Prospectus Summary
PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our consolidated financial statements and related notes, and the risk factors beginning on page 11, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, we use the terms “Acacia Communications,” “Acacia,” “our company,” “we,” “us” and “our” in this prospectus to refer to Acacia Communications, Inc. and its subsidiaries.Overview
Our mission is to deliver high-speed coherent optical interconnect products that transform communications networks, relied upon by cloud infrastructure operators and content and communication service providers, through improvements in performance and capacity and a reduction in associated costs. By converting optical interconnect technology to a silicon-based technology, a process we refer to as the siliconization of optical interconnect, we believe we are leading a disruption that is analogous to the computing industry’s integration of multiple functions into a microprocessor. Our products include a series of low-power coherent digital signal processor application-specific integrated circuits, or DSP ASICs, and silicon photonic integrated circuits, or silicon PICs, which we have integrated into families of optical interconnect modules with transmission speeds ranging from 40 to 400 gigabits per second, or Gbps, for use in long-haul, metro and inter-data center markets. Our modules perform a majority of the digital signal processing and optical functions in optical interconnects and offer low power consumption, high density and high speeds at attractive price points. Through the use of standard interfaces, our modules can be easily integrated with customers’ network equipment. The advanced software in our modules enables increased configurability and automation, provides insight into network and connection point characteristics and helps identify network performance problems, all of which increase flexibility and reduce operating costs.
Our modules are rooted in our low-power coherent DSP ASICs and silicon PICs, which we have specifically developed for our target markets. Our coherent DSP ASICs are manufactured using complementary metal oxide semiconductor, or CMOS, and our silicon PICs are manufactured using a CMOS-compatible process. CMOS is a widely-used and cost-effective semiconductor process technology. Using CMOS to siliconize optical interconnect technology enables us to continue to integrate increasing functionality into our products, benefit from higher yields and reliability associated with CMOS and capitalize on regular improvements in CMOS performance, density and cost. Our use of CMOS also enables us to use outsourced foundry services rather than requiring custom fabrication to manufacture our products. In addition, our use of CMOS and CMOS compatible processes enables us to take advantage of the major investments in manufacturing and the technology and integration improvements driven by other computer and communications markets that rely on CMOS.
Our engineering and management teams have extensive experience in optical systems and networking, digital signal processing, large-scale ASIC design and verification, silicon photonic integration, system software development, hardware design and high-speed electronics design. This broad expertise in a range of advanced technologies, methodologies and processes enhances our innovation, design and development capabilities and has enabled us to develop and introduce nine optical interconnect modules, five coherent DSP ASICs and two silicon PICs since 2009. In the course of our product development cycles, we continuously engage with our customers as they design their current and next-generation network equipment, which provides us with insights into current and future market needs.
We sell our products through a direct sales force to leading network equipment manufacturers. The number of customers who have purchased and deployed our products has increased from eight in 2011 to more than 20 during the twelve months ended September 30, 2015. We have experienced rapid revenue growth over the last several years. Our revenue for 2014 was $146.2 million, an 88.3% increase from $77.7 million of revenue in 2013. Our revenue for the nine months ended September 30, 2015 was $170.5 million, a 62.0% increase from $105.2 million of revenue in the nine months ended September 30, 2014. In 2014, we generated net income of $13.5 million and our adjusted EBITDA was $20.4 million, compared to a net loss of $1.2 million and adjusted EBITDA of $3.6 million in 2013. For the nine months ended September 30, 2015, we generated net income of $17.9 million and our adjusted EBITDA was $31.7 million, compared to net income of $11.0 million and adjusted EBITDA of $16.0 million for the nine months ended September 30, 2014. See “Selected Consolidated Financial Data—Non-GAAP Financial Measures” for more information regarding our use of adjusted EBITDA and other non-GAAP financial measures and a reconciliation of adjusted EBITDA to net (loss) income.
Industry Background
According to Cisco’s Visual Networking Index Report dated May 2015, or the VNI Report, global internet protocol, or IP, traffic is projected to nearly triple from 2.0 exabytes per day in 2014 to 5.5 exabytes per day in 2019, representing a 23% compound annual growth rate, or CAGR. This growth is expected to be driven by a variety of factors, including increased data and video consumption, growth in mobile and 4G/LTE communications, proliferation of cloud services, changing traffic patterns in metro and inter-data center networks, and adoption of the “Internet of Things.” To satisfy this growth in demand for bandwidth, cloud infrastructure operators and content and communications service providers, which we refer to collectively as cloud and service providers, are investing in the capacity and performance of their network equipment.
The table below outlines the principal types of networks and estimated annual spend on high-speed optical network hardware related to the long-haul, metro and inter-data center markets, as described in the ACG Research Market Release DCI Optical Networking Market 2Q 2014 Worldwide report:
Importance of Optical Interconnect Technologies
Optical equipment that interfaces directly with fiber relies on optical interconnect technologies that take digital signals from network equipment, perform signal processing to convert these digital signals to optical signals for transmission over a fiber network, and then perform the reverse functions on the receive side. These technologies also incorporate advanced signal processing that can monitor, manage and reduce errors and distortion in the fiber connection between the transmit and receive sides. Advanced optical interconnect technologies can enhance network performance by improving the capabilities and increasing the capacities of optical equipment and routers and switches, while also reducing operating costs. The key characteristics of advanced optical interconnect technologies that dictate performance and capacity include speed, density, robustness, power consumption, automation and manageability.
Our Solution—The Siliconization of Optical Interconnect
We have developed families of high-speed coherent optical interconnect products that reduce the complexity and cost of optical interconnect technology, while simultaneously improving network performance and the pace of innovation in the optical networking industry. Our optical interconnect solution includes sophisticated modules that perform a majority of the digital signal processing and optical functions required to process network traffic at transmission speeds of 100 Gbps and above in long-haul, metro and inter-data center networks. These modules meet the needs of cloud and service providers for optical interconnect products in a simple, open, high-performance form factor that can be easily integrated in a cost-effective manner with existing network equipment.
Our interconnect products are powered by our internally developed and purpose-built coherent DSP ASICs and silicon PICs. Our coherent DSP ASICs and silicon PICs are engineered to work together and each integrates numerous signal processing and optical transmission functions that together deliver a complete, cost-effective high-speed coherent optical interconnect solution in a small footprint that requires low power and provides significant automation and management capabilities. We believe that our highly integrated optical interconnect modules, which are based on our coherent DSP ASIC and silicon PIC, were, at the time market introduction, the industry’s first interconnect modules to deliver transmission speeds of 100 Gbps and higher. Prior to the introduction of our highly integrated optical interconnect modules, we believe that these transmission speeds were not possible in modules in an industry standard form factor without sacrificing signal quality or other performance characteristics.
Our Competitive Strengths
We believe the following strengths will enable us to maintain and extend our position in the high-speed optical interconnect market:
Our Growth Strategy
Our goal is to become the leading provider of high-speed optical interconnect technology that underpins the world’s data and communication networks. To grow our business and achieve our vision, we are pursuing the following strategies:
Risks Associated with Our Business
You should consider carefully the risks described under the “Risk Factors” section beginning on page 11 and elsewhere in this prospectus. These risks, which include the following, could materially and adversely affect our business, financial condition, operating results, cash flow and prospects, which could cause the trading price of our common stock to decline and could result in a partial or total loss of your investment:
Our Corporate Information
We were incorporated in the State of Delaware in June 2009. Our principal executive offices are located at Three Clock Tower Place, Suite 100, Maynard, MA 01754, and our telephone number at that address is (978) 938-4896. Our website address is www.acacia-inc.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.
“Acacia Communications®,” “Acacia®,” our logo, and other trademarks or tradenames of Acacia Communications, Inc. appearing in this prospectus are our property. This prospectus also contains trademarks and trade names of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including:
We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of this offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenue, we have more than $700 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than $1 billion of non-convertible debt securities over a three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of certain reduced reporting obligations in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to new or revised accounting standards that are applicable to other public companies that are not emerging growth companies.