UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
November 9, 2016
Date of Report (Date of earliest event reported)
HARMONIC INC.
(Exact name of Registrant as specified in its charter)
Delaware | 000-25826 | 77-0201147 |
(State or other jurisdiction of incorporation or organization) | Commission File Number | (I.R.S. Employer Identification Number) |
4300 North First Street
San Jose, CA 95134
(408) 542-2500
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On November 9, 2016, Harmonic Inc. (“Harmonic”) issued a press release regarding its unaudited financial results for the quarter ended September 30, 2016. In the press release, Harmonic also announced that it would be holding a conference call on November 9, 2016 to discuss its financial results for the quarter ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 hereto, and the information in Exhibit 99.1 is incorporated herein by reference.
The information in this Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and this Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 furnished herewith shall not be incorporated by reference into any filing by Harmonic under the Securities Act of 1933, as amended (the “Securities Act”), or under the Exchange Act.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit No. | Description |
99.1 | Press release of Harmonic Inc. dated November 9, 2016, entitled “Harmonic Announces Third Quarter 2016 Results.” |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 9, 2016 | HARMONIC INC. | |||||
By: | /s/ Timothy C. Chu | |||||
Timothy C. Chu | ||||||
General Counsel, SVP HR and Corporate Secretary | ||||||
3
EXHIBIT INDEX
Exhibit No. | Description |
99.1 | Press release of Harmonic Inc. dated November 9, 2016, entitled “Harmonic Announces Third Quarter 2016 Results.” |
Exhibit 99.1
 |  |
FOR IMMEDIATE RELEASE
Harmonic Announces Third Quarter 2016 Results
SAN JOSE, Calif.-November 9, 2016-Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its unaudited results for the third quarter of 2016.
GAAP net revenue for the third quarter of 2016 was $101.4 million, compared with $109.6 million for the second quarter of 2016 and $83.3 million for the third quarter of 2015.
Non-GAAP net revenue for the third quarter of 2016 was $101.7 million, compared with $110.4 million for the second quarter of 2016 and $83.3 million for the third quarter of 2015.
Bookings for the third quarter of 2016 were $97.3 million, compared with $117.3 million for the second quarter of 2016 and $74.6 million for the third quarter of 2015.
GAAP net loss for the third quarter of 2016 was $(16.0) million, or $(0.21) per diluted share, compared with a GAAP net loss for the second quarter of 2016 of $(20.7) million, or $(0.27) per diluted share, and a GAAP net loss of $(4.8) million, or $(0.05) per diluted share, for the third quarter of 2015.
Non-GAAP net loss for the third quarter of 2016 was $(1.1) million, or $(0.01) per diluted share, compared with non-GAAP net loss for the second quarter of 2016 of $(0.2) million, or $0.00 per diluted share, and non-GAAP net loss of $(0.2) million, or $0.00 per diluted share, for the third quarter of 2015. See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations” below.
Total cash, cash equivalents and short-term investments were $52.7 million at the end of the third quarter of 2016, down $12.6 million from $65.3 million at the end of the prior quarter, primarily due to timing of receipts from our customers and payments of restructuring and integration charges. In the third quarter of 2016, the Company used approximately 4.6 million of cash from operations.
“Our third quarter results reflect our ongoing business transformations, as Cable Edge segment revenue declined in advance of the pending release of our new CableOS products,” said Patrick Harshman, President and CEO of Harmonic. “Although our outlook for fourth quarter Cable Edge spending is therefore cautious, our recently executed warrant agreement with Comcast and our first CableOS revenue shipments bolster our confidence in our CableOS growth strategy. Turning to our Video segment, our transformational VOS™ offering drove a stronger-than-forecasted mix of software- and services-related orders, impacting third quarter revenue recognition while maintaining near-record backlog and deferred revenue. We are encouraged by the competitive momentum of our transformational initiatives, and remain focused on revenue growth, improving profitability and enhancing shareholder value.”
Third Quarter 2016 Highlights
• | Soft legacy cable edge demand and a stronger mix of video software and services orders impacted revenue. |
• | Near record backlog and deferred revenue of $181.1 million. |
• | Launched CableOS, the industry’s first software-based CMTS core. |
• | Executed Comcast warrant agreement validating our investment strategy in CableOS. |
• | Exceeding annualized cost savings targets from the combination of Harmonic and TVN. We now expect to realize annualized cost savings in a range of $24-25 million by the end of calendar year 2016, up from our initial target of $20-$22 million. |
• | Several key trials underway on our recently announced VOS Cloud and VOS 360 software-as-a-service offerings with new cloud partners and tier 1 media and pay TV companies. |
Business Outlook
Fourth Quarter 2016 GAAP Financial Guidance
For the fourth quarter of 2016, Harmonic anticipates:
• | Net revenue to be $105.8 million to $110.8 million, which includes Video revenue of $96.8 million to $99.8 million and Cable Edge revenue of $9.0 million to $11.0 million |
• | Gross margin to be 48.0% to 49.0% |
• | Operating expense to be $64.5 million to $66.5 million |
• | Operating loss to be $(13.5) million to $(11.5) million |
• | EPS to be $(0.20) to $(0.18) |
• | Share count for EPS calculation to be approximately 79.0 million shares of Harmonic common stock |
• | Cash and short-term investments at quarter-end to be $60.0 million to $65.0 million |
Fourth Quarter 2016 Non-GAAP Financial Guidance
For the fourth quarter of 2016, Harmonic anticipates:
• | Net revenue to be $106.0 million to $111.0 million, which includes Video revenue of $97.0 million to $100.0 million and Cable Edge revenue of $9.0 million to $11.0 million |
• | Gross margin to be 53.0% to 54.0% |
• | Operating expense to be $50.0 million to $52.0 million |
• | Operating income to be $6.0 million to $8.0 million |
• | EPS to be $0.05 to $0.07 |
• | Tax rate to be approximately 15% |
• | Share count for EPS calculation to be approximately 79.0 million shares of Harmonic common stock |
• | Cash and short-term investments at quarter-end to be $60.0 million to $65.0 million |
See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations” below.
Conference Call Information
Harmonic will host a conference call to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern) on Wednesday, November 9, 2016. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling +1.574.990.1032 or +1.800.240.9147 (passcode 8557770). The replay will be available after 4:30 p.m. Pacific at the same website address or by calling +1.404.537.3406 or +1.855.859.2056 (passcode 8557770).
About Harmonic Inc.
Harmonic (NASDAQ: HLIT) is the worldwide leader in video delivery infrastructure for emerging television and video services. Harmonic enables customers to produce, deliver, and monetize amazing video experiences, with unequalled business agility and operational efficiency, by providing market-leading innovation, high-quality service, and compelling total-cost-of-ownership. More information is available at www.harmonicinc.com.
Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations regarding: GAAP net revenue, GAAP gross margins, GAAP operating expenses, GAAP operating income (loss), GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP EPS, and tax rate for the fourth quarter of 2016, as well as cash and short-term investments at the end of the fourth quarter of 2016. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: unexpected delays, difficulties and/or costs relating to integrating TVN with Harmonic; anticipated business opportunities and operational efficiencies for the combined company do not fully materialize; the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; a strong U.S. dollar may have a negative impact on our business in certain international markets; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite and telco and broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions on our sales and operations; our ability to develop
new and enhanced products in a timely manner and market acceptance of our new or existing products; losses of one or more key customers; risks associated with our international operations, including in Ukraine; risks associated with our CableOS and VOS™ product initiatives; dependence on market acceptance of various types of broadband services, on the adoption of new broadband technologies and on broadband industry trends; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of fluctuations in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in our markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; the effect on our business of natural disasters; and risks associated with our outstanding convertible notes. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic's filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K for the year ended December 31, 2015, our recent Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.
Use of Non-GAAP Financial Measures
In establishing operating budgets, managing its business performance, and setting internal measurement targets, we exclude a number of items required by GAAP. Management believes that these accounting charges and credits, most of which are non-cash or non-recurring in nature, are not useful in managing its operations and business. Historically, the Company has also publicly presented these supplemental non-GAAP measures in order to assist the investment community to see the Company “through the eyes of management,” and thereby enhance understanding of its operating performance. The non-GAAP measures presented here are: revenue, gross profit, operating expenses, income (loss) from operations, total non-operating income (expense), net and net income (loss), and net income (loss) per diluted share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements provided with this press release. The types of non-GAAP adjustments described below have historically been excluded from our GAAP financial measures: acquisition accounting impacts to TVN deferred revenue and TVN inventory valuation; TVN acquisition-and integration-related costs; Cable Edge inventory charge in connection with certain product lines; restructuring and related charges; and non-cash items, such as impairment of long-term investment, stock-based compensation expense, amortization of intangibles and non-cash interest expenses related to convertible debt and adjustments that normalize the tax rate.
CONTACTS:
Harold Covert | Blair King |
Chief Financial Officer | Director, Investor Relations |
Harmonic Inc. | Harmonic Inc. |
+1.408.542.2500 | +1.408.490.6172 |
Harmonic Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)
September 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 44,741 | $ | 126,190 | |||
Short-term investments | 7,931 | 26,604 | |||||
Accounts receivable, net | 99,078 | 69,515 | |||||
Inventories | 35,828 | 38,819 | |||||
Prepaid expenses and other current assets | 38,519 | 25,003 | |||||
Total current assets | 226,097 | 286,131 | |||||
Property and equipment, net | 35,145 | 27,012 | |||||
Goodwill | 239,880 | 197,781 | |||||
Intangibles, net | 33,121 | 4,097 | |||||
Other long-term assets | 31,218 | 9,936 | |||||
Total assets | $ | 565,461 | $ | 524,957 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Other debts and capital lease obligations, current | $ | 6,825 | $ | — | |||
Accounts payable | 31,407 | 19,364 | |||||
Income taxes payable | 545 | 307 | |||||
Deferred revenue | 54,319 | 33,856 | |||||
Accrued liabilities | 50,369 | 31,354 | |||||
Total current liabilities | 143,465 | 84,881 | |||||
Convertible debt, long-term | 101,964 | 98,295 | |||||
Other debts and capital lease obligations, long-term | 15,949 | — | |||||
Income taxes payable, long-term | 2,863 | 3,886 | |||||
Deferred tax liabilities, long-term | 2,163 | — | |||||
Other non-current liabilities | 17,604 | 9,727 | |||||
Total liabilities | 284,008 | 196,789 | |||||
Stockholders' equity: | |||||||
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued or outstanding | — | — | |||||
Common stock, $0.001 par value, 150,000 shares authorized; 78,311 and 76,015 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 78 | 76 | |||||
Additional paid-in capital | 2,249,857 | 2,236,418 | |||||
Accumulated deficit | (1,965,779 | ) | (1,903,908 | ) | |||
Accumulated other comprehensive loss | (2,703 | ) | (4,418 | ) | |||
Total stockholders' equity | 281,453 | 328,168 | |||||
Total liabilities and stockholders' equity | $ | 565,461 | $ | 524,957 | |||
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three months ended | Nine months ended | ||||||||||||||
September 30, 2016 | October 2, 2015 | September 30, 2016(1) | October 2, 2015 | ||||||||||||
Net revenue | $ | 101,406 | $ | 83,305 | $ | 292,809 | $ | 290,424 | |||||||
Cost of revenue | 50,043 | 37,074 | 149,752 | 134,780 | |||||||||||
Gross profit | 51,363 | 46,231 | 143,057 | 155,644 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 24,202 | 21,679 | 74,272 | 65,824 | |||||||||||
Selling, general and administrative | 36,112 | 28,966 | 105,498 | 91,443 | |||||||||||
Amortization of intangibles | 3,009 | 1,446 | 9,606 | 4,338 | |||||||||||
Restructuring and asset impairment charges | (27 | ) | 397 | 4,488 | 626 | ||||||||||
Total operating expenses | 63,296 | 52,488 | 193,864 | 162,231 | |||||||||||
Loss from operations | (11,933 | ) | (6,257 | ) | (50,807 | ) | (6,587 | ) | |||||||
Interest (expense) income, net | (2,734 | ) | 30 | (7,806 | ) | 102 | |||||||||
Other (expense) income, net | (328 | ) | 148 | (5 | ) | (299 | ) | ||||||||
Loss on impairment of long-term investment | (1,259 | ) | — | (2,735 | ) | (2,505 | ) | ||||||||
Loss before income taxes | (16,254 | ) | (6,079 | ) | (61,353 | ) | (9,289 | ) | |||||||
(Benefit from) provision for income taxes | (242 | ) | (1,268 | ) | 518 | (827 | ) | ||||||||
Net loss | $ | (16,012 | ) | $ | (4,811 | ) | $ | (61,871 | ) | $ | (8,462 | ) | |||
Net loss per share: | |||||||||||||||
Basic and diluted | $ | (0.21 | ) | $ | (0.05 | ) | $ | (0.80 | ) | $ | (0.10 | ) | |||
Shares used in per share calculation: | |||||||||||||||
Basic and diluted | 78,092 | 87,991 | 77,475 | 88,359 | |||||||||||
(1) On February 29, 2016, Harmonic closed the acquisition of TVN and as a result, our 2016 results for the nine months ended September 30, 2016 include TVN results beginning on February 29, 2016.
Harmonic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Nine months ended | |||||||
September 30, 2016 | October 2, 2015 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (61,871 | ) | $ | (8,462 | ) | |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||
Amortization of intangibles | 12,711 | 4,971 | |||||
Depreciation | 13,198 | 10,143 | |||||
Stock-based compensation | 8,542 | 11,845 | |||||
Amortization of discount on convertible debt | 3,669 | — | |||||
Restructuring, asset impairment and loss on retirement of fixed assets | 1,476 | 354 | |||||
Loss on impairment of long-term investment | 2,735 | 2,505 | |||||
Provision for excess and obsolete inventories | 6,246 | 1,234 | |||||
Allowance for doubtful accounts, returns and discounts | 1,222 | 576 | |||||
Other non-cash adjustments, net | 251 | — | |||||
Changes in assets and liabilities, net of effects of acquisition: | |||||||
Accounts receivable | (12,869 | ) | 9,440 | ||||
Inventories | 2,225 | (7,936 | ) | ||||
Prepaid expenses and other assets | (5,938 | ) | (13,817 | ) | |||
Accounts payable | 2,505 | 1,772 | |||||
Deferred revenue | 20,038 | 5,237 | |||||
Income taxes payable | (827 | ) | (1,372 | ) | |||
Accrued and other liabilities | (6,230 | ) | (7,926 | ) | |||
Net cash (used in) provided by operating activities | (12,917 | ) | 8,564 | ||||
Cash flows from investing activities: | |||||||
Acquisition of business, net of cash acquired | (75,669 | ) | — | ||||
Purchases of investments | — | (20,714 | ) | ||||
Proceeds from sales and maturities of investments | 18,692 | 26,534 | |||||
Purchases of property and equipment | (11,423 | ) | (10,393 | ) | |||
Purchases of long-term investments | — | (85 | ) | ||||
Restricted cash | — | (1,091 | ) | ||||
Net cash used in investing activities | (68,400 | ) | (5,749 | ) | |||
Cash flows from financing activities: | |||||||
Payment of convertible debt issuance costs | (582 | ) | — | ||||
Proceeds from other debts and capital leases | 5,968 | — | |||||
Repayment of other debts and capital leases | (8,038 | ) | — | ||||
Payments for repurchase of common stock | — | (20,007 | ) | ||||
Proceeds from common stock issued to employees | 3,736 | 9,255 | |||||
Payment of tax withholding obligations related to net share settlements of restricted stock units | (1,313 | ) | (3,288 | ) | |||
Net cash used in financing activities | (229 | ) | (14,040 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 97 | (236 | ) | ||||
Net decrease in cash and cash equivalents | (81,449 | ) | (11,461 | ) | |||
Cash and cash equivalents at beginning of period | 126,190 | 73,032 | |||||
Cash and cash equivalents at end of period | $ | 44,741 | $ | 61,571 | |||
Harmonic Inc.
Revenue Information
(Unaudited, in thousands, except percentages)
Three months ended | |||||||||||||||||||||||||||||||
September 30, 2016 | July 1, 2016 | October 2, 2015 | |||||||||||||||||||||||||||||
GAAP | Adjustment(1) | Non-GAAP | GAAP | Adjustment(1) | Non-GAAP | GAAP and Non-GAAP(2) | |||||||||||||||||||||||||
Product | |||||||||||||||||||||||||||||||
Video Products | $ | 63,288 | $ | — | $ | 63,288 | 62% | $ | 61,660 | $ | 205 | $ | 61,865 | 56% | $ | 48,629 | 59% | ||||||||||||||
Cable Edge | 6,997 | — | 6,997 | 7% | 15,751 | — | 15,751 | 14% | 8,616 | 10% | |||||||||||||||||||||
Services and Support | 31,121 | 325 | 31,446 | 31% | 32,160 | 575 | 32,735 | 30% | 26,060 | 31% | |||||||||||||||||||||
Total | $ | 101,406 | $ | 325 | $ | 101,731 | 100% | $ | 109,571 | $ | 780 | $ | 110,351 | 100% | $ | 83,305 | 100% | ||||||||||||||
Geography | |||||||||||||||||||||||||||||||
Americas | $ | 47,856 | $ | 166 | $ | 48,022 | 47% | $ | 57,680 | $ | 143 | $ | 57,823 | 52% | $ | 44,926 | 54% | ||||||||||||||
EMEA | 32,405 | 106 | 32,511 | 32% | 33,456 | 467 | 33,923 | 31% | 19,269 | 23% | |||||||||||||||||||||
APAC | 21,145 | 53 | 21,198 | 21% | 18,435 | 170 | 18,605 | 17% | 19,110 | 23% | |||||||||||||||||||||
Total | $ | 101,406 | $ | 325 | $ | 101,731 | 100% | $ | 109,571 | $ | 780 | $ | 110,351 | 100% | $ | 83,305 | 100% | ||||||||||||||
Market | |||||||||||||||||||||||||||||||
Service Provider | $ | 53,459 | $ | 97 | $ | 53,556 | 53% | $ | 65,733 | $ | 329 | $ | 66,062 | 60% | $ | 46,451 | 56% | ||||||||||||||
Broadcast and Media | 47,947 | 228 | 48,175 | 47% | 43,838 | 451 | 44,289 | 40% | 36,854 | 44% | |||||||||||||||||||||
Total | $ | 101,406 | $ | 325 | $ | 101,731 | 100% | $ | 109,571 | $ | 780 | $ | 110,351 | 100% | $ | 83,305 | 100% | ||||||||||||||
Nine months ended | ||||||||||||||||||
September 30, 2016 | October 2, 2015 | |||||||||||||||||
GAAP | Adjustment(1) | Non-GAAP | GAAP and Non-GAAP(2) | |||||||||||||||
Product | ||||||||||||||||||
Video Products | $ | 169,162 | $ | 560 | $ | 169,722 | 58% | $ | 153,439 | 53% | ||||||||
Cable Edge | 36,180 | — | 36,180 | 12% | 61,726 | 21% | ||||||||||||
Services and Support | 87,467 | 1,168 | 88,635 | 30% | 75,259 | 26% | ||||||||||||
Total | $ | 292,809 | $ | 1,728 | $ | 294,537 | 100% | $ | 290,424 | 100% | ||||||||
Geography | ||||||||||||||||||
Americas | $ | 154,513 | $ | 390 | $ | 154,903 | 53% | $ | 165,786 | 57% | ||||||||
EMEA | 85,716 | 974 | 86,690 | 29% | 71,302 | 25% | ||||||||||||
APAC | 52,580 | 364 | 52,944 | 18% | 53,336 | 18% | ||||||||||||
Total | $ | 292,809 | $ | 1,728 | $ | 294,537 | 100% | $ | 290,424 | 100% | ||||||||
Market | ||||||||||||||||||
Service Provider | $ | 170,462 | $ | 575 | $ | 171,037 | 58% | $ | 178,466 | 61% | ||||||||
Broadcast and Media | 122,347 | 1,153 | 123,500 | 42% | 111,958 | 39% | ||||||||||||
Total | $ | 292,809 | $ | 1,728 | $ | 294,537 | 100% | $ | 290,424 | 100% | ||||||||
(1) Non-GAAP revenue for the three months ended September 30, 2016 and July 1, 2016 and for the nine months ended September 30, 2016 include $0.3 million, $0.8 million and $1.7 million adjustments relating to TVN deferred revenue as a result of acquisition accounting, respectively.
(2) There is no revenue adjustment for the three months and nine months ended October 2, 2015.
Harmonic Inc.
Segment Revenue and Operating Income (Loss)
(Unaudited, in thousands)
Three months ended | |||||||||||||||||||||||||||||
September 30, 2016 | July 1, 2016 | October 2, 2015 | |||||||||||||||||||||||||||
GAAP | Adjustments(1) | Non-GAAP | GAAP | Adjustments(1) | Non-GAAP | GAAP | Adjustments(1) | Non-GAAP | |||||||||||||||||||||
Net revenue: | |||||||||||||||||||||||||||||
Video | $ | 91,353 | $ | 325 | $ | 91,678 | $ | 90,588 | $ | 780 | $ | 91,368 | $ | 71,889 | $ | — | $ | 71,889 | |||||||||||
Cable Edge | 10,053 | — | 10,053 | 18,983 | — | 18,983 | 11,416 | — | 11,416 | ||||||||||||||||||||
Total consolidated net revenue | $ | 101,406 | $ | 325 | $ | 101,731 | $ | 109,571 | $ | 780 | $ | 110,351 | $ | 83,305 | $ | — | $ | 83,305 | |||||||||||
Operating income (loss): | |||||||||||||||||||||||||||||
Video | $ | 4,886 | $ | 325 | $ | 5,211 | $ | 518 | $ | 780 | $ | 1,298 | $ | 3,575 | $ | — | $ | 3,575 | |||||||||||
Cable Edge | (4,767 | ) | — | (4,767 | ) | (498 | ) | — | (498 | ) | (3,963 | ) | — | (3,963 | ) | ||||||||||||||
Total segment operating income (loss) | 119 | 325 | 444 | 20 | 780 | 800 | (388 | ) | — | (388 | ) | ||||||||||||||||||
Unallocated corporate expenses | (4,983 | ) | 4,983 | — | (9,831 | ) | 9,831 | — | (510 | ) | 510 | — | |||||||||||||||||
Stock-based compensation | (2,680 | ) | 2,680 | — | (2,768 | ) | 2,768 | — | (3,827 | ) | 3,827 | — | |||||||||||||||||
Amortization of intangibles | (4,389 | ) | 4,389 | — | (5,539 | ) | 5,539 | — | (1,532 | ) | 1,532 | — | |||||||||||||||||
Income (loss) from operations | (11,933 | ) | 12,377 | 444 | (18,118 | ) | 18,918 | 800 | (6,257 | ) | 5,869 | (388 | ) | ||||||||||||||||
Non-operating (expense) income, net | (4,321 | ) | 2,609 | (1,712 | ) | (2,319 | ) | 1,233 | (1,086 | ) | 178 | — | 178 | ||||||||||||||||
Income (loss) before income taxes | $ | (16,254 | ) | $ | 14,986 | $ | (1,268 | ) | $ | (20,437 | ) | $ | 20,151 | $ | (286 | ) | $ | (6,079 | ) | $ | 5,869 | $ | (210 | ) | |||||
Nine months ended | |||||||||||||||||||
September 30, 2016 | October 2, 2015 | ||||||||||||||||||
GAAP | Adjustments(1) | Non-GAAP | GAAP | Adjustments(1) | Non-GAAP | ||||||||||||||
Net revenue: | |||||||||||||||||||
Video | $ | 246,949 | $ | 1,728 | $ | 248,677 | $ | 219,378 | $ | — | $ | 219,378 | |||||||
Cable Edge | 45,860 | — | 45,860 | 71,046 | — | 71,046 | |||||||||||||
Total consolidated net revenue | $ | 292,809 | $ | 1,728 | $ | 294,537 | $ | 290,424 | $ | — | $ | 290,424 | |||||||
Operating income (loss): | |||||||||||||||||||
Video | $ | (1,943 | ) | $ | 1,917 | $ | (26 | ) | $ | 8,386 | $ | — | $ | 8,386 | |||||
Cable Edge | (7,118 | ) | — | (7,118 | ) | 2,582 | — | 2,582 | |||||||||||
Total segment operating income (loss) | (9,061 | ) | 1,917 | (7,144 | ) | 10,968 | — | 10,968 | |||||||||||
Unallocated corporate expenses | (20,493 | ) | 20,493 | — | (739 | ) | 739 | — | |||||||||||
Stock-based compensation | (8,542 | ) | 8,542 | — | (11,845 | ) | 11,845 | — | |||||||||||
Amortization of intangibles | (12,711 | ) | 12,711 | — | (4,971 | ) | 4,971 | — | |||||||||||
Income (loss) from operations | (50,807 | ) | 43,663 | (7,144 | ) | (6,587 | ) | 17,555 | 10,968 | ||||||||||
Non-operating (expense) income, net | (10,546 | ) | 6,505 | (4,041 | ) | (2,702 | ) | 2,505 | (197 | ) | |||||||||
Income (loss) before income taxes | $ | (61,353 | ) | $ | 50,168 | $ | (11,185 | ) | $ | (9,289 | ) | $ | 20,060 | $ | 10,771 | ||||
(1) See “Use of Non-GAAP Financial Measures” 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 | ||||||||||||||||||
September 30, 2016 | ||||||||||||||||||
Revenue | Gross Profit | Total Operating Expense | Income (loss) from Operations | Total Non-operating Income (expense), net | Net loss | |||||||||||||
GAAP | $ | 101,406 | $ | 51,363 | $ | 63,296 | $ | (11,933 | ) | $ | (4,321 | ) | $ | (16,012 | ) | |||
Cable Edge inventory charge | — | (159 | ) | — | (159 | ) | — | (159 | ) | |||||||||
Acquisition accounting impact related to TVN deferred revenue | 325 | 325 | — | 325 | — | 325 | ||||||||||||
Stock-based compensation in cost of revenue | — | 360 | — | 360 | — | 360 | ||||||||||||
Stock-based compensation in research and development | — | — | (771 | ) | 771 | — | 771 | |||||||||||
Stock-based compensation in selling, general and administrative | — | — | (1,549 | ) | 1,549 | — | 1,549 | |||||||||||
Amortization of intangibles | — | 1,380 | (3,009 | ) | 4,389 | — | 4,389 | |||||||||||
Restructuring and related charges | — | (1 | ) | 27 | (28 | ) | — | (28 | ) | |||||||||
TVN acquisition-and integration-related costs | — | 119 | (5,051 | ) | 5,170 | 98 | 5,268 | |||||||||||
Loss on impairment of long-term investment | — | — | — | — | 1,259 | 1,259 | ||||||||||||
Non-cash interest expenses related to convertible notes | — | — | — | — | 1,252 | 1,252 | ||||||||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | — | — | (52 | ) | |||||||||||
Non-GAAP | $ | 101,731 | $ | 53,387 | $ | 52,943 | $ | 444 | $ | (1,712 | ) | $ | (1,078 | ) | ||||
As a % of revenue (GAAP) | 50.7 | % | 62.4 | % | (11.8 | )% | (4.3 | )% | (15.8 | )% | ||||||||
As a % of revenue (Non-GAAP) | 52.5 | % | 52.0 | % | 0.4 | % | (1.7 | )% | (1.1 | )% | ||||||||
Diluted net loss per share: | ||||||||||||||||||
Diluted net loss per share-GAAP | $ | (0.21 | ) | |||||||||||||||
Diluted net loss per share-Non-GAAP | $ | (0.01 | ) | |||||||||||||||
Shares used to compute diluted net loss per share: | ||||||||||||||||||
GAAP and Non-GAAP | 78,092 | |||||||||||||||||
Three months ended | ||||||||||||||||||
July 1, 2016 | ||||||||||||||||||
Revenue | Gross Profit | Total Operating Expense | Income (loss) from Operations | Total Non-operating Income (expense), net | Net Loss | |||||||||||||
GAAP | $ | 109,571 | $ | 51,040 | $ | 69,158 | $ | (18,118 | ) | $ | (2,319 | ) | $ | (20,679 | ) | |||
Cable Edge inventory charge | — | 4,519 | — | 4,519 | 4,519 | |||||||||||||
Acquisition accounting impacts related to TVN deferred revenue | 780 | 780 | — | 780 | — | 780 | ||||||||||||
Stock-based compensation in cost of revenue | — | 424 | — | 424 | — | 424 | ||||||||||||
Stock-based compensation in research and development | — | — | (841 | ) | 841 | — | 841 | |||||||||||
Stock-based compensation in selling, general and administrative | — | — | (1,503 | ) | 1,503 | — | 1,503 | |||||||||||
Amortization of intangibles | — | 1,307 | (4,232 | ) | 5,539 | — | 5,539 | |||||||||||
Restructuring and related charges | — | 6 | (1,903 | ) | 1,909 | — | 1,909 | |||||||||||
TVN acquisition-and integration-related costs | — | 433 | (2,970 | ) | 3,403 | — | 3,403 | |||||||||||
Non-cash interest expenses related to convertible notes | — | — | — | — | 1,233 | 1,233 | ||||||||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | — | — | 285 | ||||||||||||
Non-GAAP | $ | 110,351 | $ | 58,509 | $ | 57,709 | $ | 800 | $ | (1,086 | ) | $ | (243 | ) | ||||
As a % of revenue (GAAP) | 46.6 | % | 63.1 | % | (16.5 | )% | (2.1 | )% | (18.9 | )% | ||||||||
As a % of revenue (Non-GAAP) | 53.0 | % | 52.3 | % | 0.7 | % | (1.0 | )% | (0.2 | )% | ||||||||
Diluted net loss per share: | ||||||||||||||||||
Diluted net loss per share-GAAP | $ | (0.27 | ) | |||||||||||||||
Diluted net loss per share-Non-GAAP | $ | 0.00 | ||||||||||||||||
Shares used to compute diluted net loss per share: | ||||||||||||||||||
GAAP and Non-GAAP | 77,342 | |||||||||||||||||
Three months ended | ||||||||||||||||||
October 2, 2015 | ||||||||||||||||||
Revenue | Gross Profit | Total Operating Expense | Loss from Operations | Total Non-operating Income (expense), net | Net Loss | |||||||||||||
GAAP | $ | 83,305 | $ | 46,231 | $ | 52,488 | $ | (6,257 | ) | $ | 178 | $ | (4,811 | ) | ||||
Stock-based compensation in cost of revenue | — | 433 | — | 433 | — | 433 | ||||||||||||
Stock-based compensation in research and development | — | — | (1,074 | ) | 1,074 | — | 1,074 | |||||||||||
Stock-based compensation in selling, general and administrative | — | — | (2,320 | ) | 2,320 | — | 2,320 | |||||||||||
Amortization of intangibles | — | 86 | (1,446 | ) | 1,532 | — | 1,532 | |||||||||||
Restructuring and related charges | — | 113 | (397 | ) | 510 | — | 510 | |||||||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | — | — | (1,224 | ) | |||||||||||
Non-GAAP | $ | 83,305 | $ | 46,863 | $ | 47,251 | $ | (388 | ) | $ | 178 | $ | (166 | ) | ||||
As a % of revenue (GAAP) | 55.5 | % | 63.0 | % | (7.5 | )% | 0.2 | % | (5.8 | )% | ||||||||
As a % of revenue (Non-GAAP) | 56.3 | % | 56.7 | % | (0.5 | )% | 0.2 | % | (0.2 | )% | ||||||||
Diluted net income (loss) per share: | ||||||||||||||||||
Diluted net loss per share-GAAP | $ | (0.05 | ) | |||||||||||||||
Diluted net loss per share-Non-GAAP | $ | 0.00 | ||||||||||||||||
Shares used to compute diluted net loss per share: | ||||||||||||||||||
GAAP and Non-GAAP | 87,991 | |||||||||||||||||
Nine months ended | ||||||||||||||||||
September 30, 2016 | ||||||||||||||||||
Revenue | Gross Profit | Total Operating Expense | Income (loss) from Operations | Total Non-operating Income (expense), net | Net Loss | |||||||||||||
GAAP | $ | 292,809 | $ | 143,057 | $ | 193,864 | $ | (50,807 | ) | $ | (10,546 | ) | $ | (61,871 | ) | |||
Cable Edge inventory charge | — | 4,360 | — | 4,360 | — | 4,360 | ||||||||||||
Acquisition accounting impacts related to TVN deferred revenue | 1,728 | 1,728 | — | 1,728 | — | 1,728 | ||||||||||||
Acquisition accounting impacts related to TVN fair value of inventory | — | 189 | — | 189 | — | 189 | ||||||||||||
Stock-based compensation in cost of revenue | — | 1,011 | — | 1,011 | — | 1,011 | ||||||||||||
Stock-based compensation in research and development | — | — | (2,581 | ) | 2,581 | — | 2,581 | |||||||||||
Stock-based compensation in selling, general and administrative | — | — | (4,950 | ) | 4,950 | — | 4,950 | |||||||||||
Amortization of intangibles | — | 3,105 | (9,606 | ) | 12,711 | — | 12,711 | |||||||||||
Restructuring and related charges | — | (24 | ) | (4,488 | ) | 4,464 | — | 4,464 | ||||||||||
TVN acquisition-and integration-related costs | — | 610 | (11,059 | ) | 11,669 | 98 | 11,767 | |||||||||||
Loss on impairment of long-term investment | — | — | — | — | 2,735 | 2,735 | ||||||||||||
Non-cash interest expenses related to convertible notes | — | — | — | — | 3,672 | 3,672 | ||||||||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | — | — | 2,197 | ||||||||||||
Non-GAAP | $ | 294,537 | $ | 154,036 | $ | 161,180 | $ | (7,144 | ) | $ | (4,041 | ) | $ | (9,506 | ) | |||
As a % of revenue (GAAP) | 48.9 | % | 66.2 | % | (17.4 | )% | (3.6 | )% | (21.1 | )% | ||||||||
As a % of revenue (Non-GAAP) | 52.3 | % | 54.7 | % | (2.4 | )% | (1.4 | )% | (3.2 | )% | ||||||||
Diluted net loss per share: | ||||||||||||||||||
Diluted net loss per share-GAAP | $ | (0.80 | ) | |||||||||||||||
Diluted net loss per share-Non-GAAP | $ | (0.12 | ) | |||||||||||||||
Shares used to compute diluted net loss per share: | ||||||||||||||||||
GAAP and Non-GAAP | 77,475 | |||||||||||||||||
Nine months ended | ||||||||||||||||||
October 2, 2015 | ||||||||||||||||||
Revenue | Gross Profit | Total Operating Expense | Income (loss) from Operations | Total Non-operating Income (expense), net | Net Income (Loss) | |||||||||||||
GAAP | $ | 290,424 | $ | 155,644 | $ | 162,231 | $ | (6,587 | ) | $ | (2,702 | ) | $ | (8,462 | ) | |||
Stock-based compensation in cost of revenue | — | 1,383 | — | 1,383 | — | 1,383 | ||||||||||||
Stock-based compensation in research and development | — | — | (3,249 | ) | 3,249 | — | 3,249 | |||||||||||
Stock-based compensation in selling, general and administrative | — | — | (7,213 | ) | 7,213 | — | 7,213 | |||||||||||
Amortization of intangibles | — | 633 | (4,338 | ) | 4,971 | — | 4,971 | |||||||||||
Restructuring and related charges | — | 113 | (626 | ) | 739 | — | 739 | |||||||||||
Loss on impairment of long-term investment | — | — | — | — | 2,505 | 2,505 | ||||||||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | — | — | (3,089 | ) | |||||||||||
Non-GAAP | $ | 290,424 | $ | 157,773 | $ | 146,805 | $ | 10,968 | $ | (197 | ) | $ | 8,509 | |||||
As a % of revenue (GAAP) | 53.6 | % | 55.9 | % | (2.3 | )% | (0.9 | )% | (2.9 | )% | ||||||||
As a % of revenue (Non-GAAP) | 54.3 | % | 50.5 | % | 3.8 | % | (0.1 | )% | 2.9 | % | ||||||||
Diluted net loss per share: | ||||||||||||||||||
Diluted net loss per share-GAAP | $ | (0.10 | ) | |||||||||||||||
Diluted net income per share-Non-GAAP | $ | 0.10 | ||||||||||||||||
Shares used to compute diluted net income (loss) per share: | ||||||||||||||||||
GAAP | 88,359 | |||||||||||||||||
Non-GAAP | 89,410 | |||||||||||||||||
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Business Outlook
(In millions, except percentages and per share data)
Q4 2016 Financial Guidance | ||||||
Revenue | Gross Profit | Total Operating Expense | Income(loss) from Operations | Total Non-operating Income (expense), net | Net Income(loss) | |
GAAP | $105.8 to $110.8 | $51.0 to $55.0 | $64.5 to $66.5 | $(13.5) to $(11.5) | $(2.6) | ($16.0) to ($14.0) |
Acquisition accounting impact related to TVN deferred revenue | 0.2 | 0.2 | — | 0.2 | — | 0.2 |
Stock-based compensation expense | — | 0.6 | (3.8) | 4.4 | — | 4.4 |
Amortization of intangibles | — | 1.4 | (1.0) | 2.4 | — | 2.4 |
Restructuring and related charges and TVN acquisition/integration costs | — | 2.8 | (9.8) | 12.6 | — | 12.6 |
Non-cash interest expense related to convertible notes | — | — | — | — | 1.3 | 1.3 |
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | — | — | (0.8) |
0.2 | 5.0 | (14.6) | 19.6 | (1.3) | 20.1 | |
Non-GAAP | $106.0 to $111.0 | $56.0 to $60.0 | $50.0 to $52.0 | $6.0 to $8.0 | $(1.3) | $4.0 to $6.0 |
As a % of revenue (GAAP) | 48% to 49% | 60% to 61% | (13)% to (11)% | (2%) | (15)% to (13)% | |
As a % of revenue (Non-GAAP) | 53% to 54% | 46% to 47% | 6% to 7% | (1%) | 4% to 5% | |
Diluted income (loss) per share: | ||||||
Diluted net loss per share-GAAP | $(0.20) to $(0.18) | |||||
Diluted net income per share-Non-GAAP | $0.05 to $0.07 | |||||
Shares used to compute diluted income (loss) per share: | ||||||
GAAP and Non-GAAP | 79.0 | |||||