Harmonic Announces Second Quarter 2018 Results
SAN JOSE, Calif., July 30, 2018 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, today announced its unaudited results for the second quarter of 2018.
"Continued execution of our CableOS and VOS strategy drove sequential and year over year revenue growth and gross margin expansion, and a return to non-GAAP profitability," said Patrick Harshman, president and chief executive officer of Harmonic. "Looking ahead, we remain confident that CableOS is firmly on track to become a market-leading cable access platform, and that VOS software and SaaS momentum will continue to enable a more consistently profitable Video segment."
Q2 Financial and Business Highlights
-- GAAP revenue $99.2 million, up 20% year over year; non-GAAP revenue
$99.4 million, up 21% year over year.
-- Cable Access segment revenue: GAAP $20.0 million; non-GAAP $20.2
million, up over 70% year over year.
-- Video segment operating profit: 7.9% operating margin, up $15.2 million
year over year.
-- Operating income: GAAP $0.6 million and non-GAAP $6.8 million, compared
to GAAP loss $27.4 million and non-GAAP loss $16.4 million in the year
ago period.
-- EPS: GAAP net loss per share 3 cents and non-GAAP net income per share 5
cents, compared to GAAP net loss per share 39 cents and non-GAAP net
loss per share 20 cents in the year ago period.
-- Bookings $107.9 million, up 18% year over year, drove record backlog and
deferred revenue to $230.4 million, up 19% year over year.
-- CableOS deployments continued to scale, surpassing 400,000 served cable
modems, up 100% quarter over quarter.
-- Over 34,000 OTT channels deployed globally, up 6% quarter over quarter,
powered in part by multiple new VOS SaaS wins.
Select Financial Information
GAAP Non-GAAP
Key Financial
Results Q2 2018 Q1 2018 Q2 2017 Q2 2018 Q1 2018 Q2 2017
------- ------- ------- ------- ------- -------
(in millions, except per share data)
Net revenue $99.2 $90.1 $82.3 $99.4 $90.2 $82.3
Net income (loss) $(2.9) $(13.7) $(31.5) $4.6 $(1.1) $(15.7)
Diluted EPS $(0.03) $(0.16) $(0.39) $0.05 $(0.01) $(0.20)
Other Financial Information Q2 2018 Q1 2018 Q2 2017
------- ------- -------
(in millions)
Bookings for the quarter $107.9 $102.6 $91.1
Backlog and deferred revenue as of quarter end $230.4 $224.4 $194.4
Cash as of quarter end $54.1 $52.0 $52.9
---------------------- ----- ----- -----
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".
Financial Guidance
Q3 2018 Q4 2018 2018
GAAP Financial
Guidance Low High Low High Low High
--- ---- --- ---- --- ----
(in millions, except percentages and per share data)
Net Revenue $93.0 $103.0 $105.0 $118.0 $388.0 $411.0
Video $70.0 $76.0 $75.0 $82.0 $296.0 $309.0
Cable Access $23.0 $27.0 $30.0 $36.0 $92.0 $102.0
Gross Margin % 48.4% 49.5% 48.0% 51.2% 50.3% 51.3%
Operating Expenses $55.1 $56.1 $53.5 $54.5 $215.8 $217.8
Operating Income
(Loss) $(11.1) $(4.1) $(4.1) $6.9 $(22.8) $(4.8)
Tax Benefit
(Expense) $(0.7) $(0.7) $(0.7) $(0.7) $(2.8) $(2.8)
EPS $(0.17) $(0.09) $(0.09) $0.03 $(0.45) $(0.24)
Shares 86.4 86.4 87.0 88.5 85.7 85.7
Cash $50.0 $60.0 $50.0 $60.0 $50.0 $60.0
---- ----- ----- ----- ----- ----- -----
Q3 2018 Q4 2018 2018
Non-GAAP Financial
Guidance Low High Low High Low High
--- ---- --- ---- --- ----
(in millions, except percentages and per share data)
Net Revenue $93.0 $103.0 $105.0 $118.0 $388.0 $411.0
Video $70.0 $76.0 $75.0 $82.0 $296.0 $309.0
Cable Access $23.0 $27.0 $30.0 $36.0 $92.0 $102.0
Gross Margin % 51.0% 52.0% 50.0% 52.0% 52.0% 53.0%
Operating Expenses $49.0 $50.0 $50.0 $51.0 $195.0 $197.0
Operating Income
(Loss) $(3.0) $4.0 $1.0 $12.0 $6.0 $24.0
Tax Rate 16% 16% 16% 16% 16% 16%
EPS $(0.05) $0.03 $ - $0.09 $(0.01) $0.16
Shares 86.4 87.4 87.0 88.5 85.7 86.6
Cash $50.0 $60.0 $50.0 $60.0 $50.0 $60.0
---- ----- ----- ----- ----- ----- -----
See "Use of Non-GAAP Financial
Measures" and "GAAP to Non-GAAP
Reconciliations" below.
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, July 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 1778335). 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 1778335).
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 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 our long-term investments 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.
Gain (loss) on equity investments - We exclude the change in fair value of our equity investments 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)
June 29, 2018 December 31, 2017
------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $54,098 $57,024
Accounts receivable, net 82,635 69,844
Inventories 22,994 25,976
Prepaid expenses and other
current assets 19,377 18,931
------ ------
Total current assets 179,104 171,775
Property and equipment, net 25,631 29,265
Goodwill 241,176 242,827
Intangibles, net 17,010 21,279
Other long-term assets 42,863 42,913
------ ------
Total assets $505,784 $508,059
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other debts and capital lease
obligations, current $1,723 $7,610
Accounts payable 28,992 33,112
Income taxes payable 560 233
Deferred revenue 56,278 52,429
Accrued and other current
liabilities 51,221 48,705
------ ------
Total current liabilities 138,774 142,089
Convertible notes, long-term 111,702 108,748
Other debts and capital lease
obligations, long-term 14,318 15,336
Income taxes payable, long-term 1,086 917
Other non-current liabilities 19,169 22,626
------ ------
Total liabilities 285,049 289,716
------- -------
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;
85,439 and 82,554 shares
issued and outstanding at June
29, 2018 and December 31,
2017, respectively 85 83
Additional paid-in capital 2,283,649 2,272,690
Accumulated deficit (2,062,988) (2,057,812)
Accumulated other comprehensive
income (loss) (11) 3,382
--- -----
Total stockholders' equity 220,735 218,343
------- -------
Total liabilities and
stockholders' equity $505,784 $508,059
======== ========
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three months ended Six months ended
June 29, 2018 June 30, 2017 June 29, 2018 June 30, 2017
------------- ------------- ------------- -------------
Revenue:
Product $60,599 $50,190 $115,973 $100,594
Service 38,561 32,125 73,314 64,664
------ ------ ------ ------
Total net revenue 99,160 82,315 189,287 165,258
Cost of revenue:
Product 31,251 32,005 57,860 58,107
Service 16,306 16,495 32,641 32,928
------ ------ ------ ------
Total cost of
revenue 47,557 48,500 90,501 91,035
------ ------ ------ ------
Gross profit 51,603 33,815 98,786 74,223
Operating expenses:
Research and
development 21,542 27,055 44,999 51,937
Selling, general and
administrative 27,988 32,625 59,151 67,256
Amortization of
intangibles 800 780 1,604 1,554
Restructuring and
related charges 631 777 1,717 2,056
--- --- ----- -----
Total operating
expenses 50,961 61,237 107,471 122,803
Income (loss) from
operations 642 (27,422) (8,685) (48,580)
Interest expense,
net (2,863) (2,680) (5,620) (5,270)
Other income
(expense), net 199 (819) (333) (1,330)
---
Loss before income
taxes (2,022) (30,921) (14,638) (55,180)
Provision for income
taxes 891 579 1,969 347
--- --- ----- ---
Net loss $(2,913) $(31,500) $(16,607) $(55,527)
======= ======== ======== ========
Net loss per share:
Basic and diluted $(0.03) $(0.39) $(0.20) $(0.69)
====== ====== ====== ======
Shares used in per share
calculation:
Basic and diluted 85,304 80,590 84,616 80,203
====== ====== ====== ======
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six months ended
June 29, 2018 June 30, 2017
------------- -------------
Cash flows from operating activities:
Net loss $(16,607) $(55,527)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Amortization of intangibles 4,194 4,144
Depreciation 6,771 7,139
Stock-based compensation 8,769 7,387
Amortization of discount on
convertible debt 2,954 2,676
Amortization of non-cash warrant 395 416
Restructuring, asset impairment and
loss on retirement of fixed assets 93 228
Deferred income taxes 530 (38)
Foreign currency adjustments (1,042) 1,131
Provision for excess and obsolete
inventories 822 5,094
Allowance for doubtful accounts,
returns and discounts 623 3,274
Other non-cash adjustments, net 64 189
Changes in operating assets and liabilities, net of
effects of acquisition:
Accounts receivable (13,572) 23,479
Inventories 2,000 2,912
Prepaid expenses and other assets 1,897 5,933
Accounts payable (4,187) 1,434
Deferred revenue 9,378 1,308
Income taxes payable 503 228
Accrued and other liabilities (337) (8,793)
---- ------
Net cash provided by operating
activities 3,248 2,614
----- -----
Cash flows from investing activities:
Proceeds from maturities of
investments - 3,106
Proceeds from sale of investments - 3,792
Purchases of property and equipment (3,181) (5,943)
Net cash (used in) provided by
investing activities (3,181) 955
------ ---
Cash flows from financing activities:
Proceeds from other debts and capital
leases - 164
Repayment of other debts and capital
leases (6,176) (6,650)
Proceeds from common stock issued to
employees 2,366 2,117
Payment of tax withholding
obligations related to net share
settlements of restricted stock
units (54) (2,726)
--- ------
Net cash used in financing activities (3,864) (7,095)
------ ------
Effect of exchange rate changes on
cash, cash equivalents and
restricted cash (588) 935
---- ---
Net decrease in cash, cash
equivalents and restricted cash (4,385) (2,591)
Cash, cash equivalents and restricted
cash at beginning of period 58,757 57,420
------ ------
Cash, cash equivalents and restricted
cash at end of period $54,372 $54,829
======= =======
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):
June 29, 2018 December 31, 2017
------------- -----------------
Cash and cash equivalents $54,098 $57,024
Restricted cash included in prepaid expenses and other current assets 274 530
Restricted cash included in other long-term assets - 1,203
--- -----
Total cash, cash equivalents and restricted cash $54,372 $58,757
======= =======
Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
Three months ended
June 29, 2018 March 30, 2018 June 30, 2017
GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP
---- ------------- -------- ---- ------------- -------- ---- ------------- --------
Product
Video Products $50,441 $ - $50,441 51% $47,412 $ - $47,412 52% $44,824 $ - $44,824 54%
Cable Access 10,159 117 10,276 10% 7,962 67 8,029 9% 5,366 $ - 5,366 7%
Services and
Support 38,560 167 38,727 39% 34,753 44 34,797 39% 32,125 - 32,125 39%
------ --- ------ --- ------ --- ------ --- ------ --- ------ ---
Total $99,160 $284 $99,444 100% $90,127 $111 $90,238 100% $82,315 $ - $82,315 100%
======= ==== ======= === ======= ==== ======= === ======= === === ======= ===
Geography
Americas $52,918 $284 $53,202 53% $48,856 $111 $48,967 54% $40,611 $ - $40,611 50%
EMEA 31,676 - 31,676 32% 23,202 - 23,202 26% 24,953 - 24,953 30%
APAC 14,566 - 14,566 15% 18,069 - 18,069 20% 16,751 - 16,751 20%
------ --- ------ --- ------ --- ------ --- ------ --- ------ ---
Total $99,160 $284 $99,444 100% $90,127 $111 $90,238 100% $82,315 $ - $82,315 100%
======= ==== ======= === ======= ==== ======= === ======= === === ======= ===
Market
Service
Provider $54,142 $284 $54,426 55% $52,217 $111 $52,328 58% $46,420 $ - $46,420 56%
Broadcast and
Media 45,018 - 45,018 45% 37,910 - 37,910 42% 35,895 - 35,895 44%
Total $99,160 $284 $99,444 100% $90,127 $111 $90,238 100% $82,315 $ - $82,315 100%
======= ==== ======= === ======= ==== ======= === ======= === === ======= ===
Six months ended
June 29, 2018 June 30, 2017
GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP
---- ------------- -------- ---- ------------- --------
Product
Video Products $97,853 $ - $97,853 52% $90,342 $ - $90,342 55%
Cable Access 18,121 184 18,305 9% 10,252 191 10,443 6%
Services and
Support 73,313 211 73,524 39% 64,664 336 65,000 39%
------ --- ------ --- ------ --- ------ ---
Total $189,287 $395 $189,682 100% $165,258 $527 $165,785 100%
======== ==== ======== === ======== ==== ======== ===
Geography
Americas $101,774 $395 $102,169 54% $78,517 $416 $78,933 48%
EMEA 54,878 - 54,878 29% 50,392 111 50,503 30%
APAC 32,635 - 32,635 17% 36,349 - 36,349 22%
------ --- ------ --- ------ --- ------ ---
Total $189,287 $395 $189,682 100% $165,258 $527 $165,785 100%
======== ==== ======== === ======== ==== ======== ===
Market
Service
Provider $106,359 $395 $106,754 56% $94,448 $416 $94,864 57%
Broadcast and
Media 82,928 - 82,928 44% 70,810 111 70,921 43%
------ --- --- ------ --- ---
Total $189,287 $395 $189,682 100% $165,258 $527 $165,785 100%
======== ==== ======== === ======== ==== ======== ===
(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 June 29, 2018
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $79,208 $20,236 $99,444 $(284) $99,160
Gross profit 43,558 10,187 53,745 (2,142) 51,603
Gross margin% 55.0% 50.3% 54.0% 52.0%
Operating
income (loss) 6,239 540 6,779 (6,137) 642
Operating
margin% 7.9% 2.7% 6.8% 0.6%
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 June 30, 2017
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $73,379 $8,936 $82,315 $ - $82,315
Gross profit 37,720 1,699 39,419 (5,604) 33,815
Gross margin% 51.4% 19.0% 47.9% 41.1%
Operating loss (8,947) (7,411) (16,358) (11,064) (27,422)
Operating
margin% (12.2)% (82.9)% (19.9)% (33.3)%
Six months ended June 29, 2018
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $150,956 $38,726 $189,682 $(395) $189,287
Gross profit 84,784 18,827 103,611 (4,825) 98,786
Gross margin% 56.2% 48.6% 54.6% 52.2%
Operating
income (loss) 8,234 (973) 7,261 (15,946) (8,685)
Operating
margin% 5.5% (2.5)% 3.8% (4.6)%
Six months ended June 30, 2017
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $147,832 $17,953 $165,785 $(527) $165,258
Gross profit 78,604 4,325 82,929 (8,706) 74,223
Gross margin% 53.2% 24.1% 50.0% 44.9%
Operating loss (14,672) (13,075) (27,747) (20,833) (48,580)
Operating
margin% (9.9)% (72.8)% (16.7)% (29.4)%
(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 June 29, 2018
Revenue Gross Total Income Total Non- Net
Profit Operating from operating Income
Expense Operations Expense, net (Loss)
--- ------- ---------- ----- ------
GAAP $99,160 $51,603 $50,961 $642 $(2,664) $(2,913)
Accounting impact
related to warrant
amortization 284 284 - 284 - 284
Stock-based
compensation - 448 (2,564) 3,012 - 3,012
Amortization of
intangibles - 1,295 (800) 2,095 - 2,095
Restructuring and
related charges - 115 (631) 746 - 746
Gain on equity
investments - - - - (183) (183)
Non-cash interest
expenses related to
convertible notes - - - - 1,501 1,501
Discrete tax items and
tax effect of non-
GAAP adjustments - - - - - 22
Total adjustments 284 2,142 (3,995) 6,137 1,318 7,477
--- ----- ------ ----- ----- -----
Non-GAAP $99,444 $53,745 $46,966 $6,779 $(1,346) $4,564
======= ======= ======= ====== ======= ======
As a % of revenue (GAAP) 52.0% 51.4% 0.6% (2.7)% (2.9)%
As a % of revenue (Non-GAAP) 54.0% 47.2% 6.8% (1.4)% 4.6%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $(0.03)
======
Diluted net income per share-Non-GAAP $0.05
=====
Shares used to compute diluted net
income (loss) per share:
GAAP 85,304
======
Non-GAAP 85,758
======
Three months ended March 30, 2018
Revenue Gross Total Income Total Non- Net Loss
Profit Operating (Loss) operating
Expense from Expense, net
Operations
--- ---
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 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 June 30, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense, net
--- --- ---
GAAP $82,315 $33,815 $61,237 $(27,422) $(3,499) $(31,500)
Cable Edge inventory
charge - 3,331 - 3,331 - 3,331
Stock-based
compensation - 700 (3,436) 4,136 - 4,136
Amortization of
intangibles - 1,295 (780) 2,075 - 2,075
Restructuring and
related charges - 278 (777) 1,055 - 1,055
TVN acquisition-and
integration-related
costs - - (467) 467 - 467
Non-cash interest
expenses related to
convertible notes - - - - 1,360 1,360
Discrete tax items and
tax effect of non-
GAAP adjustments - - - - - 3,354
Total adjustments $ - $5,604 $(5,460) $11,064 $1,360 $15,778
Non-GAAP $82,315 $39,419 $55,777 $(16,358) $(2,139) $(15,722)
======= ======= ======= ======== ======= ========
As a % of revenue (GAAP) 41.1% 74.4% (33.3)% (4.3)% (38.3)%
As a % of revenue (Non-GAAP) 47.9% 67.8% (19.9)% (2.6)% (19.1)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.39)
======
Diluted net loss per share-Non-GAAP $(0.20)
======
Shares used to compute diluted net loss
per share:
GAAP and Non-GAAP 80,590
======
Six months ended June 29, 2018
Revenue Gross Total Income Total Non- Net
Profit Operating (Loss) operating Income
Expense from Expense (Loss)
Operations
--- ---
GAAP $189,287 $98,786 $107,471 $(8,685) $(5,953) $(16,607)
Accounting impact
related to warrant
amortization 395 395 - 395 - 395
Stock-based
compensation - 963 (7,806) 8,769 - 8,769
Amortization of
intangibles - 2,590 (1,604) 4,194 - 4,194
Restructuring and
related charges - 877 (1,717) 2,594 - 2,594
Gain on equity
investments - - - - (183) (183)
Non-cash interest
expenses related to
convertible notes - - - - 2,955 2,955
Avid litigation
settlement and
associated legal fees - - 6 (6) - (6)
Discrete tax items and
tax effect of non-
GAAP adjustments - - - - - 1,316
Total adjustments $395 $4,825 $(11,121) $15,946 $2,772 $20,034
Non-GAAP $189,682 $103,611 $96,350 $7,261 $(3,181) $3,427
======== ======== ======= ====== ======= ======
As a % of revenue (GAAP) 52.2% 56.8% (4.6)% (3.1)% (8.8)%
As a % of revenue (Non-GAAP) 54.6% 50.8% 3.8% (1.7)% 1.8%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $(0.20)
======
Diluted net income per share-Non-GAAP $0.04
=====
Shares used to compute diluted net
income (loss) per share:
GAAP 84,616
======
Non-GAAP 85,052
======
Six months ended June 30, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense
--- --- ---
GAAP $165,258 $74,223 $122,803 $(48,580) $(6,600) $(55,527)
Cable Edge inventory
charge - 3,316 - 3,316 - 3,316
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 - 1,145 (6,242) 7,387 - 7,387
Amortization of
intangibles - 2,590 (1,554) 4,144 - 4,144
Restructuring and
related charges - 786 (2,056) 2,842 - 2,842
TVN acquisition-and
integration-related
costs - 342 (2,275) 2,617 - 2,617
Non-cash interest
expenses related to
convertible notes - - - - 2,676 2,676
Discrete tax items and
tax effect of non-
GAAP adjustments - - - - - 5,098
Total adjustments 527 8,706 (12,127) 20,833 2,676 28,607
Non-GAAP $165,785 $82,929 $110,676 $(27,747) $(3,924) $(26,920)
======== ======= ======== ======== ======= ========
As a % of revenue (GAAP) 44.9% 74.3% (29.4)% (4.0)% (33.6)%
As a % of revenue (Non-GAAP) 50.0% 66.8% (16.7)% (2.4)% (16.2)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.69)
======
Diluted net loss per share-Non-GAAP $(0.34)
======
Shares used to compute diluted net loss
per share:
GAAP and Non-GAAP 80,203
======
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Financial Guidance
(In millions, except percentages and per share data)
Q3 2018 Financial Guidance
Revenue Gross Total Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations Expense,
net
--- ---
GAAP $93.0 to $45.0 to $55.1 to $(11.1) to $(3.3) $(15.1) to
$103.0 $51.0 $56.1 $(4.1) $(7.5)
Stock-based
compensation - 0.7 (5.3) 6.0 - 6.0
Amortization of
intangibles - 1.3 (0.8) 2.1 - 2.1
Non-cash interest
expense related to
convertible notes - - - - 1.5 1.5
Tax effect of non-
GAAP adjustments - - - - - $0.9 to $1.5
--- --- --- --- --- ------------
Total adjustments - 2.0 (6.1) 8.1 1.5 $10.5 to
$11.1
-----
Non-GAAP $93.0 to $47.0 to $49.0 to $(3.0) to $(1.8) $(4.0) to
$103.0 $53.0 $50.0 $4.0 $3.0
====== ===== ===== ==== ====
As a % of revenue (GAAP) 48.4% to 53.5% to (11.9)% to (3.5%) (16.2)% to
49.5% 60.3% (4.0)% (7.3)%
As a % of revenue (Non-GAAP) 51% to 47.5% to (3)% to 4% (2%) (4)% to 3%
52% 54.0%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $(0.17) to $(0.09)
=================
Diluted net (loss) income per share-Non-
GAAP $(0.05) to $0.03
Shares used to compute diluted net loss per
share:
GAAP and Non-GAAP 86.4
Shares used to compute diluted net income per
share:
Non-GAAP 87.4
====
Q4 2018 Financial Guidance
Revenue Gross Total Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations Expense,
net
--- ---
GAAP $105.0 to $50.4 to $53.5 to $(4.1) to $(3.4) $(8.2) to
$118.0 $60.4 $54.5 $6.9 $2.5
Stock-based
compensation - 0.3 (2.7) 3.0 - 3.0
Amortization of
intangibles - 1.3 (0.8) 2.1 - 2.1
Non-cash interest
expense related to
convertible notes - - - - 1.6 1.6
Tax effect of non-
GAAP adjustments - - - - - $(1.2) to
$1.5
--- ----
Total adjustments - 1.6 (3.5) 5.1 1.6 $5.5 to $8.2
--- ---
Non-GAAP $105.0 to $52.0 to $50.0 to $1.0 to $12.0 $(1.8) $0.0 to $8.0
$118.0 $62.0 $51.0
====== ===== =====
As a % of revenue (GAAP) 48.0% to 45.3% to (3.9)% to (3.0%) (7.8)% to
51.2% 51.9% 5.8% 2.2%
As a % of revenue (Non-GAAP) 50% to 42.5% to 1% to 10% (2%) 0% to 7%
52% 48.5%
Diluted net income (loss) per share:
Diluted net income (loss) per share-GAAP $(0.09) to $0.03
================
Diluted net (loss) income per share-Non-
GAAP $0.00 to $0.09
Shares used to compute diluted net loss per
share:
GAAP and Non-GAAP 87.0
Shares used to compute diluted net income per
share:
GAAP and Non-GAAP 88.5
====
2018 Financial Guidance
Revenue Gross Total Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations Expense,
net
--- ---
GAAP $388.0 to $195.0 to $215.8 to $(22.8) to $(13.3) $(38.8) to
$411.0 $211.0 $217.8 $(4.8) $(20.9)
Stock-based
compensation - 1.9 (15.9) 17.8 - 17.8
Amortization of
intangibles - 5.2 (3.2) 8.4 - 8.4
Restructuring and
related charges - 0.9 (1.7) 2.6 - 2.6
Non-cash interest
expense related to
convertible notes - - - - 6.1 6.1
Tax effect of non-
GAAP adjustments - - - - - $0.0 to $2.9
--- --- --- --- --- ------------
Total adjustments - 8.0 (20.8) 28.8 6.1 $34.9 to
$37.8
--- -----
Non-GAAP $388.0 to $203.0 to $195.0 to $6.0 to $24.0 $(7.2) $(1.0) to
$411.0 $219.0 $197.0 $14.0
====== ====== ====== =====
As a % of revenue (GAAP) 50.3% to 52.5% to (5.9)% to (3)% (10.0)% to
51.3% 56.1% (1.2)% (5.1)%
As a % of revenue (Non-GAAP) 52% to 47.5% to 1.5% to (2)% (0.3)% to
53% 51% 6.0% 3.5%
Diluted income (loss) per share:
Diluted net loss per share-GAAP $(0.45) to $(0.24)
=================
Diluted net (loss) income per share-Non-
GAAP $(0.01) to $0.16
Shares used to compute diluted net loss per
share:
GAAP and Non-GAAP 85.7
Shares used to compute diluted net income per
share:
Non-GAAP 86.6
====
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SOURCE Harmonic Inc.
