HARMONIC INC. SAN JOSE, Calif., July 31, 2017 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its unaudited results for the second quarter of 2017.
GAAP net revenue for the second quarter of 2017 was $82.3 million, compared with $82.9 million for the first quarter of 2017 and $109.6 million for the second quarter of 2016.
Non-GAAP net revenue for the second quarter of 2017 was $82.3 million, compared with $83.5 million for the first quarter of 2017 and $110.4 million for the second quarter of 2016.
Bookings for the second quarter of 2017 were $91.1 million, compared with $82.1 million for the first quarter of 2017 and $117.3 million for the second quarter of 2016.
The GAAP net loss for the second quarter of 2017 was $(31.5) million, or $(0.39) per diluted share, compared with a GAAP net loss for the first quarter of 2017 of $(24.0) million, or $(0.30) per diluted share, and a GAAP net loss of $(20.7) million, or $(0.27) per diluted share, for the second quarter of 2016.
The non-GAAP net loss for the second quarter of 2017 was $(15.7) million, or $(0.20) per diluted share, compared with non-GAAP net loss for the first quarter of 2017 of $(11.2) million, or $(0.14) per diluted share, and a non-GAAP net loss of $(0.2) million, or $0.00 per diluted share, for the second quarter of 2016. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.
Total cash, cash equivalents and short-term investments were $52.9 million at the end of the second quarter of 2017, down $2.4 million from $55.3 million at the end of the prior quarter.
"Market demand for video infrastructure delivered through SaaS is accelerating," said Patrick Harshman, president and chief executive officer of Harmonic. "During Q2 2017, with respect to our OTT SaaS business, TCV grew 90% sequentially to 8% of total bookings, reducing near-term revenue and profitability but establishing a trajectory for stronger financial performance mid- to long-term. Additionally, recent material CableOS bookings and field deployment success bolster our confidence in the growth outlook for our Cable Edge segment."
Outlook and Financial Guidance
GAAP Financial
Guidance Q3 2017 Q4 2017 2017
--------------
Low High Low High Low High
--- ---- --- ---- --- ----
(in millions, except percentages and per share data)
Net Revenue $80.0 $90.0 $90.0 $100.0 $335.5 $355.5
----- ----- ----- ------ ------ ------
Video $72.0 $81.0 $80.0 $86.0 $299.9 $314.9
Cable Edge $8.0 $9.0 $10.0 $14.0 $35.6 $40.6
Gross Margin % 48.0% 49.0% 50.0% 51.0% 47.0% 48.0%
---- ---- ---- ---- ---- ----
Video 52.0% 53.0% 52.0% 54.0% 51.0% 52.0%
Cable Edge 19.0% 20.0% 26.0% 28.0% 13.0% 14.0%
Operating
Expenses $55.7 $57.7 $53.7 $55.7 $232.5 $236.5
Operating Loss $(19.3) $(11.3) $(10.8) $(2.3) $(79.3) $(62.3)
Tax benefit
(expense) $1.7 $1.7 $(0.7) $(0.7) $0.6 $0.6
EPS $(0.25) $(0.16) $(0.18) $(0.07) $(1.11) $(0.94)
Shares 81.4 81.4 82.0 82.0 81.0 81.0
Cash and short-
term
investments $40.0 $50.0 $40.0 $50.0 $40.0 $50.0
Non-GAAP
Financial
Guidance Q3 2017 Q4 2017 2017
----------
Low High Low High Low High
--- ---- --- ---- --- ----
(in millions, except percentages and per share data)
Net Revenue $80.0 $90.0 $90.0 $100.0 $336.0 $356.0
----- ----- ----- ------ ------ ------
Video $72.0 $81.0 $80.0 $86.0 $300.0 $315.0
Cable Edge $8.0 $9.0 $10.0 $14.0 $36.0 $41.0
Gross Margin % 51.0% 52.0% 52.0% 53.5% 51.0% 51.5%
---- ---- ---- ---- ---- ----
Video 55.0% 56.0% 55.0% 57.0% 54.0% 55.0%
Cable Edge 20.0% 21.0% 27.0% 29.0% 24.0% 25.0%
Operating
Expenses $48.0 $50.0 $48.0 $50.0 $207.0 $211.0
Operating
Income (Loss) $(9.0) $(1.0) $(3.0) $5.5 $(40.0) $(23.0)
Tax rate 15% 15% 15% 15% 15% 15%
EPS $(0.11) $(0.03) $(0.05) $0.04 $(0.50) $(0.33)
Shares 81.4 81.4 82.0 84.0 81.0 81.0
Cash and short-
term
investments $40.0 $50.0 $40.0 $50.0 $40.0 $50.0
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, July 31, 2017. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling +1.800.240.9147 or +1.574.990.1032 (passcode 53385607). A replay of the conference call will be available after 4:30 p.m. Pacific at the same website address or by calling +1.855.859.2056 or +1.404.537.3406 (passcode 53385607).
About Harmonic Inc.
Harmonic (NASDAQ: HLIT) is the worldwide leader in video delivery infrastructure for emerging television and video services. Harmonic enables customers to produce, deliver, and monetize amazing video experiences, with unequalled business agility and operational efficiency, by providing market-leading innovation, high-quality service, and compelling total-cost-of-ownership. 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 loss, non-GAAP tax rate and non-GAAP EPS for the third and fourth quarter of 2017 and for the fiscal year ended December 31, 2017, share count, cash and short-term investments at the end of the third and fourth quarter of 2017 and December 31, 2017, accelerating market demand for video infrastructure delivered through SaaS, the trajectory of our future financial performance, and the growth of our Cable Edge segment. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite, telco, broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions on our sales and operations; our ability to develop new and enhanced products in a timely manner and market acceptance of our new or existing products; losses of one or more key customers; risks associated with our international operations; exchange rate fluctuations of the currencies in which we conduct business; risks associated with our CableOS(TM) and VOS(TM) product solutions; dependence on market acceptance of various types of broadband services, on the adoption of new broadband technologies and on broadband industry trends; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in our markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; and the effect on our business of natural disasters. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic's filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K for the year ended December 31, 2016, our most recent Quarterly Report on Form 10-Q and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business, establish operating budgets, set internal measurement targets and make operating decisions.
These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Harmonic's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Harmonic's results of operations in conjunction with the corresponding GAAP measures.
The Company believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP.
The non-GAAP measures presented here are: revenue, gross profit, operating expenses, income (loss) from operations, non-operating expenses and net income (loss) (including those amounts as a percentage of revenue), and net income (loss) per diluted share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements provided with this press release. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures.
Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
Total Contract Value (TCV) - TCV bookings for OTT SaaS are comprised of the total value of new customer contracts closed during a specified period, including license, maintenance and services contracts, that we believe to be firm commitments to provide our software solutions and related services. Bookings by their nature are significantly based on estimates and judgments that we make regarding total contract values, and bookings are not meant as a substitute measure for revenue in accordance with GAAP.
Cable Edge Inventory charge - Harmonic from time to time incurs inventory impairment charges associated with material business shifts, such as the repositioning of our Cable Edge segment. We exclude these items, because we do not believe they are reflective of our ongoing long-term business and operating results.
Stock-based Compensation - Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We believe that management is limited in its ability to project the impact of stock-based compensation would have on our operating results. In addition, for comparability purposes, we believe it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies.
Amortization of Intangibles - A portion of the purchase price of our acquisitions is generally allocated to intangible assets, and is subject to amortization. However, Harmonic does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition's purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore, we believe that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.
Restructuring and related charges: Harmonic from time to time incurs restructuring charges which primarily consist of employee severance, one-time termination benefits related to the reduction of its workforce, lease exit costs, and other costs. These charges are associated with material business shifts. We exclude these items, because we do not believe they are reflective of our ongoing long-term business and operating results.
TVN acquisition and integration related costs - As a result of the Company's acquisition of Thomson Video Networks (TVN) in February 2016, the Company incurred acquisition-and integration-related expenses, including legal, accounting and other professional services as well as integration-related costs that are not expected to generate future benefits once the integration is fully consummated. We exclude these transaction and integration expenses because we believe these expenses have no direct correlation to the operation of our business, and because we believe that the non-GAAP financial measures excluding these costs provide meaningful supplemental information regarding our operational performance and liquidity. In addition, excluding these costs from the non-GAAP measures facilitates comparisons to our historical operating results and comparisons to peer company operating results.
Inventory fair value adjustment - Purchase accounting requires us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company's cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustments to our cost of revenues exclude the expected profit margin component that is recorded under purchase accounting associated with our acquisitions. We believe the adjustments are useful to investors as an additional means to reflect cost of revenues and gross margin trends of our business.
Deferred revenue fair value adjustment: We define non-GAAP net revenues as net revenues excluding the impact of purchase accounting. In connection with our acquisitions, the acquired deferred revenue balances were required to be written down due to purchase accounting in accordance with GAAP. The impact on revenues related to purchase accounting as a result of these transactions, limits the comparability of revenues between periods. We do not expect revenues generated from new contracts to be similarly impacted by purchase accounting adjustments. Accordingly, we believe presenting non-GAAP net revenues to exclude the impact of purchase accounting adjustments aids in the comparability between periods and in assessing our overall operating performance.
Non-cash interest expense related to convertible notes - We record the accretion of the debt discount related to the equity component and amortization of issuance costs as non-cash interest expense. We believe that excluding these costs provides meaningful supplemental information regarding operational performance and liquidity, along with enhancing investors' ability to view the Company's results from management's perspective. In addition, we believe excluding these costs from the non-GAAP measures facilitates comparisons to our historical operating results and comparisons to peer company operating results.
Accounting impact related to warrant amortization - We entered into a warrant agreement with a customer, Comcast Corporation, in September 2016 pursuant to which Comcast may purchase up to 7.8 million shares of Harmonic common stock. Vesting of the warrant shares is subject to Comcast achieving certain milestones and purchase volume commitments, and therefore the accounting guidance requires that the value of the warrant be recorded as a reduction in the Company's net revenues. Until final vesting, changes in the fair value of the warrant share will be marked to market and any adjustment as such will also be recorded in revenue. The change in fair value together with vested warrant shares are amortized to revenue using a ratio of revenue recognized from the customer in the period compared to total revenue expected from the customer. We have excluded the effect of warrant amortization in our non-GAAP financial measures. Management believes it is useful to exclude the charge for the fair value of the warrant shares in order to better understand the effects of these items on our total revenues and gross margin.
Loss on impairment of long-term investments - We exclude the effect of any other-than-temporary impairment of a cost method investment in calculating our non-GAAP financial measures. We exclude these items because we do not believe they are reflective of our ongoing long-term business and operating results.
Discrete tax items and tax effect of non-GAAP adjustments - The income tax effect of non-GAAP adjustments relates to the tax effect of the adjustments that we incorporate into non-GAAP financial measures in order to provide a more meaningful measure of non-GAAP net income.
Harmonic Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)
June 30, 2017 December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $52,885 $55,635
Short-term investments - 6,923
Accounts receivable, net 60,427 86,765
Inventories 35,130 41,193
Prepaid expenses and other
current assets 24,318 26,319
------ ------
Total current assets 172,760 216,835
Property and equipment, net 31,624 32,164
Goodwill 240,570 237,279
Intangibles, net 25,317 29,231
Other long-term assets 37,745 38,560
------ ------
Total assets $508,016 $554,069
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other debts and capital lease
obligations, current $7,130 $7,275
Accounts payable 31,322 28,892
Income taxes payable 1,349 1,166
Deferred revenue 55,165 52,414
Accrued and other current
liabilities 50,272 55,150
------ ------
Total current liabilities 145,238 144,897
Convertible notes, long-term 105,935 103,259
Other debts and capital lease
obligations, long-term 9,292 13,915
Income taxes payable, long-
term 2,996 2,926
Deferred tax liabilities,
long-term 258 -
Other non-current liabilities 16,716 18,431
------ ------
Total liabilities 280,435 283,428
------- -------
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; 80,669 and
78,456 shares issued and
outstanding at June 30, 2017
and December 31, 2016,
respectively 81 78
Additional paid-in capital 2,260,886 2,254,055
Accumulated deficit (2,030,384) (1,976,222)
Accumulated other
comprehensive loss (3,002) (7,270)
------ ------
Total stockholders' equity 227,581 270,641
------- -------
Total liabilities and
stockholders' equity $508,016 $554,069
======== ========
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three months ended Six months ended
June 30, 2017 July 1, 2016 June 30, 2017 July 1, 2016
------------- ------------ ------------- ------------
Revenue:
Product $50,190 $77,413 $100,594 $135,057
Services 32,125 32,158 64,664 56,346
------ ------ ------ ------
Total net revenue 82,315 109,571 165,258 191,403
Cost of revenue:
Product 32,005 44,049 58,107 71,238
Services 16,495 14,482 32,928 28,471
------ ------ ------ ------
Total cost of
revenue 48,500 58,531 91,035 99,709
------ ------ ------ ------
Gross profit 33,815 51,040 74,223 91,694
Operating expenses:
Research and
development 27,055 26,507 51,937 50,070
Selling, general
and administrative 32,625 36,516 67,256 69,386
Amortization of
intangibles 780 4,232 1,554 6,597
Restructuring and
related charges 777 1,903 2,056 4,515
--- ----- ----- -----
Total operating
expenses 61,237 69,158 122,803 130,568
Loss from
operations (27,422) (18,118) (48,580) (38,874)
Interest expense,
net (2,680) (2,651) (5,270) (5,072)
Other Income
(expense), net (819) 332 (1,330) 323
Loss on impairment
of long-term
investment - - - (1,476)
--- --- --- ------
Loss before income
taxes (30,921) (20,437) (55,180) (45,099)
Provision for
income taxes 579 242 347 760
--- --- --- ---
Net loss $(31,500) $(20,679) $(55,527) $(45,859)
======== ======== ======== ========
Net loss per share:
Basic and diluted $(0.39) $(0.27) $(0.69) $(0.59)
====== ====== ====== ======
Shares used in per share
calculation:
Basic and diluted 80,590 77,342 80,203 77,168
====== ====== ====== ======
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six months ended
June 30, 2017 July 1, 2016
------------- ------------
Cash flows from operating activities:
Net loss $(55,527) $(45,859)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Amortization of
intangibles 4,144 8,322
Depreciation 7,139 7,737
Stock-based
compensation 7,387 5,862
Amortization of
discount on
convertible debt 2,676 2,417
Amortization of non-
cash warrant 416 -
Restructuring, asset
impairment and loss
on retirement of
fixed assets 228 1,687
Loss on impairment
of long-term
investment - 1,476
Deferred income
taxes (38) 38
Provision for excess
and obsolete
inventories 5,094 5,203
Allowance for
doubtful accounts,
returns and
discounts 3,274 697
Other non-cash
adjustments, net 189 144
Changes in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable 23,479 (16,000)
Inventories 2,912 3,158
Prepaid expenses and
other assets 5,933 (4,148)
Accounts payable 1,434 2,168
Deferred revenue 1,308 25,956
Income taxes payable 228 (122)
Accrued and other
liabilities (7,662) (7,029)
------ ------
Net cash provided by
(used in) operating
activities 2,614 (8,293)
----- ------
Cash flows from investing activities:
Acquisition of
business, net of
cash acquired - (72,989)
Proceeds from
maturities and sale
of investments 6,898 12,842
Purchases of
property and
equipment (5,943) (7,708)
Net cash provided by
(used in) investing
activities 955 (67,855)
--- -------
Cash flows from financing activities:
Payment of
convertible debt
issuance costs - (582)
Proceeds from other
debts and capital
leases 164 5,972
Repayment of other
debts and capital
leases (6,650) (6,524)
Proceeds from common
stock issued to
employees 2,117 3,737
Payment of tax
withholding
obligations related
to net share
settlements of
restricted stock
units (2,726) (1,034)
------ ------
Net cash (used in)
provided by
financing
activities (7,095) 1,569
------ -----
Effect of exchange
rate changes on
cash and cash
equivalents 776 (95)
--- ---
Net decrease in cash
and cash
equivalents (2,750) (74,674)
Cash and cash
equivalents at
beginning of period 55,635 126,190
------ -------
Cash and cash
equivalents at end
of period $52,885 $51,516
======= =======
Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
Three months ended
------------------
June 30, 2017 March 31, 2017 July 1, 2016
------------- -------------- ------------
GAAP Adjust- Non-GAAP GAAP Adjust- Non-GAAP GAAP Adjust- Non-GAAP
ments ments(1) ments(1)
--- --- ---
Product
Video Products $44,824 $ - $44,824 54% $45,518 $ - $45,518 55% $61,662 $205 $61,867 56%
Cable Edge 5,366 - 5,366 7% 4,886 191 5,077 6% 15,751 $ - 15,751 14%
Services and
Support 32,125 - 32,125 39% 32,539 336 32,875 39% 32,158 575 32,733 30%
------ --- ------ --- ------ --- ------ --- ------ --- ------ ---
Total $82,315 $ - $82,315 100% $82,943 $527 $83,470 100% $109,571 $780 $110,351 100%
======= === === ======= === ======= ==== ======= === ======== ==== ======== ===
Geography
Americas $40,611 $ - $40,611 50% $37,906 $416 $38,322 46% $57,680 $143 $57,823 52%
EMEA 24,953 - 24,953 30% 25,439 111 25,550 31% 33,456 467 33,923 31%
APAC 16,751 - 16,751 20% 19,598 - 19,598 23% 18,435 170 18,605 17%
------ --- ------ --- ------ --- ------ --- ------ --- ------ ---
Total $82,315 $ - $82,315 100% $82,943 $527 $83,470 100% $109,571 $780 $110,351 100%
======= === === ======= === ======= ==== ======= === ======== ==== ======== ===
Market
Service Provider $46,420 $ - $46,420 56% $48,028 $416 $48,444 58% $65,733 $329 $66,062 60%
Broadcast and
Media 35,895 - 35,895 44% 34,915 111 35,026 42% 43,838 451 44,289 40%
Total $82,315 $ - $82,315 100% $82,943 $527 $83,470 100% $109,571 $780 $110,351 100%
======= === === ======= === ======= ==== ======= === ======== ==== ======== ===
Six months ended
----------------
June 30, 2017 July 1, 2016
------------- ------------
GAAP Adjust- Non-GAAP GAAP Adjust- Non-GAAP
ments(1)
ments(1)
-------
Product
Video Products $90,342 $ - $90,342 55% $105,874 $560 $106,434 55%
Cable Edge 10,252 191 10,443 6% 29,183 - 29,183 15%
Services and Support 64,664 336 65,000 39% 56,346 843 57,189 30%
------ --- ------ --- ------ --- ------ ---
Total $165,258 $527 $165,785 100% $191,403 $1,403 $192,806 100%
======== ==== ======== === ======== ====== ======== ===
Geography
Americas $78,517 $416 $78,933 48% $106,657 $224 $106,881 55%
EMEA 50,392 111 50,503 30% 53,311 868 54,179 28%
APAC 36,349 - 36,349 22% 31,435 311 31,746 17%
------ --- ------ --- ------ --- ------ ---
Total $165,258 $527 $165,785 100% $191,403 $1,403 $192,806 100%
======== ==== ======== === ======== ====== ======== ===
Market
Service Provider $94,448 $416 $94,864 57% $117,003 $478 $117,481 61%
Broadcast and Media 70,810 111 70,921 43% 74,400 925 75,325 39%
--- ------ --- ------ ---
Total $165,258 $527 $165,785 100% $191,403 $1,403 $192,806 100%
======== ==== ======== === ======== ====== ======== ===
(1) See "Use of Non-GAAP Financial
Measures" above and "GAAP to Non-
GAAP Reconciliations" below.
Harmonic Inc.
Preliminary Segment Information
(Unaudited, in thousands, except percentages)
Three months ended June 30, 2017
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
--------
Net revenue $73,379 $8,936 $82,315 $ - $82,315
Gross profit 37,720 1,699 39,419 (5,604) 33,815
Gross margin% 51.4% 19.0% 47.9% 41.1%
Operating loss (8,947) (7,411) (16,358) (11,064) (27,422)
Operating
margin% (12.2)% (82.9)% (19.9)% (33.3)%
Three months ended March 31, 2017
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
--------
Net revenue $74,453 $9,017 $83,470 $(527) $82,943
Gross profit 40,884 2,626 43,510 (3,102) 40,408
Gross margin% 54.9% 29.1% 52.1% 48.7%
Operating loss (5,725) (5,664) (11,389) (9,769) (21,158)
Operating
margin% (7.7)% (62.8)% (13.6)% (25.5)%
Three months ended July 1, 2016
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
--------
Net revenue $91,368 $18,983 $110,351 $(780) $109,571
Gross profit 51,233 7,276 58,509 (7,469) 51,040
Gross margin% 56.1% 38.3% 53.0% 46.6%
Operating income
(loss) 1,298 (498) 800 (18,918) (18,118)
Operating
margin% 1.4% (2.6)% 0.7% (16.5)%
Six months ended June 30, 2017
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
--------
Net revenue $147,832 $17,953 $165,785 $(527) $165,258
Gross profit 78,604 4,325 82,929 (8,706) 74,223
Gross margin% 53.2% 24.1% 50.0% 44.9%
Operating loss (14,672) (13,075) (27,747) (20,833) (48,580)
Operating
margin% (9.9)% (72.8)% (16.7)% (29.4)%
Six months ended July 1, 2016 (2)
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
--------
Net revenue $156,999 $35,807 $192,806 $(1,403) $191,403
Gross profit 86,125 14,524 100,649 (8,955) 91,694
Gross margin% 54.9% 40.6% 52.2% 47.9%
Operating loss (5,238) (2,350) (7,588) (31,286) (38,874)
Operating
margin% (3.3)% (6.6)% (3.9)% (20.3)%
(1) See "Use of Non-GAAP Financial
Measures" above and "GAAP to Non-
GAAP Reconciliations" below.
(2) Excludes TVN results prior to
March 1, 2016.
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
Three months ended
------------------
June 30, 2017
-------------
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense, net
--- --- ---
GAAP $82,315 $33,815 $61,237 $(27,422) $(3,499) $(31,500)
Cable Edge inventory
charge - 3,331 - 3,331 - 3,331
Stock-based
compensation in
cost of revenue - 700 - 700 - 700
Stock-based
compensation in
research and
development - - (1,337) 1,337 - 1,337
Stock-based
compensation in
selling, general
and administrative - - (2,099) 2,099 - 2,099
Amortization of
intangibles - 1,295 (780) 2,075 - 2,075
Restructuring and
related charges - 278 (777) 1,055 - 1,055
TVN acquisition-and
integration-
related costs - - (467) 467 - 467
Non-cash interest
expenses related to
convertible notes - - - - 1,360 1,360
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 3,354
Total adjustments - 5,604 (5,460) 11,064 1,360 15,778
Non-GAAP $82,315 $39,419 $55,777 $(16,358) $(2,139) $(15,722)
======= ======= ======= ======== ======= ========
As a % of revenue (GAAP) 41.1% 74.4% (33.3)% (4.3)% (38.3)%
As a % of revenue (Non-GAAP) 47.9% 67.8% (19.9)% (2.6)% (19.1)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.39)
======
Diluted net loss per share-Non-
GAAP $(0.20)
======
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 80,590
======
Three months ended
------------------
March 31, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense, net
--- --- ---
GAAP $82,943 $40,408 $61,566 $(21,158) $(3,101) $(24,027)
Cable Edge inventory
charge - (15) - (15) - (15)
Acquisition
accounting impact
related to TVN
deferred revenue 111 111 - 111 - 111
Accounting impact
related to warrant
amortization 416 416 - 416 - 416
Stock-based
compensation in
cost of revenue - 445 - 445 - 445
Stock-based
compensation in
research and
development - - (977) 977 - 977
Stock-based
compensation in
selling, general
and administrative - - (1,829) 1,829 - 1,829
Amortization of
intangibles - 1,295 (774) 2,069 - 2,069
Restructuring and
related charges - 508 (1,279) 1,787 - 1,787
TVN acquisition-and
integration-
related costs - 342 (1,808) 2,150 - 2,150
Non-cash interest
expenses related to
convertible notes - - - - 1,316 1,316
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 1,744
--- --- --- --- --- -----
Total adjustments 527 3,102 (6,667) 9,769 1,316 12,829
Non-GAAP $83,470 $43,510 $54,899 $(11,389) $(1,785) $(11,198)
======= ======= ======= ======== ======= ========
As a % of revenue (GAAP) 48.7% 74.2% (25.5)% (3.7)% (29.0)%
As a % of revenue (Non-GAAP) 52.1% 65.8% (13.6)% (2.1)% (13.4)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.30)
======
Diluted net loss per share-Non-
GAAP $(0.14)
======
Shares used to compute diluted net
income (loss) per share:
GAAP and Non-GAAP 79,810
======
Three months ended
------------------
July 1, 2016
Revenue Gross Total Income Total Non- Net Loss
Profit Operating (Loss) operating
Expense from Expense, net
Operations
--- ---
GAAP $109,571 $51,040 $69,158 $(18,118) $(2,319) $(20,679)
Cable Edge inventory
charge - 4,519 - 4,519 - 4,519
Acquisition
accounting impacts
related to TVN
deferred revenue 780 780 - 780 - 780
Stock-based
compensation in
cost of revenue - 424 - 424 - 424
Stock-based
compensation in
research and
development - - (841) 841 - 841
Stock-based
compensation in
selling, general
and administrative - - (1,503) 1,503 - 1,503
Amortization of
intangibles - 1,307 (4,232) 5,539 - 5,539
Restructuring and
related charges - 6 (1,903) 1,909 - 1,909
TVN acquisition-and
integration-
related costs - 433 (2,970) 3,403 - 3,403
Non-cash interest
expenses related to
convertible notes - - - - 1,233 1,233
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 285
--- --- --- --- --- ---
Total adjustments 780 7,469 (11,449) 18,918 1,233 20,436
Non-GAAP $110,351 $58,509 $57,709 $800 $(1,086) $(243)
======== ======= ======= ==== ======= =====
As a % of revenue (GAAP) 46.6% 63.1% (16.5)% (2.1)% (18.9)%
As a % of revenue (Non-GAAP) 53.0% 52.3% 0.7% (1.0)% (0.2)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.27)
======
Diluted net loss per share-Non-
GAAP $0.00
=====
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 77,342
======
Six months ended
----------------
June 30, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense
--- --- ---
GAAP $165,258 $74,223 $122,803 $(48,580) $(6,600) $(55,527)
Cable Edge inventory
charge - 3,316 - 3,316 - 3,316
Acquisition
accounting impacts
related to TVN
deferred revenue 111 111 - 111 - 111
Accounting impact
related to warrant
amortization 416 416 - 416 - 416
Stock-based
compensation in
cost of revenue - 1,145 - 1,145 - 1,145
Stock-based
compensation in
research and
development - - (2,314) 2,314 - 2,314
Stock-based
compensation in
selling, general
and administrative - - (3,928) 3,928 - 3,928
Amortization of
intangibles - 2,590 (1,554) 4,144 - 4,144
Restructuring and
related charges - 786 (2,056) 2,842 - 2,842
TVN acquisition-and
integration-
related costs - 342 (2,275) 2,617 - 2,617
Non-cash interest
expenses related to
convertible notes - - - - 2,676 2,676
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 5,098
---
Total adjustments 527 8,706 (12,127) 20,833 2,676 28,607
Non-GAAP $165,785 $82,929 $110,676 $(27,747) $(3,924) $(26,920)
======== ======= ======== ======== ======= ========
As a % of revenue (GAAP) 44.9% 74.3% (29.4)% (4.0)% (33.6)%
As a % of revenue (Non-GAAP) 50.0% 66.8% (16.7)% (2.4)% (16.2)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.69)
======
Diluted net loss per share-Non-
GAAP $(0.34)
======
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 80,203
======
Six months ended
----------------
July 1, 2016
------------
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense
--- --- ---
GAAP $191,403 $91,694 $130,568 $(38,874) $(6,225) $(45,859)
Cable Edge inventory
charge - 4,519 4,519 - 4,519
Acquisition
accounting impacts
related to TVN
deferred revenue 1,403 1,403 - 1,403 - 1,403
Acquisition
accounting impacts
related to TVN fair
value of inventory - 189 - 189 - 189
Stock-based
compensation in
cost of revenue - 651 - 651 - 651
Stock-based
compensation in
research and
development - - (1,810) 1,810 - 1,810
Stock-based
compensation in
selling, general
and administrative - - (3,401) 3,401 - 3,401
Amortization of
intangibles - 1,725 (6,597) 8,322 - 8,322
Restructuring and
related charges - (23) (4,515) 4,492 - 4,492
TVN acquisition-and
integration-
related costs - 491 (6,008) 6,499 - 6,499
Loss on impairment
of long-term
investment - - - - 1,476 1,476
Non-cash interest
expenses related to
convertible notes - - - - 2,420 2,420
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 2,248
--- --- --- --- --- -----
Total adjustments 1,403 8,955 (22,331) 31,286 3,896 37,430
Non-GAAP $192,806 $100,649 $108,237 $(7,588) $(2,329) $(8,429)
======== ======== ======== ======= ======= =======
As a % of revenue (GAAP) 47.9% 68.2% (20.3)% (3.3)% (24.0)%
As a % of revenue (Non-GAAP) 52.2% 56.1% (3.9)% (1.2)% (4.4)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.59)
======
Diluted net loss per share-Non-
GAAP $(0.11)
======
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 77,168
======
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Business Outlook
(In millions, except percentages and per share data)
Q3 2017 Financial Guidance
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense,
net
--- ---
GAAP $80.0 to $38.4 to $55.7 to $(19.3) to $(3.1) $(20.2) to
$90.0 $44.4 $57.7 $(11.3) $(13.3)
Stock-based
compensation expense - 0.8 (4.3) 5.1 - 5.1
Amortization of
intangibles - 1.3 (0.8) 2.1 - 2.1
Restructuring and
related charges and
TVN integration
costs - 0.5 (2.6) 3.1 - 3.1
Non-cash interest
expense related to
convertible notes - - - - 1.4 1.4
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - (0.5)
--- --- --- --- --- ----
Total adjustments - 2.6 (7.7) 10.3 1.4 11.2
Non-GAAP $80.0 to $41.0 to $48.0 to $(9.0) to $(1.7) $(9.0) to
$90.0 $47.0 $50.0 $(2.1)
$(1.0)
=== ===
As a % of revenue (GAAP) 48% to 64% to (24)% to (3)% to (25)% to
49% 70% (13)% (4)% (15)%
As a % of revenue (Non-GAAP) 51% to 56% to (11)% to 2% (11)% to
52% 60% (2)%
(1)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.25) to
$(0.16)
Diluted net loss per share-Non-
GAAP $(0.11) to
$(0.03)
Shares used to compute diluted
net loss per share:
GAAP and Non-GAAP 81.4
Q4 2017 Financial Guidance
Revenue Gross Total Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Operations Expense,
Expense net
------- ---
GAAP $90.0 to $44.9 to $53.7 to $(10.8) to $(3.1) $(14.6) to
$100.0 $51.4 $55.7 $(2.3)
$(6.1)
Stock-based
compensation expense - 0.8 (4.5) 5.3 - 5.3
Amortization of
intangibles - 1.3 (0.8) 2.1 - 2.1
Restructuring and
related charges and
TVN integration
costs - - (0.4) 0.4 - 0.4
Non-cash interest
expense related to
convertible notes - - - - 1.4 1.4
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - $1.4 to $0.1
--- --- --- --- --- ------------
Total adjustments - 2.1 (5.7) 7.8 1.4 $10.6 to
$9.1
Non-GAAP $90.0 to $47.0 to $48.0 to $(3.0) to $(1.7) $(4.0) to
$100.0 $53.5 $50.0 $5.5 $3.0
====== ===== ===== ==== ====
As a % of revenue
(GAAP) 50% to 60% (12)% to (3)% (16)% to (6)%
51% (2)%
As a % of revenue
(Non-GAAP) 52.0% to 50% to (3)% to 5.5% 2% (4)% to 3%
53.5% 53%
Diluted net income
(loss) per share:
Diluted net loss per
share-GAAP $(0.18) to
$(0.07)
======
Diluted net income
(loss) per share-
Non-GAAP $(0.05) to
$0.04
=====
Shares used to
compute diluted net
loss per share:
GAAP and Non-GAAP 82.0
====
Shares used to
compute diluted net
income per share:
GAAP 84.0
====
2017 Financial Guidance
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense,
net
---
GAAP $335.5 to $157.2 to $232.5 to $(79.3) to $(12.8) $(90.1) to
$355.5 $170.2 $236.5 $(62.3) $(76.3)
Acquisition
accounting impact
related to TVN
deferred revenue 0.1 0.1 - 0.1 - 0.1
Accounting impact
related to warrant
amortization 0.4 0.4 - 0.4 - 0.4
Cable Edge inventory
charge - 3.3 - 3.3 - 3.3
Stock-based
compensation expense - 2.7 (15.1) 17.8 - 17.8
Amortization of
intangibles - 5.2 (3.1) 8.3 - 8.3
Restructuring and
related charges and
TVN integration
costs - 2.1 (7.3) 9.4 - 9.4
Non-cash interest
expense related to
convertible notes - - - - 5.5 5.5
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 5.3
--- --- --- --- --- ---
Total adjustments 0.5 13.8 (25.5) 39.3 5.5 50.1
Non-GAAP $336.0 to $171.0 to $207.0 to $(40.0) to $(7.3) $(40.0) to
$356.0 $184.0 $(26.2)
$211.0 $(23.0)
====== ======
As a % of revenue
(GAAP) 47% to 66% (24)% to (4%) (27)% to
48% (18)% (21)%
to 67%
As a % of revenue
(Non-GAAP) 51.0% to 59% (12)% to (2%) (12)% to
(6)% (7)%
51.5% to 62%
Diluted loss per
share:
Diluted net loss per
share-GAAP $(1.11) to
$(0.94)
======
Diluted net loss per
share-Non-GAAP $(0.50) to
$(0.33)
======
Shares used to
compute diluted net
loss per share:
GAAP and Non-GAAP 81.0
====
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SOURCE Harmonic Inc.
