Document


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
 
Date of Report (Date of earliest event reported): February 3, 2020
  
HARMONIC INC.
(Exact name of Registrant as specified in its charter)
 
 
Delaware
000-25826
77-0201147
(State or other jurisdiction of
incorporation)
Commission
File Number
(IRS Employer
Identification No.)
4300 North First Street
San Jose, CA 95134
(Address of principal executive offices, including zip code)

(408) 542-2500
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

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:
¨
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))
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
HLIT
The NASDAQ Stock Market LLC




Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐




Item 2.02.
Results of Operations and Financial Condition.
On February 3, 2020, Harmonic Inc. (“Harmonic”) issued a press release regarding its preliminary unaudited financial results for the quarter and year ended December 31, 2019. In the press release, Harmonic also announced that it would be holding a conference call on February 3, 2020 to discuss its financial results for the quarter and year ended December 31, 2019. 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
Number
  
Description
99.1

  
Press release of Harmonic Inc. dated February 3, 2020, entitled “Harmonic Announces Fourth Quarter and Fiscal 2019 Results.”

EXHIBIT INDEX
 
 
 
Exhibit
Number
  
Description
99.1

  


3



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: February 3, 2020
 
 
 
HARMONIC INC.
 
 
 
 
 
 
 
 
By:
 
/s/ Sanjay Kalra
 
 
 
 
 
 
Sanjay Kalra
 
 
 
 
 
 
Chief Financial Officer



4
Exhibit


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13335626&doc=3
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13335626&doc=4
FOR IMMEDIATE RELEASE
Harmonic Announces Fourth Quarter and Fiscal 2019 Results
Strong Cable Access Revenue Growth
Record Video Gross Margins
SAN JOSE, California, February 3, 2020 - Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the fourth quarter and fiscal year ended December 31, 2019.
“Harmonic delivered another quarter of strong financial and strategic results,” said Patrick Harshman, president and chief executive officer of Harmonic. “Our industry-leading CableOS solution continued to gain market share, resulting in 78.3% revenue growth year over year. Our Video segment reported record gross margin of 60% and operating margin of 14%, reflecting our ongoing profitable transformation to live streaming software and SaaS.”
Q4 Financial and Business Highlights

Financial

Revenue: $122.2 million, up 7.5% year over year.
SaaS and service revenue: $36.3 million, up 18.9% year over year.
Gross margin: GAAP 50.5% and non-GAAP 52.3%, compared to GAAP 53.1% and non-GAAP 54.5% in the year ago period.
Cable Access segment revenue: $43.0 million, up 78.3% year over year.
Video segment gross margin: 60.0%, compared to 57.5% in the year ago period.
Operating income: GAAP income $6.7 million and non-GAAP income $14.8 million, compared to GAAP income $7.3 million and non-GAAP income $12.7 million in the year ago period.
EPS: GAAP net income per share 6 cents and non-GAAP net income per share 12 cents, compared to GAAP net income per share 4 cents and non-GAAP net income per share 11 cents in the year ago period.
Cash: $93.1 million, up $27.1 million year over year.

Business

CableOS solution commercially deployed with 23 customers, up over 20% quarter over quarter.
Initial multi-million dollar CableOS purchase orders received from two new international Tier 1 operators.
Video SaaS customer base increased from 36 to 48 customers, up 33% quarter over quarter and 153% year over year.
Video SaaS annual recurring revenue of $16.3 million, up 70% year over year.

1



Select Financial Information
 
 
GAAP
 
Non-GAAP
Key Financial Results
 
Q4 2019
 
Q3 2019
 
Q4 2018
 
Q4 2019
 
Q3 2019
 
Q4 2018
 
 
(in millions, except per share data)
Net revenue
 
$
122.2

 
$
115.7

 
$
113.7

 
$
122.2

 
$
115.7

 
$
113.6

Net income
 
$
5.6

 
$
11.7

 
$
3.3

 
$
12.1

 
$
24.6

 
$
9.7

Diluted EPS
 
$
0.06

 
$
0.12

 
$
0.04

 
$
0.12

 
$
0.25

 
$
0.11

 
 
 
 
 
 
 
 
 
 
 
 
 
Other Financial Information
Q4 2019
 
Q3 2019
 
Q4 2018
 
(in millions)
Bookings for the quarter
$
140.1

 
$
126.5

 
$
92.8

Backlog and deferred revenue as of quarter end
$
210.2

 
$
192.5

 
$
186.4

Cash and cash equivalents as of quarter end
$
93.1

 
$
66.7

 
$
66.0

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
 
Q1 2020
 
2020
 
Low
 
High
 
Low
 
High
 
 
 
(in millions, except percentages and per share data)
Net Revenue
 
$
80.0

 
$
90.0

 
$
390.0

 
$
430.0

 
Video
 
$
60.0

 
$
65.0

 
$
260.0

 
$
280.0

 
Cable Access
 
$
20.0

 
$
25.0

 
$
130.0

 
$
150.0

Gross Margin %
 
47.5
%
 
49.0
%
 
49.0
%
 
54.0
%
Operating Expenses
 
$
55.5

 
$
57.5

 
$
214.0

 
$
226.5

Operating Income (Loss)
 
$
(19.5
)
 
$
(11.0
)
 
$
(24.0
)
 
$
5.0

Tax Expense
 
$
0.7

 
$
0.7

 
$
2.9

 
$
2.9

EPS
 
$
(0.24
)
 
$
(0.16
)
 
$
(0.40
)
 
$
(0.11
)
Shares
 
95.8

 
95.8

 
97.7

 
97.7

Cash
 
$
70.0

 
$
80.0

 
$
50.0

 
$
60.0

Non-GAAP Financial Guidance
 
Q1 2020
 
2020
 
Low
 
High
 
Low
 
High
 
 
 
(in millions, except percentages and per share data)
Net Revenue
 
$
80.0

 
$
90.0

 
$
390.0

 
$
430.0

 
Video
 
$
60.0

 
$
65.0

 
$
260.0

 
$
280.0

 
Cable Access
 
$
20.0

 
$
25.0

 
$
130.0

 
$
150.0

Gross Margin %
 
50.0
%
 
52.0
%
 
50.0
%
 
55.0
%
Operating Expenses
 
$
48.0

 
$
50.0

 
$
190.0

 
$
202.0

Operating Income (Loss)
 
$
(9.5
)
 
$
(1.5
)
 
$
5.0

 
$
34.0

Tax rate
 
10
%
 
10
%
 
10
%
 
10
%
EPS
 
$
(0.10
)
 
$
(0.03
)
 
$
0.00

 
$
0.26

Shares
 
95.8

 
95.8

 
97.7

 
101.2

Cash
 
$
70.0

 
$
80.0

 
$
50.0

 
$
60.0


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

2



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 Monday, February 3, 2020. 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 7278754). 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 7278754).
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 and 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.


3



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 expense 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 expense. We believe that excluding these costs provides meaningful supplemental information regarding operational performance and liquidity, along with enhancing

4



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.

CONTACTS:
 
Sanjay Kalra
Nicole Noutsios
Chief Financial Officer
Investor Relations
Harmonic Inc.
Harmonic Inc.
+1.408.490.6031
+1.510.315.1003

 
 

5



Harmonic Inc.
Preliminary Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)

 
December 31, 2019
 
December 31, 2018
ASSETS
 
 
 
Current assets:
 
 
 
   Cash and cash equivalents
$
93,058

 
$
65,989

   Accounts receivable, net
88,500

 
81,795

   Inventories
29,042

 
25,638

   Prepaid expenses and other current assets
40,762

 
23,280

Total current assets
251,362

 
196,702

Property and equipment, net
22,928

 
22,321

Goodwill
239,780

 
240,618

Intangibles, net
4,461

 
12,817

Other long-term assets
68,796

 
38,377

Total assets
$
587,327

 
$
510,835

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
   Other debts and capital lease obligations, current
$
6,713

 
$
7,175

   Accounts payable
40,933

 
33,778

   Income taxes payable
1,226

 
1,099

   Deferred revenue
37,117

 
41,592

   Accrued and other current liabilities
62,535

 
52,761

Total current liabilities
148,524

 
136,405

Convertible notes, long-term
132,004

 
114,808

Other debts and capital lease obligations, long-term
10,511

 
12,684

Income taxes payable, long-term
178

 
460

Other non-current liabilities
41,254

 
18,228

Total liabilities
$
332,471

 
$
282,585

 
 
 
 
Convertible notes
2,410

 

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; 91,875 and 87,057 shares issued and outstanding at December 31, 2019 and 2018, respectively
92

 
87

   Additional paid-in capital
2,327,359

 
2,296,795

   Accumulated deficit
(2,071,940
)
 
(2,067,416
)
   Accumulated other comprehensive loss
(3,065
)
 
(1,216
)
Total stockholders’ equity
252,446

 
228,250

Total liabilities and stockholders’ equity
$
587,327

 
$
510,835



6



Harmonic Inc.
Preliminary Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
 
Three months ended
 
Year ended
 
December 31, 2019
 
December 31, 2018
 
December 31, 2019
 
December 31, 2018
Revenue:
 
 
 
 
 
 
 
     Appliance and integration
$
85,933

 
$
83,179

 
$
275,797

 
$
287,564

     SaaS and service
36,245

 
30,476

 
127,077

 
115,994

Total net revenue
122,178

 
113,655

 
402,874

 
403,558

Cost of revenue:
 
 
 
 
 
 
 
     Appliance and integration
47,107

 
42,289

 
130,284

 
148,472

     SaaS and service
13,376

 
11,045

 
49,578

 
45,877

Total cost of revenue
60,483

 
53,334

 
179,862

 
194,349

Total gross profit
61,695

 
60,321

 
223,012

 
209,209

Operating expenses:
 
 
 
 
 
 
 
   Research and development
21,703

 
21,913

 
84,614

 
89,163

   Selling, general and administrative
30,557

 
30,078

 
119,035

 
118,952

   Amortization of intangibles
782

 
791

 
3,139

 
3,187

   Restructuring and related charges
1,947

 
214

 
3,141

 
2,918

Total operating expenses
54,989

 
52,996

 
209,929

 
214,220

Income (loss) from operations
6,706

 
7,325

 
13,083

 
(5,011
)
Interest expense, net
(2,789
)
 
(2,909
)
 
(11,651
)
 
(11,401
)
Loss on debt extinguishment

 

 
(5,695
)
 

Other income (expense), net

 
162

 
(2,333
)
 
(536
)
Income (loss) before income taxes
3,917

 
4,578

 
(6,596
)
 
(16,948
)
Provision for (benefit from) income taxes
(1,653
)
 
1,248

 
(672
)
 
4,087

Net income (loss)
$
5,570

 
$
3,330

 
$
(5,924
)
 
$
(21,035
)
Net income (loss) per share:
 
 
 
 
 
 
 
   Basic
$
0.06

 
$
0.04

 
$
(0.07
)
 
$
(0.25
)
   Diluted
$
0.06

 
$
0.04

 
$
(0.07
)
 
$
(0.25
)
Shares used in per share calculations:
 
 
 
 
 
 
 
   Basic
91,124

 
86,846

 
89,575

 
85,615

   Diluted
97,499

 
89,028

 
89,575

 
85,615



7



Harmonic Inc.
Preliminary Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
Year ended
 
December 31, 2019
 
December 31, 2018
Cash flows from operating activities:
 
 
 
Net loss
$
(5,924
)
 
$
(21,035
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
   Amortization of intangibles
8,319

 
8,367

   Depreciation
11,287

 
12,971

   Stock-based compensation
12,074

 
17,289

   Amortization of discount on convertible debt
6,756

 
6,060

   Provision for non-cash warrant
13,576

 
1,178

   Restructuring, asset impairment and loss on retirement of fixed assets
124

 
1,491

   Loss on debt extinguishment
5,695

 

   Foreign currency adjustments
(290
)
 
(1,906
)
   Deferred income taxes, net
(2,076
)
 
661

   Provision for doubtful accounts, returns and discounts
1,500

 
2,521

   Provision for excess and obsolete inventories
1,479

 
1,649

   Other non-cash adjustments, net
1,225

 
407

   Changes in operating assets and liabilities:
 
 
 
      Accounts receivable
(8,388
)
 
(14,700
)
      Inventories
(4,819
)
 
(2,045
)
      Prepaid expenses and other assets
(3,347
)
 
3,227

      Accounts payable
5,086

 
1,018

      Deferred revenues
(3,436
)
 
(4,808
)
      Income taxes payable
(136
)
 
440

      Accrued and other liabilities
(7,410
)
 
(501
)
Net cash provided by operating activities
31,295

 
12,284

Cash flows from investing activities:
 
 
 
   Proceeds from sales of investments

 
104

   Purchases of property and equipment
(10,328
)
 
(7,044
)
Net cash used in investing activities
(10,328
)
 
(6,940
)
Cash flows from financing activities:
 
 
 
   Proceeds from convertible debt
115,500

 

   Payments of convertible debt
(109,603
)
 

   Payment of convertible debt issuance costs
(4,277
)
 

   Proceeds from other debts and finance leases
4,684

 
5,066

   Repayment of other debts and finance leases
(6,913
)
 
(7,132
)
   Proceeds from common stock issued to employees
8,406

 
4,947

   Payment of tax withholding obligations related to net share settlements of restricted stock units
(1,492
)
 
(230
)
Net cash provided by financing activities
6,305

 
2,651

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(203
)
 
(763
)
Net increase in cash, cash equivalents and restricted cash
27,069

 
7,232

Cash, cash equivalents and restricted cash, beginning of the year
65,989

 
58,757

Cash, cash equivalents and restricted cash, end of the year
$
93,058

 
$
65,989



8



Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
 
Three months ended
 
December 31, 2019
 
September 27, 2019
 
December 31, 2018
 
GAAP
Adjustment(1)
Non-GAAP
 
GAAP
Adjustment(1)
Non-GAAP
 
GAAP
Adjustment(1)
Non-GAAP
Geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
$
68,869

$

$
68,869

56%
 
$
78,699

$

$
78,699

68%
 
$
63,007

$
(7
)
$
63,000

55%
EMEA
39,874


39,874

33%
 
24,322


24,322

21%
 
25,880


25,880

23%
APAC
13,435


13,435

11%
 
12,704


12,704

11%
 
24,768


24,768

22%
Total
$
122,178

$

$
122,178

100%
 
$
115,725

$

$
115,725

100%
 
$
113,655

$
(7
)
$
113,648

100%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service Provider
$
83,976

$

$
83,976

69%
 
$
77,886

$

$
77,886

67%
 
$
80,325

$
(7
)
$
80,318

71%
Broadcast and Media
38,202


38,202

31%
 
37,839


37,839

33%
 
33,330


33,330

29%
Total
$
122,178

$

$
122,178

100%
 
$
115,725

$

$
115,725

100%
 
$
113,655

$
(7
)
$
113,648

100%

 
Twelve months ended
 
December 31, 2019
 
December 31, 2018
 
GAAP
Adjustment(1)
Non-GAAP
 
GAAP
Adjustment(1)
Non-GAAP
Geography
 
 
 
 
 
 
 
 
 
Americas
$
224,193

$
48

$
224,241

56%
 
$
218,900

$
1,178

$
220,078

54%
EMEA
117,477


117,477

29%
 
107,074


107,074

27%
APAC
61,204


61,204

15%
 
77,584


77,584

19%
Total
$
402,874

$
48

$
402,922

100%
 
$
403,558

$
1,178

$
404,736

100%
 
 
 
 
 
 
 
 
 
 
Market
 





 
 





Service Provider
$
249,512

$
48

$
249,560

62%
 
$
253,421

$
1,178

$
254,599

63%
Broadcast and Media
153,362


153,362

38%
 
150,137


150,137

37%
Total
$
402,874

$
48

$
402,922

100%
 
$
403,558

$
1,178

$
404,736

100%

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


9



Harmonic Inc.
Preliminary Segment Information
(Unaudited, in thousands, except percentages)
 
Three months ended December 31, 2019
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
79,172

 
$
43,006

 
$
122,178

 
$

 
$
122,178

Gross profit
47,463

 
16,492

 
63,955

 
(2,260
)
 
61,695

Gross margin%
60.0
 %
 
38.3
 %
 
52.3
%
 
 
 
50.5
 %
Operating income
11,105

 
3,649

 
14,754

 
(8,048
)
 
6,706

Operating margin%
14.0
 %
 
8.5
 %
 
12.1
%
 
 
 
5.5
 %
 
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 December 31, 2018
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
89,528

 
$
24,120

 
$
113,648

 
$
7

*
$
113,655

Gross profit
51,449

 
10,509

 
61,958

 
(1,637
)
 
60,321

Gross margin%
57.5
 %
 
43.6
 %
 
54.5
%
 
 
 
53.1
 %
Operating income (loss)
12,678

 

 
12,678

 
(5,353
)
 
7,325

Operating margin%
14.2
 %
 
 %
 
11.2
%
 
 
 
6.4
 %
 
Twelve months ended December 31, 2019
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
278,028

 
$
124,894

 
$
402,922

 
$
(48
)
*
$
402,874

Gross profit
162,156

 
68,596

 
230,752

 
(7,740
)
 
223,012

Gross margin%
58.3
 %
 
54.9
 %
 
57.3
%
 
 
 
55.4
 %
Operating income
15,837

 
22,219

 
38,056

 
(24,973
)
 
13,083

Operating margin%
5.7
 %
 
17.8
 %
 
9.4
%
 
 
 
3.2
 %
 
Twelve months ended December 31, 2018
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
313,828

 
$
90,908

 
$
404,736

 
$
(1,178
)
*
$
403,558

Gross profit
178,170

 
40,207

 
218,377

 
(9,168
)
 
209,209

Gross margin%
56.8
 %
 
44.2
 %
 
54.0
%
 
 
 
51.8
 %
Operating income (loss)
26,170

 
(578
)
 
25,592

 
(30,603
)
 
(5,011
)
Operating margin%
8.3
 %
 
(0.6
)%
 
6.3
%
 
 
 
(1.2
)%

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


10



* 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 twelve months ended December 31, 2019 was $124,846; the GAAP revenue for the three and twelve months ended December 31, 2018 was $24,127 and $89,730, respectively. 


11



Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(in thousands, except percentages and per share data)
 
Three months ended December 31, 2019
 
Revenue
Gross Profit
Total Operating Expense
Income from Operations
Total Non-operating expense, net
Net Income
GAAP
$
122,178

$
61,695

$
54,989

$
6,706

$
(2,789
)
$
5,570

  Stock-based compensation

297

(3,059
)
3,356


3,356

  Amortization of intangibles

1,295

(782
)
2,077


2,077

  Restructuring and related charges

668

(1,947
)
2,615


2,615

  Non-cash interest expenses related to convertible notes




1,796

1,796

  Discrete tax items and tax effect of non-GAAP adjustments





(3,303
)
Total adjustments

2,260

(5,788
)
8,048

1,796

6,541

Non-GAAP
$
122,178

$
63,955

$
49,201

$
14,754

$
(993
)
$
12,111

As a % of revenue (GAAP)
 
50.5
%
45.0
%
5.5
 %
(2.3
)%
4.6
 %
As a % of revenue (Non-GAAP)
 
52.3
%
40.3
%
12.1
 %
(0.8
)%
9.9
 %
Diluted net income per share:
 
 
 
 
 
 
  Diluted net income per share-GAAP
 
 
 
 
 
$
0.06

  Diluted net income per share-Non-GAAP
 
 
 
 
 
$
0.12

Shares used to compute diluted net income per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
97,499

 
 
 
 
 
 
 
 
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 income per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
97,596

 
 
 
 
 
 
 

12



 
Three months ended December 31, 2018
 
Revenue
Gross Profit
Total Operating Expense
Income from Operations
Total Non-operating expense, net
Net Income
GAAP
$
113,655

$
60,321

$
52,996

$
7,325

$
(2,747
)
$
3,330

  Accounting impact related to warrant amortization
(7
)
(7
)

(7
)

(7
)
  Stock-based compensation

376

(2,711
)
3,087


3,087

  Amortization of intangibles

1,295

(791
)
2,086


2,086

  Restructuring and related charges

(27
)
(214
)
187


187

  Non-cash interest expenses related to convertible notes




1,577

1,577

  Discrete tax items and tax effect of non-GAAP adjustments





(593
)
Total adjustments
(7
)
1,637

(3,716
)
5,353

1,577

6,337

Non-GAAP
$
113,648

$
61,958

$
49,280

$
12,678

$
(1,170
)
$
9,667

As a % of revenue (GAAP)
 
53.1
%
46.6
%
6.4
 %
(2.4
)%
2.9
 %
As a % of revenue (Non-GAAP)
 
54.5
%
43.4
%
11.2
 %
(1.0
)%
8.5
 %
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net income per share-GAAP
 
 
 
 
 
$
0.04

  Diluted net income per share-Non-GAAP
 
 
 
 
 
$
0.11

Shares used to compute diluted net income per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
89,028

 
 
 
 
 
 
 
 
Twelve months ended December 31, 2019
 
Revenue
Gross Profit
Total Operating Expense
Income from Operations
Total Non-operating expense, net
Net Income (Loss)
GAAP
$
402,874

$
223,012

$
209,929

$
13,083

$
(19,679
)
$
(5,924
)
  Accounting impact related to warrant amortization
48

48


48


48

  Stock-based compensation

1,121

(10,953
)
12,074


12,074

  Amortization of intangibles

5,180

(3,139
)
8,319


8,319

  Restructuring and related charges

1,391

(3,141
)
4,532


4,532

  Loss on debt extinguishment




5,695

5,695

  Non-cash interest and other expenses related to convertible notes




7,683

7,683

  Discrete tax items and tax effect of non-GAAP adjustments





(4,482
)
Total adjustments
48

7,740

(17,233
)
24,973

13,378

33,869

Non-GAAP
$
402,922

$
230,752

$
192,696

$
38,056

$
(6,301
)
$
27,945

As a % of revenue (GAAP)
 
55.4
%
52.1
%
3.2
 %
(4.9
)%
(1.5
)%
As a % of revenue (Non-GAAP)
 
57.3
%
47.8
%
9.4
 %
(1.6
)%
6.9
 %
Diluted net income (loss) per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$
(0.07
)
  Diluted net income per share-Non-GAAP
 
 
 
 
 
$
0.30

Shares used to compute diluted net income (loss) per share:
 
 
 
 
 
 
  GAAP
 
 
 
 
 
89,575

  Non-GAAP
 
 
 
 
 
93,830


13



 
 
 
 
 
 
 
 
Twelve months ended December 31, 2018
 
Revenue
Gross Profit
Total Operating Expense
Loss from Operations
Total Non-operating expense, net
Net Loss
GAAP
$
403,558

$
209,209

$
214,220

$
(5,011
)
$
(11,937
)
$
(21,035
)
  Accounting impact related to warrant amortization
1,178

1,178


1,178


1,178

  Stock-based compensation

1,953

(15,336
)
17,289


17,289

  Amortization of intangibles

5,180

(3,187
)
8,367


8,367

  Restructuring and related charges

857

(2,918
)
3,775


3,775

  Gain on equity investments




(111
)
(111
)
  Avid litigation settlement and associated legal fees


6

(6
)

(6
)
  Non-cash interest expenses related to convertible notes




6,060

6,060

  Discrete tax items and tax effect of non-GAAP adjustments





950

Total adjustments
1,178

9,168

(21,435
)
30,603

5,949

37,502

Non-GAAP
$
404,736

$
218,377

$
192,785

$
25,592

$
(5,988
)
$
16,467

As a % of revenue (GAAP)
 
51.8
%
53.1
%
(1.2
)%
(3.0
)%
(5.2
)%
As a % of revenue (Non-GAAP)


54.0
%
47.6
%
6.3
 %
(1.5
)%
4.1
 %
Diluted net loss per share:
 










  Diluted net loss per share-GAAP
 





$
(0.25
)
  Diluted net income per share-Non-GAAP
 
 
 
 
 
$
0.19

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

  GAAP
 
 
 
 
 
85,615

  Non-GAAP
 
 
 
 
 
86,741



14



Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Financial Guidance
(In millions, except percentages and per share data)
 
Q1 2020 Financial Guidance
 
Revenue
Gross Profit
Total Operating Expense
Loss from Operations
Total Non-operating Expense, net
Net Loss
GAAP
$80.0 to $90.0
$38.0 to $44.3
$55.5 to $57.5
$(19.5) to $(11.0)
$(3.1)
$(23.2) to $(14.9)
  Stock-based compensation
1.2
(6.4)
7.6
7.6
  Amortization of intangibles
0.9
(0.8)
1.7
1.7
  Restructuring and related charges
0.2
(0.2)
0.4
0.4
  Non-cash interest and other expenses related to convertible notes
1.8
1.8
 Tax effect of non-GAAP adjustments
$1.0 to $1.8
Total adjustments
2.3
(7.4)
9.7
1.8
$12.5 to $13.3
Non-GAAP
$80.0 to $90.0
$40.3 to $46.6
$48.0 to $50.0
$(9.5) to $(1.5)
$(1.3)
$(9.7) to $(2.5)
As a % of revenue (GAAP)
 
47.5% to 49.0%
61.6% to 71.8%
(24.3)% to (12.3)%
(3.4)% to (3.9)%
(29.0)% to (16.6)%
As a % of revenue (Non-GAAP)
 
50.0% to 52.0%
53.3% to 62.5%
(11.9)% to (1.7)%
(1.4)% to (1.6)%
(12.1)% to (2.8)%
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$(0.24) to $(0.16)
  Diluted net loss per share-Non-GAAP
 
 
 
 
 
$(0.10) to $(0.03)
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
95,762
 
2020 Financial Guidance
 
Revenue
Gross Profit
Total Operating Expense
Income (Loss) from Operations
Total Non-operating Expense, net
Net Income (Loss)
GAAP
$390.0 to $430.0
$190.3 to $231.2
$214.3 to $226.3
$(24.0) to $4.9
$(12.6)
$(39.5) to $(10.6)
  Stock-based compensation expense
2.9
(20.5)
23.4
23.4
  Amortization of intangibles
1.0
(3.0)
4.0
4.0
  Restructuring and related charges
0.8
(0.8)
1.6
1.6
  Non-cash interest expense related to convertible notes
7.4
7.4
Tax effect of non-GAAP adjustments
$0.1 to $2.9
Total adjustments
4.7
(24.3)
29.0
7.4
$36.4 to $39.3
Non-GAAP
$390.0 to $430.0
$195.0 to $235.9
$190.0 to $202.0
$5.0 to $34.0
$(5.2)
$(0.2) to $25.8
As a % of revenue (GAAP)
 
49.0% to 54.0%
54.9% to 52.6%
(6.2)% to 1.1%
(2.9)% to (3.2)%
(10.1)% to (2.5)%
As a % of revenue (Non-GAAP)
 
50.0% to 55.0%
48.7% to 47.0%
1.3% to 7.9%
(1.2)% to (1.3)%
(0.1)% to 6.0%
Diluted net income (loss) per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$(0.40) to $(0.11)
  Diluted net income (loss) per share-Non-GAAP
 
 
 
 
 
$0.00 to $0.26
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
97,659
Shares used to compute diluted net income per share:
 
 
 
 
 
 
  Non-GAAP
 
 
 
 
 
101,165

15