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Calix Files for an IPO

Why wait for 2012? The end of the world is starting right now: Calix Inc. (NYSE: CALX) has filed to go public.

We'll repeat that while you get your jaw off the floor: Calix has filed to go public.

Light Reading has been running stories about theoretical Calix IPOs since the dawn of time (or maybe 2004). There was the time the hot access equipment startup sought an executive "to prepare the company for Sarbannes/Oxley compliance." (See Calix Picking Public Beancounters.) There was the time when sources swore that IPO paperwork was all but complete. (See Calix IPO Talk Resurfaces.) There was the CFO hiring early last year, surely a sign that something was imminent. (It wasn't.) (See Calix IPO Still on Hold.)

And don't mention all those appearances on our Top Private Companies lists. (See Light Reading's Top Ten Private Companies.)

Over the years, CEO Carl Russo has repeatedly told Light Reading that he relishes the life of a privately held company. (See Full Transcript of LRTV’s Interview With Carl Russo, CEO, Calix .) But he usually added that an IPO, someday, wouldn't be out of the question.

Of course, the fun of an IPO filing is that you get to see how much money Calix has been making -- or not. Here are the numbers from its S-1 filing today.

Table 1: Calix's Financials
2006 2007 2008
Revenues ($M) 203.6 193.8 250.5
Net income (loss) ($M) (19.5) (24.9) (12.9)
Income (loss) per share ($4.17) ($4.64) ($2.85)
Source: Calix.




For the nine months ended Sept. 26, 2009, Calix is reporting revenues of $144.6 million and net losses of $28.3 million, or $4.69 per share.

Today's filing is a preliminary one, providing no specifics on the total number of shares to be offered. For purposes of calculating the registration fee, Calix wrote $100 million as a maximum price for the offering.

The underwriters are Goldman Sachs & Co. , Morgan Stanley , Jefferies & Co. Inc. , and UBS Investment Bank .

— Craig Matsumoto, West Coast Editor, Light Reading

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danp5648 12/5/2012 | 3:52:15 PM
re: Calix Files for an IPO

"Many CSPs significantly decreased their capital spending in order to conserve cash and significantly reduced their orders for our access systems and software. our visibility into our projected revenue and cash flows declined and our expectations of growth decreased significantly As a result, the fair market value of our common stock decreased significantly between October 22, 2008 and January 27, 2009 orders for our access systems and software declined during the first and second quarters of 2009, and our revenue in the first and second quarters of 2009 declined over the corresponding periods in 2008 As a result, the fair market value of our common stock decreased between January 27, 2009 and July 14, 2009. On July 14, 2009, our board of directors determined the fair market value of our common stock was $3.49.&nbsp; October 2009 CSPs&rsquo; capital spending generally began to increase. Our prospects and our expectations of growth improved and our third quarter revenue was flat from the corresponding period in 2008 (the same as Enablence) .



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paolo.franzoi 12/5/2012 | 3:52:14 PM
re: Calix Files for an IPO

Niles,


You are making the same mistake that OSX is.&nbsp; You are both assuming that the rural telcos are not spending due to lack of RUS loan availability.&nbsp; This is simply NOT true.&nbsp; These loans are not subscribed 100% for available funds.&nbsp; Why?&nbsp; The budgets of the these telcos ALREADY take the loans into account.&nbsp; These budgets are not going to change.&nbsp; That is why the GRANT money is the only real increase as this is an INCREASE to the budget dollars.&nbsp; The loan money already exists.


If there are 1% loans already why not put $100T dollars on the table for loans?&nbsp; That will make the market almost infinite right?&nbsp; The reason is that the market for these loans is basically fixed.


seven

paolo.franzoi 12/5/2012 | 3:52:14 PM
re: Calix Files for an IPO

OSX,


Here is what you are missing on the RUS money.&nbsp; The RUS COULD have loaned more last year but nobody applied for the funds as their budgets were tapped out.&nbsp; So, the kind of carriers that bought money with RUS funds are already at 100% of spend with loans.&nbsp; So allocated them $1T in loans and the gain is still 0.


The people that might go for loans from this money are not buying from Calix, Adtran or Occam because they are not Tier 3 telcos.&nbsp; The tier 3s are already spending 100% of their budgets.&nbsp; The Tier 2s and Tier 1s have already rejected these funds.


seven


&nbsp;

Toad680 12/5/2012 | 3:52:14 PM
re: Calix Files for an IPO

OSXman, that is an interesting point you are making.&nbsp; Would you mind explaining in english what a loan loss reserve means and how that can go from 500 million to 7 billion in funding?&nbsp; Thanks.

Niles_3.0 12/5/2012 | 3:52:14 PM
re: Calix Files for an IPO According to Adelstein the historic default rate on RUS loans is very low, less than 1%. The subsidy rate is also very low as well, only about 7%. So, to loan $1mm to help fund a rural telco network project it really only costs the government about $72K.

OSXman is correct in that a $500mm reserve results in $7B or so in loans. This stimulus spend is actually going to be bigger than most people think.
OSXman 12/5/2012 | 3:52:14 PM
re: Calix Files for an IPO

Basically, the RUS is acting as a bank, allowing telcos to borrow at the treasury rate.&nbsp; The only cost to the RUS is when carriers borrow and then subsequently default.&nbsp; The RUS obviously doesn't know who is going to default, but hey have probabilistic experience based on the past and they can lend on this basis.&nbsp;


&nbsp;


Adelstein has basically said they will lever up about 14 to 1, which turns $500mm of loan loss reserve into $7 billion of actual loans.

Niles_3.0 12/5/2012 | 3:52:13 PM
re: Calix Files for an IPO Problem is, the only way to get a grant award from RUS is to submit an app with a loan component high enough to get approved. Apps requesting 100% grants are most likely dead in the water. The result should be a total spend larger than the original $7.2B headline number.

With 25-30% of their customer base submitting apps in round one alone, I think Occam will be a beneficiary of the stimulus.
OSXman 12/5/2012 | 3:52:12 PM
re: Calix Files for an IPO

Both Seven and Niles make legitimate points, but I think Niles is looking at it correctly.&nbsp;


The RUS has been undersubscribed in the past relative to its lending capacity, but how do you explain $28 billion of grant/loan applications?&nbsp;


I think anyone who is applying based only on a 100% grant doesn't have a very good shot at financing.&nbsp; The key is that these are grant/loan combos, which weren't previously available.&nbsp;


Let's take a look at the West Kentucky Rural Telephone application.&nbsp; They are an Occam customer.&nbsp; They have a $123mm project.&nbsp; They are kicking in $10mm of equity, asking for $28mm of grants and $85mm of loans.&nbsp; They would not have done this in the absence of the grant component.

bollocks187 12/5/2012 | 3:52:12 PM
re: Calix Files for an IPO

Calix only options is to go and get an IPO as I am sure with them losing money on a regular basis the investors need an out or payback.


The challenge for Calix is can they be profitable !


Surely with this amount of revenue they can achieve this simply goal. Perhaps it is a simple case of "buying' the market up the VC money they have raised $500M I'm guessing please clarify if you know how much they have raised.


Now with market conditions and VC dry funds they are 'forced' to go to an IPO - not be design but out of survival.


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&nbsp;


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Toad680 12/5/2012 | 3:52:11 PM
re: Calix Files for an IPO

Thanks for explaining that earlier OSX.&nbsp; It surely has sparked some interesting debate.&nbsp; But I have to believe that with $28bn in applications, which are combinations of grants and loans and equity, that the RUS is going to be able to leverage the loan loss reserve.

So let&rsquo;s say that the stimulus is $13 billion.&nbsp; Not all of that will get spent on access gear.&nbsp; Let&rsquo;s assume that 15% does, which is probably low, but there will be wireless, etc.&nbsp;&nbsp; That means that about $2 billion of funding will go toward access gear.

There has been a pretty clear trend in the applications toward tier 3 SPs and the bulk of that money is heading here.&nbsp;&nbsp; Depending on whose estimate you look at for tier 3 access gear, the annual figure is ~$400-500 million.

That means a potential stimulus of 4-5x the size of the market being applied over the next 2-3 years.&nbsp; I have Calix at 38% and Occam at 21% share of that market currently.&nbsp; Both are going to do very well if these numbers are accurate and I don&rsquo;t imagine there is going to be any near-term margin pressure.

Calix may finally actually make it public&hellip;

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