Occam Networks Announces Third-Quarter 2008 Results

Revenue for the third quarter was $25.1 million, up 10 percent compared with the prior quarter and up over 60 percent from the same quarter a year ago. The sequential increase in revenue was due to higher sales of fiber products.

Gross margin was $10.8 million, or 43% of revenue, compared with $10.1 million, or 44% of revenue, for the prior quarter. Gross margin for the second quarter of 2008 benefited from a one-time warranty reserve adjustment. Gross margin for the third quarter of 2007 was $5.7 million, or 36% of revenue.

As reported under U.S. generally accepted accounting principles (GAAP), net loss attributable to common stockholders for the third quarter of 2008 was $659,000, or a loss of $0.03 per basic share, compared with a net loss of $2.7 million, or a loss of $0.13 per basic share, for the second quarter of 2008 and with a net loss of $4.9 million, or $0.25 per basic share, for the third quarter of 2007.

Non-GAAP net loss attributable to common stockholders for the third quarter of 2008, which excludes stock-based compensation expense of $628,000, was $31,000, or a loss of $0.00 per basic share. This compared with a net loss of $1.7 million, or a loss of $0.09 per basic share, for the second quarter of 2008 and with a net loss of $4.4 million, or a loss of $0.22 per basic share, for the third quarter of 2007. A reconciliation of Occam's non-GAAP results to its GAAP net loss is provided in the financial statements portion of this news release.

"During the quarter, we saw strong initial customer adoption of our new GPON product, recorded additional incremental sales to FairPoint for its Northern New England Initiative, and continued to grow our overall customer base," said Bob Howard-Anderson, president and CEO of Occam. "In addition we made good progress toward our goal of returning to profitability. While the impact of the current economic environment is difficult to predict, we are encouraged by our results and the early success of GPON."

Highlights for the third quarter of 2008 included:

-- 16th consecutive quarter with 10 or more new customer wins

-- Continued customer adoption of GPON product with more than 10 network design wins

-- Acquisition of additional Canadian customers -- expanding Occam's footprint in both Ontario and Quebec -- where there are the highest number of Tier 2 and 3 service providers in Canada

-- Continued sales traction with FairPoint Communications for its major broadband initiative in Northern New England

-- Metro Ethernet Forum certification of Occam's BLC 6450, BLC 6312 and BLC 6314 products, demonstrating the company's innovative product leadership.

Business Outlook

Occam currently expects annual revenue for fiscal 2008 to remain in the range of $90 million to $95 million and full-year gross margin percentage between 40% and 42%.

Today's Conference Call

Occam plans to hold a teleconference to discuss its third-quarter results at 5:00 p.m. EST (2:00 p.m. PST) today. The call can be accessed by dialing (719) 325-2399 (for both U.S. and international callers). A live and archived webcast of the call will be available on the Occam website for up to one year after the call. To access the webcast, go to the Investor Relations page at http://www.occamnetworks.com, select "Earnings Calls" at the bottom of the page and click on the "Q3 2008 Webcast" link. In addition to the webcast, a phone replay will be available for one week after the live call at (719) 457-0820, code number 8439124.

Non-GAAP Disclosure

Certain non-GAAP financial measures are included in this news release. Occam's GAAP results have been adjusted to exclude stock-based compensation charges associated with the issuance of stock options, restricted stock units, and restricted stock. These non-GAAP financial measures are provided to enhance the reader's overall understanding of the company's financial performance and company prospects for the future. Specifically, Occam believes non-GAAP measures can provide useful information to both management and investors by excluding certain non-cash expenses that are not indicative of the company's core operating results. Further, these non-GAAP financial measures are one of the primary indicators management uses for planning and forecasting future periods. In addition, since Occam has historically reported non-GAAP measures to the investment community, management believes the inclusion of non-GAAP measures provides consistency in Occam's financial reporting. The presentation of this additional information is not meant to be considered a substitute for, or superior to, the financial measures prepared in accordance with GAAP. A reconciliation of GAAP to non-GAAP net loss is included below.

Cautionary Note Concerning Forward-Looking Statements

This news release contains forward-looking statements within the meaning of applicable securities laws, including statements about the company's expectations relating to fiscal 2008 revenues and gross margin percentage, the company's efforts to return to profitability and improve operating performance, and the status of the relationship with FairPoint. Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those indicated in forward-looking statements. Risks and uncertainties that could adversely affect the company's business, revenues, results of operations and financial condition include, without limitation, the following: (i) the company's revenues and operating results have varied substantially on a quarter-to-quarter basis in the past and are likely to continue to vary in the future based, among other factors, on levels of customer demand, capital investment trends in the telecommunications industry, the size and timing of orders the company receives, and potentially substantial delays from the time the company receives orders until the company may recognize revenue under applicable revenue recognition rules; (ii) the company's expectations concerning gross margin percentage rely on assumptions concerning revenues and costs, particularly manufacturing costs, that are subject to substantial uncertainty; (iii) the company cannot predict the amount or timing of orders from FairPoint or the timing of its ability to recognize resulting revenue; (iv) capital investment in the telecommunications industry may be reduced if macroeconomic weakness continues in North America; (v) any inability to remedy previously disclosed internal control deficiencies could have an adverse impact on the reliability of the company's financial statements; and (vi) the company is subject to litigation risks associated with pending stockholder litigation arising from its recent audit committee investigation and financial restatement. The company makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. Please also refer to the company's most recent Annual Report on Form 10-K filed on March 11, 2008 and Quarterly Reports on Form 10-Q filed on August 11, 2008, as well as the company's future filings with the SEC, for other important risk factors that could cause the company's actual results to differ materially from those contained in any forward-looking statements.

About Occam Networks Inc.

Occam Networks' broadband access solutions empower service providers to offer profitable new voice, data, and video services over copper and fiber. Occam systems deliver flexibility and scalability in a Triple Play world. Over 2 million BLC 6000 ports are currently deployed at over 300 service providers in North America and CALA. For more information, please visit www.occamnetworks.com.

Occam Networks and Occam BLC 6000 are either registered trademarks or trademarks of Occam Networks, Inc. in the United States and/or other countries.

All other trademarks mentioned are the property of their respective owners.

OCCAM NETWORKS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands, except share data) September 30, December 31, 2008 2007 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 21,882 $ 37,637 Restricted cash 16,909 13,103 Accounts receivable, net 17,104 14,819 Inventories 18,965 13,371 Prepaid and other current assets 3,215 2,108 Total current assets 78,075 81,038 Property and equipment, net 11,035 8,874 Intangibles, net 161 890 Other assets 89 83 Total assets $ 89,360 $ 90,885 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,879 $ 10,135 Accrued expenses 7,128 6,464 Deferred revenue 14,575 12,420 Deferred rent 403 237 Capital lease obligations 23 17 Total current liabilities 32,008 29,273 Deferred rent, net of current portion 1,958 1,299 Capital lease obligation, net of current portion 50 47 Total liabilities 34,016 30,619 Stockholders' equity: Common stock, $0.001 par value, 250,000,000 shares authorized; 289 289 19,988,574 and 19,773,730 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively Additional paid-in capital 182,391 179,455 Warrants 331 331 Accumulated deficit (127,667 ) (119,809 ) Total stockholders' equity 55,344 60,266 Total liabilities and stockholders' equity $ 89,360 $ 90,885

OCCAM NETWORKS, INC. AND SUBSIDIARY GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three months ended Nine months ended September 30, June 30, September 30, September 30, September 30, 2008 2008 2007 2008 2007 Revenue $ 25,131 $ 22,826 $ 15,660 $ 67,610 $ 53,884 Cost of revenue (1) 14,380 12,731 9,959 38,331 34,054 Gross margin 10,751 10,095 5,701 29,279 19,830 Operating expenses (1): Research and development 5,004 4,774 3,245 14,337 8,985 Sales and marketing 4,677 5,105 3,728 14,760 10,779 General and administrative 2,050 3,080 4,218 8,253 8,030 Total operating expenses 11,731 12,959 11,191 37,350 27,794 Loss from operations (980 ) (2,864 ) (5,490 ) (8,071 ) (7,964 ) Other income (expense), net - (48 ) (200 ) (702 ) (91 ) Interest income (expense), net 250 275 784 885 2,232 Loss before provision for income taxes (730 ) (2,637 ) (4,906 ) (7,888 ) (5,823 ) Provision for income taxes (71 ) 22 - (30 ) - Net Loss $ (659 ) $ (2,659 ) $ (4,906 ) $ (7,858 ) $ (5,823 ) Net loss per share attributable to common stockholders: Basic and diluted $ (0.03 ) $ (0.13 ) $ (0.25 ) $ (0.40 ) $ (0.29 ) Weighted average shares attributable to common stockholders: Basic and diluted 19,894 19,801 19,765 19,826 19,756 (1) Total stock-based compensation included in: Cost of sales $ 72 $ 111 $ 71 $ 290 $ 194 Research and development 243 329 164 868 542 Sales and marketing 149 221 144 557 422 General and administrative 164 237 110 633 407 Total stock-based compensation $ 628 $ 898 $ 489 $ 2,348 $ 1,565

OCCAM NETWORKS, INC. AND SUBSIDIARY NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three months ended Nine months ended September 30, June 30, September 30, September 30, September 30, 2008 2008 2007 2008 2007 Revenue $ 25,131 $ 22,826 $ 15,660 $ 67,610 $ 53,884 Cost of revenue 14,308 12,620 9,888 38,041 33,860 Gross margin 10,823 10,206 5,772 29,569 20,024 Operating expenses: Research and development 4,761 4,445 3,081 13,469 8,443 Sales and marketing 4,528 4,884 3,584 14,203 10,357 General and administrative 1,886 2,843 4,108 7,620 7,623 Total operating expenses 11,175 12,172 10,773 35,292 26,423 Loss from operations (352 ) (1,966 ) (5,001 ) (5,723 ) (6,399 ) Other income (expense), net - (11 ) (200 ) (11 ) (91 ) Interest income (expense), net 250 275 784 885 2,232 Non-GAAP loss (102 ) (1,702 ) (4,417 ) (4,849 ) (4,258 ) Provision for income taxes (71 ) 22 - (30 ) - Non-GAAP net loss $ (31 ) $ (1,724 ) $ (4,417 ) $ (4,819 ) $ (4,258 ) Non-GAAP net loss per share: Basic and diluted $ (0.00 ) $ (0.09 ) $ (0.22 ) $ (0.24 ) $ (0.22 ) Weighted average shares attributable to common stockholders: Basic and diluted 19,894 19,801 19,765 19,826 19,756 Reconciliation of non-GAAP net loss to GAAP net loss: Non-GAAP net loss $ (31 ) $ (1,724 ) $ (4,417 ) $ (4,819 ) $ (4,258 ) Stock-based compensation 628 898 489 2,348 1,565 Terawave-related divestiture charge - 37 - 691 - Net loss $ (659 ) $ (2,659 ) $ (4,906 ) $ (7,858 ) $ (5,823 )

SOURCE: Occam Networks

Occam Networks Jeanne Seeley, 1-805-692-2957 (Financial) ir@occamnetworks.com or Stearns Johnson Communications Tim Johnson, 1-415-397-7600 (Media) tjohnson@stearnsjohnson.com