Document
false0000851310 0000851310 2020-07-31 2020-07-31


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): July 31, 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)

(408542-2500
(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
NASDAQ Global Select Market




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 August 3, 2020, Harmonic Inc. (“Harmonic” or the “Company”) issued a press release regarding its preliminary unaudited financial results for the quarter ended June 26, 2020. In the press release, Harmonic also announced that it would be holding a conference call on August 3, 2020 to discuss its financial results for the quarter ended June 26, 2020. 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 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Harmonic announced today that Ian Graham has been appointed Senior Vice President, Global Sales and Video Services of the Company. Eric Louvet stepped down from the role on July 31, 2020, and will be leaving Harmonic effective August 17, 2020, to pursue other opportunities. In connection with his termination of employment, Mr. Louvet is expected to enter into a separation agreement and release with Harmonic (the “Separation Agreement”) in exchange for the right to receive the following payments: (1) cash severance in the amount of 12 months of base salary, or $262,500, and (2) bonus amounts earned in the first half of fiscal 2020 under Harmonic’s 2020 corporate key contributor and executive incentive plan. The description of the severance benefits above is qualified in its entirety by the full text of the Separation Agreement, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending June 26, 2020 to be filed with the Securities and Exchange Commission.

Item 9.01.
Financial Statements and Exhibits.
(d)
Exhibits.
Exhibit
Number
  
Description
99.1

  
104

 
Cover Page Interactive Data File (embedded within the Inline XBRL document)



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



4
Exhibit


Exhibit 99.1
https://cdn.kscope.io/4245f6a43f087fea2f615c1b90158eff-logopra07.jpg
https://cdn.kscope.io/4245f6a43f087fea2f615c1b90158eff-pressreleasea29.jpg
FOR IMMEDIATE RELEASE
Harmonic Announces Second Quarter 2020 Results
Cable Access Segment Revenue up over 100% Year Over Year

SAN JOSE, California, August 3, 2020 - Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the second quarter of 2020.
“Harmonic executed well, exceeding expectations despite challenging market conditions,” said Patrick Harshman, president and chief executive officer of Harmonic. “Our Cable Access revenue and Video SaaS customer base both grew solidly in the quarter, and we strengthened our cash position. Looking ahead, we are capitalizing on this momentum around the world and anticipate delivering a profitable second half of 2020.”
Q2 Financial and Business Highlights

Financial

Revenue: $74.0 million, down 12.8% year over year.
SaaS and service revenue: $31.8 million, up 4.3% year over year.
Gross margin: GAAP 51.0% and non-GAAP 51.6%, compared to GAAP 51.8% and non-GAAP 53.6% in the year ago period.
Cable Access segment revenue: $26.5 million, up 100% year over year.
Video segment gross margin: 54.8%, compared to 57.9% in the year ago period.
Operating loss: GAAP loss $9.6 million and non-GAAP loss $5.1 million, compared to GAAP loss $7.8 million and non-GAAP loss $2.8 million in the year ago period.
EPS: GAAP net loss per share $0.16 cents and non-GAAP net loss per share $0.06 cents, compared to GAAP net loss per share $0.13 cents and non-GAAP net loss per share $0.04 cents in the year ago period.
Cash: $77.7 million, up $19.6 million year over year.

Business

CableOS solution commercially deployed with 29 customers, up 81% year over year.
CableOS deployments scaled to 1.7 million served cable modems, up 116% year over year.
Video SaaS customer base increased to 66 customers, up 136% year over year.
Over 47,000 OTT channels deployed globally, up 19% year over year.
Launched partnership with SES to enable 5G in the U.S. through an innovative bandwidth reclamation solution.



1



Select Financial Information
 
 
GAAP
 
Non-GAAP
Key Financial Results
 
Q2 2020
 
Q1 2020
 
Q2 2019
 
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
(in millions, except per share data)
Net revenue
 
$
74.0

 
$
78.4

 
$
84.9

 
$
74.0

 
$
78.4

 
$
84.9

Net loss
 
$
(15.4
)
 
$
(22.0
)
 
$
(11.8
)
 
$
(5.9
)
 
$
(9.8
)
 
$
(4.0
)
Diluted EPS
 
$
(0.16
)
 
$
(0.23
)
 
$
(0.13
)
 
$
(0.06
)
 
$
(0.10
)
 
$
(0.04
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Financial Information
Q2 2020
 
Q1 2020
 
Q2 2019
 
(in millions)
Adjusted EBITDA
$
(2.8
)
 
$
(7.0
)
 
$
(0.3
)
Bookings for the quarter
$
77.0

 
$
76.3

 
$
92.6

Backlog and deferred revenue as of quarter end
$
210.2

 
$
207.9

 
$
194.7

Cash and cash equivalents as of quarter end
$
77.7

 
$
71.7

 
$
58.1

Explanations regarding our use of non-GAAP financial measures and related definitions, and reconciliations of our GAAP and non-GAAP measures, are provided in the sections below entitled “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations”.
Financial Guidance
GAAP Financial Guidance
 
Q3 2020
 
Q4 2020
 
2020
 
Low
 
High
 
Low
 
High
 
Low
 
High
(in millions, except percentages and per share data)
Net Revenue
 
$
75.0

 
$
87.0

 
$
122.0

 
$
142.0

 
$
349.5

 
$
381.5

 
Video
 
$
40.0

 
$
47.0

 
$
87.0

 
$
97.0

 
$
229.0

 
$
246.0

 
Cable Access
 
$
35.0

 
$
40.0

 
$
35.0

 
$
45.0

 
$
120.5

 
$
135.5

Gross Margin %
 
50.0
%
 
51.5
%
 
50.0
%
 
53.0
%
 
49.5
%
 
51.0
%
Operating Expenses
 
$
50.0

 
$
52.0

 
$
50.0

 
$
54.0

 
$
202.5

 
$
208.5

Operating Income (Loss)
 
$
(14.5
)
 
$
(5.5
)
 
$
11.0

 
$
21.0

 
$
(31.5
)
 
$
(12.5
)
Tax Expense
 
$
(0.6
)
 
$
(0.6
)
 
$
(0.6
)
 
$
(0.6
)
 
$
(3.4
)
 
$
(3.4
)
EPS
 
$
(0.19
)
 
$
(0.10
)
 
$
0.07

 
$
0.17

 
$
(0.50
)
 
$
(0.31
)
Shares
 
97.6

 
97.6

 
98.5

 
98.5

 
97.0

 
97.0

Cash
 
$
80.0

 
$
90.0

 
$
80.0

 
$
90.0

 
$
80.0

 
$
90.0


2



Non-GAAP Financial Guidance
 
Q3 2020
 
Q4 2020
 
2020
 
Low
 
High
 
Low
 
High
 
Low
 
High
(in millions, except percentages and per share data)
Net Revenue
 
$
75.0


$
87.0

 
$
122.0

 
$
142.0

 
$
349.5

 
$
381.5

 
Video
 
$
40.0


$
47.0

 
$
87.0

 
$
97.0

 
$
229.0

 
$
246.0

 
Cable Access
 
$
35.0


$
40.0

 
$
35.0

 
$
45.0

 
$
120.5

 
$
135.5

Gross Margin %
 
50.5
%
 
52.0
%
 
50.0
%
 
53.0
%
 
50.0
%
 
51.5
%
Operating Expenses
 
$
45.0

 
$
47.0

 
$
45.0

 
$
49.5

 
$
181.5

 
$
187.5

Operating Income (Loss)
 
$
(9.0
)
 
$
0.0

 
$
16.0

 
$
26.0

 
$
(7.5
)
 
$
11.5

Adjusted EBITDA
 
$
(6.0
)
 
$
3.0

 
$
19.0

 
$
29.0

 
$
3.0

 
$
22.0

Tax rate
 
10
%
 
10
%
 
10
%
 
10
%
 
10
%
 
10
%
EPS
 
$
(0.09
)
 
$
(0.01
)
 
$
0.13

 
$
0.22

 
$
(0.12
)
 
$
0.05

Shares
 
97.6


97.6

 
98.5

 
98.5

 
97.0

 
98.1

Cash
 
$
80.0


$
90.0

 
$
80.0

 
$
90.0

 
$
80.0

 
$
90.0


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. Pacific (5:00 p.m. Eastern) on Monday, August 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 7493165). 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 7493165).
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), Adjusted EBITDA, 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 market and technology trends underlying our Video and Cable Access businesses will not continue to develop in their current direction or 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 potential impact of the Covid-19 pandemic on our operations or the operations of our supply chain or our customers; the impact of general economic conditions on our sales and operations; 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; 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

3



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, 2019, 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), Adjusted EBITDA 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.

4



Loss on debt extinguishment - In the second quarter of fiscal 2020, we recorded a debt extinguishment loss of $0.8 million resulting from the exchange of $37.7 million in aggregate principal amount of our convertible notes due in 2020 for $37.7 million in aggregate principal amount of convertible notes due in 2022. 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 and other debt - We record the accretion of the debt discount related to the equity component and amortization of issuance costs as non-cash interest expense. We believe that excluding these costs provides meaningful supplemental information regarding operational performance and liquidity, along with enhancing investors’ ability to view the Company’s results from management’s perspective. In addition, we believe excluding these costs from the non-GAAP measures facilitates comparisons to our historical operating results and comparisons to peer company operating results.
Accounting impact related to warrant amortization - We issued a warrant to a customer, Comcast Corporation, in September 2016 pursuant to which Comcast may purchase up to 7.8 million shares of Harmonic common stock. 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 as of July 1, 2019. As a result of Comcast's election of enterprise license pricing, we no longer excluded the effect of warrant amortization in our non-GAAP financial measures beginning with the third quarter of fiscal 2019.

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
Michael Smiley
Chief Financial Officer
Investor Relations
Harmonic Inc.
Harmonic Inc.
+1.408.490.6031
+1.408.490.6176

 
 

5



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

 
June 26, 2020
 
December 31, 2019
ASSETS
 
 
 
Current assets:
 
 
 
   Cash and cash equivalents
$
77,744

 
$
93,058

   Accounts receivable, net
74,781

 
88,500

   Inventories, net
32,097

 
29,042

   Prepaid expenses and other current assets
23,255

 
40,762

Total current assets
207,877

 
251,362

Property and equipment, net
41,341

 
22,928

Operating lease right-of-use assets

25,292

 
27,491

Goodwill
239,816

 
239,780

Intangibles, net
1,993

 
4,461

Other long-term assets
41,202

 
41,305

Total assets
$
557,521

 
$
587,327

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
   Other debts and finance lease obligations, current
$
6,323

 
$
6,713

   Accounts payable
27,235

 
40,933

   Income taxes payable
1,017

 
1,226

   Deferred revenue
47,605

 
37,117

   Accrued and other current liabilities
55,366

 
62,535

   Convertible notes, short-term
7,855

 
43,375

Total current liabilities
145,401

 
191,899

Convertible notes, long-term
126,554

 
88,629

Other debts and finance lease obligations, long-term
13,994

 
10,511

Income taxes payable, long-term
182

 
178

Other non-current liabilities
41,108

 
41,254

Total liabilities
$
327,239

 
$
332,471

 
 
 
 
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; 96,863 and 91,875 shares issued and outstanding at June 26, 2020 and December 31, 2019, respectively
97

 
92

   Additional paid-in capital
2,342,856

 
2,327,359

   Accumulated deficit
(2,109,295
)
 
(2,071,940
)
   Accumulated other comprehensive loss
(3,376
)
 
(3,065
)
Total stockholders’ equity
230,282

 
252,446

Total liabilities and stockholders’ equity
$
557,521

 
$
587,327



6



Harmonic Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
 
Three months ended
 
Six months ended
 
June 26, 2020
 
June 28, 2019
 
June 26, 2020
 
June 28, 2019
Revenue:
 
 
 
 
 
 
 
     Appliance and integration
$
42,224

 
$
54,417

 
$
89,976

 
$
106,782

     SaaS and service
31,770

 
30,448

 
62,435

 
58,189

Total net revenue
73,994

 
84,865

 
152,411

 
164,971

Cost of revenue:
 
 
 
 
 
 
 
     Appliance and integration
22,784

 
29,312

 
49,071

 
56,366

     SaaS and service
13,437

 
11,625

 
28,829

 
22,828

Total cost of revenue
36,221

 
40,937

 
77,900

 
79,194

Total gross profit
37,773

 
43,928

 
74,511

 
85,777

Operating expenses:
 
 
 
 
 
 
 
   Research and development
19,498

 
21,313

 
41,621

 
42,714

   Selling, general and administrative
27,005

 
29,319

 
58,223

 
57,330

   Amortization of intangibles
742

 
784

 
1,512

 
1,572

   Restructuring and related charges
82

 
276

 
758

 
333

Total operating expenses
47,327

 
51,692

 
102,114

 
101,949

Loss from operations
(9,554
)
 
(7,764
)
 
(27,603
)
 
(16,172
)
Interest expense, net
(3,062
)
 
(2,956
)
 
(5,965
)
 
(5,862
)
Loss on debt extinguishment
(834
)
 

 
(834
)
 

Other expense, net
(373
)
 
(428
)
 
(646
)
 
(739
)
Loss before income taxes
(13,823
)
 
(11,148
)
 
(35,048
)
 
(22,773
)
Provision for income taxes
1,578

 
697

 
2,307

 
378

Net loss
$
(15,401
)
 
$
(11,845
)
 
$
(37,355
)
 
$
(23,151
)
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
   Basic and diluted
$
(0.16
)
 
$
(0.13
)
 
$
(0.39
)
 
$
(0.26
)
Shares used in per share calculations:
 
 
 
 
 
 
 
   Basic and diluted
96,727

 
88,931

 
96,255

 
88,554



7



Harmonic Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
Six months ended
 
June 26, 2020
 
June 28, 2019
Cash flows from operating activities:
 
 
 
Net loss
$
(37,355
)
 
$
(23,151
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
   Amortization of intangibles
2,462

 
4,162

   Depreciation
5,535

 
5,716

   Stock-based compensation
9,807

 
4,623

   Amortization of discount on convertible and other debt
3,785

 
3,262

   Amortization of non-cash warrant
868

 
48

   Loss on debt extinguishment
834

 

   Deferred income taxes, net
1,116

 
(145
)
   Provision for doubtful accounts, returns and discounts
662

 
500

   Provision for excess and obsolete inventories
723

 
384

   Other non-cash adjustments, net
118

 
79

   Changes in operating assets and liabilities:
 
 
 
      Accounts receivable
13,024

 
10,699

      Inventories
(4,032
)
 
(2,440
)
      Prepaid expenses and other assets
19,182

 
(1,526
)
      Accounts payable
(14,963
)
 
(1,752
)
      Deferred revenues
11,241

 
4,989

      Income taxes payable
(181
)
 
(292
)
      Accrued and other liabilities
(11,936
)
 
(9,802
)
Net cash provided by (used in) operating activities
890

 
(4,646
)
Cash flows from investing activities:
 
 
 
   Purchases of property and equipment
(20,753
)
 
(2,939
)
Net cash used in investing activities
(20,753
)
 
(2,939
)
Cash flows from financing activities:
 
 
 
   Payments of convertible debt
(25
)
 

   Payment of convertible debt issuance costs
(35
)
 

   Proceeds from other debts and finance leases
9,398

 
4,503

   Repayment of other debts and finance leases
(6,342
)
 
(6,162
)
   Proceeds from common stock issued to employees
3,000

 
2,147

   Payment of tax withholding obligations related to net share settlements of restricted stock units
(1,049
)
 
(828
)
Net cash provided by (used in) financing activities
4,947

 
(340
)
Effect of exchange rate changes on cash and cash equivalents
(398
)
 

Net decrease in cash and cash equivalents
(15,314
)
 
(7,925
)
Cash and cash equivalents at beginning of the year
93,058

 
65,989

Cash and cash equivalents at end of the year
$
77,744

 
$
58,064



8



Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
 
Three months ended
 
June 26, 2020
 
March 27, 2020
 
June 28, 2019
 
GAAP
Adjustment(1)
Non-GAAP
 
GAAP
Adjustment(1)
Non-GAAP
 
GAAP
Adjustment(1)
Non-GAAP
Geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
$
42,307

$

$
42,307

58%
 
$
37,650

$

$
37,650

48%
 
$
42,437

$
23

$
42,460

50%
EMEA
24,714


24,714

33%
 
27,816


27,816

35%
 
25,203


25,203

30%
APAC
6,973


6,973

9%
 
12,951


12,951

17%
 
17,225


17,225

20%
Total
$
73,994

$

$
73,994

100%
 
$
78,417

$

$
78,417

100%
 
$
84,865

$
23

$
84,888

100%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service Provider
$
42,169

$

$
42,169

57%
 
$
43,759

$

$
43,759

56%
 
$
43,438

$
23

$
43,461

51%
Broadcast and Media
31,825


31,825

43%
 
34,658


34,658

44%
 
41,427


41,427

49%
Total
$
73,994

$

$
73,994

100%
 
$
78,417

$

$
78,417

100%
 
$
84,865

$
23

$
84,888

100%

 
Six months ended
 
June 26, 2020
 
June 28, 2019
 
GAAP
Adjustments(1)
Non-GAAP
 
GAAP
Adjustments(1)
Non-GAAP
Geography
 
 
 
 
 
 
 
 
 
Americas
$
79,957

$

$
79,957

53%
 
$
76,625

$
48

$
76,673

46%
EMEA
52,530


52,530

34%
 
53,281


53,281

32%
APAC
19,924


19,924

13%
 
35,065


35,065

22%
Total
$
152,411

$

$
152,411

100%
 
$
164,971

$
48

$
165,019

100%
 
 
 
 
 
 
 
 
 
 
Market
 
 
 
 
 
 
 
 
 
Service Provider
$
85,928

$

$
85,928

56%
 
$
87,650

$
48

$
87,698

53%
Broadcast and Media
66,483


66,483

44%
 
77,321


77,321

47%
Total
$
152,411

$

$
152,411

100%
 
$
164,971

$
48

$
165,019

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 June 26, 2020
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
47,453

 
$
26,541

 
$
73,994

 
$

 
$
73,994

Gross profit
26,024

 
12,128

 
38,152

 
(379
)
 
37,773

Gross margin%
54.8
 %
 
45.7
 %
 
51.6
 %
 
 
 
51.0
 %
Operating loss
(4,237
)
 
(878
)
 
(5,115
)
 
(4,439
)
 
(9,554
)
Operating margin%
(8.9
)%
 
(3.3
)%
 
(6.9
)%
 
 
 
(12.9
)%
 
Three months ended March 27, 2020
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
54,372

 
$
24,045

 
$
78,417

 
$

 
$
78,417

Gross profit
27,907

 
10,414

 
38,321

 
(1,583
)
 
36,738

Gross margin%
51.3
 %
 
43.3
 %
 
48.9
 %
 
 
 
46.8
 %
Operating loss
(6,267
)
 
(3,265
)
 
(9,532
)
 
(8,517
)
 
(18,049
)
Operating margin%
(11.5
)%
 
(13.6
)%
 
(12.2
)%
 
 
 
(23.0
)%
 
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
)%
 
Six months ended June 26, 2020
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
101,825

 
$
50,586

 
$
152,411

 
$

 
$
152,411

Gross profit
53,931

 
22,542

 
76,473

 
(1,962
)
 
74,511

Gross margin%
53.0
 %
 
44.6
 %
 
50.2
 %
 
 
 
48.9
 %
Operating loss
(10,504
)
 
(4,143
)
 
(14,647
)
 
(12,956
)
 
(27,603
)
Operating margin%
(10.3
)%
 
(8.2
)%
 
(9.6
)%
 
 
 
(18.1
)%
 
Six months ended June 28, 2019
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
138,801

 
$
26,218

 
$
165,019

 
$
(48
)
*
$
164,971

Gross profit
80,046

 
9,179

 
89,225

 
(3,448
)
 
85,777

Gross margin%
57.7
 %
 
35.0
 %
 
54.1
 %
 
 
 
52.0
 %
Operating income (loss)
6,427

 
(13,040
)
 
(6,613
)
 
(9,559
)
 
(16,172
)
Operating margin%
4.6
 %
 
(49.7
)%
 
(4.0
)%
 
 
 
(9.8
)%

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

10



* This non-GAAP adjustment is for warrant amortization and relate to our Cable Access segment. After applying this adjustment to the non-GAAP revenue for the Cable Access segment, our GAAP revenue for the Cable Access segment for the three and six months ended June 28, 2019 was $13,240 and $26,170, respectively. 


11



Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(in thousands, except percentages and per share data)
 
Three months ended June 26, 2020
 
Revenue
Gross Profit
Total Operating Expense
Loss from Operations
Total Non-operating expense, net
Net Loss
GAAP
$
73,994

$
37,773

$
47,327

$
(9,554
)
$
(4,269
)
$
(15,401
)
  Stock-based compensation

312

(3,236
)
3,548


3,548

  Amortization of intangibles

65

(742
)
807


807

  Restructuring and related charges

2

(82
)
84


84

  Loss on convertible debt extinguishment




834

834

  Non-cash interest and other expenses related to convertible notes and other debt




1,950

1,950

  Discrete tax items and tax effect of non-GAAP adjustments





2,238

Total adjustments

379

(4,060
)
4,439

2,784

9,461

Non-GAAP
$
73,994

$
38,152

$
43,267

$
(5,115
)
$
(1,485
)
$
(5,940
)
As a % of revenue (GAAP)
 
51.0
%
64.0
%
(12.9
)%
(5.8
)%
(20.8
)%
As a % of revenue (Non-GAAP)
 
51.6
%
58.5
%
(6.9
)%
(2.0
)%
(8.0
)%
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$
(0.16
)
  Diluted net loss per share-Non-GAAP
 
 
 
 
 
$
(0.06
)
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
96,727

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended March 27, 2020
 
Revenue
Gross Profit
Total Operating Expense
Loss from Operations
Total Non-operating expense, net
Net Loss
GAAP
$
78,417

$
36,738

$
54,787

$
(18,049
)
$
(3,176
)
$
(21,954
)
  Stock-based compensation

771

(5,488
)
6,259


6,259

  Amortization of intangibles

885

(770
)
1,655


1,655

  Restructuring and related charges

(73
)
(676
)
603


603

  Non-cash interest and other expenses related to convertible notes and other debt




1,835

1,835

  Discrete tax items and tax effect of non-GAAP adjustments





1,816

Total adjustments

1,583

(6,934
)
8,517

1,835

12,168

Non-GAAP
$
78,417

$
38,321

$
47,853

$
(9,532
)
$
(1,341
)
$
(9,786
)
As a % of revenue (GAAP)
 
46.8
%
69.9
%
(23.0
)%
(4.1
)%
(28.0
)%
As a % of revenue (Non-GAAP)
 
48.9
%
61.0
%
(12.2
)%
(1.7
)%
(12.5
)%
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$
(0.23
)
  Diluted net loss per share-Non-GAAP
 
 
 
 
 
$
(0.10
)
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
95,575

 
 
 
 
 
 
 

12



 
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 and other debt




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


 
Six months ended June 26, 2020
 
Revenue
Gross Profit
Total Operating Expense
Loss from Operations
Total Non-operating Expense
Net Loss
GAAP
$
152,411

$
74,511

$
102,114

$
(27,603
)
$
(7,445
)
$
(37,355
)
  Stock-based compensation

1,083

(8,724
)
9,807


9,807

  Amortization of intangibles

950

(1,512
)
2,462


2,462

  Restructuring and related charges

(71
)
(758
)
687


687

  Loss on convertible debt extinguishment




834

834

  Non-cash interest and other expenses related to convertible notes and other debt




3,785

3,785

  Discrete tax items and tax effect of non-GAAP adjustments





4,054

Total adjustments

1,962

(10,994
)
12,956

4,619

21,629

Non-GAAP
$
152,411

$
76,473

$
91,120

$
(14,647
)
$
(2,826
)
$
(15,726
)
As a % of revenue (GAAP)
 
48.9
%
67.0
%
(18.1
)%
(4.9
)%
(24.5
)%
As a % of revenue (Non-GAAP)
 
50.2
%
59.8
%
(9.6
)%
(1.9
)%
(10.3
)%
 
 
 
 
 
 
 
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$
(0.39
)
  Diluted net loss per share-Non-GAAP
 
 
 
 
 
$
(0.16
)
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
96,255



13



 
Six months ended June 28, 2019
 
Revenue
Gross Profit
Total Operating Expense
Loss from Operations
Total Non-operating Expense
Net Loss
GAAP
$
164,971

$
85,777

$
101,949

$
(16,172
)
$
(6,601
)
$
(23,151
)
  Accounting impact related to warrant amortization
48

48


48


48

  Stock-based compensation

418

(4,205
)
4,623


4,623

  Amortization of intangibles

2,590

(1,572
)
4,162


4,162

  Restructuring and related charges

392

(334
)
726


726

  Non-cash interest and other expenses related to convertible notes and other debt




3,262

3,262

  Discrete tax items and tax effect of non-GAAP adjustments





1,572

Total adjustments
48

3,448

(6,111
)
9,559

3,262

14,393

Non-GAAP
$
165,019

$
89,225

$
95,838

$
(6,613
)
$
(3,339
)
$
(8,758
)
As a % of revenue (GAAP)
 
52.0
%
61.8
%
(9.8
)%
(4.0
)%
(14.0
)%
As a % of revenue (Non-GAAP)
 
54.1
%
58.1
%
(4.0
)%
(2.0
)%
(5.3
)%
 
 
 
 
 
 
 
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$
(0.26
)
  Diluted net loss per share-Non-GAAP
 
 
 
 
 
$
(0.10
)
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
88,554





14



Harmonic Inc.
Preliminary Adjusted EBITDA Reconciliation (Unaudited)
(In thousands)
 
Three months ended
 
June 26, 2020
March 27, 2020
June 28, 2019
Net loss - GAAP
$
(15,401
)
$
(21,954
)
$
(11,845
)
Provision for income taxes
1,578

729

697

Interest expense, net
3,062

2,903

2,956

Depreciation
2,692

2,843

2,870

Amortization of intangibles
807

1,655

2,079

EBITDA
(7,262
)
(13,824
)
(3,243
)
 



Adjustments
 
 
 
Accounting impact related to warrant amortization



23

Stock-based compensation

3,548

6,259

2,510

Loss on convertible debt extinguishment
834



Restructuring and related charges

84

603

368

Adjusted EBITDA

$
(2,796
)
$
(6,962
)
$
(342
)

 
Six months ended
 
June 26, 2020
June 28, 2019
Net loss - GAAP
$
(37,355
)
$
(23,151
)
Provision for income taxes
2,307

378

Interest expense, net
5,965

5,862

Depreciation
5,535

5,716

Amortization of intangibles
2,462

4,162

EBITDA
(21,086
)
(7,033
)
 
 
 
Adjustments
 
 
Accounting impact related to warrant amortization


48

Stock-based compensation

9,807

4,623

Loss on convertible debt extinguishment
834


Restructuring and related charges

687

726

Adjusted EBITDA

$
(9,758
)
$
(1,636
)



15




Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Financial Guidance
(In millions, except percentages and per share data)
 
Q3 2020 Financial Guidance
 
Revenue
Gross Profit
Total Operating Expense
Income (Loss) from Operations
Total Non-operating Expense, net
Net Loss
GAAP
$75.0 to $87.0
$37.4 to $44.7
$50.0 to $52.0
$(14.5) to $(5.5)
$(3.0) to $(3.2)
$(18.2) to $(9.4)
  Stock-based compensation
0.3
(3.8)
4.1
4.1
  Amortization of intangibles
(0.7)
0.7
0.7
  Restructuring and related charges
0.2
(0.6)
0.8
0.8
  Non-cash interest and other expenses related to convertible notes and other debt
1.7
1.7
 Tax effect of non-GAAP adjustments
$0.7 to $1.6
Total adjustments
0.5
(5.1)
5.6
1.7
$8.0 to $8.9
Non-GAAP
$75.0 to $87.0
$37.9 to $45.2
$45.0 to $47.0
$(9.0) to $0.0
$(1.3) to $(1.5)
$(9.3) to $(1.4)
As a % of revenue (GAAP)
 
50.0% to 51.5%
57.8% to 69.3%
(19.5)% to (6.4)%
(3.4)% to (4.3)%
(24.2)% to (10.7)%
As a % of revenue (Non-GAAP)
 
50.5% to 52.0%
52.0% to 62.5%
(12.0)% to 0.0%
(1.5)% to (2.0)%
(12.4)% to (1.6)%
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$(0.19) to $(0.10)
  Diluted net loss per share-Non-GAAP
 
 
 
 
 
$(0.09) to $(0.01)
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
97.6

16



 
Q4 2020 Financial Guidance
 
Revenue
Gross Profit
Total Operating Expense
Income from Operations
Total Non-operating Expense, net
Net Income
GAAP
$122.0 to $142.0
$60.7 to $75.1
$50.0 to $54.0
$11.0 to $21.0
$(3.0) to $(3.3)
$7.3 to $17.1
  Stock-based compensation
0.3
(3.8)
4.1
4.1
  Amortization of intangibles
(0.7)
0.7
0.7
  Restructuring and related charges
0.2
(0.2)
0.4
0.4
  Non-cash interest and other expenses related to convertible notes and other debt
1.7
1.7
 Tax effect of non-GAAP adjustments
$(1.9) to $(1.0)
Total adjustments
0.5
(4.7)
5.2
1.7
$5.0 to $5.9
Non-GAAP
$122.0 to $142.0
$61.2 to $75.6
$45.0 to $49.5
$16.0 to $26.0
$(1.3) to $(1.6)
$13.2 to $22.1
As a % of revenue (GAAP)
 
50.0% to 53.0%
40.9% to 38.2%
8.9% to 14.7%
(2.1)% to (2.6)%
6.0% to 12.1%
As a % of revenue (Non-GAAP)
 
50.0% to 53.0%
37.0% to 34.9%
13.1% to 18.4%
(0.9)% to (1.3)%
10.8% to 15.6%
Diluted net income per share:
 
 
 
 
 
 
  Diluted net income per share-GAAP
 
 
 
 
 
$0.07 to $0.17
  Diluted net income per share-Non-GAAP
 
 
 
 
 
$0.13 to $0.22
Shares used to compute diluted net income per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
98.5
 
2020 Financial Guidance
 
Revenue
Gross Profit
Total Operating Expense
Income (Loss) from Operations
Total Non-operating Expense, net
Net Income (Loss)
GAAP
$349.5 to $381.5
$172.5 to $194.2
$202.5 to $208.5
$(31.5) to $(12.5)
$(13.4) to $(13.9)
$(48.5) to $(29.8)
  Stock-based compensation
1.7
(16.4)
18.1
18.1
  Amortization of intangibles
1.0
(3.0)
4.0
4.0
  Restructuring and related charges
0.4
(1.5)
1.9
1.9
  Non-cash interest and other expenses related to convertible notes and other debt
7.2
7.2
  Loss on debt extinguishment
0.8
0.8
 Tax effect of non-GAAP adjustments
$2.9 to $4.8
Total adjustments
3.1
(20.9)
24.0
8.0
$34.9 to $36.8
Non-GAAP
$349.5 to $381.5
$175.6 to $197.3
$181.5 to $187.5
$(7.5) to $11.5
$(5.4) to $(5.9)
$(11.7) to $5.1
As a % of revenue (GAAP)
 
49.5% to 51.0%
57.9% to 54.6%
(9.0)% to (3.3)%
(3.5)% to (4.0)%
(13.9)% to (7.8)%
As a % of revenue (Non-GAAP)
 
50.0% to 51.5%
51.9% to 49.2%
(2.2)% to 3.0%
(1.4)% to (1.7)%
(3.3)% to 1.3%
Diluted net income (loss) per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP