HARMONIC INC. SAN JOSE, Calif., Oct. 30, 2017 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, today announced its unaudited results for the third quarter of 2017.
Q3 Financial and Business Highlights
-- GAAP revenue of $92.0 million up 11.8%, and non-GAAP revenue of $91.6
million up 11.3%, sequentially
-- GAAP and non-GAAP Video revenue of $84.2 million up 14.7%, sequentially
-- GAAP gross margin up 10.0% from 41.1% to 51.1%, and non-GAAP gross
margin up 5.5% from 47.9% to 53.4%, sequentially
-- GAAP operating expense flat, and non-GAAP operating expense down 14.5%,
sequentially
-- GAAP operating margin of (15.4%) and non-GAAP operating margin of 1.4%
-- Record backlog and deferred revenue of $200.9 million, with CableOS
backlog greater than $20 million
-- Video SaaS TCV 6% of total bookings, and ARR of $7 million up 37%
sequentially
-- Surpassed 20,000 live OTT channels powered globally
-- Further expansion of CableOS deployments and advanced field trials
-- Settled Avid litigation
"We drove high single digit operating margin in our video segment through growth of our premium live OTT solutions and crisp cost control," said Patrick Harshman, president and chief executive officer of Harmonic. "Our CableOS program also made significant progress, including a new tier 1 customer design win, expanded commercial deployments and trial activity, and a growing backlog of orders."
Select Financial Information
GAAP Non-GAAP
Key Financial
Results Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q2 2017 Q3 2016
------- ------- ------- ------- ------- -------
(in millions, except per share data)
Net revenue $92.0 $82.3 $101.4 $91.6 $82.3 $101.7
Net loss $(15.6) $(31.5) $(16.0) $(0.5) $(15.7) $(1.1)
Diluted EPS $(0.19) $(0.39) $(0.21) $(0.01) $(0.20) $(0.01)
Other Financial Information Q3 2017 Q2 2017 Q3 2016
------- ------- -------
(in millions)
Bookings for the quarter $96.0 $91.1 $97.3
Backlog and deferred revenue as of quarter end $200.9 $194.4 $181.1
Cash and short-term investments as of quarter end $50.0 $52.9 $52.7
------------------------------------------------- ----- ----- -----
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".
Outlook and Financial Guidance
GAAP Financial Guidance Q4 2017 2017
Low High Low High
--- ---- --- ----
(in millions, except percentages and per share data)
Net Revenue $90.0 $100.0 $347.9 $357.9
Video $80.0 $86.0 $311.9 $317.9
Cable Edge $10.0 $14.0 $36.0 $40.0
Gross Margin % 50.0% 51.0% 48.0% 49.0%
Video 52.0% 54.0% 52.0% 53.0%
Cable Edge 26.0% 28.0% 12.0% 14.0%
Operating Expenses $54.4 $56.4 $238.0 $240.0
Operating Loss $(11.5) $(3.0) $(73.2) $(64.7)
Tax benefit (expense) $(0.8) $(0.8) $0.8 $0.8
EPS $(0.19) $(0.08) $(1.06) $(0.96)
Shares 82.0 82.0 81.0 81.0
Cash and short-term
investments $40.0 $50.0 $40.0 $50.0
------------------- ----- ----- ----- -----
Non-GAAP Financial
Guidance Q4 2017 2017
Low High Low High
--- ---- --- ----
(in millions, except percentages and per share data)
Net Revenue $90.0 $100.0 $348.0 $358.0
Video $80.0 $86.0 $312.0 $318.0
Cable Edge $10.0 $14.0 $36.0 $40.0
Gross Margin % 52.0% 53.5% 51.5% 52.0%
Video 55.0% 57.0% 55.0% 55.5%
Cable Edge 27.0% 29.0% 22.0% 23.0%
Operating Expenses $48.0 $50.0 $206.0 $208.0
Operating Income (Loss) $(3.0) $5.5 $(28.5) $(20.0)
Tax rate 15% 15% 15% 15%
EPS $(0.05) $0.04 $(0.38) $(0.29)
Shares 82.0 82.5 81.0 81.0
Cash and short-term
investments $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, October 30, 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 99911839). 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 99911839).
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. Harmonic has also revolutionized cable access networking via the industry's first virtualized CCAP solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers' homes and mobile devices. Whether simplifying OTT video delivery via innovative cloud and software-as-a-service (SaaS) technologies, or powering the delivery of gigabit internet cable services, Harmonic is changing the way media companies and service providers monetize live and VOD content on every screen. More information is available at www.harmonicinc.com.
Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations regarding: GAAP net revenue, GAAP gross margins, GAAP operating expenses, GAAP operating loss, GAAP tax expense, GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP tax rate and non-GAAP EPS for the fourth quarter of 2017 and for the fiscal year ended December 31, 2017, share count, and cash and short-term investments at December 31, 2017. 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:
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 issued a warrant to a customer, Comcast Corporation, in September 2016 pursuant to which Comcast may purchase up to 7.8 million shares of Harmonic common stock. Vesting of the warrant shares is subject to Comcast achieving certain milestones and purchase volume commitments, and therefore the accounting guidance requires that the value of the warrant be recorded as a reduction in the Company's net revenues. Until final vesting, changes in the fair value of the warrant share will be marked to market and any adjustment as such will also be recorded in revenue. The change in fair value together with vested warrant shares are amortized to revenue using a ratio of revenue recognized from the customer in the period compared to total revenue expected from the customer. We have excluded the effect of warrant amortization in our non-GAAP financial measures. Management believes it is useful to exclude the charge for the fair value of the warrant shares in order to better understand the effects of these items on our total revenues and gross margin.
Loss on impairment of long-term investments - We exclude the effect of any other-than-temporary impairment of 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.
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 in this quarter 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.
The Company has also provided in this release the following non-GAAP financial measures:
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.
Annual recurring revenue (ARR) - ARR is used to assess the trajectory of our OTT SaaS business. ARR means, as of a specified date, the contracted recurring revenue which includes both subscription and maintenance contracts (and excludes perpetual license, term license and service agreements) that are current and booked with a future start date. ARR should be viewed independently of revenue and any other GAAP measure.
Harmonic Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)
September 29, 2017 December 31, 2016
------------------ -----------------
ASSETS
Current assets:
Cash and cash equivalents $50,039 $55,635
Short-term investments - 6,923
Accounts receivable, net 71,582 86,765
Inventories 31,754 41,193
Prepaid expenses and other
current assets 22,682 26,319
------ ------
Total current assets 176,057 216,835
Property and equipment, net 30,731 32,164
Goodwill 241,932 237,279
Intangibles, net 23,316 29,231
Other long-term assets 39,926 38,560
------ ------
Total assets $511,962 $554,069
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other debts and capital lease
obligations, current $7,434 $7,275
Accounts payable 31,839 28,892
Income taxes payable 1,411 1,166
Deferred revenue 52,811 52,414
Accrued and other current
liabilities 52,828 55,150
------ ------
Total current liabilities 146,323 144,897
Convertible notes, long-term 107,318 103,259
Other debts and capital lease
obligations, long-term 15,439 13,915
Income taxes payable, long-term 591 2,926
Deferred tax liabilities, long-
term 327 -
Other non-current liabilities 21,366 18,431
------ ------
Total liabilities 291,364 283,428
------- -------
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;
81,606 and 78,456 shares
issued and outstanding at
September 29, 2017 and
December 31, 2016,
respectively 82 78
Additional paid-in capital 2,267,213 2,254,055
Accumulated deficit (2,045,967) (1,976,222)
Accumulated other comprehensive
loss (730) (7,270)
---- ------
Total stockholders' equity 220,598 270,641
------- -------
Total liabilities and
stockholders' equity $511,962 $554,069
======== ========
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three months ended Nine months ended
September 29, September 30, September 29, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Revenue:
Product $58,161 $70,285 $158,657 $205,342
Services 33,853 31,121 98,615 87,467
------ ------ ------ ------
Total net revenue 92,014 101,406 257,272 292,809
Cost of revenue:
Product 27,736 34,460 85,843 105,698
Services 17,253 15,583 50,181 44,054
------ ------ ------ ------
Total cost of
revenue 44,989 50,043 136,024 149,752
------ ------ ------- -------
Gross profit 47,025 51,363 121,248 143,057
Operating expenses:
Research and
development 21,289 24,202 73,226 74,272
Selling, general and
administrative 37,121 36,112 104,377 105,498
Amortization of
intangibles 793 3,009 2,347 9,606
Restructuring and
related charges 2,028 (27) 4,084 4,488
----- --- ----- -----
Total operating
expenses 61,231 63,296 184,034 193,864
Loss from operations (14,206) (11,933) (62,786) (50,807)
Interest expense,
net (2,794) (2,734) (8,064) (7,806)
Other expense, net (498) (328) (1,828) (5)
Loss on impairment
of long-term
investment - (1,259) - (2,735)
--- ------ --- ------
Loss before income
taxes (17,498) (16,254) (72,678) (61,353)
(Benefit from)
provision for
income taxes (1,915) (242) (1,568) 518
------ ---- ------ ---
Net loss $(15,583) $(16,012) $(71,110) $(61,871)
======== ======== ======== ========
Net loss per share:
Basic and diluted $(0.19) $(0.21) $(0.88) $(0.80)
====== ====== ====== ======
Shares used in per share calculation:
Basic and diluted 81,445 78,092 80,618 77,475
====== ====== ====== ======
Harmonic Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Nine months ended
September 29, September 30,
2017 2016
---- ----
Cash flows from operating activities:
Net loss $(71,110) $(61,871)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Amortization of
intangibles 6,232 12,711
Depreciation 11,045 13,198
Stock-based
compensation 11,107 8,542
Amortization of
discount on
convertible debt 4,060 3,669
Amortization of non-
cash warrant 38 -
Restructuring, asset
impairment and loss
on retirement of
fixed assets 565 1,476
Loss on impairment
of long-term
investment - 2,735
Foreign currency
adjustments 1,795 (911)
Provision for excess
and obsolete
inventories 5,578 6,246
Allowance for
doubtful accounts,
returns and
discounts 4,309 1,222
Other non-cash
adjustments, net 298 251
Changes in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable 11,367 (12,869)
Inventories 6,188 2,225
Prepaid expenses and
other assets 6,702 (5,938)
Accounts payable 2,129 2,505
Deferred revenue (1,098) 20,038
Income taxes payable (2,122) (827)
Accrued and other
liabilities (3,053) (5,040)
------ ------
Net cash used in
operating
activities (5,970) (12,638)
------ -------
Cash flows from investing activities:
Acquisition of
business, net of
cash acquired - (75,669)
Proceeds from
maturities and sale
of investments 6,898 18,692
Purchases of
property and
equipment (9,075) (11,423)
Net cash used in
investing
activities (2,177) (68,400)
------ -------
Cash flows from financing activities:
Payment of
convertible debt
issuance costs - (582)
Proceeds from other
debts and capital
leases 6,344 5,968
Repayment of other
debts and capital
leases (7,008) (8,038)
Proceeds from common
stock issued to
employees 4,697 3,736
Payment of tax
withholding
obligations related
to net share
settlements of
restricted stock
units (2,757) (1,313)
------ ------
Net cash provided
by (used in)
financing
activities 1,276 (229)
----- ----
Effect of exchange
rate changes on
cash and cash
equivalents 1,275 (182)
----- ----
Net decrease in cash
and cash
equivalents (5,596) (81,449)
Cash and cash
equivalents at
beginning of period 55,635 126,190
------ -------
Cash and cash
equivalents at end
of period $50,039 $44,741
======= =======
Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
Three months ended
September 29, 2017 June 30, 2017 September 30, 2016
GAAP Adjust- Non-GAAP GAAP Adjust- Non-GAAP GAAP Adjust- Non-GAAP
ments(1) ments(1) ments(1)
--- --- ---
Product
Video Products $54,175 $ - $54,175 59% $44,726 $ - $44,726 54% $63,288 $ - $63,288 62%
Cable Edge 3,986 (163) 3,823 4% 5,366 - 5,366 7% 6,997 $ - 6,997 7%
Services and
Support 33,853 (215) 33,638 37% 32,223 - 32,223 39% 31,121 325 31,446 31%
------ ---- ------ --- ------ --- ------ --- ------ --- ------ ---
Total $92,014 $(378) $91,636 100% $82,315 $ - $82,315 100% $101,406 $325 $101,731 100%
======= ===== ======= === ======= === === ======= === ======== ==== ======== ===
Geography
Americas $48,656 $(378) $48,278 53% $40,611 $ - $40,611 50% $47,856 $166 $48,022 47%
EMEA 27,528 - 27,528 30% 24,953 - 24,953 30% 32,405 106 32,511 32%
APAC 15,830 - 15,830 17% 16,751 - 16,751 20% 21,145 53 21,198 21%
------ --- ------ --- ------ --- ------ --- ------ --- ------ ---
Total $92,014 $(378) $91,636 100% $82,315 $ - $82,315 100% $101,406 $325 $101,731 100%
======= ===== ======= === ======= === === ======= === ======== ==== ======== ===
Market
Service
Provider $50,410 $(378) $50,032 55% $46,420 $ - $46,420 56% $53,459 $97 $53,556 53%
Broadcast and
Media 41,604 - 41,604 45% 35,895 - 35,895 44% 47,947 228 48,175 47%
Total $92,014 $(378) $91,636 100% $82,315 $ - $82,315 100% $101,406 $325 $101,731 100%
======= ===== ======= === ======= === === ======= === ======== ==== ======== ===
Nine months ended
September 29, 2017 September 30, 2016
GAAP Adjust- Non-GAAP GAAP(2) Adjust- Non-GAAP(2)
ments(1) ments(1)
------- -------
Product
Video Products $144,419 $ - $144,419 56% $169,162 $560 $169,722 58%
Cable Edge 14,238 28 14,266 6% 36,180 - 36,180 12%
Services and Support 98,615 121 98,736 38% 87,467 1,168 88,635 30%
------ --- ------ --- ------ ----- ------ ---
Total $257,272 $149 $257,421 100% $292,809 $1,728 $294,537 100%
======== ==== ======== === ======== ====== ======== ===
Geography
Americas $127,173 $38 $127,211 49% $154,513 $390 $154,903 53%
EMEA 77,920 111 78,031 30% 85,716 974 86,690 29%
APAC 52,179 - 52,179 21% 52,580 364 52,944 18%
------ --- ------ --- ------ --- ------ ---
Total $257,272 $149 $257,421 100% $292,809 $1,728 $294,537 100%
======== ==== ======== === ======== ====== ======== ===
Market
Service Provider $144,858 $38 $144,896 56% $170,462 $575 $171,037 58%
Broadcast and Media 112,414 111 112,525 44% 122,347 1,153 123,500 42%
------- --- ------- ----- ------- ---
Total $257,272 $149 $257,421 100% $292,809 $1,728 $294,537 100%
======== ==== ======== === ======== ====== ======== ===
(1) See "Use of Non-GAAP Financial
Measures" above and "GAAP to Non-GAAP
Reconciliations" below.
(2) Exclude TVN revenue prior to March 1,
2016.
Harmonic Inc.
Preliminary Segment Information
(Unaudited, in thousands, except percentages)
Three months ended September, 29 2017
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $84,155 $7,481 $91,636 $378 $92,014
Gross profit 48,283 686 48,969 (1,944) 47,025
Gross margin% 57.4% 9.2% 53.4% 51.1%
Operating
income (loss) 7,009 (5,735) 1,274 (15,480) (14,206)
Operating
margin% 8.3% (76.7)% 1.4% (15.4)%
Three months ended June 30, 2017
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $73,379 $8,936 $82,315 $ - $82,315
Gross profit 37,720 1,699 39,419 (5,604) 33,815
Gross margin% 51.4% 19.0% 47.9% 41.1%
Operating loss (8,947) (7,411) (16,358) (11,064) (27,422)
Operating
margin% (12.2)% (82.9)% (19.9)% (33.3)%
Three months ended September 30, 2016
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $91,678 $10,053 $101,731 $(325) $101,406
Gross profit 49,633 3,754 53,387 (2,024) 51,363
Gross margin% 54.1% 37.3% 52.5% 50.7%
Operating
income (loss) 5,211 (4,767) 444 (12,377) (11,933)
Operating
margin% 5.7% (47.4)% 0.4% (11.8)%
Nine months ended September 29, 2017
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $231,987 $25,434 $257,421 $(149) $257,272
Gross profit 126,887 5,011 131,898 (10,650) 121,248
Gross margin% 54.7% 19.7% 51.2% 47.1%
Operating loss (7,663) (18,810) (26,473) (36,313) (62,786)
Operating
margin% (3.3)% (74.0)% (10.3)% (24.4)%
Nine months ended September 30, 2016 (2)
Video Cable Edge Total Segment Adjustments (1) Consolidated GAAP
Measures Measures
(non-GAAP)
---
Net revenue $248,677 $45,860 $294,537 $(1,728) $292,809
Gross profit 135,758 18,278 154,036 (10,979) 143,057
Gross margin% 54.6% 39.9% 52.3% 48.9%
Operating loss (27) (7,117) (7,144) (43,663) (50,807)
Operating
margin% - % (15.5)% (2.4)% (17.4)%
(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 September 29, 2017
Revenue Gross Total Income Total Non- Net Loss
Profit Operating (loss) from operating
Expense Operations Expense, net
--- ------- ---------- ---
GAAP $92,014 $47,025 $61,231 $(14,206) $(3,292) $(15,583)
Accounting impact
related to warrant
amortization (378) (378) - (378) - (378)
Stock-based
compensation in
cost of revenue - 478 - 478 - 478
Stock-based
compensation in
research and
development - - (1,183) 1,183 - 1,183
Stock-based
compensation in
selling, general
and administrative - - (2,059) 2,059 - 2,059
Amortization of
intangibles - 1,295 (793) 2,088 - 2,088
Restructuring and
related charges - 549 (2,028) 2,577 - 2,577
TVN acquisition-
and integration-
related costs - - (117) 117 - 117
Avid litigation
settlement fees and
associated legal
fees - - (7,356) 7,356 - 7,356
Non-cash interest
expenses related to
convertible notes - - - - 1,384 1,384
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - (1,820)
Total adjustments (378) 1,944 (13,536) 15,480 1,384 15,044
Non-GAAP $91,636 $48,969 $47,695 $1,274 $(1,908) $(539)
======= ======= ======= ====== ======= =====
As a % of revenue (GAAP) 51.1% 66.5% (15.4)% (3.6)% (16.9)%
As a % of revenue (Non-GAAP) 53.4% 52.0% 1.4% (2.1)% (0.6)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.19)
======
Diluted net loss per share-Non-GAAP $(0.01)
======
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 81,445
======
Three months ended June 30, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense
--- --- ---
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 September 30, 2016
Revenue Gross Total Income Total Non- Net Loss
Profit Operating (loss) from operating
Expense Operations Expense
--- ------- ------- ---
GAAP $101,406 $51,363 $63,296 $(11,933) $(4,321) $(16,012)
Cable Edge inventory
charge - (159) - (159) - (159)
Acquisition
accounting impacts
related to TVN
deferred revenue 325 325 - 325 - 325
Stock-based
compensation in
cost of revenue - 360 - 360 - 360
Stock-based
compensation in
research and
development - - (771) 771 - 771
Stock-based
compensation in
selling, general
and administrative - - (1,549) 1,549 - 1,549
Amortization of
intangibles - 1,380 (3,009) 4,389 - 4,389
Restructuring and
related charges - (1) 27 (28) - (28)
TVN acquisition-and
integration-
related costs - 119 (5,051) 5,170 98 5,268
Loss on impairment
of long-term
investment - - - - 1,259 1,259
Non-cash interest
expenses related to
convertible notes - - - - 1,252 1,252
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - (52)
Total adjustments 325 2,024 (10,353) 12,377 2,609 14,934
Non-GAAP $101,731 $53,387 $52,943 $444 $(1,712) $(1,078)
======== ======= ======= ==== ======= =======
As a % of revenue (GAAP) 50.7% 62.4% (11.8)% (4.3)% (15.8)%
As a % of revenue (Non-GAAP) 52.5% 52.0% 0.4% (1.7)% (1.1)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.21)
======
Diluted net loss per share-Non-GAAP $(0.01)
======
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 78,092
======
Nine months ended September 29, 2017
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense
--- --- ---
GAAP $257,272 $121,248 $184,034 $(62,786) $(9,892) $(71,110)
Cable Edge inventory
charge - 3,316 - 3,316 - 3,316
Acquisition
accounting impacts
related to TVN
deferred revenue 111 111 - 111 - 111
Accounting impact
related to warrant
amortization 38 38 - 38 - 38
Stock-based
compensation in
cost of revenue - 1,623 - 1,623 - 1,623
Stock-based
compensation in
research and
development - - (3,497) 3,497 - 3,497
Stock-based
compensation in
selling, general
and administrative - - (5,987) 5,987 - 5,987
Amortization of
intangibles - 3,885 (2,347) 6,232 - 6,232
Restructuring and
related charges - 1,335 (4,084) 5,419 - 5,419
TVN acquisition-and
integration-
related costs - 342 (2,392) 2,734 - 2,734
Avid litigation
settlement and
associated legal
fees - - (7,356) 7,356 - 7,356
Non-cash interest
expenses related to
convertible notes - - - - 4,060 4,060
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 3,278
Total adjustments 149 10,650 (25,663) 36,313 4,060 43,651
Non-GAAP $257,421 $131,898 $158,371 $(26,473) $(5,832) $(27,459)
======== ======== ======== ======== ======= ========
As a % of revenue (GAAP) 47.1% 71.5% (24.4)% (3.8)% (27.6)%
As a % of revenue (Non-GAAP) 51.2% 61.5% (10.3)% (2.3)% (10.7)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.88)
======
Diluted net loss per share-Non-GAAP (0.34)
=====
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 80,618
======
Nine months ended September 30, 2016
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense
--- --- ---
GAAP $292,809 $143,057 $193,864 $(50,807) $(10,546) $(61,871)
Cable Edge inventory
charge - 4,360 - 4,360 - 4,360
Acquisition
accounting impacts
related to TVN
deferred revenue 1,728 1,728 - 1,728 - 1,728
Acquisition
accounting impacts
related to TVN fair
value of inventory - 189 - 189 - 189
Stock-based
compensation in
cost of revenue - 1,011 - 1,011 - 1,011
Stock-based
compensation in
research and
development - - (2,581) 2,581 - 2,581
Stock-based
compensation in
selling, general
and administrative - - (4,950) 4,950 - 4,950
Amortization of
intangibles - 3,105 (9,606) 12,711 - 12,711
Restructuring and
related charges - (24) (4,488) 4,464 - 4,464
TVN acquisition-and
integration-
related costs - 610 (11,059) 11,669 98 11,767
Loss on impairment
of long-term
investment - - - - 2,735 2,735
Non-cash interest
expenses related to
convertible notes - - - - 3,672 3,672
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 2,197
--- --- --- --- --- -----
1,728 10,979 (32,684) 43,663 6,505 52,365
Non-GAAP $294,537 $154,036 $161,180 $(7,144) $(4,041) $(9,506)
======== ======== ======== ======= ======= =======
As a % of revenue (GAAP) 48.9% 66.2% (17.4)% (3.6)% (21.1)%
As a % of revenue (Non-GAAP) 52.3% 54.7% (2.4)% (1.4)% (3.2)%
Diluted net loss per share:
Diluted net loss per share-GAAP $(0.80)
======
Diluted net loss per share-Non-GAAP $(0.12)
======
Shares used to compute diluted net
loss per share:
GAAP and Non-GAAP 77,475
======
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Business Outlook
(In millions, except percentages and per share data)
Q4 2017 Financial Guidance
Revenue Gross Total Income Total Non- Net Income
Profit Operating (Loss) from operating (Loss)
Expense Operations Expense,
net
--- ---
GAAP $90.0 to $44.9 to $54.4 to $(11.5) to $(3.1) $(15.9) to
$100.0 $51.4 $56.4 $(3.0) $(6.9)
Stock-based
compensation
expense - 0.8 (4.7) 5.5 - 5.5
Amortization of
intangibles - 1.3 (0.8) 2.1 - 2.1
Avid litigation
legal fees - - (0.3) 0.3 - 0.3
Restructuring and
related charges and
TVN integration
costs - - (0.6) 0.6 - 0.6
Non-cash interest
expense related to
convertible notes - - - - 1.4 1.4
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - 2.0
--- --- --- --- --- ---
Total adjustments - 2.1 (6.4) 8.5 1.4 $11.9 to
$9.9
Non-GAAP $90.0 to $47.0 to $48.0 to $(3.0) to $(1.7) $(4.0) to
$100.0 $53.5 $3.0
$50.0 $5.5
=== ==== ===
As a % of revenue (GAAP) 50% to 57% to (13)% to (3)% (18)% to
51% 60% (3)% (7)%
As a % of revenue (Non-GAAP) 52.0% to 50% to (3)% to (2)% (4)% to 3%
53.5% 53%
5.5%
Diluted net income (loss) per share:
Diluted net loss per share-GAAP $(0.19) to $(0.08)
=================
Diluted net (loss) income 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:
Non-GAAP 82.5
====
2017 Financial Guidance
Revenue Gross Total Loss from Total Non- Net Loss
Profit Operating Operations operating
Expense Expense,
net
---
GAAP $347.9 to $166.8 to $238.0 to $(73.2) to $(13.0) $(85.7) to
$357.9 $173.3 $240.0 $(64.7) $(77.7)
Acquisition
accounting impact
related to TVN
deferred revenue 0.1 0.1 - 0.1 - 0.1
Cable Edge inventory
charge - 3.3 - 3.3 - 3.3
Stock-based
compensation
expense - 2.4 (14.2) 16.6 - 16.6
Amortization of
intangibles - 5.2 (3.1) 8.3 - 8.3
Avid litigation
settlement and
associated legal
fees - - (7.7) 7.7 - 7.7
Restructuring and
related charges and
TVN integration
costs - 1.7 (7) 8.7 - 8.7
Non-cash interest
expense related to
convertible notes - - - - 5.5 5.5
Discrete tax items
and tax effect of
non-GAAP
adjustments - - - - - $4.0 to $5.0
--- --- --- --- --- ------------
Total adjustments 0.1 12.7 (32.0) 44.7 5.5 $54.2 to
$55.2
Non-GAAP $348.0 to $179.5 to $206.0 to $(28.5) to $(7.5) $(30.5) to
$358.0 $186.0 $(23.5)
$208.0 $(20.0)
====== ======
As a % of revenue
(GAAP) 48% to 67% (21)% to (4%) (24)% to
49% (18)% (22)%
to 68%
As a % of revenue
(Non-GAAP) 51.5% to 58% (8)% to (2%) (9)% to
52.0% (7)%
to 59% (6)%
Diluted loss per
share:
Diluted net loss per
share-GAAP $(1.06) to $(0.96)
=================
Diluted net loss per
share-Non-GAAP $(0.38) to $(0.29)
Shares used to
compute diluted net
loss per share:
GAAP and Non-GAAP 81.0
====
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SOURCE Harmonic Inc.
