Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 1, 2018
 
Acacia Communications, Inc.
(Exact name of Registrant as Specified in Its Charter)
 
Delaware
001-37771
27-0291921
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
 
 
 
Three Mill and Main Place, Suite 400
Maynard, Massachusetts
 
01754
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (978) 938-4896

(Former Name or Former Address, if Changed Since Last Report): Not applicable
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.     ☐
 





Item 2.02.     Results of Operations and Financial Condition.
On November 1, 2018, Acacia Communications, Inc. (the “Registrant”) announced its financial results for its third fiscal quarter ended September 30, 2018. The full text of the press release issued by the Registrant concerning the foregoing results is furnished herewith as Exhibit 99.1.
Item 7.01.     Regulation FD Disclosure.
From time to time, representatives of the Registrant conduct meetings with investors, analysts and other third parties regarding the Registrant in which the Registrant uses an investor presentation. A copy of our current investor presentation, dated November 1, 2018, is attached to this Current Report on Form 8-K as Exhibit 99.2 (the “Presentation”).
By filing this Current Report on Form 8-K and furnishing the information contained herein, the Registrant makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.
The information contained in the Presentation is summary information that is intended to be considered in the context of the Registrant’s Securities and Exchange Commission (“SEC”) filings and other public announcements that the Registrant may make, by press release or otherwise, from time to time. The Registrant undertakes no duty or obligation to publicly update or revise the information contained in this report, including the exhibits attached hereto, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”) or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as expressly set forth by specific reference in such a filing. In accordance with General Instruction B.2 of this Current Report on Form 8-K, the information presented in Items 2.02 and 7.01 of this Current Report on Form 8-K and Exhibits 99.1 and 99.2 shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act.
Item 9.01.     Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No.
 
Description
99.1
 
99.2
 






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
 
 
 
ACACIA COMMUNICATIONS, INC.
 
 
 
 
Date: November 1, 2018
 
 
By:
/s/ Janene I. Ásgeirsson
 
 
 
 
Janene I. Ásgeirsson
 
 
 
 
Vice President, General Counsel and Secretary
 
 
 
 
 



Exhibit



Acacia Communications Reports Third Quarter 2018 Results
MAYNARD, Mass., November 1, 2018 (GLOBE NEWSWIRE) -- Acacia Communications, Inc. (NASDAQ: ACIA), a leading provider of high-speed coherent optical interconnect products, today reported financial results for its third quarter ended September 30, 2018.
“I am pleased with our strong third quarter results, which exceeded the high end of our guidance on revenue, non-GAAP net income and non-GAAP diluted earnings per share and included solid quarterly profitability,” said Raj Shanmugaraj, President and Chief Executive Officer of Acacia Communications. “In the third quarter, newer customers contributed 43% of our total revenue and a Tier 1 switch and router customer contributed greater than 10% of revenue for the first time. We believe there are several industry trends that are driving the adoption of DCO modules, reinforcing Acacia’s market vision and playing to our strengths.”
“In the third quarter of 2018, increased demand for our newer products, along with a favorable shift in product mix, contributed to an increase in non-GAAP gross margins of 300 basis points relative to the prior year period,” said John Gavin, Chief Financial Officer of Acacia Communications. “At the midpoint of our revenue guidance range, we anticipate year-over-year revenue growth in the fourth quarter. Moreover, we are pleased to reinstate our long-term financial targets which are unchanged from the targets we had in place prior to the ZTE ban.”
Results for the Third Quarter of 2018

Revenue of $94.8 million, decreased 10% year-over-year
GAAP gross margin of 47.3%; non-GAAP gross margin* of 46.7%
GAAP income from operations of $8.0 million; non-GAAP income from operations* of $15.0 million
GAAP net income of $8.2 million; non-GAAP net income* of $17.6 million
EBITDA* of $11.4 million; adjusted EBITDA* of $18.5 million
GAAP diluted EPS of $0.19; non-GAAP diluted EPS* of $0.42

Outlook for the Fourth Quarter of 2018

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially, as a result of, among other things, the important factors discussed at the end of this press release. Acacia Communications disclaims any obligation to update these forward-looking statements.

Acacia Communications’ guidance for its fourth quarter ending December 31, 2018 is:

Quarter Ending December 31, 2018
 
 
 
 
 
 
Revenue (millions)
 
$98.0
 
to
 
$106.0
Non-GAAP Net Income* (millions)
 
$12.8
 
to
 
$16.6
Non-GAAP Diluted EPS*
 
$0.30
 
to
 
$0.40

*Non-GAAP gross margin, non-GAAP income from operations, non-GAAP net income, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA and non-GAAP diluted earnings per share (EPS) are non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles (GAAP). Please refer below to Use of Non-GAAP Financial Information for descriptions of these non-GAAP financial measures and to the Reconciliation of GAAP Measures to Non-GAAP Measures, attached as Schedule D, for reconciliations of the most directly comparable GAAP financial measures to these non-GAAP financial measures.

        




Acacia Communications has not reconciled the above fourth quarter 2018 guidance for GAAP net income and GAAP diluted EPS to non-GAAP net income and non-GAAP diluted EPS, respectively, because the expected tax benefits derived from any employee equity awards during the fourth quarter of 2018 cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

Conference Call

Acacia Communications will host a conference call to discuss its results for the third quarter of 2018, recent developments and the Company’s business outlook and strategy at 5 p.m. Eastern Time today. The live webcast of the call, along with the Company’s earnings press release, can be accessed at the Acacia Communications’ Investor Relations website at http://ir.acacia-inc.com. The U.S. dial-in for the call is 1-877-407-8293 (1-201-689-8349 for non-U.S. callers). Please ask to be joined to the Acacia Communications call. A replay of the conference call will be available until November 15, 2018, at 11:59 p.m. Eastern Time, while an archived version of the webcast will be available on the Acacia Communications’ Investor Relations website for 90 days. The U.S. dial-in for the conference call replay is 1-877-660-6853 (1-201-612-7415 for non-U.S. callers). The replay access code is 1368-3966.





        




Use of Non-GAAP Financial Information

This press release includes non-GAAP financial measures that are not prepared in accordance with, nor an alternative to, GAAP. In addition, these non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

Schedule D of this press release provides reconciliations of Acacia Communications’ most comparable GAAP financial measures to non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expenses, non-GAAP sales, general and administrative expenses, non-GAAP operating expenses, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP effective tax rate, EBITDA, adjusted EBITDA and non-GAAP diluted earnings (loss) per share.

Acacia Communications believes that providing these non-GAAP financial measures to investors, in addition to providing the most directly comparable GAAP measures, provides investors the benefit of viewing the Company’s performance using the same financial metrics that its management team uses in making many key decisions and evaluating how its results of operations may look in the future. Acacia Communications’ management does not believe that items not involving cash expenditures, such as non-cash compensation related to equity awards, are part of its critical decision making process. Also, Acacia Communications’ management does not believe that items such as warranty and other charges arising from a manufacturing process quality issue or certain litigation related costs and settlement reserves outside the normal course of the Company’s business are reflective of the Company’s underlying operating performance. Further, in connection with the seven-year denial of export privileges imposed on April 15, 2018 by the U.S. Department of Commerce against ZTE, which was subsequently lifted on July 13, 2018, the Company recorded inventory write-offs. Acacia Communications’ management does not believe these write-offs, and any subsequent adjustments as a result of management’s ongoing evaluation of the ZTE inventory, are reflective of the Company’s underlying operating performance. Additionally, Acacia Communications’ management believes the impacts of the U.S. Tax Cuts and Jobs Act (the “Act”) which were recorded in the fourth quarter of 2017 upon enactment of the Act, including the revaluation of its deferred tax assets and liabilities and the repatriation of accumulated foreign earnings, is a unique event that limits comparability with prior periods and does not accurately reflect the underlying performance of its continuing business operations for the period in which they were incurred. Therefore, Acacia Communications excludes those items, as applicable, from non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expenses, non-GAAP sales, general and administrative expenses, non-GAAP operating expenses, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP effective tax rate, non-GAAP diluted earnings (loss) per share, EBITDA and adjusted EBITDA. In addition, the impacts of the Act have been excluded in the fourth quarter of 2017. For all subsequent periods, the impacts of the Act have not been excluded.

Acacia Communications’ non-GAAP financial measures reflect adjustments based on the metrics described below, as well as the related income tax effects. The income tax effect of these non-GAAP adjustments is determined by recalculating income tax expense excluding these adjustments.

Non-GAAP gross profit and gross margin.    Acacia Communications defines non-GAAP gross profit as gross profit as reported on its consolidated statements of operation, excluding the impact of stock-based compensation, which is a non-cash charge, warranty and other charges arising from a manufacturing process quality issue and ZTE-related inventory write-offs and subsequent adjustments. Acacia Communications defines non-GAAP gross margin as the non-GAAP gross profit divided by revenue as reported on its consolidated statements of operation. Acacia Communications has presented non-GAAP gross profit and gross margin because the Company believes that the exclusion of stock-based compensation, warranty and other charges

        




arising from a manufacturing process quality issue and ZTE-related inventory write-offs and subsequent adjustments facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP research and development expenses.    Acacia Communications defines non-GAAP research and development expenses as research and development expenses as reported on the Company’s consolidated statements of operation, excluding the impact of stock-based compensation. Acacia Communications has presented non-GAAP research and development expenses because the Company believes that the exclusion of stock-based compensation facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP sales, general and administrative expenses.    Acacia Communications defines non-GAAP sales, general and administrative expenses as sales, general and administrative expenses as reported on the Company’s consolidated statements of operation, excluding the impact of stock-based compensation and certain litigation related costs and settlement reserves. Acacia Communications has presented non-GAAP sales, general and administrative expenses because the Company believes that the exclusion of stock-based compensation and certain litigation related costs and settlement reserves facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP operating expenses.    Acacia Communications defines non-GAAP operating expenses as operating expenses as reported on the Company’s consolidated statements of operation, excluding the impact of stock-based compensation and certain litigation related costs and settlement reserves. Acacia Communications has presented non-GAAP operating expenses because the Company believes that the exclusion of stock-based compensation and certain litigation related costs and settlement reserves facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP income (loss) from operations.    Acacia Communications defines non-GAAP income (loss) from operations as income (loss) from operations as reported on the Company’s consolidated statements of operation, excluding the impact of stock-based compensation, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves. Acacia Communications has presented non-GAAP income (loss) from operations because the Company believes that the exclusion of stock-based compensation, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP net income (loss), non-GAAP effective tax rate and non-GAAP diluted earnings (loss) per share.    Acacia Communications defines non-GAAP net income (loss) as net income (loss) as reported on the Company’s consolidated statements of operation, excluding the impact of stock-based compensation which is a non-cash charge, as well as warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments, certain litigation related costs and settlement reserves and the tax effects of those excluded items. Additionally, the impacts of the Act in the fourth quarter of 2017 have been excluded as it is a unique event that limits comparability with prior periods and does not accurately reflect the underlying performance of the Company’s continuing business operations for the period in which they were incurred.

Acacia Communications defines non-GAAP effective tax rate as the non-GAAP (benefit) provision for income taxes divided by non-GAAP income (loss) before (benefit) provision for income taxes. Non-GAAP (benefit) provision for income taxes is defined as the provision (benefit) for income taxes as reported on the Company’s consolidated statements of operation, as adjusted for the tax effects of excluding stock-based compensation expense, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments, certain litigation related costs and settlement reserves, as well as the

        




impact of the Act in the fourth quarter of 2017. Non-GAAP income (loss) before (benefit) provision for income taxes is defined as GAAP income (loss) before provision (benefit) for income taxes as reported on the Company’s consolidated statements of operations, excluding stock-based compensation expense, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves.

In order to calculate non-GAAP diluted earnings (loss) per share, Acacia Communications uses a non-GAAP weighted-average share count which will include the impact of dilutive stock-based awards for periods in which there was a GAAP net loss resulting in GAAP diluted net loss per share, but a non-GAAP net income.

Acacia Communications has presented non-GAAP net income (loss), non-GAAP effective tax rate and non-GAAP diluted earnings (loss) per share because the Company believes that the exclusion of the items discussed above facilitates comparisons of its results of operations to other companies in its industry and more accurately reflects the underlying performance of our continuing business operations.

EBITDA and Adjusted EBITDA.    Acacia Communications defines EBITDA as net income (loss) as reported on the Company’s consolidated statements of operation before depreciation, interest income, net, and its provision (benefit) for income taxes. Acacia Communications defines adjusted EBITDA as EBITDA excluding the impact of stock-based compensation, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves. Acacia Communications has presented adjusted EBITDA because it is a key measure used by its management and board of directors to understand and evaluate the Company’s operating performance, to establish budgets and to develop operational goals for managing its business. In particular, Acacia Communications believes that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of its core operating performance.

Acacia Communications uses these non-GAAP financial measures to evaluate its operating performance and trends, and make planning decisions. Acacia Communications believes that each of these non-GAAP financial measures helps identify underlying trends in its business that could otherwise be masked by the effect of the items that the Company excludes. Accordingly, Acacia Communications believes that these financial measures provide useful information to investors and others in understanding and evaluating its operating results, enhancing the overall understanding of the Company’s past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by its management in its financial and operational decision-making.

Acacia Communications’ non-GAAP financial measures are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures rather than gross profit, gross margin, research and development expenses, sales, general and administrative expenses, operating expenses, income (loss) from operations, net income (loss), effective tax rate or diluted earnings (loss) per share, which are the most directly comparable GAAP measures. Some of these limitations are:
Acacia Communications excludes stock-based compensation expense from each of its non-GAAP financial measures, although it has recently been, and will continue to be for the foreseeable future, a significant recurring expense for its business and an important part of the Company’s compensation strategy;

        




Acacia Communications excludes the tax benefits generated from the exercise of non-qualified stock options, the disqualifying disposition of incentive stock options and ESPP shares, and the vesting of restricted stock units, including any excess tax benefits and shortfalls recognized by the Company in the year of the taxable transaction, in calculating its non-GAAP effective tax rate, non-GAAP net income (loss), and non-GAAP diluted earnings (loss) per share. The Company believes that excluding these tax benefits enables investors to see the full effect that excluding stock-based compensation expense had on the operating results. These benefits are tied to the exercise or vesting of underlying employee equity awards and the price of our common stock at the time of exercise or vesting, which factors may vary from period to period independent of the operating performance of the Company’s business. Similar to stock-based compensation expense, the Company believes that excluding these tax benefits provides investors and management with greater visibility to the underlying performance of its business operations and facilitates comparison with other periods as well as the results of other companies in its industry;
Acacia Communications excludes warranty and other charges arising from a manufacturing process quality issue from its non-GAAP gross profit, non-GAAP gross margin, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP effective tax rate, non-GAAP diluted earnings (loss) per share and adjusted EBITDA measures, as management does not believe the charges are reflective of the Company’s underlying operating performance;
Acacia Communications excludes ZTE-related inventory write-offs and subsequent adjustments from its non-GAAP gross profit, non-GAAP gross margin, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP effective tax rate, non-GAAP diluted earnings (loss) per share and adjusted EBITDA measures, as management believes the activity is not related to the Company’s normal course of business and is not reflective of the Company’s underlying operating performance;
Acacia Communications excludes certain litigation related costs and settlement reserves from its non-GAAP sales, general and administrative expenses, non-GAAP operating expenses, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP effective tax rate, non-GAAP diluted earnings (loss) per share and adjusted EBITDA measures, if management believes the activity is not related to the Company’s normal course of business and is not reflective of the Company’s underlying operating performance. These expenses may continue in the future;
Non-GAAP net income (loss), non-GAAP effective tax rate and non-GAAP diluted earnings (loss) per share do not reflect the impact of the Act in the fourth quarter of 2017, part of which is federal taxes incurred on the repatriation of accumulated foreign earnings which will be paid over an eight-year period;
EBITDA and adjusted EBITDA exclude depreciation expense and, although this is a non-cash expense, the assets being depreciated may have to be replaced in the future;
EBITDA and adjusted EBITDA do not reflect interest income, which increases cash available to the Company, as this income is not generated by the Company’s core operations;
EBITDA and adjusted EBITDA do not reflect the provision (benefit) for income tax which may impact cash available to the Company; and
the expenses and other items that the Company excludes in its calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results.
Because of these limitations, non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with GAAP.


        




Acacia Communications’ use of non-GAAP financial measures, and the underlying methodology when excluding certain items, is not necessarily an indication of the results of operations that may be expected in the future, or that Acacia Communications will not, in fact, record such items in future periods.

Investors should consider Acacia Communications’ non-GAAP financial measures in conjunction with the corresponding GAAP financial measures.

About Acacia Communications

Acacia Communications develops, manufactures and sells high-speed coherent optical interconnect products that are designed to transform communications networks through improvements in performance, capacity and cost. By leveraging silicon technology to build optical interconnects, a process Acacia Communications refers to as the “siliconization of optical interconnect,” Acacia Communications is able to offer products at higher speeds and density with lower power consumption, that meet the needs of cloud and service providers and can be easily integrated in a cost-effective manner with existing network equipment. www.acacia-inc.com.


        




Forward Looking Statements

This press release includes statements concerning Acacia Communications and its future expectations, plans and prospects that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements. Acacia Communications has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that the Company believes may affect its business, financial condition and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to a number of risks, uncertainties and assumptions including, without limitation, the Company’s ability to sustain or increase revenue from its larger customers, generate revenues from new customers, or offset the discontinuation of concentrated purchases by its larger customers with purchases by new or existing customers, the Company’s expectations regarding expenses and revenue, its ability to maintain and expand gross profit, the sufficiency of the Company’s cash resources and needs for additional financing, the Company’s ability to produce products free of problems, defects, errors and vulnerabilities, the Company’s anticipated growth strategies, its expectations regarding competition, the anticipated trends and challenges in its business and the market in which it operates, the Company’s expectations regarding, and the capacity and stability of, its supply chain and manufacturing, the size and growth of the potential markets for its products and the ability to serve those markets, the scope, progress, expansion and costs of developing and commercializing its products, the timing, rate and degree of introducing any of its products into the market and the market acceptance of any of its products, the Company’s ability to establish and maintain development partnerships, its ability to attract or retain key personnel, the Company’s expectations regarding federal, state and foreign regulatory requirements, including export controls, tax law changes and interpretations, economic sanctions and anti-corruption regulations, regulatory or legislative developments in the United States and foreign countries, including trade policy and tariffs and export control laws or regulations that could impede its ability to sell its products to its customer ZTE Kangxun Telecom Co. Ltd. or any of its affiliates or that could impede its ability to sell products to other customers in certain foreign jurisdictions, particularly in China, the Company’s ability to obtain and maintain intellectual property protection for its products, the Company’s ability to provide guidance on future revenue from ZTE, as well as anticipate the timing and scale of ZTE’s demand for the Company’s products, and other risks set forth under the caption “Risk Factors” in the Company’s public reports filed with the SEC, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2018 and June 30, 2018, its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2018 to be filed with the SEC and in other filings that the Company may make with the SEC in the future. Acacia Communications assumes no obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.


        




SCHEDULE A
ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
September 30, 2018
 
December 31, 2017
 
ASSETS
 

 
 

 
Current assets:
 

 
 

 
Cash and cash equivalents
$
70,361

 
$
67,495

 
Marketable securities - short-term
252,747

 
211,933

 
Accounts receivable
81,465

 
86,602

 
Inventory
34,699

 
62,232

 
Prepaid expenses and other current assets
10,202

 
18,985

 
Total current assets
449,474

 
447,247

 
Marketable securities - long-term
68,943

 
85,182

 
Property and equipment, net
28,314

 
28,175

 
Deferred tax asset
50,632

 
41,901

 
Other assets
8,015

 
8,745

 
Total assets
$
605,378

 
$
611,250

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS EQUITY
 

 
 

 
Current liabilities:
 

 
 

 
Accounts payable
$
32,728

 
$
47,819

 
Accrued liabilities
34,845

 
37,234

 
Deferred revenue
2,694

 
573

 
Total current liabilities
70,267

 
85,626

 
Income taxes payable
19,205

 
21,034

 
Other long-term liabilities
5,378

 
2,540

 
Total liabilities
94,850

 
109,200

 
 
 
 
 
 
Stockholders equity:
 
 
 
 
Common stock
4

 
4

 
Treasury stock
(12,699
)
 

 
Additional paid-in capital
350,055

 
324,944

 
Accumulated other comprehensive loss
(284
)
 
(320
)
 
Retained earnings
173,452

 
177,422

 
Total stockholders equity
510,528

 
502,050

 
Total liabilities and stockholders equity
$
605,378

 
$
611,250

 



        





SCHEDULE B
ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenue
$
94,814

 
$
104,998

 
$
232,758

 
$
298,563

Cost of revenue
49,981

 
58,856

 
138,649

 
170,739

Gross profit
44,833

 
46,142

 
94,109

 
127,824

Operating expenses:
 
 
 
 
 

 
 

Research and development
24,696

 
27,135

 
73,481

 
67,597

Sales, general and administrative
12,134

 
10,105

 
39,406

 
28,164

Gain on disposal of property and equipment

 

 

 
(47
)
Total operating expenses
36,830

 
37,240

 
112,887

 
95,714

Income (loss) from operations
8,003

 
8,902

 
(18,778
)
 
32,110

Other income, net:
 
 
 
 
 

 
 

Interest income, net
2,074

 
990

 
4,919

 
2,262

Other expense, net
(63
)
 
(21
)
 
(325
)
 
(60
)
Total other income, net
2,011

 
969

 
4,594

 
2,202

Income (loss) before provision (benefit) for income taxes
10,014

 
9,871

 
(14,184
)
 
34,312

Provision (benefit) for income taxes
1,863

 
(8,628
)
 
(10,012
)
 
(24,560
)
Net income (loss)
$
8,151

 
$
18,499

 
$
(4,172
)
 
$
58,872

Earnings (loss) per share:
 
 
 
 
 

 
 

Basic
$
0.20

 
$
0.47

 
$
(0.10
)
 
$
1.52

Diluted
$
0.19

 
$
0.44

 
$
(0.10
)
 
$
1.41

Weighted-average shares used to compute earnings (loss) per share:
 
 
 
 
 

 
 

Basic
40,495

 
39,259

 
40,217

 
38,754

Diluted
42,060

 
41,757

 
40,217

 
41,660















        




SCHEDULE C
ACACIA COMMUNICATIONS, INC.
CONSENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

 
Net (loss) income
$
(4,172
)
 
$
58,872

 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 

 
 

 
Depreciation
10,132

 
9,101

 
Gain on disposal of property and equipment

 
(47
)
 
Stock-based compensation
21,865

 
17,162

 
Deferred income taxes
(8,781
)
 
(23,569
)
 
Other non-cash (benefits) charges
(356
)
 
259

 
Changes in operating assets and liabilities:
 
 
 

 
Accounts receivable
5,137

 
12,505

 
Inventory
27,533

 
(18,302
)
 
Prepaid expenses and other current assets
8,615

 
(5,156
)
 
Other assets
737

 
(4,658
)
 
Accounts payable
(14,075
)
 
(9,878
)
 
Accrued liabilities
(2,463
)
 
6,258

 
Deferred revenue
5,710

 
(92
)
 
Income taxes payable
(1,829
)
 

 
Other long-term liabilities
(376
)
 
992

 
Net cash provided by operating activities
47,677

 
43,447

 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

 
Purchases of property and equipment
(11,287
)
 
(10,031
)
 
Purchases of marketable securities
(249,727
)
 
(306,327
)
 
Sales and maturities of marketable securities
225,589

 
177,353

 
Deposits
(7
)
 
(52
)
 
Net cash used in investing activities
(35,432
)
 
(139,057
)
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

 
Treasury stock acquired
(12,699
)
 

 
Payment of public offering costs

 
(201
)
 
Proceeds from the issuance of common stock under stock-based compensation plans
3,320

 
3,540

 
Net cash (used in) provided by financing activities
(9,379
)
 
3,339

 
 
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
2,866

 
(92,271
)
 
Cash, cash equivalents and restricted cash—Beginning of period
67,495

 
208,032

 
Cash, cash equivalents and restricted cash—End of period
$
70,361

 
$
115,761

 
 
 
 
 
 
Supplemental cash flow disclosures:
 

 
 

 
(Refunds received) cash paid for income taxes, net
$
(6,874
)
 
$
840

 

        




SCHEDULE D
ACACIA COMMUNICATIONS, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
 (in thousands, except for per share data)
(unaudited)

 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Non-GAAP Gross Profit and Non-GAAP Gross Margin
 
 
 
 
 
 
GAAP gross profit
 
$
44,833

 
$
25,205

 
$
46,142

Stock-based compensation - cost of revenue
 
508

 
572

 
518

Warranty and other charges due to manufacturing process quality issue
 
218

 
405

 
(739
)
Inventory write-offs
 
(1,294
)
 
(1,259
)
 

Non-GAAP gross profit
 
$
44,265

 
$
24,923

 
$
45,921

GAAP gross margin
 
47.3
%
 
38.8
%
 
43.9
%
Non-GAAP gross margin
 
46.7
%
 
38.3
%
 
43.7
%
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Non-GAAP R&D Expenses
 
 
 
 
 
 
GAAP research and development expenses
 
$
24,696

 
$
24,340

 
$
27,135

Stock-based compensation
 
4,654

 
4,467

 
3,743

Non-GAAP research and development expenses
 
$
20,042

 
$
19,873

 
$
23,392

 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Non-GAAP SG&A Expenses
 
 
 
 
 
 
GAAP sales, general and administrative expenses
 
$
12,134

 
$
12,984

 
$
10,105

Stock-based compensation
 
2,577

 
2,549

 
2,159

Litigation related costs and settlement reserves
 
369

 
772

 

Non-GAAP sales, general and administrative expenses
 
$
9,188

 
$
9,663

 
$
7,946

 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Non-GAAP Operating Expenses
 
 
 
 
 
 
GAAP operating expenses
 
$
36,830

 
$
37,324

 
$
37,240

Stock-based compensation
 
7,231

 
7,016

 
5,902

Litigation related costs and settlement reserves
 
369

 
772

 

Non-GAAP operating expenses
 
$
29,230

 
$
29,536

 
$
31,338

 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Non-GAAP Income (Loss) from Operations
 
 
 
 
 
 
GAAP income (loss) from operations
 
$
8,003

 
$
(12,119
)
 
$
8,902

Stock-based compensation
 
7,739

 
7,588

 
6,420

Warranty and other charges due to manufacturing process quality issue
 
218

 
405

 
(739
)
Litigation related costs and settlement reserves
 
369

 
772

 

Inventory write-offs
 
(1,294
)
 
(1,259
)
 

Non-GAAP income (loss) from operations
 
$
15,035

 
$
(4,613
)
 
$
14,583


        




SCHEDULE D (Cont.)
ACACIA COMMUNICATIONS, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
 (in thousands, except for per share data)
(unaudited)

 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Non-GAAP Net Income (Loss)
 
 
 
 
 
 
GAAP net income (loss)
 
$
8,151

 
$
(3,245
)
 
$
18,499

Stock-based compensation
 
7,739

 
7,588

 
6,420

Warranty and other charges due to manufacturing process quality issue
 
218

 
405

 
(739
)
Litigation related costs and settlement reserves
 
369

 
772

 

Inventory write-offs
 
(1,294
)
 
(1,259
)
 

Tax effect of excluded items
 
2,448

 
(7,447
)
 
(5,062
)
Non-GAAP net income (loss)
 
$
17,631

 
$
(3,186
)
 
$
19,118

 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Non-GAAP Effective Tax Rate
 
 
 
 
 
 
GAAP effective tax rate
 
18.6
 %
 
70.0
 %
 
(87.4
)%
Tax effect of excluded items
 
(22.0
)%
 
(66.2
)%
 
64.5
 %
Non-GAAP effective tax rate
 
(3.4
)%
 
3.8
 %
 
(22.9
)%
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization and Adjusted EBITDA
 
 
 
 
 
 
GAAP net income (loss)
 
$
8,151

 
$
(3,245
)
 
$
18,499

Depreciation
 
3,498

 
3,368

 
3,260

Interest income, net
 
(2,074
)
 
(1,491
)
 
(990
)
Provision (benefit) for income taxes
 
1,863

 
(7,574
)
 
(8,628
)
Earnings (loss) before interest, taxes, depreciation and amortization
 
11,438

 
(8,942
)
 
12,141

Stock-based compensation
 
7,739

 
7,588

 
6,420

Warranty and other charges due to manufacturing process quality issue
 
218

 
405

 
(739
)
Litigation related costs and settlement reserves
 
369

 
772

 

Inventory write-offs
 
(1,294
)
 
(1,259
)
 

Adjusted earnings (loss) before interest, taxes, depreciation and amortization
 
$
18,470

 
$
(1,436
)
 
$
17,822


        




SCHEDULE D (Cont.)
ACACIA COMMUNICATIONS, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
 (in thousands, except for per share data)
(unaudited)
 
 
Three Months Ended
 
 
Q3 2018
 
Q2 2018
 
Q3 2017
Non-GAAP Diluted Earnings (Loss) per Share
 
 
 
 
 
 
GAAP Diluted net income (loss) per share
 
$
0.19

 
$
(0.08
)
 
$
0.44

Stock-based compensation
 
0.18

 
0.19

 
0.16

Warranty and other charges due to manufacturing process quality issue
 
0.01

 
0.01

 
(0.02
)
Litigation related costs and settlement reserves
 
0.01

 
0.02

 

Inventory write-offs
 
(0.03
)
 
(0.03
)
 

Tax effect of excluded items
 
0.06

 
(0.19
)
 
(0.12
)
Non-GAAP diluted earnings (loss) per share
 
$
0.42

 
$
(0.08
)
 
$
0.46

 
 
 
 
 
 
 
Weighted-average shares used to compute GAAP and non-GAAP diluted net income (loss) per share
 
42,060

 
40,307

 
41,757




        




SOURCE Acacia Communications, Inc.

For further information:

Investor Relations Contact:
Monica Gould
Office: (212) 871-3927
Email: IR@acacia-inc.com

Lindsay Savarese
Office: (212) 331-8417
Email: IR@acacia-inc.com

Public Relations Contact:
Jackie D’Andrea
Office: (781) 966-4143
Email: PR@acacia-inc.com




        
q318investorrelations992
CONNECTING AT THE SPEED OF LIGHT Investor Presentation November 1, 2018 © 2018 Acacia Communications, Inc. 1 © 2018 Acacia Communications, Inc.


 
Safe Harbor Statement This presentation contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this presentation, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “forecast,” “target,” “vision,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward- looking statements we make. The forward-looking statements contained in this presentation reflect our current views with respect to future events, and we assume no obligation to update any forward-looking statements. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this presentation, and our actual future results may be materially different from what we expect. We have included important factors in the cautionary statements included in our Quarterly Report on Form 10-Q for the three month period ended September 30, 2018 and other documents we have filed with the SEC, particularly in the Risk Factors section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Non-GAAP Financial Measures This presentation includes measures defined by the SEC as non-GAAP financial measures. We believe that these non-GAAP financial measures can provide useful supplemental information to investors when read in conjunction with our reported results. Reconciliations of these non-GAAP financial measures to their closest GAAP measures are available in the Appendix to this presentation and descriptions of these non-GAAP financial measures can be found in our earnings release with respect to our third quarter 2018 results. 2 © 2018 Acacia Communications, Inc.


 
Acacia Communications, Inc. Coherent Optical Interconnect First to Market, Provider & Innovator Award Winning Products Addressing Existing & Emerging Proven Management Coherent Markets Team Driving the Siliconization of Strong Balance Sheet Optical Interconnect Mission: Deliver silicon-based interconnects that transform cloud and communication networks by simplifying these networks, digitizing numerous complex analog functions, and providing significant improvements in speed, capacity and power consumption 3 © 2018 Acacia Communications, Inc.


 
Acacia Advancing Next Generation of Optical Communications Coherent Portfolio Key Technologies Proven Execution • Addressing Edge/Access, DCI, • In-house Coherent DSP ASIC • >200,000 coherent ports Metro, Long-haul and deployed Submarine • Highly integrated Silicon Photonics • 7 DSP ASICs developed since • Capacity, flexibility, intelligence, • Advanced packaging for high- 2009 reach, scalability density coherent applications • 3rd generation PIC • 1st to market DCO for CFP and • Pluggable & Embedded coherent CFP2 form factors optical modules Strategic Vision: • Address high-growth market segments based on low-power DSPs and integrated photonics • Broaden market penetration through increased engagement with Tier-1 NEMs • Maintain a technology leadership position with first to market products 4 © 2018 Acacia Communications, Inc. 1 Reprinted with permission: Cignal AI, April 2018


 
Demand for Bandwidth and Network Capacity Forecasted traffic demands by the year 20211,2 Data & Video Mobile & 4GLTE/5G Cloud Changing Traffic Patterns “Internet of Things” Video: expected Wireless/mobile traffic 94% of all workload/compute Smartphone traffic expected # of devices connected to IP 82% of all IP expected >63% instances expected to 1 to exceed PC traffic networks expected to be 3x as traffic1 of total IP traffic1 be processed in cloud2 high as the global population1 Global IP Traffic Growth, 2017-20211 300 23% CAGR Global IP traffic expected to 250 2017-2021 increase >2.25x from 2017 to 200 2021 150 278.1 228.4 Exabytes 100 186.4 per Month 150.9 Coherent Optical Technology 50 121.7 enables higher capacity “pipes” 0 2017 2018 2019 2020 2021 5 © 2018 Acacia Communications, Inc. 1. Cisco VNI Global IP Traffic Forecast 2016-2021, September 2017 2. Cisco Global Cloud Index 2016-2021, February 2018


 
Key Markets 100G+ Module Sales Compared to the Rest of the WDM Market1 2019 Market Size Coherent Modules: $680M1 Total Coherent Ports: $3.75B1 Optical Transceivers (all types): $6.67B1 Three drivers for 100G+ market growth: DCI Metro China Low-power Density Low-power High density Low-cost Easy to deploy DCOs Low-cost per bit Plugability Interoperability 1 2 6 © 2018 Acacia Communications, Inc. 1. Reprinted with permission: LightCounting, Oct 2018 2. CAGR calculated by 100G Port Equivalent growth 2017-2023, LightCounting, Oct 2018 (200G Port = 2 100G Eq., 400G Port = 4 100G Eq., etc.)


 
Infrastructure to Support Traffic Growth: Coherent Market Applications LONG-HAUL METRO EDGE Central Central City Office Office City Central Office • High performance • Space and power constrained • Shorter product life cycles • Fiber constrained • Pay as you grow model • Cost and power sensitive Acacia solutions designed to significantly reduce complexity and cost of high speed networks 7 © 2018 Acacia Communications, Inc.


 
Forecasted Demand Increase in Long Haul/Metro/Edge Deployed Bandwidth Growth1 Long Haul Metro Edge 2017 2022 Most significant growth anticipated from Edge (<100km) applications driven by DCI market 8 © 2018 Acacia Communications, Inc. 1 Reprinted with permission: Cignal AI, September 2018 2 CAGR calculated by 100G Port Equivalent growth, Cignal AI, Sept 2018


 
Coherent Edge Competing Market Requirements Edge DCI Market Split by Priorities Power/100G Cost/100G • Low power, pluggable module • DCI “White Box” Transport form factors Equipment • Direct detect or coherent at 100G • High-capacity • Coherent at 200G and 400G • No requirement for pluggability • Pluggable solutions enable • Embedded modules with digital coherent in shorter reach “ZR,” host interface access and campus applications Acacia’s product breadth addresses competing requirements 9 © 2018 Acacia Communications, Inc.


 
Coherent Technology Trends – Shorter Reaches Moving to shorter reach as Edge applications data rates increase Coherent 1.6T driving transition towards shorter reach coherent solutions & AC1200 800G industry standardization Industry Momentum for 400G Pluggable DCO Driven by AC400 400ZR Edge and Access Data Rate Data • OIF 200G • Targets 400G client form factors CFP2-DCO • IEEE • 100G, 200G, & 400G beyond 100G 10km reach • CableLabs Direct Detect (DD) CFP-DCO • Adopted 100G Coherent Access 0.5km 2km 10km 80km 300km 1000km Standard Reach Intra DC Campus Edge/ZR Metro LH/ULH 10 © 2018 Acacia Communications, Inc.


 
Acacia Products Designed to Address Emerging Coherent Markets Markets that may benefit from Acacia’s low-power DSP & SiPh technology Intra DC/ New Markets Campus Interconnect Acacia is Reducing Power, Size Inter DC/ Access/5G and Cost through Siliconization Edge Metro Long-Haul DSP+PIC based 400G ZR AC1200 CFP2-ACO CFP2-DCO AC400 CFP-DCO Time 11 © 2018 Acacia Communications, Inc.


 
Acacia Products: Rapid Pace of Innovation 2011 2012 2013 2014 2015 2016 2017 2018 Modules AC100 AC100S AC40S CFP-DCO AC400 CFP2-ACO CFP2-DCO AC1200 DSP ASICs: Denali Everest Mauna Kea K2 Meru Pico Sky 400G 100G 100G 40G 200G 1.2T 100G ULH/Metro DCI/Metro/LH LH LH ULH Metro Metro Multi-core Multi-core 40 nm 28 nm 16 nm Silicon PICs >500PICs on single wafer 32GB 45GB 70GB SiPh PIC SiPh PIC SiPh PIC PIC 1.5 Inch2 0.4 Inch2 0.4 Inch2 Strong and diverse portfolio of patents and intellectual property 12 © 2018 Acacia Communications, Inc.


 
Broad Portfolio of Coherent Products • New products making increasing contribution to revenue • SiPh PIC sales replace traditional discrete optics • 3 DSPs shipping in volume • 2nd generation design extends CFP-DCO lifecycle • Module product variants address emerging applications Module Product Lifecycle PRODUCT AC400 CFP-DCO EXTENSION Introduction Growth CFP2-DCO Maturity Decline AC1200 t 13 © 2018 Acacia Communications, Inc.


 
Acacia AC1200 Based on Acacia’s Pico DSP ASIC Sample shipments ongoing to customers for 2x400G and 2x600G applications High data rate transmission offers the efficiency Rich feature set for exceptional performance in required for evolving cloud networks metro, long haul, and edge applications 50% higher capacity per wavelength than competitive 400G solutions 3x the capacity in 40% smaller footprint than 400G 5”x7” modules 3D Shaping adapts transmission to the network to Lower power/bit based on increase capacity and reach Acacia’s proven DSP algorithms and enhanced TPC SD-FEC High Baud Rate performance increases reach with lower order modulation formats 14 © 2018 Acacia Communications, Inc.


 
400ZR - A Challenging DCO for Coherent Client Optics Intersection of Advanced DSP, Optics and Packaging Technology OSFP Radio DSP Frequency QSFP-DD 400ZR Modules Software Optics • Design requirements • Acacia Advantage • Advanced integration/packaging • Track record: 1st in CFP/CFP2 DCO √ • Low power DSP and module design • AC1200 performance √ Acacia Core Competencies Key to 400ZR Development • 400G optics and RF electronics • 2 x 600G DSP √ • 600G SiPh PIC √ • Software and module integration • >100,000 SiPh shipped √ 15 © 2018 Acacia Communications, Inc.


 
Evolution of Coherent Architectures Toward Modules Optical Integration and Digital Interfaces Compact, high-capacity CFP- CFP2- CFP2- 400ZR module solutions based on 400G DCO ACO DCO integrated photonics and Early coherent line card 100G 200G 200G digital host interfaces 100G AC1200 AC400 1200G 400G AC100 100G Today We believe 400ZR DCO leverages Acacia’s expertise in low-power, highly complex pluggable 16 © 2018 Acacia Communications, Inc.


 
Well Positioned to Deliver Highly Integrated Interconnects Diverse Set of Skills and Expertise Represents High Barrier to Entrance Acacia has all the pieces of the Radio interconnect puzzle to deliver: DSP Frequency • Superior performance • Higher density • Easy deployment and management • Lower cost Software Optics • Lower power We believe we were the first to introduce to the market: Silicon 100G MSA Dual-core DSP Coherent 100G CFP-DCO 1st 1st >1Tb DSP 1st PIC 400G Module 200G CFP2-DCO 17 © 2018 Acacia Communications, Inc.


 
Financial Performance Revenue ($mm) Quarterly Revenue ($mm) $115 $478 $105 $105 $102 $95 $385 $385 $87 $79 $335 $335 $73 $65 $239 2015A 2016A 2017A 2018E* Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4* 2017 2018 Year-Over-Year Change % 12% CAGR 36% (32%) (22%) (39%) (36%) (18%) (10%) 18%* *2018 Estimate based on midpoint of Acacia’s Q4 guidance of $98M - $106M; guidance is forward *Midpoint of Acacia’s Q4 guidance of $98M - $106M; guidance is looking and actual results may differ materially forward looking and actual results may differ materially 18 © 2018 Acacia Communications, Inc.


 
Operating Leverage Non-GAAP Net Income (Loss)1 ($mm) $123 Key Drivers 115 95 Capital Efficiency $73 75 55 Leveraged Sales Model $33 35 $32 $32 $19 $18 $15 15 $11 $11 Operational Scalability $4 -5 ($3) 2015 2016 2017 2018* Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418* % of Revenue 14% 26% 19% 10% 28% 14% 18% 13% 6% (5%) 19% 14%* Efficient R&D *2018 Estimate based on midpoint of Acacia’s Q4 guidance of $12.8M - *Rounded midpoint of Acacia’s Q4 guidance of $12.8M – $16.6M; $16.6M; guidance is forward looking and actual results may differ materially guidance is forward looking and actual results may differ materially 1 This is a “non-GAAP financial measure” as defined in Regulation G under the Securities Exchange Act of 1934, as amended, and reconciliation of such non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP is provided in the Appendix to this presentation. Descriptions of this non-GAAP financial measure can be found in the company’s earnings release with respect to its third quarter 2018 results. 19 © 2018 Acacia Communications, Inc.


 
Long-Term Financial Targets Historical Financial Data 2015A 2016A 2017A Q1 Q2 Q3 Long Term Percent of Revenue (Audited) (Audited) (Audited) 2018A 2018A 2018A Target Range* Non-GAAP Gross Profit Margin* 39% 47% 45% 43% 38% 47% 48% - 50% Non-GAAP Research & 16% 13% 20% 28% 31% 21% 17% - 19% Development* Non-GAAP Sales, General & 5% 4% 8% 12% 15% 10% 6% - 8% Administrative* Non-GAAP Operating Margin* 18% 29% 17% 3% (7%) 16% 23% - 27% Non-GAAP Tax Rate (on Profit 25% 11% (6%) (23%) 4% (3%) 9% - 12% Before Tax)* Non-GAAP Net Income Margin* 14% 26% 19% 6% -5% 19% 21% - 25% *These long-term financial targets are forward-looking, are subject to significant uncertainties and contingencies and are based upon assumptions with respect to future circumstances, which are subject to change. Actual results will vary and those variations may be material. For discussion of some of the important factors that could cause these variations, please consult the “Risk Factors” sec on of the Form 10-K for the fiscal year ended December 31, 2017 and the Forms 10-Q for the fiscal quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, that we have filed with the SEC. These long-term financial targets include “non-GAAP financial measures” as defined in Regula on G under the Securities Exchange Act of 1934, as amended, and reconciliations of such historical non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with U.S. GAAP are provided in the Appendix to this presentation. Acacia Communications has not reconciled the forward-looking non-GAAP measures included in these long-term financial targets because the expected tax benefits derived from any disqualifying dispositions of equity awards during the periods included in these long-range financial targets cannot be reasonably calculated or predicted at this time and, accordingly, a reconciliation is not available without unreasonable effort. Descriptions of the non-GAAP financial measures included in these long-term financial targets can be found in the company’s earnings release with respect to its third quarter 2018 results. 20 © 2018 Acacia Communications, Inc.


 
Industry Awards & Accolades 2016 Finalist 2011 2014 2016 New England Region 2018 Outstanding Components Vendor 21 © 2018 Acacia Communications, Inc.


 
Sustainable Optical Networking Helping to ensure sustainability despite soaring bandwidth growth • Optimizing design of DSP ASIC and SiPh PIC • Developing power efficient algorithms • Helping our service provider and cloud customers dramatically reduce energy consumption Acacia has been able to reduce the power consumed by its coherent optical interconnects by as much as 85% in the last 5 years. 22 © 2018 Acacia Communications, Inc.


 
Appendix 23 © 2018 Acacia Communications, Inc.


 
Reconciliation of GAAP to Non-GAAP Year Ended December 31, Quarter Ended Septemeber 30, 2015 2016 2017 Q1 2018 Q2 2018 2018 2017 Audited Audited Audited Unaudited Unaudited Unaudited Unaudited Non-GAAP Gross Profit;Non-GAAP Gross Profit Margin (in thousands) Gross profit $93,706 $220,987 $167,840 $24,071 $25,205 $44,833 $46,142 GAAP gross profit margin 39.2% 46.2% 43.6% 33.0% 38.8% 47.3% 43.9% Stock-based compensation - cost of revenue 75 1,629 1,993 521 572 508 518 Warranty charges due to manufacturing quality issue - - 5,090 (375) 405 218 (739) Inventory write-offs - - - 7,063 (1,259) (1,294) - Non-GAAP gross profit $93,781 $222,616 $174,923 $31,280 $24,923 $44,265 $45,921 Non-GAAP gross profit margin 39.2% 46.5% 45.4% 42.9% 38.3% 46.7% 43.7% Non-GAAP R&D Expenses GAAP research and development expenses $38,645 $75,696 $92,027 $24,445 $24,340 $24,696 $27,135 GAAP research and development expenses as % of revenue 16.2% 15.8% 23.9% 33.5% 37.4% 26.0% 25.8% Stock-based compensation 561 12,347 14,150 3,788 4,467 4,654 3,743 Non-GAAP research and development expenses $38,084 $63,349 $77,877 $20,657 $19,873 $20,042 $23,392 Non-GAAP research and development expenses as % of revenue 15.9% 13.2% 20.2% 28.3% 30.6% 21.1% 22.3% Non-GAAP SG&A Expenses GAAP selling, general and administrative expenses $13,124 $27,676 $38,807 $14,288 $12,984 $12,134 $10,105 GAAP selling, general and administrative expenses as % of 5.5% 5.8% 10.1% 19.6% 20.0% 12.8% 9.6% revenue Stock-based compensation 189 6,769 7,230 2,229 2,549 2,577 2,159 Litigation related costs and settlement reserves - - - 3,621 772 369 - Non-GAAP selling, general and administrative expenses $12,935 $20,907 $31,577 $8,438 $9,663 $9,188 $7,946 Non-GAAP selling, general and administrative expenses as % of 5.4% 4.4% 8.2% 11.6% 14.9% 9.7% 7.6% revenue Non-GAAP Operating Expenses GAAP operating expenses $51,769 $103,397 $130,787 $38,733 $37,324 $36,830 $37,240 GAAP operating expenses as % of revenue 21.7% 21.6% 34.0% 53.1% 57.4% 38.8% 35.5% Stock-based compensation 750 19,116 21,380 6,017 7,016 7,231 5,902 Litigation related costs and settlement reserves - - - 3,621 772 369 - Non-GAAP operating expenses $51,019 $84,281 $109,407 $29,095 $29,536 $29,230 $31,338 Non-GAAP operating expenses as % of revenue 21.3% 17.6% 28.4% 39.9% 45.4% 30.8% 29.8% 24 © 2018 Acacia Communications, Inc.


 
Reconciliation of GAAP to Non-GAAP Year Ended December 31, Quarter Ended Septemeber 30, 2015 2016 2017 Q1 2018 Q2 2018 2018 2017 Audited Audited Audited Unaudited Unaudited Unaudited Unaudited Non-GAAP Income from Operations; Non-GAAP Operating Margin (in thousands) GAAP Income (Loss) from operations $41,937 $117,590 $37,053 ($14,662) ($12,119) $8,003 $8,902 GAAP operating margin 17.5% 24.6% 9.6% -20.1% -18.6% 8.4% 8.5% Stock-based compensation 825 20,745 23,373 6,538 7,588 7,739 6,420 Warranty charges due to manufacturing quality issue - - 5,090 (375) 405 218 (739) Litigation related costs and settlement reserves - - - 3,621 772 369 - Inventory write-offs - - - 7,063 (1,259) (1,294) - Non-GAAP income (loss) income from operations $42,762 $138,335 $65,516 $2,185 ($4,613) $15,035 $14,583 Non-GAAP operating margin 17.9% 28.9% 17.0% 3.0% -7.1% 15.9% 13.9% Non-GAAP Net Income (Loss); Non-GAAP Net Income Margin GAAP Net income (loss) $40,520 $131,577 $38,508 ($9,078) ($3,245) $8,151 $18,499 GAAP net income (loss) margin 17.0% 27.5% 10.0% -12.4% -5.0% 8.6% 17.6% Stock-based compensation 825 20,745 23,373 6,538 7,588 7,739 6,420 Warranty charges due to manufacturing quality issue - - 5,090 (375) 405 218 (739) Litigation related costs and settlement reserves - - - 3,621 772 369 - Inventory write-offs - - - 7,063 (1,259) (1,294) - Change in fair value of preferred stock warrant liability 2,154 3,361 0 - - - - Reversal of valuation allowance (11,142) - - - - - - Tax effect of excluded items (47) (32,324) (25,295) (3,491) (7,447) 2,449 (5,062) Impact of the U.S. Tax Cuts and Jobs Act - - 31,425 - - - - Non-GAAP net income (loss) $32,310 $123,359 $73,101 $4,278 ($3,186) $17,632 $19,118 Non-GAAP net income (loss) margin 13.5% 25.8% 19.0% 5.9% -4.9% 18.6% 18.2% 25 © 2018 Acacia Communications, Inc.


 
Reconciliation of GAAP to Non-GAAP Year Ended December 31, Quarter Ended Septemeber 30, 2015 2016 2017 Q1 2018 Q2 2018 2018 2017 Audited Audited Audited Unaudited Unaudited Unaudited Unaudited Non-GAAP Effective Tax Rate (in thousands) GAAP Effective Tax Rate (1.8%) (14.8%) 4.5% 32.1% 70.0% 18.6% (87.4%) Total adjustments to GAAP provision for income taxes 26.3% 25.9% 34.9% (55.5%) (66.2%) (22.0%) 64.5% Impact of the U.S. Tax Cuts and Jobs Act - - (45.7%) - - - - Non-GAAP effective tax rate 24.5% 11.1% (6.3%) (23.4%) 3.8% (3.4%) (22.9%) Adjusted EBITDA GAAP Net income (loss) $40,520 $131,577 $38,508 ($9,078) ($3,245) $8,151 $18,499 Depreciation 4,576 9,168 12,280 3,266 3,368 3,498 3,260 Interest expense(income), net 135 (453) (3,389) (1,354) (1,491) (2,074) (990) Provision(benefit) for income taxes (715) (16,956) 1,795 (4,301) (7,574) 1,863 (8,628) Earnings (loss) before interest, taxes, depreciation and $44,516 $123,336 $49,194 ($11,467) ($8,942) $11,438 $12,141 amortization - EBITDA EBITDA as % of revenue 18.6% 25.8% 12.8% -15.7% -13.8% 12.1% 11.6% Stock-based compensation 825 20,745 23,373 6,538 7,588 7,739 6,420 Warranty charges due to manufacturing quality issue - - 5,090 (375) 405 218 (739) Litigation related costs and settlement reserves - - - 3,621 772 369 - Inventory write-offs - - - 7,063 (1,259) (1,294) - Change in fair value of preferred stock warrant liability 2,154 3,361 0 - - - - Adjusted EBITDA $47,495 $147,442 $77,657 $5,380 ($1,436) $18,470 $17,822 Adjusted EBITDA as % of revenue 19.9% 30.8% 20.2% 7.4% -2.2% 19.5% 17.0% 26 © 2018 Acacia Communications, Inc.