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What changed in CALIX, INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CALIX, INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+255 added−268 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in CALIX, INC's 2024 10-K

255 paragraphs added · 268 removed · 213 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

54 edited+7 added−23 removed17 unchanged
Biggest changeThese opportunities open new markets and relationships with the public sector to reduce reliance on and protect against 5G LTE fixed wireless access. 5 Table of Contents • SmartBiz™ managed services that address the business networking and productivity needs of small business owners with an all-in-one managed service that increases staff productivity, secures critical business systems and enhances customer loyalty.
Biggest changeThese opportunities open new markets and relationships with the public sector to reduce reliance on and augment 5G LTE fixed wireless access. • SmartBiz™ managed services that address the business networking and productivity needs of small business owners with an all-in-one solution that increases staff productivity, secures critical business systems and enhances customer loyalty. 5 Table of Contents • SmartMDU™ managed services provide purpose-built, flexible connectivity solutions for multi-family properties of any type, enabling service providers and property owners to exceed resident expectations with a simple, secure, personalized and efficient managed Wi-Fi solution. • ManagedBiz™ is a cloud-managed network security and connectivity solution tailored for large businesses with complex information technology use cases, featuring a security and routing appliance, multi-layer network security and seamless management via the Calix Broadband Platform.
Expanding customer footprint across our total addressable opportunity – Our total addressable opportunity includes service providers of any type and size, including local and competitive exchange carriers, cable multiple system operators, or cable MSOs, wireless internet service providers, or WISPs, fiber overbuilders such as municipalities and electric cooperatives and tribal communities, multiple dwelling units and hospitality providers.
Expanding customer footprint across our total addressable opportunity – Our total addressable opportunity includes service providers of any type and size, including local and competitive exchange carriers, cable multiple system operators, or cable MSOs, wireless internet service providers, or WISPs, fiber overbuilders such as municipalities, electric cooperatives, tribal communities, multiple dwelling units and hospitality providers.
Our research and development team is composed of engineers with expertise in software and cloud platforms, optics, wireless technologies and systems engineering. Our research and development team is responsible for designing, developing and enhancing our platform and managed services, performing product and quality assurance testing and ensuring the compatibility of our products with third-party hardware and software products.
Our research and development team is composed of engineers with expertise in software and cloud platforms, optics, wireless technologies and systems engineering. Our research and development team is responsible for designing, developing and enhancing our platform, cloud and managed services, performing product and quality assurance testing and ensuring the compatibility of our products with third-party hardware and software products.
For the past four years, we have averaged adding over 90 new BSP customers per year purchasing directly or through our partners. Our diverse and growing customer footprint is a critical source of our future growth as we expand our portfolio and sell additional components of our platform and managed services to both new and existing customers.
For the past four years, we have averaged adding over 90 new customers per year purchasing directly or through our partners. Our diverse and growing customer footprint is a critical source of our future growth as we expand our portfolio and sell additional components of our platform and managed services to both new and existing customers.
Each managed subscriber service is complemented by real-time subscriber insights via Calix Engagement Cloud, Calix Service Cloud and Calix Operations Cloud offerings, which are configurable to display role-based insights for BSP general management, marketing, support, operations and engineering staff.
Each subscriber managed service is complemented by real-time subscriber insights via Calix Engagement Cloud, Calix Operations Cloud offerings and Calix Service Cloud, which are configurable to display role-based insights for general management, marketing, support, operations and engineering staff.
These insights enable BSPs to anticipate and target new revenue-generating services and applications through our mobile application, CommandIQ ® for residents and CommandWorx ™ for businesses. Our Calix Cloud enables simple integrations with other market-leading workflow solutions for marketing (including Facebook, Mailchimp, Constant Contact and HubSpot), support ticketing solutions and operations support systems and business support systems.
These insights enable BEPs to anticipate and target new revenue-generating services and applications through our mobile application, CommandIQ ® for residents and CommandWorx ™ for businesses. Our Calix Cloud enables simple integrations with other market-leading workflow solutions for marketing (including Facebook, Mailchimp, Constant Contact and HubSpot), support ticketing solutions and operations support systems and business support systems.
Most BSPs will require transformation of their business and operations to become an essential provider of data-driven, high-value managed services to their subscribers. The principal elements of our strategy are: Starting with the data – The principal way we gather, analyze and deliver actionable insights for BSPs is via the Calix Cloud.
Most BEPs will require transformation of their business and operations to become an essential provider of data-driven, high-value managed services to their subscribers. The principal elements of our strategy are: Starting with the data – The principal way we gather, analyze and deliver actionable insights for BEPs is via Calix Cloud.
We offer a range of training, professional and success services to assist BSPs in every domain of network management from strategy to deployment and management. These offerings are sold independently and offer unique entry points for new customers who are partnering with Calix to transform their businesses.
We offer a range of training, professional and success services to assist BEPs in every domain of network management from strategy to deployment and management. These offerings are sold independently and offer unique entry points for new customers, who are partnering with Calix to transform their businesses.
Our role-based cloud enables BSP teams, such as marketing, operations or customer support, to leverage real-time behavioral analytics to anticipate the subscriber’s needs, whether they are in the home, roaming across the town or managing a small business.
Our role-based cloud enables BEP teams, such as marketing, operations or customer support, to leverage real-time behavioral analytics to anticipate the subscriber’s needs, whether they are in the home, roaming across the town or managing a small business.
Our SmartLife managed services offerings, which consist of: • SmartHome™ managed services and applications to enhance, operate and secure the connected experience of subscribers in their home, including managed Wi-Fi, advanced content control, network security, connected cameras, social media monitoring for kids and device protection programs. • SmartTown ® managed services that reimagine community Wi-Fi as a ubiquitous, secure and managed experience across a BSP’s footprint by making their town a SmartTown.
Our SmartLife™ managed service offerings, which consist of: • SmartHome™ managed services and applications to enhance, operate and secure the connected experience of subscribers in their home, including managed Wi-Fi, advanced content control, network security, connected cameras, social media monitoring for kids and device protection programs. • SmartTown ® managed services that reimagine community Wi-Fi as a ubiquitous, secure and managed experience across a BEP’s footprint by making their town a SmartTown.
Our direct model is complemented with selective programs for our channel partners, who have established local market expertise and have demonstrated the ability to generate new market opportunities and support sales of cutting-edge technologies for BSPs.
Our direct model is complemented with selective programs for our channel partners, who have established local market expertise and have demonstrated the ability to generate new market opportunities and support sales of cutting-edge technologies for BEPs.
The BSPs’ teams can utilize insights from Calix Cloud to offer these new and innovative services to those subscribers who have the propensity to buy, thereby growing revenue as they deliver a connected experience at significantly lower operating costs. This also enables them to build their brand and value proposition around innovation and subscriber experience.
The BEPs’ teams can utilize insights from Calix Cloud to offer new and innovative services to those subscribers who have the propensity to buy, thereby growing revenue as they deliver a connected experience at significantly lower operating costs. This also enables them to build their brand and value proposition around innovation and subscriber experience.
Competition is largely based on any one or a combination of the following factors: functionality and features, price, existing business and customer relationships, 7 Table of Contents product quality, installation capability, service and support, long-term returns, scalability, development and manufacturing capability. We compete with several companies within the markets that we serve, and we anticipate that competition will intensify.
Competition is largely based on any one or a combination of the following factors: functionality and features, price, existing business and customer relationships, product quality, installation capability, service and support, long-term returns, scalability, development and manufacturing capability. We compete with several companies within the markets that we serve, and we anticipate that competition will intensify.
Finally, to support these managed services, we offer market activation resources and customer support programs through our customer success organization to enable BSP teams to quickly deploy, manage and monetize each service that they provide to subscribers. These resources include marketing content that can be easily customized with on-line tools, training programs, success services and professional services.
Finally, to support these managed services, we offer market activation resources and customer support programs through our Success organization to enable BEP teams to quickly deploy, manage and monetize each service that they provide to subscribers. These resources include marketing content that can be easily customized with on-line tools, training programs and success services.
Engaging directly with BSP customers – We continue to invest in our direct sales capabilities so that we can engage deeply with our BSP customers to help them understand the differentiable value that our platform provides.
Engaging directly with BEP customers – We continue to invest in our direct sales capabilities so that we can engage deeply with our customers to help them understand the differentiable value that our platform provides.
In recent years, as our revenue from our large customers decreased, we have experienced less year-end volatility due to capital budgetary spending or freezing. This, combined with an increase in recurring revenue, has resulted in smaller seasonal fluctuations, and we expect this trend to continue. Competition The communications software and systems equipment markets are highly competitive.
In recent years, as our revenue from our large customers decreased, we have experienced less year-end volatility due to capital budgetary spending or freezing. This, combined with an increase in recurring revenue, has resulted in smaller seasonal fluctuations, and we expect this trend to continue. 7 Table of Contents Competition The communications software and systems equipment markets are highly competitive.
Vendors with which we compete include: ADTRAN, Inc.; Ciena Corporation; CommScope Inc.; DZS Inc.; eero/Ring (Amazon companies); Harmonic, Inc.; Huawei Technologies Co., Ltd.; Google Nest (a Google company); Nokia Corporation; Plume Design, Inc. and Ubiquiti Inc. In various geographic or vertical markets, there are also several smaller companies with which we compete.
Vendors with which we may compete include: ADTRAN Holdings, Inc.; Ciena Corporation; CommScope Holding Company, Inc.; eero/Ring (Amazon companies); Harmonic Inc.; Huawei Technologies Co., Ltd.; Google Nest (a Google company); Nokia Corporation; Plume Design, Inc. and Ubiquiti Inc. In various geographic or vertical markets, there are also several smaller companies with which we may compete.
Customers We market and sell our platform (cloud, software and systems) and managed services to service providers of all types and sizes. To date, we have focused primarily on service providers in the North American market. Our customers span all sizes of broadband subscriber count from a few hundred to more than six million.
Customers We market and sell our platform (cloud, software and systems) and managed services to service providers of all types and sizes. To date, we have focused primarily on service providers in the North American market. Our customers span all sizes of broadband subscriber count from a few subscribers to more than eleven million.
Our platform is built to enable BSPs to quickly and easily deploy a growing portfolio of SmartLife managed services to connect entire communities. This enables BSPs to establish themselves as essential technology innovators that are enabling their communities to grow and thrive.
Our platform is built to enable BEPs to quickly and easily deploy a growing portfolio of SmartLife™ managed services to connect entire communities. Embracing this strategy enables BEPs to establish themselves as essential technology innovators that are enabling their communities to grow and thrive.
ITEM 1. Business Company Overview Calix was founded in 1999. We develop, market and sell our platform (cloud, software and systems) and managed services that enable service providers of all types and sizes to innovate and transform their businesses.
ITEM 1. Business Company Overview Calix was founded in 1999. We develop, market and sell our appliance-based platform, cloud and managed services that enable service providers of all types and sizes to innovate and transform their businesses.
As a result, many of Calix’s BSP customers have experienced improved customer satisfaction scores, minimal churn and significant growth. To expand our reach in the market, we will continue to pursue strategic technology and distribution relationships that align with BSPs’ strategic priorities.
As a result, many of Calix’s BEP customers have experienced improved customer satisfaction scores, minimal churn and significant revenue growth. To expand our reach in the market, we will continue to pursue strategic technology and distribution relationships that align with BEPs’ strategic priorities.
Our role-based Calix Cloud enables critical functions within a BSP’s business, such as marketing, operations and support, to leverage real-time data to continually understand and optimize the experience for their subscribers. 4 Table of Contents Building and evolving our platform – Our product strategy centers on our strategic platform.
Our role-based Calix Cloud enables critical functions within a BEP’s business, such as marketing, operations and support, to leverage real-time data to continually understand and optimize the experience for their subscribers. Building and evolving our platform – Our product strategy centers on our strategic platform.
By leveraging residential and small business Wi-Fi systems combined with strategically deployed outdoor Wi-Fi access points, BSPs can serve subscribers, schools, municipalities, organizations, planned communities and more.
By leveraging residential and small business Wi-Fi systems combined with strategically deployed outdoor Wi-Fi access points, BEPs can serve subscribers, schools, municipalities, organizations, planned communities, parks, marinas and more.
Innovative BSPs, who embrace our platform, understand this competitive threat and that their brand’s central position in the home is their most valuable strategic asset. As such, they must protect and expand continually.
BEPs, who embrace our platform, understand this competitive threat and that their brand’s central position in the home, the business and the town is their most valuable strategic asset. As such, they must protect and expand continually.
Our Calix Platform, which consists of: • Calix Cloud ® , which comes in three role-base editions: Calix Engagement Cloud (formerly Calix Marketing Cloud), Calix Service Cloud (formerly Calix Support Cloud) and Calix Operations Cloud. • Calix Intelligent Access EDGE™, access network solution for automated, intelligent next generation networks. • Calix Revenue EDGE™, our premises solution for subscriber managed services. 2.
Our Calix Platform, which consists of: • Calix Cloud ® , which comes in three role-base editions: Calix Engagement Cloud, Calix Operations Cloud and Calix Service Cloud. • Calix Intelligent Access™ our network solution for automated, intelligent next generation networks. • Calix Unlimited Subscriber™ our premises solution for subscriber managed services. 2.
Moreover, an increased segment of our customer base is leveraging all components of our platform and managed services in an end-to-end strategy to simplify their businesses, excite their subscribers and grow the value that they deliver for their subscribers and communities.
Moreover, an increased segment of our customer base is leveraging all components of our platform and managed services in an end-to-end strategy to simplify their businesses, innovate for their subscribers and grow the value that they deliver for their consumer, business and municipal subscribers.
Strategy Overview Our strategy is to position Calix as the key partner providing a broadband delivery platform (cloud, software and systems) and managed services to enable and facilitate the transformation of BSP networks and the residential and small business network experience in order to excite all of their subscribers.
Strategy Overview Our strategy is to position Calix as the key partner providing a broadband delivery platform (cloud, software and systems) and managed services to enable and facilitate the transformation of BEP networks and the residential, community and business network experience in order to innovate for all of their subscribers.
Our platform simplifies BSPs’ businesses by delivering intelligence and automation across the entire subscriber facing network – from the data center edge to the subscriber’s devices. Our strategy is to continually augment and extend our platform with features and services directly or through partners to allow our BSP customers to deliver cutting-edge services to their subscribers.
Our platform simplifies BEPs’ businesses by delivering intelligence and automation across the entire subscriber facing network – from the data center edge to 4 Table of Contents the subscriber’s devices. Our strategy is to continually augment and extend our platform with features and services directly or through partners to allow our BEP customers to deliver cutting-edge services to their subscribers.
At the same time, we offer our Calix Customer Success and Support Services along with a growing portfolio of award-winning market activation resources that provide the BSPs with best practices and programs to strengthen and grow their brand with their subscribers, thereby increasing subscriber loyalty and opportunities to grow their subscriber base.
At the same time, we offer our Calix Success Services along with a growing portfolio of award-winning market activation resources that provide BEPs with best practices and programs to strengthen and grow their brands with their subscribers, thereby increasing subscriber loyalty and opportunities to grow their subscriber bases.
Our Intelligent Access EDGE network solution and Revenue EDGE subscriber solution are designed to allow BSPs to simplify their businesses and reduce operating costs, while launching exciting new services in a matter of days and weeks instead of months and years.
Our Intelligent Access network solution and Unlimited Subscriber solution are designed to allow BEPs to simplify their businesses and reduce operating costs, while launching innovative new services in a matter of days and weeks instead of months and years.
For our customers to successfully transform their businesses into the innovative broadband service providers, or BSPs, of the future, they require actionable data for critical business functions such as network operations, customer support and marketing. However, this data is often trapped in disparate systems or departmental silos.
For our customers to successfully become Broadband Experience Providers, or BEPs, of the future, they require actionable data for critical business functions such as network operations, customer engagement and service. However, this data is often trapped in disparate systems or departmental silos.
The SmartLife™ managed services are built on the Calix Platform and fully integrated with our GigaSpire ® and GigaPro ® family of Wi-Fi systems to be ready for deployment as a complete subscriber experience solution for a BSP’s residential subscribers, small business subscribers and community networks. Calix customers are evolving their go-to-market strategies to go beyond marketing broadband speed.
The SmartLife™ managed services are built on the Calix platform and fully integrated with our GigaSpire ® and GigaPro ® family of Wi-Fi systems to be ready for deployment as a complete subscriber experience solution for a BEP’s residential subscribers, business subscribers and community networks.
Our global supply chain management organization oversees these third parties to source and procure materials, manufacture and deliver our products. Our global supply chain management organization consists of order management, planning, sourcing, logistics, test and manufacturing engineers and new product introduction personnel.
The global supply chain organization oversees these third parties to source and procure materials, manufacture and deliver products. This organization includes order management, planning, sourcing, logistics, test and manufacturing engineers, and new product introduction personnel. We integrate our supply chain management and new product introduction activities with those outsourced to third parties.
Increasingly, they are becoming “experience” providers by delivering valuable managed services built on top of their Wi-Fi offerings. This unique portfolio gives BSPs more opportunities to provide differentiated services to their subscribers and grow their revenue. Our access network solutions redefine the access edge of the network by simplifying its architecture and operations.
Calix customers are evolving their go-to-market strategies to go beyond marketing broadband speed by delivering valuable managed services built on top of their Wi-Fi offerings. This unique portfolio gives them more opportunities to provide differentiated services to their subscribers and grow their revenue. Our access network solutions redefine the access edge of the network by simplifying its architecture and operations.
Human Capital We employed 1,760 employees globally as of December 31, 2023 with 1,055 employees located in the United States and 705 outside of the United States, primarily in Canada, China and India.
Human Capital We employed 1,820 employees globally as of December 31, 2024 with 1,013 employees located in the U.S. and 807 outside of the U.S., primarily in Canada, China and India.
We believe that our relationships with and our reliance on third parties allow us to improve new product introduction time, conserve working capital, reduce product costs and minimize delivery lead times while maintaining high product quality as well as the ability to scale quickly to handle increased order volume.
Relationships with and reliance on these third parties allow us to improve new product introduction time, conserve working capital, reduce product costs and minimize delivery lead times while maintaining product quality and scaling quickly to handle increased order volume. We continue to qualify and utilize additional vendors for various portions of the supply chain as needed.
Our service provider customers include: ALLO Communications; Connect Holding II, LLC (dba Brightspeed); CityFibre Holdings Limited; Conexon Connect; Cox Communications; Gibson Connect, LLC; Hunter Communications; Jade Communications; Gridiron Fiber Corporation (DBA Lumos); Lumen Technologies, Inc., or Lumen; Paul Bunyan Communications; Silver Star Communications; Tombigbee Electric Power Association and Tombigbee Fiber, LLC and Verizon Communications, Inc. The U.S.
Our service provider customers include: ALLO Communications, LLC; Connect Holding II LLC (dba Brightspeed); CityFibre Holdings Limited; Conexon Connect, LLC; Cox Communications, Inc.; Highline; Hunter Communications; ICS Advanced Technologies; Jade Communications, LLC; New Visions Communications, Inc.; Rally Networks; South Central Telephone Association, Inc.; Tombigbee Electric Power Association and Tombigbee Fiber, LLC and Verizon Communications Inc. The U.S.
As we expand into adjacent markets, we expect to encounter new competitors. Many of our competitors have the financial resources to offer competitive products at a below market price, which could prevent us from competing effectively. Intellectual Property We rely on a combination of IP rights, including patents, trade secrets, copyrights and trademarks as well as customary contractual protections.
As we expand into adjacent markets and expand our platform, cloud and managed services offerings, we expect to encounter new competitors. Many of our competitors have the financial resources to offer competitive products at a below market price, which could prevent us from competing effectively.
BSPs can consolidate multiple access network elements into a single system using specialized software modules that add functionality and remove complexity, thereby reducing the total cost of ownership and the time to market for new services.
Our platform’s access network component is implemented in our E-Series family of modular, non-blocking systems, enabling BEPs to meet a wide variety of deployment scenarios. our customers can consolidate multiple access network elements into a single system using specialized software modules that add functionality and remove complexity, thereby reducing the total cost of ownership and the time to market for new services.
Sales to customers outside the United States represented 9% of our revenue in 2023, 9% of our revenue in 2022 and 17% of our revenue in 2021. Our sales outside the United States have been and are currently predominantly to customers in the Americas and Europe.
No customer represented more than 10% of revenue in 2024, 2023 or 2022. Sales to customers outside the U.S. represented 8% of our revenue in 2024 and 9% of our revenue in 2023 and 2022. Our sales outside the U.S. have been and are currently predominantly to customers in the Americas and Europe.
These rights and protections are accomplished through a combination of internal and external controls, including contractual protections with employees, contractors, customers and partners, and through a combination of U.S. and international IP laws. As of December 31, 2023, we held 111 U.S. patents and 26 pending U.S. and international patent applications.
Intellectual Property We rely on a combination of IP rights, including patents, trade secrets, copyrights and trademarks as well as customary contractual protections. These rights and protections are accomplished through a combination of internal and external controls, including contractual protections with employees, contractors, customers and partners, and through a combination of U.S. and international IP laws.
We will also continue to pursue service provider segments where there is an opportunity to grow our current share, such as cable MSOs, large traditional wireline-focused service providers and international markets.
We will also continue to pursue service provider segments where there is an opportunity to grow our current share, such as cable MSOs, large traditional wireline-focused service providers and international markets. Extending portfolio of Calix services – Our Success team supports our customers as they define their transformation strategies, build new skills, implement new technologies and deploy new subscriber services.
Medium service providers also operate typically within a wide geographic footprint but are smaller in scale with broadband subscribers that range from 250,000 to 2.5 million. Small service providers consist primarily of over 1,000 predominantly local independent operating companies, or IOCs, typically focused on a single community or a cluster of communities.
Large service providers are those with wide geographic footprints and broadband subscribers of 2.5 million or more. Medium service providers also operate typically within a wide geographic footprint but are smaller in scale with broadband subscribers that range from 250,000 to 2.5 million.
Examples of these partners are Conexon Connect, LLC, ePlus Technology, inc. and The Pivot Group, LLC. Product Overview Our product strategy centers on increasing the market adoption of two fundamental components: 1.
Product Overview Our product strategy centers on increasing the market adoption of two fundamental components: 1.
Federal government has approved programs, totaling more than $60 billion, to fund broadband and connectivity expansion across the United States. Calix has a dedicated team of funding specialists, assisting our customers with the most up-to-date information on broadband funding opportunities as they are introduced and personalized strategies to maximize their grants to support their growth.
Calix has a dedicated team of funding specialists, assisting customers and prospects with the most up-to-date information on broadband funding opportunities as they are introduced and personalized strategies to maximize their grants to support their growth. 6 Table of Contents We classify service providers into large, medium and small based on the number of broadband subscribers they serve.
We believe that these initiatives have helped Calix become a top company to work for. Corporate Information Our principal executive offices are located at: 2777 Orchard Parkway, San Jose, California 95134, and our telephone number is (408) 514-3000. Our website address is: www.calix.com.
Our talent strategy focuses on our culture and core values, our talent programs and the overall well-being and safety of our talent. Corporate Information Our principal executive offices are located at: 2777 Orchard Parkway, San Jose, California 95134, and our telephone number is (408) 514-3000. Our website address is: www.calix.com.
These services allow BSPs to benefit directly from our deep expertise working with service providers to optimize their operations and leverage our advanced analytics to improve the operational efficiency of their teams. Pursuing strategic relationships – We will continue to pursue strategic technology and distribution relationships that help us align with BSPs’ strategic priorities.
Calix Success’ capabilities address our customers’ entire network and service delivery lifecycle. These services allow our customers to benefit directly from our deep expertise working with service providers of all types and sizes to optimize their operations and leverage our advanced analytics to improve the operational efficiency of their teams.
U.S. patents generally have a term of twenty years from filing. The remaining terms on our individual patents vary from less than a year to seventeen years. U.S. patent, copyright and trade secret laws afford us only limited protection, and the laws of some foreign countries do not protect proprietary rights to the same extent.
U.S. patent, copyright and trade secret laws afford us only limited protection, and the laws of some foreign countries do not protect proprietary rights to the same extent. We believe that the frequency of assertions of patent infringement has and continues to increase in our industry.
Our platform, which includes Calix Cloud, Revenue EDGE and Intelligent Access EDGE, gathers, analyzes and applies machine learning to deliver real-time insights seamlessly to each key business function. Our customers utilize these data and insights to simplify network operations, marketing and customer support and deliver a growing portfolio of SmartLife managed services and experiences that excite their subscribers.
Our platform, which includes Calix Cloud, Intelligent Access, and Unlimited Subscriber, gathers, analyzes and applies machine learning to deliver real-time insights seamlessly to each key business function.
We continue to invest to provide technical synergy across the ecosystems that support our customers’ most critical business processes through our partner program. By adding new solutions to our platform ecosystem, we significantly enhance the value that our platform delivers to BSPs. In addition, we are expanding our relationships with organizations that help our customers plan and execute in-market.
By adding new solutions to our platform ecosystem, we significantly enhance the value that our platform delivers to our customers. In addition, we are continuing to expand our relationships with organizations that help our customers plan and execute in-market. Examples of these partners are Conexon, LLC, ePlus Technology, Inc., BroadEngagement (Refindable LLC business) and GOCare™ (NuTEQ Solutions, LLC business).
This enables BSPs to grow their brand through increased subscriber acquisition, loyalty and revenue and to reduce their operating costs, creating value for their businesses and the communities they serve. This is our mission: to enable BSPs of all sizes to simplify, excite and grow.
This partnership enables BEPs to grow their brand through increased subscriber acquisition, loyalty and revenue while reducing their operating costs. This is our mission: to enable BEPs of all sizes to simplify, innovate and grow. We believe our platform offers a competitive edge to BEPs at a critical time of increasing competition.
Over time, we expect this competition can erode a BSP’s brand and relationship with its subscribers, by reducing broadband to an easy-to-replace commodity, which can increase churn and reduce revenue. Our platform enables BSPs to build next generation networks and offer higher-value managed service offerings that enable them to grow revenue, increase subscriber loyalty and monetize their network investments.
Our platform enables these service providers to build next generation networks and offer higher-value managed service experiences that enable them to grow revenue, increase subscriber loyalty and monetize their network investments for generations.
Seasonality Fluctuations in our revenue occur due to many factors, including the varying budget cycles and seasonal buying patterns of our customers.
Supply chain management includes adherence to our supplier code of conduct, transparent tracking of sustainability goals and the importance of using different suppliers. We track our enterprise greenhouse gas emissions and report them via our website. Seasonality Fluctuations in our revenue occur due to many factors, including the varying budget cycles and seasonal buying patterns of our customers.
They include a growing number of municipalities, cable MSOs, electric cooperatives, fiber overbuilders and WISPs. These entities range in size from a few hundred to 250,000 broadband subscribers. 6 Table of Contents No customer represented more than 10% of revenue in 2023, 2022 or 2021.
Small service providers consist primarily of over 1,000 predominantly local independent operating companies, or IOCs, typically focused on a single community or a cluster of communities. They include a growing number of municipalities, cable MSOs, electric cooperatives, fiber overbuilders, tribal entities and WISPs. These entities range in size from a few subscribers to 250,000 broadband subscribers.
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We believe our platform offers a competitive edge to BSPs at a critical time of increasing competition from direct-to-consumer cloud companies and device providers as they expand their reach and focus on owning the connected home experience.
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Our customers utilize these data and insights to simplify network operations, customer engagement and service and innovate for their consumer, business and municipal subscribers with a growing portfolio of SmartLife managed service experiences that grow their businesses and the communities they serve.
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For example, these over-the-top competitors are entering the home by offering Wi-Fi enabled devices, and then leveraging behavioral insights to expand their direct relationship and build their brand, not the BSP’s, with the subscriber by offering additional consumer services.
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With the increase in both private and public funding of broadband access, we anticipate at least two fiber-to-the-home providers vying for subscribers in every market.
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Extending portfolio of Calix services – Our services team, Calix Services, supports our BSPs as they define their transformation strategies, build new skills, implement new technologies and deploy new subscriber services. Calix Services’ capabilities address the BSP’s entire network and service delivery lifecycle.
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These providers have a choice: become a speed provider focused on offering the fastest speeds at the lowest price, or become an experience provider focused on delivering innovative, value-added services that improve the lives of their subscribers.
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The Calix Platform’s access network component is implemented in our E-Series family of modular, non-blocking systems, enabling BSPs to meet a wide variety of deployment scenarios.
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Pursuing strategic relationships – We will continue to pursue strategic technology and distribution relationships that help us align with our customers’ strategic priorities. We continue to invest to provide technical synergy across the ecosystems that support our customers’ most critical business processes through our partner program.
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We classify service providers into large, medium and small based on the number of broadband subscribers they serve. Large service providers are those with wide geographic footprints and broadband subscribers of 2.5 million or more.
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Federal government has approved programs, totaling more than $60 billion, to fund broadband and connectivity expansion across the rural parts of the U.S.
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We tightly integrate our supply chain management and new product introduction activities with the activities outsourced to these third parties.
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Sustainability We operate with a “sustainable by design” approach, integrating sustainability practices and goals into our business. Product planning incorporates consideration for improvements in energy efficiency, product durability and recyclability. Our human capital management emphasizes employee engagement and talent development.
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We continue to qualify and utilize additional vendors for various portions of our supply chain from time to time. The COVID-19 pandemic-induced global demand surge resulted in supply chain challenges, including component shortages or unavailability, end-of-life notifications, extended lead times, elongated transit times, port congestion, spot market purchases, multiple price increases and surcharges. These challenges abated during 2023.
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As of December 31, 2024, we held 114 U.S. patents and 50 pending U.S. and international patent applications. U.S. patents generally have a term of twenty years from filing. The remaining terms on our individual patents vary from less than a year to seventeen years.
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The overhang from these events is a buildup of inventory in the supply chain. At our direction, our suppliers built up inventory to buffer against the long lead-times for semiconductors and other electronic components. We are using this as an opportunity to realign our strategic buffer inventory to protect against future disruptions.
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Most of the excess inventory will be worked off during the normal course of business. As time goes on, there may be components that become obsolete due to technology shifts or demand changes. This will be reflected in our inventory reserve balance as it becomes apparent during our financial reviews.
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For example, during the fourth quarter of 2023, we wrote down obsolete inventory and accrued a liability for components at suppliers primarily related to the wind down of our legacy product family that existed before our shift to an all-platform model.
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We believe that the frequency of assertions of patent infringement has and continues to increase in our industry.
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Our talent strategy focuses on our culture and core values, our talent programs and the overall well-being and safety of our talent. Culture and values. At Calix, we believe culture is how each employee treats their teammates, customers and partners every day. Each employee is entrusted with our culture to create a positive work experience for all.
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This is grounded by each employee knowing their purpose, their commitment to creativity, collaboration and communication as well as investing in the success of others. From leadership down, Calix embraces a “better, better, never best” philosophy, which we believe encourages continuous improvement and experimentation.
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This culture enables Calix to deliver on its mission to help BSPs simplify their businesses, excite their subscribers and grow value for their communities. Talent Development. We prioritize the ongoing professional growth of our team by providing on-demand access to training through top-notch industry platforms.
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Additionally, we provide educational resources and the chance to glean insights from subject matter experts spanning diverse topics. Our commitment extends globally, fostering a collaborative space for leaders to connect and evolve as Calix champions. Complementing these efforts, we offer valuable developmental opportunities such as stretch assignments and participation in our mentorship program.
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We firmly believe that sustained investment in the skills and knowledge of our team is pivotal to ensuring our enduring success. Diversity, Equity and Inclusion. At Calix, we strive to create an inclusive culture that values diversity, promotes equity and celebrates the differences among us.
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We believe a diverse workforce is at the core of our innovation and drives productivity and growth. Our diversity and inclusion strategy takes into consideration the entire employee life cycle, from recruitment, to learning and development and total rewards.
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We support a range of employee programs and initiatives designed to foster belonging, engagement, acceptance and diversity through employee-led affinity groups, leadership events, meetups and celebrations. We are proud and honored to be recognized by industry experts for our diverse culture. Community Outreach.
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Calix is committed to creating a positive social impact by leveraging our resources, expertise and network to address pressing societal challenges. We strive to give back to the community whenever possible.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn light of the complex and evolving nature of EU, EU Member State and UK privacy and security laws, there can be no assurances that we will be successful in our efforts to comply with such laws; violations of such laws could result in regulatory investigations, fines, orders to cease/change our use of technologies and/or our processing activities, enforcement notices and assessment notices (for a compulsory audit), as well as lead to civil claims including class actions, and reputational damage. 20 Table of Contents Complying with new and changing laws could cause us to incur substantial costs in order to market and sell our cloud-based solutions in the U.S. and internationally, deter customers from adopting our cloud-based solutions or require us to redesign our platform in order to meet customer requirements related to such laws.
Biggest changeIn light of the complex and evolving nature of EU, EU Member State and UK privacy and security laws, there can be no assurances that we will be successful in our efforts to comply with such laws; violations of such laws could result in regulatory investigations, fines, orders to cease/change our use of technologies and/or our processing activities, enforcement notices and assessment notices (for a compulsory audit), as well as lead to civil claims including class actions, and reputational damage.
If we are unable to deliver products timely to our 10 Table of Contents customers, we may lose customer goodwill or our customers may choose to purchase from other vendors, all of which may have a material negative impact on our revenue and operating results.
If we are unable to deliver products timely to our customers, we may lose customer goodwill or our 10 Table of Contents customers may choose to purchase from other vendors, all of which may have a material negative impact on our revenue and operating results.
Further, security incidents could subject us to obligations under privacy and data security laws and regulations around the world (including to notify governmental authorities, regulatory bodies and/or affected individuals), lead to liability given the increasing development of such strict laws and regulations, 11 Table of Contents increase the risk of litigation and governmental or regulatory investigation, require us to notify our customers or other counterparties in relation to such incidents, damage our reputation and adversely affect our business, financial condition, operating results and cash flows.
Further, security incidents could subject us to obligations under privacy and data security laws and regulations around the world (including to notify governmental authorities, regulatory bodies and/or affected individuals), lead to liability given the increasing development of such strict laws and regulations, increase the risk of litigation and governmental or regulatory 11 Table of Contents investigation, require us to notify our customers or other counterparties in relation to such incidents, damage our reputation and adversely affect our business, financial condition, operating results and cash flows.
As a result, we must continually ensure that our products interoperate properly with these existing and planned networks. To meet these requirements, we must undertake development efforts, including test protocols, that require substantial capital investment and employee resources. We may not accomplish these development goals quickly or cost-effectively, if at all.
As a result, we must continually ensure that our products interoperate properly with these existing and planned networks. To meet these requirements, we must undertake development efforts, including test protocols, which require substantial capital investment and employee resources. We may not accomplish these development goals quickly or cost-effectively, if at all.
For example, we have experienced disruptions in our supply of certain components that we source from suppliers in China and other Asian countries due to production disruptions, factory closures and longer lead times for components and from uncertainty around trade and tariff policies between the U.S. and China, which caused delays in our product supply.
For example, we have experienced disruptions in our supply of certain components that we source from suppliers in China and other Asian countries due to production disruptions, factory closures and longer lead times for components and from uncertainty around trade and tariff policies between the U.S. and China, which has caused delays in our product supply.
Business and Operational Risks We face risks associated with being materially dependent upon third-party vendors; certain factors that affect our business as a result of those dependencies have and could continue to disrupt our business and adversely impact our gross margin and results of operations.
We face risks associated with being materially dependent upon third-party vendors; certain factors that affect our business as a result of those dependencies have and could continue to disrupt our business and adversely impact our gross margin and results of operations.
For example, the U.S. government recently passed The Infrastructure Investment Jobs Act, which charged the NTIA with establishing the BEAD Program and ensuring that BEAD-funded infrastructure projects comply with the Buy America Domestic Content Procurement Preference, or Buy America Preference, of the Build America, Buy America Act, or BABA. In accordance with BABA, the U.S.
For example, the U.S. government passed The Infrastructure Investment Jobs Act, which charged the NTIA with establishing the BEAD Program and ensuring that BEAD-funded infrastructure projects comply with the Buy America Domestic Content Procurement Preference, or Buy America Preference, of the Build America, Buy America Act, or BABA. In accordance with BABA, the U.S.
If we raise debt financing, we may be subject to restrictive covenants that limit our ability to conduct our business. If we are unable to sustain positive operating income and cash flows from operations, our liquidity, results of operations and financial condition may be adversely affected.
If we raise debt financing, we may be subject to restrictive covenants that limit our ability to conduct our business. If we are unable to obtain and sustain operating income and positive cash flows from operations, our liquidity, results of operations and financial condition may be adversely affected.
Our ability to compete successfully depends on a number of factors, including our ability to successfully develop new products and solutions that anticipate BSP and market requirements and changes in technology and industry standards; BSP acceptance and adoption of our products and solutions; our ability to differentiate our products from our competitors’ offerings based on performance, features, cost-effectiveness or other factors; our product capabilities to meet customer network requirements and preferences; and our success in marketing and selling our products and platform solutions.
Our ability to compete successfully depends on a number of factors, including our ability to successfully develop new products and solutions that anticipate BEP and market requirements and changes in technology and industry standards; BEP acceptance and adoption of our products and solutions; our ability to differentiate our products from our competitors’ offerings based on performance, features, cost-effectiveness or other factors; our product capabilities to meet customer network requirements and preferences; and our success in marketing and selling our products and platform solutions.
If we are forced to reduce prices to retain existing customers or win new customers, we may be unable to sustain gross margin at desired levels or profitability.
If we are forced to reduce prices to retain existing customers or win new customers, we may be unable to sustain gross margin at desired levels or obtain or sustain profitability.
Further, BSPs may pursue capital investment in network technologies other than those offered by us or may choose not to adopt our products and platform solutions in their networks. Reductions in capital expenditures by BSPs would have a material negative impact on our revenue and results of operations and slow our rate of revenue growth.
Further, BEPs may pursue capital investment in network technologies other than those offered by us or may choose not to adopt our products and platform solutions in their networks. Reductions in capital expenditures by BEPs would have a material negative impact on our revenue and results of operations and slow our rate of revenue growth.
As a consequence, our results for a particular period may be difficult to predict, and our prior results are not necessarily indicative of results in future periods. Government-sponsored programs and U.S. federal government shutdowns could impact the timing and buying patterns of BSPs, which may cause fluctuations in our operating results.
As a consequence, our results for a particular period may be difficult to predict, and our prior results are not necessarily indicative of results in future periods. Government-sponsored programs and U.S. federal government shutdowns could impact the timing and buying patterns of BEPs, which may cause fluctuations in our operating results.
If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions continues, this could lead to substantial costs, require significant systems changes, limit the effectiveness of marketing activities conducted on behalf of our customers, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities.
If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions continues, this could lead to substantial costs, require significant systems changes, limit the effectiveness of marketing activities conducted on behalf of our customers, divert the attention of our 19 Table of Contents technology personnel, adversely affect our margins, and subject us to additional liabilities.
In addition, as part of our business operations, we collect, store, process, use and/or disclose information, including sensitive data relating to our business and personal information about individuals such as our employees and our customers’ subscribers, or collectively, Confidential Information.
In addition, as part of our business operations, we collect, store, process, use and/or disclose information, including sensitive data relating to our business, our business partners and our customers, and personal information about individuals such as our employees and our customers’ subscribers, or collectively, Confidential Information.
We are also subject to certain anti-takeover provisions under Delaware law, which prohibits a corporation, in general, from engaging in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the Board of Directors has approved the transaction.
We are also subject to certain anti-takeover provisions under Delaware law, which prohibits a corporation, in general, from engaging in a business combination with any 21 Table of Contents holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the Board of Directors has approved the transaction.
Although we have not had a greater-than-10%-of-revenue customer in the past three years, a large portion of our sales has been, and in the future may be, to a limited number of customers.
Although we have not had a greater-than-10%-of-revenue customer in the past four years, a large portion of our sales has been, and in the future may be, to a limited number of customers.
If we 23 Table of Contents are unable to produce accurate financial statements on a timely basis, investors could lose confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline and make it more difficult for us to finance our operations and growth. ITEM 1B. Unresolved Staff Comments None.
If we are unable to produce accurate financial statements on a timely basis, investors could lose confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline and make it more difficult for us to finance our operations and growth. ITEM 1B. Unresolved Staff Comments None.
If we do not successfully increase our sales through adoption of our new platform and managed service offerings, our operating results, financial condition, cash flows and long-term growth may be negatively impacted. We have platform and managed service offerings that are new and early in their life cycles and subject to uncertain market demand.
If we do not successfully increase our sales through adoption of our platform, cloud and managed service offerings, our operating results, financial condition, cash flows and long-term growth may be negatively impacted. We have platform, cloud and managed service offerings that are early in their product life cycles and subject to uncertain market demand.
Capital spending is cyclical in our industry, sporadic among individual BSPs and can change on short notice, which gives us little visibility into changes in spending behavior in any particular quarter.
Capital spending is cyclical in our industry, sporadic among individual BEPs and can change on short notice, which gives us little visibility into changes in spending behavior in any particular quarter.
A number of factors contribute to this risk, including our ability to adequately assess a customer’s creditworthiness and financial condition, changes in a customer’s financial condition and/or liquidity, our ability to timely collect our accounts receivable from customers, disagreements with customers on invoiced balances and economic downturns or other unanticipated events impacting a customer’s ability to pay.
A number of factors contribute to this risk, including our ability to adequately assess a customer’s creditworthiness and financial condition, changes 13 Table of Contents in a customer’s financial condition and/or liquidity, our ability to timely collect our accounts receivable from customers, disagreements with customers on invoiced balances and economic downturns or other unanticipated events impacting a customer’s ability to pay.
Some of our competitors have stronger relationships with some of our interoperability partners, and as a result, our ability to have successful interoperability arrangements with these companies may be harmed, which in turn may harm our ability to successfully sell and market our products. 15 Table of Contents Our estimates regarding warranty or product obligations are highly subjective.
Some of our competitors have stronger relationships with some of our interoperability partners, and as a result, our ability to have successful interoperability arrangements with these companies may be harmed, which in turn may harm our ability to successfully sell and market our products. Our estimates regarding warranty or product obligations are highly subjective.
For 21 Table of Contents example, the FCC has jurisdiction over many of our U.S. customers, and FCC regulatory policies that create disincentives for investment in access network infrastructure or impact the competitive environment in which our customers operate may harm our business. Moreover, various international regulatory bodies have jurisdiction over certain of our customers outside the U.S.
For example, the FCC has jurisdiction over many of our U.S. customers, and FCC regulatory policies that create disincentives for investment in access network infrastructure or impact the competitive environment in which our customers operate may harm our business. Moreover, various international regulatory bodies have jurisdiction over certain of our customers outside the U.S.
If we are unable to generate 22 Table of Contents sufficient cash flows or obtain other sources of liquidity, we will be forced to limit our development activities, reduce our investment in growth initiatives and institute cost-cutting measures, all of which would adversely impact our business and growth.
If we are unable to generate sufficient cash flows or obtain other sources of liquidity, we will be forced to limit our development activities, reduce our investment in growth initiatives and institute cost-cutting measures, all of which would adversely impact our business and growth.
In addition, on an ongoing basis, we expect to reposition our product and service offerings and introduce new offerings as we encounter rapidly changing BSP requirements and increasing competitive pressures.
In addition, on an ongoing basis, we expect to reposition our product and service offerings and introduce new offerings as we encounter rapidly changing BEP requirements and increasing competitive pressures.
For example, we may be forced to forego product features or platform offerings, including features and offerings we believe are critical to our strategy, accept substitute technology of lower quality or performance standards or incur higher costs, or the time-to-market of our products or product features could be delayed.
For example, we may be forced to forego product features or platform offerings, including features and offerings we believe are critical to our strategy, accept substitute technology of lower quality or performance standards or incur higher costs, or the time- 15 Table of Contents to-market of our products or product features could be delayed.
The timing of revenue related to sales of products and services that have installation requirements may be difficult to predict due to interdependencies that may be beyond our control, such as BSP testing and turn-up protocols or other vendors’ products, services or installations of equipment upon which our products and services rely.
The timing of revenue related to sales of products and services that have installation requirements may be difficult to predict due to interdependencies that may be beyond our control, such as new customer testing and turn-up protocols or other vendors’ products, services or installations of equipment upon which our products and services rely.
Additional compliance investment and potential business process changes may also be required. Similar laws have been passed in other states, and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States.
Additional compliance investment and potential business process changes may also be required. Similar laws have been passed in other states, and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the U.S.
Changes in any of these standards, laws and regulations, or judgments in favor of plaintiffs in lawsuits against BSPs based on changed standards, laws and regulations could adversely affect the development of broadband networks and services. This, in turn, could directly or indirectly adversely impact the industries in which our customers operate.
Changes in any of these standards, laws and regulations, or judgments in favor of plaintiffs in lawsuits against broadband service providers based on changed standards, laws and regulations could adversely affect the development of broadband networks and services. This, in turn, could directly or indirectly adversely impact the industries in which our customers operate.
Our growth depends upon our ability to increase sales to existing and new service providers of all types and sizes, and the execution of our strategy to increase sales to BSPs involves significant risk.
Our growth depends upon our ability to increase sales to existing and new service providers of all types and sizes, and the execution of our strategy to increase sales to BEPs involves significant risk.
The risks described below are not the only ones we face. Additional risks not currently known to us or that we currently believe are immaterial may also significantly impair our business operations. Our business could be harmed by any of these risks.
The risks described below are not the only 8 Table of Contents ones we face. Additional risks not currently known to us or that we currently believe are immaterial may also significantly impair our business operations. Our business could be harmed by any of these risks.
BSP spending is also affected by reductions in budgets, including as a result of a general economic downturn, delays in purchasing cycles, access to government funding programs or capital markets, and seasonality and delays in capital allocation decisions.
BEP spending is also affected by reductions in budgets, including as a result of a general economic downturn, delays in purchasing cycles, access to or timing of government funding programs or capital markets, and seasonality and delays in capital allocation decisions.
In some cases, we are required to obtain certifications or authorizations before our products can be introduced, marketed or sold in new markets or to new customers. For example, our ability to maintain Operations System Modification for Intelligent Network Elements certification for our products will affect our ongoing ability to continue to sell our products to large BSPs.
In some cases, we are required to obtain certifications or authorizations before our products can be introduced, marketed or sold in new markets or to new customers. For example, our ability to maintain Operations System Modification for Intelligent Network Elements certification for our products will affect our ongoing ability to continue to sell our products to large broadband service providers.
We also have limited control over disruptions that may occur at the facilities of those providers, such as supply interruptions, labor shortages, strikes, shipping backlogs at ports and similar disruptions to transportation infrastructure, design and manufacturing failures, quality control issues, systems failures or even facility closures arising from pandemics or natural disasters.
We also have limited control over disruptions that may occur at the facilities of those providers, such as supply interruptions, labor shortages, strikes, shipping backlogs at ports and similar disruptions to transportation infrastructure, design and manufacturing failures, quality control issues, systems failures or facility closures arising from pandemics, natural disasters, terrorist attacks or acts of war.
These provisions include: (1) 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; (2) no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; (3) 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; (4) 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; (5) a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; (6) 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 (7) 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.
These provisions include: (i) 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; (ii) no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; (iii) 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; (iv) 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; (v) a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; (vi) 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 (vii) 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.
Changes in the BSP market, such as financial difficulties, spending cuts or corporate consolidations that impact purchasing decisions by these customers have and may again negatively impact our revenue, and as a result, revenue from such customers may remain flat or decline.
Changes in the broadband service provider market, such as financial difficulties, spending cuts or corporate consolidations that impact purchasing decisions by these customers have and may again negatively impact our revenue, and as a result, revenue from such customers may remain flat or decline.
In particular, as a technology company, we are subject to IP claims asserting patent, 13 Table of Contents copyright, trademark and/or other infringement claims that are costly to defend and could limit our ability to use some technologies in the future.
In particular, as a technology company, we are subject to IP claims asserting patent, copyright, trademark and/or other infringement claims that are costly to defend and could limit our ability to use some technologies in the future.
Historically, our customers may spend less or have less deployments in the first quarter due to 18 Table of Contents pending annual budgets or, in certain regions, due to weather conditions that inhibit outside fiber deployment, resulting in weaker demand for our products in the first quarter.
Historically, our customers may spend less or have less deployments in the first quarter due to pending annual budgets or, in certain regions, due to weather conditions that inhibit outside fiber deployment, resulting in weaker demand for our products in the first quarter.
In addition, new security regulations, such as the EU’s Network and Information Security 2 Directive (NIS2) and the UK’s Telecommunications (Security) Act 2021 together with its implementing regulations impose further security obligations, including on electronic communications networks and services.
In addition, new security regulations, such as the EU’s Network and Information Security 2 Directive (NIS2) and its EU Member State transpositions, and the UK’s Telecommunications (Security) Act 2021 together with its implementing regulations impose further security obligations, including on electronic communications networks and services.
Our dependence solely on third-party manufacturers makes us vulnerable to possible supply and capacity constraints and reduces our control over manufacturing disruptions due to component availability, extended lead times delivery schedules, quality, manufacturing yields and increased costs. Some of these risks occur from time to time in our business, including recent increases in component costs.
Our dependence solely on third-party manufacturers makes us vulnerable to possible supply and capacity constraints and reduces our 9 Table of Contents control over manufacturing disruptions due to component availability, extended lead times delivery schedules, quality, manufacturing yields and increased costs. Some of these risks occur from time to time in our business.
For example, our managed services include managed Wi-Fi, network security, parental controls and an ecosystem of services from partners, including Arlo, Bark and Servify.
For example, our SmartLife TM managed services include managed Wi-Fi, network security, parental controls and an ecosystem of services from partners, including Arlo and Bark.
If we are unable to increase our sales to new and existing BSPs, our operating results, financial condition, cash flows and long-term growth may be negatively impacted. Our strategy includes investing in regional sales teams and select channel partners to sell to smaller regional BSPs.
If we are unable to increase our sales to new and existing BEPs, our operating results, financial condition, cash flows and long-term growth may be negatively impacted. Our strategy includes investing in regional sales teams and select channel partners to sell to smaller regional broadband service providers.
Demand for our products depends on the magnitude and timing of capital spending by BSPs as they construct, expand, upgrade and maintain their access networks as well as BSPs’ adoption of our platform and managed services.
Demand for our products depends on the magnitude and timing of capital spending by BEPs as they construct, expand, upgrade and maintain their access networks as well as BEPs’ adoption of our platform and managed services.
Long lead times for component supply, which have been exacerbated by higher demand for certain components, and demand for our products has and is expected to continue to impact our ability to accurately forecast our production requirements.
Long lead times for component supply, which may be exacerbated by higher demand for certain components, and demand for our products has and is expected to continue to impact our ability to accurately forecast our production requirements.
If these disruptions and constraints are prolonged, or if these manufacturers do not have 9 Table of Contents the ability or business continuity plans to fulfill their obligations to us, our business could be disrupted.
If these disruptions and constraints are prolonged, or if these manufacturers do not have the ability or business continuity plans to fulfill their obligations to us, our business could be disrupted.
We process Confidential Information to operate our business, including in connection with the provision of our cloud services and by relying on our and our providers’ IT Systems and data centers, including third-party data centers.
We process Confidential Information to operate our business, including in connection with the provision of our cloud services and by relying on our and our providers’ IT Systems.
We sell to BSPs, including U.S.-based IOCs, which rely significantly upon interstate and intrastate access charges and federal and state subsidies in the form of grants and other funding, such as the Federal Communications Commission’s, or FCC’s, Rural Digital Opportunity Fund, the CARES Act, Enhanced Alternative Connect America Cost Model, or the American Rescue Plan Act.
We sell to broadband service providers and BEPs, including U.S.-based independent operating companies, or IOCs, which rely significantly upon interstate and intrastate access charges and federal and state subsidies in the form of grants and other funding, such as the Federal Communications Commission’s, or FCC’s, Rural Digital Opportunity Fund, the CARES Act Enhanced Alternative Connect America Cost Model, or the American Rescue Plan Act.
Furthermore, the GDPR imposes significant penalties for noncompliance which can amount to €20 million (for the EU GDPR) or £17.5 million (for the UK GDPR), or in the case of an undertaking, up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher; thus, any non-compliance with the GDPR could result in a material adverse effect on our business, financial condition and results of operations.
Furthermore, the GDPR imposes significant penalties for noncompliance which can amount to the greater of €20 million (for the EU GDPR) or £17.5 million (for the UK GDPR) or 4% of the total worldwide annual turnover of the preceding financial year; thus, any non-compliance with the GDPR could result in a material adverse effect on our business, financial condition and results of operations.
Moreover, adoption of our cloud product offerings, such as our Revenue EDGE, is dependent upon the success of our customers in investing, marketing, selling and deploying broader services—including managed services—to their subscribers, and our ability to differentiate our products from competing or substitutive product and service offerings.
Moreover, adoption of our platform, cloud and managed service offerings is dependent upon the success of our customers in investing, marketing, selling and deploying broader services to their subscribers, and our ability to differentiate our products from competing or substitutive product and service offerings.
Our business depends upon the capital spending patterns and decisions of BSPs, and any decrease or delay in capital spending by BSPs due to the timing and availability of capital and other causes would reduce our revenue and harm our business.
Macroeconomic and Industry Risks Our business depends upon the capital spending patterns and decisions of BEPs, and any decrease or delay in capital spending by BEPs due to the timing and availability of capital and other causes would reduce our revenue and harm our business.
In 2022, we implemented a software billing application on Salesforce.com. With these implementations, we are highly dependent upon Oracle and Saleforce.com to host, manage and maintain our ERP system and supporting applications. Any disruptions to their business or processes, or delays in their ability to provide services to us, may in turn disrupt our business operations or increase costs.
With these implementations, we are highly dependent upon Oracle and Saleforce.com to host, manage and maintain our ERP system and supporting applications. Any disruptions to their business or processes, or delays in their ability to provide services to us, may in turn disrupt our business operations or increase costs.
Repurchases we consummate could increase the volatility of the price of our common stock and could have a negative impact on our available cash balance. We have a common stock repurchase program of which $113.6 million was available as of December 31, 2023.
Repurchases we consummate could increase the volatility of the price of our common stock and could have a negative impact on our available cash balance. We have a common stock repurchase program of which $102.9 million was available as of December 31, 2024.
We have experienced increases in demand from many customers, in part as a result of higher consumer demand for internet services and improved Wi-Fi; in turn, this has resulted in our shipments being delayed. If we underestimate product demand from our customers, our manufacturers may have inadequate component inventory to meet our demand.
We have experienced increases in demand from many customers, in part as a result of higher consumer demand for better internet services and improved Wi-Fi. If we underestimate product demand from our customers, our manufacturers may have inadequate component inventory to meet our demand.
We face evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including from diverse threat actors such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors such as social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error and, as a result of bugs, misconfigurations or exploited vulnerabilities in software or hardware.
We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including from diverse threat actors such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors such as social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error and, as a result of malicious code embedded in open-source software, bugs, misconfigurations or exploited vulnerabilities in software or hardware that is integrated into our (or our suppliers’ or service providers’) IT Systems, products or services.
If we cannot evolve and scale our business and operations effectively, we may not be able to execute our business strategies in a cost-effective manner and our business, financial condition, profitability and results of operations could be adversely affected.
If we cannot evolve and scale our business and operations effectively, we may not be able to execute our business strategies in a cost-effective manner and our business, financial condition and results of operations could be adversely affected. Litigation and regulatory proceedings could harm our business or negatively impact our results of operations.
The General Data Protection Regulation, or EU GDPR, adopted by the European Union, or EU, and the UK General Data Protection Regulation, or UK GDPR, adopted by the United Kingdom, or UK, (the EU GDPR and UK GDPR hereinafter referred to as the GDPR) and national data protection supplementing laws in these jurisdictions impose specific duties and requirements upon companies that are subject to their provisions and collect, process or control personal data of individuals, including a principle of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit.
The General Data Protection Regulation, or EU GDPR, adopted by the European Union, or EU, and the UK General Data Protection Regulation, or UK GDPR, adopted by the United Kingdom, or UK, (the EU GDPR and UK GDPR hereinafter referred to as the GDPR) and national data protection supplementing laws in these jurisdictions impose specific duties and requirements upon companies that are subject to their provisions and collect, process or control personal data of individuals.
If we overestimate our product demand, our third-party manufacturers may purchase excess components and build excess inventory, and we could be required to pay for these excess parts or products and their storage costs. For example, as of December 31, 2023, we had inventory deposits totaling $78.1 million.
If we overestimate our product demand, our third-party manufacturers may purchase excess components and build excess inventory, and we could be required to pay for these excess parts or products and their storage costs. For example, as of December 31, 2024, we had inventory deposits totaling $62.6 million to address excess components owned by our CMs and ODMs.
If we experience disruptions with our enterprise resource planning system, we may not be able to effectively transact business or produce financial statements, which would adversely affect our business, results of operations and cash flows. In January 2020, we migrated our Oracle enterprise resource planning, or ERP, system to Oracle’s cloud platform.
If we experience disruptions with our enterprise resource planning system, we may not be able to effectively transact business or produce financial statements, which would adversely affect our business, results of operations and cash flows. We operate our Oracle enterprise resource planning, or ERP, system on Oracle’s cloud platform and our software billing application on Salesforce.com.
Sales cycles for larger customers are relatively longer and require considerably more time and expense. We spend substantial time, effort and money in our sales efforts without any assurance that our efforts will produce sales. In addition, product purchases are frequently subject to budget constraints, multiple approvals and unplanned administrative, processing and other delays.
We spend substantial time, effort and money in our sales efforts without any assurance that our efforts will produce sales. In addition, product purchases are frequently subject to budget constraints, multiple approvals and unplanned administrative, processing and other delays.
We may need additional capital in the future to finance our business. While our working capital needs to support our business operations and growth have been funded from operating cash flows in the near term, we may need additional capital if our current plans and assumptions change.
We may need additional capital in the future to finance our business. While our working capital needs to support our business operations and growth have been funded from operating cash flows and through issuance of our common stock under our equity incentive plans, we may need additional capital if our current plans and assumptions change.
Any such interruption or delay may force us and our manufacturers to seek components or materials from alternative sources, which may not be available, or result in higher prices.
As a result, suppliers could stop selling to us and our manufacturers at commercially reasonable prices, or at all. Any such interruption or delay may force us and our manufacturers to seek components or materials from alternative sources, which may not be available, or result in higher prices.
We are subject to business and operational risks associated with our international operations, including our global supply-chain operations, and our international offices located in Nanjing, China and Bangalore, India as well as dependence upon our international sales operations. In addition, we are exposed to risk arising from dependence upon third-party development contractors in India.
Business and operational risks associated with expanding our international operations could harm our business. We are subject to business and operational risks associated with our international operations, including our global supply-chain operations, and our international offices located in Nanjing, China and Bangalore, India as well as dependence upon our international sales operations.
Our products, including our platform (cloud, software and systems) and managed services, are highly technical and, when deployed, are critical to the operation of many networks. Our products have contained and are subject to defects, bugs or security vulnerabilities, which risks may be exacerbated as we continue to expand our cloud and software portfolio and include services from third-party partners.
Our products have contained and are subject to defects, bugs or security vulnerabilities, which risks may be exacerbated as we continue to expand our cloud and software portfolio and include services from third-party partners.
Most of the new or proposed laws include restrictions on processing consumer information for targeted advertising, which could negatively affect our marketing cloud products.
Most of the new or proposed laws include restrictions on processing consumer information for targeted advertising, which could negatively affect our marketing cloud products. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.
We cannot be certain that the actions we have taken to implement internal controls over financial reporting will be sufficient. We have in the past discovered, and may in the future discover, areas of our internal financial and accounting controls and procedures that need improvement, particularly as we enhance, automate and improve functionality of our processes and internal applications.
We have in the past discovered, and may in the future discover, areas of our internal financial and accounting controls and procedures that need 22 Table of Contents improvement, particularly as we enhance, automate and improve functionality of our processes and internal applications.
We operate using a 14 Table of Contents “work-from-anywhere” model, and if we do not continue to effectively manage our distributed workforce, we could face challenges maintaining our corporate culture, which could increase attrition or limit our ability to attract personnel.
We operate using a “work-from-anywhere” model, and if we do not continue to effectively manage our distributed workforce, we could face challenges maintaining our corporate culture, which could increase attrition or limit our ability to attract personnel. None of our key personnel are bound by a written employment contract to remain with us for a specified period.
In such event, we could be required to make our proprietary software generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could adversely affect our revenue and operating expenses. 16 Table of Contents Macroeconomic and Industry Risks Adverse global economic, market and industry conditions, geopolitical issues and other conditions that impact our increasingly global operations could have a negative effect on our business, results of operations and financial condition and liquidity.
In such event, we could be required to make our proprietary software generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could adversely affect our revenue and operating expenses.
In addition, inflation in the United States has affected businesses across many industries, including ours, by increasing the costs of labor, employee healthcare, components and freight and shipping, which may further constrain our customers’ or prospective customers’ budgets.
New or increased tariffs and other changes in U.S. trade policy, including new sanctions, could trigger retaliatory actions by affected countries. In addition, inflation in the U.S. has affected businesses across many industries, including ours, by increasing the costs of labor, employee healthcare, components and freight and shipping, which may further constrain our customers’ or prospective customers’ budgets.
None of our key personnel are bound by a written employment contract to remain with us for a specified period. In addition, we do not currently maintain key person life insurance covering our key personnel. If we lose the services of any key personnel, our business, financial condition and results of operations may suffer.
In addition, we do not currently maintain key person life insurance covering our key personnel. If we lose the services of any key personnel, our business, financial condition and results of operations may suffer.
Any change in export or import regulations, duties or related legislation, shift in approach to the enforcement or scope of existing regulations, or change in the countries, persons or technologies targeted by such regulations, could negatively impact our ability to sell, profitably or at all, our products to existing or potential international customers.
Any change in export or import regulations, duties or related legislation, shift in approach to the enforcement or scope of existing regulations, or change in the countries, persons or technologies targeted by such regulations, could negatively impact our ability to sell, profitably or at all, our products to existing or potential international customers. 20 Table of Contents Regulatory and physical impacts of climate change and other natural events may affect our customers and our manufacturers, resulting in adverse effects on our operating results.
Changes to the terms or administration of these programs, including uncertainty from government and administrative change, increasing focus on domestic requirements by the U.S. that may require re-assessment of compliance, potential funding limitations that impact our ability to meet program requirements or delays due to U.S. federal government shutdowns could reduce the ability of IOCs to access capital or secure funding under these programs to purchase our products and services and thus reduce our revenue opportunities.
Any failure of such products to meet BABA domestic content requirements would result in those products being ineligible for purchase and use by certain customers under the BEAD Program, and could result in lost sales, lost business opportunity, breach of warranty claims, and damage to our reputation and customer relationships. 16 Table of Contents Changes to the terms or administration of these programs, including uncertainty from government and administrative change, increasing focus on domestic requirements by the U.S. that may require re-assessment of compliance, potential funding limitations that impact our ability to meet program requirements or delays due to U.S. federal government shutdowns could reduce the ability of IOCs to access capital or secure funding under these programs to purchase our products and services and thus reduce our revenue opportunities.
The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. 19 Table of Contents In the event that we are subject to or affected by the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
If we are subject to or affected by the CCPA, or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
Cyberattacks or other security incidents that disrupt our operations or compromise data, may expose us to liability, harm our reputation or otherwise adversely affect our business. We rely on hardware, software, technology infrastructure, data centers, digital networks and online sites and services for both internal and customer-facing operations that are critical to our business, or collectively, IT Systems.
We rely on our own and third-party hardware, software, technology infrastructure, data centers, digital networks and online sites and services for both internal and customer-facing operations that are critical to our business, or collectively, IT Systems.
Our industry is characterized by rapid technological change, changing needs of BSPs, evolving industry standards and frequent introductions of new products and platform offerings. We invest significant amounts to pursue innovative technologies that we believe will be adopted by BSPs. For example, we have invested and plan to continue to invest resources in our platform offerings.
We invest significant amounts to pursue innovative technologies that we believe will be adopted by BEPs. For example, we have invested and plan to continue to invest resources in our platform offerings.
Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast revenue, gross margin and operating expenses. Further, bank failures and other adverse developments that affect financial institutions, transactional counterparties, or other third parties, or concerns or rumors about these events, have led to market-wide liquidity problems.
Further, bank failures and other adverse developments that affect financial institutions, transactional counterparties, or other third parties, or concerns or rumors about these events, have led to market-wide liquidity problems.
Competitive pressures could result in increased pricing pressure, reduced profit margin, increased sales and marketing expenses and failure to increase, or the loss of, market share, any of which could reduce our revenue and adversely affect our financial results.
Competitive pressures could result in increased pricing pressure, reduced profit margin, increased sales and marketing expenses and failure to increase, or the loss of, market share, any of which could reduce our revenue and adversely affect our financial results. 17 Table of Contents Historically, our customer base has been concentrated, and the loss of any of our key customers may adversely impact our revenue and results of operations, and any delays in payment by a key customer could negatively impact our cash flows and working capital.
The EU GDPR and UK GDPR regulate cross-border transfers of personal data out of the European Economic Area, or the EEA, and the UK.
The EU GDPR and UK GDPR regulate cross-border transfers of personal data out of the European Economic Area, or the EEA, and the UK. There is currently legal complexity and uncertainty regarding international personal data transfers, and we expect this to continue.
The loss of a key channel partner or the failure of our partners to provide adequate services could have a negative effect on customer satisfaction and could cause harm to our business. Our selling efforts to larger BSPs require substantial investments of technical, marketing and sales resources through lengthy equipment qualification and sales cycles without any assurance of generating sales.
The loss of a key channel partner or the failure of our partners to provide adequate services could have a negative effect on customer satisfaction and could cause harm to our business.
We may be required to invest in costly upgrades to meet more stringent performance criteria and interoperability requirements, develop new customer-specific features or adapt our products to meet required standards.
Our selling efforts to larger broadband service providers require substantial investments of technical, marketing and sales resources through lengthy equipment qualification and sales cycles without any assurance of generating sales. We may be required to invest in costly upgrades to meet more stringent performance criteria and interoperability requirements, develop new customer-specific features or adapt our products to meet required standards.
As a result, our failure to maintain high quality support and services could result in the loss of customers, which would harm our business. We may have difficulty evolving and scaling our business and operations to meet customer and market demand, which could result in lower profitability or cause us to fail to execute on our business strategies.
As a result, our failure to maintain high quality support and services could result in the loss of customers, which would harm our business.
If we invest substantial resources to expand our international operations and are unable to do so successfully and in a timely manner, our financial condition and results of operations may suffer. 12 Table of Contents If we do not successfully execute our business strategy to increase our sales to new and existing BSPs, our operating results, financial condition, cash flows and long-term growth may be negatively impacted.
Business and Operational Risks If we do not successfully execute our business strategy to increase our sales to new and existing Broadband Experience Providers, or BEPs, our operating results, financial condition, cash flows and long-term growth may be negatively impacted.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeSee Item 1A “Risk Factors – Cyberattacks or other security incidents that disrupt our operations or compromise data, may expose us to liability, harm our reputation or otherwise adversely affect our business.” Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Cybersecurity Committee (the “Committee”) since its formation in 2017 oversight of business continuity, cybersecurity and other information technology risks.
Biggest changeSee Item 1A “Risk Factors – Cyberattacks or other security incidents that disrupt our operations or compromise data, may expose us to liability, harm our reputation or otherwise adversely affect our business.” 23 Table of Contents Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Cybersecurity Committee (the “Committee”) since its formation in 2017 oversight of business continuity, cybersecurity, privacy and other IT risks.
Our operational cybersecurity teams are comprised of members with decades of collective experience in IT security systems, tooling, operations, and governance, and hold various IT security industry certifications and have received specialized cybersecurity training.
Our operational cybersecurity teams are comprised of members with decades of collective experience in IT security systems, tooling, operations and governance; hold various IT security industry certifications and have received specialized cybersecurity training.
The full Board also receives briefings from management on our cyber risk management program. Board members receive presentations on cybersecurity topics from our management team, internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies.
The full Board also periodically receives briefings from management on our cyber risk management program. Board members receive presentations on cybersecurity topics from our management team, internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies.
Our cybersecurity management team includes our corporate vice president of information technology, who leads the operational teams responsible for enterprise security, data governance and enterprise incident response, and global operations, and our senior vice president of cloud and engineering operations, who leads the operational teams responsible for product and cloud security, data governance and product security incident response.
Our cybersecurity management team includes our Corporate Vice President, Information Technology, who leads the operational teams responsible for enterprise security, data governance and enterprise incident response and global operations, and our Senior Vice President of Cloud and Engineering operations, who leads the operational teams responsible for product and cloud privacy and security, data governance and product security incident response.
This does not imply that we meet any particular technical standards, specifications or requirements, only that we use the NIST CSF and the MITRE ATT&CK ® as a guide to help us identify, assess and manage cybersecurity risks relevant to our business.
This does not imply that we meet any particular technical standards, specifications or requirements, only that we use the NIST CSF and MITRE ATT&CK ® as guides to help us identify, assess and manage cybersecurity risks relevant to our business.
Key aspects of our cybersecurity risk management program include the following: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services and our broader enterprise IT environment; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls and processes; • cybersecurity awareness training of our employees, incident response personnel and senior management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for key service providers, suppliers and vendors.
Key aspects of our cybersecurity risk management program include the following: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services and our broader enterprise IT environment; • a security team principally responsible for managing; (i) our cybersecurity risk assessment processes, (ii) our security controls and (iii) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls and processes; • cybersecurity awareness training of our employees, incident response personnel and senior management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for key service providers, suppliers and vendors.
They stay informed about and monitory the prevention, detection, mitigation and remediation of key cybersecurity risks and incidents through various means, which may include briefings with internal and external security team 24 Table of Contents members, threat intelligence and other information obtained from public or private sources and alerts and reports produced by security tools deployed in the IT environment.
Collectively, they stay informed about and monitor the prevention, detection, mitigation and remediation of key cybersecurity risks and incidents through various means, which may include briefings with internal and external security team members, threat intelligence and other information obtained from public or private sources and alerts and reports produced by security tools deployed in the IT environment.
Added
Our Chief Commercial Operations Officer has played a pivotal role in enhancing the Company's cybersecurity frameworks across the enterprise through his experience in risk management and IT governance. He has overseen the implementation of data governance and data protection policies and has been instrumental in fostering a culture of cybersecurity awareness across the organization.
Added
Our Chief Product Officer has significantly contributed to the Company's cybersecurity efforts through his experience in product management and development. He has been instrumental in integrating security by design and privacy by design into our products, helping to ensure that cybersecurity is a core component of our product strategy.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. Properties We currently lease our corporate headquarters in San Jose, California. In addition to our headquarters site, we lease additional office space in China, India and the United States. We believe that our facilities are in good condition and are generally suitable to meet our needs for the foreseeable future.
Biggest changeITEM 2. Properties We currently lease our corporate headquarters in San Jose, California. In addition to our headquarters site, we lease additional office space in China, India and the U.S. We believe that our facilities are in good condition and are generally suitable to meet our needs for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any legal proceedings that, if determined adversely to us, in our opinion, are currently expected to individually or in the aggregate have a material adverse effect on our business, operating results or financial condition taken as a whole. ITEM 4. Mine Safety Disclosures Not applicable. 25 Table of Contents PART II
Biggest changeWe are not currently a party to any legal proceedings that, if determined adversely to us, in our opinion, are currently expected to individually or in the aggregate have a material adverse effect on our business, operating results or financial condition taken as a whole. ITEM 4. Mine Safety Disclosures Not applicable. 24 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur repurchase activity for the three months ended December 31, 2023 was as follows (in thousands, except per share amounts): Total Number of Shares Repurchased Average Price Paid Per Share Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1 to October 31 485 $ 35.07 485 $ 40,587 November 1 to November 30 772 34.96 772 113,603 December 1 to December 31 — — — 113,603 1,257 1,257 Performance Graph The following graph shows a comparison of the cumulative total stockholder return on our common stock with the cumulative total returns of the NYSE Composite Index, Russell 2000 Index and the S&P 500 Communications Equipment Index.
Biggest changeOur repurchase activity for the three months ended December 31, 2024 was as follows (in thousands, except per share amounts): Total Number of Shares Repurchased Average Price Paid Per Share Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1 to October 31 — $ — — $ 109,865 November 1 to November 30 228 30.52 228 102,910 December 1 to December 31 — — — 102,910 228 228 Performance Graph The following graph shows a comparison of the cumulative total stockholder return on our common stock with the cumulative total returns of the NYSE Composite Index, Russell 2000 Index and the S&P 500 Communications Equipment Index.
Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns. 26 Table of Contents This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Calix, Inc. under the Securities Act of 1933, as amended.
Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns. 25 Table of Contents This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Calix, Inc. under the Securities Act of 1933, as amended.
The graph tracks the performance of a $100 investment in our common stock and in each of the indexes during the last five fiscal years ended December 31, 2023. Data for the Russell 2000 Index and S&P 500 Communications Equipment assume reinvestment of dividends.
The graph tracks the performance of a $100 investment in our common stock and in each of the indexes during the last five fiscal years ended December 31, 2024. Data for the Russell 2000 Index and S&P 500 Communications Equipment assume reinvestment of dividends.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item is incorporated by reference to our 2023 Annual Report to Stockholders, which includes our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item is incorporated by reference to our 2024 Annual Report to Stockholders, which includes our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders.
Number of Common Stockholders As of February 9, 2024, the approximate number of holders of our common stock was 1,151 (not including beneficial owners of stock held in street name).
Number of Common Stockholders As of February 10, 2025, the approximate number of holders of our common stock was 1,160 (not including beneficial owners of stock held in street name).
Removed
In November 2023, our Board of Directors authorized a $100 million increase to this program.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8. Financial Statements and Supplementary Data 35 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 60 Item 9A. Controls and Procedures 60
Biggest changeItem 6. [Reserved] 26 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8. Financial Statements and Supplementary Data 35 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 61 Item 9A. Controls and Procedures 61 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

44 edited+20 added−12 removed28 unchanged
Biggest changeInterest and Other Income, Net The following table sets forth our interest and other income, net (dollars in thousands): Years Ended December 31, 2023 vs 2022 Change 2023 2022 $ % Interest and other income, net $ 9,172 $ 1,432 $ 7,740 541 % Interest and other income, net increased by $7.7 million in 2023 compared with 2022 mainly due to income from marketable securities corresponding to an increase in interest rates.
Biggest changeWe expect our general and administrative investments to be fairly constant in absolute dollars in the near term and potentially decline as a percentage of revenue over time in relation to anticipated longer-term increased revenue. 30 Table of Contents Interest Income and Other Expense, Net The following table sets forth our interest income and other expense, net (dollars in thousands): Years Ended December 31, 2024 vs 2023 Change 2024 2023 $ % Interest income and other expense, net $ 11,388 $ 9,172 $ 2,216 24 % Interest income and other expense, net increased by $2.2 million in 2024 compared with 2023 mainly due to a higher rate of interest earned on our cash, cash equivalents and marketable securities as well as a larger cash and marketable securities balance.
In addition, we periodically elect to ship by air versus by ocean in order to meet delivery commitments to our customers, which is more costly. Cost of revenue also includes fixed expenses related to our internal operations, which could increase our cost of revenue as a percentage of revenue if our revenue declines.
In addition, we periodically ship by air versus by ocean in order to meet delivery commitments to our customers, which is more costly. Cost of revenue also includes fixed expenses related to our internal operations, which could increase our cost of revenue as a percentage of revenue if our revenue declines.
Our income taxes may be subject to fluctuation during the year and in future years as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as actual results differing from our estimates of pre-tax earnings in the various jurisdictions in which we operate, which could impact the recognition of our deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where we conduct business. 2022 Compared to 2021 For a comparison of our results of operations for the years ended December 31, 2022 and 2021, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 21, 2023.
Our income taxes may be subject to fluctuation during the year and in future years as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as actual results differing from our estimates of pre-tax earnings in the various jurisdictions in which we operate, which could impact the recognition of our deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where we conduct business. 2023 Compared to 2022 For a comparison of our results of operations for the years ended December 31, 2023 and 2022, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 23, 2024.
Revenue fluctuations result from many factors, including, but not limited to: increases or decreases in customer orders for our products and services, market, financial or other factors that may delay or materially impact customer purchasing decisions, non-availability of products due to supply chain challenges, including component and labor shortages and increasing lead times as well as disruptions as a result of pandemics or natural disasters, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers.
Revenue fluctuations result from many factors, including, but not limited to: increases or decreases in customer orders for our products and services, market, financial or other factors such as government stimulus that may delay or materially impact customer purchasing decisions, non-availability of products due to supply chain challenges, including component and labor shortages and increasing lead times as well as disruptions as a result of pandemics or natural disasters, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers.
Revenue from sales of access and premises systems is recognized when control is transferred to the customer, which is generally when the products are shipped. Revenue from software platform licenses, which provides the customer with a right to use the software as it exists, is generally recognized upfront when product is made available to the customer.
Revenue from sales of access and premises systems is recognized when control is transferred to the customer, which is generally when the products are shipped. Revenue from software platform licenses, which provides the customer with a right to use the software as it exists, is generally recognized upfront when the license is made available to the customer.
Contractual Obligations and Commitments Our principal commitments as of December 31, 2023 consisted of our contractual obligations under non-cancelable outstanding purchase obligations and operating lease obligations for office space.
Contractual Obligations and Commitments Our principal commitments as of December 31, 2024 consisted of our contractual obligations under non-cancelable outstanding purchase obligations and operating lease obligations for office space.
Our customers range from smaller, regional service providers to some of the world’s largest service 27 Table of Contents providers. Customers are defined into small (less than 250,000 subscribers), medium (250,000 to 2.5 million subscribers) or large (greater than 2.5 million subscribers).
Our customers range from smaller, regional service providers to some of the world’s largest service providers. Customers are defined into small (less than 250,000 subscribers), medium (250,000 to 2.5 million subscribers) or large (greater than 2.5 million subscribers).
We base our estimates, assumptions and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. To the extent there are material differences between these estimates and actual results, our financial statements may be affected. We evaluate our estimates, assumptions and judgments on an ongoing basis.
We base our estimates, assumptions and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. To the extent there are material differences between these estimates and 27 Table of Contents actual results, our financial statements may be affected. We evaluate our estimates, assumptions and judgments on an ongoing basis.
Our revenue and potential revenue growth will depend on our ability to develop, market and sell our platform and managed services to strategically aligned customers of all types such as WISPs, fiber overbuilders, cable MSOs, municipalities and electric cooperatives in the United States and internationally.
Our revenue and potential revenue growth will depend on our ability to develop, market and sell our platform and managed services to strategically aligned customers of all types such as WISPs, fiber overbuilders, cable MSOs, municipalities and electric cooperatives in the U.S. and internationally.
Furthermore, we maintain a common stock repurchase program of which $113.6 million was available as of December 31, 2023. Our stock repurchase program does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time.
Furthermore, we maintain a common stock repurchase program of which $102.9 million was available as of December 31, 2024. Our stock repurchase program does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time.
As of December 31, 2023, our liability for taxes that would be payable because of repatriation of undistributed earnings of our foreign subsidiaries to the United States was not significant and limited to withholding taxes considering our existing net operating loss carryovers.
As of December 31, 2024, our liability for taxes that would be payable because of repatriation of undistributed earnings of our foreign subsidiaries to the U.S. was not significant and limited to withholding taxes considering our existing net operating loss carryovers.
The decrease in gross margin of 30 basis points, compared to the corresponding period in 2022, was mainly due to charges of $28.7 million recorded in the fourth quarter of 2023 as we wrote down obsolete inventory and accrued a liability for components at suppliers primarily associated with our legacy product family that existed before our shift to an all-platform model.
The increase in gross margin of 470 basis points, compared to the corresponding period in 2023, was primarily related to a charge of $28.7 million that we recorded in the fourth quarter of 2023 as we wrote down obsolete inventory and accrued a liability for components at suppliers primarily associated with our legacy product family that existed before our shift to an all-platform model.
As of December 31, 2023, we had cash, cash equivalents and marketable securities of $220.3 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S. government securities and commercial paper. This includes $7.7 million of cash primarily held by our foreign subsidiaries.
As of December 31, 2024, we had cash, cash equivalents and marketable securities of $297.1 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S. government securities and commercial paper. This includes $9.1 million of cash primarily held by our foreign subsidiaries.
This enables BSPs to grow their brand through increased subscriber acquisition, loyalty and revenue and to reduce their operating costs, creating value for their businesses and the communities they serve. We market our platform and managed services to communication service providers globally through our direct sales force as well as select resellers.
This enables BEPs to grow their businesses through increased 26 Table of Contents subscriber acquisition, loyalty and revenue and to reduce their operating costs, while creating value for their members, investors and the communities they serve. We market our platform and managed services to communication service providers globally through our direct sales force as well as select resellers.
See Note 5 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our outstanding purchase commitments related to our third-party manufacturers. (2) Future minimum operating lease obligations in the table above primarily include payments for our office locations, which expire at various dates through 2029.
See Note 5 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our outstanding purchase commitments related to our third-party manufacturers. 32 Table of Contents (2) Future minimum operating lease obligations in the table above primarily include payments for our office locations, which expire at various dates through 2033, including our new San Jose headquarters lease that will commence in August 2025.
Our contracts may include multiple performance obligations. For such arrangements, we allocate the contract’s transaction price to each performance obligation using the relative stand-alone selling price of each distinct good or service in the contract. We generally determine stand-alone selling prices based on the prices charged to customers or our best estimate of stand-alone selling price.
Our contracts generally include multiple performance obligations. For such arrangements, we allocate the contract’s transaction price to each performance obligation using the relative stand-alone selling price of each distinct good or service in the contract.
Our effective tax rate was lower than the federal statutory rate of 21% primarily due to research and development tax credits and provision to return adjustments, partially offset by the impact of stock-based compensation and uncertain tax positions. During 2022, our current tax expense was $11.1 million, and our deferred tax expense was $1.9 million.
Our effective tax rate was lower than the federal statutory rate of 21% primarily due to research and development tax credits and provision to return adjustments, partially offset by the impact of stock-based compensation and uncertain tax positions.
Financing Activities In 2023, net cash used in financing activities of $65.9 million consisted of purchases of our common stock of $86.4 million and payments related to a financing arrangement of $11.7 million, partially offset by proceeds from the issuance of common stock related to our equity plans of $32.1 million. 32 Table of Contents 2022 Compared to 2021 For a discussion of our liquidity and capital resources and our cash flow activities for the years ended December 31, 2022 and 2021, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 21, 2023.
Financing Activities In 2024, net cash provided by financing activities of $20.9 million consisted of the issuance of common stock related to our equity plans of $31.6 million partially offset by purchases of our common stock of $10.7 million. 2023 Compared to 2022 For a discussion of our liquidity and capital resources and our cash flow activities for the years ended December 31, 2023 and 2022, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 23, 2024.
Liquidity and Capital Resources Historically, we have funded our operations and investing activities primarily through cash flow generated from operations, sales of our common stock and various borrowing arrangements.
Liquidity and Capital Resources We fund our operations and investing activities primarily through cash flow generated from operations and sales of our common stock.
Non-cash charges consisted of stock-based compensation of $62.8 million, depreciation and amortization of $16.6 million and deferred income taxes of $0.7 million partially offset by net accretion of available-for-sale securities of $4.2 million.
Non-cash charges consisted of stock-based compensation of $70.8 million and depreciation and amortization of $19.6 million partially offset by deferred income taxes of $10.0 million and net accretion of available-for-sale securities of $5.3 million.
Income Taxes The following table sets forth our income taxes (dollars in thousands): Years Ended December 31, 2023 vs 2022 Change 2023 2022 $ % Income taxes $ 5,432 $ 13,032 $ (7,600) (58) % Effective tax rate 16 % 24 % During 2023, our current tax expense was $6.1 million, and our deferred tax expense was $(0.7) million.
Income Taxes The following table sets forth our income taxes (dollars in thousands): Years Ended December 31, 2024 vs 2023 Change 2024 2023 $ % Income taxes $ (1,899) $ 5,432 $ (7,331) (135) % Effective tax rate 6 % 16 % During 2024, our current tax expense was $8.1 million, and our deferred tax benefit was $10.0 million.
The increase in net cash provided by operating activities during 2023 as compared to 2022 was due primarily to an increase in our net operating results after adjustment of non-cash charges of $2.9 million and an increase in our net cash inflow resulting from changes in operating assets and liabilities of $26.1 million.
The increase in net cash provided by operating activities during 2024 as compared to 2023 was due primarily to an increase in our net cash inflow resulting from changes in operating assets and liabilities of $70.7 million partially offset by a decrease in our net operating results after adjustment of non-cash charges of $58.6 million.
Our primary focus has been, and in the near term will continue to be, the United States and Canada given our large, direct sales and marketing presence and the amount of government stimulus being invested into underserved and not-served areas of these countries. In 2022, we introduced our platform to the United Kingdom.
Revenue generated in the U.S. represented 92% of revenue in 2024 and 91% in 2023. Our primary focus has been, and in the near term will continue to be, the U.S. and Canada given our large, direct sales and marketing presence and the amount of government stimulus being invested into underserved and not-served areas of these countries.
The following table presents the cash inflows and outflows by activity during 2023 and 2022 (in thousands): Years Ended December 31, 2023 2022 Net cash provided by operating activities $ 56,251 $ 27,183 Net cash used in investing activities (6,245) (24,082) Net cash provided by financing activities (65,926) 25,063 Operating Activities Our operating activities provided cash of $56.3 million in 2023 and $27.2 million in 2022.
The following table presents the cash inflows and outflows by activity during 2024 and 2023 (in thousands): Years Ended December 31, 2024 2023 Net cash provided by operating activities $ 68,400 $ 56,251 Net cash used in investing activities (109,530) (6,245) Net cash provided by (used in) financing activities 20,897 (65,926) 31 Table of Contents Operating Activities Our operating activities provided cash of $68.4 million in 2024 and $56.3 million in 2023.
We believe the following critical accounting policies affect our significant judgments and estimates used in the preparation of our financial statements. 28 Table of Contents Revenue Recognition Revenue is recognized when a performance obligation is satisfied, which occurs when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Revenue Recognition Revenue is recognized when a performance obligation is satisfied, which occurs when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The following table sets forth our research and development expenses (dollars in thousands): Years Ended December 31, 2023 vs 2022 Change 2023 2022 $ % Research and development $ 177,772 $ 131,994 $ 45,778 35 % Percent of revenue 17 % 15 % Percent of gross profit 34 % 30 % The increase in research and development expenses of $45.8 million during 2023 compared with 2022 was mainly due to increases in personnel expenses of $31.7 million driven by increased headcount, stock-based compensation of $4.8 million, depreciation and amortization of $3.2 million, prototypes and test equipment expenses of $2.9 million and outside services of $1.2 million.
The following table sets forth our research and development expenses (dollars in thousands): Years Ended December 31, 2024 vs 2023 Change 2024 2023 $ % Research and development $ 179,870 $ 177,772 $ 2,098 1 % Percent of revenue 22 % 17 % Percent of gross profit 40 % 34 % The increase in research and development expenses of $2.1 million during 2024 compared with 2023 was mainly due to increases in depreciation and amortization of $3.0 million, stock-based compensation of $2.1 million, software subscriptions of $1.9 million and personnel expenses of $1.2 million.
The following table sets forth our sales and marketing expenses (dollars in thousands): Years Ended December 31, 2023 vs 2022 Change 2023 2022 $ % Sales and marketing $ 214,564 $ 174,549 $ 40,015 23 % Percent of revenue 21 % 20 % Sales and marketing expenses increased by $40.0 million during 2023 compared to 2022 primarily due to increases in personnel expenses of $29.4 million mainly related to increased sales headcount and higher sales incentive compensation corresponding to our increased revenue, stock-based compensation of $5.0 million and travel expenses of $2.2 million.
The following table sets forth our sales and marketing expenses (dollars in thousands): Years Ended December 31, 2024 vs 2023 Change 2024 2023 $ % Sales and marketing $ 217,879 $ 214,564 $ 3,315 2 % Percent of revenue 26 % 21 % Sales and marketing expenses increased by $3.3 million during 2024 compared to 2023 primarily due to increases in stock-based compensation of $3.9 million, marketing expenses of $0.8 million and travel expenses of $0.6 million.
Gross Profit and Gross Margin The following table sets forth our gross profit and gross margin (dollars in thousands): Years Ended December 31, 2023 vs 2022 Change 2023 2022 $ % Gross profit $ 518,316 $ 435,428 $ 82,888 19 % Gross margin 49.9 % 50.2 % Gross profit increased by $82.9 million to $518.3 million during 2023 from $435.4 million during 2022.
Gross Profit and Gross Margin The following table sets forth our gross profit and gross margin (dollars in thousands): Years Ended December 31, 2024 vs 2023 Change 2024 2023 $ % Gross profit $ 453,594 $ 518,316 $ (64,722) (12) % Gross margin 54.6 % 49.9 % Gross profit decreased by $64.7 million to $453.6 million during 2024 from $518.3 million during 2023.
We expect our investments in research and development to increase in absolute dollars as we seek to expand the functionality and capabilities of our platforms. General and Administrative Expenses General and administrative expenses consist primarily of personnel costs related to our executive, finance, human resources, information technology and legal organizations, outside consulting services, insurance, facilities and fees for professional services.
General and Administrative Expenses General and administrative expenses consist primarily of personnel costs related to our executive, finance, human resources, information technology and legal organizations, outside consulting services, insurance, facilities and fees for professional services. Professional services consist of outside audit, legal, accounting and tax services.
We expect our investments in sales and marketing will increase in absolute dollars as we extend our market reach and grow our business in support of our key strategic initiatives. 30 Table of Contents Research and Development Expenses Research and development expenses include personnel costs, outside contractor and consulting services, depreciation on lab equipment, costs of prototypes and overhead allocations.
We expect our investments in sales and marketing will be relatively flat in absolute dollars in the near term. Research and Development Expenses Research and development expenses include personnel costs, outside contractor and consulting services, depreciation on lab equipment, costs of prototypes and overhead allocations.
In addition, from time to time, we procure component inventory primarily as a result of manufacturing discontinuation of critical components by suppliers. Furthermore, post the global pandemic-induced supply chain challenges, we have purchased, and may continue to purchase, excess components from our suppliers and consigned back to our suppliers to be consumed on future finish good builds.
Furthermore, as a result of the global pandemic-induced supply chain challenges and supply assurance plans, we have purchased, and may continue to purchase, excess components from our suppliers and consign components back to our suppliers to be consumed on future finished good builds. We regularly monitor inventory on-hand and record write-downs for excess and obsolete inventory.
The following table sets forth our general and administrative expenses (dollars in thousands): Years Ended December 31, 2023 vs 2022 Change 2023 2022 $ % General and administrative $ 100,395 $ 76,275 $ 24,120 32 % Percent of revenue 10 % 9 % The increase in general and administrative expenses of $24.1 million in 2023 compared to 2022 was mainly due to increases in personnel expenses of $10.8 million driven by increased headcount, stock-based compensation of $8.0 million, litigation settlement of $3.2 million and outside services of $1.0 million.
The following table sets forth our general and administrative expenses (dollars in thousands): Years Ended December 31, 2024 vs 2023 Change 2024 2023 $ % General and administrative $ 98,879 $ 100,395 $ (1,516) (2) % Percent of revenue 12 % 10 % The decrease in general and administrative expenses of $1.5 million in 2024 compared to 2023 was mainly due to a decrease in legal costs due to a settlement in 2023 of $3.3 million and lower outside services expenses of $2.9 million.
Investing Activities In 2023, net cash used in investing activities of $6.2 million consisted of capital expenditures of $17.9 million, primarily consisting of purchases of test and computer equipment and software, partially offset by net maturities of marketable securities of $11.6 million.
Investing Activities In 2024, net cash used in investing activities of $109.5 million consisted of net purchases of marketable securities of $91.4 million and capital expenditures of $18.1 million, primarily consisting of purchases of test and computer equipment.
We regularly monitor inventory on-hand and record write-downs for excess and obsolete inventory based on our estimate of demand for our products, potential obsolescence of technology, product life cycles and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds our estimated selling price.
These write-downs and accruals are based on our assumptions of demand for our products and requires significant judgement of relevant factors including a comparison of the quantity and cost of inventory on hand to our estimated forecast of customer demand, current levels of orders and backlog, market conditions, potential obsolescence of technology, product life cycles and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds our estimated selling price.
Our effective tax rate was higher than the federal statutory rate of 21% due to state taxes, the U.S. tax impact of foreign operations, and the impact of stock-based compensation, partially offset by research and development tax credits and stock option windfall deductions. 31 Table of Contents We continue to maintain a valuation allowance of $29.9 million on certain U.S. federal and California state deferred tax assets that we believe are not more likely than not to be realized in future periods.
We continue to maintain a valuation allowance of $30.6 million on certain U.S. federal and California state deferred tax assets that we believe are not more likely than not to be realized in future periods.
Overview We develop, market and sell our platform (cloud, software and systems) and managed services that enable service providers of all types and sizes to innovate and transform their businesses.
Overview We develop, market and sell our appliance-based platform, cloud and managed services that enable service providers of all types and sizes to innovate and transform their businesses. For our customers to successfully transform their businesses into the innovative BEPs of the future, they require actionable data for critical business functions such as network operations, customer support and marketing.
The following table summarizes our contractual obligations as of December 31, 2023 (in thousands): Payments Due by Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Non-cancelable purchase commitments (1) $ 219,989 $ 140,521 $ 69,145 $ 6,649 $ 3,674 Operating lease obligations (2) 12,454 4,676 5,978 1,576 224 $ 232,443 $ 145,197 $ 75,123 $ 8,225 $ 3,898 (1) Represents outstanding purchase commitments to be delivered by our third-party manufacturers or other vendors.
The following table summarizes our contractual obligations as of December 31, 2024 (in thousands): Payments Due by Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Non-cancelable purchase commitments (1) $ 248,739 $ 129,607 $ 81,709 $ 35,951 $ 1,472 Operating lease obligations (2) 17,374 4,528 5,152 3,544 4,150 $ 266,113 $ 134,135 $ 86,861 $ 39,495 $ 5,622 (1) Represents outstanding purchase commitments to be delivered by our third-party manufacturers or other vendors.
These factors are impacted by market and economic conditions, competitive dynamics, technology changes and new product introductions and require estimates that may include elements that are uncertain. Actual demand may differ from forecasted demand and may have a material effect on gross profit.
Factors that could influence management’s assumptions and judgements include changes in economic conditions, competitive dynamics, losing a key customer, changes in our customers’ capital expenditures, government investment programs, technology changes, new product introductions and supply-chain lead times. Actual demand may differ from forecasted demand and may have a material effect on gross profit.
Our platform, which includes Calix Cloud, Revenue EDGE and Intelligent Access EDGE, gathers, analyzes and applies machine learning to deliver real-time insights seamlessly to each key business function. Our customers utilize these insights to simplify network operations, marketing and customer support and deliver a growing portfolio of SmartLife managed services and experiences that excite their subscribers.
Our customers utilize these insights to simplify network operations, marketing and customer support and innovate for their customers, business and municipal subscribers by delivering a growing portfolio of SmartLife™ managed services and experiences.
Results of Operations for Years Ended December 31, 2023 and 2022 Revenue The following table sets forth our revenue (dollars in thousands): Years Ended December 31, 2023 vs 2022 Change 2023 2022 $ % Revenue $ 1,039,593 $ 867,827 $ 171,766 20 % 29 Table of Contents Our revenue increased by $171.8 million, or 20%, during 2023 compared with 2022.
Results of Operations for Years Ended December 31, 2024 and 2023 Revenue The following table sets forth our revenue by customer size (dollars in thousands): Years Ended December 31, 2024 vs 2023 Change 2024 2023 $ % Large $ 50,776 $ 82,627 $ (31,851) (39) % Medium 123,977 166,820 (42,843) (26) % Small 656,765 790,146 (133,381) (17) % $ 831,518 $ 1,039,593 $ (208,075) (20) % Our revenue decreased by $208.1 million, or 20%, during 2024 compared with 2023.
These changes were partially offset by an increase in accrued liabilities of $32.7 million, mainly due to an increase in the reserves for inventory at suppliers, a decrease in inventory of $16.2 million and an increase in deferred revenue of $2.9 million.
These changes were partially offset by a decrease in accrued liabilities of $36.0 million, a decrease in accounts payable of $15.1 million due to the lower inventory purchases and a decrease in deferred revenue of $13.9 million due to a change in billing practices towards monthly versus annual.
In 2023, cash outflows from changes in operating assets and liabilities primarily consisted of an increase in prepaid expenses and other assets of $60.8 million, mainly due to advanced payments to supply chain partners, an increase in prepaid taxes and reclassification of contract assets from deferred revenue; an increase in accounts receivable of $32.2 million due to the timing of shipments; and a decrease in accounts payable of $6.4 million due to the timing of inventory payments.
In 2024, cash inflows from changes in operating assets and liabilities primarily consisted of decreases in accounts receivable of $46.7 million and inventory of $30.3 million, both due to lower revenue, and a decrease in prepaid expenses and other assets of $11.2 million.
Operating Expenses Sales and Marketing Expenses Sales and marketing expenses consist of personnel costs, employee sales commissions, marketing programs and events, software tools and travel-related expenses.
Additionally, we continued to experience growth in our licenses, cloud and managed services, which became a greater percentage of our total revenue since the overall decline in revenue was related to our appliance revenue. 29 Table of Contents Operating Expenses Sales and Marketing Expenses Sales and marketing expenses consist of personnel costs, employee sales commissions, marketing programs and events, software tools and travel-related expenses.
If inventory is written down, a new cost basis is established that cannot be increased in future periods. The sale of previously reserved inventory has not had a material impact on our gross margin. Recent Accounting Pronouncements Not Yet Adopted There have been no additional accounting pronouncements or changes in accounting pronouncements that are significant or potentially significant to us.
If inventory is written down, a new cost basis is established that cannot be increased in future periods.
Removed
For our customers to successfully transform their businesses into the innovative BSPs of the future, they require actionable data for critical business functions such as network operations, customer support and marketing. However, this data is often trapped in disparate systems or departmental silos.
Added
However, this data is often trapped in disparate systems or departmental silos. Our platform, which includes Calix Cloud, Revenue EDGE and Intelligent Access EDGE, gathers, analyzes and applies machine learning to deliver real-time insights seamlessly to each key business function.
Removed
Our estimate of stand-alone selling price is established considering multiple factors including, but not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives, characteristics of targeted customers and pricing practices. The determination of estimated stand-alone selling price is made through consultation with and formal approval by management, taking into consideration the go-to-market strategy.
Added
We believe the following critical accounting policies affect our significant judgments and estimates used in the preparation of our financial statements.
Removed
We also evaluate our supplier purchase commitments, which remain elevated due to extended lead-times created by pandemic-induced supply-chain challenges, and record a liability for excess and obsolete components based on our estimated demand of our products, potential obsolescence of technology and product life cycles.
Added
Observable prices of a product or service when we sell them separately based on stratification by classes of customers and products are the best estimate of stand-alone selling prices. However, when stand-alone selling prices are not directly observable, they are estimated, and judgment is required in their determination.
Removed
For example, during the fourth quarter of 2023, we wrote down excess and obsolete inventory and accrued a liability for components at suppliers primarily related to the wind down of our legacy product family that existed before our shift to an all-platform model.
Added
In these instances, we determine stand-alone selling prices using all other available information, which may include pricing practices relative to geographies, market conditions, competitive landscape, characteristics of targeted customers for hardware products, internal costs and gross margin objectives for services and internal costs and value assessments for subscriptions.
Removed
The increase in revenue was primarily due to strength in shipments to one of our large customers, continued shipments throughout 2023 from a new medium-sized BSP customer that we added in the third quarter of 2022 and higher revenue from our growing base of small and medium BSP customers as they expand with our platform and managed services to simplify their operations, excite their subscribers with better experiences and grow their value to the communities they serve.
Added
In addition, from time to time, we procure component inventory primarily as a result of manufacturing discontinuation of critical components by suppliers or a change in suppliers.
Removed
Our revenue is principally derived in the United States. Revenue generated in the United States represented 91% of revenue in 2023 and 91% in 2022.
Added
We also evaluate our supplier purchase commitments and record a liability for excess and obsolete components consistent with the valuation of our excess and obsolete inventory and future production requirements.
Removed
Over time, we expect to move to additional high average-revenue-per-user markets with our platform. No customer accounted for more than 10% of our revenue for 2023, 2022 or 2021.
Added
Recent Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes, which prescribes standardized categories and disaggregation of information in the reconciliation of provision for income taxes, requires disclosure of disaggregated income taxes paid and modifies other income tax-related disclosure requirements.
Removed
Gross margin decreased to 49.9% during 2023 from 50.2% during 2022.
Added
The updated standard is effective for us beginning 28 Table of Contents with its 2025 annual reporting period. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.
Removed
During 2023, customers moved to our platform model at a faster rate than originally anticipated, leaving us with excess finished goods and related components at suppliers.
Added
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires additional disclosure of certain costs and expenses within the notes to the financial statements. The updated standard is effective for our annual periods beginning in 2027 and interim periods beginning in the first quarter of 2028. Early adoption is permitted.
Removed
This decrease was partially offset by increased contributions from our platform and managed services, a shift in product mix and the sell through of a lower amount of excessively priced components acquired in the secondary market during the supply-chain disruption.
Added
We are currently evaluating the impact that the updated standard will have on our financial statement disclosures. There have been no other accounting pronouncements or changes in accounting pronouncements that are significant or potentially significant to us.
Removed
Professional services consist of outside audit, legal, accounting and tax services.
Added
The decrease in revenue in the large- and medium-customer segment was primarily due to a small set of significant customers that slowed purchases while we believe they reevaluated their investment priorities.
Removed
We expect our general and administrative investments to increase in absolute dollars as we support the business.
Added
The decrease in revenue in the small-customer segment was primarily due to what we believe were delayed purchasing decisions of our appliances as our customers evaluated and prepared for various government stimulus programs and customers adjusting their purchases due to our shortened lead times. Our revenue is principally derived in the U.S.
Added
The decrease in international revenue for 2024, as compared to 2023, was mainly due to lower shipments to Europe and to a lesser extent the Americas outside the U.S. No customer accounted for more than 10% of our revenue for 2024, 2023 or 2022.
Added
This decrease was mainly due to the corresponding decrease in revenue. Gross margin increased to 54.6% during 2024 from 49.9% during 2023.
Added
Furthermore, there was a mix shift of hardware sales towards small customers, which generally have higher gross margins, from large- and medium-sized customers.
Added
These increases were partially offset by decreases of outside services of $1.2 million and personnel expenses of $0.7 million. During 2024, sales and marketing expenses as a percentage of revenue increased to 26% from 21% due to lower revenue compared to 2023.
Added
These increases were partially offset by decreases in prototypes and test equipment expenses of $3.7 million and outside services of $3.5 million as we transition projects from consultants to our own employees. During 2024, research and development expenses as a percentage of revenue increased to 22% from 17% due to lower revenue compared to 2023.
Added
We expect our investments in research and development to remain relatively flat in absolute dollars in the short term as we seek to expand the functionality and capabilities of our platform, cloud and managed services.
Added
These decreases were partially offset by increases in stock-based compensation of $2.0 million and personnel expenses of $1.6 million. During 2024, general and administrative expenses as a percentage of revenue increased to 12% from 10% due to lower revenue compared to 2023.
Added
Our effective tax rate was lower than the federal statutory rate of 21% primarily due to the impact of stock-based compensation, foreign operations, valuation allowance and uncertain tax positions, offset by research and development tax credits and provision to return adjustments. During 2023, our current tax expense was $6.1 million, and our deferred tax benefit was $0.7 million.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−0 removed8 unchanged
Biggest changeThe percentages of our operating expenses denominated in the following currencies for the indicated fiscal years were as follows: Years Ended December 31, 2023 2022 2021 USD 90 % 91 % 92 % RMB 6 6 6 INR 3 1 — GBP 1 2 2 100 % 100 % 100 % If USD had appreciated or depreciated by 10%, relative to RMB, GBP and INR, our operating expenses for 2023 would have decreased or increased by approximately $4.9 million, or approximately 1%.
Biggest changeThe percentages of our operating expenses denominated in the following currencies for the indicated fiscal years were as follows: Years Ended December 31, 2024 2023 2022 USD 84 % 86 % 88 % RMB 6 6 6 INR 4 3 1 CAD 4 4 3 GBP 2 1 2 100 % 100 % 100 % If USD had appreciated or depreciated by 10%, relative to RMB, INR, CAD and GBP our operating expenses for 2024 would have decreased or increased by approximately $7.8 million, or approximately 2%.
We use foreign currency forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain assets denominated in foreign currencies. These foreign exchange forward contracts typically have maturities of approximately one to two months. As of December 31, 2023, we had no forward contracts outstanding.
We use foreign currency forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain assets denominated in foreign currencies. These foreign exchange forward contracts typically have maturities of approximately one to two months. As of December 31, 2024, we had no forward contracts outstanding.
Additionally, if the USD 33 Table of Contents strengthens relative to other currencies, such strengthening could have an indirect effect on our sales to the extent it raises the cost of our products to non-U.S. customers and thereby reduces demand. A weaker USD could have the opposite effect.
Additionally, if the USD strengthens relative to other currencies, such strengthening could have an indirect effect on our sales to the extent it raises the cost of our products to non-U.S. customers and thereby reduces demand. A weaker USD could have the opposite effect.
Foreign exchange rate fluctuations may also adversely impact our financial position as the assets and liabilities of our foreign operations are translated into USD in preparing our Consolidated Balance Sheets. The effect of foreign exchange rate fluctuations on our consolidated financial position for the year ended December 31, 2023 was a net translation gain of $0.1 million.
Foreign exchange rate fluctuations may also adversely impact our financial position as the assets and liabilities of our foreign operations are translated into USD in preparing our Consolidated Balance Sheets. The effect of foreign exchange rate fluctuations on our consolidated financial position for the year ended December 31, 2024 was a net translation loss of $0.1 million.
Transaction gains and losses on these foreign currency denominated assets and liabilities are recognized each period within “Other expense, net” in our Consolidated Statements of Comprehensive Income. During the year ended December 31, 2023, the net loss we recognized related to these foreign exchange assets and liabilities was approximately $0.2 million. 34 Table of Contents
Transaction gains and losses on these foreign currency denominated assets and liabilities are recognized each period within “Other expense, net” in our Consolidated Statements of Comprehensive Income (Loss). During the year ended December 31, 2024, the net loss we recognized related to these foreign currency denominated assets and liabilities was approximately $0.7 million. 34 Table of Contents
This gain is recognized as an adjustment to stockholders’ equity through “Accumulated other comprehensive loss.” Transaction Exposure We have certain assets and liabilities, primarily accounts receivable and accounts payable (including inter-company transactions) that are denominated in currencies other than the relevant entity’s functional currency.
This loss is recognized as an adjustment to stockholders’ equity through “Accumulated other comprehensive income (loss).” 33 Table of Contents Transaction Exposure We have certain assets and liabilities, primarily accounts receivable and accounts payable (including inter-company transactions) that are denominated in currencies other than the relevant entity’s functional currency.
Our operating expenses are incurred primarily in the United States, in China associated with our research and development operations that are maintained there, in India for our center of excellence and in the United Kingdom for our international sales and marketing activities.
Our operating expenses are incurred primarily in the U.S. and Canada (Canadian Dollar, or CAD), in China associated with our research and development operations that are maintained there, in India for our center of excellence and in the United Kingdom for our international sales and marketing activities.
As of December 31, 2023, we had cash, cash equivalents and marketable securities of $220.3 million, which was held primarily in cash, money market funds and highly liquid marketable securities such as U.S. government securities and commercial paper.
As of December 31, 2024, we had cash, cash equivalents and marketable securities of $297.1 million, which was held primarily in cash, money market funds and highly liquid marketable securities such as U.S. government securities, corporate debt and commercial paper.

Other CALX 10-K year-over-year comparisons