Harmonic Announces First Quarter 2018 Results
Harmonic Announces First Quarter 2018 Results
Cable Access Drives Year Over Year Growth
SAN JOSE, Calif., April 30, 2018 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, today announced its unaudited results for the first quarter of 2018.
"We continue to execute on our strategic initiatives, evidenced by 17% year over year gross profit expansion," said Patrick Harshman, president and chief executive officer of Harmonic. "Our CableOS program continues to gain momentum, delivering 37% sequential revenue growth and a major new Tier 1 customer contract. Our Video segment has been profitable for three consecutive quarters, as gross margin expanded to 57.5% in the current quarter, driven by our ongoing transition to software and SaaS."
Q1 Financial and Business Highlights
-- GAAP revenue of $90.1 million, up 9% year over year; non-GAAP revenue of
$90.2 million, up 8% year over year.
-- Cable Access segment revenue: GAAP $18.4 million; non-GAAP $18.5
million, up over 70% year over year.
-- Video segment operating profit: $2.0 million, up $7.7 million year over
year.
-- Gross margin: GAAP 52.4% compared to 48.7% in the year ago period;
non-GAAP 55.3% compared to 52.1% in the year ago period.
-- Record backlog and deferred revenue of $224.4 million, up 21.8% year
over year.
-- New CableOS multi-year supply agreement worth over $50 million awarded
by a Tier 1 international cable operator.
-- Surpassed 32,500 OTT channels deployed globally, up over 50% in past six
months.
Select Financial Information
GAAP Non-GAAP
Key Financial
Results Q1 2018 Q4 2017 Q1 2017 Q1 2018 Q4 2017 Q1 2017
------- ------- ------- ------- ------- -------
(in millions, except per share data)
Net revenue $90.1 $101.0 $82.9 $90.2 $101.1 $83.5
Net loss $(13.7) $(11.8) $(24.0) $(1.1) $(0.4) $(11.2)
Diluted EPS $(0.16) $(0.14) $(0.30) $(0.01) $0.00 $(0.14)
Other Financial Information Q1 2018 Q4 2017 Q1 2017
------- ------- -------
(in millions)
Bookings for the quarter $102.6 $122.9 $82.1
Backlog and deferred revenue as of quarter end $224.4 $224.4 $184.2
Cash as of quarter end $52.0 $57.0 $55.3
---------------------- ----- ----- -----
Explanations regarding our use of non-GAAP financial measures and related definitions, and reconciliations of our GAAP and non-GAAP measures, are provided in the sections below entitled "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations".
Q2 Financial Guidance and Outlook for 2018
GAAP Financial Guidance Q2 2018 2018
Low High Low High
--- ---- --- ----
(in millions, except percentages and per share data)
Net Revenue $88.0 $98.0 $375.0 $425.0
Video $70.0 $76.0 $285.0 $315.0
Cable Access $18.0 $22.0 $90.0 $110.0
Gross Margin % 50.5% 52.5% 48.5% 50.5%
Operating Expenses $52.5 $54.5 $217.0 $225.0
Operating Income (Loss) $(10.2) $(1.2) $(43.2) $(2.2)
Tax Benefit (Expense) $(0.7) $(0.7) $(2.8) $(2.8)
EPS $(0.17) $(0.06) $(0.69) $(0.21)
Shares 85.4 85.4 86.0 86.0
Cash $45.0 $55.0 $45.0 $55.0
---- ----- ----- ----- -----
Non-GAAP Financial
Outlook Q2 2018 2018
Low High Low High
--- ---- --- ----
(in millions, except percentages and per share data)
Net Revenue $88.0 $98.0 $375.0 $425.0
Video $70.0 $76.0 $285.0 $315.0
Cable Access $18.0 $22.0 $90.0 $110.0
Gross Margin % 52.0% 54.0% 51.0% 52.0%
Operating Expenses $49.0 $51.0 $197.0 $205.0
Operating Income (Loss) $(5.0) $4.0 $(15.0) $26.0
Tax Rate 16% 16% 16% 16%
EPS $(0.07) $0.02 $(0.22) $0.18
Shares 85.4 86.0 86.0 87.0
Cash $45.0 $55.0 $45.0 $55.0
---- ----- ----- ----- -----
See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.
Effective January 1, 2018, we adopted the new revenue recognition standard entitled Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("ASC 606"). The 2018 Outlook reflects the effects of adopting this new accounting standard for 2018, with an expected net decrease in 2018 revenue of approximately $5 million and an increase in 2018 operating expense of approximately $1.0 million.
Conference Call Information
Harmonic will host a conference call to discuss its financial results at 2:00 p.m. PT (5:00 p.m. ET) on Monday, April 30, 2018. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling 1.574.990.1032 or +1.800.240.9147 (passcode 6987705). A replay will be available after 4:30 p.m. PT on the same web site or by calling +1.404.537.3406 or +1.855.859.2056 (passcode 6987705).
About Harmonic Inc.
Harmonic (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, enables media companies and service providers to deliver ultra-high-quality broadcast and OTT video services to consumers globally. The company has also revolutionized cable access networking via the industry's first virtualized CCAP solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers' homes and mobile devices. Whether simplifying OTT video delivery via innovative cloud and software-as-a-service (SaaS) technologies, or powering the delivery of gigabit internet cable services, Harmonic is changing the way media companies and service providers monetize live and VOD content on every screen. More information is available at www.harmonicinc.com.
Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations regarding: GAAP net revenue, GAAP gross margins, GAAP operating expenses, GAAP operating loss, GAAP tax expense, GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP tax rate, non-GAAP EPS, share count and cash. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite, telco, broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions on our sales and operations; our ability to develop new and enhanced products in a timely manner and market acceptance of our new or existing products; losses of one or more key customers; risks associated with our international operations; exchange rate fluctuations of the currencies in which we conduct business; risks associated with our CableOS(TM) and VOS(TM) product solutions; dependence on market acceptance of various types of broadband services, on the adoption of new broadband technologies and on broadband industry trends; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in our markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; and the effect on our business of natural disasters. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic's filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K for the year ended December 31, 2017, our most recent Quarterly Report on Form 10-Q and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business, establish operating budgets, set internal measurement targets and make operating decisions.
These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Harmonic's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Harmonic's results of operations in conjunction with the corresponding GAAP measures.
The Company believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP.
The non-GAAP measures presented here are: revenue, gross profit, operating expenses, income (loss) from operations, non-operating expenses and net income (loss) (including those amounts as a percentage of revenue), and net income (loss) per diluted share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements provided with this press release. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures.
Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
Cable Access inventory charge - Harmonic from time to time incurs inventory impairment charges associated with material business shifts, such as the repositioning of our Cable Access segment. We exclude these items, because we do not believe they are reflective of our ongoing long-term business and operating results.
Stock-based compensation - Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We believe that management is limited in its ability to project the impact of stock-based compensation would have on our operating results. In addition, for comparability purposes, we believe it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies.
Amortization of intangibles - A portion of the purchase price of our acquisitions is generally allocated to intangible assets, and is subject to amortization. However, Harmonic does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition's purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore, we believe that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.
Restructuring and related charges - Harmonic from time to time incurs restructuring charges which primarily consist of employee severance, one-time termination benefits related to the reduction of its workforce, lease exit costs, and other costs. These charges are associated with material business shifts. We exclude these items, because we do not believe they are reflective of our ongoing long-term business and operating results.
TVN acquisition- and integration-related costs - As a result of the Company's acquisition of Thomson Video Networks (TVN) in February 2016, the Company incurred acquisition- and integration-related expenses, including legal, accounting and other professional services as well as integration-related costs that are not expected to generate future benefits once the integration is fully consummated. We exclude these transaction and integration expenses because we believe these expenses have no direct correlation to the operation of our business, and because we believe that the non-GAAP financial measures excluding these costs provide meaningful supplemental information regarding our operational performance and liquidity. In addition, excluding these costs from the non-GAAP measures facilitates comparisons to our historical operating results and comparisons to peer company operating results.
Inventory fair value adjustment - Purchase accounting requires us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company's cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustments to our cost of revenues exclude the expected profit margin component that is recorded under purchase accounting associated with our acquisitions. We believe the adjustments are useful to investors as an additional means to reflect cost of revenues and gross margin trends of our business.
Deferred revenue fair value adjustment - We define non-GAAP net revenues as net revenues excluding the impact of purchase accounting. In connection with our acquisitions, the acquired deferred revenue balances were required to be written down due to purchase accounting in accordance with GAAP. The impact on revenues related to purchase accounting as a result of these transactions, limits the comparability of revenues between periods. We do not expect revenues generated from new contracts to be similarly impacted by purchase accounting adjustments. Accordingly, we believe presenting non-GAAP net revenues to exclude the impact of purchase accounting adjustments aids in the comparability between periods and in assessing our overall operating performance.
Non-cash interest expense related to convertible notes - We record the accretion of the debt discount related to the equity component and amortization of issuance costs as non-cash interest expense. We believe that excluding these costs provides meaningful supplemental information regarding operational performance and liquidity, along with enhancing investors' ability to view the Company's results from management's perspective. In addition, we believe excluding these costs from the non-GAAP measures facilitates comparisons to our historical operating results and comparisons to peer company operating results.
Accounting impact related to warrant amortization - We issued a warrant to a customer, Comcast Corporation, in September 2016 pursuant to which Comcast may purchase up to 7.8 million shares of Harmonic common stock. Vesting of the warrant shares is subject to Comcast achieving certain milestones and purchase volume commitments, and therefore the accounting guidance requires that the value of the warrant be recorded as a reduction in the Company's net revenues. Until final vesting, changes in the fair value of the warrant share will be marked to market and any adjustment as such will also be recorded in revenue. The change in fair value together with vested warrant shares are amortized to revenue using a ratio of revenue recognized from the customer in the period compared to total revenue expected from the customer. We have excluded the effect of warrant amortization in our non-GAAP financial measures. Management believes it is useful to exclude the charge for the fair value of the warrant shares in order to better understand the effects of these items on our total revenues and gross margin.
Loss on impairment of long-term investments - We exclude the effect of any other-than-temporary impairment of a cost method investment in calculating our non-GAAP financial measures. We exclude these items because we do not believe they are reflective of our ongoing long-term business and operating results.
Avid litigation settlement and associated legal fees - In the third quarter of fiscal 2017, we settled the patent litigation with Avid Technology, Inc. by entering into a settlement and patent portfolio cross-license agreement with Avid. Under the agreement, we agreed to pay Avid a one-time non-recurring amount of $6 million in installments. $2.5 million was paid upfront in October 2017 and $1.5 million and $2.0 million will be paid in 2019 and 2020, respectively. Also, the Avid litigation costs of approximately $1.4 million and $0.7 million in the third and fourth fiscal quarter of 2017, respectively, were significantly higher compared to prior periods. We excluded these expenses from our non-GAAP results because we do not believe they are reflective of our ongoing long-term business and operating results.
Discrete tax items and tax effect of non-GAAP adjustments - The income tax effect of non-GAAP adjustments relates to the tax effect of the adjustments that we incorporate into non-GAAP financial measures in order to provide a more meaningful measure of non-GAAP net income.
Harmonic Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)
March 30, 2018 December 31, 2017
-------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $52,045 $57,024
Accounts receivable, net 74,760 69,844
Inventories 25,074 25,976
Prepaid expenses and other
current assets 29,967 18,931
------ ------
Total current assets 181,846 171,775
Property and equipment, net 27,703 29,265
Goodwill 243,805 242,827
Intangibles, net 19,233 21,279
Other long-term assets 43,647 42,913
------ ------
Total assets $516,234 $508,059
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other debts and capital lease
obligations, current $7,551 $7,610
Accounts payable 27,573 33,112
Income taxes payable 481 233
Deferred revenue 57,629 52,429
Accrued and other current
liabilities 49,202 48,705
------ ------
Total current liabilities 142,436 142,089
Convertible notes, long-term 110,201 108,748
Other debts and capital lease
obligations, long-term 15,424 15,336
Income taxes payable, long-
term 927 917
Other non-current liabilities 21,273 22,626
------ ------
Total liabilities 290,261 289,716
------- -------
Stockholders' equity:
Preferred stock, $0.001 par
value, 5,000 shares
authorized; no shares issued
or outstanding - -
Common stock, $0.001 par
value, 150,000 shares
authorized; 85,194 and 82,554
shares issued and outstanding
at March 30, 2018 and
December 31, 2017,
respectively 85 83
Additional paid-in capital 2,280,847 2,272,690
Accumulated deficit (2,060,075) (2,057,812)
Accumulated other
comprehensive income 5,116 3,382
----- -----
Total stockholders' equity 225,973 218,343
------- -------
Total liabilities and
stockholders' equity $516,234 $508,059
======== ========
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three months ended
March 30, March 31,
2018 2017
---- ----
Revenue:
Product $55,374 $50,404
Service 34,753 32,539
------ ------
Total
net
revenue 90,127 82,943
Cost of revenue:
Product 26,609 26,102
Service 16,335 16,433
------ ------
Total
cost
of
revenue 42,944 42,535
------ ------
Gross
profit 47,183 40,408
Operating expenses:
Research
and
development 23,457 24,882
Selling,
general
and
administrative 31,163 34,631
Amortization
of
intangibles 804 774
Restructuring
and
related
charges 1,086 1,279
----- -----
Total
operating
expenses 56,510 61,566
Loss
from
operations (9,327) (21,158)
Interest
expense,
net (2,757) (2,590)
Other
expense,
net (532) (511)
----
Loss
before
income
taxes (12,616) (24,259)
Provision
for
(benefit
from)
income
taxes 1,078 (232)
----- ----
Net
loss $(13,694) $(24,027)
======== ========
Net loss per share:
Basic
and
diluted $(0.16) $(0.30)
====== ======
Shares used in per
share calculation:
Basic
and
diluted 83,912 79,810
====== ======
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Three months ended
March 30, 2018 March 31, 2017
-------------- --------------
Cash flows from operating activities:
Net loss $(13,694) $(24,027)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Amortization of
intangibles 2,099 2,069
Depreciation 3,456 3,599
Stock-based
compensation 5,757 3,251
Amortization of
discount on
convertible debt 1,453 1,316
Amortization of non-
cash warrant 111 416
Restructuring, asset
impairment and loss
on retirement of
fixed assets 40 187
Foreign currency
adjustments 835 182
Provision for excess
and obsolete
inventories 458 387
Allowance for
doubtful accounts,
returns and
discounts 1,122 2,700
Other non-cash
adjustments, net 132 72
Changes in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable (5,925) 14,388
Inventories 424 942
Prepaid expenses and
other assets (6,511) (3,151)
Accounts payable (5,710) (6,687)
Deferred revenue 10,009 5,435
Income taxes payable 253 6
Accrued and other
liabilities (933) (4,181)
---- ------
Net cash used in
operating
activities (6,624) (3,096)
------ ------
Cash flows from investing activities:
Proceeds from
maturities of
investments - 3,106
Proceeds from sale
of investments - 3,792
Purchases of
property and
equipment (1,775) (3,217)
Net cash provided by
(used in) investing
activities (1,775) 3,681
------ -----
Cash flows from financing activities:
Repayment of other
debts and capital
leases (448) (953)
Proceeds from common
stock issued to
employees 2,347 2,114
Payment of tax
withholding
obligations related
to net share
settlements of
restricted stock
units - (2,383)
--- ------
Net cash provided by
(used in) financing
activities 1,899 (1,222)
----- ------
Effect of exchange
rate changes on
cash, cash
equivalents and
restricted cash 73 347
--- ---
Net decrease in
cash, cash
equivalents and
restricted cash (6,427) (290)
Cash, cash
equivalents and
restricted cash at
beginning of period 58,757 57,420
------ ------
Cash, cash
equivalents and
restricted cash at
end of period $52,330 $57,130
======= =======
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same amounts presented in the Condensed Consolidated Statements of Cash Flows (in thousands):
March 30, 2018 December 31, 2017
-------------- -----------------
Cash and cash
equivalents $52,045 $57,024
Restricted cash
included in
prepaid
expenses and
other current
assets 285 530
Restricted cash
included in
other long-
term assets - 1,203
--- -----
Total cash, cash
equivalents and
restricted cash $52,330 $58,757
======= =======
Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
Three months ended
March 30, 2018 December 31, 2017 March 31, 2017
GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP
---- ------------- -------- ---- ------------- -------- ---- ------------- --------
Product
Video Products $47,412 $ - $47,412 53% $59,882 $ - $59,882 59% $45,518 $ - $45,518 55%
Cable Access 7,962 67 8,029 9% 6,106 50 6,156 6% 4,886 $191 5,077 6%
Services and
Support 34,753 44 34,797 39% 34,986 65 35,051 35% 32,539 336 32,875 39%
------ --- ------ --- ------ --- ------ --- ------ --- ------ ---
Total $90,127 $111 $90,238 100% $100,974 $115 $101,089 100% $82,943 $527 $83,470 100%
======= ==== ======= === ======== ==== ======== === ======= ==== ======= ===
Geography
Americas $48,856 $111 $48,967 54% $44,563 $115 $44,678 44% $37,906 $416 $38,322 46%
EMEA 23,202 - 23,202 26% 39,209 - 39,209 39% 25,439 111 25,550 31%
APAC 18,069 - 18,069 20% 17,202 - 17,202 17% 19,598 19,598 23%
------ --- ------ --- ------ --- ------ --- ------ ------ ---
Total $90,127 $111 $90,238 100% $100,974 $115 $101,089 100% $82,943 $527 $83,470 100%
======= ==== ======= === ======== ==== ======== === ======= ==== ======= ===
Market
Service
Provider $52,217 $111 $52,328 58% $53,052 $115 $53,167 53% $48,028 $416 $48,444 58%
Broadcast and
Media 37,910 - 37,910 42% 47,922 - 47,922 47% 34,915 111 35,026 42%
Total $90,127 $111 $90,238 100% $100,974 $115 $101,089 100% $82,943 $527 $83,470 100%
======= ==== ======= === ======== ==== ======== === ======= ==== ======= ===
(1) See "Use of Non-GAAP Financial
Measures" above and "GAAP to Non-
GAAP Reconciliations" below.
Harmonic Inc.
Preliminary Segment Information
(Unaudited, in thousands, except percentages)
Three months ended March 30, 2018
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $71,748 $18,490 $90,238 $(111) $90,127
Gross profit 41,226 8,640 49,866 (2,683) 47,183
Gross margin% 57.5% 46.7% 55.3% 52.4%
Operating
income (loss) 1,995 (1,513) 482 (9,809) (9,327)
Operating
margin% 2.8% (8.2)% 0.5% (10.3)%
Three months ended December 31, 2017
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $87,596 $13,493 $101,089 $(115) $100,974
Gross profit 46,639 4,034 50,673 (2,101) 48,572
Gross margin% 53.2% 29.9% 50.1% 48.1%
Operating
income (loss) 5,752 (4,192) 1,560 (9,651) (8,091)
Operating
margin% 6.6% (31.1)% 1.5% (8.0)%
Three months ended March 31, 2017
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $74,453 $9,017 $83,470 $(527) $82,943
Gross profit 40,884 2,626 43,510 (3,102) 40,408
Gross margin% 54.9% 29.1% 52.1% 48.7%
Operating loss (5,725) (5,664) (11,389) (9,769) (21,158)
Operating
margin% (7.7)% (62.8)% (13.6)% (25.5)%
(1) See "Use of Non-GAAP Financial
Measures" above and "GAAP to Non-
GAAP Reconciliations" below.
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
Three months ended March 30, 2018
Revenue Gross Total Income Total Non- Net Loss
Profit Operating (loss) from operating
Expense Operations Expense, net
--- ------- ---------- ---
GAAP $90,127 $47,183 $56,510 $(9,327) $(3,289) $(13,694)
Accounting impact
related to warrant
amortization 111 111 - 111 - 111
Stock-based
compensation - 515 (5,242) 5,757 - 5,757
Amortization of
intangibles - 1,295 (804) 2,099 - 2,099
Restructuring and
related charges - 762 (1,086) 1,848 - 1,848
Avid litigation
settlement fees and
associated legal
fees - - 6 (6) - (6)
Non-cash interest
expenses related to
convertible notes - - - - 1,454 1,454
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 1,294
Total adjustments 111 2,683 (7,126) 9,809 1,454 12,557
--- ----- ------ ----- ----- ------
Non-GAAP $90,238 $49,866 $49,384 $482 $(1,835) $(1,137)
======= ======= ======= ==== ======= =======
As a % of revenue (GAAP) 52.4% 62.7% (10.3)% (3.6)% (15.2)%
As a % of revenue (Non-GAAP) 55.3% 54.7% 0.5% (2.0)% (1.3)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.16)
======
Diluted net loss per share-Non-GAAP $(0.01)
======
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 83,912
======
Three months ended December 31, 2017
Revenue Gross Total Income Total Non- Net Loss
Profit Operating (loss) from operating
Expense Operations Expense, net
--- ------- ---------- ---
GAAP $100,974 $48,572 $56,663 $(8,091) $(3,938) $(11,845)
Accounting impact
related to warrant
amortization 115 115 - 115 - 115
Stock-based
compensation - 747 (4,756) 5,503 - 5,503
Amortization of
intangibles - 1,295 (795) 2,090 - 2,090
Restructuring and
related charges - (56) (1,223) 1,167 - 1,167
TVN acquisition- and
integration-related
costs - - (84) 84 - 84
Avid litigation
settlement fees - - (692) 692 - 692
Loss on impairment of
long-term
investment - - - - 530 530
Non-cash interest
expenses related to
convertible notes - - - - 1,429 1,429
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - (121)
--- --- --- --- --- ----
Total adjustments 115 2,101 (7,550) 9,651 1,959 11,489
--- ----- ------ ----- ----- ------
Non-GAAP $101,089 $50,673 $49,113 $1,560 $(1,979) $(356)
======== ======= ======= ====== ======= =====
As a % of revenue (GAAP) 48.1% 56.1% (8.0)% (3.9)% (11.7)%
As a % of revenue (Non-GAAP) 50.1% 48.6% 1.5% (2.0)% (0.4)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.14)
======
Diluted net loss per share-Non-GAAP $0.00
=====
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 82,014
======
Three months ended March 31, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense, net
--- --- ---
GAAP $82,943 $40,408 $61,566 $(21,158) $(3,101) $(24,027)
Cable Access
inventory charge - (15) - (15) - (15)
Acquisition
accounting impacts
related to TVN
deferred revenue 111 111 - 111 - 111
Accounting impact
related to warrant
amortization 416 416 - 416 - 416
Stock-based
compensation - 445 (2,806) 3,251 - 3,251
Amortization of
intangibles - 1,295 (774) 2,069 - 2,069
Restructuring and
related charges - 508 (1,279) 1,787 - 1,787
TVN acquisition-and
integration-related
costs - 342 (1,808) 2,150 - 2,150
Non-cash interest
expenses related to
convertible notes - - - - 1,316 1,316
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 1,744
--- --- --- --- --- -----
Total adjustments $527 $3,102 $(6,667) $9,769 $1,316 $12,829
Non-GAAP $83,470 $43,510 $54,899 $(11,389) $(1,785) $(11,198)
======= ======= ======= ======== ======= ========
As a % of revenue (GAAP) 48.7% 74.2% (25.5)% (3.7)% (29.0)%
As a % of revenue (Non-GAAP) 52.1% 65.8% (13.6)% (2.1)% (13.4)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.30)
======
Diluted net loss per share-Non-GAAP $(0.14)
======
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 79,810
======
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Business Outlook
(In millions, except percentages and per share data)
Q2 2018 Financial Guidance
Revenue Gross Total Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations Expense,
net
--- ---
GAAP $88.0 to $44.3 to $52.5 to $(10.2) to $(3.3) $(14.0) to
$98.0 $51.3 $54.5 $(1.2) $(5.0)
Stock-based
compensation - 0.3 (2.6) 2.9 - 2.9
Amortization of
intangibles - 1.3 (0.8) 2.1 - 2.1
Restructuring and
related charges - 0.1 (0.1) 0.2 - 0.2
Non-cash interest
expense related to
convertible notes - - - - 1.5 1.5
Tax effect of non-
GAAP adjustments - - - - - $0 to $1.5
--- --- --- --- --- ----------
Total adjustments - 1.7 (3.5) 5.2 1.5 $6.7 to $8.2
--- ---
Non-GAAP $88.0 to $46.0 to $49.0 to $(5.0) to $(1.8) $(5.8) to
$98.0 $53.0 $51.0 $4.0 $1.7
===== ===== ===== ==== ====
As a % of revenue (GAAP) 50.5% to 53.5% to (11.5)% to (3.5)% (16)% to
52.5% 62% (1)% (5)%
As a % of revenue (Non-GAAP) 52% to 50% to (5.5)% to 4% (2)% (6.5)% to
54% 58% 1.5%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $(0.17) to $(0.06)
=================
Diluted net (loss) income per share-Non-GAAP $(0.07) to $0.02
Shares used to compute diluted net loss per
share:
GAAP and Non-GAAP 85.4
Shares used to compute diluted net income per
share:
Non-GAAP 86.0
====
2018 Outlook
Revenue Gross Total Loss from Total Non- Net Income
Profit Operating Operations operating (Loss)
Expense Expense,
net
---
GAAP $375.0 to $184.8 to $217.0 to $(43.2) to $(13.3) $(59.3) to
$425.0 $216.8 $225.0 $(2.2) $(18.3)
Stock-based
compensation - 2.0 (15.4) 17.4 - 17.4
Amortization of
intangibles - 5.2 (3.2) 8.4 - 8.4
Restructuring and
related charges - 1.0 (1.4) 2.4 - 2.4
Non-cash interest
expense related to
convertible notes - - - - 6.1 6.1
Tax effect of non-
GAAP adjustments - - - - - $0 to $6
--- --- --- --- --- --------
Total adjustments - 8.2 (20.0) 28.2 6.1 $34.3 to
$40.3
-----
Non-GAAP $375.0 to $190.0 to $197.0 to $(15.0) to $(7.2) $(19.0) to
$425.0 $223.0 $205.0 $26.0 $16.0
====== ====== ====== ===== =====
As a % of revenue
(GAAP) 48.5% to 51% to (11.5)% to (3)% (15.5)% to
50.5% 60% (0.5)% (4)%
As a % of revenue
(Non-GAAP) 51% to 46.5% to (4)% to 6% (2)% (5)% to 4%
52% 54.5%
Diluted income (loss)
per share:
Diluted net loss per
share-GAAP $(0.69) to $(0.21)
=================
Diluted net (loss)
income per share-
Non-GAAP $(0.22) to $0.18
Shares used to
compute diluted net
loss per share:
GAAP and Non-GAAP 86.0
Shares used to
compute diluted net
income per share:
Non-GAAP 87.0
====
CONTACT: Sanjay Kalra, Chief Financial Officer, Harmonic Inc., +1.408.490.6031 or Nicole Noutsios, Investor Relations, Harmonic Inc., +1.510.315.1003
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SOURCE Harmonic Inc.
