Harmonic Inc. : Harmonic Announces Third Quarter Results
10/23/2012| 04:25pm US/Eastern
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SAN JOSE, Calif. - October 23, 2012 -- Harmonic Inc. (NASDAQ:
HLIT), a global leader in video infrastructure solutions,
announced today its preliminary and unaudited results for the
quarter ended September 28, 2012.
Net revenue for the third quarter of 2012 was $136.7 million,
compared with $132.6 million for the second quarter of 2012
and $138.9 million for the third quarter of 2011.
Total bookings in the third quarter of 2012 were
approximately $128.7, compared with $141.4 million for the
third quarter of 2011. Total backlog and deferred
revenue was $137.7 million as of September 28, 2012, compared
with $125.4 million as of September 30, 2011.
The company reported a GAAP net loss for the third quarter of
2012 of $(8.2) million, or $(0.07) per share, compared with a
GAAP net income for the third quarter of 2011 of $3.5 million
or $0.03 per share. Non-GAAP net income for the third
quarter of 2012 was $8.1 million, or $0.07 per share,
compared with $12.7 million, or $0.11 per share for the third
quarter of 2011. See "Use of Non-GAAP Financial
Measures" and "GAAP to Non-GAAP Net Income (Loss)
Reconciliation" below.
Harmonic reported GAAP gross margins of 44% and GAAP
operating margins of (1)% for the third quarter of 2012,
compared to 46% and 3%, respectively, for the same period of
2011. Non-GAAP gross margins were 48% and non-GAAP operating
margins were 8% for the third quarter of 2012, compared to
51% and 12%, respectively, for the same period of 2011.
As of September 28, 2012, the Company had cash, cash
equivalents and short-term investments of $192.0 million, an
increase from $177.8 million as of June 29, 2012. The
company generated approximately $22.0 million of cash from
operations in the third quarter of 2012, and repurchased 1.65
million shares of common stock for approximately $7.4 million
under its previously announced stock repurchase program.
"Harmonic delivered sequential revenue and earnings
growth, and more than $20 million of cash from operations, in
what continues to be a challenging economic
environment," said Patrick Harshman, President and Chief
Executive Officer. "Our competitive position remains
strong, and we believe we gained market share in both
domestic and international markets. We also made
significant progress on new product developments that
position Harmonic to capitalize on the next wave of
investment by our customers, including cable access (CCAP),
high efficiency video coding (HEVC) for next-generation
Internet-delivered and Ultra HD video, and a further
strengthened solution portfolio enabling multiscreen video
services."
Business Outlook
Harmonic anticipates net revenue in the range of $132 million
to $142 million for the fourth quarter of 2012. GAAP
gross margins and operating expenses for the fourth quarter
of 2012 are expected to be in the range of 44% to 46% and $60
million to $61.5 million, respectively. Non-GAAP gross
margins and operating expenses for the fourth quarter of
2012, which will exclude stock-based compensation and the
amortization of intangibles, are anticipated to be in the
range of 48% to 50% and $55 million to $56.5 million,
respectively.
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 Tuesday,
October 23, 2012. A listen-only broadcast of the conference
call can be accessed either from the Company's website at
www.harmonicinc.com
or by calling +1.847.944.7317 or +1.866.297.6395 (conference
confirmation number 33516255). The replay will be available
after 6:00 p.m. Pacific at the same website address or by
calling +1.630.652.3042 or +1.888.843.7419 (pass code
33516255#).
About Harmonic Inc.
Harmonic Inc. (NASDAQ: HLIT) provides infrastructure that
powers the video economy. The company enables content and
service providers to efficiently create, prepare, and deliver
differentiated video services for television and new media
platforms. 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
our final results for the third quarter ended September 28,
2012; , regarding the challenging economic environment;
regarding our strong competitive position; regarding gains in
market share in domestic and international markets; regarding
significant progress on new product developments that
position Harmonic to capitalize on the next wave of
investment by its customers; and regarding net revenue, GAAP
gross margins, GAAP operating expenses, non-GAAP gross
margins and non-GAAP operating expenses for the fourth
quarter of 2012. 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 the possibility, in no particular order, that:
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 and telco and broadcast and media
industries; customer concentration and consolidation; the
impact of general economic conditions, including as a result
of recent turmoil in the global financial markets,
particularly on our European and other international sales
and operations; our ability to develop new and enhanced
products in a timely manner and market acceptance of new or
existing Harmonic products; losses of one or more key
customers; risks associated with Harmonic's international
operations; dependence on market acceptance of several
broadband services, on the adoption of new broadband
technologies and on broadband industry trends; and
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 Harmonic's markets; risks associated with
unpredictable sales cycles; our dependence on contract
manufacturers and sole or limited source suppliers; the
effect on Harmonic's business of natural disasters; and
the risks that our international sales and support center
will not provide the operational or tax benefits that we
anticipate or that its expenses exceed our plans. 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 Annual
Report on Form 10-K for the year ended December 31, 2011 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.
Editor's Note: Product and company names used herein are
trademarks or registered trademarks of their respective
owners.
HARMONIC INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 28, 2012
December 31, 2011
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents
$ 103,235
$ 90,983
Short-term investments
88,747
70,854
Accounts receivable, net
94,638
109,886
Inventories
68,269
70,649
Deferred income taxes
29,897
28,032
Prepaid expenses and other current assets
19,178
21,474
Total current assets
403,964
391,878
Property and equipment, net
39,121
40,469
Goodwill, intangibles and other assets
280,415
301,819
Total assets
$ 723,500
$ 734,166
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended
Nine months ended
September 28, 2012
September 30, 2011
September 28, 2012
September 30, 2011
(In thousands, except per share amounts)
Net revenue
$ 136,682
$ 138,871
$ 397,037
$ 405,702
Cost of revenue
76,778
74,910
225,893
218,058
Gross profit
59,904
63,961
171,144
187,644
Operating expenses:
Research and development
26,524
25,638
79,994
77,449
Selling, general and administrative
32,150
32,254
96,603
98,361
Amortization of intangibles
2,179
2,229
6,548
6,688
Total operating expenses
60,853
60,121
183,145
182,498
Income (loss) from operations
(949)
3,840
(12,001)
5,146
Interest and other income (expense), net
(36)
471
482
231
Income (loss) before income taxes
(985)
4,311
(11,519)
5,377
Provision for income taxes
7,245
765
4,222
925
Net income (loss)
$
(8,230)
$ 3,546
$ (15,741)
$ 4,452
Net income (loss) per share:
Basic
$
(0.07)
$
0.03
$
(0.13)
$
0.04
Diluted
$
(0.07)
$
0.03
$
(0.13)
$
0.04
Weighted average shares:
Basic
116,517
115,791
116,946
114,855
Diluted
116,517
116,208
116,946
116,005
HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended
September 28, 2012
September 30, 2011
(In thousands)
Cash flows from operating activities:
Net income (loss)
$
(15,741)
$
4,452
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Amortization of intangibles
22,004
22,767
Depreciation
11,337
10,306
Stock-based compensation
14,123
16,099
Net loss (gain) on disposal of fixed assets
(57)
450
Deferred income taxes
1,627
(2,218)
Provision for excess and obsolete inventory
2,466
2,424
Allowance for doubtful accounts, returns and discounts
216
2,646
Other non-cash adjustments, net
617
564
Changes in assets and liabilities:
Accounts receivable
15,036
(17,429)
Inventories
(85)
(9,581)
Prepaid expenses and other assets
1,847
7,176
Accounts payable
364
5,117
Deferred revenue
3,307
(9,610)
Income taxes payable
(1,482)
(5,927)
Accrued and other liabilities
(5,353)
(6,847)
Net cash provided by operating activities
50,226
20,389
Cash flows from investing activities:
Purchases of investments
(94,123)
(76,164)
Proceeds from sales and maturities of investments
75,362
33,770
Acquisition of property and equipment
(9,850)
(12,373)
Other acquisitions
-
(250)
Net cash used in investing activities
(28,611)
(55,017)
Cash flows from financing activities:
Payments for repurchase of common stock
(14,388)
-
Proceeds from issuance of common stock, net
4,922
13,301
Net cash provided by (used in) financing activities
(9,466)
13,301
Effect of exchange rate changes on cash and cash
equivalents
103
29
Net increase (decrease) in cash and cash equivalents
12,252
(21,298)
Cash and cash equivalents at beginning of period
90,983
96,533
Cash and cash equivalents at end of period
$ 103,235
$
75,235
Harmonic Inc.
Revenue Information
(Unaudited)
Three months ended
Nine months ended
September 28, 2012
September 30, 2011
September 28, 2012
September 30, 2011
(In thousands, except percentages)
Product
Video Processing
$ 49,899
37%
$ 57,027
41%
$ 161,880
41%
$ 172,310
42%
Production and Playout
23,786
17%
26,619
19%
65,327
16%
73,005
18%
Edge and Access
40,084
29%
38,308
28%
110,484
28%
109,662
27%
Services and Support
22,913
17%
16,917
12%
59,346
15%
50,725
13%
Total
$ 136,682
100%
$ 138,871
100%
$ 397,037
100%
$ 405,702
100%
Geography
United States
$ 57,357
42%
$ 68,718
49%
$ 179,558
45%
$ 183,250
45%
International
79,325
58%
70,153
51%
217,479
55%
222,452
55%
Total
$ 136,682
100%
$ 138,871
100%
$ 397,037
100%
$ 405,702
100%
Market
Cable
$ 67,593
50%
$ 62,722
45%
$ 193,580
48%
$ 182,784
45%
Satellite and Telco
27,997
20%
33,974
25%
81,726
21%
97,319
24%
Broadcast and Media
41,092
30%
42,175
30%
121,731
31%
125,599
31%
Total
$ 136,682
100%
$ 138,871
100%
$ 397,037
100%
$ 405,702
100%
Use of Non-GAAP Financial Measures
In establishing operating budgets, managing its business
performance, and setting internal measurement targets, the
Company excludes a number of items required by GAAP.
Management believes that these accounting charges and
credits, most of which are non-cash or non-recurring in
nature, are not useful in managing its operations and
business. Historically, the Company has also publicly
presented these supplemental non-GAAP measures in order to
assist the investment community to see the Company
"through the eyes of management," and thereby
enhance understanding of its operating performance. The
non-GAAP measures presented here are gross margin, operating
expenses, net income and net income per 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 contained in this presentation.
The non-GAAP adjustments described below have historically
been excluded from our GAAP financial measures. These
adjustments are excess facilities and severance charges and
non-cash items, such as stock-based compensation expense,
amortization of intangibles, and discrete tax items and
adjustments.
Harmonic Inc.
GAAP to Non-GAAP Net Income (Loss) Reconciliation
(Unaudited)
Three months ended
September 28, 2012
September 30, 2011
Gross Profit
Operating Expense
Net Income
Gross Profit
Operating Expense
Net Income
(In thousands, except per share amounts)
GAAP
$ 59,904
$ 60,853
$ (8,230)
$ 63,961
$ 60,121
$ 3,546
Cost of revenue related to stock-based compensation
expense
702
-
702
843
-
843
Research and development expense related to stock-based
compensation expense
-
(1,512)
1,512
-
(1,658)
1,658
Selling, general and administrative expense related to
stock-based compensation expense
-
(2,406)
2,406
-
(2,504)
2,504
Amortization of intangibles
5,048
(2,179)
7,227
5,446
(2,229)
7,675
Discrete tax items and adjustments
-
-
4,529
-
-
(3,483)
Non-GAAP
$ 65,654
$ 54,756
$ 8,146
$ 70,250
$ 53,730
$ 12,743
GAAP net income (loss) per share - basic
$ (0.07)
$ 0.03
GAAP net income (loss) per share - diluted
$ (0.07)
$ 0.03
Non-GAAP net income per share - basic
$ 0.07
$ 0.11
Non-GAAP net income per share - diluted
$ 0.07
$ 0.11
Shares used in per share calculation - basic
116,517
115,791
Shares used in per share calculation - diluted, GAAP
116,517
116,208
Shares used in per share calculation - diluted,
non-GAAP
116,918
116,208
Nine months ended
September 28, 2012
September 30, 2011
Gross Profit
Operating Expense
Net Income (Loss)
Gross Profit
Operating Expense
Net Income
(In thousands, except per share amounts)
GAAP
$ 171,144
$ 183,145
$ (15,741)
$ 187,644
$ 182,498
$ 4,452
Cost of revenue related to stock-based compensation
expense
2,301
-
2,301
2,352
-
2,352
Research and development expense related to stock-based
compensation expense
-
(4,947)
4,947
-
(5,265)
5,265
Selling, general and administrative expense related to
stock-based compensation expense
-
(6,874)
6,874
-
(8,482)
8,482
Selling, general and administrative expense related to
excess facility costs, severance
costs and other non-recurring
expenses
-
-
-
-
(409)
409
Amortization of intangibles
15,456
(6,548)
22,004
16,079
(6,688)
22,767
Discrete tax items and adjustments
-
-
(1,932)
-
-
(10,238)
Non-GAAP
$ 188,901
$ 164,776
$ 18,453
$ 206,075
$ 161,654
$ 33,489
GAAP net income (loss) per share - basic
$ (0.13)
$ 0.04
GAAP net income (loss) per share - diluted
$ (0.13)
$ 0.04
Non-GAAP net income per share - basic
$ 0.16
$ 0.29
Non-GAAP net income per share - diluted
$ 0.16
$ 0.29
Shares used in per share calculation - basic
116,946
114,855
Shares used in per share calculation - diluted, GAAP
116,946
116,005
Shares used in per share calculation - diluted,
non-GAAP
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