Harmonic Announces Fourth Quarter and Fiscal 2018 Results
SAN JOSE, Calif., Feb. 4, 2019 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the fourth quarter and fiscal year ended December 31, 2018.
"Continued execution of our strategic initiatives drove solid revenue growth and profitability in the quarter," said Patrick Harshman, president and chief executive officer of Harmonic. "Cable Access segment revenue grew 80% year over year as Harmonic's CableOS(TM) solution continues to lead the market in defining the next generation of cable access networks. Our Video segment reported both revenue growth and record operating margin, demonstrating our market leading position in live OTT."
Q4 Financial and Business Highlights
-- GAAP revenue $113.7 million, up 13% year over year; non-GAAP revenue
$113.6 million, up 12% year over year.
-- Cable Access segment revenue: GAAP $24.1 million, up 80% year over year;
non-GAAP $24.1 million, up 79% year over year.
-- Video segment revenue was $89.5 million, up 22% quarter over quarter and
2% year over year.
-- Video segment operating margin: 14.2%, sixth consecutive quarter of
positive segment operating income.
-- Gross margin: GAAP 53.1% compared to 48.1% in the year ago period;
non-GAAP 54.5% compared to 50.1% in the year ago period.
-- Operating income: GAAP income $7.3 million and non-GAAP income $12.7
million, compared to GAAP loss $8.1 million and non-GAAP income $1.6
million in the year ago period.
-- EPS: GAAP net income per share 4 cents and non-GAAP net income per share
11 cents, compared to GAAP net loss per share 14 cents and non-GAAP net
loss per share zero cents in the year ago period.
-- CableOS deployments continued to scale, surpassing 535,000 served cable
modems, up 11% quarter over quarter.
-- CableOS global design win momentum continued with 29 deployments and
trials underway, up 16% quarter over quarter.
-- Over 37,000 OTT channels deployed globally, up 5% quarter over quarter.
-- Video SaaS customer base increased from 7 to 19 customers, up 171% year
over year.
Select Financial Information
GAAP
Non-GAAP
Key Financial Results Q4 2018 Q3 2018 Q4 2017 Q4 2018 Q3 2018 Q4 2017
(in millions, except per share data)
Net revenue $
113.7 $
100.6 $
101.0 $
113.6 $
101.4 $
101.1
Net income (loss) $
3.3 $
(7.8) $
(11.8) $
9.7 $
3.4 $
(0.4)
Diluted EPS $
0.04 $
(0.09) $
(0.14) $
0.11 $
0.04 $
0.00
Other Financial Information Q4 2018 Q3 2018 Q4 2017
(in millions)
Bookings for the quarter $
92.8 $
79.5 $
122.9
Backlog and deferred revenue as of quarter end $
186.4 $
207.6 $
224.4
Cash and cash equivalents as of quarter end $
66.0 $
61.7 $
57.0
---
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
Q1 2019 2019
Low
High
Low
High
(in millions, except percentages and per share data)
Net Revenue $
80.0 $
90.0 $
390.0 $
440.0
Video $
70.0 $
75.0 $
290.0 $
310.0
Cable Access $
10.0 $
15.0 $
100.0 $
130.0
Gross Margin % 50.6 52.9 48.3 52.0
% % % %
Operating
Expenses $
52.0 $
54.0 $
211.1 $
221.1
Operating Income
(Loss) $
(13.5) $
(4.4) $
(32.8) $
17.6
Tax Benefit
(Expense) $
(0.7) $
(0.7) $
(2.6) $
(2.6)
EPS $
(0.20) $
(0.09) $
(0.54) $
0.02
Shares 88.2 88.2 89.5 91.1
Cash $
60.0 $
70.0 $
65.0 $
85.0
---
Non-GAAP
Financial
Guidance
Q1 2019 2019
Low
High
Low
High
(in millions, except percentages and per share data)
Net Revenue $
80.0 $
90.0 $
390.0 $
440.0
Video $
70.0 $
75.0 $
290.0 $
310.0
Cable Access $
10.0 $
15.0 $
100.0 $
130.0
Gross Margin % 52.5 54.5 50.0 53.5
% % % %
Operating
Expenses $
49.0 $
51.0 $
195.0 $
205.0
Operating Income
(Loss) $
(9.0) $
0.1 $
(10.0) $
40.4
Tax rate 12 12
% % 12
% 12
%
EPS $
(0.11) $
(0.01) $
(0.16) $
0.33
Shares 88.2 88.2 89.5 91.1
Cash $
60.0 $
70.0 $
65.0 $
85.0
---
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. Pacific (5:00 p.m. Eastern) on Monday, February 4, 2019. The live webcast will be available on the Harmonic Investor Relations website at http://investor.harmonicinc.com. An audio version of the webcast will be available by calling +1.574.990.1032 or +1.800.240.9147 (passcode 6997107). 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 6997107).
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 income (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 and non-GAAP EPS. 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; 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 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 is 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, change in fair value of the warrant share is being marked to market and any adjustment as such is 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 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.
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 Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)
December 31, 2018 December 31, 2017
---
ASSETS
Current assets:
Cash and cash equivalents $
65,989 $
57,024
Accounts receivable, net 81,795 69,844
Inventories 25,638 25,976
Prepaid expenses and other
current assets 23,280 18,931
Total current assets 196,702 171,775
Property and equipment, net 22,321 29,265
Goodwill 240,618 242,827
Intangibles, net 12,817 21,279
Other long-term assets 38,377 42,913
Total assets $
510,835 $
508,059
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other debts and capital lease
obligations, current $
7,175 $
7,610
Accounts payable 33,778 33,112
Income taxes payable 1,099 233
Deferred revenue 41,592 52,429
Accrued and other current
liabilities 52,761 48,705
Total current liabilities 136,405 142,089
Convertible notes, long-term 114,808 108,748
Other debts and capital lease
obligations, long-term 12,684 15,336
Income taxes payable, long-
term 460 917
Other non-current liabilities 18,228 22,626
Total liabilities 282,585 289,716
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;
87,057 and 82,554 shares
issued and outstanding at
December 31, 2018 and 2017,
respectively 87 83
Additional paid-in capital 2,296,795 2,272,690
Accumulated deficit (2,067,416) (2,057,812)
Accumulated other comprehensive
income (loss) (1,216) 3,382
Total stockholders' equity 228,250 218,343
Total liabilities and
stockholders' equity $
510,835 $
508,059
Harmonic Inc.
Preliminary Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three months ended
Year ended
December 31, December 31, December 31, December 31,
2018 2017 2018 2017
---
Revenue:
Product $
73,291 $
65,988 $
252,067 $
224,645
Service 40,364 34,986 151,491 133,601
Total net revenue 113,655 100,974 403,558 358,246
Cost of revenue:
Product 36,184 33,959 127,268 119,802
Service 17,150 18,443 67,081 68,624
Total cost of
revenue 53,334 52,402 194,349 188,426
Total gross profit 60,321 48,572 209,209 169,820
Operating expenses:
Research and
development 21,913 22,752 89,163 95,978
Selling, general and
administrative 30,078 31,893 118,952 136,270
Amortization of
intangibles 791 795 3,187 3,142
Restructuring and
related charges 214 1,223 2,918 5,307
Total operating
expenses 52,996 56,663 214,220 240,697
Income (loss) from
operations 7,325 (8,091) (5,011) (70,877)
Interest expense,
net (2,909) (3,014) (11,401) (11,078)
Other income
(expense), net 162 (394) (536) (2,222)
Loss on impairment
of long-term
investments - (530) (530)
Income (loss) before
income taxes 4,578 (12,029) (16,948) (84,707)
Provision for
(benefit from)
income taxes 1,248 (184) 4,087 (1,752)
Net income (loss) $
3,330 $
(11,845) $
(21,035) $
(82,955)
Net income (loss) per share:
Basic $
0.04 $
(0.14) $
(0.25) $
(1.02)
Diluted $
0.04 $
(0.14) $
(0.25) $
(1.02)
Shares used in per share
calculations:
Basic 86,846 82,014 85,615 80,974
Diluted 89,028 82,014 85,615 80,974
Harmonic Inc.
Preliminary Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Year ended
December 31, December 31,
2018 2017
---
Cash flows from operating activities:
Net loss $
(21,035) $
(82,955)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of
intangibles 8,367 8,322
Depreciation 12,971 14,599
Stock-based
compensation 17,289 16,610
Amortization of
discount on
convertible debt 6,060 5,489
Provision for non-
cash warrant 1,178 153
Restructuring, asset
impairment and loss
on retirement of
fixed assets 1,491 1,906
Loss on impairment of
long-term
investments - 530
Unrealized foreign
exchange (gain) loss (1,906) 2,369
Deferred income taxes,
net 661 2,189
Provision for doubtful
accounts, returns and
discounts 2,521 4,912
Provision for excess
and obsolete
inventories 1,649 6,005
Other non-cash
adjustments, net 407 445
Changes in operating assets and
liabilities:
Accounts receivable (14,700) 12,598
Inventories (2,045) 11,687
Prepaid expenses and
other assets 3,227 6,642
Accounts payable 1,018 3,432
Deferred revenues (4,808) (392)
Income taxes payable 440 (2,978)
Accrued and other
liabilities (501) (8,499)
Net cash provided by
operating activities 12,284 3,064
Cash flows from investing activities:
Proceeds from
maturities of
investments - 3,106
Proceeds from sales of
investments 104 3,792
Purchases of property
and equipment (7,044) (11,399)
Net cash used in
investing activities (6,940) (4,501)
Cash flows from financing activities:
Proceeds from other
debts and capital
leases 5,066 6,344
Repayment of other
debts and capital
leases (7,132) (7,408)
Proceeds from common
stock issued to
employees 4,947 4,716
Payment of tax
withholding
obligations related
to net share
settlements of
restricted stock
units (230) (2,757)
Net cash provided by
financing activities 2,651 895
Effect of exchange
rate changes on cash,
cash equivalents and
restricted cash (763) 1,879
Net increase in cash,
cash equivalents and
restricted cash 7,232 1,337
Cash, cash equivalents
and restricted cash,
beginning of the year 58,757 57,420
Cash, cash equivalents
and restricted cash,
end of the year $
65,989 $
58,757
Reconciliation of cash, cash
equivalents, and restricted cash to the
preliminary consolidated balance sheets
Cash and cash
equivalents $
65,989 $
57,024
Restricted cash
included in prepaid
expenses and other
current assets - 530
Restricted cash
included in other
long-term assets - 1,203
Total cash, cash
equivalents and
restricted cash $
65,989 $
58,757
Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
Three months ended
December 31, 2018
September 28, 2018
December 31, 2017
GAAP Adjustment(1) Non-GAAP GAAP Adjustment(1) Non-GAAP GAAP Adjustment(1) Non-GAAP
---
Product
Video Products $
59,499
$ $
59,499 52% $
45,781
$ $
45,781 45% $
59,882
$ $
59,882 59%
Cable Access 13,792 (4) 13,788 12% 17,022 518 17,540 17% 6,106 50 6,156 6%
Services and
Support 40,364 (3) 40,361 36% 37,813 272 38,085 38% 34,986 65 35,051 35%
---
Total $
113,655 $
(7) $
113,648 100% $
100,616 $
790 $
101,406 100% $
100,974 $
115 $
101,089 100%
===
Geography
Americas $
63,007 $
(7) $
63,000 55% $
54,119 $
790 $
54,909 54% $
44,563 $
115 $
44,678 44%
EMEA 25,880 25,880 23% 26,316 26,316 26% 39,209 39,209 39%
APAC 24,768 24,768 22% 20,181 20,181 20% 17,202 17,202 17%
---
Total $
113,655 $
(7) $
113,648 100% $
100,616 $
790 $
101,406 100% $
100,974 $
115 $
101,089 100%
===
Market
Service
Provider $
80,325 $
(7) $
80,318 71% $
66,737 $
790 $
67,527 67% $
53,052 $
115 $
53,167 53%
Broadcast and
Media 33,330 33,330 29% 33,879 33,879 33% 47,922 47,922 47%
Total $
113,655 $
(7) $
113,648 100% $
100,616 $
790 $
101,406 100% $
100,974 $
115 $
101,089 100%
===
Twelve months ended
December 31, 2018
December 31, 2017
GAAP Adjustment(1) Non-GAAP GAAP Adjustment(1) Non-GAAP
Product
Video Products $
203,133
$ $
203,133 50% $
204,301
$ $
204,301 57%
Cable Access 48,935 698 49,633 12% 20,344 78 20,422 6%
Services and
Support 151,490 480 151,970 38% 133,601 186 133,787 37%
Total $
403,558 $
1,178 $
404,736 100% $
358,246 $
264 $
358,510 100%
Geography
Americas $
218,900 $
1,178 $
220,078 54% $
171,736 $
153 $
171,889 48%
EMEA 107,074 107,074 27% 117,129 111 117,240 33%
APAC 77,584 77,584 19% 69,381 69,381 19%
Total $
403,558 $
1,178 $
404,736 100% $
358,246 $
264 $
358,510 100%
Market
Service
Provider $
253,421 $
1,178 $
254,599 63% $
197,910 $
153 $
198,063 55%
Broadcast and
Media 150,137 150,137 37% 160,336 111 160,447 45%
Total $
403,558 $
1,178 $
404,736 100% $
358,246 $
264 $
358,510 100%
(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 December 31, 2018
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
89,528 $
24,120 $
113,648 $
7 * $
113,655
Gross profit 51,449 10,509 61,958 (1,637) 60,321
Gross margin% 57.5 43.6
%
%
%
% 54.5 53.1
Operating
income (loss) 12,678 12,678 (5,353) 7,325
Operating 14.2 % 11.2 6.4
margin%
%
% %
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 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 6.6 (31.1)
margin%
%
%
%
% 1.5 (8.0)
Twelve months ended December 31, 2018
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
313,828 $
90,908 $
404,736 $
(1,178) * $
403,558
Gross profit 178,170 40,207 218,377 (9,168) 209,209
Gross margin% 56.8 44.2
%
%
%
% 54.0 51.8
Operating
income (loss) 26,170 (578) 25,592 (30,603) (5,011)
Operating 8.3 (0.6)
margin%
%
%
%
% 6.3 (1.2)
Twelve months ended December 31, 2017 (2)
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
319,583 $
38,927 $
358,510 $
(264) * $
358,246
Gross profit 173,526 9,045 182,571 (12,751) 169,820
Gross margin% 54.3 23.2
%
%
%
% 50.9 47.4
Operating loss (1,911) (23,002) (24,913) (45,964) (70,877)
Operating (0.6) (59.1)
margin%
%
%
%
% (6.9) (19.8)
(1) See "Use of Non-GAAP Financial
Measures" above and "GAAP to Non-GAAP
Reconciliations" below.
(2) The Company has historically
employed an aggregate allocation
methodology based on total revenues to
attribute professional services
revenue and sales expenses between its
Video and Cable Access segments.
Beginning in the fourth quarter of
2017, the Company has prospectively
changed to a more precise attribution
methodology as the activities of
selling and supporting the CableOS
solution have become increasingly
distinct from those of Video
solutions. The impact of making this
change for fiscal year ended December
31, 2017 compared to the Company's
historical approach was an increase in
operating loss of $5.9 million from
the Video segment and a corresponding
decrease in operating loss of the
Cable Access segment. The Company
believes that the updated allocation
methodology will provide greater
clarity regarding the operating
metrics of the Video and Cable Access
business segments.
* These non-GAAP adjustments are
primarily 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
twelve months ended December 31, 2018
was $24,127 and $89,730, respectively;
the GAAP revenue for the three and
twelve months ended December 31, 2017
was $13,378 and $38,774, respectively;
and the GAAP revenue for the three
months ended September 28, 2018 was
$27,272.
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(in thousands, except percentages and per share data)
Three months ended December 31, 2018
Revenue Gross Total Income Total Non- Net Income
Profit Operating from operating
Expense Operations expense, net
---
GAAP $
113,655 $
60,321 $
52,996 $
7,325 $
(2,747) $
3,330
Accounting impact
related to warrant
amortization (7) (7) (7) (7)
Stock-based
compensation - 376 (2,711) 3,087 3,087
Amortization of
intangibles - 1,295 (791) 2,086 2,086
Restructuring and
related charges - (27) (214) 187 187
Non-cash interest
expenses related to
convertible notes - 1,577 1,577
Discrete tax items
and tax effect of
non-GAAP
adjustments - (593)
Total adjustments (7) 1,637 (3,716) 5,353 1,577 6,337
Non-GAAP $
113,648 $
61,958 $
49,280 $
12,678 $
(1,170) $
9,667
As a % of revenue (GAAP) 53.1 46.6 6.4 (2.4) 2.9
%
%
%
%
%
As a % of revenue (Non-GAAP) 54.5 43.4 11.2 (1.0) 8.5
%
%
%
%
%
Diluted net income per share:
Diluted net income per share-GAAP $
0.04
Diluted net income per share-Non-
GAAP $
0.11
Shares used to compute diluted net
income per share:
GAAP and Non-GAAP 89,028
Three months ended September 28, 2018
Revenue Gross Total Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations expense, net
---
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 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 and
associated legal
fees - (692) 692 692
Loss on impairment
of long-term
investments - 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
Twelve months ended December 31, 2018
Revenue Gross Total Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations expense, net
---
GAAP $
403,558 $
209,209 $
214,220 $
(5,011) $
(11,937) $
(21,035)
Accounting impact
related to warrant
amortization 1,178 1,178 1,178 1,178
Stock-based
compensation - 1,953 (15,336) 17,289 17,289
Amortization of
intangibles - 5,180 (3,187) 8,367 8,367
Restructuring and
related charges - 857 (2,918) 3,775 3,775
Gain on equity
investments - (111) (111)
Avid litigation
settlement and
associated legal
fees - 6 (6) (6)
Non-cash interest
expenses related to
convertible notes - 6,060 6,060
Discrete tax items
and tax effect of
non-GAAP
adjustments - 950
Total adjustments 1,178 9,168 (21,435) 30,603 5,949 37,502
Non-GAAP $
404,736 $
218,377 $
192,785 $
25,592 $
(5,988) $
16,467
As a % of revenue (GAAP) 51.8 53.1 (1.2) (3.0) (5.2)
%
%
%
%
%
As a % of revenue (Non-GAAP) 54.0 47.6 6.3 (1.5) 4.1
%
%
%
%
%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $
(0.25)
Diluted net income per share-Non-
GAAP $
0.19
Shares used to compute diluted net
income (loss) per share:
GAAP 85,615
Non-GAAP 86,741
Twelve months ended December 31, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense expense, net
---
GAAP $
358,246 $
169,820 $
240,697 $
(70,877) $
(13,830) $
(82,955)
Cable Access
inventory charge - 3,316 3,316 3,316
Acquisition
accounting impact
related to TVN
deferred revenue 111 111 111 111
Accounting impact
related to warrant
amortization 153 153 153 153
Stock-based
compensation - 2,370 (14,240) 16,610 16,610
Amortization of
intangibles - 5,180 (3,142) 8,322 8,322
Restructuring and
related charges - 1,279 (5,307) 6,586 6,586
TVN acquisition-and
integration-
related costs - 342 (2,476) 2,818 2,818
Avid litigation
settlement and
associated legal
fees - (8,048) 8,048 8,048
Loss on impairment
of long-term
investments - 530 530
Non-cash interest
expenses related to
convertible notes - 5,489 5,489
Discrete tax items
and tax effect of
non-GAAP
adjustments - 3,156
Total adjustments 264 12,751 (33,213) 45,964 6,019 55,139
Non-GAAP $
358,510 $
182,571 $
207,484 $
(24,913) $
(7,811) $
(27,816)
As a % of revenue (GAAP) 47.4 67.2 (19.8) (3.9) (23.2)
%
%
%
% %
As a % of revenue (Non-GAAP) 50.9 57.9 (6.9) (2.2) (7.8)
%
%
%
%
%
Diluted net loss per share:
Diluted net loss per share-GAAP $
(1.02)
Diluted net loss per share-Non-GAAP $
(0.34)
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 80,974
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Financial Guidance
(In millions, except percentages and per share data)
Q1 2019 Financial Guidance
Revenue Gross Total
Income (Loss)
Total Non- Net Loss
Profit Operating from operating
Expense Operations Expense, net
---
GAAP
$80.0 to
$40.5 to
$52.0 to
$(13.5) to $(3.2)
$(17.4) to
$90.0 $47.6 $54.0 $(4.4) $(8.3)
Stock-based
compensation - 0.2 (2.2) 2.4 2.4
Amortization of
intangibles - 1.3 (0.8) 2.1 2.1
Non-cash interest
expense related to
convertible notes - 1.6 1.6
Discrete tax items
and tax effect of
non-GAAP
adjustments -
$0.9 to $2.0
Total adjustments - 1.5 (3.0) 4.5 1.6
$7.0 to $8.1
Non-GAAP
$80.0 to $90.0
$42.0 to $49.1
$49.0 to $51.0
$(9.0) to $0.1 $(1.6)
$(9.3) to
$(1.3)
===
As a % of revenue (GAAP) 50.6% to 52.9% 57.8% to 67.5% (16.9)% to (4.9)% (3.6)% (21.7)% to (9.2)%
As a % of revenue (Non-GAAP) 52.5% to 54.5% 54.4% to 63.8% (11.3)% to 0.1% (2.0)% (11.6)% to (1.4)%
Diluted net loss per share:
Diluted net loss per share-GAAP
$(0.20) to $(0.09)
Diluted net loss per share-Non-GAAP
$(0.11) to $(0.01)
Shares used to compute diluted net loss per
share:
GAAP and Non-GAAP 88.2
2019 Financial Guidance
Revenue Gross Total
Income (Loss)
Total Non- Net Income
Profit Operating from operating (Loss)
Expense Operations Expense, net
---
GAAP
$390.0 to
$188.3 to
$211.1 to
$(32.8) to $(13.1)
$(48.5) to
$440.0 $228.7 $221.1 $17.6 $1.9
Stock-based
compensation
expense - 1.5 (12.9) 14.4 14.4
Amortization of
intangibles - 5.2 (3.2) 8.4 8.4
Non-cash interest
expense related to
convertible notes - 6.7 6.7
Discrete tax items
and tax effect of
non-GAAP
adjustments -
$(1.5) to $4.6
Total adjustments - 6.7 (16.1) 22.8 6.7
$28.0 to $34.1
Non-GAAP
$390.0 to
$195.0 to $235.4
$195.0 to $205.0
$(10.0) to $40.4 $(6.4)
$(14.4) to
$440.0 $29.9
===
As a % of revenue (GAAP) 48.3% to 52.0% 48.0% to 56.7% (8.4)% to 4.0% (3.0)% (12.4)% to 0.4%
As a % of revenue (Non-GAAP) 50.0% to 53.5% 44.3% to 52.6% (2.6)% to 9.2% (1.5)% (3.7)% to 6.8%
Diluted net income (loss) per share:
Diluted net income (loss) per share-GAAP
$(0.54) to $0.02
Diluted net income (loss) per share-Non-
GAAP
$(0.16) to $0.33
Shares used to compute diluted net loss per
share:
GAAP and Non-GAAP 89.5
Shares used to compute diluted net income per
share:
GAAP and Non-GAAP 91.1
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SOURCE Harmonic Inc.
