calx-20240330

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 March 30, 2024


☐			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 Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.025 per share

CALX

New 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 Filer

☒

Accelerated Filer

☐

Non-accelerated filer

☐

Smaller 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

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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 15, 2024, there were 65,525,049 shares of the Registrant’s common stock, par value $0.025, outstanding.

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CALIX, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			4

Item 1. Financial Statements (Unaudited)			4

Condensed Consolidated Balance Sheets			4

Condensed Consolidated Statements of Comprehensive Income (L oss)			5

Condensed Consolidated Statements of Stockholders ’ Equity			6

Condensed Consolidated Statements of Cash Flows			7

Notes to Condensed Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18

Overview			18

Critical Accounting Policies and Estimates			19

Results of Operations			19

Liquidity and Capital Resources			22

Item 3. Quantitative and Qualitative Disclosures About Market Risk			23

Item 4. Controls and Procedures			24

PART II. OTHER INFORMATION			26

Item 1. Legal Proceedings			26

Item 1A. Risk Factors			26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			41

Item 3. Defaults Upon Senior Securities			41

Item 4. Mine Safety Disclosures			41

Item 5. Other Information			41

Item 6. Exhibits			42

SIGNATURES			43

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PART I. FINANCIAL INFORMATION

ITEM 1.Financial Statements

CALIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)


	March 30, 2024		December 31, 2023
	(Unaudited)		(See Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	88,418	$	63,409
Marketable securities	151,064		156,937
Accounts receivable, net	100,307		126,027
Inventory	119,782		132,985
Prepaid expenses and other current assets	119,214		118,598
Total current assets	578,785		597,956
Property and equipment, net	28,876		29,461
Right-of-use operating leases	9,065		9,262
Deferred tax assets	170,213		167,691
Goodwill	116,175		116,175
Other assets	19,674		21,320
	$	922,788	$	941,865
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	19,026	$	34,746
Accrued liabilities	87,605		116,227
Deferred revenue	39,448		36,669
Total current liabilities	146,079		187,642
Long-term portion of deferred revenue	24,434		24,864
Operating leases	6,925		7,421
Other long-term liabilities	2,657		2,956
Total liabilities	180,095		222,883
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 March 30, 2024 and December 31, 2023	—		—
Common stock, $0.025 par value; 100,000 shares authorized; 65,525 shares issued and outstanding as of March 30, 2024, and 65,052 shares issued and outstanding as of December 31, 2023	1,638		1,627
Additional paid-in capital	1,102,314		1,078,393
Accumulated other comprehensive loss	(983)		(659)
Accumulated deficit	(360,276)		(360,379)
Total stockholders’ equity	742,693		718,982
	$	922,788	$	941,865

See accompanying notes to condensed consolidated financial statements.

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CALIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)


	Three Months Ended
	March 30, 2024		April 1, 2023

Revenue	$	226,310	$	250,008
Cost of revenue	103,733		121,957
Gross profit	122,577		128,051
Operating expenses:
Sales and marketing	53,897		51,865
Research and development	44,422		43,173
General and administrative	26,290		23,077


Total operating expenses	124,609		118,115
Operating income (loss)	(2,032)		9,936
Interest income and other expense, net:
Interest income, net	2,635		1,640
Other expense, net	(135)		(167)
Total interest income and other expense, net	2,500		1,473
Income before income taxes	468		11,409
Income taxes	365		1,811
Net income	$	103	$	9,598
Net income per common share:
Basic	$	0.00	$	0.15
Diluted	$	0.00	$	0.14
Weighted-average number of shares used to compute
net income per common share:
Basic	65,338		66,044
Diluted	68,119		69,708

Net income	$	103	$	9,598
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale marketable securities, net	(212)		1,064
Foreign currency translation adjustments, net	(112)		102
Total other comprehensive income (loss), net of tax	(324)		1,166
Comprehensive income (loss)	$	(221)	$	10,764

See accompanying notes to condensed consolidated financial statements.

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CALIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2023	65,052	$	1,627	$	1,078,393	$	(659)	$	(360,379)	$	718,982
Stock-based compensation	—	—		16,856		—		—		16,856
Issuance of common stock under equity incentive plans, net of forfeitures	587	14		10,800		—		—		10,814
Repurchases of common stock	(114)	(3)		(3,735)		—		—		(3,738)
Net income	—	—		—		—		103		103
Other comprehensive loss	—	—		—		(324)		—		(324)
Balance as of March 30, 2024	65,525	$	1,638	$	1,102,314	$	(983)	$	(360,276)	$	742,693


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2022	65,735	$	1,644	$	1,070,100	$	(2,473)	$	(389,704)	$	679,567
Stock-based compensation	—	—		16,220		—		—		16,220
Issuance of common stock under equity incentive plans, net of forfeitures	534	13		12,458		—		—		12,471
Repurchases of common stock	(25)	(1)		(1,182)		—		—		(1,183)
Net income	—	—		—		—		9,598		9,598
Other comprehensive income	—	—		—		1,166		—		1,166
Balance as of April 1, 2023	66,244	$	1,656	$	1,097,596	$	(1,307)	$	(380,106)	$	717,839

See accompanying notes to condensed consolidated financial statements.

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CALIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)


	Three Months Ended
	March 30, 2024		April 1, 2023
Operating activities:
Net income	$	103	$	9,598
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	16,856		16,220
Depreciation and amortization	4,867		3,723
Deferred income taxes	(2,448)		(681)
Net accretion of available-for-sale securities	(1,406)		(708)
Changes in operating assets and liabilities:
Accounts receivable, net	25,719		1,595
Inventory	13,203		(7,353)
Prepaid expenses and other assets	272		(7,083)
Accounts payable	(15,973)		(5,899)
Accrued liabilities	(28,056)		(8,688)
Deferred revenue	2,348		11,005
Other long-term liabilities	(794)		(3,617)
Net cash provided by operating activities	14,691		8,112
Investing activities
Purchases of property and equipment	(3,709)		(4,618)
Purchases of marketable securities	(35,575)		(54,908)
Maturities of marketable securities	42,565		56,248
Net cash provided by (used in) investing activities	3,281		(3,278)
Financing activities:
Proceeds from common stock issuances related to employee benefit plans	10,814		12,471
Repurchases of common stock	(3,738)		(1,183)
Payments related to financing arrangements	—		(1,066)
Net cash provided by financing activities	7,076		10,222
Effect of exchange rate changes on cash and cash equivalents	(39)		57
Net increase in cash and cash equivalents	25,009		15,113
Cash and cash equivalents at beginning of period	63,409		79,073
Cash and cash equivalents at end of period	$	88,418	$	94,186

See accompanying notes to condensed consolidated financial statements.

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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 a platform (cloud, software and systems) and managed services that focus on the subscriber-facing network, the portion of the network that governs available bandwidth and determines the range and quality of services that can be offered to subscribers. This platform and managed services enable broadband service providers (“BSPs”) of all sizes to innovate and transform their businesses. The Company’s BSP customers are empowered to utilize real-time data and insights from the Calix platform 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, 2023 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, 2023.

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 March 30, 2024 than for the three months ended April 1, 2023. 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.

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, 2023. The Company’s significant accounting policies did not change during the three months ended March 30, 2024.

Newly Adopted Accounting Standard

The Company did not adopt any new accounting standards during the three months ended March 30, 2024 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 March 30, 2024 as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, that are significant or expected to be significant to the Company.

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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 U.S. treasury securities, corporate debt instruments, commercial paper 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 U.S. treasury securities, corporate debt instruments, commercial paper 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 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 each of the three months ended March 30, 2024 and April 1, 2023.

Cash, cash equivalents and marketable securities consisted of the following (in thousands):


	March 30, 2024		December 31, 2023
Cash and cash equivalents:
Cash	$	34,063	$	18,040
Commercial paper	28,704		32,837
Money market funds	21,556		2,563
U.S. government securities	3,098		9,969
U.S. government agency securities	997		—

Total cash and cash equivalents	88,418		63,409
Marketable securities:
U.S. government securities	83,412		92,277
U.S. government agency securities	40,287		43,521
Commercial paper	20,366		14,139
Corporate debt securities	6,999		7,000
Municipal securities	—		—
Total marketable securities	151,064		156,937
	$	239,482	$	220,346

The carrying amounts of the Company’s money market funds approximate their fair values due to their nature, duration and short maturities.

The amortized cost and fair value of marketable securities were as follows (in thousands):


As of March 30, 2024	Amortized Cost		Unrealized Losses		Fair Value
U.S. government securities	$	86,588	$	(78)	$	86,510
Commercial paper	49,092		(22)		49,070
U.S. government agency securities	41,439		(155)		41,284

Corporate debt securities	7,027		(28)		6,999
	$	184,146	$	(283)	$	183,863


As of December 31, 2023	Amortized Cost		Unrealized Losses		Fair Value
U.S. government securities	$	102,167	$	80	$	102,247
Commercial paper	47,003		(28)		46,975
U.S. government agency securities	43,573		(52)		43,521
Corporate debt securities	6,999		1		7,000

	$	199,742	$	1	$	199,743

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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 March 30, 2024	Level 1		Level 2		Total
Money market funds	$	21,556	$	—	$	21,556
U.S. government securities	86,510		—		86,510
Commercial paper	—		49,070		49,070
U.S. government agency securities	—		41,284		41,284

Corporate debt securities	—		6,999		6,999
	$	108,066	$	97,353	$	205,419


As of December 31, 2023	Level 1		Level 2		Total
Money market funds	$	2,563	$	—	$	2,563
U.S. government securities	102,246		—		102,246
Commercial paper	—		46,976		46,976
U.S. government agency securities	—		43,521		43,521
Corporate debt securities	—		7,000		7,000

	$	104,809	$	97,497	$	202,306

5. Balance Sheet Details

Accounts receivable, net consisted of the following (in thousands):


	March 30, 2024		December 31, 2023
Accounts receivable	$	100,617	$	126,331
Allowance for doubtful accounts	(310)		(304)
	$	100,307	$	126,027

Inventory consisted of the following (in thousands):


	March 30, 2024		December 31, 2023
Raw materials	$	25,675	$	22,119
Finished goods	94,107		110,866
	$	119,782	$	132,985

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Prepaid expenses and other current assets consisted of the following (in thousands):


	March 30, 2024		December 31, 2023
Supplier deposits	$	76,131	$	78,131
Prepaid expenses and other current assets	43,083		40,467
	$	119,214	$	118,598

Property and equipment, net consisted of the following (in thousands):


	March 30, 2024		December 31, 2023
Test equipment	$	52,838	$	50,853
Computer equipment	14,008		13,615
Software	10,534		12,972
Leasehold improvements	2,107		2,122
Furniture and fixtures	1,267		1,283
Total	80,754		80,845
Accumulated depreciation and amortization	(51,878)		(51,384)
	$	28,876	$	29,461

Accrued liabilities consisted of the following (in thousands):


	March 30, 2024		December 31, 2023
Component inventory held by suppliers	$	25,536	$	32,182
Compensation and related benefits	22,630		36,741
Professional and consulting fees	6,985		7,717
Current portion of warranty and retrofit	5,581		5,655
Operating leases	4,236		4,142
Taxes payable	4,165		4,317
Litigation settlement	3,250		3,250
Product returns	3,040		2,897
Customer advances or rebates	3,038		5,967
Insurance	2,106		2,107

Business events	—		2,938
Other	7,038		8,314
	$	87,605	$	116,227

Changes in the Company’s accrued warranty and retrofit liability were as follows (in thousands):


	Three Months Ended
	March 30, 2024		April 1, 2023
Balance at beginning of period	$	8,029	$	8,386
Accruals for product warranty and retrofit	339		1,016
Cost of warranty and retrofit claims	(713)		(957)

Balance at end of period	$	7,655	$	8,445

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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 March 30, 2024 (in thousands):


Period	Future Minimum Lease Payments
Remainder of 2024	$	3,522
2025	4,545
2026	1,672
2027	1,240
2028 and thereafter	1,048

Total future minimum lease payments	12,027
Less imputed interest	(866)
	$	11,161

As of March 30, 2024, the operating lease liability consisted of the following (in thousands):



Accrued liabilities - current portion of operating leases	$	4,236
Operating leases	6,925
	$	11,161

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 $4.3 million and are included in the table above.

The weighted average discount rate for the Company’s operating leases as of March 30, 2024 was 5.1%. The weighted average remaining lease term as of March 30, 2024 was 3.1 years.

For the three months ended March 30, 2024 and April 1, 2023, total rent expense of the Company was $1.1 million and $1.2 million, respectively. Cash paid within operating cash flows for operating leases was $1.1 million and $1.2 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

Purchase Commitments

The Company’s contract manufacturers (“CMs”) and original design manufacturers (“ODMs”) place orders for component inventory based upon the Company’s build forecasts and pursuant to stated component lead times to 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 it takes ownership of the finished goods inventory after the CMs and ODMs convert the component inventory into a finished product.

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 actual demand. 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. The estimated excess and obsolete component liabilities related to manufacturing and engineering change orders, termination of manufacturing partners and other factors are included in “Accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets, because the corresponding component parts have not been received by the Company. The Company records the related charges in “Cost of revenue” in its Condensed Consolidated Statements of Comprehensive Income (Loss).

As of March 30, 2024 and December 31, 2023, the Company had approximately $146.8 million and $176.3 million, respectively, of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs.

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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 proceeding or any legal proceeding known to be contemplated by government authorities that, if determined adversely to the Company, in management’s opinion, is 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 March 30, 2024, there were 2.9 million shares available for issuance under the 2019 Plan.

During the three months ended March 30, 2024, time-based 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 $35.95 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 2024, performance-based stock option awards exercisable for up to an aggregate of 2.4 million shares of common stock were granted to certain Company executives with a grant date exercise price of $34.26 per share and divided into two plans, with the first plan accounting for 75% of the total shares granted and the second plan accounting for 25% of the total shares granted. The actual number of shares earned is contingent upon achievement of annual corporate financial targets for bookings and non-GAAP net operating income for 2024 (collectively, the “2024 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 2024 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. For the first plan, if the non-GAAP net operating income target and the bookings target are each achieved below 80% of target, no shares would be awarded, and the performance-based stock option awards would be forfeited in full. If either target is achieved at the minimum threshold of 80% of target, then the shares are awarded at 75% of the granted shares, with an increasing percentage of shares awarded above the minimum thresholds up to 120% of the granted shares for each target. Each target result is then weighted by 50% and the combined total determines the percent of target shares. The maximum combined award is 100%. For the second plan, if the bookings target is achieved below 90% of target, the performance-based stock option awards would be forfeited in full. If the target is achieved at the minimum threshold of 90% of target, then the shares are awarded at 75% with an increasing percentage of shares awarded above the minimum thresholds up to 100% of the granted shares. The maximum award is 100%. The probability of meeting a portion of the performance conditions related to these performance-based stock option awards was assessed to be probable as of March 30, 2024, and stock-based compensation expense of $1.7 million was recognized for the three months ended March 30, 2024.

During the three months ended March 30, 2024, 168,000 shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $8.56 per share. As of March 30, 2024, unrecognized stock-based compensation expense of $87.8 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.3 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.

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 March 30, 2024, there were 4.3 million shares available for issuance under the ESPP. During the three months ended March 30,

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2024, 0.2 million shares were purchased under the ESPP. As of March 30, 2024, unrecognized stock-based compensation expense of $0.9 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 recurring 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. The NQ ESPP provides quarterly offering periods from February 8th through May 7th, May 8th through August 7th, August 8th through November 7th and November 8th through February 7th of each year, with a maximum of 0.25 million shares allocated per purchase period. The maximum number of shares of common stock currently authorized for issuance under the NQ ESPP is 7.5 million shares. As of March 30, 2024, there were 3.1 million shares available for issuance under the NQ ESPP. During the three months ended March 30, 2024, 0.2 million shares were purchased and issued. As of March 30, 2024, unrecognized stock-based compensation expense of $11.3 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 0.8 years.

Stock-Based Compensation

The following table summarizes stock-based compensation expense (in thousands):


	Three Months Ended
	March 30, 2024		April 1, 2023
Cost of revenue	$	636	$	800
Sales and marketing	4,850		4,432
Research and development	4,515		4,312
General and administrative	6,855		6,676
	$	16,856	$	16,220
Income tax benefit recognized	$	3,312	$	4,153

Stock Repurchase Program

The Company maintains a common stock repurchase program. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The specific timing, price and size of the purchases depends on prevailing stock prices, general economic and market conditions, and other considerations consistent with the Company’s capital allocation strategy. The repurchase program does not obligate the Company to acquire a particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. For the three months ended March 30, 2024, the Company purchased

SEC Form 10-Q filed by Calix Inc