Investor Relations

Press Release

<< Back

Harmonic Announces Second Quarter 2019 Results

CableOS Leadership Position Bolstered by New Multi-Year Agreements

SAN JOSE, Calif., July 29, 2019 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the second quarter of 2019.

Harmonic logo (PRNewsfoto/Harmonic Inc.)

"We delivered solid second quarter results, while also strengthening our strategic positioning and long-term business outlook," said Patrick Harshman, president and chief executive officer of Harmonic. "Our CableOS program momentum accelerated with two new material customer commitments. On the Video side of our business, we continued to execute our OTT SaaS transformation while delivering another quarter of positive operating income."

Q2 Financial and Business Highlights

  • Revenue: GAAP $84.9 million, down 14.4% year over year; non-GAAP $84.9 million, down 14.6% year over year.
  • Gross margin: GAAP 51.8%, compared to 52.0% in the year ago period; non-GAAP 53.6%, compared to 54.0% in the year ago period.
  • SaaS and service revenue: $30.4 million, 35.9% of total revenue, compared to 30.9% in the year ago period.
  • SaaS and service gross margin: GAAP 61.8% and non-GAAP 62.6%, a decrease of 272 and 298 basis points, respectively, year over year.
  • Operating expenses: GAAP $51.7 million, compared to $51.0 million in the year ago period; non-GAAP $48.3 million, compared to $47.0 million in the year ago period.
  • Cash: ended Q2 with $58.1 million, down $11.9 million quarter over quarter.
  • CableOS deployments continued to scale, over 780,000 served cable modems, up 16% quarter over quarter.
  • $175 million CableOS software license agreement signed with Comcast in July.
  • CableOS supply agreement with estimated total value greater than $55 million signed with international cable operator in July.
  • Video SaaS deployed by 28 customers, up 65% year over year.
  • Video segment operating income: $4.4 million, eighth consecutive quarter of positive segment operating income.
  • Book to Bill ratio of 1.1 in Q2, compared to 1.0 in prior quarter.

Select Financial Information



GAAP


Non-GAAP

Key Financial Results


Q2 2019


Q1 2019


Q2 2018


Q2 2019


Q1 2019


Q2 2018



(in millions, except per share data)

Net revenue


$

84.9



$

80.1



$

99.2



$

84.9



$

80.1



$

99.4


Net income (loss)


$

(11.8)



$

(11.3)



$

(2.9)



$

(4.0)



$

(4.8)



$

4.6


Diluted EPS


$

(0.13)



$

(0.13)



$

(0.03)



$

(0.04)



$

(0.05)



$

0.05















Other Financial Information

Q2 2019


Q1 2019


Q2 2018


(in millions)

Recurring revenue*

$

30.4



$

27.7



$

30.7


Recurring revenue as % of total revenue

35.9

%


34.6

%


30.9

%

Bookings for the quarter

$

92.6



$

81.0



$

107.9


Backlog and deferred revenue as of quarter end

$

194.7



$

187.2



$

230.4


Cash as of quarter end

$

58.1



$

69.9



$

54.1



* Recurring revenue consists of revenue for the period from our appliance-based support and maintenance plans and revenue from usage of our cloud-based subscription plan offerings, which are generally renewed on an annual basis.

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

GAAP Financial Guidance


Q3 2019


Q4 2019


2019


Low


High


Low


High


Low


High



(in millions, except percentages and per share data)

Net Revenue


$

110.0



$

120.0



$

100.0



$

110.0



$

375.0



$

395.0


Video


$

63.0



$

68.0



$

70.0



$

75.0



$

272.0



$

282.0


Cable Access


$

47.0



$

52.0



$

30.0



$

35.0



$

103.0



$

113.0


Gross Margin %


62.5

%


65.0

%


49.5

%


51.0

%


54.5

%


55.5

%

Operating Expenses


$

53.0



$

55.0



$

52.0



$

54.0



$

207.5



$

211.5


Operating Income (Loss)


$

13.0



$

25.0



$

(4.5)



$

4.0



$

(7.5)



$

12.5


Tax Expense


$

(0.8)



$

(0.8)



$

(0.8)



$

(0.8)



$

(2.0)



$

(2.0)


EPS


$

0.09



$

0.20



$

(0.10)



$

0.00



$

(0.26)



$

(0.03)


Shares


101.5



101.5



90.3



90.3



89.8



89.8


Cash


$

65.0



$

75.0



$

90.0



$

100.0



$

90.0



$

100.0


 

Non-GAAP Financial Guidance

Q3 2019


Q4 2019


2019

Low


High


Low


High


Low


High



(in millions, except percentages and per share data)

Net Revenue

$

110.0



$

120.0



$

100.0



$

110.0



$

375.0



$

395.0


Video


$

63.0



$

68.0



$

70.0



$

75.0



$

272.0



$

282.0


Cable Access


$

47.0



$

52.0



$

30.0



$

35.0



$

103.0



$

113.0


Gross Margin %

64.0

%


66.5

%


51.0

%


52.5

%


56.0

%


57.5

%

Operating Expenses

$

48.0



$

50.0



$

48.0



$

50.0



$

192.0



$

196.0


Operating Income

$

20.0



$

32.0



$

1.0



$

10.0



$

15.0



$

35.0


Tax Rate

12

%


12

%


12

%


12

%


12

%


12

%

EPS

$

0.16



$

0.26



$

(0.01)



$

0.07



$

0.07



$

0.26


Shares

101.5



101.5



90.3



102.3



96.5



96.5


Cash

$

65.0



$

75.0



$

90.0



$

100.0



$

90.0



$

100.0


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 29, 2019. The live webcast will be available on the Harmonic Investor Relations website at http://investor.harmonicinc.com. An audio version of the webcast will be available by calling +1.574.990.1032 or +1.800.240.9147 (passcode 4270848). A replay will be available after 5:00 p.m. PT on the same web site or by calling +1.404.537.3406 or +1.855.859.2056 (passcode 4270848).

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 cable access 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 income (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 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; 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, 2018, 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, segment 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 is 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.

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. Through the end of the second quarter of 2019, vesting of the warrant shares was 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 the first quarter of fiscal 2019, changes in fair value of the warrant shares were being marked to market until final vesting, and any adjustment as such was being recorded in revenue. The change in fair value together with vested warrant shares were amortized to revenue using a ratio of revenue recognized from the customer in the period compared to total revenue expected from the customer. Beginning in the first quarter of fiscal 2019, due to the adoption of new accounting guidance (ASU No. 2018-07), the fair value of unvested warrant shares is no longer required to be marked to market. As a result, the charge to revenue for warrant shares no longer includes the change in fair value of the warrant shares.

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 warrant shares in order to better understand the effects of these items on our total revenues and gross margin, as well as on Cable Access segment revenue.

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.

Gain (loss) on equity investments - We exclude the change in fair value and gain (loss) from sale 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 $6.0 million in installments. $2.5 million was paid upfront in October 2017, $1.5 million was paid in the second quarter of 2019 and $2.0 million will be paid in 2020. 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 28, 2019


December 31, 2018

ASSETS




Current assets:




   Cash and cash equivalents

$

58,064



$

65,989


   Accounts receivable, net

70,571



81,795


   Inventories

27,659



25,638


   Prepaid expenses and other current assets

29,209



23,280


Total current assets

185,503



196,702


Property and equipment, net

19,312



22,321


Operating lease right-of-use assets

30,386




Goodwill

240,335



240,618


Intangibles, net

8,640



12,817


Other long-term assets

42,545



38,377


Total assets

$

526,721



$

510,835


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




   Other debts and capital lease obligations, current

$

1,379



$

7,175


   Accounts payable

31,849



33,778


   Income taxes payable

989



1,099


   Deferred revenue

47,330



41,592


   Accrued and other current liabilities

56,764



52,761


Total current liabilities

138,311



136,405


Convertible notes, long-term

118,070



114,808


Other debts and finance lease obligations, long-term

16,697



12,684


Income taxes payable, long-term

266



460


Other non-current liabilities

41,311



18,228


Total liabilities

314,655



282,585


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; 89,074 and 87,057 shares issued and outstanding at June 28, 2019 and December 31, 2018, respectively

89



87


   Additional paid-in capital

2,302,798



2,296,795


   Accumulated deficit

(2,089,167)



(2,067,416)


   Accumulated other comprehensive loss

(1,654)



(1,216)


Total stockholders' equity

212,066



228,250


Total liabilities and stockholders' equity

$

526,721



$

510,835


 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)



Three months ended


Six months ended


June 28, 2019


June 29, 2018


June 28, 2019


June 29, 2018

Revenue:








Appliance and integration

$

54,417



$

68,434



$

106,782



$

132,420


SaaS and service

30,448



30,726



58,189



56,867


Total net revenue

84,865



99,160



164,971



189,287


Cost of revenue:








Appliance and integration

29,312



36,662



56,366



67,238


SaaS and service

11,625



10,895



22,828



23,263


Total cost of revenue

40,937



47,557



79,194



90,501


   Gross profit

43,928



51,603



85,777



98,786


Operating expenses:








   Research and development

21,313



21,542



42,714



44,999


   Selling, general and administrative

29,319



27,988



57,330



59,151


   Amortization of intangibles

784



800



1,572



1,604


   Restructuring and related charges

276



631



333



1,717


      Total operating expenses

51,692



50,961



101,949



107,471


Income (loss) from operations

(7,764)



642



(16,172)



(8,685)


Interest expense, net

(2,956)



(2,863)



(5,862)



(5,620)


Other income (expense), net

(428)



199



(739)



(333)


Loss before income taxes

(11,148)



(2,022)



(22,773)



(14,638)


Provision for income taxes

697



891



378



1,969


Net loss

$

(11,845)



$

(2,913)



$

(23,151)



$

(16,607)


Net loss per share:








   Basic and diluted

$

(0.13)



$

(0.03)



$

(0.26)



$

(0.20)


Shares used in per share calculation:








   Basic and diluted

88,931



85,304



88,554



84,616


 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Six months ended


June 28, 2019


June 29, 2018

Cash flows from operating activities:




Net loss

$

(23,151)



$

(16,607)


Adjustments to reconcile net loss to net cash provided by (used in) operating activities:




   Amortization of intangibles

4,162



4,194


   Depreciation

5,716



6,771


   Stock-based compensation

4,623



8,769


   Amortization of discount on convertible debt

3,262



2,954


   Amortization of non-cash warrant

48



395


   Restructuring, asset impairment and loss on retirement of fixed assets

101



93


   Deferred income taxes, net

(145)



530


   Foreign currency adjustments

(325)



(1,042)


   Provision for excess and obsolete inventories

384



822


   Allowance for doubtful accounts, returns and discounts

500



623


   Other non-cash adjustments, net

303



64


   Changes in operating assets and liabilities:




      Accounts receivable

10,699



(13,572)


      Inventories

(2,440)



2,000


      Prepaid expenses and other assets

(1,526)



1,897


      Accounts payable

(1,752)



(4,187)


      Deferred revenue

4,989



9,378


      Income taxes payable

(292)



503


      Accrued and other liabilities

(9,802)



(337)


Net cash provided by (used in) operating activities

(4,646)



3,248


Cash flows from investing activities:




   Purchases of property and equipment

(2,939)



(3,181)


Net cash used in investing activities

(2,939)



(3,181)


Cash flows from financing activities:




  Proceeds from other debts and finance leases

4,503




  Repayment of other debts and finance leases

(6,162)



(6,176)


   Proceeds from common stock issued to employees

2,147



2,366


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

(828)



(54)


Net cash used in financing activities

(340)



(3,864)


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



(588)


Net decrease in cash, cash equivalents and restricted cash

(7,925)



(4,385)


Cash, cash equivalents and restricted cash at beginning of period

65,989



58,757


Cash, cash equivalents and restricted cash at end of period

$

58,064



$

54,372






Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets

 




Cash and cash equivalents

$

58,064



$

54,098


Restricted cash included in prepaid expenses and other current assets



274


    Total cash, cash equivalents and restricted cash

$

58,064



$

54,372


The accompanying notes are an integral part of these condensed consolidated financial statements.

Harmonic Inc.

Preliminary Revenue Information

(Unaudited, in thousands, except percentages)



Three months ended


June 28, 2019


March 29, 2019


June 29, 2018


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP

Geography















Americas

$

42,437


$

23


$

42,460


50%


$

34,188


$

25


$

34,213


43%


$

52,918


$

284


$

53,202


53%

EMEA

25,203



25,203


30%


28,078



28,078


35%


31,676



31,676


32%

APAC

17,225



17,225


20%


17,840



17,840


22%


14,566



14,566


15%

Total

$

84,865


$

23


$

84,888


100%


$

80,106


$

25


$

80,131


100%


$

99,160


$

284


$

99,444


100%
















Market















Service Provider

$

43,438


$

23


$

43,461


51%


$

44,212


$

25


$

44,237


55%


$

54,142


$

284


$

54,426


55%

Broadcast and Media

41,427



41,427


49%


35,894



35,894


45%


45,018



45,018


45%

Total

$

84,865


$

23


$

84,888


100%


$

80,106


$

25


$

80,131


100%


$

99,160


$

284


$

99,444


100%

 


Six months ended


June 28, 2019


June 29, 2018


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP

Geography










Americas

$

76,625


$

48


$

76,673


46%


$

101,774


$

395


$

102,169


54%

EMEA

53,281



53,281


32%


54,878



54,878


29%

APAC

35,065



35,065


22%


32,635



32,635


17%

Total

$

164,971


$

48


$

165,019


100%


$

189,287


$

395


$

189,682


100%











Market










Service Provider

$

87,650


$

48


$

87,698


53%


$

106,359


$

395


$

106,754


56%

Broadcast and Media

77,321



77,321


47%


82,928



82,928


44%

Total

$

164,971


$

48


$

165,019


100%


$

189,287


$

395


$

189,682


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 28, 2019


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measure
s

Net revenue

$

71,625



$

13,263



$

84,888



$

(23)


*

$

84,865


Gross profit

41,444



4,086



45,530



(1,602)



43,928


Gross margin%

57.9

%


30.8

%


53.6

%




51.8

%

Operating income (loss)

4,459



(7,243)



(2,784)



(4,980)



(7,764)


Operating margin%

6.2

%


(54.6)

%


(3.3)

%




(9.1)

%


Three months ended March 29, 2019


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

67,176



$

12,955



$

80,131



$

(25)


*

$

80,106


Gross profit

38,602



5,093



43,695



(1,846)



41,849


Gross margin%

57.5

%


39.3

%


54.5

%




52.2

%

Operating income (loss)

1,968



(5,797)



(3,829)



(4,579)



(8,408)


Operating margin%

2.9

%


(44.7)

%


(4.8)

%




(10.5)

%


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

6,239



540



6,779



(6,137)



642


Operating margin%

7.9

%


2.7

%


6.8

%




0.6

%


Six months ended June 28, 2019


Video


Cable Edge


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

138,801



$

26,218



$

165,019



$

(48)


*

$

164,971


Gross profit

80,046



9,179



89,225



(3,448)



85,777


Gross margin%

57.7

%


35.0

%


54.1

%




52.0

%

Operating income (loss)

6,427



(13,040)



(6,613)



(9,559)



(16,172)


Operating margin%

4.6

%


(49.7)

%


(4.0)

%




(9.8)

%


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)

%


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


* These non-GAAP adjustments are primarily for warrant amortization for the respective periods and relate to our Cable Access segment. After applying these adjustments to the non-GAAP revenue for the Cable Access segment, our GAAP revenue for the Cable Access segment for the three and six months ended June 28, 2019 was $13,240 and $26,170, respectively; the GAAP revenue for the three and six months ended June 29, 2018 was $19,952 and $38,331, respectively; and the GAAP revenue for the three months ended March 29, 2019 was $12,930.

 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations (Unaudited)

(In thousands, except percentages and per share data)



Three months ended June 28, 2019


Revenue

Gross
Profit

Total
Operating
Expense

Loss from
Operations

Total Non-
operating
Expense, net

Net Loss

GAAP

$

84,865


$

43,928


$

51,692


$

(7,764)


$

(3,384)


$

(11,845)


  Accounting impact related to warrant amortization

23


23



23



23


  Stock-based compensation


193


(2,317)


2,510



2,510


  Amortization of intangibles


1,295


(784)


2,079



2,079


  Restructuring and related charges


91


(277)


368



368


  Non-cash interest expenses related to convertible notes





1,656


1,656


  Discrete tax items and tax effect of non-GAAP adjustments






1,238


Total adjustments

$

23


$

1,602


$

(3,378)


$

4,980


$

1,656


$

7,874


Non-GAAP

$

84,888


$

45,530


$

48,314


$

(2,784)


$

(1,728)


$

(3,971)


As a % of revenue (GAAP)


51.8

%

60.9

%

(9.1)

%

(4.0)

%

(14.0)

%

As a % of revenue (Non-GAAP)


53.6

%

56.9

%

(3.3)

%

(2.0)

%

(4.7)

%








Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.13)


  Diluted net loss per share-Non-GAAP






$

(0.04)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






88,931










Three months ended March 29, 2019


Revenue

Gross
Profit

Total
Operating
Expense

Loss from
Operations

Total Non-
operating
Expense, net

Net Loss

GAAP

$

80,106


$

41,849


$

50,257


$

(8,408)


$

(3,217)


$

(11,306)


  Accounting impact related to warrant amortization

25


25



25



25


  Stock-based compensation


225


(1,888)


2,113



2,113


  Amortization of intangibles


1,295


(788)


2,083



2,083


  Restructuring and related charges


301


(57)


358



358


  Non-cash interest expenses related to convertible notes





1,606


1,606


  Discrete tax items and tax effect of non-GAAP adjustments






334


Total adjustments

$

25


$

1,846


$

(2,733)


$

4,579


$

1,606


$

6,519


Non-GAAP

$

80,131


$

43,695


$

47,524


$

(3,829)


$

(1,611)


$

(4,787)


As a % of revenue (GAAP)


52.2

%

62.7

%

(10.5)

%

(4.0)

%

(14.1)

%

As a % of revenue (Non-GAAP)


54.5

%

59.3

%

(4.8)

%

(2.0)

%

(6.0)

%








Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.13)


  Diluted net loss per share-Non-GAAP






$

(0.05)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






88,165










 


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










Six months ended June 28, 2019


Revenue

Gross
Profit

Total
Operating
Expense

Loss from
Operations

Total Non-
operating
Expense

Net Loss

GAAP

$

164,971


$

85,777


$

101,949


$

(16,172)


$

(6,601)


$

(23,151)


  Accounting impact related to warrant amortization

48


48



48



48


  Stock-based compensation


418


(4,205)


4,623



4,623


  Amortization of intangibles


2,590


(1,572)


4,162



4,162


  Restructuring and related charges


392


(334)


726



726


  Non-cash interest expenses related to convertible notes





3,262


3,262


  Discrete tax items and tax effect of non-GAAP adjustments






1,572


Total adjustments

$

48


$

3,448


$

(6,111)


$

9,559


$

3,262


$

14,393


Non-GAAP

$

165,019


$

89,225


$

95,838


$

(6,613)


$

(3,339)


$

(8,758)


As a % of revenue (GAAP)


52.0

%

61.8

%

(9.8)

%

(4.0)

%

(14.0)

%

As a % of revenue (Non-GAAP)


54.1

%

58.1

%

(4.0)

%

(2.0)

%

(5.3)

%








Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.26)


  Diluted net loss per share-Non-GAAP






$

(0.10)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






88,554










 


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



2,594


  Gain on equity investments





(183)


(183)


  Non-cash interest expenses related to convertible notes





2,955


2,955


  Avid litigation settlement and associated legal fees



6


(6)



(6)


  Discrete tax items and tax effect of non-GAAP adjustments






1,316


Total adjustments

$

395


$

4,825


$

(11,121)


$

15,946


$

2,772


$

20,034


Non-GAAP

$

189,682


$

103,611


$

96,350


$

7,261


$

(3,181)


$

3,427


As a % of revenue (GAAP)


52.2

%

56.8

%

(4.6)

%

(3.1)

%

(8.8)

%

As a % of revenue (Non-GAAP)


54.6

%

50.8

%

3.8

%

(1.7)

%

1.8

%








Diluted net income (loss) per share:







  Diluted net loss per share-GAAP






$

(0.20)


  Diluted net income per share-Non-GAAP






$

0.04


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







  GAAP






84,616


  GAAP and Non-GAAP






85,052


 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations on Financial Guidance

(In millions, except percentages and per share data)



Q3 2019 Financial Guidance


Revenue

Gross
Profit

Total
Operating
Expense

Income
from
Operations

Total Non-
operating
Expense,
net

Net Income

GAAP

$110.0 to $120.0

$68.7 to $78.1

$53.3 to $55.3

$13.4 to $24.8

$(3.4)

$9.2 to $20.6

  Stock-based compensation

0.4

(3.9)

4.3

4.3

  Amortization of intangibles