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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2022
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-34674
Calix, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 68-0438710
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
2777 Orchard Parkway, San Jose, CA 95134
(Address of Principal Executive Offices) (Zip Code)
(408) 514-3000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.025 per share
CALXNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes:  x    No:  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes:  x    No:  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated filerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes:     No:  x
As of April 18, 2022, there were 64,611,837 shares of the Registrant’s common stock, par value $0.025 outstanding.


CALIX, INC.
FORM 10-Q
TABLE OF CONTENTS
 
3

PART I. FINANCIAL INFORMATION
 
ITEM 1.Financial Statements
CALIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value) 
April 2,
2022
December 31,
2021
 (Unaudited) (See Note 1)
ASSETS
Current assets:
Cash and cash equivalents$44,369 $51,333 
Marketable securities168,756 153,002 
Accounts receivable, net87,952 85,219 
Inventory105,016 88,880 
Prepaid expenses and other current assets34,129 30,811 
Total current assets440,222 409,245 
Property and equipment, net22,307 21,783 
Right-of-use operating leases11,796 12,182 
Deferred tax assets168,685 168,962 
Goodwill116,175 116,175 
Other assets16,061 13,685 
$775,246 $742,032 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$37,553 $29,061 
Accrued liabilities71,764 71,597 
Deferred revenue32,261 27,478 
Total current liabilities141,578 128,136 
Long-term portion of deferred revenue21,189 22,016 
Operating leases11,656 12,376 
Other long-term liabilities9,018 11,076 
Total liabilities183,441 173,604 
Commitments and contingencies (See Note 6)
Stockholders’ equity:
Preferred stock, $0.025 par value; 5,000 shares authorized; no shares issued and outstanding as of April 2, 2022 and December 31, 2021
  
Common stock, $0.025 par value; 100,000 shares authorized; 64,612 shares issued and outstanding as of April 2, 2022, and 64,274 shares issued and outstanding as of December 31, 2021
1,616 1,607 
Additional paid-in capital1,014,336 997,855 
Accumulated other comprehensive loss(1,552)(320)
Accumulated deficit(422,595)(430,714)
Total stockholders’ equity591,805 568,428 
$775,246 $742,032 
See accompanying notes to condensed consolidated financial statements.
4

CALIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
April 2,
2022
April 3,
2021
Revenue:
Systems$174,426 $153,302 
Services10,522 8,772 
Total revenue184,948 162,074 
Cost of revenue:
Systems85,913 69,663 
Services7,243 6,169 
Total cost of revenue93,156 75,832 
Gross profit91,792 86,242 
Operating expenses:
Sales and marketing36,091 28,051 
Research and development29,817 24,364 
General and administrative16,031 13,025 
Total operating expenses81,939 65,440 
Operating income9,853 20,802 
Interest and other expense, net:
Interest income (expense), net35 (125)
Other income (expense), net(68)88 
Total interest and other expense, net(33)(37)
Income before income taxes9,820 20,765 
Income taxes1,701 150 
Net income$8,119 $20,615 
Net income per common share:
Basic$0.13 $0.33 
Diluted$0.12 $0.31 
Weighted-average number of shares used to compute
net income per common share:
Basic64,489 62,554 
Diluted68,405 67,019 
Net income$8,119 $20,615 
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale marketable securities, net(1,161) 
Foreign currency translation adjustments, net(71)(35)
Total other comprehensive loss, net of tax(1,232)(35)
Comprehensive income$6,887 $20,580 

See accompanying notes to condensed consolidated financial statements.
5

CALIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, unaudited)

Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance as of December 31, 202164,274 $1,607 $997,855 $(320)$(430,714)$568,428 
Stock-based compensation
— — 10,467 — — 10,467 
Issuance of common stock under equity incentive plans, net of forfeitures338 9 6,014 — — 6,023 
Net income— — — — 8,119 8,119 
Other comprehensive loss— — — (1,232)— (1,232)
Balance as of April 2, 202264,612 $1,616 $1,014,336 $(1,552)$(422,595)$591,805 

Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance as of December 31, 202062,122 $1,553 $948,055 $(191)$(669,092)$280,325 
Stock-based compensation
— — 5,171 — — 5,171 
Issuance of common stock under equity incentive plans, net of forfeitures729 19 8,620 — — 8,639 
Net income— — — — 20,615 20,615 
Other comprehensive loss— — — (35)— (35)
Balance as of April 3, 202162,851 $1,572 $961,846 $(226)$(648,477)$314,715 


See accompanying notes to condensed consolidated financial statements.
6

CALIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 Three Months Ended
April 2,
2022
April 3,
2021
Operating activities:
Net income$8,119 $20,615 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation10,467 5,171 
Depreciation and amortization3,943 4,077 
Deferred income taxes277  
Changes in operating assets and liabilities:
Accounts receivable, net(2,733)(4,989)
Inventory(16,137)(19,943)
Prepaid expenses and other assets(6,738)(1,321)
Accounts payable8,186 16,156 
Accrued liabilities802 (12,856)
Deferred revenue3,956 5,362 
Other long-term liabilities(2,777)(2,374)
Net cash provided by operating activities7,365 9,898 
Investing activities
Purchases of property and equipment(3,231)(2,274)
Purchases of marketable securities(73,034)(54,192)
Maturities of marketable securities56,119 43,000 
Net cash used in investing activities(20,146)(13,466)
Financing activities:
Proceeds from common stock issuances related to employee benefit plans6,023 8,639 
Payments related to financing arrangements(137) 
Net cash provided by financing activities5,886 8,639 
Effect of exchange rate changes on cash and cash equivalents(69)(24)
Net increase (decrease) in cash and cash equivalents(6,964)5,047 
Cash and cash equivalents at beginning of period51,333 80,807 
Cash and cash equivalents at end of period$44,369 $85,854 

See accompanying notes to condensed consolidated financial statements.
7

CALIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Company and Basis of Presentation
Company
Calix, Inc. (together with its subsidiaries, “Calix” or the “Company”) was incorporated in August 1999 and is a Delaware corporation. The Company is the leading global provider of cloud and software platforms, systems and services that focus on the access network, the portion of the network that governs available bandwidth and determines the range and quality of services that can be offered to subscribers. These cloud and software platforms enable broadband service providers (“BSPs”) of all types and sizes to innovate and transform their businesses. The Company’s BSP customers are empowered to utilize real-time data and insights from Calix platforms to simplify their businesses and deliver experiences that excite their subscribers. These insights enable BSPs to grow their businesses through increased subscriber acquisition, loyalty and revenue, thereby increasing the value of their businesses and contributions to their communities.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, including the accounts of Calix, Inc. and its wholly-owned subsidiaries, have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (“GAAP”) can be condensed or omitted. In the opinion of management, the financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results. All intercompany balances and transactions have been eliminated in consolidation. The Condensed Consolidated Balance Sheet as of December 31, 2021 has been derived from the audited financial statements at that date.
The results of the Company’s operations can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year or any future periods. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The Company’s fiscal year begins on January 1st and ends on December 31st. Quarterly periods are based on a 4-4-5 calendar with the first quarter ending on the Saturday closest to March 31st. As a result, the Company had one less day in the three months ended April 2, 2022 than for the three months ended April 3, 2021. The preparation of financial statements in conformity with GAAP for interim financial reporting requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, particularly as variants of the coronavirus continue to spread around the world. Although the availability of vaccines has increased, there are no assurances as to when the pandemic will become endemic. In March 2020, the Company instituted office closures, travel restrictions and a work-from-anywhere policy for substantially all of its employees due to shelter-in-place mandates. In July 2021, the Company reopened its U.S. offices to fully-vaccinated employees who choose to work in the office and lifted certain travel restrictions. The COVID-19 pandemic has had a prolonged impact on the Company’s supply chain operations due to restrictions, reduced capacity and limited availability from suppliers on whom the Company relies for sourcing components and materials and from third-party partners on whom the Company relies for manufacturing, warehousing and logistics services. Although demand for the Company’s products has been strong in the short-term as subscribers seek more bandwidth and better Wi-Fi, customers’ purchasing decisions over the long-term may be impacted by the pandemic and its impact on the economy, which could in turn impact the Company’s revenue and results of operations. Furthermore, the Company’s supply chain continues to face constraints primarily due to challenges in sourcing components and materials for the Company’s products. The prolonged impact of COVID-19 could exacerbate these constraints or cause further supply chain disruptions. As of the issuance date of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity or results of operations remains uncertain.
8

2. Significant Accounting Policies
The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021. The Company’s significant accounting policies did not change during the three months ended April 2, 2022.
Newly Adopted Accounting Standard
The Company did not adopt any new accounting standards during the three months ended April 2, 2022 that were significant to the Company.

Recent Accounting Pronouncements Not Yet Adopted
There have been no additional accounting pronouncements or changes in accounting pronouncements during the three months ended April 2, 2022 as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, that are significant or potentially significant to the Company.
3. Cash, Cash Equivalents and Marketable Securities
The Company has invested its excess cash primarily in money market funds and highly liquid marketable securities such as commercial paper, corporate debt securities, municipal securities and U.S. government securities. The Company considers all investments with maturities of three months or less when purchased to be cash equivalents. Marketable securities represent highly liquid commercial paper, U.S. government agency securities, corporate debt securities, municipal securities and U.S. government securities with maturities greater than 90 days at date of purchase. Cash equivalents are stated at amounts that approximate fair value based on quoted market prices. Marketable securities are recorded at their fair values.
Marketable securities with maturities greater than one year are classified as current because management considers all marketable securities to be available for current operations.
The Company’s investments have been classified and accounted for as available-for-sale. Such investments are recorded at fair value and unrealized holding gains and losses are reported as a separate component of accumulated other comprehensive loss in the stockholders’ equity until realized. Realized gains and losses on sales of marketable securities, if any, are determined on the specific identification method and are reclassified from accumulated other comprehensive loss to results of operations as other expense, net. There were no realized gains and losses for the period ended April 2, 2022.
Cash, cash equivalents and marketable securities consisted of the following (in thousands):
April 2,
2022
December 31,
2021
Cash and cash equivalents:
Cash$26,269 $26,442 
Commercial paper9,139 21,582 
U.S. government agency securities3,797  
U.S. government securities2,499  
Municipal securities1,760  
Money market funds805 2,320 
Corporate debt securities100 989 
Total cash and cash equivalents44,369 51,333 
Marketable securities:
U.S. government securities88,727 60,279 
Commercial paper69,279 80,812 
U.S. government agency securities6,613 5,527 
Municipal securities2,226 2,808 
Corporate debt securities1,911 3,576 
Total marketable securities168,756 153,002 
$213,125 $204,335 
The carrying amounts of the Company’s money market funds approximate their fair values due to their nature, duration and short maturities.
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The amortized cost and fair value of marketable securities as of April 2, 2022 were as follows (in thousands):
Amortized CostGross Unrealized LossesFair Value
U.S. government securities$89,943 $(1,216)$88,727 
Commercial paper69,317 (38)69,279 
U.S. government agency securities6,685 (72)6,613 
Municipal securities2,231 (5)2,226 
Corporate debt securities1,916 (5)1,911 
Total marketable securities$170,092 $(1,336)$168,756 
Unrealized gains and losses were de minimis as of December 31, 2021.
4. Fair Value Measurements
The Company measures its cash equivalents and marketable securities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company utilizes the following three-tier value hierarchy, which prioritizes the inputs used in measuring fair value:
Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Observable inputs other than quoted prices included in Level 1 for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-driven valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3 – Unobservable inputs to the valuation derived from fair valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The fair value hierarchy also requires the Company to maximize the use of observable inputs, when available, and to minimize the use of unobservable inputs when determining inputs and determining fair value.

The following tables sets forth the Company’s financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):
As of April 2, 2022Level 1Level 2Total
Money market funds$805 $ $805 
U.S. government securities91,226  91,226 
Commercial paper 78,418 78,418 
U.S. government agency securities 10,410 10,410 
Municipal securities 3,986 3,986 
Corporate debt securities 2,011 2,011 
$92,031 $94,825 $186,856 

As of December 31, 2021Level 1Level 2Total
Money market funds$2,320 $ $2,320 
U.S. government securities60,279  60,279 
Commercial paper 102,394 102,394 
U.S. government agency securities 5,527 5,527 
Corporate debt securities 4,565 4,565 
Municipal securities 2,808 2,808 
$62,599 $115,294 $177,893 
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5. Balance Sheet Details
Accounts receivable, net consisted of the following (in thousands):
April 2,
2022
December 31,
2021
Accounts receivable$88,663 $85,944 
Allowance for doubtful accounts(711)(725)
$87,952 $85,219 
Inventory consisted of the following (in thousands):
April 2,
2022
December 31,
2021
Raw materials$323 $130 
Finished goods104,693 88,750 
$105,016 $88,880 
Property and equipment, net consisted of the following (in thousands):
April 2,
2022
December 31,
2021
Test equipment$41,093 $39,476 
Computer equipment10,735 11,156 
Software9,264 9,013 
Furniture and fixtures1,526 1,812 
Leasehold improvements1,401 1,351 
Total64,019 62,808 
Accumulated depreciation and amortization(41,712)(41,025)
$22,307 $21,783 
Other long-term assets consisted of the following (in thousands):
April 2,
2022
December 31,
2021
Intangible asset$6,227 $6,885 
Other long-term assets9,834 6,800 
$16,061 $13,685 
Intangible Asset Acquisition
In March 2018, and as amended in December 2020, the Company entered into an agreement with a vendor to develop a certain software product and related enhancements pursuant to which the Company is obligated to make revenue-share payments under the program, subject to aggregate fixed revenue-share payments of $15.8 million. The payments are based on a revenue-share rate applied to revenue from the developed-product and the corresponding hardware sales through March 2024. If the minimum revenue-share payments are not achieved by the end of that period, a true-up payment will be due. The Company had its first sale in August 2019, and as a result, the Company capitalized an intangible asset with a value of $13.2 million in the third quarter of 2019 and also recognized a liability of $13.2 million (a non-cash investing activity). The intangible asset has an estimated five-year useful life and is being amortized using the greater of the ratio of current gross revenue for the products to the total of current and anticipated future gross revenue for the products or the straight-line method. As of April 2, 2022, the liability, including accrued interest, was $13.3 million of which $6.6 million is included in “Accrued liabilities” and $6.7 million in “Other long-term liabilities” in the accompanying Condensed Consolidated Balance Sheet. As of December 31, 2021, the liability, including accrued interest, was $13.2 million of which $4.7 million was included in “Accrued liabilities” and $8.5 million in other “Other long-term liabilities.”
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Accrued liabilities consisted of the following (in thousands):
April 2,
2022
December 31,
2021
Compensation and related benefits$15,979 $23,165 
Component inventory held by suppliers8,360 7,611 
Current portion of warranty and retrofit7,337 7,076 
Customer advances or rebates6,979 4,742 
Current portion of revenue share payments6,580 4,731 
Professional and consulting fees5,654 4,819 
Taxes payable5,115 4,251 
Freight4,548 3,997 
Operating leases3,761 3,596 
Product returns2,186 1,836 
Operations1,213 1,400 
Other4,052 4,373 
$71,764 $71,597 
Changes in the Company’s accrued warranty and retrofit liability were as follows (in thousands):
 Three Months Ended
April 2,
2022
April 3,
2021
Balance at beginning of period$9,594 $9,208 
Provision for warranty and retrofit charged to cost of revenue527 1,202 
Utilization of reserve(551)(760)
Balance at end of period$9,570 $9,650 
6. Commitments and Contingencies
Lease Commitments
The Company leases office space under non-cancelable operating leases. Certain of the Company’s operating leases contain renewal options and rent acceleration clauses. Future minimum payments under the non-cancelable operating leases consisted of the following as of April 2, 2022 (in thousands):
PeriodFuture Minimum Lease Payments
Remainder of 2022$3,423 
20234,706 
20244,536 
20254,036 
2026566 
Total future minimum lease payments17,267 
Less imputed interest(1,850)
$15,417 
As of April 2, 2022, the operating lease liability consisted of the following (in thousands):
Accrued liabilities - current portion of operating leases$3,761 
Operating leases11,656 
$15,417 
The Company leases its headquarters office space in San Jose, California under a lease agreement that expires in December 2025. The future minimum lease payments under the lease are $9.0 million and are included in the table above.
The weighted average discount rate for the Company’s operating leases as of April 2, 2022 was 6.1%. The weighted average remaining lease term as of April 2, 2022 was 3.8 years.
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Total rent expense of the Company was $1.1 million for the three months ended April 2, 2022 and April 3, 2021 for each respective period. Cash paid within operating cash flows for operating leases was $1.1 million and $1.0 million for the three months ended April 2, 2022 and April 3, 2021, respectively.
Purchase Commitments
The Company’s suppliers, including contract manufacturers (“CMs”) and original design manufacturers (“ODMs”), place orders for certain component inventory in advance based upon the Company’s build forecasts in order to reduce manufacturing lead times and ensure adequate component supply. The components are used by the CMs and ODMs to build the products included in the build forecasts. The Company generally does not take ownership of the components held by CMs and ODMs. The Company places purchase orders with its CMs and ODMs in order to fulfill its monthly finished product inventory requirements. The Company incurs a liability when the CMs and ODMs convert the component inventory to a finished product and takes ownership of the finished goods inventory. In the event of termination of services with a manufacturing partner, the Company has purchased, and may be required to purchase in the future, certain of the remaining components inventory held by the CM or ODM as well as any outstanding orders pursuant to the contractual provisions with such CM or ODM. As of April 2, 2022 and April 3, 2021, the Company had approximately $261.4 million and $107.8 million, respectively, of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within one to two years.
The Company has from time to time, and subject to certain conditions, reimbursed certain suppliers for component inventory purchases when this inventory has been rendered excess or obsolete, for example due to manufacturing and engineering change orders resulting from design changes, manufacturing discontinuation of products by its suppliers, or in cases where the Company has committed inventory levels that greatly exceed projected demand. The estimated excess and obsolete inventory liabilities related to such manufacturing and engineering change orders and other factors, which are included in accrued liabilities in the accompanying balance sheets, were $8.4 million and $7.6 million as of April 2, 2022 and December 31, 2021, respectively. The Company records the related charges in cost of systems revenue in its Condensed Consolidated Statements of Comprehensive Income.
Litigation
From time to time, the Company is involved in various legal proceedings arising from the normal course of business activities. The Company is not currently a party to any legal proceedings that, if determined adversely to the Company, in management’s opinion, are currently expected to individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition taken as a whole.
7. Stockholders’ Equity
2019 Equity Incentive Award Plan
Employees and consultants of the Company, its subsidiaries and affiliates, as well as members of the Company’s Board of Directors, are eligible to receive awards under the 2019 Equity Incentive Award Plan (“the 2019 Plan”). The 2019 Plan provides for the grant of stock options, including incentive stock options and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock or cash-based awards and dividend equivalents to eligible individuals. As of April 2, 2022, there were 5.9 million shares available for issuance under the 2019 Plan.
Stock Options
During the three months ended April 2, 2022, stock option awards exercisable for up to an aggregate of 0.3 million shares of common stock were granted with a grant date weighted-average exercise price of $55.96 per share. These stock option awards vest 25% on the first anniversary of the vesting commencement date and on a quarterly basis thereafter over an additional three years.
In February 2022, performance-based stock option awards exercisable for up to an aggregate of 0.7 million shares of common stock were granted to certain Company executives with a grant date exercise price of $55.96 per share. The actual number of shares earned is contingent upon achievement of annual corporate financial targets for bookings and non-GAAP net operating income for 2022 (collectively, the “2022 Performance Targets”) during the one-year performance period. These performance-based stock option awards will vest, subject to certification by the Compensation Committee of the Company’s Board of Directors upon the achievement of the 2022 Performance Targets, as to 25% of the shares of common stock earned on the one year anniversary of the date of grant, and as to the remaining 75% of the shares of common stock earned, in substantially equal quarterly installments over the subsequent 36 months, subject to the executive’s continuous service with the Company through the respective vesting dates. If the non-GAAP net operating income target is achieved below 80% of target or the bookings target is achieved below 90% of target, no shares would be awarded, and the performance-based stock option awards would be forfeited in full. If both targets are achieved at the minimum threshold of 80% of target for non-GAAP net operating income
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and 90% of target for bookings, then the shares are awarded at 50% of the granted shares, with an increasing percentage of shares awarded above the minimum thresholds up to 100% of the granted shares if both targets are achieved at 100% or more of target. The probability of meeting the performance conditions related to these performance-based stock option awards was assessed to be probable as of April 2, 2022, and stock-based compensation expense of $1.6 million was recognized for the three months ended April 2, 2022.
During the three months ended April 2, 2022, 0.2 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $7.61 per share. As of April 2, 2022, unrecognized stock-based compensation expense of $54.6 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.2 years.
Employee Stock Purchase Plans
The Company maintains two employee stock purchase plans - the Amended and Restated Employee Stock Purchase Plan (the “ESPP”) and the Amended and Restated 2017 Nonqualified Employee Stock Purchase Plan (the “NQ ESPP”).
The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their eligible compensation subject to certain Internal Revenue Code limitations. In addition, no participant may purchase more than 2,000 shares of common stock in each offering period.
The offering periods under the ESPP are two six-month offering periods from August 15th through February 14th and February 15th through August 14th of each year. The price of common stock purchased under the ESPP is 85% of the lower of the fair market value of the common stock on the commencement date and the end date of each six-month offering period. As of April 2, 2022, there were 3.5 million shares available for issuance under the ESPP. During the three months ended April 2, 2022, 0.1 million shares were purchased under the ESPP. As of April 2, 2022, unrecognized stock-based compensation expense of $0.8 million related to the ESPP is expected to be recognized over a remaining service period of 0.4 years.
The NQ ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 25% of their eligible compensation. Eligible employees have the right to (a) purchase the maximum number of whole shares of common stock that can be purchased with the elected payroll deductions during each offering period for which the employee is enrolled at a purchase price equal to the closing price of the Company’s common stock on the last day of such offering period and (b) receive an equal number of shares of the Company’s common stock that are subject to a risk of forfeiture in the event the employee terminates employment within the one year period immediately following the purchase date. Beginning in the second quarter of 2022, the NQ ESPP will provide four three-month offering periods, from August 8th through November 7th, November 8th through February 7th, February 8th through May 7th and May 8th through August 7th of each year. A transition period will begin on May 15th and will end on August 7, 2022. As of April 2, 2022, there were 2.8 million shares available for issuance under the NQ ESPP. As of April 2, 2022, unrecognized stock-based compensation expense of $6.4 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 1.0 year.
Stock-Based Compensation
The following table summarizes stock-based compensation expense (in thousands):
 Three Months Ended
April 2,
2022
April 3,
2021
Cost of revenue:
Products$373 $162 
Services242 150 
Sales and marketing2,482 1,447 
Research and development3,745 1,583 
General and administrative3,625 1,829 
$10,467 $5,171 
8. Revenue from Contracts with Customers
The Company derives revenue from contracts with customers primarily from the following and categorizes its revenue as follows:
Systems include revenue from the sale of access and premises systems, software platform licenses and cloud-based software subscriptions; and
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Services include revenue from customer support, software- and cloud-based maintenance, extended warranty subscriptions, professional services, training and managed services.
The following is a summary of revenue disaggregated by geographic region based upon the location of the customers (in thousands):
Three Months Ended
April 2, 2022April 3, 2021
United States$165,631 $139,347 
Americas ex U.S.8,871 11,403 
Europe6,573 3,414 
Middle East & Africa3,617 7,089 
Asia Pacific256 821 
$184,948 $162,074 
Contract Asset
The primary contract asset is revenue recognized on professional services contracts where the services are transferred to the customer over time, which has yet to be billed, and is classified within accounts receivable. Amounts are billed in accordance with the agreed-upon contractual terms. The balance as of December 31, 2021 was $1.7 million of which $0.9 million remained in the Company’s Condensed Consolidated Balance Sheet as of April 2, 2022. The closing balance as of April 2, 2022 was $2.1 million of which the Company expects to bill 83% of the balance during the remainder of 2022. The increase in the contract asset was driven by the timing of professional services contracts with the Company's customers.
Contract Liability
Deferred revenue consisted of the following (in thousands):
April 2,
2022
December 31,
2021
Current:
Products and services$27,293 $22,586 
Extended warranty4,968 4,892 
32,261 27,478 
Long-term:
Products and services2,568 3,137 
Extended warranty18,621 18,879 
21,189 22,016 
$53,450 $49,494 

The increase in the deferred revenue balance for the three months ended April 2, 2022 is primarily driven by cash payments received or due in advance of satisfying the Company’s performance obligations offset by $7.3 million of revenue recognized that was included in the deferred revenue balance at the beginning of the period.
Revenue allocated to remaining performance obligations represents contract revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. This amount was $138.0 million as of April 2, 2022, and the Company expects to recognize 35% of such revenue over the next 12 months and the remainder thereafter.
Contract Costs
The Company capitalizes certain sales commissions related primarily to multi-year subscriptions and extended warranty support for which the expected amortization period is greater than one year. As of April 2, 2022 and December 31, 2021, the unamortized balance of deferred commissions was $7.3 million and $7.4 million, respectively. For the three months ended April 2, 2022 and April 3, 2021, the amount of amortization was $0.8 million and $0.1 million, respectively. There was no impairment loss in relation to the costs capitalized for either period.
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Concentration of Customer Risk
No customer accounted for more than 10% of the Company’s total revenue for the three months ended April 2, 2022 and April 3, 2021.
No customer represented more than 10% of the Company’s accounts receivable as of April 2, 2022. One customer represented 12% of the Company’s accounts receivable as of December 31, 2021.
9. Income Taxes
The following table presents income taxes and the effective tax rates for the periods indicated (in thousands, except percentages):
 Three Months Ended
April 2,
2022
April 3,
2021
Income before income taxes$9,820 $20,765 
Income taxes$1,701 $150 
Effective tax rate17.3 %0.7 %
The Company’s income taxes for the three months ended April 2, 2022 and April 3, 2021 were determined using an estimated effective tax rate adjusted for discrete items that occurred during the respective periods. The Company's effective tax rate for the three months ended April 2, 2022 was lower than the statutory federal corporate tax rate of 21% primarily due to U.S. federal research tax credits and excess tax benefits from stock-based compensation partially offset by state taxes, the inclusion of income from certain foreign operations and the effect of non-deductible stock-based compensation for executive officers. The Company's effective tax rate for the three months ended April 3, 2021 was significantly lower than 2022 as the Company maintained a full valuation allowance during the period.
The Company has net deferred tax assets that have arisen primarily as a result of temporary differences, net operating loss carryforwards and tax credits. The Company’s ability to realize a deferred tax asset is based on its ability to generate sufficient future taxable income within the applicable carryforward period and subject to any applicable limitations. Management continues to believe that it is more likely than not we will utilize a significant portion of our deferred tax assets.
The Company continues to maintain a valuation allowance of $30.3 million on certain U.S. federal and state deferred tax assets that the Company believes are not more likely than not to be realized in future periods.
The Company considers scheduled reversals of deferred tax liabilities, projected future taxable income, ongoing tax planning strategies and other matters, including the period over which its deferred tax assets will be recoverable, in assessing the need for and the amount of the valuation allowance. In the event that actual results differ from these estimates, or if the Company decides to adjust these estimates in the future periods, further adjustments to its valuation allowance may be recorded, which could materially impact the Company’s financial position and net income in the period of the adjustment.
The Company’s 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 as actual results differing from its estimates of pre-tax earnings in the various jurisdictions in which the Company operates, which could impact the recognition of its deferred tax assets, benefits from stock option exercises, further investments in the Company’s foreign operations, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.
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10. Net Income Per Common Share
The following table sets forth the computation of basic and diluted net income per common share for the periods indicated (in thousands, except per share data):
 Three Months Ended
April 2,
2022
April 3,
2021
Numerator:
Net income$8,119 $20,615 
Denominator:
Weighted-average common shares outstanding used to compute basic net income per share64,489 62,554 
Effect of dilutive common stock equivalents3,916 4,465 
Weighted-average common shares outstanding used to compute diluted net income per share68,405 67,019 
Net income per common share:
Basic net income per common share$0.13 $0.33 
Diluted net income per common share$0.12 $0.31 
Potentially dilutive shares, weighted average1,231 415 
Potentially dilutive shares have been excluded from the computation of diluted net income per common share when their effect is antidilutive. These antidilutive shares were from stock options.
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ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities and Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenue or other financial items, any statement of or concerning the following: the plans and objectives of management for future operations, proposed new products or licensing, product development, anticipated customer demand or capital expenditures, anticipated growth and trends in our business and industry, future economic and/or market conditions or performance and assumptions underlying any of the above. In some cases, forward-looking statements can be identified by the use of terminology such as “could,” “may,” “will,” “would,” “expects,” “believes,” “intends,” “plans,” “anticipates,” “estimates,” “projects,” “predicts,” “potential,” or “continue” or the negative thereof or other comparable terminology. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including those identified in the Risk Factors discussed in Part II, Item 1A, of this report on Form 10-Q, as well as in other sections of this report and in our Annual Report on Form 10-K for the year ended December 31, 2021. All forward-looking statements and reasons why results may differ included in this Quarterly Report on Form 10-Q are made as of the date hereof, and we assume no obligation to update these forward-looking statements or reasons why actual results might differ.
Overview
We are the leading global provider of cloud and software platforms, systems and services that focus on the access network, the portion of the network that governs available bandwidth and determines the range and quality of services that can be offered to subscribers. These cloud and software platforms enable broadband service providers, or BSPs, of all types and sizes to innovate and transform their businesses. Our BSP customers are empowered to utilize real-time data and insights from Calix platforms to simplify their businesses and deliver experiences that excite their subscribers. These insights enable BSPs to grow their brand through increased subscriber acquisition, loyalty and revenue and to reduce their operating costs, thereby increasing the value of their businesses and contributions to their communities.
We market our cloud and software platforms, systems and services to BSPs globally through our direct sales force as well as select resellers. Our customers range from smaller, regional BSPs to some of the world’s largest BSPs. We have enabled approximately 1,700 BSP customers purchasing directly and through partners to deploy passive optical, Active Ethernet and point-to-point Ethernet fiber access networks.
Our revenue and potential revenue growth will depend on our ability to sell and license our cloud and software platforms, systems and services to strategically aligned customers of all types such as wireless internet service providers, fiber overbuilders, cable MSOs, municipalities and electric cooperatives in the United States and internationally. Our growth is also highly dependent on the speed and willingness of customers to adopt these platforms.
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 the COVID-19 pandemic, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers. More specifically, our customers have in the past spent less in the first quarter as they are finalizing their annual budgets, and in certain regions, customers are challenged by winter weather conditions that inhibit fiber deployment in outside infrastructure. Our revenue is also dependent upon our customers’ timing of purchases, capital expenditure plans and decisions to upgrade their network or adopt new technologies, including adoption of our software and cloud platform solutions, as well as our ability to grow our customer base.
Cost of revenue is strongly correlated to revenue and tends to fluctuate due to all of the above factors that may cause revenue fluctuations. Factors that have impacted our cost of revenue for the three months ended April 2, 2022, and that we expect will impact cost of revenue in future periods, also include: changes in the mix of products delivered, customer location and regional mix, changes in the cost of our inventory, including higher costs due to materials shortages including components, supply constraints or unfavorable changes in trade policies, investments to support expansion of cloud and customer support offerings as well as our customer success organization, changes in product warranty and incurrence of retrofit costs, amortization of intangibles, asset write-offs, support fees for silicon-related development work for our products, allowances for obligations to our suppliers and inventory write-downs. Given the ongoing supply chain disruptions related to component shortages, longer lead times as a result of increased global demand for certain components and disruptions related to the COVID-19 pandemic, we have experienced and are continuing to experience product supply delays and related challenges, and we expect these delays
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and related challenges to persist in the foreseeable future. Similarly, challenges in supply chain logistics have persisted due to greater global demand for transport services as well as labor shortages and resulted in increases in our global freight charges. In addition, we periodically elect to ship by air in order to meet delivery commitments to our customers, and air freight rates remain elevated relative to pre-pandemic levels. 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 gross profit and gross margin fluctuate based on timing of factors such as changes in customer mix and changes in the mix of products demanded and sold (and any related write-downs of existing inventory or accrual for supplier commitments) and have in the past been negatively impacted by increases in mix of revenue from channel sales rather than direct sales or other unfavorable customer or product mix, shipment volumes and any related volume discounts, changes in our product and services costs, pricing decreases or discounts, new product introductions or upgrades to existing products, customer rebates and incentive programs due to competitive pressure or materials shortages, supply constraints, investments to support expansion of cloud and customer support offerings, tariffs or unfavorable changes in trade policies.
Our operating expenses fluctuate based on the following factors among others: changes in headcount and personnel costs, which comprise a significant portion of our operating expenses; variable compensation due to fluctuations in shipment volumes or level of achievement against performance targets; timing of research and development expenses, including investments in innovative solutions and new customer segments, prototype builds and outsourced development resources; investments in marketing programs; asset write-offs; investments in our business and information technology infrastructure; and fluctuations in stock-based compensation expenses due to timing of equity grants or other factors affecting vesting.
Further, as a result of factors contributing to the fluctuations described above among other factors, many of which are outside our control, our quarterly operating results fluctuate from period to period. Comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance.
COVID-19 Pandemic
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, particularly as variants of the coronavirus continue to spread around the world. In March 2020, we instituted office closures, travel restrictions and a work-from-anywhere policy for substantially all our employees due to shelter-in-place mandates. In July 2021, we reopened our U.S. offices to fully-vaccinated employees, who choose to work in the office, and we lifted certain travel restrictions. The COVID-19 pandemic has had a prolonged impact on our supply chain operations due to restrictions, reduced capacity and limited availability from suppliers on whom we rely for sourcing components and materials and from third-party partners on whom we rely for manufacturing, warehousing and logistics services. Although demand for our products has been strong in the short-term as subscribers seek more bandwidth and better Wi-Fi, customers’ purchasing decisions over the long-term may be impacted by the pandemic and its impact on the economy, which could in turn impact our revenue and results of operations. Furthermore, our supply chain continues to face constraints primarily due to challenges in sourcing components and materials and managing global logistics and transport services for our products due to shortages and delays. The prolonged impact of COVID-19 could exacerbate these constraints or cause further supply chain disruptions.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Management bases its 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. Our management evaluates its estimates, assumptions and judgments on an ongoing basis.
Our critical accounting policies and estimates, which are revenue recognition, inventory valuation and supplier purchase commitments and income taxes, are described under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021. For the three months ended April 2, 2022, there have been no significant changes in our critical accounting policies and estimates.
Recent Accounting Pronouncements
There have been no additional accounting pronouncements or changes in accounting pronouncements during the three months ended April 2, 2022 as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2021 that are significant or potentially significant to us.
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Results of Operations
Comparison of the Three Months Ended April 2, 2022 and April 3, 2021
Revenue
The following table sets forth our revenue (dollars in thousands):
 Three Months Ended
April 2,
2022
April 3,
2021
Variance
in
Dollars
Variance
in
Percent
Revenue:
Systems$174,426 $153,302 $21,124 14 %
Services10,522 8,772 1,750 20 %
$184,948 $162,074 $22,874 14 %
Percent of total revenue:
Systems94 %95 %
Services%%
100 %100 %
Our revenue increased by $22.9 million for the three months ended April 2, 2022, as compared to the corresponding period in 2021 mostly due to higher systems revenue of $21.1 million, as compared to the corresponding period in 2021. Services revenue increased by $1.8 million compared to the corresponding period in 2021. The increase in systems revenue was primarily due to higher revenue from our growing base of small, regional customers as BSPs continue to adopt our All Platform offerings and seek to provide a better Wi-Fi experience for their customers. The increase in services revenue was due to the continued ramp in our service offerings aligned with cloud and software products for our customers.
For the three months ended April 2, 2022, revenue generated in the United States was $165.6 million, or 90% of our total revenue, compared to $139.3 million, or 86% of our total revenue, for the same period in 2021. International revenue was $19.3 million, or 10% of our total revenue, for the three months ended April 2, 2022, as compared to $22.7 million, or 14% of our total revenue, for the same period in 2021.
No customer accounted for more than 10% of the Company’s total revenue for the three months ended April 2, 2022 and April 3, 2021.
Gross Profit and Gross Margin
The following table sets forth our gross profit and gross margin (dollars in thousands):
 Three Months Ended
 April 2,
2022
April 3,
2021
Variance
in
Dollars
Variance
in
Percent
Gross profit:
Systems$88,513 $83,639 $4,874 %
Services3,279 2,603 676 26 %
$91,792 $86,242 $5,550 %
Gross margin:
Systems50.7 %54.6 %
Services31.2 %29.7 %
Overall49.6 %53.2 %
Gross profit increased to $91.8 million for the three months ended April 2, 2022, from $86.2 million during the corresponding period in 2021 due to higher revenue for both systems and services. The decrease in systems gross margin of 390 basis points for the three months ended April 2, 2022 compared to the corresponding period in 2021 was mainly due to higher component and logistics costs. Services gross margin increased by 150 basis points for the three months ended April 2, 2022 compared to the corresponding period in 2021 as our service revenue reflects a greater contribution from higher gross margin services aligned with our platform offerings, which more than offset the investments in our customer success organization.
20

Operating Expenses
Sales and Marketing Expenses
The following table sets forth our sales and marketing expenses (dollars in thousands):
 Three Months Ended
 April 2,
2022
April 3,
2021
Variance
in
Dollars
Variance
in
Percent
Sales and marketing expenses$36,091 $28,051 $8,040 29 %
Percent of total revenue20 %17 %
Sales and marketing expenses for the three months ended April 2, 2022 increased by $8.0 million compared with the corresponding period in 2021 primarily due to increases in personnel expenses of $5.9 million, mainly related to investments in sales headcount and higher sales incentive compensation, travel expenses of $1.1 million and stock-based compensation of $1.0 million.
We expect our investments in sales and marketing will increase in absolute dollars, but be relatively consistent as a percentage of revenue, as we extend our market reach and grow our business in support of our key strategic initiatives.
Research and Development Expenses
The following table sets forth our research and development expenses (dollars in thousands):
 Three Months Ended
 April 2,
2022
April 3,
2021
Variance
in
Dollars
Variance
in
Percent
Research and development expenses$29,817 $24,364 $5,453 22 %
Percent of total revenue16 %15 %
Percentage of systems gross profit34 %29 %
Research and development expenses for the three months ended April 2, 2022 increased by $5.5 million as compared with the corresponding period in 2021 mainly due to increases in personnel expenses of $2.5 million and stock-based compensation of $2.2 million and outside services of $0.6 million.
We expect our investments in research and development to increase in absolute dollars, but remain relatively consistent as a percentage of systems gross profit, as we expand the functionality and capabilities of our platforms.
General and Administrative Expenses
The following table sets forth our general and administrative expenses (dollars in thousands):
 Three Months Ended
 April 2,
2022
April 3,
2021
Variance
in
Dollars
Variance
in
Percent
General and administrative expenses$16,031 $13,025 $3,006 23 %
Percent of total revenue%%
General and administrative expenses for the three months ended April 2, 2022 increased by $3.0 million as compared with the corresponding period in 2021 mainly due to increases in stock-based compensation of $1.8 million, personnel expenses of $0.6 million and outside services of $0.5 million.
We expect our general and administrative investments to increase in absolute dollars but decline slightly as a percentage of revenue over time as revenue continues to grow.
21

Income Taxes
The following table sets forth our income taxes (dollars in thousands):
 Three Months Ended
 April 2,
2022
April 3,
2021
Variance
in
Dollars
Variance
in
Percent
Income taxes$1,701 $150 $1,551 1,034 %
Effective tax rate17.3 %0.7 %
For the first quarter of 2021, we maintained a full valuation allowance against our deferred tax assets, resulting an income tax provision primarily due to state and foreign taxes payable. For the first quarter of 2022, after having released the valuation allowance during the third quarter of 2021, our income tax expense was $1.7 million for an effective tax rate of 17.3%, which differs from the statutory rate of 21% primarily due to U.S. federal research tax credits and excess tax benefits from stock-based compensation partially offset by state taxes, the inclusion of income from certain foreign operations and the effect of non-deductible stock-based compensation for executive officers.
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, further benefits from stock option exercises, investments in our foreign operations, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where we conduct business.
Liquidity and Capital Resources
We have funded our operations and investing activities primarily through sales of our common stock, cash flow generated from operations and various borrowing arrangements. As of April 2, 2022, we had cash, cash equivalents and marketable securities of $213.1 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S. government agency securities and commercial paper.
Operating Activities
Net cash provided by operating activities was $7.4 million for the three months ended April 2, 2022 and consisted of net income of $8.1 million partially offset by non-cash charges of $14.7 million and cash flow decreases of $15.4 million reflected in the net change in assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $10.5 million and depreciation and amortization of $3.9 million.
Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of an increase in inventory of $16.1 million to support revenue growth and to mitigate supply chain shortages and disruptions and an increase in accounts receivable of $2.7 million in line with our revenue growth. In addition, there was an increase in prepaid expenses and other assets of $6.7 million mainly due to advanced payments to supply chain partners and a decrease in total accrued liabilities of $2.0 million. These changes were partially offset by an increase in accounts payable of $8.2 million due to increased inventory purchases and an increase in deferred revenue of $4.0 million due to Calix Cloud subscriptions and support contracts.
During the three months ended April 3, 2021, net cash provided by operating activities was $9.9 million and consisted of net income of $20.6 million and non-cash charges of $9.2 million, consisting of stock-based compensation of $5.2 million and depreciation and amortization of $4.1 million. This was partially offset by cash flow decreases of $20.0 million reflected in the net change in assets and liabilities. Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of an increase in inventory of $19.9 million to support revenue growth and to mitigate supply chain shortages and disruptions and a decrease in total accrued liabilities of $15.2 million, mainly related to incentive compensation payouts, rebate redemptions and a reduction of customer advance payments. In addition, there was an increase in accounts receivable of $5.0 million, due to product shipment timing, and an increase in prepaid expenses and other assets of $1.3 million mainly due to prepaid software licenses. These changes were partially offset by an increase in accounts payable of $16.2 million due to increased inventory purchases and an increase in deferred revenue of $5.4 million due to support contracts, extended warranties and Calix Cloud subscriptions.
Investing Activity
For the three months ended April 2, 2022, cash used in investing activities of $20.1 million consisted of net purchases of marketable securities of $16.9 million and capital expenditures of $3.2 million, consisting primarily of purchases of test equipment and computer equipment.
22

For the three months ended April 3, 2021, cash used in investing activities of $13.5 million consisted of net purchases of marketable securities of $11.2 million and capital expenditures of $2.3 million, consisting primarily of purchases of test equipment and computer equipment.
Financing Activities
Net cash provided by financing activities of $5.9 million for the three months ended April 2, 2022 and $8.6 million for the three months ended April 3, 2021 primarily consisted of proceeds from the issuance of common stock related to our equity plans.
Working Capital and Capital Expenditure Needs
Our material cash commitments include non-cancelable firm purchase commitments, normal recurring trade payables, compensation-related and expense accruals, operating leases and revenue-share obligations. We believe that our outsourced approach to manufacturing provides us significant flexibility in both managing inventory levels and financing our inventory. In the event that our revenue plan does not meet our expectations, we may be required to curtail or eliminate expenditures to mitigate the impact on our working capital.
We believe, based on our current operating plan and expected operating cash flows, that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated cash needs for at least the next twelve months. If we are unable to execute on our current operating plan or continue to generate operating income and positive cash flows, our liquidity, results of operations and financial condition will be adversely affected, and we may need to seek other sources of liquidity, including the sale of additional equity or borrowing, to support our working capital needs. In addition, we may choose to seek other sources of liquidity even if we believe we have generated sufficient cash flows to support our operational needs. There is no assurance that any other sources of liquidity may be available to us on acceptable terms or at all. 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 may adversely impact our business and potential growth.

Contractual Obligations and Commitments
Our principal commitments as of April 2, 2022 consisted of our contractual obligations under non-cancelable outstanding purchase obligations, operating lease obligations for office space and a revenue share obligation. The following table summarizes our contractual obligations as of April 2, 2022 (in thousands):
Payments Due by Period
TotalLess Than 1 Year1-3 Years3-5 YearsMore Than 5 Years
Non-cancelable purchase commitments (1)
$317,604 $245,071 $52,519 $12,865 $7,149 
Operating lease obligations (2)
17,267 4,593 9,161 3,513 — 
Revenue share obligation (3)
13,997 5,164 8,833 — — 
$348,868 $254,828 $70,513 $16,378 $7,149 

(1) Represents outstanding purchase commitments to be delivered by our third-party manufacturers or other vendors. See Note 6, “Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q 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 2026. See Note 6 “Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion regarding our operating leases.
(3) Represents remaining payments related to a revenue-share obligation, including imputed interest associated with developed software product and related enhancements by an engineering service provider. The schedule reflects our expected revenue-share and true-up payments based on our revenue projections for the developed products over a sales period through March 2024. If the minimum revenue-share payments are not achieved by the end of that period, a true-up payment will be due. See Note 5 “Balance Sheet Details” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion regarding our outstanding liability.
23

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The primary objectives of our investment activity are to preserve principal, provide liquidity and maximize income without significantly increasing risk. By policy, we do not enter into investments for trading or speculative purposes. As of April 2, 2022, we had cash, cash equivalents and marketable securities of $213.1 million, which was held primarily in cash, money market funds and highly liquid marketable securities such as U.S. government agency securities and commercial paper. Due to the nature of these money market funds and highly liquid marketable securities, we believe that we do not have any material exposure to changes in the fair value of our cash equivalents and marketable securities as a result of changes in interest rates.
Foreign Currency Exchange Risk
Our primary foreign currency exposures are described below.
Economic Exposure
The direct effect of foreign currency fluctuations on our sales and expenses has not been material because our sales and expenses are primarily denominated in U.S. dollars, or USD. However, we are indirectly exposed to changes in foreign currency exchange rates to the extent of our use of foreign CMs whom we pay in USD. Increases in the local currency rates of these vendors in relation to USD could cause an increase in the price of products that we purchase. 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. The precise indirect effect of currency fluctuations is difficult to measure or predict because our sales are influenced by many factors in addition to the impact of such currency fluctuations.
Translation Exposure
Our sales contracts are primarily denominated in USD and, therefore, the majority of our revenue is not subject to foreign currency risk. We are directly exposed to changes in foreign exchange rates to the extent such changes affect our expenses related to our foreign assets and liabilities with our subsidiaries in China, India and the United Kingdom, whose functional currencies are Chinese Renminbi, or RMB, Indian Rupee, or INR, and British Pounds Sterling, or GBP.
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 new center of excellence and in the United Kingdom for our international sales and marketing activities. Our operating expenses are generally denominated in the functional currencies of our subsidiaries in which the operations are located. The percentages of our operating expenses denominated in the following currencies for the indicated periods were as follows:
 Three Months Ended
 April 2,
2022
April 3,
2021
USD92 %91 %
RMB%%
GBP%%
INR— %— %
100 %100 %
If USD had appreciated or depreciated by 10%, relative to RMB, GBP and INR, our operating expenses for the first three months of 2022 would have decreased or increased by approximately $0.6 million, or approximately 1%. We do not currently enter into forward exchange contracts to hedge exposure denominated in foreign currencies or any derivative financial instruments. In the future, we may consider entering into hedging transactions to help mitigate our foreign currency exchange risk.
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 Condensed Consolidated Balance Sheets. The effect of foreign exchange rate fluctuations on our consolidated financial position for the three months ended April 2, 2022 was a net translation loss of $0.1 million. This loss is recognized as an adjustment to stockholders’ equity through “Accumulated other comprehensive loss.”
24

Transaction Exposure
We have certain assets and liabilities, primarily receivables and accounts payable (including inter-company transactions) that are denominated in currencies other than the relevant entity’s functional currency. In certain circumstances, changes in the functional currency value of these assets and liabilities create fluctuations in our reported consolidated financial position, cash flows and results of operations. Transaction gains and losses on these foreign currency denominated assets and liabilities are recognized each period within “Other income (expense), net” in our Condensed Consolidated Statements of Comprehensive Income. During the three months ended April 2, 2022, the net gain we recognized related to these foreign exchange assets and liabilities of approximately $41,000.
ITEM 4.