Company: CALX
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001406666-25-000008
Chunk: 85

Company: CALIX, INC
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1B
Chunk 85
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bound shipping costs and tariffs are included in the cost of inventory. In addition, from time to time, the Company procures component inventory primarily as a result of manufacturing discontinuation of critical components by suppliers or a change in suppliers. Furthermore, as a result of the global pandemic-induced supply chain challenges and supply assurance plans, the Company has purchased, and may continue to purchase, 

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excess components from its suppliers and consign components back to its suppliers to be consumed on future finished good builds.The Company regularly monitors inventory on-hand and record write-downs for excess and obsolete inventory. The Company also evaluates its supplier purchase commitments and records a liability for excess and obsolete components consistent with the valuation of the Company’s excess and obsolete inventory and future production requirements. These write-downs and accruals are based on the Company’s assumptions of demand for our products and requires significant judgement of relevant factors including a comparison of the quantity and cost of inventory on hand to the Company’s estimated forecast of customer demand, current levels of orders and backlog, market conditions, potential obsolescence of technology, product life cycles and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds the Company’s estimated selling price. Factors that could influence management’s assumptions and judgements include changes in economic conditions, competitive dynamics, winning or losing a key customer, changes in the Company’s customers’ capital expenditures, government investment programs, technology changes, new product introductions and supply-chain lead times. Actual demand may differ from forecasted demand and may have a material effect on gross profit. If inventory is written down, a new cost basis is established that cannot be increased in future periods.Contract CostsThe Company capitalizes certain sales commissions related primarily to multi-year cloud-based software subscriptions and extended warranty support contracts.Capitalized commissions are amortized as sales and marketing expenses over the period that the related revenue is recognized, which can be up to five years for extended warranty. The Company classifies the unamortized portion of deferred commissions as current or noncurrent based on the timing of when the Company expects to recognize the expense. The current and noncurrent portions of deferred commissions are included in “Prepaid expenses and other current assets” and “Other assets,” respectively, in the Company’s Consolidated Balance Sheets.Property and EquipmentProperty and equipment are stated at cost, less accumulated depreciation, and are depreciated using the straight-line method over the estimated useful life of each asset. Generally, computer equipment is depreciated over two years; purchased software is depreciated over three to five years; test