
|
39,775
|
|
|
$
|
50,359
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
||||||
Interest paid
|
|
$
|
649
|
|
|
$
|
313
|
|
|
$
|
127
|
|
Income taxes paid
|
|
$
|
561
|
|
|
915
|
|
|
965
|
|
||
Non-cash investing activities:
|
|
|
|
|
|
|
||||||
Changes in accounts payable and accrued liabilities related to purchases of property and equipment
|
|
$
|
8,459
|
|
|
$
|
(55
|
)
|
|
$
|
(478
|
)
|
•
|
Systems include revenue from the sale of access and premises systems, software platform licenses and cloud-based software subscriptions.
|
•
|
Services include revenue from professional services, customer support, software- and cloud-based maintenance, extended warranty subscriptions, training and managed services.
|
|
|
Balance at December 31, 2017
|
|
Adjustments
|
|
Balance at January 1, 2018
|
|||||||||||
Accounts receivable, net
|
|
$
|
80,392
|
|
|
$
|
491
|
|
|
$
|
80,883
|
|
|||||
Prepaid expenses and other current assets
|
|
10,759
|
|
|
(245
|
)
|
|
10,514
|
|
||||||||
Other assets
|
|
759
|
|
|
698
|
|
|
1,457
|
|
||||||||
Total assets
|
|
295,070
|
|
|
944
|
|
|
296,014
|
|
||||||||
Deferred revenue
|
|
13,076
|
|
|
(829
|
)
|
|
12,247
|
|
||||||||
Total liabilities
|
|
150,107
|
|
|
(829
|
)
|
|
149,278
|
|
||||||||
Accumulated deficit
|
|
(667,357
|
)
|
|
1,773
|
|
|
(665,584
|
)
|
||||||||
Total liabilities and stockholders’ equity
|
|
295,070
|
|
|
944
|
|
|
296,014
|
|
As of December 31, 2018
|
|
As Reported
|
|
Adjustments
|
|
Balances Without Adoption of Topic 606
|
|||||||||||
Accounts receivable, net
|
|
$
|
67,026
|
|
|
$
|
(1,095
|
)
|
|
$
|
65,931
|
|
|||||
Prepaid expenses and other current assets
|
|
7,306
|
|
|
953
|
|
|
8,259
|
|
||||||||
Other assets
|
|
1,203
|
|
|
(567
|
)
|
|
636
|
|
||||||||
Total assets
|
|
317,080
|
|
|
(709
|
)
|
|
316,371
|
|
||||||||
Accrued liabilities
|
|
57,869
|
|
|
(880
|
)
|
|
56,989
|
|
||||||||
Deferred revenue
|
|
33,096
|
|
|
2,801
|
|
|
35,897
|
|
||||||||
Total liabilities
|
|
165,146
|
|
|
1,921
|
|
|
167,067
|
|
||||||||
Accumulated deficit
|
|
(684,882
|
)
|
|
(2,630
|
)
|
|
(687,512
|
)
|
||||||||
Total liabilities and stockholders’ equity
|
|
317,080
|
|
|
(709
|
)
|
|
316,371
|
|
Year Ended December 31, 2018
|
|
As Reported
|
|
Adjustments
|
|
Balances Without Adoption of Topic 606
|
|||||||||||
Revenue:
|
|
|
|
|
|
|
|||||||||||
Systems
|
|
$
|
405,923
|
|
|
$
|
(3,253
|
)
|
|
$
|
402,670
|
|
|||||
Services
|
|
35,397
|
|
|
1,559
|
|
|
36,956
|
|
||||||||
Total revenue
|
|
441,320
|
|
|
(1,694
|
)
|
|
439,626
|
|
||||||||
Cost of revenue:
|
|
|
|
|
|
|
|||||||||||
Systems
|
|
216,529
|
|
|
(1,052
|
)
|
|
215,477
|
|
||||||||
Services
|
|
27,409
|
|
|
274
|
|
|
27,683
|
|
||||||||
Total cost of revenue
|
|
243,938
|
|
|
(778
|
)
|
|
243,160
|
|
||||||||
Gross profit
|
|
197,382
|
|
|
(916
|
)
|
|
196,466
|
|
||||||||
Sales and marketing
|
|
86,432
|
|
|
(59
|
)
|
|
86,373
|
|
||||||||
Net loss
|
|
(19,298
|
)
|
|
(857
|
)
|
|
(20,155
|
)
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Cash and cash equivalents:
|
|
|
|
|
||||
Cash
|
|
$
|
45,806
|
|
|
$
|
35,999
|
|
Money market funds
|
|
3,840
|
|
|
3,776
|
|
||
|
|
$
|
49,646
|
|
|
$
|
39,775
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Accounts receivable
|
|
$
|
67,396
|
|
|
$
|
81,793
|
|
Allowance for doubtful accounts
|
|
(370
|
)
|
|
(579
|
)
|
||
Product return reserve
(1)
|
|
—
|
|
|
(822
|
)
|
||
|
|
$
|
67,026
|
|
|
$
|
80,392
|
|
(1)
|
With adoption of Topic 606 on January 1, 2018, the product return reserve is considered a contract liability and has been reclassified to accrued liabilities.
|
|
|
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, 2018
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
579
|
|
|
$
|
(5
|
)
|
|
$
|
(204
|
)
|
|
$
|
370
|
|
Product return reserve
|
|
822
|
|
|
771
|
|
|
(713
|
)
|
|
880
|
|
||||
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
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Test equipment
|
|
$
|
39,148
|
|
|
$
|
39,952
|
|
Computer equipment and purchased software
|
|
34,697
|
|
|
32,175
|
|
||
Furniture and fixtures
|
|
1,976
|
|
|
2,714
|
|
||
Leasehold improvements
|
|
3,559
|
|
|
6,029
|
|
||
|
|
79,380
|
|
|
80,870
|
|
||
Accumulated depreciation and amortization
|
|
(54,435
|
)
|
|
(65,189
|
)
|
||
|
|
$
|
24,945
|
|
|
$
|
15,681
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Accrued compensation and related benefits
|
|
$
|
19,811
|
|
|
$
|
15,563
|
|
Accrued warranty and retrofit
|
|
8,547
|
|
|
8,708
|
|
||
Accrued customer rebates/prepayments
|
|
6,103
|
|
|
1,432
|
|
||
Accrued professional and consulting fees
|
|
6,060
|
|
|
9,604
|
|
||
Accrued excess and obsolete inventory at CMs or ODMs
|
|
2,667
|
|
|
2,430
|
|
||
Current portion of equipment financing arrangements
|
|
1,778
|
|
|
—
|
|
||
Accrued business events
|
|
1,696
|
|
|
1,272
|
|
||
Accrued non-income related taxes
|
|
1,288
|
|
|
1,778
|
|
||
Accrued freight
|
|
1,187
|
|
|
593
|
|
||
Accrued insurance
|
|
917
|
|
|
827
|
|
||
Product return reserve
(1)
|
|
880
|
|
|
—
|
|
||
Accrued restructuring charges
|
|
28
|
|
|
1,417
|
|
||
Accrued other
|
|
6,907
|
|
|
5,655
|
|
||
|
|
$
|
57,869
|
|
|
$
|
49,279
|
|
(1)
|
With adoption of Topic 606 on January 1, 2018, the product return reserve is considered a contract liability and has been reclassified from accounts receivable.
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at beginning of period
|
|
$
|
8,708
|
|
|
$
|
12,214
|
|
|
$
|
9,564
|
|
Provision for warranty and retrofit charged to cost of revenue
|
|
5,215
|
|
|
8,720
|
|
|
9,898
|
|
|||
Utilization of reserve
|
|
(5,376
|
)
|
|
(12,226
|
)
|
|
(6,816
|
)
|
|||
Adjustments to pre-existing reserve
|
|
—
|
|
|
—
|
|
|
(432
|
)
|
|||
Balance at end of period
|
|
$
|
8,547
|
|
|
$
|
8,708
|
|
|
$
|
12,214
|
|
|
|
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
|
|
Restructuring charges for the year
|
|
5,203
|
|
|
502
|
|
|
5,705
|
|
|||
Cash payments
|
|
(6,178
|
)
|
|
(916
|
)
|
|
(7,094
|
)
|
|||
Balance at December 31, 2018
|
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Current:
|
|
|
|
|
||||
Product and services
|
|
$
|
11,600
|
|
|
$
|
9,125
|
|
Extended warranty
|
|
4,000
|
|
|
3,951
|
|
||
|
|
15,600
|
|
|
13,076
|
|
||
Non-current:
|
|
|
|
|
||||
Product and services
|
|
440
|
|
|
18
|
|
||
Extended warranty
|
|
17,056
|
|
|
20,627
|
|
||
|
|
17,496
|
|
|
20,645
|
|
||
|
|
$
|
33,096
|
|
|
$
|
33,721
|
|
|
|
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, 2017
|
|
1,726
|
|
|
$
|
7.53
|
|
|
150
|
|
|
$
|
7.42
|
|
Granted
|
|
174
|
|
|
6.66
|
|
|
—
|
|
|
—
|
|
||
Vested
|
|
(835
|
)
|
|
7.57
|
|
|
(87
|
)
|
|
7.42
|
|
||
Canceled
|
|
(277
|
)
|
|
7.65
|
|
|
—
|
|
|
—
|
|
||
Outstanding at December 31, 2018
|
|
788
|
|
|
$
|
7.26
|
|
|
63
|
|
|
$
|
7.42
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Stock options
|
|
$
|
3.41
|
|
|
$
|
3.19
|
|
|
$
|
3.58
|
|
RSUs
|
|
N/A
|
|
|
$
|
6.75
|
|
|
$
|
6.91
|
|
|
PRSUs
|
|
N/A
|
|
|
N/A
|
|
|
$
|
7.42
|
|
||
ESPP
|
|
$
|
2.21
|
|
|
$
|
1.76
|
|
|
$
|
1.92
|
|
Nonqualified ESPP
|
|
$
|
7.34
|
|
|
$
|
6.90
|
|
|
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
|
|
2018
|
|
2017
|
|
2016
|
|||
Expected volatility
|
|
50
|
%
|
|
52
|
%
|
|
53
|
%
|
Expected life (years)
|
|
6.11
|
|
|
5.88
|
|
|
6.25
|
|
Expected dividend yield
|
|
—
|
|
|
—
|
|
|
—
|
|
Risk-free interest rate
|
|
2.83
|
%
|
|
2.10
|
%
|
|
1.60
|
%
|
|
|
Years Ended December 31,
|
|||||||
ESPP
|
|
2018
|
|
2017
|
|
2016
|
|||
Expected volatility
|
|
42
|
%
|
|
45
|
%
|
|
46
|
%
|
Expected life (years)
|
|
0.50
|
|
|
0.49
|
|
|
0.52
|
|
Expected dividend yield
|
|
—
|
|
|
—
|
|
|
—
|
|
Risk-free interest rate
|
|
2.21
|
%
|
|
1.24
|
%
|
|
0.47
|
%
|
|
|
December 31, 2018
|
||||||||||
|
|
Stock Option
|
|
RSU
|
|
ESPPs
|
||||||
Unrecognized stock-based compensation expense
|
|
$
|
5,088
|
|
|
$
|
3,337
|
|
|
$
|
3,879
|
|
Weighted-average amortization period (in years)
|
|
1.9
|
|
|
1.0
|
|
|
1.1
|
|
|
|
December 31,
|
||||
|
|
2018
|
|
2017
|
||
Stock options outstanding
|
|
4,442
|
|
|
5,756
|
|
Restricted stock units outstanding
|
|
788
|
|
|
1,726
|
|
Performance restricted stock units outstanding
|
|
63
|
|
|
150
|
|
Shares available for future grant under 2010 Plan
|
|
2,306
|
|
|
281
|
|
Shares available for future issuance under ESPP
|
|
1,550
|
|
|
2,456
|
|
Shares available for future issuance under Nonqualified ESPP
|
|
2,764
|
|
|
551
|
|
|
|
11,913
|
|
|
10,920
|
|
|
|
Unrealized Gains and Losses on Available-for-Sale Marketable Securities
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
||||||
Balance at December 31, 2016
|
|
$
|
(6
|
)
|
|
$
|
(650
|
)
|
|
$
|
(656
|
)
|
Other comprehensive income
|
|
6
|
|
|
481
|
|
|
487
|
|
|||
Balance at December 31, 2017
|
|
—
|
|
|
(169
|
)
|
|
(169
|
)
|
|||
Other comprehensive loss
|
|
—
|
|
|
(584
|
)
|
|
(584
|
)
|
|||
Balance at December 31, 2018
|
|
$
|
—
|
|
|
$
|
(753
|
)
|
|
$
|
(753
|
)
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
|
||||||
State
|
|
$
|
105
|
|
|
$
|
115
|
|
|
$
|
102
|
|
Foreign
|
|
360
|
|
|
577
|
|
|
673
|
|
|||
Current income tax
|
|
465
|
|
|
692
|
|
|
775
|
|
|||
Deferred foreign income tax (benefit)
|
|
65
|
|
|
551
|
|
|
(428
|
)
|
|||
|
|
$
|
530
|
|
|
$
|
1,243
|
|
|
$
|
347
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Net operating loss carryforwards
|
|
$
|
132,420
|
|
|
$
|
134,731
|
|
Tax credit carryforwards
|
|
46,884
|
|
|
43,095
|
|
||
Depreciation and amortization
|
|
1,924
|
|
|
1,892
|
|
||
Accruals and reserves
|
|
10,021
|
|
|
7,933
|
|
||
Deferred revenue
|
|
7,815
|
|
|
7,928
|
|
||
Stock-based compensation
|
|
4,447
|
|
|
3,100
|
|
||
Intangible assets
|
|
37
|
|
|
64
|
|
||
Other
|
|
5
|
|
|
23
|
|
||
Gross deferred tax assets
|
|
203,553
|
|
|
198,766
|
|
||
Valuation allowance
|
|
(203,550
|
)
|
|
(198,746
|
)
|
||
|
|
$
|
3
|
|
|
$
|
20
|
|
|
|
Years Ended December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Balance at beginning of year
|
|
$
|
20,289
|
|
|
$
|
18,349
|
|
Additions for tax positions related to prior year
|
|
516
|
|
|
—
|
|
||
Additions for tax positions related to current year
|
|
1,193
|
|
|
1,940
|
|
||
Balance at end of year
|
|
$
|
21,998
|
|
|
$
|
20,289
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Numerator:
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(19,298
|
)
|
|
$
|
(83,032
|
)
|
|
$
|
(27,402
|
)
|
Denominator:
|
|
|
|
|
|
|
||||||
Weighted-average common shares outstanding
|
|
52,609
|
|
|
50,155
|
|
|
48,730
|
|
|||
Basic and diluted net loss per common share
|
|
$
|
(0.37
|
)
|
|
$
|
(1.66
|
)
|
|
$
|
(0.56
|
)
|
Potentially dilutive shares, weighted-average
|
|
5,833
|
|
|
3,446
|
|
|
5,890
|
|
(1)
|
Revenue amounts are accounted for under Topic 605 for 2017 and 2016.
|
|
|
Fiscal Year 2018 Quarter Ended
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 29
|
|
December 31
|
||||||||
Revenue
|
|
$
|
99,403
|
|
|
$
|
111,702
|
|
|
$
|
114,699
|
|
|
$
|
115,516
|
|
Gross profit
|
|
42,059
|
|
|
50,866
|
|
|
52,833
|
|
|
51,624
|
|
||||
Operating income (loss)
|
|
(11,109
|
)
|
|
(2,926
|
)
|
|
676
|
|
|
(5,155
|
)
|
||||
Net income (loss)
|
|
(11,736
|
)
|
|
(2,793
|
)
|
|
809
|
|
|
(5,578
|
)
|
||||
Net income (loss) per common share, basic and diluted
|
|
$
|
(0.23
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
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 and diluted
|
|
$
|
(0.67
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
(0.25
|
)
|
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
|
|
|
|
10.29
|
|
|
10.30
|
|
|
21.1
|
|
|
23.1
|
|
|
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 1, 2019
|
By:
|
|
/s/ Carl Russo
|
|
|
|
|
Carl Russo
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
||
Dated:
|
March 1, 2019
|
By:
|
|
/s/ Cory Sindelar
|
|
|
|
|
Cory Sindelar
|
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
||
/s/ Carl Russo
|
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
March 1, 2019
|
Carl Russo
|
|
|
|
|
|
|
|
||
/s/ Cory Sindelar
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
March 1, 2019
|
Cory Sindelar
|
|
|
|
|
|
|
|
|
|
/s/ Don Listwin
|
|
Chairman of the Board of Directors
|
|
March 1, 2019
|
Don Listwin
|
|
|
|
|
|
|
|
||
/s/ Christopher Bowick
|
|
Director
|
|
March 1, 2019
|
Christopher Bowick
|
|
|
|
|
|
|
|
|
|
/s/ Kathy Crusco
|
|
Director
|
|
March 1, 2019
|
Kathy Crusco
|
|
|
|
|
|
|
|
|
|
/s/ Kevin DeNuccio
|
|
Director
|
|
March 1, 2019
|
Kevin DeNuccio
|
|
|
|
|
|
|
|
||
/s/ Michael Everett
|
|
Director
|
|
March 1, 2019
|
Michael Everett
|
|
|
|
|
|
|
|
||
/s/ Kira Makagon
|
|
Director
|
|
March 1, 2019
|
Kira Makagon
|
|
|
|
|
|
|
|
|
|
/s/ Michael Matthews
|
|
Director
|
|
March 1, 2019
|
Michael Matthews
|
|
|
|
|
|
|
|
||
/s/ Kevin Peters
|
|
Director
|
|
March 1, 2019
|
Kevin Peters
|
|
|
|
|
|
|
|
|
|
/s/ J. Daniel Plants
|
|
Director
|
|
March 1, 2019
|
J. Daniel Plants
|
|
|
|
|
1.
|
General
. This Non-Employee Director Cash Compensation Policy (“
Policy
”) was adopted by the Board of Directors (“
Board
”) of Calix, Inc. (“
Company
”) on and is effective as of June 7, 2018.
|
2.
|
Annual Cash Compensation
. Each member of the board who is not employed by the Company or one of its affiliates shall be entitled to an annual retainer with the amount determined as follows (the net sum for each director, his or her “
Annual Retainer
”):
|
3.
|
Timing of Payment
. Annual Retainers shall be paid in quarterly installments in arrears on the date of each regularly scheduled quarterly board meeting. Installments will be pro-rated for any partial period of service.
|
4.
|
Policy Subject to Amendment, Modification and Termination
. This Policy may be amended, modified or terminated by the Board at any time in the future at its sole discretion.
|
LANDLORD:
|
TENANT:
|
Orchard Parkway San Jose, LLC,
a California limited liability company
By:
/s/ Scott R. Trobbe
Name:
Scott R. Trobbe
Title:
Authorized Signatory
Date:
Nov. 14, 2018
|
Calix, Inc.,
a Delaware corporation
By:
/s/ Suzanne Tom
Name:
Suzanne Tom
Title:
VP, General Counsel
Date:
11/14/18
|
Re:
|
Net Lease Agreement, dated March 9, 2018 (“
Original Lease
”), between Orchard Parkway San Jose, LLC, a California limited liability company, as “
Landlord
”, and Calix, Inc., a Delaware corporation, as “
Tenant
”, as amended by that certain First Amendment to Lease dated November _, 2018 (“
First Amendment
”) between Landlord and Tenant (collectively with the Original Lease, the "
Lease
"), concerning that premises, consisting of approximately 64,991 rentable square feet, more or less, consisting of the entire rentable areas of the building having a street address of 2777 Orchard Parkway, San Jose, California (the “
Premises
”).
|
1.
|
Landlord delivered possession of the Premises to Tenant on September 17, 2018 with all improvements and work, if any, completed in a good and workmanlike manner and otherwise in the condition required under the Lease and Tenant accepted possession of the Premises, subject to completion by Landlord of the Outstanding Tenant Improvement Work Items listed and described more fully in Section 7(b) of the First Amendment.
|
2.
|
The Commencement Date of the Lease Term for the Premises is September 17, 2018 (the "
Commencement Date
") and the initial Lease Term for the Premises expires on December 31, 2025 (the "
Ending Date
"), unless sooner terminated according to the terms of the Lease.
|
3.
|
That in accordance with the Lease, monthly Rent shall commence to accrue on September 17, 2018 (except that monthly Rent shall be conditionally abated for the first three (3) full months of the Lease Term in accordance with (and subject to) the provisions of Paragraph 1.8 of the Original Lease), and Tenant’s obligation to pay Tenant’s share of Operating Expenses (as described below) shall commence to accrue on October 1, 2018. The Converted Amount (as set forth Paragraph 2(c) of the First Amendment) is the amount of One Hundred Seventy-five Thousand Four Hundred Seventy-five and 70/100ths Dollars ($175,475.70).
|
4.
|
Tenant's percentage share of Operating Expenses is one hundred percent (100%) as to the Building and sixty-four and eleven one hundredths percent (64.11%) as to the Project.
|
5.
|
In accordance with the Lease, the Converted Amount shall be applied by Landlord against the abated installment of monthly Rent due for the last full month of the abatement of Rent, with the result that Tenant shall have two (2) full months of abatement of Rent (and not three (3) full months of abatement of Rent). Application of the Converted Amount (i) defrays the cost of the Change Orders, and the costs associated with any Extra Work, as described in Section 2(c) of the First Amendment, and (ii) reduces by one (1) full month the Tenant right to abated monthly Rent set forth in paragraph 3 above.
|
6.
|
In accordance with the Lease the "One-for-One Rent Credit Trigger Date" is August 17, 2018. The One-for-One Rent Credit amount is One Hundred Seventy-five Thousand Four Hundred Seventy-five and 70/100ths Dollars ($175,475.70) and shall be applied by Landlord as an extension to the conditionally abated monthly Rent. Application of the One-For-One Rent Credit amount off sets in part the application of the Converted Amount set forth in paragraph 5 above, with the result that Tenant shall again have three (3) full months of abatement of Rent.
|
7.
|
Notwithstanding anything to the contrary contained in the Lease and/or this Commencement Date Letter, Tenant’s first payment of monthly Rent is due December 16, 2018 in the amount of Ninety Thousand Five Hundred Sixty-eight and 10/100ths Dollars ($90,568.10) for the balance of the calendar month of December 2018 (i.e. $175,475.70/31 days x 16 days).
|
8.
|
Authorized Signatories. Each party represents and warrants to the other that it is duly authorized to enter into this document and that the person signing on its behalf is duly authorized to sign on behalf of such party.
|
LANDLORD:
ORCHARD PARKWAY SAN JOSE, LLC,
a California limited liability company
By: ____________________
Name: ____________________
Title: _____________________
Date: _____________________
|
ACCEPTED AND AGREED:
TENANT:
CALIX, INC.,
a Delaware corporation
By: ____________________
Name: ____________________
Title: _____________________
Date: _____________________
|
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, 2018
;
|
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):
|
(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.
|
Date: March 1, 2019
|
|
|
|
/s/ Carl Russo
|
|
|
|
|
Carl Russo
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
1.
|
I have reviewed this annual report on Form 10-K of Calix, Inc. for the year ended
December 31, 2018
;
|
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):
|
(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.
|
Date: March 1, 2019
|
|
|
|
/s/ Cory Sindelar
|
|
|
|
|
Cory Sindelar
|
|
|
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|
Date: March 1, 2019
|
|
|
|
/s/ Carl Russo
|
|
|
|
|
Carl Russo
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
Date: March 1, 2019
|
|
|
|
/s/ Cory Sindelar
|
|
|
|
|
Cory Sindelar
|
|
|
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|