Harmonic Announces Third Quarter 2018 Results
SAN JOSE, Calif., Oct. 29, 2018 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the third quarter of 2018.
"Continued execution of our CableOS and Video strategies drove double-digit growth of non-GAAP revenue and operating profit year over year," said Patrick Harshman, president and chief executive officer of Harmonic. "Shipments of CableOS nodes for new distributed access architectures were up 174% sequentially, underscoring positive momentum in our Cable Access segment. Video segment gross margin of 57.2% and operating margin of 7.2% highlight our ongoing profitable transformation to software and SaaS."
Q3 Financial and Business Highlights
-- GAAP revenue $100.6 million, up 9% year over year; non-GAAP revenue
$101.4 million, up 11% year over year.
-- Cable Access segment revenue: GAAP $27.3 million, up 138% year over
year; non-GAAP $28.1 million, up 153% year over year.
-- Video segment operating margin: 7.2%, fifth consecutive quarter of
positive segment operating income.
-- Operating income: GAAP loss $3.7 million and non-GAAP income $5.7
million, compared to GAAP loss $14.2 million and non-GAAP income $1.3
million in the year ago period.
-- EPS: GAAP net loss per share 9 cents and non-GAAP net income per share 4
cents, compared to GAAP net loss per share 19 cents and non-GAAP net
loss per share 1 cent in the year ago period.
-- Ended the quarter with $61.7 million in cash and cash equivalents,
compared to $54.1 million in the prior quarter.
-- CableOS deployments continued to scale, surpassing 480,000 served cable
modems, up 20% quarter over quarter.
-- CableOS global design wins and execution continues with 25 deployments
and trials underway, up 25% quarter over quarter.
-- Over 35,000 OTT channels deployed globally, up 4% quarter over quarter,
powered in part by new Video SaaS wins.
Select Financial Information
GAAP
Non-GAAP
Key Financial
Results Q3 2018 Q2 2018 Q3 2017 Q3 2018 Q2 2018 Q3 2017
(in millions, except per share data)
Net revenue $
100.6 $
99.2 $
92.0 $
101.4 $
99.4 $
91.6
Net income (loss) $
(7.8) $
(2.9) $
(15.6) $
3.4 $
4.6 $
(0.5)
Diluted EPS $
(0.09) $
(0.03) $
(0.19) $
0.04 $
0.05 $
(0.01)
Other Financial Information Q3 2018 Q2 2018 Q3 2017
(in millions)
Bookings for the quarter $
79.5 $
107.9 $
96.0
Backlog and deferred revenue as of quarter end $
207.6 $
230.4 $
200.9
Cash as of quarter end $
61.7 $
54.1 $
50.0
---
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
GAAP
Financial
Guidance
Q4 2018 2018
Low High Low High
(in millions, except percentages and per share data)
Net Revenue $
104.7 $
117.7 $
394.5 $
407.5
Video $
80.0 $
83.0 $
304.0 $
307.0
Cable Access $
24.7 $
34.7 $
90.5 $
100.5
Gross Margin 48.0 48.5 50.0 50.5
% % % % %
Operating
Expenses $
52.5 $
53.5 $
213.7 $
214.7
Operating
Income
(Loss) $
(3.2) $
4.2 $
(15.6) $
(8.2)
Tax Expense $
(0.5) $
(0.5) $
(3.3) $
(3.3)
EPS $
(0.08) $
0.01 $
(0.36) $
(0.28)
Shares 86.8 89.2 85.7 85.7
Cash $
55.0 $
65.0 $
55.0 $
65.0
---
Non-GAAP
Financial
Guidance
Q4 2018 2018
Low High Low High
(in millions, except percentages and per share data)
Net Revenue $
105.0 $
118.0 $
396.0 $
409.0
Video $
80.0 $
83.0 $
304.0 $
307.0
Cable Access $
25.0 $
35.0 $
92.0 $
102.0
Gross Margin 49.0 50.0 52.5 53.0
% % % % %
Operating
Expenses $
49.0 $
50.0 $
192.5 $
193.5
Operating
Income $
2.2 $
9.6 $
15.1 $
22.5
Tax Rate 16 16 16 16
% % % %
EPS $
0.01 $
0.07 $
0.09 $
0.16
Shares 89.2 89.2 86.9 86.9
Cash $
55.0 $
65.0 $
55.0 $
65.0
---
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, October 29, 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 7595808). 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 7595808).
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 cable access 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® 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, segment revenue, gross profit, operating expenses, income (loss) from operations, non-operating expenses, 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.
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, as well as on Cable Access segment revenue.
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 and gain (loss) from sale 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)
September 28, 2018 December 31, 2017
---
ASSETS
Current assets:
Cash and cash equivalents $
61,654 $
57,024
Accounts receivable, net 77,986 69,844
Inventories 23,333 25,976
Prepaid expenses and other
current assets 24,226 18,931
Total current assets 187,199 171,775
Property and equipment, net 24,151 29,265
Goodwill 241,512 242,827
Intangibles, net 14,938 21,279
Other long-term assets 38,624 42,913
Total assets $
506,424 $
508,059
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other debts and capital lease
obligations, current $
7,677 $
7,610
Accounts payable 29,354 33,112
Income taxes payable 830 233
Deferred revenue 48,679 52,429
Accrued and other current
liabilities 50,734 48,705
Total current liabilities 137,274 142,089
Convertible notes, long-term 113,230 108,748
Other debts and capital lease
obligations, long-term 13,155 15,336
Income taxes payable, long-
term 747 917
Other non-current liabilities 18,989 22,626
Total liabilities 283,395 289,716
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; 86,687 and 82,554
shares issued and outstanding
at September 28, 2018 and
December 31, 2017,
respectively 87 83
Additional paid-in capital 2,293,174 2,272,690
Accumulated deficit (2,070,746) (2,057,812)
Accumulated other
comprehensive income 514 3,382
Total stockholders' equity 223,029 218,343
Total liabilities and
stockholders' equity $
506,424 $
508,059
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three months ended Nine months ended
September 28, September 29, September 28, September 29,
2018 2017 2018 2017
---
Revenue:
Product $
62,803 $
58,161 $
178,776 $
158,657
Service 37,813 33,853 111,127 98,615
Total net revenue 100,616 92,014 289,903 257,272
Cost of revenue:
Product 33,224 27,736 91,084 85,843
Service 17,290 17,253 49,931 50,181
Total cost of
revenue 50,514 44,989 141,015 136,024
Gross profit 50,102 47,025 148,888 121,248
Operating expenses:
Research and
development 22,251 21,289 67,250 73,226
Selling, general
and administrative 29,723 37,121 88,874 104,377
Amortization of
intangibles 792 793 2,396 2,347
Restructuring and
related charges 987 2,028 2,704 4,084
Total operating
expenses 53,753 61,231 161,224 184,034
Loss from
operations (3,651) (14,206) (12,336) (62,786)
Interest expense,
net (2,872) (2,794) (8,492) (8,064)
Other expense, net (365) (498) (698) (1,828)
Loss before income
taxes (6,888) (17,498) (21,526) (72,678)
Provision for
(benefit from)
income taxes 870 (1,915) 2,839 (1,568)
Net loss $
(7,758) $
(15,583) $
(24,365) $
(71,110)
Net loss per share:
Basic and diluted $
(0.09) $
(0.19) $
(0.29) $
(0.88)
Shares used in per share
calculation:
Basic and diluted 86,321 81,445 85,188 80,618
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Nine months ended
September 28, September 29,
2018 2017
---
Cash flows from operating activities:
Net loss $
(24,365) $
(71,110)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of
intangibles 6,281 6,232
Depreciation 9,910 11,045
Stock-based
compensation 14,202 11,107
Amortization of
discount on
convertible debt 4,482 4,060
Amortization of non-
cash warrant 1,185 38
Restructuring, asset
impairment and loss
on retirement of
fixed assets 1,105 565
Deferred income taxes 1,056
Foreign currency
adjustments (1,034) 1,795
Provision for excess
and obsolete
inventories 1,259 5,578
Allowance for doubtful
accounts, returns and
discounts 1,357 4,309
Other non-cash
adjustments, net 286 298
Changes in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable (9,585) 11,367
Inventories 997 6,188
Prepaid expenses and
other assets 2,507 6,702
Accounts payable (4,032) 2,129
Deferred revenue 1,783 (1,098)
Income taxes payable 461 (2,122)
Accrued and other
liabilities (2,188) (3,053)
Net cash provided by
(used in) operating
activities 5,667 (5,970)
Cash flows from investing activities:
Proceeds from
maturities of
investments - 3,106
Proceeds from sale of
investments 104 3,792
Purchases of property
and equipment (4,703) (9,075)
Net cash used in
investing activities (4,599) (2,177)
Cash flows from financing activities:
Proceeds from other
debts and capital
leases 5,066 6,344
Repayment of other
debts and capital
leases (6,568) (7,008)
Proceeds from common
stock issued to
employees 4,299 4,697
Payment of tax
withholding
obligations related
to net share
settlements of
restricted stock
units (166) (2,757)
Net cash provided by
financing activities 2,631 1,276
Effect of exchange
rate changes on cash,
cash equivalents and
restricted cash (580) 1,471
Net increase
(decrease) in cash,
cash equivalents and
restricted cash 3,119 (5,400)
Cash, cash equivalents
and restricted cash
at beginning of
period 58,757 57,420
Cash, cash equivalents
and restricted cash
at end of period $
61,876 $
52,020
Reconciliation of cash, cash
equivalents, and restricted cash to the
condensed consolidated balance sheets
Cash and cash
equivalents $
61,654 $
50,039
Restricted cash
included in prepaid
expenses and other
current assets 222 803
Restricted cash
included in other
long-term assets - 1,178
Total cash, cash
equivalents and
restricted cash $
61,876 $
52,020
The accompanying notes are an integral part of these condensed consolidated financial statements.
Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
Three months ended
September 28, 2018
June 29, 2018
September 29, 2017
GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP
---
Product
Video Products $
45,781
$ $
45,781 45% $
50,441
$ $
50,441 51% $
54,175
$ $
54,175 59%
Cable Access 17,022 518 17,540 17% 10,159 117 10,276 10% 3,986 $
(163) 3,823 4%
Services and
Support 37,813 272 38,085 38% 38,560 167 38,727 39% 33,853 (215) 33,638 37%
---
Total $
100,616 $
790 $
101,406 100% $
99,160 $
284 $
99,444 100% $
92,014 $
(378) $
91,636 100%
===
Geography
Americas $
54,119 $
790 $
54,909 54% $
52,918 $
284 $
53,202 53% $
48,656 $
(378) $
48,278 53%
EMEA 26,316 26,316 26% 31,676 31,676 32% 27,528 27,528 30%
APAC 20,181 20,181 20% 14,566 14,566 15% 15,830 15,830 17%
---
Total $
100,616 $
790 $
101,406 100% $
99,160 $
284 $
99,444 100% $
92,014 $
(378) $
91,636 100%
===
Market
Service
Provider $
66,737 $
790 $
67,527 67% $
54,142 $
284 $
54,426 55% $
50,410 $
(378) $
50,032 55%
Broadcast and
Media 33,879 33,879 33% 45,018 45,018 45% 41,604 41,604 45%
Total $
100,616 $
790 $
101,406 100% $
99,160 $
284 $
99,444 100% $
92,014 $
(378) $
91,636 100%
===
Nine months ended
September 28, 2018
September 29, 2017
GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP
Product
Video Products $
143,634
$ $
143,634 49% $
144,419
$ $
144,419 56%
Cable Access 35,143 702 35,845 12% 14,238 28 14,266 6%
Services and
Support 111,126 483 111,609 39% 98,615 121 98,736 38%
Total $
289,903 $
1,185 $
291,088 100% $
257,272 $
149 $
257,421 100%
Geography
Americas $
155,893 $
1,185 $
157,078 54% $
127,173 $
38 $
127,211 49%
EMEA 81,194 81,194 28% 77,920 111 78,031 30%
APAC 52,816 52,816 18% 52,179 52,179 21%
Total $
289,903 $
1,185 $
291,088 100% $
257,272 $
149 $
257,421 100%
Market
Service
Provider $
173,096 $
1,185 $
174,281 60% $
144,858 $
38 $
144,896 56%
Broadcast and
Media 116,807 116,807 40% 112,414 111 112,525 44%
Total $
289,903 $
1,185 $
291,088 100% $
257,272 $
149 $
257,421 100%
(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 September 28, 2018
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
73,344 $
28,062 $
101,406 $
(790) * $
100,616
Gross profit 41,937 10,871 52,808 (2,706) 50,102
Gross margin% 57.2 38.7 52.1 49.8
%
%
%
%
Operating
income (loss) 5,258 395 5,653 (9,304) (3,651)
Operating 7.2 1.4 5.6 (3.6)
margin%
%
%
%
%
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 6,239 540 6,779 (6,137) 642
Operating 7.9 2.7 6.8 0.6
margin%
%
%
% %
Three months ended September 29, 2017
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
84,155 $
7,481 $
91,636 $
378 * $
92,014
Gross profit 48,283 686 48,969 (1,944) 47,025
Gross margin% 57.4 9.2 53.4 51.1
%
%
%
%
Operating
income (loss) 7,009 (5,735) 1,274 (15,480) (14,206)
Operating 8.3 (76.7)
margin%
%
%
%
% 1.4 (15.4)
Nine months ended September 28, 2018
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
224,300 $
66,788 $
291,088 $
(1,185) * $
289,903
Gross profit 126,721 29,698 156,419 (7,531) 148,888
Gross margin% 56.5 44.5 53.7 51.4
%
%
%
%
Operating
income (loss) 13,492 (578) 12,914 (25,250) (12,336)
Operating 6.0 (0.9) 4.4 (4.3)
margin%
%
%
%
%
Nine months ended September 29, 2017
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
231,987 $
25,434 $
257,421 $
(149) * $
257,272
Gross profit 126,887 5,011 131,898 (10,650) 121,248
Gross margin% 54.7 19.7 51.2 47.1
%
%
%
%
Operating loss (7,663) (18,810) (26,473) (36,313) (62,786)
Operating (3.3) (74.0)
margin%
%
%
%
% (10.3) (24.4)
(1) See "Use of Non-GAAP Financial
Measures" above and "GAAP to Non-
GAAP Reconciliations" below.
* These non-GAAP adjustments are for
warrant amortization for the
respective periods and relate to our
Cable Access segment. After applying
these adjustments to the non-GAAP
revenue for the Cable Access segment,
our GAAP revenue for the Cable Access
segment for the three and nine months
ended September 28, 2018 was $27,272
and $65,603, respectively; the GAAP
revenue for the three and nine months
ended September 29, 2017 was $7,859
and $25,285, respectively; and the
GAAP revenue for the three months
ended June 29, 2018 was $19,952.
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
Three months ended September 28, 2018
Revenue Gross Total Income Total Non- Net
Profit Operating from operating Income
Expense Operations Expense, net (Loss)
---
GAAP $
100,616 $
50,102 $
53,753 $
(3,651) $
(3,237) $
(7,758)
Accounting impact
related to warrant
amortization 790 790 790 790
Stock-based
compensation - 614 (4,819) 5,433 5,433
Amortization of
intangibles - 1,295 (792) 2,087 2,087
Restructuring and
related charges - 7 (987) 994 994
Loss on equity
investments - 72 72
Non-cash interest
expenses related to
convertible notes - 1,528 1,528
Discrete tax items
and tax effect of
non-GAAP
adjustments - 227
Total adjustments 790 2,706 (6,598) 9,304 1,600 11,131
Non-GAAP $
101,406 $
52,808 $
47,155 $
5,653 $
(1,637) $
3,373
As a % of revenue (GAAP) 49.8 53.4 (3.6) (3.2)
%
%
%
%
% (7.7)
As a % of revenue (Non-GAAP) 52.1 46.5 5.6 (1.6)
%
%
%
%
% 3.3
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $
(0.09)
Diluted net income per share-Non-
GAAP $
0.04
Shares used to compute diluted net
income (loss) per share:
GAAP 86,321
Non-GAAP 87,770
Three months ended June 29, 2018
Revenue Gross Profit Total Income Total Non- Net
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
investment - (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 September 29, 2017
Revenue Gross Total Income Total Non- Net Loss
Profit Operating (Loss) operating
Expense from Expense, net
Operations
---
GAAP $
92,014 $
47,025 $
61,231 $
(14,206) $
(3,292) $
(15,583)
Accounting impact
related to warrant
amortization (378) (378) (378) (378)
Stock-based
compensation - 478 (3,242) 3,720 3,720
Amortization of
intangibles - 1,295 (793) 2,088 2,088
Restructuring and
related charges - 549 (2,028) 2,577 2,577
TVN acquisition-and
integration-
related costs - (117) 117 117
Avid litigation
settlement and
associated legal
fees - (7,356) 7,356 7,356
Non-cash interest
expenses related to
convertible notes - 1,384 1,384
Discrete tax items
and tax effect of
non-GAAP
adjustments - (1,820)
Total adjustments $
(378) $
1,944 $
(13,536) $
15,480 $
1,384 $
15,044
Non-GAAP $
91,636 $
48,969 $
47,695 $
1,274 $
(1,908) $
(539)
As a % of revenue (GAAP) 51.1 66.5 (15.4) (3.6) (16.9)
%
%
% % %
As a % of revenue (Non-GAAP) 53.4 52.0 1.4 (2.1)
%
%
%
%
% (0.6)
Diluted net loss per share:
Diluted net loss per share-GAAP $
(0.19)
Diluted net loss per share-Non-GAAP $
(0.01)
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 81,445
Nine months ended September 28, 2018
Revenue Gross Total Income Total Non- Net
Profit Operating (Loss) operating Income
Expense from Expense, net (Loss)
Operations
---
GAAP $
289,903 $
148,888 $
161,224 $
(12,336) $
(9,190) $
(24,365)
Accounting impact
related to warrant
amortization 1,185 1,185 1,185 1,185
Stock-based
compensation - 1,577 (12,625) 14,202 14,202
Amortization of
intangibles - 3,885 (2,396) 6,281 6,281
Restructuring and
related charges - 884 (2,704) 3,588 3,588
Gain on equity
investments - (111) (111)
Non-cash interest
expenses related to
convertible notes - 4,483 4,483
Avid litigation
settlement and
associated legal
fees - 6 (6) (6)
Discrete tax items
and tax effect of
non-GAAP
adjustments - 1,543
Total adjustments $
1,185 $
7,531 $
(17,719) $
25,250 $
4,372 $
31,165
Non-GAAP $
291,088 $
156,419 $
143,505 $
12,914 $
(4,818) $
6,800
As a % of revenue (GAAP) 51.4 55.6 (4.3) (3.2)
%
%
%
%
% (8.4)
As a % of revenue (Non-GAAP) 53.7 49.3 4.4 (1.7)
%
%
%
%
% 2.3
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $
(0.29)
Diluted net income per share-Non-
GAAP $
0.08
Shares used to compute diluted net
income (loss) per share:
GAAP 85,188
Non-GAAP 85,962
Nine months ended September 29, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense, net
---
GAAP $
257,272 $
121,248 $
184,034 $
(62,786) $
(9,892) $
(71,110)
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 38 38 38 38
Stock-based
compensation - 1,623 (9,484) 11,107 11,107
Amortization of
intangibles - 3,885 (2,347) 6,232 6,232
Restructuring and
related charges - 1,335 (4,084) 5,419 5,419
TVN acquisition-and
integration-
related costs - 342 (2,392) 2,734 2,734
Avid litigation
settlement and
associated legal
fees - (7,356) 7,356 7,356
Non-cash interest
expenses related to
convertible notes - 4,060 4,060
Discrete tax items
and tax effect of
non-GAAP
adjustments - 3,278
Total adjustments 149 10,650 (25,663) 36,313 4,060 43,651
Non-GAAP $
257,421 $
131,898 $
158,371 $
(26,473) $
(5,832) $
(27,459)
As a % of revenue (GAAP) 47.1 71.5 (24.4) (3.8) (27.6)
%
%
% % %
As a % of revenue (Non-GAAP) 51.2 61.5 (10.3) (2.3) (10.7)
%
%
% % %
Diluted net loss per share:
Diluted net loss per share-GAAP $
(0.88)
Diluted net loss per share-Non-GAAP $
(0.34)
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 80,618
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Financial Guidance
(In millions, except percentages and per share data)
Q4 2018 Financial Guidance
Revenue Gross Total
Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations Expense,
net
---
GAAP
$104.7 to $117.7
$50.3 to $56.7
$52.5 to $53.5
$(3.2) to $4.2 $(3.2)
$(6.9) to $0.5
Accounting impact
related to warrant
amortization 0.3 0.3 0.3 0.3
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 -
$(0.8) to 0.4
---
Total adjustments 0.3 1.9 (3.5) 5.4 1.6
$6.2 to $7.4
Non-GAAP
$105.0 to $118.0
$52.2 to $58.6
$49.0 to $50.0
$2.2 to $9.6 $(1.6)
$0.5 to $6.7
===
As a % of revenue (GAAP) 48.0% to 48.5% 44.6% to 51.1% (3.1)% to 3.6% (3.0)% (6.6)% to 0.4%
As a % of revenue (Non-GAAP) 49.0% to 50.0% 41.5% to 47.6% 2.1% to 8.1% (1.5)% 0.5% to 5.7%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP
$(0.08) to $0.01
Diluted net income per share-Non-GAAP
$0.01 to $0.07
Shares used to compute diluted net loss per
share:
GAAP 86.8
Shares used to compute diluted net income per
share:
GAAP and Non-GAAP 89.2
2018 Financial Guidance
Revenue Gross Total
Income Total Non- Net Income
Profit Operating operating (Loss)
Expense (Loss) from Expense,
Operations net
---
GAAP
$394.5 to $407.5
$199.1 to $205.5
$213.7 to $214.7
$(15.6) to $(8.2) $(12.3)
$(31.2) to $(23.8)
Accounting impact
related to warrant
amortization 1.5 1.5 1.5 1.5
Stock-based
compensation - 1.9 (15.3) 17.2 17.2
Amortization of
intangibles - 5.2 (3.2) 8.4 8.4
Restructuring and
related charges - 0.9 (2.7) 3.6 3.6
Non-cash interest
expense related to
convertible notes - 6.1 6.1
Gain on equity
investment - (0.1) (0.1)
Tax effect of non-
GAAP adjustments -
$0.7 to 1.9
---
Total adjustments 1.5 9.5 (21.2) 30.7 6.0
$37.4 to $38.6
Non-GAAP
$396.0 to $409.0
$208.6 to $215.0
$192.5 to $193.5
$15.1 to $22.5 $(6.3)
$7.4 to $13.6
===
As a % of revenue (GAAP) 50.0% to 50.5% 52.4% to 54.4% (4.0)% to (2.0)% (3.0)% (7.9)% to (5.8)%
As a % of revenue (Non-GAAP) 52.5% to 53.0% 47.1% to 48.9% 3.8% to 5.5% (1.5)% 1.9% to 3.3%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP
$(0.36) to $(0.28)
Diluted net income per share-Non-GAAP
$0.09 to $0.16
Shares used to compute diluted net loss per
share:
GAAP 85.7
Shares used to compute diluted net income per
share:
Non-GAAP 86.9
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SOURCE Harmonic Inc.
