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Harmonic Announces Second Quarter 2018 Results

Revenue Up 20% Year Over Year

SAN JOSE, Calif., July 30, 2018 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, today announced its unaudited results for the second quarter of 2018.

Harmonic logo (PRNewsfoto/Harmonic Inc.)

"Continued execution of our CableOS and VOS strategy drove sequential and year over year revenue growth and gross margin expansion, and a return to non-GAAP profitability," said Patrick Harshman, president and chief executive officer of Harmonic. "Looking ahead, we remain confident that CableOS is firmly on track to become a market-leading cable access platform, and that VOS software and SaaS momentum will continue to enable a more consistently profitable Video segment."

Q2 Financial and Business Highlights

  • GAAP revenue $99.2 million, up 20% year over year; non-GAAP revenue $99.4 million, up 21% year over year.
  • Cable Access segment revenue: GAAP $20.0 million; non-GAAP $20.2 million, up over 70% year over year.
  • Video segment operating profit: 7.9% operating margin, up $15.2 million year over year.
  • Operating income: GAAP $0.6 million and non-GAAP $6.8 million, compared to GAAP loss $27.4 million and non-GAAP loss $16.4 million in the year ago period.
  • EPS: GAAP net loss per share 3 cents and non-GAAP net income per share 5 cents, compared to GAAP net loss per share 39 cents and non-GAAP net loss per share 20 cents in the year ago period.
  • Bookings $107.9 million, up 18% year over year, drove record backlog and deferred revenue to $230.4 million, up 19% year over year.
  • CableOS deployments continued to scale, surpassing 400,000 served cable modems, up 100% quarter over quarter.
  • Over 34,000 OTT channels deployed globally, up 6% quarter over quarter, powered in part by multiple new VOS SaaS wins.

Select Financial Information



GAAP


Non-GAAP

Key Financial Results


Q2 2018


Q1 2018


Q2 2017


Q2 2018


Q1 2018


Q2 2017



(in millions, except per share data)

Net revenue


$

99.2



$

90.1



$

82.3



$

99.4



$

90.2



$

82.3


Net income (loss)


$

(2.9)



$

(13.7)



$

(31.5)



$

4.6



$

(1.1)



$

(15.7)


Diluted EPS


$

(0.03)



$

(0.16)



$

(0.39)



$

0.05



$

(0.01)



$

(0.20)















Other Financial Information

Q2 2018


Q1 2018


Q2 2017


(in millions)

Bookings for the quarter

$

107.9



$

102.6



$

91.1


Backlog and deferred revenue as of quarter end

$

230.4



$

224.4



$

194.4


Cash as of quarter end

$

54.1



$

52.0



$

52.9


Explanations regarding our use of non-GAAP financial measures and related definitions, and reconciliations of our GAAP and non-GAAP measures, are provided in the sections below entitled "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations".

Financial Guidance



Q3 2018


Q4 2018


2018

GAAP Financial Guidance


Low


High


Low


High


Low


High



(in millions, except percentages and per share data)

Net Revenue


$

93.0



$

103.0



$

105.0



$

118.0



$

388.0



$

411.0


Video


$

70.0



$

76.0



$

75.0



$

82.0



$

296.0



$

309.0


Cable Access


$

23.0



$

27.0



$

30.0



$

36.0



$

92.0



$

102.0


Gross Margin %


48.4

%


49.5

%


48.0

%


51.2

%


50.3

%


51.3

%

Operating Expenses


$

55.1



$

56.1



$

53.5



$

54.5



$

215.8



$

217.8


Operating Income (Loss)


$

(11.1)



$

(4.1)



$

(4.1)



$

6.9



$

(22.8)



$

(4.8)


Tax Benefit (Expense)


$

(0.7)



$

(0.7)



$

(0.7)



$

(0.7)



$

(2.8)



$

(2.8)


EPS


$

(0.17)



$

(0.09)



$

(0.09)



$

0.03



$

(0.45)



$

(0.24)


Shares


86.4



86.4



87.0



88.5



85.7



85.7


Cash


$

50.0



$

60.0



$

50.0



$

60.0



$

50.0



$

60.0





Q3 2018


Q4 2018


2018

Non-GAAP Financial Guidance


Low


High


Low


High


Low


High



(in millions, except percentages and per share data)

Net Revenue


$

93.0



$

103.0



$

105.0



$

118.0



$

388.0



$

411.0


Video


$

70.0



$

76.0



$

75.0



$

82.0



$

296.0



$

309.0


Cable Access


$

23.0



$

27.0



$

30.0



$

36.0



$

92.0



$

102.0


Gross Margin %


51.0

%


52.0

%


50.0

%


52.0

%


52.0

%


53.0

%

Operating Expenses


$

49.0



$

50.0



$

50.0



$

51.0



$

195.0



$

197.0


Operating Income (Loss)


$

(3.0)



$

4.0



$

1.0



$

12.0



$

6.0



$

24.0


Tax Rate


16

%


16

%


16

%


16

%


16

%


16

%

EPS


$

(0.05)



$

0.03



$



$

0.09



$

(0.01)



$

0.16


Shares


86.4



87.4



87.0



88.5



85.7



86.6


Cash


$

50.0



$

60.0



$

50.0



$

60.0



$

50.0



$

60.0



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

Conference Call Information

Harmonic will host a conference call to discuss its financial results at 2:00 p.m. PT (5:00 p.m. ET) on Monday, July 30, 2018. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling 1.574.990.1032 or +1.800.240.9147 (passcode 1778335). A replay will be available after 4:30 p.m. PT on the same web site or by calling +1.404.537.3406 or +1.855.859.2056 (passcode 1778335).

About Harmonic Inc.

Harmonic (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, enables media companies and service providers to deliver ultra-high-quality broadcast and OTT video services to consumers globally. The company has also revolutionized cable access networking via the industry's first virtualized 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, non-GAAP EPS, share count and cash. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace 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™ and VOS™ product solutions; dependence on market acceptance of various types of broadband services, on the adoption of new broadband technologies and on broadband industry trends; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in our markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; and the effect on our business of natural disasters. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic's filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K for the year ended December 31, 2017, 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 Access inventory charge - Harmonic from time to time incurs inventory impairment charges associated with material business shifts, such as the repositioning of our Cable Access segment. We exclude these items, because we do not believe they are reflective of our ongoing long-term business and operating results.

Stock-based compensation - Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We believe that management is limited in its ability to project the impact stock-based compensation would have on our operating results. In addition, for comparability purposes, we believe it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies.

Amortization of intangibles - A portion of the purchase price of our acquisitions is generally allocated to intangible assets, and is subject to amortization. However, Harmonic does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition's purchase price allocated to intangible assets and the term of its related amortization can vary significantly and 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 our long-term investments in calculating our non-GAAP financial measures. We exclude these items because we do not believe they are reflective of our ongoing long-term business and operating results.

Gain (loss) on equity investments - We exclude the change in fair value of our equity investments in calculating our non-GAAP financial measures. We exclude these items because we do not believe they are reflective of our ongoing long-term business and operating results.

Avid litigation settlement and associated legal fees - In the third quarter of fiscal 2017, we settled the patent litigation with Avid Technology, Inc. by entering into a settlement and patent portfolio cross-license agreement with Avid. Under the agreement, we agreed to pay Avid a one-time non-recurring amount of $6 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 and $0.7 million in the third and fourth fiscal quarter of 2017, respectively, were significantly higher compared to prior periods. We excluded these expenses from our non-GAAP results because we do not believe they are reflective of our ongoing long-term business and operating results.

Discrete tax items and tax effect of non-GAAP adjustments - The income tax effect of non-GAAP adjustments relates to the tax effect of the adjustments that we incorporate into non-GAAP financial measures in order to provide a more meaningful measure of non-GAAP net income.

Harmonic Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except per share data)



June 29, 2018


December 31, 2017

ASSETS




Current assets:




   Cash and cash equivalents

$

54,098



$

57,024


   Accounts receivable, net

82,635



69,844


   Inventories

22,994



25,976


   Prepaid expenses and other current assets

19,377



18,931


Total current assets

179,104



171,775


Property and equipment, net

25,631



29,265


Goodwill

241,176



242,827


Intangibles, net

17,010



21,279


Other long-term assets

42,863



42,913


Total assets

$

505,784



$

508,059






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




   Other debts and capital lease obligations, current

$

1,723



$

7,610


   Accounts payable

28,992



33,112


   Income taxes payable

560



233


   Deferred revenue

56,278



52,429


   Accrued and other current liabilities

51,221



48,705


Total current liabilities

138,774



142,089


Convertible notes, long-term

111,702



108,748


Other debts and capital lease obligations, long-term

14,318



15,336


Income taxes payable, long-term

1,086



917


Other non-current liabilities

19,169



22,626


Total liabilities

285,049



289,716






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; 85,439 and 82,554 shares issued and outstanding at June 29, 2018 and December 31, 2017, respectively

85



83


   Additional paid-in capital

2,283,649



2,272,690


   Accumulated deficit

(2,062,988)



(2,057,812)


   Accumulated other comprehensive income (loss)

(11)



3,382


Total stockholders' equity

220,735



218,343


Total liabilities and stockholders' equity

$

505,784



$

508,059


 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)



Three months ended


Six months ended


June 29, 2018


June 30, 2017


June 29, 2018


June 30, 2017

Revenue:








Product

$

60,599



$

50,190



$

115,973



$

100,594


Service

38,561



32,125



73,314



64,664


Total net revenue

99,160



82,315



189,287



165,258


Cost of revenue:








Product

31,251



32,005



57,860



58,107


Service

16,306



16,495



32,641



32,928


Total cost of revenue

47,557



48,500



90,501



91,035


   Gross profit

51,603



33,815



98,786



74,223


Operating expenses:








   Research and development

21,542



27,055



44,999



51,937


   Selling, general and administrative

27,988



32,625



59,151



67,256


   Amortization of intangibles

800



780



1,604



1,554


   Restructuring and related charges

631



777



1,717



2,056


      Total operating expenses

50,961



61,237



107,471



122,803


Income (loss) from operations

642



(27,422)



(8,685)



(48,580)


Interest expense, net

(2,863)



(2,680)



(5,620)



(5,270)


Other income (expense), net

199



(819)



(333)



(1,330)


Loss before income taxes

(2,022)



(30,921)



(14,638)



(55,180)


Provision for income taxes

891



579



1,969



347


Net loss

$

(2,913)



$

(31,500)



$

(16,607)



$

(55,527)


Net loss per share:








   Basic and diluted

$

(0.03)



$

(0.39)



$

(0.20)



$

(0.69)


Shares used in per share calculation:








   Basic and diluted

85,304



80,590



84,616



80,203


 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Six months ended


June 29, 2018


June 30, 2017

Cash flows from operating activities:




Net loss

$

(16,607)



$

(55,527)


Adjustments to reconcile net loss to net cash provided by operating activities:




   Amortization of intangibles

4,194



4,144


   Depreciation

6,771



7,139


   Stock-based compensation

8,769



7,387


   Amortization of discount on convertible debt

2,954



2,676


   Amortization of non-cash warrant

395



416


   Restructuring, asset impairment and loss on retirement of fixed assets

93



228


   Deferred income taxes

530



(38)


   Foreign currency adjustments

(1,042)



1,131


   Provision for excess and obsolete inventories

822



5,094


   Allowance for doubtful accounts, returns and discounts

623



3,274


   Other non-cash adjustments, net

64



189


   Changes in operating assets and liabilities, net of effects of acquisition:




      Accounts receivable

(13,572)



23,479


      Inventories

2,000



2,912


      Prepaid expenses and other assets

1,897



5,933


      Accounts payable

(4,187)



1,434


      Deferred revenue

9,378



1,308


      Income taxes payable

503



228


      Accrued and other liabilities

(337)



(8,793)


Net cash provided by operating activities

3,248



2,614


Cash flows from investing activities:




   Proceeds from maturities of investments



3,106


   Proceeds from sale of investments



3,792


   Purchases of property and equipment

(3,181)



(5,943)


Net cash (used in) provided by investing activities

(3,181)



955


Cash flows from financing activities:




  Proceeds from other debts and capital leases



164


  Repayment of other debts and capital leases

(6,176)



(6,650)


   Proceeds from common stock issued to employees

2,366



2,117


   Payment of tax withholding obligations related to net share settlements of restricted stock units

(54)



(2,726)


Net cash used in financing activities

(3,864)



(7,095)


Effect of exchange rate changes on cash, cash equivalents and restricted cash

(588)



935


Net decrease in cash, cash equivalents and restricted cash

(4,385)



(2,591)


Cash, cash equivalents and restricted cash at beginning of period

58,757



57,420


Cash, cash equivalents and restricted cash at end of period

$

54,372



$

54,829


The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same amounts presented in the Condensed Consolidated Statements of Cash Flows (in thousands):


June 29, 2018


December 31, 2017

Cash and cash equivalents

$

54,098



$

57,024


Restricted cash included in prepaid expenses and other current assets

274



530


Restricted cash included in other long-term assets



1,203


    Total cash, cash equivalents and restricted cash

$

54,372



$

58,757


 

Harmonic Inc.

Preliminary Revenue Information

(Unaudited, in thousands, except percentages)



Three months ended


June 29, 2018


March 30, 2018


June 30, 2017


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP

Product















Video Products

$

50,441


$


$

50,441


51%


$

47,412


$


$

47,412


52%


$

44,824


$


$

44,824


54%

Cable Access

10,159


117


10,276


10%


7,962


67


8,029


9%


5,366


$


5,366


7%

Services and Support

38,560


167


38,727


39%


34,753


44


34,797


39%


32,125



32,125


39%

Total

$

99,160


$

284


$

99,444


100%


$

90,127


$

111


$

90,238


100%


$

82,315


$


$

82,315


100%
















Geography















Americas

$

52,918


$

284


$

53,202


53%


$

48,856


$

111


$

48,967


54%


$

40,611


$


$

40,611


50%

EMEA

31,676



31,676


32%


23,202



23,202


26%


24,953



24,953


30%

APAC

14,566



14,566


15%


18,069



18,069


20%


16,751



16,751


20%

Total

$

99,160


$

284


$

99,444


100%


$

90,127


$

111


$

90,238


100%


$

82,315


$


$

82,315


100%
















Market















Service Provider

$

54,142


$

284


$

54,426


55%


$

52,217


$

111


$

52,328


58%


$

46,420


$


$

46,420


56%

Broadcast and Media

45,018



45,018


45%


37,910



37,910


42%


35,895



35,895


44%

Total

$

99,160


$

284


$

99,444


100%


$

90,127


$

111


$

90,238


100%


$

82,315


$


$

82,315


100%

 


Six months ended


June 29, 2018


June 30, 2017


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP

Product










Video Products

$

97,853


$


$

97,853


52%


$

90,342


$


$

90,342


55%

Cable Access

18,121


184


18,305


9%


10,252


191


10,443


6%

Services and Support

73,313


211


73,524


39%


64,664


336


65,000


39%

Total

$

189,287


$

395


$

189,682


100%


$

165,258


$

527


$

165,785


100%











Geography










Americas

$

101,774


$

395


$

102,169


54%


$

78,517


$

416


$

78,933


48%

EMEA

54,878



54,878


29%


50,392


111


50,503


30%

APAC

32,635



32,635


17%


36,349



36,349


22%

Total

$

189,287


$

395


$

189,682


100%


$

165,258


$

527


$

165,785


100%











Market










Service Provider

$

106,359


$

395


$

106,754


56%


$

94,448


$

416


$

94,864


57%

Broadcast and Media

82,928



82,928


44%


70,810


111


70,921


43%

Total

$

189,287


$

395


$

189,682


100%


$

165,258


$

527


$

165,785


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 29, 2018


Video


Cable Access


Total Segment
Measures
(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

79,208



$

20,236



$

99,444



$

(284)



$

99,160


Gross profit

43,558



10,187



53,745



(2,142)



51,603


Gross margin%

55.0

%


50.3

%


54.0

%




52.0

%

Operating income (loss)

6,239



540



6,779



(6,137)



642


Operating margin%

7.9

%


2.7

%


6.8

%




0.6

%



Three months ended March 30, 2018


Video


Cable Access


Total Segment
Measures
(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

71,748



$

18,490



$

90,238



$

(111)



$

90,127


Gross profit

41,226



8,640



49,866



(2,683)



47,183


Gross margin%

57.5

%


46.7

%


55.3

%




52.4

%

Operating income (loss)

1,995



(1,513)



482



(9,809)



(9,327)


Operating margin%

2.8

%


(8.2)

%


0.5

%




(10.3)

%



Three months ended June 30, 2017


Video


Cable Access


Total Segment
Measures
(non-GAAP)


Adjustments (1)


Consolidated GAAP
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)

%



Six months ended June 29, 2018


Video


Cable Access


Total Segment
Measures
(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

150,956



$

38,726



$

189,682



$

(395)



$

189,287


Gross profit

84,784



18,827



103,611



(4,825)



98,786


Gross margin%

56.2

%


48.6

%


54.6

%




52.2

%

Operating income (loss)

8,234



(973)



7,261



(15,946)



(8,685)


Operating margin%

5.5

%


(2.5)

%


3.8

%




(4.6)

%



Six months ended June 30, 2017


Video


Cable Access


Total Segment
Measures
(non-GAAP)


Adjustments (1)


Consolidated GAAP
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)

%


(1) See "Use of Non-GAAP Financial Measures" above and "GAAP to Non-GAAP Reconciliations" below.

 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations (Unaudited)

(In thousands, except percentages and per share data)



Three months ended June 29, 2018


Revenue

Gross
Profit

Total
Operating
Expense

Income
from
Operations

Total Non-
operating
Expense, net

Net
Income
(Loss)

GAAP

$

99,160


$

51,603


$

50,961


$

642


$

(2,664)


$

(2,913)


Accounting impact related to warrant amortization

284


284



284



284


Stock-based compensation


448


(2,564)


3,012



3,012


Amortization of intangibles


1,295


(800)


2,095



2,095


Restructuring and related charges


115


(631)


746



746


Gain on equity investments





(183)


(183)


Non-cash interest expenses related to convertible notes





1,501


1,501


Discrete tax items and tax effect of non-GAAP adjustments






22


Total adjustments

284


2,142


(3,995)


6,137


1,318


7,477


Non-GAAP

$

99,444


$

53,745


$

46,966


$

6,779


$

(1,346)


$

4,564


As a % of revenue (GAAP)


52.0

%

51.4

%

0.6

%

(2.7)

%

(2.9)

%

As a % of revenue (Non-GAAP)


54.0

%

47.2

%

6.8

%

(1.4)

%

4.6

%








Diluted net income (loss) per share:







Diluted net loss per share-GAAP






$

(0.03)


Diluted net income per share-Non-GAAP






$

0.05


Shares used to compute diluted net income (loss) per share:







GAAP






85,304


Non-GAAP






85,758










Three months ended March 30, 2018


Revenue

Gross
Profit

Total
Operating
Expense

Income
(Loss)
from
Operations

Total Non-
operating
Expense, net

Net Loss

GAAP

$

90,127


$

47,183


$

56,510


$

(9,327)


$

(3,289)


$

(13,694)


Accounting impact related to warrant amortization

111


111



111



111


Stock-based compensation


515


(5,242)


5,757



5,757


Amortization of intangibles


1,295


(804)


2,099



2,099


Restructuring and related charges


762


(1,086)


1,848



1,848


Avid litigation settlement and associated legal fees



6


(6)



(6)


Non-cash interest expenses related to convertible notes





1,454


1,454


Discrete tax items and tax effect of non-GAAP adjustments






1,294


Total adjustments

111


2,683


(7,126)


9,809


1,454


12,557


Non-GAAP

$

90,238


$

49,866


$

49,384


$

482


$

(1,835)


$

(1,137)


As a % of revenue (GAAP)


52.4

%

62.7

%

(10.3)

%

(3.6)

%

(15.2)

%

As a % of revenue (Non-GAAP)


55.3

%

54.7

%

0.5

%

(2.0)

%

(1.3)

%








Diluted net loss per share:







Diluted net loss per share-GAAP






$

(0.16)


Diluted net loss per share-Non-GAAP






$

(0.01)


Shares used to compute diluted net loss per share:







GAAP and Non-GAAP






83,912










Three months ended June 30, 2017


Revenue

Gross
Profit

Total
Operating
Expense

Loss from
Operations

Total Non-
operating
Expense, net

Net Loss

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


700


(3,436)


4,136



4,136


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










Six months ended June 29, 2018


Revenue

Gross
Profit

Total
Operating
Expense

Income
(Loss)
from
Operations

Total Non-
operating
Expense

Net
Income
(Loss)

GAAP

$

189,287


$

98,786


$

107,471


$

(8,685)


$

(5,953)


$

(16,607)


Accounting impact related to warrant amortization

395


395



395



395


Stock-based compensation


963


(7,806)


8,769



8,769


Amortization of intangibles


2,590


(1,604)


4,194



4,194


Restructuring and related charges


877


(1,717)


2,594