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Harmonic Announces Third Quarter 2019 Results

CableOS Success Drives Record Earnings

SAN JOSE, Calif., Oct. 28, 2019 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the third quarter of 2019.

Harmonic logo (PRNewsfoto/Harmonic Inc.)

"We delivered strong revenue growth and record earnings, powered by the growing success of our CableOS solution," said Patrick Harshman, president and chief executive officer of Harmonic. "Our Cable Access segment continues to lead the market through new deployments and recently-announced fiber-to-the-home functionality. Similarly, our Video business transformation to live OTT has been bolstered by the launch of innovative new live streaming capabilities and new customer deployments."

Q3 Financial and Business Highlights

Financial

  • Revenue: $115.7 million, up 15.0% year over year.
  • SaaS and service revenue: $32.6 million, up 13.9% year over year.
  • Gross margin: GAAP 65.3% and non-GAAP 67.0%, compared to GAAP 49.8% and non-GAAP 52.1% in the year ago period.
  • Cable Access gross margin: 77.1%, compared to 38.7% in the year ago period.
  • Video gross margin: 57.7%, compared to 57.2% in the year ago period.
  • Operating income: GAAP income $22.5 million and non-GAAP income $29.9 million, compared to GAAP loss $3.7 million and non-GAAP income $5.7 million in the year ago period.
  • EPS: GAAP net income per share 12 cents and non-GAAP net income per share 25 cents, compared to GAAP net loss per share 9 cents and non-GAAP net income per share 4 cents in the year ago period.
  • Cash: $66.7 million, up $8.6 million quarter over quarter and up $5.0 million year over year.
  • Completed a new $115.5 million convertible debt issuance to refinance approximately 65% of existing convertible debt, reducing potential dilution by 5% and annual interest cost by 19%.

Business

  • CableOS deployments scaled to over 935,000 served cable modems, up 20% quarter over quarter.
  • Extended Cable Access market leadership, announcing CableOS solution with expanded cloud-native and new fiber-to-the-home capabilities.
  • Video SaaS offering now deployed with 36 customers, up 29% quarter over quarter and 140% year over year.
  • Expanded addressed video market by launching new CDN optimization solution for high-demand live video streaming services.

Select Financial Information



GAAP


Non-GAAP

Key Financial Results


Q3 2019


Q2 2019


Q3 2018


Q3 2019


Q2 2019


Q3 2018



(in millions, except per share data)

Net revenue


$

115.7



$

84.9



$

100.6



$

115.7



$

84.9



$

101.4


Net income (loss)


$

11.7



$

(11.8)



$

(7.8)



$

24.6



$

(4.0)



$

3.4


Diluted EPS


$

0.12



$

(0.13)



$

(0.09)



$

0.25



$

(0.04)



$

0.04















Other Financial Information

Q3 2019


Q2 2019


Q3 2018


(in millions)

Recurring revenue*

$

32.6



$

30.4



$

28.7


Recurring revenue as % of total revenue

28.2

%


35.9

%


28.3

%

Bookings for the quarter

$

126.5



$

92.6



$

79.5


Backlog and deferred revenue as of quarter end

$

192.5



$

194.7



$

207.6


Cash as of quarter end

$

66.7



$

58.1



$

61.7



* 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


Q4 2019


2019


Low


High


Low


High



(in millions, except percentages and per share data)

Net Revenue


$

108.0



$

118.0



$

389.0



$

399.0


          Video


$

78.0



$

83.0



$

277.0



$

282.0


          Cable Access


$

30.0



$

35.0



$

112.0



$

117.0


Gross Margin %


49.5

%


51.0

%


55.0

%


55.5

%

Operating Expenses


$

52.0



$

54.0



$

207.0



$

209.0


Operating Income (Loss)


$

(0.5)



$

8.5



$

6.0



$

15.0


Tax Expense


$

0.6



$

0.6



$

1.6



$

1.6


EPS


$

(0.05)



$

0.04



$

(0.18)



$

(0.08)


Shares


90.5



95.8



89.9



89.9


Cash


$

90.0



$

100.0



$

90.0



$

100.0


 

Non-GAAP Financial Guidance

Q4 2019


2019

Low


High


Low


High



(in millions, except percentages and per share data)

Net Revenue

$

108.0



$

118.0



$

389.0



$

399.0


          Video


$

78.0



$

83.0



$

277.0



$

282.0


          Cable Access


$

30.0



$

35.0



$

112.0



$

117.0


Gross Margin %

51.0

%


52.5

%


57.0

%


57.5

%

Operating Expenses

$

48.0



$

50.0



$

191.5



$

193.5


Operating Income

$

5.0



$

14.0



$

28.5



$

37.5


Tax Rate

12

%


12

%


12

%


12

%

EPS

$

0.03



$

0.11



$

0.20



$

0.29


Shares

95.8



95.8



93.8



93.8


Cash

$

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, October 28, 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 1363335). 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 1363335).

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.

Loss on debt extinguishment - In the third quarter of fiscal 2019, we recorded a debt extinguishment loss of $5.7 million resulting from refinancing a portion of our convertible notes due in 2020. We have excluded this loss from our non-GAAP financial measures because we do not believe the loss is reflective of our ongoing long-term business and operating results.

Non-cash interest and other expenses 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 and other expenses. 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. In July 2019, in connection with Comcast's election of enterprise license pricing for the Company's CableOS software, all warrant shares were fully vested and exercisable as of July 1, 2019. As a result of Comcast's election of enterprise license pricing, we no longer exclude the effect of warrant amortization in our non-GAAP financial measures beginning with the third quarter of fiscal 2019.

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)



September 27, 2019


December 31, 2018

ASSETS




Current assets:




   Cash and cash equivalents

$

66,695



$

65,989


   Accounts receivable, net

100,905



81,795


   Inventories

28,970



25,638


   Prepaid expenses and other current assets

40,317



23,280


Total current assets

236,887



196,702


Property and equipment, net

18,901



22,321


Operating lease right-of-use assets

27,694




Goodwill

238,734



240,618


Intangibles, net

6,518



12,817


Other long-term assets

39,472



38,377


Total assets

$

568,206



$

510,835


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




   Other debts and capital lease obligations, current

$

6,962



$

7,175


   Accounts payable

31,227



33,778


   Income taxes payable

1,128



1,099


   Deferred revenue

47,873



41,592


   Accrued and other current liabilities

59,260



52,761


Total current liabilities

146,450



136,405


Convertible notes, long-term

130,217



114,808


Other debts and finance lease obligations, long-term

10,384



12,684


Income taxes payable, long-term

269



460


Other non-current liabilities

39,836



18,228


Total liabilities

327,156



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; 90,315 and 87,057 shares issued and outstanding at September 27, 2019 and December 31, 2018, respectively

90



87


   Additional paid-in capital

2,323,839



2,296,795


   Accumulated deficit

(2,077,510)



(2,067,416)


   Accumulated other comprehensive loss

(5,369)



(1,216)


Total stockholders' equity

241,050



228,250


Total liabilities and stockholders' equity

$

568,206



$

510,835


 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)



Three months ended


Nine months ended


September 27,
2019


September 28,
2018


September 27,
2019


September 28,
2018

Revenue:








Appliance and integration

$

83,082



$

71,965



$

189,864



$

204,385


SaaS and service

32,643



28,651



90,832



85,518


Total net revenue

115,725



100,616



280,696



289,903


Cost of revenue:








Appliance and integration

26,812



38,945



83,178



106,183


SaaS and service

13,373



11,569



36,201



34,832


Total cost of revenue

40,185



50,514



119,379



141,015


   Gross profit

75,540



50,102



161,317



148,888


Operating expenses:








   Research and development

20,197



22,251



62,911



67,250


   Selling, general and administrative

31,148



29,723



88,478



88,874


   Amortization of intangibles

785



792



2,357



2,396


   Restructuring and related charges

861



987



1,194



2,704


      Total operating expenses

52,991



53,753



154,940



161,224


Income (loss) from operations

22,549



(3,651)



6,377



(12,336)


Interest expense, net

(3,000)



(2,872)



(8,862)



(8,492)


Loss on debt extinguishment

(5,695)





(5,695)




Other expense, net

(1,594)



(365)



(2,333)



(698)


Income (loss) before income taxes

12,260



(6,888)



(10,513)



(21,526)


Provision for income taxes

603



870



981



2,839


Net income (loss)

$

11,657



$

(7,758)



$

(11,494)



$

(24,365)


Net income (loss) per share:








   Basic

$

0.13



$

(0.09)



$

(0.13)



$

(0.29)


   Diluted

$

0.12



$

(0.09)



$

(0.13)



$

(0.29)


Shares used in per share calculation:








   Basic

89,964



86,321



89,030



85,188


   Diluted

97,596



86,321



89,030



85,188


 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Nine months ended


September 27,
2019


September 28,
2018

Cash flows from operating activities:




Net loss

$

(11,494)



$

(24,365)


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




   Amortization of intangibles

6,242



6,281


   Depreciation

8,480



9,910


   Stock-based compensation

8,719



14,202


   Amortization of discount on convertible debt

4,960



4,482


   Amortization of non-cash warrant

13,137



1,185


   Restructuring, asset impairment and loss on retirement of fixed assets

85



1,105


   Loss on debt extinguishment

5,695




   Deferred income taxes, net

75



1,056


   Foreign currency adjustments

(1,719)



(1,034)


   Provision for excess and obsolete inventories

704



1,259


   Allowance for doubtful accounts, returns and discounts

988



1,357


   Other non-cash adjustments, net

1,150



286


   Changes in operating assets and liabilities:




      Accounts receivable

(20,521)



(9,585)


      Inventories

(4,170)



997


      Prepaid expenses and other assets

(5,703)



2,507


      Accounts payable

(2,839)



(4,032)


      Deferred revenue

8,002



1,783


      Income taxes payable

(114)



461


      Accrued and other liabilities

(10,536)



(2,188)


Net cash provided by operating activities

1,141



5,667


Cash flows from investing activities:




   Proceeds from sale of investments



104


   Purchases of property and equipment

(4,973)



(4,703)


Net cash used in investing activities

(4,973)



(4,599)


Cash flows from financing activities:




Proceeds from convertible debt

115,500




Payments of convertible debt

(109,603)




Payment of convertible debt issuance costs

(3,465)




Proceeds from other debts and finance leases

4,684



5,066


Repayment of other debts and finance leases

(6,387)



(6,568)


   Proceeds from common stock issued to employees

5,573



4,299


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

(1,278)



(166)


Net cash provided by financing activities

5,024



2,631


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

(486)



(580)


Net increase in cash, cash equivalents and restricted cash

706



3,119


Cash, cash equivalents and restricted cash at beginning of period

65,989



58,757


Cash, cash equivalents and restricted cash at end of period

$

66,695



$

61,876






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




Cash and cash equivalents

$

66,695



$

61,654


Restricted cash included in prepaid expenses and other current assets



222


    Total cash, cash equivalents and restricted cash

$

66,695



$

61,876


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


September 27, 2019


June 28, 2019


September 28, 2018


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP

Geography















Americas

$

78,699


$


$

78,699


68%


$

42,437


$

23


$

42,460


50%


$

54,119


$

790


$

54,909


54%

EMEA

24,322



24,322


21%


25,203



25,203


30%


26,316



26,316


26%

APAC

12,704



12,704


11%


17,225



17,225


20%


20,181



20,181


20%

Total

$

115,725


$


$

115,725


100%


$

84,865


$

23


$

84,888


100%


$

100,616


$

790


$

101,406


100%
















Market















Service Provider

$

77,886


$


$

77,886


67%


$

43,438


$

23


$

43,461


51%


$

66,737


$

790


$

67,527


67%

Broadcast and Media

37,839



37,839


33%


41,427



41,427


49%


33,879



33,879


33%

Total

$

115,725


$


$

115,725


100%


$

84,865


$

23


$

84,888


100%


$

100,616


$

790


$

101,406


100%










Nine months ended



September 27, 2019


September 28, 2018



GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP

Geography











Americas


$

155,324


$

48


$

155,372


54%


$

155,893


$

1,185


$

157,078


54%

EMEA


77,603



77,603


28%


81,194



81,194


28%

APAC


47,769



47,769


18%


52,816



52,816


18%

Total


$

280,696


$

48


$

280,744


100%


$

289,903


$

1,185


$

291,088


100%












Market











Service Provider


$

165,536


$

48


$

165,584


59%


$

173,096


$

1,185


$

174,281


60%

Broadcast and Media


115,160



115,160


41%


116,807



116,807


40%

Total


$

280,696


$

48


$

280,744


100%


$

289,903


$

1,185


$

291,088


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 September 27, 2019


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

60,055



$

55,670



$

115,725



$


*

$

115,725


Gross profit

34,646



42,925



77,571



(2,031)



75,540


Gross margin%

57.7

%


77.1

%


67.0

%




65.3

%

Operating income (loss)

(1,696)



31,611



29,915



(7,366)



22,549


Operating margin%

(2.8)

%


56.8

%


25.9

%




19.5

%


Three months ended June 28, 2019


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

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 September 28, 2018


Video


Cable Access


Total Segment Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

73,344



$

28,062



$

101,406



$

(790)


*

$

100,616


Gross profit

41,937



10,871



52,808



(2,706)



50,102


Gross margin%

57.2

%


38.7

%


52.1

%




49.8

%

Operating income

5,258



395



5,653



(9,304)



(3,651)


Operating margin%

7.2

%


1.4

%


5.6

%




(3.6)

%


Nine months ended September 27, 2019


Video


Cable Access


Total Segment Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

198,856



$

81,888



$

280,744



$

(48)


*

$

280,696


Gross profit

114,692



52,104



166,796



(5,479)



161,317


Gross margin%

57.7

%


63.6

%


59.4

%




57.5

%

Operating income (loss)

4,731



18,571



23,302



(16,925)



6,377


Operating margin%

2.4

%


22.7

%


8.3

%




2.3

%


Nine months ended September 28, 2018


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

224,300



$

66,788



$

291,088



$

(1,185)


*

$

289,903


Gross profit

126,721



29,698



156,419



(7,531)



148,888


Gross margin%

56.5

%


44.5

%


53.7

%




51.4

%

Operating income (loss)

13,492



(578)



12,914



(25,250)



(12,336)


Operating margin%

6.0

%


(0.9)

%


4.4

%




(4.3)

%


(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 nine months ended September 27, 2019 was $55,670 and $81,840, respectively; the GAAP revenue for the three and nine months ended September 28, 2018 was $27,272 and $65,603, respectively; and the GAAP revenue for the three months ended June 28, 2019 was $13,240.

 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations (Unaudited)

(In thousands, except percentages and per share data)



Three months ended September 27, 2019


Revenue

Gross
Profit

Total
Operating
Expense

Income
from
Operations

Total Non-
operating
Expense, net

Net
Income

GAAP

$

115,725


$

75,540


$

52,991


$

22,549


$

(10,289)


$

11,657


  Stock-based compensation


405


(3,689)


4,094



4,094


  Amortization of intangibles


1,295


(785)


2,080



2,080


  Restructuring and related charges


331


(861)


1,192



1,192


  Loss on convertible debt extinguishment





5,695


5,695


  Non-cash interest and other expenses related to convertible notes





2,625


2,625


  Discrete tax items and tax effect of non-GAAP adjustments






(2,751)


Total adjustments

$


$

2,031


$

(5,335)


$

7,366


$

8,320


$

12,935


Non-GAAP

$

115,725


$

77,571


$

47,656


$

29,915


$

(1,969)


$

24,592


As a % of revenue (GAAP)


65.3

%

45.8

%

19.5

%

(8.9)

%

10.1

%

As a % of revenue (Non-GAAP)


67.0

%

41.2

%

25.9

%

(1.7)

%

21.3

%








Diluted net income per share:







  Diluted net income per share-GAAP






$

0.12


  Diluted net income per share-Non-GAAP






$

0.25


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






97,596










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 and other 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 September 28, 2018


Revenue

Gross
Profit

Total
Operating
Expense

Income
(Loss)
from
Operations

Total Non-
operating
Expense, net

Net
Income
(Loss)

GAAP

$

100,616


$

50,102


$

53,753


$

(3,651)


$

(3,237)


$

(7,758)


  Accounting impact related to warrant amortization

790


790



790



790


  Stock-based compensation


614


(4,819)


5,433



5,433


  Amortization of intangibles


1,295


(792)


2,087



2,087


  Restructuring and related charges


7


(987)


994



994


  Loss on equity investments





72


72


  Non-cash interest and other expenses related to convertible notes





1,528


1,528


  Discrete tax items and tax effect of non-GAAP adjustments






227


Total adjustments

$

790


$

2,706


$

(6,598)


$

9,304


$

1,600


$

11,131


Non-GAAP

$

101,406


$

52,808


$

47,155


$

5,653


$

(1,637)


$

3,373


As a % of revenue (GAAP)


49.8

%

53.4

%

(3.6)

%

(3.2)

%

(7.7)

%

As a % of revenue (Non-GAAP)


52.1

%

46.5

%

5.6

%

(1.6)

%

3.3

%








Diluted net income (loss) per share:







  Diluted net loss per share-GAAP






$

(0.09)


  Diluted net income per share-Non-GAAP






$

0.04


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







  GAAP






86,321


  Non-GAAP






87,770










Nine months ended September 27, 2019


Revenue

Gross
Profit

Total
Operating
Expense

Income
from
Operations

Total Non
-operating
Expense

Net
Income
(Loss)

GAAP

$

280,696


$

161,317


$

154,940


$

6,377


$

(16,890)


$

(11,494)


  Accounting impact related to warrant amortization

48


48



48



48


  Stock-based compensation


823


(7,894)


8,717



8,717


  Amortization of intangibles


3,885


(2,357)


6,242



6,242


  Restructuring and related charges


723


(1,195)


1,918



1,918


  Loss on debt extinguishment





5,695


5,695


  Non-cash interest and other expenses related to convertible notes





5,887


5,887


  Discrete tax items and tax effect of non-GAAP adjustments






(1,179)


Total adjustments

$

48


$

5,479


$

(11,446)


$

16,925


$

11,582


$

27,328


Non-GAAP

$

280,744


$

166,796


$

143,494


$

23,302


$

(5,308)


$

15,834


As a % of revenue (GAAP)


57.5

%

55.2

%

2.3

%

(6.0)

%

(4.1)

%

As a % of revenue (Non-GAAP)


59.4

%

51.1

%

8.3

%

(1.9)

%

5.6

%








Diluted net income (loss) per share:







  Diluted net loss per share-GAAP






$

(0.13)


  Diluted net income per share-Non-GAAP






$

0.17


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







  GAAP






89,030


  Non-GAAP






92,579










Nine months ended September 28, 2018


Revenue

Gross
Profit

Total
Operating
Expense

Income
(Loss)
from Operations

Total Non-
operating
Expense

Net
Income
(Loss)

GAAP

$

289,903


$

148,888


$

161,224


$

(12,336)


$

(9,190)


$

(24,365)


  Accounting impact related to warrant amortization

1,185


1,185



1,185



1,185


  Stock-based compensation


1,577


(12,625)


14,202



14,202


  Amortization of intangibles


3,885


(2,396)


6,281



6,281


  Restructuring and related charges


884


(2,704)


3,588



3,588


  Gain on equity investments





(111)


(111)


  Non-cash interest and other expenses related to convertible notes





4,483


4,483


  Avid litigation settlement and associated legal fees



6


(6)



(6)


  Discrete tax items and tax effect of non-GAAP adjustments






1,543


Total adjustments

$

1,185


$

7,531


$

(17,719)


$

25,250


$

4,372


$

31,165


Non-GAAP

$

291,088


$

156,419


$

143,505


$

12,914


$

(4,818)


$

6,800


As a % of revenue (GAAP)


51.4

%

55.6

%

(4.3)

%

(3.2)

%

(8.4)

%

As a % of revenue (Non-GAAP)


53.7

%

49.3

%

4.4

%

(1.7)

%

2.3

%








Diluted net income (loss) per share:







  Diluted net loss per share-GAAP






$

(0.29)


  Diluted net income per share-Non-GAAP






$

0.08


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







  GAAP






85,188


  GAAP and Non-GAAP






85,962


 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations on Financial Guidance

(In millions, except percentages and per share data)



Q4 2019 Financial Guidance


Revenue

Gross
Profit

Total
Operating
Expense

Income
(Loss) from
Operations

Total Non-
operating
Expense,
net

Net  Income
(Loss)

GAAP

$108.0 to $118.0

$53.5 to $60.4

$52.2 to $54.2

$(0.7) to $8.2

$(3.3)

$(4.6) to $4.3

  Stock-based compensation

0.3

(3.2)

3.5

3.5

  Amortization of intangibles

1.3

(0.8)

2.1

2.1

  Restructuring and related charges

(0.2)

0.2

0.2

  Non-cash interest and other expenses related to convertible notes

1.8

1.8

  Tax effect of non-GAAP adjustments

$(0.9) to $0.2

Total adjustments

1.6

(4.2)

5.8

1.8

$6.7 to $7.8

Non-GAAP

$108.0 to $118.0

$55.1 to $62.0

$48.0 to $50.0

$5.1 to $14.0

$(1.5)

$3.2 to $11

As a % of revenue (GAAP)


49.5% to 51.1%

44.2% to 50.2%

(0.7)% to 6.9%

(2.8)%

(4.3)% to 3.6%

As a % of revenue (Non-GAAP)


51.0% to 52.5%

40.7% to 46.3%

4.7% to 11.8%

(1.3)%

2.9% to 9.3%

Diluted net income (loss) per share:







  Diluted net income (loss) per share-GAAP





$(0.05) to $0.04

  Diluted net income per share-Non-GAAP





$0.03 to $0.11

Shares used to compute diluted net loss per share:







  GAAP





90.5

Shares used to compute diluted net income per share:







  GAAP and Non-GAAP





95.8






2019 Financial Guidance


Revenue

Gross
Profit

Total
Operating
Expense

Income
from
Operations<