Harmonic Announces Third Quarter 2019 Results
SAN JOSE, Calif., Oct. 28, 2019 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the third quarter of 2019.
"We delivered strong revenue growth and record earnings, powered by the growing success of our CableOS solution," said Patrick Harshman, president and chief executive officer of Harmonic. "Our Cable Access segment continues to lead the market through new deployments and recently-announced fiber-to-the-home functionality. Similarly, our Video business transformation to live OTT has been bolstered by the launch of innovative new live streaming capabilities and new customer deployments."
Q3 Financial and Business Highlights
Financial
-- Revenue: $115.7 million, up 15.0% year over year.
-- SaaS and service revenue: $32.6 million, up 13.9% year over year.
-- Gross margin: GAAP 65.3% and non-GAAP 67.0%, compared to GAAP 49.8% and
non-GAAP 52.1% in the year ago period.
-- Cable Access gross margin: 77.1%, compared to 38.7% in the year ago
period.
-- Video gross margin: 57.7%, compared to 57.2% in the year ago period.
-- Operating income: GAAP income $22.5 million and non-GAAP income $29.9
million, compared to GAAP loss $3.7 million and non-GAAP income $5.7
million in the year ago period.
-- EPS: GAAP net income per share 12 cents and non-GAAP net income per
share 25 cents, compared to GAAP net loss per share 9 cents and non-GAAP
net income per share 4 cents in the year ago period.
-- Cash: $66.7 million, up $8.6 million quarter over quarter and up $5.0
million year over year.
-- Completed a new $115.5 million convertible debt issuance to refinance
approximately 65% of existing convertible debt, reducing potential
dilution by 5% and annual interest cost by 19%.
Business
-- CableOS deployments scaled to over 935,000 served cable modems, up 20%
quarter over quarter.
-- Extended Cable Access market leadership, announcing CableOS solution
with expanded cloud-native and new fiber-to-the-home capabilities.
-- Video SaaS offering now deployed with 36 customers, up 29% quarter over
quarter and 140% year over year.
-- Expanded addressed video market by launching new CDN optimization
solution for high-demand live video streaming services.
Select Financial Information
GAAP
Non-GAAP
Key Financial
Results Q3 2019 Q2 2019 Q3 2018
Q3 2019
Q2 2019
Q3 2018
(in millions, except per share data)
Net revenue $
115.7 $
84.9 $
100.6 $
115.7 $
84.9 $
101.4
Net income (loss) $
11.7 $
(11.8) $
(7.8) $
24.6 $
(4.0) $
3.4
Diluted EPS $
0.12 $
(0.13) $
(0.09) $
0.25 $
(0.04) $
0.04
Other Financial Information
Q3 2019
Q2 2019
Q3 2018
(in millions)
Recurring revenue* $
32.6 $
30.4 $
28.7
Recurring revenue as % of total revenue 28.2
% 35.9
% 28.3
%
Bookings for the quarter $
126.5 $
92.6 $
79.5
Backlog and deferred revenue as of quarter end $
192.5 $
194.7 $
207.6
Cash as of quarter end $
66.7 $
58.1 $
61.7
---
* Recurring revenue consists of
revenue for the period from our
appliance-based support and
maintenance plans and revenue
from usage of our cloud-based
subscription plan offerings,
which are generally renewed on
an annual basis.
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 2019 2019
Low High Low High
(in millions, except percentages and per share data)
Net Revenue $
108.0 $
118.0 $
389.0 $
399.0
Video $
78.0 $
83.0 $
277.0 $
282.0
Cable Access $
30.0 $
35.0 $
112.0 $
117.0
Gross Margin 49.5 51.0 55.0 55.5
% % % % %
Operating
Expenses $
52.0 $
54.0 $
207.0 $
209.0
Operating
Income
(Loss) $
(0.5) $
8.5 $
6.0 $
15.0
Tax Expense $
0.6 $
0.6 $
1.6 $
1.6
EPS $
(0.05) $
0.04 $
(0.18) $
(0.08)
Shares 90.5 95.8 89.9 89.9
Cash $
90.0 $
100.0 $
90.0 $
100.0
---
Non-GAAP
Financial
Guidance
Q4 2019 2019
Low High Low High
---
(in millions, except percentages and per share data)
Net Revenue $
108.0 $
118.0 $
389.0 $
399.0
Video $
78.0 $
83.0 $
277.0 $
282.0
Cable Access $
30.0 $
35.0 $
112.0 $
117.0
Gross Margin 51.0 52.5 57.0 57.5
% % % % %
Operating
Expenses $
48.0 $
50.0 $
191.5 $
193.5
Operating
Income $
5.0 $
14.0 $
28.5 $
37.5
Tax Rate 12 12 12 12
% % % %
EPS $
0.03 $
0.11 $
0.20 $
0.29
Shares 95.8 95.8 93.8 93.8
Cash $
90.0 $
100.0 $
90.0 $
100.0
---
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 28, 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 1363335). A replay will be available after 5:00 p.m. PT on the same web site or by calling +1.404.537.3406 or +1.855.859.2056 (passcode 1363335).
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, non-GAAP EPS 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; 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, 2018, 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.
Loss on debt extinguishment - In the third quarter of fiscal 2019, we recorded a debt extinguishment loss of $5.7 million resulting from refinancing a portion of our convertible notes due in 2020. We have excluded this loss from our non-GAAP financial measures because we do not believe the loss is reflective of our ongoing long-term business and operating results.
Non-cash interest and other expenses 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 and other expenses. 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. In July 2019, in connection with Comcast's election of enterprise license pricing for the Company's CableOS software, all warrant shares were fully vested and exercisable as of July 1, 2019. As a result of Comcast's election of enterprise license pricing, we no longer exclude the effect of warrant amortization in our non-GAAP financial measures beginning with the third quarter of fiscal 2019.
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 $6.0 million in installments. $2.5 million was paid upfront in October 2017, $1.5 million was paid in the second quarter of 2019 and $2.0 million will be paid in 2020. 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 27, 2019 December 31, 2018
---
ASSETS
Current assets:
Cash and cash equivalents $
66,695 $
65,989
Accounts receivable, net 100,905 81,795
Inventories 28,970 25,638
Prepaid expenses and other
current assets 40,317 23,280
Total current assets 236,887 196,702
Property and equipment, net 18,901 22,321
Operating lease right-of-use
assets 27,694
Goodwill 238,734 240,618
Intangibles, net 6,518 12,817
Other long-term assets 39,472 38,377
Total assets $
568,206 $
510,835
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other debts and capital lease
obligations, current $
6,962 $
7,175
Accounts payable 31,227 33,778
Income taxes payable 1,128 1,099
Deferred revenue 47,873 41,592
Accrued and other current
liabilities 59,260 52,761
Total current liabilities 146,450 136,405
Convertible notes, long-term 130,217 114,808
Other debts and finance lease
obligations, long-term 10,384 12,684
Income taxes payable, long-
term 269 460
Other non-current liabilities 39,836 18,228
Total liabilities 327,156 282,585
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; 90,315 and 87,057
shares issued and outstanding
at September 27, 2019 and
December 31, 2018,
respectively 90 87
Additional paid-in capital 2,323,839 2,296,795
Accumulated deficit (2,077,510) (2,067,416)
Accumulated other
comprehensive loss (5,369) (1,216)
Total stockholders' equity 241,050 228,250
Total liabilities and
stockholders' equity $
568,206 $
510,835
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three months ended Nine months ended
September 27, September 28, September 27, September 28,
2019 2018 2019 2018
---
Revenue:
Appliance and
integration $
83,082 $
71,965 $
189,864 $
204,385
SaaS and service 32,643 28,651 90,832 85,518
Total net revenue 115,725 100,616 280,696 289,903
Cost of revenue:
Appliance and
integration 26,812 38,945 83,178 106,183
SaaS and service 13,373 11,569 36,201 34,832
Total cost of revenue 40,185 50,514 119,379 141,015
Gross profit 75,540 50,102 161,317 148,888
Operating expenses:
Research and
development 20,197 22,251 62,911 67,250
Selling, general and
administrative 31,148 29,723 88,478 88,874
Amortization of
intangibles 785 792 2,357 2,396
Restructuring and
related charges 861 987 1,194 2,704
Total operating
expenses 52,991 53,753 154,940 161,224
Income (loss) from
operations 22,549 (3,651) 6,377 (12,336)
Interest expense, net (3,000) (2,872) (8,862) (8,492)
Loss on debt
extinguishment (5,695) (5,695)
Other expense, net (1,594) (365) (2,333) (698)
Income (loss) before
income taxes 12,260 (6,888) (10,513) (21,526)
Provision for income
taxes 603 870 981 2,839
Net income (loss) $
11,657 $
(7,758) $
(11,494) $
(24,365)
Net income (loss) per share:
Basic $
0.13 $
(0.09) $
(0.13) $
(0.29)
Diluted $
0.12 $
(0.09) $
(0.13) $
(0.29)
Shares used in per share calculation:
Basic 89,964 86,321 89,030 85,188
Diluted 97,596 86,321 89,030 85,188
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Nine months ended
September 27, September 28,
2019 2018
---
Cash flows from operating activities:
Net loss $
(11,494) $
(24,365)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of
intangibles 6,242 6,281
Depreciation 8,480 9,910
Stock-based
compensation 8,719 14,202
Amortization of
discount on
convertible debt 4,960 4,482
Amortization of non-
cash warrant 13,137 1,185
Restructuring, asset
impairment and loss
on retirement of
fixed assets 85 1,105
Loss on debt
extinguishment 5,695
Deferred income taxes,
net 75 1,056
Foreign currency
adjustments (1,719) (1,034)
Provision for excess
and obsolete
inventories 704 1,259
Allowance for doubtful
accounts, returns and
discounts 988 1,357
Other non-cash
adjustments, net 1,150 286
Changes in operating assets and
liabilities:
Accounts receivable (20,521) (9,585)
Inventories (4,170) 997
Prepaid expenses and
other assets (5,703) 2,507
Accounts payable (2,839) (4,032)
Deferred revenue 8,002 1,783
Income taxes payable (114) 461
Accrued and other
liabilities (10,536) (2,188)
Net cash provided by
operating activities 1,141 5,667
Cash flows from investing activities:
Proceeds from sale of
investments - 104
Purchases of property
and equipment (4,973) (4,703)
Net cash used in
investing activities (4,973) (4,599)
Cash flows from financing activities:
Proceeds from
convertible debt 115,500
Payments of
convertible debt (109,603)
Payment of convertible
debt issuance costs (3,465)
Proceeds from other
debts and finance
leases 4,684 5,066
Repayment of other
debts and finance
leases (6,387) (6,568)
Proceeds from common
stock issued to
employees 5,573 4,299
Payment of tax
withholding
obligations related
to net share
settlements of
restricted stock
units (1,278) (166)
Net cash provided by
financing activities 5,024 2,631
Effect of exchange
rate changes on cash,
cash equivalents and
restricted cash (486) (580)
Net increase in cash,
cash equivalents and
restricted cash 706 3,119
Cash, cash equivalents
and restricted cash
at beginning of
period 65,989 58,757
Cash, cash equivalents
and restricted cash
at end of period $
66,695 $
61,876
Reconciliation of cash, cash
equivalents, and restricted cash to the
condensed consolidated balance sheets
Cash and cash
equivalents $
66,695 $
61,654
Restricted cash
included in prepaid
expenses and other
current assets - 222
Total cash, cash
equivalents and
restricted cash $
66,695 $
61,876
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 27, 2019
June 28, 2019
September 28, 2018
GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP
---
Geography
Americas $
78,699
$ $
78,699 68% $
42,437 $
23 $
42,460 50% $
54,119 $
790 $
54,909 54%
EMEA 24,322 24,322 21% 25,203 25,203 30% 26,316 26,316 26%
APAC 12,704 12,704 11% 17,225 17,225 20% 20,181 20,181 20%
---
Total $
115,725
$ $
115,725 100% $
84,865 $
23 $
84,888 100% $
100,616 $
790 $
101,406 100%
===
Market
Service
Provider $
77,886
$ $
77,886 67% $
43,438 $
23 $
43,461 51% $
66,737 $
790 $
67,527 67%
Broadcast and
Media 37,839 37,839 33% 41,427 41,427 49% 33,879 33,879 33%
Total $
115,725
$ $
115,725 100% $
84,865 $
23 $
84,888 100% $
100,616 $
790 $
101,406 100%
===
Nine months ended
September 27, 2019
September 28, 2018
GAAP Adjustments(1) Non-GAAP GAAP Adjustments(1) Non-GAAP
Geography
Americas $
155,324 $
48 $
155,372 54% $
155,893 $
1,185 $
157,078 54%
EMEA 77,603 77,603 28% 81,194 81,194 28%
APAC 47,769 47,769 18% 52,816 52,816 18%
Total $
280,696 $
48 $
280,744 100% $
289,903 $
1,185 $
291,088 100%
Market
Service Provider $
165,536 $
48 $
165,584 59% $
173,096 $
1,185 $
174,281 60%
Broadcast and Media 115,160 115,160 41% 116,807 116,807 40%
Total $
280,696 $
48 $
280,744 100% $
289,903 $
1,185 $
291,088 100%
(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 27, 2019
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
60,055 $
55,670 $
115,725
$ * $
115,725
Gross profit 34,646 42,925 77,571 (2,031) 75,540
Gross margin% 57.7 77.1 67.0 65.3
%
% %
%
Operating
income (loss) (1,696) 31,611 29,915 (7,366) 22,549
Operating (2.8) 56.8 25.9 19.5
margin%
%
% %
%
Three months ended June 28, 2019
Video Cable Access Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $
71,625 $
13,263 $
84,888 $
(23) * $
84,865
Gross profit 41,444 4,086 45,530 (1,602) 43,928
Gross margin% 57.9 30.8 53.6 51.8
%
% %
%
Operating
income (loss) 4,459 (7,243) (2,784) (4,980) (7,764)
Operating 6.2 (54.6)
margin%
% %
%
% (3.3) (9.1)
Three months ended September 28, 2018
Video Cable Access Total Segment Measures Adjustments (1) Consolidated GAAP
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 5,258 395 5,653 (9,304) (3,651)
Operating 7.2 1.4 5.6 (3.6)
margin%
%
% %
%
Nine months ended September 27, 2019
Video Cable Access Total Segment Measures Adjustments (1) Consolidated GAAP
Measures
(non-GAAP)
---
Net revenue $
198,856 $
81,888 $
280,744 $
(48) * $
280,696
Gross profit 114,692 52,104 166,796 (5,479) 161,317
Gross margin% 57.7 63.6 59.4 57.5
%
% %
%
Operating
income (loss) 4,731 18,571 23,302 (16,925) 6,377
Operating 2.4 22.7 8.3 2.3
margin%
%
% % %
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%
%
% %
%
(1) See "Use of Non-GAAP Financial
Measures" above and "GAAP to Non-
GAAP Reconciliations" below.
* 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 nine months ended September
27, 2019 was $55,670 and $81,840,
respectively; the GAAP revenue for
the three and nine months ended
September 28, 2018 was $27,272 and
$65,603, respectively; and the GAAP
revenue for the three months ended
June 28, 2019 was $13,240.
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
Three months ended September 27, 2019
Revenue Gross Total Income Total Non- Net
Profit Operating from operating Income
Expense Operations Expense, net
---
GAAP $
115,725 $
75,540 $
52,991 $
22,549 $
(10,289) $
11,657
Stock-based
compensation - 405 (3,689) 4,094 4,094
Amortization of
intangibles - 1,295 (785) 2,080 2,080
Restructuring and
related charges - 331 (861) 1,192 1,192
Loss on convertible
debt extinguishment - 5,695 5,695
Non-cash interest and
other expenses
related to
convertible notes - 2,625 2,625
Discrete tax items and
tax effect of non-
GAAP adjustments - (2,751)
Total adjustments
$ $
2,031 $
(5,335) $
7,366 $
8,320 $
12,935
Non-GAAP $
115,725 $
77,571 $
47,656 $
29,915 $
(1,969) $
24,592
As a % of revenue (GAAP) 65.3 45.8 19.5 (8.9) 10.1
%
%
%
%
%
As a % of revenue (Non-GAAP) 67.0 41.2 25.9 (1.7) 21.3
%
%
%
%
%
Diluted net income per share:
Diluted net income per share-GAAP $
0.12
Diluted net income per share-Non-GAAP $
0.25
Shares used to compute diluted net loss
per share:
GAAP and Non-GAAP 97,596
Three months ended June 28, 2019
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense, net
---
GAAP $
84,865 $
43,928 $
51,692 $
(7,764) $
(3,384) $
(11,845)
Accounting impact
related to warrant
amortization 23 23 23 23
Stock-based
compensation - 193 (2,317) 2,510 2,510
Amortization of
intangibles - 1,295 (784) 2,079 2,079
Restructuring and
related charges - 91 (277) 368 368
Non-cash interest and
other expenses
related to
convertible notes - 1,656 1,656
Discrete tax items and
tax effect of non-
GAAP adjustments - 1,238
Total adjustments $
23 $
1,602 $
(3,378) $
4,980 $
1,656 $
7,874
Non-GAAP $
84,888 $
45,530 $
48,314 $
(2,784) $
(1,728) $
(3,971)
As a % of revenue (GAAP) 51.8 60.9 (9.1) (4.0) (14.0)
%
%
%
%
%
As a % of revenue (Non-GAAP) 53.6 56.9 (3.3) (2.0) (4.7)
%
%
%
%
%
Diluted net loss per share:
Diluted net loss per share-GAAP $
(0.13)
Diluted net loss per share-Non-GAAP $
(0.04)
Shares used to compute diluted net loss
per share:
GAAP and Non-GAAP 88,931
Three months ended September 28, 2018
Revenue Gross Total Income Total Non- Net
Profit Operating (Loss) operating Income
Expense from Expense, net (Loss)
Operations
---
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 and
other 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
Nine months ended September 27, 2019
Revenue Gross Total Income Total Non Net
Profit Operating from -operating Income
Expense Operations Expense (Loss)
---
GAAP $
280,696 $
161,317 $
154,940 $
6,377 $
(16,890) $
(11,494)
Accounting impact
related to warrant
amortization 48 48 48 48
Stock-based
compensation - 823 (7,894) 8,717 8,717
Amortization of
intangibles - 3,885 (2,357) 6,242 6,242
Restructuring and
related charges - 723 (1,195) 1,918 1,918
Loss on debt
extinguishment - 5,695 5,695
Non-cash interest and
other expenses
related to
convertible notes - 5,887 5,887
Discrete tax items and
tax effect of non-
GAAP adjustments - (1,179)
Total adjustments $
48 $
5,479 $
(11,446) $
16,925 $
11,582 $
27,328
Non-GAAP $
280,744 $
166,796 $
143,494 $
23,302 $
(5,308) $
15,834
As a % of revenue (GAAP) 57.5 55.2 2.3 (6.0) (4.1)
%
%
%
%
%
As a % of revenue (Non-GAAP) 59.4 51.1 8.3 (1.9) 5.6
%
%
%
%
%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $
(0.13)
Diluted net income per share-Non-GAAP $
0.17
Shares used to compute diluted net
income (loss) per share:
GAAP 89,030
Non-GAAP 92,579
Nine months ended September 28, 2018
Revenue Gross Total Income Total Non- Net
Profit Operating (Loss) operating Income
Expense from Operations Expense (Loss)
---
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 and
other 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
GAAP and Non-GAAP 85,962
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Financial Guidance
(In millions, except percentages and per share data)
Q4 2019 Financial Guidance
Revenue Gross Total
Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations Expense,
net
---
GAAP
$108.0 to $118.0
$53.5 to $60.4
$52.2 to $54.2
$(0.7) to $8.2 $(3.3)
$(4.6) to $4.3
Stock-based
compensation - 0.3 (3.2) 3.5 3.5
Amortization of
intangibles - 1.3 (0.8) 2.1 2.1
Restructuring and
related charges - (0.2) 0.2 0.2
Non-cash interest
and other expenses
related to
convertible notes - 1.8 1.8
Tax effect of non-
GAAP adjustments -
$(0.9) to $0.2
---
Total adjustments - 1.6 (4.2) 5.8 1.8
$6.7 to $7.8
---
Non-GAAP
$108.0 to $118.0
$55.1 to $62.0
$48.0 to $50.0
$5.1 to $14.0 $(1.5)
$3.2 to $11
===
As a % of revenue (GAAP) 49.5% to 51.1% 44.2% to 50.2% (0.7)% to 6.9% (2.8)% (4.3)% to 3.6%
As a % of revenue (Non-GAAP) 51.0% to 52.5% 40.7% to 46.3% 4.7% to 11.8% (1.3)% 2.9% to 9.3%
Diluted net income (loss) per share:
Diluted net income (loss) per share-GAAP
$(0.05) to $0.04
Diluted net income per share-Non-GAAP
$0.03 to $0.11
Shares used to compute diluted net loss per
share:
GAAP 90.5
Shares used to compute diluted net income per
share:
GAAP and Non-GAAP 95.8
2019 Financial Guidance
Revenue Gross Total
Income Total Non- Net Income
Profit Operating from operating (Loss)
Expense Operations Expense,
net
---
GAAP
$388.7 to $398.7
$214.9 to $221.8
$207.0 to $209.0
$5.9 to $14.8 $(20.2)
$(16.0) to $(7.1)
Stock-based
compensation - 1.1 (11.1) 12.2 12.2
Amortization of
intangibles - 5.2 (3.1) 8.3 8.3
Restructuring and
related charges - 0.7 (1.4) 2.1 2.1
Non-cash interest
and other expenses
related to
convertible notes - 13.4 13.4
Tax effect of non-
GAAP adjustments -
$(2.0) to $(0.9)
---
Total adjustments - 7.0 (15.6) 22.6 13.4
$34.0 to $35.1
---
Non-GAAP
$388.7 to $398.7
$221.9 to $228.8
$191.4 to $193.4
$28.5 to $37.4 $(6.8)
$19.1 to $26.9
===
As a % of revenue (GAAP) 55.3% to 55.6% 51.9% to 53.8% 1.5% to 3.7% (5.1)% (4.1)% to (1.8)%
As a % of revenue (Non-GAAP) 57.1% to 57.4% 48.0% to 49.8% 7.3% to 9.4% (1.7)% 4.9% to 6.7%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP
$(0.18) to $(0.08)
Diluted net income per share-Non-GAAP
$0.20 to $0.29
Shares used to compute diluted net loss per
share:
GAAP 89.9
Shares used to compute diluted net income per
share:
Non-GAAP 93.8
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SOURCE Harmonic Inc.
