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Harmonic Announces Second Quarter 2016 Results

SAN JOSE, CA -- (Marketwired) -- 08/09/16 -- Harmonic Inc.(NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its preliminary and unaudited results for the second quarter of 2016.

GAAP net revenue for the second quarter of 2016 was $108.8 million, compared with $81.8 million for the first quarter of 2016 and $103.1 million for the second quarter of 2015.

Non-GAAP net revenue for the second quarter of 2016 was $109.5 million, compared with $82.5 million for the first quarter of 2016 and $103.1 million for the second quarter of 2015.

Bookings for the second quarter of 2016 were $117.3 million, compared with $109.6 million for the first quarter of 2016 and $99.3 million for the second quarter of 2015.

GAAP net loss for the second quarter of 2016 was $(20.6) million, or $(0.27) per diluted share, compared with a GAAP net loss for the first quarter of 2016 of $(25.2) million, or $(0.33) per diluted share, and a GAAP net loss of $(1.0) million, or $(0.01) per diluted share, for the second quarter of 2015.

Non-GAAP net loss for the second quarter of 2016 was $(0.2) million, or $0.00 per diluted share, compared with non-GAAP net loss for the first quarter of 2016 of $(8.2) million, or $(0.11) per diluted share, and non-GAAP net income of $4.2 million, or $0.05 per diluted share, for the second quarter of 2015. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.

Total cash, cash equivalents and short-term investments were $65.3 million at the end of the second quarter of 2016, down $11.0 million from $76.2 million at the end of the prior quarter, primarily due to the payment of certain purchase price adjustments related to the Thomson Video Networks ("TVN") acquisition and an increase in accounts receivable which reflects our sequential revenue growth and payments of restructuring and integration charges. In the second quarter of 2016, the Company used approximately $2.9 million of cash from operations.

"Our financial results for the second quarter of 2016 were at the high end of our plan for both our Video and Cable Edge segments," said Patrick Harshman, Harmonic's President and CEO. "Consequently, we enter the second half of the year with record backlog and deferred revenue. Our new CableOS products are scheduled to begin shipping in the fourth quarter of this year, and we remain on track to realize targeted synergy savings from the combination of Harmonic and TVN," concluded Mr. Harshman.

Second Quarter 2016 Highlights

  • Strong sequential and year-over-year bookings and revenue growth.
  • Backlog and deferred revenue grew to a record $190.4 million.
  • Remained on track to realize $20-$22 million of annualized cost savings from the combination of Harmonic and TVN by the end of calendar year 2016.
  • Entered into a $10 million engineering collaboration agreement that will extend into 2017.
  • Several key trials underway on our recently announced VOS Cloud and VOS 360 software-as-a-service offerings with new cloud partners and tier 1 pay TV operators.

Business Outlook

Third Quarter 2016 GAAP Financial Guidance

For the third quarter of 2016, Harmonic anticipates:

  • Net revenue to be $104.5 million to $109.5 million, which includes Video revenue of $92.5 million to $95.5 million and Cable Edge revenue of $12.0 million to $14.0 million
  • Gross margin to be 50.0% to 51.0%
  • Operating expense to be $65.5 million to $66.5 million
  • Operating loss to be $(12.5) million to $(10.5) million
  • EPS to be $(0.16) to $(0.14)
  • Share count for EPS calculation to be approximately 78 million shares of Harmonic common stock
  • Cash on hand at quarter-end to be $60.0 million to $65.0 million

2016 GAAP Financial Guidance

Harmonic's projections for full year 2016 include two fiscal quarters of financial projections for TVN, from the third quarter through the fourth quarter of 2016.

For 2016, Harmonic anticipates:

  • Net revenue to be $408.0 million to $418.0 million, which includes Video revenue of $348.0 million to $353.0 million and Cable Edge revenue of $60.0 million to $65.0 million
  • Gross margin to be 50.0% to 51.0%
  • Operating expense to be $257.5 million to $261.5 million
  • Operating loss to be $(55.0) million to $(50.0) million
  • EPS to be $(0.69) to $(0.64)
  • Share count for EPS calculation to be 78 million to 79 million shares of Harmonic common stock
  • Capital expenditures to be $14.0 million to $16.0 million
  • Cash on hand at year-end to be $65.0 million to $70.0 million

Third Quarter 2016 Non-GAAP Financial Guidance

For the third quarter of 2016, Harmonic anticipates:

  • Net revenue to be $105.0 million to $110.0 million, which includes Video revenue of $93.0 million to $96.0 million and Cable Edge revenue of $12.0 million to $14.0 million
  • Gross margin to be 53.0% to 54.0%
  • Operating expense to be $54.0 million to $55.0 million
  • Operating income to be $2.0 million to $4.0 million
  • EPS to be $0.01 to $0.03
  • Tax rate to be approximately 15%
  • Share count for EPS calculation to be approximately 78 million shares of Harmonic common stock
  • Cash on hand at quarter-end to be $60.0 million to $65.0 million

See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.

2016 Non-GAAP Financial Guidance

For 2016, Harmonic anticipates:

  • Net revenue to be $410.0 million to $420.0 million, which includes Video revenue of $350.0 million to $355.0 million and Cable Edge revenue of $60.0 million to $65.0 million
  • Gross margin to be 53.0% to 54.0%
  • Operating expense to be $212.0 million to $216.0 million
  • EPS to be $0.01 to $0.06
  • Tax rate to be approximately 15%
  • Share count for EPS calculation to be 78 million to 79 million shares of Harmonic common stock
  • Capital expenditures to be $14.0 million to $16.0 million
  • Cash on hand at year-end to be $65.0 million to $70.0 million

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 Tuesday, August 9, 2016. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling +1.847.585.4405 or +1.888.771.4371 (passcode 42982000). The replay will be available after 4:30 p.m. Pacific at the same website address or by calling +1.630.652.3042 or +1.888.843.7419 (passcode 42982000#).

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: our final results for the second quarter ended July 1, 2016 and our expectations concerning quarter-on-quarter growth; GAAP net revenue, GAAP gross margins, GAAP operating expenses, GAAP operating income (loss), GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP EPS, and tax rate and capital expenditures for the third quarter of 2016 and fiscal year ended December 31, 2016, as well as cash on hand at the end of the third quarter of 2016 and at December 31, 2016. 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: unexpected delays, difficulties and/or costs relating to integrating TVN with Harmonic; anticipated business opportunities and operational efficiencies for the combined company do not fully materialize; the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; a strong U.S. dollar may have a negative impact on our business in certain international markets; 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 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, including in Ukraine; risks associated with our CCAP and VOS™ product initiatives; 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 fluctuations 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; the effect on our business of natural disasters; and risks associated with our outstanding convertible notes. 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, 2015, our recent Quarterly Reports 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

In establishing operating budgets, managing its business performance, and setting internal measurement targets, we exclude 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: revenue, gross profit, operating expenses, income (loss) from operations 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 types of non-GAAP adjustments described below have historically been excluded from our GAAP financial measures: acquisition accounting impacts to TVN deferred revenue and TVN inventory valuation; TVN acquisition-and integration-related costs; Cable Edge inventory charge in connection with certain product lines; restructuring and related charges; and non-cash items, such as impairment of long-term investment, stock-based compensation expense, amortization of intangibles and non-cash interest expenses related to convertible debt and adjustments that normalize the tax rate. With respect to our expectations under "Business Outlook" above, reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures. The effects of stock-based compensation expense specific to common stock options are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant impact on our GAAP financial results.

 
Harmonic Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)
 
    July 1, 2016     December 31, 2015  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 51,516     $ 126,190  
  Short-term investments     13,760       26,604  
  Accounts receivable, net     102,668       69,515  
  Inventories     36,624       38,819  
  Prepaid expenses and other current assets     44,210       25,003  
Total current assets     248,778       286,131  
Property and equipment, net     36,517       27,012  
Goodwill     235,369       197,781  
Intangibles, net     39,638       4,097  
Other long-term assets     28,635       9,936  
Total assets   $ 588,937     $ 524,957  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Other debts and capital lease obligations, current   $ 7,829     $ -  
  Accounts payable     35,794       19,364  
  Income taxes payable     139       307  
  Deferred revenue     63,518       33,856  
  Accrued liabilities     52,346       31,354  
Total current liabilities     159,626       84,881  
Convertible debt, long-term     100,712       98,295  
Other debts and capital lease obligations, long-term     16,190       -  
Income taxes payable, long-term     3,980       3,886  
Deferred tax liabilities, long-term     957       -  
Other non-current liabilities     15,341       9,727  
Total liabilities     296,806       196,789  
                 
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; 78,015 and 76,015 shares issued and outstanding at July 1, 2016 and December 31, 2015, respectively     78       76  
  Additional paid-in capital     2,245,120       2,236,418  
  Accumulated deficit     (1,949,715 )     (1,903,908 )
  Accumulated other comprehensive loss     (3,352 )     (4,418 )
Total stockholders' equity     292,131       328,168  
Total liabilities and stockholders' equity   $ 588,937     $ 524,957  
                 
 
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
 
    Three months ended     Six months ended  
    July 1, 2016     July 3, 2015     July 1, 2016 (1)     July 3, 2015  
       
Net revenue   $ 108,759     $ 103,103     $ 190,591     $ 207,119  
Cost of revenue     57,667       48,718       98,845       97,706  
  Gross profit     51,092       54,385       91,746       109,413  
Operating expenses:                                
  Research and development     26,507       21,816       50,070       44,145  
  Selling, general and administrative     36,516       31,281       69,386       62,477  
  Amortization of intangibles     4,232       1,446       6,597       2,892  
  Restructuring and asset impairment charges     1,903       185       4,515       229  
    Total operating expenses     69,158       54,728       130,568       109,743  
Loss from operations     (18,066 )     (343 )     (38,822 )     (330 )
Interest (expense) income, net     (2,651 )     17       (5,072 )     72  
Other income (expense), net     332       59       323       (447 )
Loss on impairment of long-term investment     -       -       (1,476 )     (2,505 )
Loss before income taxes     (20,385 )     (267 )     (45,047 )     (3,210 )
Provision for income taxes     242       727       760       441  
Net loss   $ (20,627 )   $ (994 )   $ (45,807 )   $ (3,651 )
Net loss per share:                                
  Basic and diluted   $ (0.27 )   $ (0.01 )   $ (0.59 )   $ (0.04 )
Shares used in per share calculation:                                
  Basic and diluted     77,342       88,426       77,168       88,541  
                                   
(1) On February 29, 2016, Harmonic closed the acquisition of TVN and as a result, our 2016 results for the six months ended July 1, 2016 include TVN results beginning on February 29, 2016.
 
   
Harmonic Inc.  
Condensed Consolidated Statements of Cash Flows  
(Unaudited, in thousands)  
   
    Six months ended  
    July 1, 2016     July 3, 2015  
Cash flows from operating activities:                
Net loss   $ (45,807 )   $ (3,651 )
  Adjustments to reconcile net loss to net cash provided by operating activities:                
  Amortization of intangibles     8,322       3,439  
  Depreciation     7,737       6,930  
  Stock-based compensation     5,862       8,018  
  Amortization of discount on convertible debt     2,417       -  
  Restructuring, asset impairment and loss on retirement of fixed assets     1,687       252  
  Loss on impairment of long-term investment     1,476       2,505  
  Deferred income taxes     38       -  
  Provision for excess and obsolete inventories     5,203       843  
  Allowance for doubtful accounts, returns and discounts     697       (713 )
  Excess tax benefits from stock-based compensation     -       (22 )
  Other non-cash adjustments, net     144       -  
  Changes in assets and liabilities, net of effects of acquisition:                
    Accounts receivable     (16,000 )     (1,222 )
    Inventories     3,158       (595 )
    Prepaid expenses and other assets     (5,039 )     (11,635 )
    Accounts payable     2,168       6,415  
    Deferred revenue     26,795       9,833  
    Income taxes payable     (122 )     (815 )
    Accrued and other liabilities     (7,029 )     (5,994 )
Net cash (used in) provided by operating activities     (8,293 )     13,588  
Cash flows from investing activities:                
  Acquisition of business, net of cash acquired     (72,989 )     -  
  Purchases of investments     -       (12,986 )
  Proceeds from sales and maturities of investments     12,842       15,744  
  Purchases of property and equipment     (7,708 )     (7,505 )
  Purchases of long-term investments     -       (85 )
Net cash used in investing activities     (67,855 )     (4,832 )
Cash flows from financing activities:                
  Payment of convertible debt issuance costs     (582 )     -  
  Increase in other debts and capital leases     5,972       -  
  Repayment of other debts and capital leases     (6,524 )     -  
  Payments for repurchase of common stock     -       (12,171 )
  Proceeds from common stock issued to employees     3,737       9,133  
  Payment of tax withholding obligations related to net share settlements of restricted stock units     (1,034 )     (2,642 )
  Excess tax benefits from stock-based compensation     -       22  
Net cash provided by (used in) financing activities     1,569       (5,658 )
Effect of exchange rate changes on cash and cash equivalents     (95 )     (81 )
Net (decrease) increase in cash and cash equivalents     (74,674 )     3,017  
Cash and cash equivalents at beginning of period     126,190       73,032  
Cash and cash equivalents at end of period   $ 51,516     $ 76,049  
                 

Harmonic Inc.
Revenue Information
(Unaudited, in thousands, except percentages)

                   
    Three months
ended
    Three months
ended
    Three months ended  
    July 1, 2016     April 1, 2016     July 3, 2015  
    GAAP   Adjustment
(1)
  Non-GAAP     GAAP (2)   Adjustment
(1)
  Non-GAAP (2)     GAAP and Non-GAAP (3)  
Product                                                            
Video Products   $ 62,158   $ 205   $ 62,363   57 %   $ 44,212   $ 355   $ 44,567   54 %   $ 56,096   54 %
Cable Edge     15,751     -     15,751   14 %     13,432     -     13,432   16 %     21,351   21 %
Services and Support     30,850     575     31,425   29 %     24,188     268     24,456   30 %     25,656   25 %
Total   $ 108,759   $ 780   $ 109,539   100 %   $ 81,832   $ 623   $ 82,455   100 %   $ 103,103   100 %
                                                             
Geography                                                            
Americas   $ 57,681   $ 150   $ 57,831   53 %   $ 48,977   $ 81   $ 49,058   59 %   $ 60,342   58 %
EMEA     33,456     488     33,944   31 %     19,855     401     20,256   25 %     27,360   27 %
APAC     17,622     142     17,764   16 %     13,000     141     13,141   16 %     15,401   15 %
Total   $ 108,759   $ 780   $ 109,539   100 %   $ 81,832   $ 623   $ 82,455   100 %   $ 103,103   100 %
                                                             
Market                                                            
Service Provider   $ 64,921   $ 329   $ 65,250   60 %   $ 51,270   $ 150   $ 51,420   62 %   $ 64,041   62 %
Broadcast and Media     43,838     451     44,289   40 %     30,562     473     31,035   38 %     39,062   38 %
Total   $ 108,759   $ 780   $ 109,539   100 %   $ 81,832   $ 623   $ 82,455   100 %   $ 103,103   100 %
                                                             
(1) Non-GAAP revenue for the three months ended July 1, 2016 and April 1, 2016 include $0.8 million and $0.6 million adjustments relating to TVN deferred revenue as a result of acquisition accounting, respectively.
 
(2) Excludes TVN revenue prior to March 1, 2016.
 
(3) There is no revenue adjustment for the three months ended July 3, 2015.
 
 
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
       
    Three months ended  
    July 1, 2016  
    Revenue   Gross
Profit
    Total
Operating
Expense
    Income
(loss) from
Operations
    Net loss  
GAAP   $ 108,759   $ 51,092     $ 69,158     $ (18,066 )   $ (20,627 )
Cable Edge inventory charge     -     4,519       -       4,519       4,519  
Acquisition accounting impact 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  
  Discrete tax items and tax effect of non-GAAP adjustments     -     -       -       -       278  
Non-GAAP   $ 109,539   $ 58,561     $ 57,709     $ 852     $ (198 )
As a % of revenue (GAAP)           47.0 %     63.6 %     (16.6 ) %     (19.0 ) %
As a % of revenue (Non-GAAP)           53.5 %     52.7 %     0.8 %     (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                                   77,342  
  Non-GAAP                                   77,342  
                                       
    Three months ended  
    April 1, 2016  
      Revenue     Gross
Profit
      Total
Operating
Expense
      Loss from Operations       Net Loss  
GAAP   $ 81,832   $ 40,654     $ 61,410     $ (20,756 )   $ (25,180 )
Acquisition accounting impacts related to TVN deferred revenue     623     623       -       623       623  
Acquisition accounting impacts related to TVN fair value of inventory     -     189       -       189       189  
  Stock-based compensation in cost of revenue     -     227       -       227       227  
  Stock-based compensation in research and development     -     -       (969 )     969       969  
  Stock-based compensation in selling, general and administrative     -     -       (1,898 )     1,898       1,898  
  Amortization of intangibles     -     418       (2,365 )     2,783       2,783  
  Restructuring and related charges     -     (29 )     (2,612 )     2,583       2,583  
  TVN acquisition-and integration-related costs     -     58       (3,038 )     3,096       3,096  
  Impairment of long-term investment     -     -       -       -       1,476  
  Non-cash interest expenses related to convertible notes     -     -       -       -       1,187  
  Discrete tax items and tax effect of non-GAAP adjustments     -     -       -       -       1,963  
Non-GAAP   $ 82,455   $ 42,140     $ 50,528     $ (8,388 )   $ (8,186 )
As a % of revenue (GAAP)           49.7 %     75.0 %     (25.4 ) %     (30.8 ) %
As a % of revenue (Non-GAAP)           51.1 %     61.3 %     (10.2 ) %     (9.9 ) %
Diluted net loss per share:                                      
  Diluted net loss per share-GAAP                                 $ (0.33 )
  Diluted net loss per share-Non-GAAP                                 $ (0.11 )
Shares used to compute diluted net loss per share:                                      
  GAAP                                   76,996  
  Non-GAAP                                   76,996  
                                       
    Three months ended  
    July 3, 2015  
      Revenue     Gross
Profit
      Total
Operating
Expense
      Income
(Loss) from Operations
      Net
Income (Loss)
 
GAAP   $ 103,103   $ 54,385     $ 54,728     $ (343 )   $ (994 )
Stock-based compensation in cost of revenue     -     422       -       422       422  
  Stock-based compensation in research and development     -     -       (1,027 )     1,027       1,027  
  Stock-based compensation in selling, general and administrative     -     -       (2,435 )     2,435       2,435  
  Amortization of intangibles     -     86       (1,446 )     1,532       1,532  
  Restructuring and related charges     -     -       (185 )     185       185  
  Discrete tax items and tax effect of non-GAAP adjustments     -     -       -       -       (393 )
Non-GAAP   $ 103,103   $ 54,893     $ 49,635     $ 5,258     $ 4,214  
As a % of revenue (GAAP)           52.7 %     53.1 %     (0.3 ) %     (1.0 ) %
As a % of revenue (Non-GAAP)           53.2 %     48.1 %     5.1 %     4.1 %
Diluted net income (loss) per share:                                      
  Diluted net loss per share-GAAP                                 $ (0.01 )
  Diluted net income per share-Non-GAAP                                 $ 0.05  
Shares used to compute diluted net income (loss) per share:                                      
  GAAP                                   88,426  
  Non-GAAP                                   89,444  
                                         

Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Business Outlook
(In millions, except percentages and per share data)

     
    Q3 2016 Financial Guidance
    Revenue   Gross Profit   Total
Operating
Expense
  Income (loss)
from
Operations
  Net
Income (loss)
GAAP   $104.5 to $109.5   $53.0 to $56.0   $65.5 to $66.5   $(12.5) to $(10.5)   ($12.5) to ($10.5)
  Acquisition accounting impact related to TVN deferred revenue   Approx. $0.5   Approx. $0.5   -   Approx. $0.5   Approx. $0.5
  Stock-based compensation expense   -   Approx. $0.5   Approx. ($3.0)   Approx. $3.5   Approx. $3.5
  Amortization of intangibles   -   Approx. $1.5   Approx. ($3.5)   Approx. $5.0   Approx. $5.0
  Restructuring and related charges and TVN acquisition/integration costs   -   Approx. $0.5   Approx. ($5.0)   Approx. $5.5   Approx. $5.5
  Non-cash interest expense related to convertible notes   -   -   -   -   Approx. $1.0
  Discrete tax items and tax effect of non-GAAP adjustments   -   -   -   -   Approx. ($2.5)
    Approx. $0.5   Approx. $3.0   Approx. ($11.5)   Approx. $14.5   Approx. $13.0
                     
Non-GAAP   $105.0 to $110.0   $56.0 to $59.0   $54.0 to $55.0   $2.0 to $4.0   $0.5 to $2.5
As a % of revenue (GAAP)       50% to 51%   61% to 63%   (12)% to (9)%   (12)% to (10)%
As a % of revenue (Non-GAAP)       53% to 54%   50% to 52%   2% to 4%   0% to 2%
Diluted income (loss) per share:                    
  Diluted net loss per share-GAAP                   $(0.16) to $(0.14)
  Diluted net income per share-Non-GAAP                   $0.01 to $0.03
Shares used to compute diluted income (loss) per share:                    
  GAAP and Non-GAAP                   78.0
                     
    2016 Financial Guidance
    Revenue   Gross Profit   Total
Operating
Expense
  Income (loss)
from
Operations
  Net
Income (loss)
GAAP   $408.0 to $418.0   $202.5 to $211.5   $257.5 to $261.5   $(55.0) to $(50.0)   $(54.0) to $(50.0)
  Acquisition accounting impact related to TVN deferred revenue   Approx. $2.0   Approx. $2.0   -   Approx. $2.0   Approx. $2.0
  Acquisition accounting impact related to TVN fair value of inventory   -   Approx. $0.2   -   Approx. $0.2   Approx. $0.2
  Stock-based compensation expense   -   Approx. $2.0   Approx. ($12.0)   Approx. $14.0   Approx. $14.0
  Amortization of intangibles   -   Approx. $4.3   Approx. ($11.0)   Approx. $15.3   Approx. $15.3
  Restructuring and related charges and TVN acquisition/integration costs   -   Approx. $1.5   Approx. ($22.5)   Approx. $24.0   Approx. $24.0
  Cable Edge inventory charge   -   Approx. $4.5   -   Approx. $4.5   Approx. $4.5
  Non-cash interest expense related to convertible notes   -   -   -   -   Approx. $4.5
  Discrete tax items and tax effect of non-GAAP adjustments   -   -   -   -   Approx. ($10.0)
    Approx. $2.0   Approx. $14.5   Approx. ($45.5)   Approx. $60.0   Approx. $54.5
                     
Non-GAAP   $410.0 to $420.0   $217.0 to $226.0   $212.0 to $216.0   $5.0 to $10.0   $0.5 to $4.5
As a % of revenue (GAAP)       50% to 51%   62% to 63%   (13)% to (12)%   (13)% to (12)%
As a % of revenue (Non-GAAP)       53% to 54%   51% to 52%   1% to 2%   0% to 1%
Diluted income (loss) per share:                    
  Diluted net loss per share-GAAP                   $(0.69) to $(0.64)
  Diluted net income per share-Non-GAAP                   $0.01 to $0.06
Shares used to compute diluted income (loss) per share:                
  GAAP and Non-GAAP                   78 to 79
                       

CONTACTS:
Harold Covert
Chief Financial Officer
Harmonic Inc.
+1.408.542.2500

Blair King
Director, Investor Relations
Harmonic Inc.
+1.408.490.6172

Source: Harmonic Inc.

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