2017 may calix investor presentation

Investor PresentationMay 2017

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© 2017 Calix | All Rights Reserved© 2017 Calix | All Rights Reserved

Safe Harbor

This presentation includes forward-looking statements within the meaning of the Private Securities Litigation

Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown

risks and uncertainties. Examples of forward-looking statements include, but are not limited to, statements about

our anticipated growth and growth drivers; our future financial condition and results of operations; our future

business, financial and operating performance; our growth strategy and market outlook; our development of new

products and product features; our estimates and planned cost savings related to our restructuring plan; and the

success and/or market adoption of our products and solutions. We have based these forward-looking statements

on our current expectations, assumptions and projections. Our actual results or actions may differ materially from

those projected in forward-looking statements. These forward-looking statements are subject to a number of

risks, uncertainties and factors that could cause results to differ materially as described in our filings with the

Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form

10-Q. Except as may be required by law, we undertake no obligation to, and expressly disclaim any obligation to,

update or alter any forward-looking statements, whether as a result of new information, future events, changes in

assumptions or otherwise.

Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press

release issued on May 9, 2017. We are not providing any financial guidance update in this presentation.

2

Please refer to the reconciliations of GAAP to Non-GAAP financial measures in the supplemental information and on the Investor Relations section of calix.com


1.

2.

3.

4.

Calix at a Glance

The Coming Wave – Access rEvolution

The Rising Tide – Infrastructure Investment

Financials4.

5. Supplemental Information

Agenda

3

Calix at a Glance

4

© 2017 Calix | All Rights Reserved

Calix strategic focus: The access network

5

Content

Applications

Device-enabled

Subscriber


Our Customers – Over 1,300 and growing

6

21%

15%

54%

9%

Customer Mix - 2016

CenturyLink Windstream

Other Medium/Small Domestic International

Source: Calix, Inc.

http://www.frontier.com/


$107.4M

$121.2M

$131.8M

$117.5M

$124.0M

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

2Q16 3Q16 4Q16 1Q17 2Q17E

$ in m

illio

ns

Our Revenue Growth

7

$330.2

$382.6

$401.2 $407.5

$458.8

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

$500.0

$550.0

2012 2013 2014 2015 2016 2017E

$ in m

illio

ns

CAGR

+7.3%

Y/Y

+12.6%

Y/Y +

>10%

Y/Y +15.4%

Y/Y +8.4%

Y/Y +7.9%

Note: 2017 and 2Q17 revenue estimates based on mid-point of guidance provided in First Quarter 2017 Financial Results earnings release issued May 9, 2017

Y/Y +25.5%

Y/Y +19.5%

The Coming Wave

8


Our Place

9

Content

Applications

Device-enabled

Subscriber


Devices Globally

0

10

20

30

40

50

60

2015 2016 2017 2018 2019 2020

IoT

Tablets

PCs

TVs

Non-Smartphones

Smartphones

Other

50B

16B

(B)

Source: Cisco VNI and Business Intelligence

10


Cloud Growth

-

100

200

300

400

500

600

700

2006 2011 2016 2021 2026 2031

Public

Private

Traditional IT

To

tal W

ork

load

s

(M)

Source: VMware

11


The Opportunity

12

Content

Applications

Device-enabled

Subscriber

-

100

200

300

400

500

600

700

2006 2011 2016 2021 2026 2031

0

10

20

30

40

50

60

2015 2016 2017 2018 2019 2020

IT Workloads Total Devices

Source: VMware Source: Cisco VNI and Business Intelligence


The End State: a Global LAN with Flexible Operating Systems and Robust Analytics

13

Content

Applications

SimpleAlways OnFast Secure

ElevateSimplifyDiscover


Global

SDN/NFV

Ecosystem Policy Device & Service ActivationAnalytics

AP

I PLANNING OPERATIONS SUPPORT MARKETING SUBSCRIBER

Virtual

Applications

Data

Center

G.fast

NG-PON2

GigaCenter

GPON

rEvolution – Software Defined Access

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E7-2

E7-20 E3-16FE5-16F

GigaFamily

E3-2

E9-2

E5-308

E5-520

rEvolution – Systems

Data Center Outside Plant Premises

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60% of TCO related

to Network Operations

SimpleAlways On

$10B of Access

downtime

Management REST SNMP NETCONF / YANG CLI OpenFlow

Infrastructure

Hardware Abstraction Layer

Service Abstraction Layer

Control & Data

Multi-Service Protocols

Layer 3 Protocols OAM Host Services 3rd Party

Topology & Discovery Protocols

Layer 2 Protocols Multicast Protocols Traffic Management

Performance Monitoring

QoS ManagerPlatform Configuration

and UpgradeDiagnostics Syslog

Timing

rEvolution – AXOS

35

Fast

2 years to certify

and activate a service

16


Next generation cloud services that reveal

actionable insights for key business functions

and their strategic needs

▪ Discover the path to revenue growth and business efficiency through analytics

▪ Simplify decision making and accelerate time to act through data correlation

▪ Elevate key business functions to be agile and subscriber driven through actionable insights

Note: Calix Cloud subscription services introduced in October 2016. Marketing Cloud released in

April 2017.

rEvolution – Calix Cloud

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Before:

Traditional Network Architecture

• Master headend and Central office

• Maximum reach of 20km from each office

• Branch network serving up to seven hubs

• Many offices, staffed and powered

After:

With AXOS E3-2 Intelligent Node

• Distributed Access/Service Management Collapse

• Extend the reach of data centers by up to 140 km

• Integrated routing and subscriber management

• Up to 80% TCO savings realized after shuttering offices(1)

140 km

rEvolution – Disruptive Economics of the AXOS E3-2

E3-2

18(1) Calix estimates


rEvolution – Disruptive Economics of the AXOS E9-2

Defining the Access Edge

▪ Subscriber facing functions

▪ Agnostic deployments (DC,CO,HE)

▪ Ride the VNF wave

Unbounded Performance

▪ Non-blocking

▪ Lowest power

▪ Snaps into Data Center fabrics

▪ Fewer to provision and manage

▪ Less rack space, HVAC, power

Aggregation

Subscriber

Management

OLT

Aggregation

switchOLT

Core

Router

Edge

Router

Open

White Box

Switching

Compute

Store

Current

Future

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The Rising Tide

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“…We are expanding our broadband capacity throughout our network and migrating more of our traffic on-net but also diversifying away from being solely a connectivity provider… With increased availability of premium broadband speeds, enabled by our Project Excel, we have a significant opportunity to migrate customers at faster speeds, which will reduce churn and improve the customer experience. This will position Windstream to take market share and grow revenue and contribution margin.” May 4, 2017

" …as we look at the networks of the future, they're going to be built with a lot of fiber deep into the network and that network is going to be built for multiuse cases, not for a single-use case. So it's going to deliver consumer to the home application. It's going to deliver small business applications. It's going to light up enterprise buildings. And it's also going to deliver smart cities and IoT solutions, too.” April 20, 2017

“…we believe the trends we are seeing in our business offer strong validation of the rationale for our investment in high-quality, high-bandwidth, broadband network infrastructure.. consumer broadband subscriber trends have been improving the last several quarters and improved again this quarter. The key thing to note here is that in areas where we are investing in higher speeds, we are growing customers and average revenue per user”. May 3, 2017

Access is Key for Communication Service ProvidersQ1 Earnings Comments – A Rising Tide

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Source: Transcript of Q1 2017 earnings calls for respective companies


Broadband Demand Growth Unrelenting (exponential)

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Nielsen’s Law

(50% annualized

growth for high-

end connections)

has proven to be

accurate for 35+

years

Source: Nielsen Norman Group

Bits p

er

se

co

nd


COPPERFIBERWIRELESSCABLE

Unified Access

Bandwidth on

demand

Transparent

quality of

experience

VDSL2

Unlicensed Spectrum

Wi-Fi 4x4

5G /

Wi-Fi

GPONEPON

XGPON-1

NG-PON2

DOCSIS 3.0

CCAP

G.fast A2Unmatched

subscriber

experienceG.hn

XGS-PON

Community

Wi-Fi

G.fast A1HotSpot 2.0Remote OLT

DOCSIS 3.1

FTTH

Gigabit

experience

New Technologies Meet the Demand

10G-EPON

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With the shift toward higher data speeds…

DOCSIS 3.0

24 BondedGigabit GPON

DOCSIS 3.1

(initial)

10000

Gigabit FTTH

10G PON

XGS/NG-PON2

…

10G XGS/NG-PON2

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Lower Operating Costs

Source: RVA LLC: North American FTTH Accelerates, (Q4 2014), RVA LLC North America FTTH Progress and Impact 2015 (June 2015), Google Fiber Kansas City, Bernstein Proprietary Census. Survey conducted by Haynes and

Company (May 2014)

Estimated Operating Expense Savings

High Customer Take Rates

25

83%

62%

81%

72%

27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Wornall Homestead Countryside Roanoke Central Hyde Park Community College

Median HH Income Take Rate


…leading to higher revenue and penetration rates…

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Source: Cincinnati Bell (September 2014)


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

100% Aerial/0% MDU

100% Aerial/20% MDU

50% Aerial/0% MDU

50% Aerial/50% MDU

Non-Electronics/Sub Electronics/Sub

…while infrastructure builds lead electronics

Source: Suburban FTTP Network Scenarios, Telecom & Networking Equipment, The FTTP Renaissance, Implications for Vendors – Jefferies Group LLC (May 6, 2015)

Electronics represent ~15-25% of the total capex cost per unit served in a fiber deployment after initial build

costs

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Connect America FundRepurposed Universal Services Fund

▪ Nearly $4B annually now completely focused on universal broadband

▪ Multi-year investment (5-year for price cap and 10-year for rate of return)

Terms

▪ Minimum 10/1 Mbps for all carriers and minimum 25/3 Mbps for many smaller carriers

▪ Targeted by state and census block at all “uncompetitive” areas

▪ Milestone-driven buildout requirements with first price cap milestone in 2017 and first rate of return milestone in 2020

Calix Strength

▪ Market leader among eligible U.S. carriers

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Source: FCC

Financials

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Target Financial Model (1)

($ in millions, except percentage and per share amounts) 2016 Long-Term Target

Revenues $458.8 $600.0

Non-GAAP gross margin 44.9% >50%

Non-GAAP operating expenses (%) 46.6% 38-42%

Non-GAAP operating margin (1.7%) >10%

Non-GAAP EPS ($0.14) >$1.25

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(1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, 2017. We are not providing any financial guidance

update in this presentation.


Bridging the long-term financial model (1)

2016 Base

Target

RevenueBase business

growth driven by

existing customer

access network

investments

Increased market

penetration with

new customers and

new market

opportunities

Innovation driven

disruption driven by

customer

investments in next

generation networks

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Q1 2017 Financial Results vs. Guidance


($ in millions, except percentages and per

share amounts)

Actual Non-GAAP Guidance Non-

GAAP

Actual GAAP Reconciliation of

Guidance to GAAP

Revenues $117.5M $110 - $114M $117.5M $110 - $114M

Gross margin 30.1% 30.0 – 34.0% 29.3% 29.3 – 33.2%

Operating expenses $63.1M(1) $61.0 - $63.0M $67.2M $64.9 - $66.9M

EPS ($0.57) (1) ($0.57) – ($0.49) ($0.67) ($0.67) – ($0.59)

Cash flow from

operations

($23.5M) Negative

(1) Excludes the impact from Non-GAAP items including restructuring charges

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2


Q2 2017 Operating Performance Guidance(1)

($ in millions, except percentages and per share amounts) Reconciliation of

Guidance to GAAP

Revenues $122 - $126M $122 - $126M

Non-GAAP Gross margin 40.5 – 43.5% 40.5 – 43.5%

Non-GAAP Operating expenses $59.0 - $61.0M(2) $63.8 - $65.8M

Non-GAAP EPS ($0.19) – ($0.12)(2) ($0.28) – ($0.21)

Cash flow from operations (GAAP) Positive


(1) Financial guidance included in this presentation speak only as of the date of our last quarterly earnings press release issued on May 9, 2017. We are not providing any financial guidance update

in this presentation.

(2) Excludes the impact from Non-GAAP items including $1.7 million in estimated restructuring charges for Q2 2017

3

3


2017 Full Year Operating Performance Guidance(1)

At least 10% year over year revenue growth

Lower Non-GAAP net loss than reported in 2016(2)




(2) Excludes the impact from Non-GAAP items including stock-based compensation, amortization of intangibles and restructuring costs

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4

Q&A

35


Additional Information

• Additional information available at http://investor-relations.calix.com/ • Stock Information

• News & Financial Information

• Events & Presentations

• Leadership & Governance

• Investor Resources

36

http://investor-relations.calix.com/

Supplemental Information

37


GAAP to Non-GAAP Reconciliation

($ in thousands, except percentages)

(Unaudited) Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017

GAAP Revenues $99,129 $112,297 $104,999 $98,375 $107,425 $121,187 $131,800 $117,518

GAAP Cost of revenue $50,840 $59,184 $58,462 $52,893 $57,419 $67,643 $79,614 $83,141

Stock-Based Compensation (211) (163) (160) (127) (183) (174) (188) (172)

Amortization of Intangibles (2,088) (2,088) (2,089) (1,663) (814) (813) (814) (813)

Non-GAAP Cost of revenue $48,541 $56,933 $56,213 $51,103 $56,422 $66,656 $53,188 $82,156

GAAP Gross Profit $48,289 $53,113 $46,537 $45,482 $50,006 $53,544 $52,186 $34,377

GAAP Gross Margin 48.7% 47.3% 44.3% 46.2% 46.5% 44.2% 39.6% 29.3%

Stock-Based Compensation 211 163 160 127 183 174 188 172

Amortization of Intangibles 2,088 2,088 2,089 1,663 814 813 814 813

Non-GAAP Gross Profit $50,588 $55,364 $48,786 $47,272 $51,003 $54,531 $53,188 $35,362

Non-GAAP Gross Margin 51.0% 49.3% 46.5% 48.1% 47.5% 45.0% 40.4% 30.1%

Q2 2015 – Q1 2017 Cost of Revenue and Gross Margins

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($ in thousands, except per share amounts)

Unaudited Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017

GAAP Operating Expenses $54,054 $52,236 $56,272 $56,220 $55,887 $52,809 $64,421 $67,193

Stock-Based Compensation (4,130) (2,427) (3,052) (2,594) (2,785) (4,503) (3.731) (3,368)

Restructuring charges 0 0 0 0 0 0 0 (699)

Amortization of Intangibles (2,552) (2,552) (2,552) (1,701) 0 0 0 0

Acquisition-Related Costs (52) (106) (24) (275) (76) 0 0 0

Non-GAAP Operating Expenses $47,320 $47,151 $50,644 $51,650 $53,026 $48,306 $60,690 $63,126

GAAP Net Income/(Loss) ($5,779) $922 ($9,546) ($10,729) ($5,826) $636 ($11,483) ($33,325)

Stock-Based Compensation 4,341 2,590 3,212 2,721 2,968 4,677 3,919 3,540

Restructuring charges 0 0 0 0 0 0 0 699

Amortization of Intangibles 4,640 4,640 4,641 3,364 814 813 814 813

Acquisition-Related Costs 52 106 24 275 76 0 0 0

Non-GAAP Net Income/(Loss) $3,254 $8,258 ($1,669) ($4,369) ($1,968) $6,126 ($6,750) ($28,273)

Basic Shares 51,950 51, 756 50,578 48,591 48,371 48,773 49,146 49,525

Diluted Shares 52,455 52,016 50,578 48,591 48,371 49,309 49,146 49,525

GAAP Income/(Loss) per share ($0.11) $0.02 ($0.19) ($0.22) ($0.12) $0.01 ($0.23) ($0.67)

Stock-Based Compensation 0.08 0.05 0.06 0.06 0.06 0.09 0.08 0.07

Restructuring charges 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01

Amortization of Intangibles 0.09 0.09 0.09 0.07 0.02 0.02 0.02 0.02

Acquisition-Related Costs 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00

Non-GAAP Income/(Loss) per share $0.06 $0.16 ($0.03) ($0.09) ($0.04) $0.12 ($0.14) ($0.57)

GAAP to Non-GAAP ReconciliationQ2 2015 – Q1 2017 Operating Expenses and Net Income/(Loss) per share

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Unaudited Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017

GAAP Gross Margin – Systems 48.7% 47.5% 44.8% 48.0% 48.6% 46.8% 43.7% 37.4%

Stock-Based Compensation 0.2% 0.1% 0.1% 0.1% 0.7% 0.1% 0.1% 0.1%

Amortization of Intangibles 2.3% 1.9% 2.1% 1.8% 0.8% 0.7% 0.7% 0.9%

Non-GAAP Gross Margin - Systems 51.1% 49.6% 47.1% 49.9% 49.5% 47.6% 44.4% 38.4%

GAAP Gross Margin – Services 49.4% 40.6% 34.5% 22.3% 18.7% 2.5% -15.7% 0.6%

Stock-Based Compensation 0.5% 0.7% 0.6% 0.6% 0.8% 0.8% 0.7% 0.2%

Non-GAAP Gross Margin – Services 49.9% 41.3% 35.1% 22.9% 19.5% 3.2% -15.0% 0.8%

GAAP to Non-GAAP ReconciliationQ2 2015 – Q1 2017 Systems and Services Gross Margin

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($ in thousands, except percentages and per share amounts)

Outlook

Three Months Ending

July 1, 2017

GAAP Gross Margin 40.4% - 43.5%

Stock-Based Compensation 0.00%-0.01%

Non-GAAP Gross Margin 40.5% – 43.5%

GAAP Operating Expenses $ 63,800 - $ 65,800

Stock-Based Compensation (3,100)

Restructuring charges (1,700)

Non-GAAP Operating Expenses $59,000 - $61,000

GAAP net loss per diluted share ($0.28) – ($0.21)

Stock-Based Compensation 0.06

Restructuring charges 0.03

Non-GAAP net loss per diluted share ($0.19) – ($0.12)

GAAP to Non-GAAP ReconciliationQ2 2017 Operating Performance Outlook (1)

41




Outlook

Twelve Months

Ending

December 31, 2017

Estimated per common share adjustments for:

Stock-Based Compensation $0.25

Amortization of Intangibles 0.02

Restructuring charges 0.13

Total GAAP to non-GAAP net loss per common share adjustments $0.40

GAAP to Non-GAAP Reconciliation2017 Net Loss Outlook (1)

42

