false2022Q3000085131012/31http://fasb.org/us-gaap/2022#AccountingStandardsUpdate202006Member.17399780.115500100008513102022-01-012022-09-3000008513102022-10-31xbrli:shares00008513102022-09-30iso4217:USD00008513102021-12-31iso4217:USDxbrli:shares0000851310hlit:ApplianceIntegrationMember2022-07-022022-09-300000851310hlit:ApplianceIntegrationMember2021-07-032021-10-010000851310hlit:ApplianceIntegrationMember2022-01-012022-09-300000851310hlit:ApplianceIntegrationMember2021-01-012021-10-010000851310hlit:SaaSServiceMember2022-07-022022-09-300000851310hlit:SaaSServiceMember2021-07-032021-10-010000851310hlit:SaaSServiceMember2022-01-012022-09-300000851310hlit:SaaSServiceMember2021-01-012021-10-0100008513102022-07-022022-09-3000008513102021-07-032021-10-0100008513102021-01-012021-10-010000851310us-gaap:CommonStockMember2022-07-010000851310us-gaap:AdditionalPaidInCapitalMember2022-07-010000851310us-gaap:RetainedEarningsMember2022-07-010000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-0100008513102022-07-010000851310us-gaap:RetainedEarningsMember2022-07-022022-09-300000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-022022-09-300000851310us-gaap:CommonStockMember2022-07-022022-09-300000851310us-gaap:AdditionalPaidInCapitalMember2022-07-022022-09-300000851310us-gaap:CommonStockMember2022-09-300000851310us-gaap:AdditionalPaidInCapitalMember2022-09-300000851310us-gaap:RetainedEarningsMember2022-09-300000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300000851310us-gaap:CommonStockMember2021-07-020000851310us-gaap:AdditionalPaidInCapitalMember2021-07-020000851310us-gaap:RetainedEarningsMember2021-07-020000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-0200008513102021-07-020000851310us-gaap:RetainedEarningsMember2021-07-032021-10-010000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-032021-10-010000851310us-gaap:CommonStockMember2021-07-032021-10-010000851310us-gaap:AdditionalPaidInCapitalMember2021-07-032021-10-010000851310us-gaap:CommonStockMember2021-10-010000851310us-gaap:AdditionalPaidInCapitalMember2021-10-010000851310us-gaap:RetainedEarningsMember2021-10-010000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-10-0100008513102021-10-010000851310us-gaap:CommonStockMember2021-12-310000851310us-gaap:AdditionalPaidInCapitalMember2021-12-310000851310us-gaap:RetainedEarningsMember2021-12-310000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-3100008513102021-01-012021-12-310000851310srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AdditionalPaidInCapitalMember2021-12-310000851310srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2021-12-310000851310srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-12-310000851310us-gaap:CommonStockMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2021-12-310000851310us-gaap:AdditionalPaidInCapitalMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2021-12-310000851310us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2021-12-310000851310srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000851310srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2021-12-310000851310us-gaap:RetainedEarningsMember2022-01-012022-09-300000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-09-300000851310us-gaap:CommonStockMember2022-01-012022-09-300000851310us-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-300000851310us-gaap:CommonStockMember2020-12-310000851310us-gaap:AdditionalPaidInCapitalMember2020-12-310000851310us-gaap:RetainedEarningsMember2020-12-310000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-3100008513102020-12-310000851310us-gaap:RetainedEarningsMember2021-01-012021-10-010000851310us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-10-010000851310us-gaap:CommonStockMember2021-01-012021-10-010000851310us-gaap:AdditionalPaidInCapitalMember2021-01-012021-10-010000851310srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate202006Member2021-12-310000851310srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate202006Member2022-07-022022-09-300000851310srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate202006Member2022-01-012022-09-300000851310hlit:EncodingcomIncMember2022-05-012022-05-310000851310hlit:EncodingcomIncMember2022-05-3100008513102022-10-012022-09-30xbrli:pure00008513102023-10-012022-09-300000851310us-gaap:MachineryAndEquipmentMember2022-09-300000851310us-gaap:MachineryAndEquipmentMember2021-12-310000851310us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-09-300000851310us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-12-310000851310us-gaap:LeaseholdImprovementsMember2022-09-300000851310us-gaap:LeaseholdImprovementsMember2021-12-310000851310us-gaap:FurnitureAndFixturesMember2022-09-300000851310us-gaap:FurnitureAndFixturesMember2021-12-310000851310us-gaap:ConstructionInProgressMember2022-09-300000851310us-gaap:ConstructionInProgressMember2021-12-310000851310hlit:ConvertibleNotedue2022Memberus-gaap:SeniorNotesMember2020-06-020000851310hlit:ConvertibleNotedue2022Memberus-gaap:SeniorNotesMemberhlit:Stockpricegreaterorequal130percentofNoteConversionPriceMember2020-06-022020-06-02utr:D0000851310hlit:Notepricelessthan98percentofstockpricetimesconversionrateMemberhlit:ConvertibleNotedue2022Memberus-gaap:SeniorNotesMember2020-06-022020-06-020000851310hlit:ConvertibleNotedue2022Memberus-gaap:SeniorNotesMember2022-09-300000851310hlit:ConvertibleNotedue2022Member2020-06-022020-06-020000851310hlit:ConvertibleNotedue2022Member2022-09-300000851310hlit:ConvertibleNotedue2022Member2021-12-310000851310hlit:ConvertibleNotedue2022Member2021-01-012021-12-310000851310hlit:ConvertibleNotedue2022Member2022-07-022022-09-300000851310hlit:ConvertibleNotedue2022Member2021-07-032021-10-010000851310hlit:ConvertibleNotedue2022Member2022-01-012022-09-300000851310hlit:ConvertibleNotedue2022Member2021-01-012021-10-010000851310hlit:ConvertibleNotedue2024Memberus-gaap:SeniorNotesMember2019-09-130000851310hlit:ConvertibleNotedue2024Memberus-gaap:SeniorNotesMember2020-09-250000851310hlit:ConvertibleNotedue2024Member2022-09-300000851310hlit:ConvertibleNotedue2024Member2021-12-310000851310hlit:ConvertibleNotedue2024Member2021-01-012021-12-310000851310hlit:ConvertibleNotedue2024Member2022-07-022022-09-300000851310hlit:ConvertibleNotedue2024Member2021-07-032021-10-010000851310hlit:ConvertibleNotedue2024Member2022-01-012022-09-300000851310hlit:ConvertibleNotedue2024Member2021-01-012021-10-010000851310hlit:ConvertibleNotedue2022Memberus-gaap:SeniorNotesMember2020-06-022020-06-020000851310hlit:ConvertibleNotedue2024Memberus-gaap:SeniorNotesMember2019-09-132019-09-130000851310us-gaap:CostOfSalesMember2022-07-022022-09-300000851310us-gaap:CostOfSalesMember2021-07-032021-10-010000851310us-gaap:CostOfSalesMember2022-01-012022-09-300000851310us-gaap:CostOfSalesMember2021-01-012021-10-010000851310us-gaap:ResearchAndDevelopmentExpenseMember2022-07-022022-09-300000851310us-gaap:ResearchAndDevelopmentExpenseMember2021-07-032021-10-010000851310us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-09-300000851310us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-10-010000851310us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-07-022022-09-300000851310us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-07-032021-10-010000851310us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-09-300000851310us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-10-010000851310us-gaap:RestrictedStockUnitsRSUMember2021-12-310000851310us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300000851310us-gaap:RestrictedStockUnitsRSUMember2022-09-300000851310us-gaap:EmployeeStockMember2022-01-012022-09-300000851310hlit:StockPlan1995Member2022-01-012022-09-300000851310hlit:StockPlan1995Member2022-09-300000851310hlit:DirectorOptionPlans2002Member2022-09-3000008513102022-02-030000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2022Member2022-09-300000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2022Memberus-gaap:FairValueInputsLevel1Member2022-09-300000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2022Memberus-gaap:FairValueInputsLevel2Member2022-09-300000851310us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2022Member2022-09-300000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2022Member2021-12-310000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2022Memberus-gaap:FairValueInputsLevel1Member2021-12-310000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2022Memberus-gaap:FairValueInputsLevel2Member2021-12-310000851310us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2022Member2021-12-310000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2024Member2022-09-300000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2024Memberus-gaap:FairValueInputsLevel1Member2022-09-300000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2024Memberus-gaap:FairValueInputsLevel2Member2022-09-300000851310us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2024Member2022-09-300000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2024Member2021-12-310000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2024Memberus-gaap:FairValueInputsLevel1Member2021-12-310000851310us-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2024Memberus-gaap:FairValueInputsLevel2Member2021-12-310000851310us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberhlit:ConvertibleNotedue2024Member2021-12-310000851310us-gaap:EmployeeStockOptionMember2022-07-022022-09-300000851310us-gaap:EmployeeStockOptionMember2021-07-032021-10-010000851310us-gaap:EmployeeStockOptionMember2022-01-012022-09-300000851310us-gaap:EmployeeStockOptionMember2021-01-012021-10-010000851310us-gaap:RestrictedStockUnitsRSUMember2022-07-022022-09-300000851310us-gaap:RestrictedStockUnitsRSUMember2021-07-032021-10-010000851310us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-10-010000851310us-gaap:EmployeeStockMember2022-07-022022-09-300000851310us-gaap:EmployeeStockMember2021-07-032021-10-010000851310us-gaap:EmployeeStockMember2021-01-012021-10-010000851310hlit:ConvertibleNotedue2022Member2022-07-022022-09-300000851310hlit:ConvertibleNotedue2022Member2021-07-032021-10-010000851310hlit:ConvertibleNotedue2022Member2022-01-012022-09-300000851310hlit:ConvertibleNotedue2022Member2021-01-012021-10-010000851310us-gaap:EmployeeStockOptionMember2022-07-022022-09-300000851310us-gaap:EmployeeStockOptionMember2021-07-032021-10-010000851310us-gaap:EmployeeStockOptionMember2022-01-012022-09-300000851310us-gaap:EmployeeStockOptionMember2021-01-012021-10-010000851310us-gaap:RestrictedStockUnitsRSUMember2022-07-022022-09-300000851310us-gaap:RestrictedStockUnitsRSUMember2021-07-032021-10-010000851310us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300000851310us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-10-010000851310us-gaap:EmployeeStockMember2022-07-022022-09-300000851310us-gaap:EmployeeStockMember2021-07-032021-10-010000851310us-gaap:EmployeeStockMember2022-01-012022-09-300000851310us-gaap:EmployeeStockMember2021-01-012021-10-01hlit:segment0000851310us-gaap:OperatingSegmentsMemberhlit:VideoSegmentMember2022-07-022022-09-300000851310us-gaap:OperatingSegmentsMemberhlit:VideoSegmentMember2021-07-032021-10-010000851310us-gaap:OperatingSegmentsMemberhlit:VideoSegmentMember2022-01-012022-09-300000851310us-gaap:OperatingSegmentsMemberhlit:VideoSegmentMember2021-01-012021-10-010000851310us-gaap:OperatingSegmentsMemberhlit:BroadbandSegmentMember2022-07-022022-09-300000851310us-gaap:OperatingSegmentsMemberhlit:BroadbandSegmentMember2021-07-032021-10-010000851310us-gaap:OperatingSegmentsMemberhlit:BroadbandSegmentMember2022-01-012022-09-300000851310us-gaap:OperatingSegmentsMemberhlit:BroadbandSegmentMember2021-01-012021-10-010000851310us-gaap:OperatingSegmentsMember2022-07-022022-09-300000851310us-gaap:OperatingSegmentsMember2021-07-032021-10-010000851310us-gaap:OperatingSegmentsMember2022-01-012022-09-300000851310us-gaap:OperatingSegmentsMember2021-01-012021-10-010000851310us-gaap:CorporateNonSegmentMember2022-07-022022-09-300000851310us-gaap:CorporateNonSegmentMember2021-07-032021-10-010000851310us-gaap:CorporateNonSegmentMember2022-01-012022-09-300000851310us-gaap:CorporateNonSegmentMember2021-01-012021-10-010000851310country:US2022-07-022022-09-300000851310country:US2021-07-032021-10-010000851310country:US2022-01-012022-09-300000851310country:US2021-01-012021-10-010000851310us-gaap:NonUsMember2022-07-022022-09-300000851310us-gaap:NonUsMember2021-07-032021-10-010000851310us-gaap:NonUsMember2022-01-012022-09-300000851310us-gaap:NonUsMember2021-01-012021-10-010000851310us-gaap:IndemnificationGuaranteeMember2022-09-300000851310us-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMemberexch:JPCB2022-10-280000851310hlit:SecuredOvernightFinancingRateSOFRMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMemberexch:JPCB2022-10-282022-10-280000851310us-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMemberexch:JPCB2022-10-282022-11-04

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________

Form 10-Q

_____________________________________________________

(Mark One)

☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2022

☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 000-25826

_____________________________________________________

HARMONIC INC.

(Exact name of registrant as specified in its charter)

_____________________________________________________

Delaware			77-0201147
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

2590 Orchard Parkway

San Jose, CA 95131

(408) 542-2500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

____________________________________________

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, $0.001 par value

HLIT

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer			☐			Accelerated Filer			☒
Non-accelerated filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

---

Table of Contents

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  ☒

The number of shares of the registrant’s Common Stock, $0.001 par value, outstanding on October 31, 2022 was 105,436,413.

---

Table of Contents

TABLE OF CONTENTS

 

PART I
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)			4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			26
ITEM 4. CONTROLS AND PROCEDURES			26
PART II
ITEM 1. LEGAL PROCEEDINGS			28
ITEM 1A. RISK FACTORS			30
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			50
ITEM 6. EXHIBITS			51
SIGNATURES			52

3

---

Table of Contents

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HARMONIC INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except per share data)

			September 30, 2022						December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	105,280					$	133,431
Accounts receivable, net			105,581						88,529
Inventories			99,024						71,195
Prepaid expenses and other current assets			26,798						29,972
Total current assets			336,683						323,127
Property and equipment, net			40,431						42,721
Operating lease right-of-use assets			25,258						30,968
Other non-current assets			61,625						56,657
Goodwill			233,874						240,213
Total assets			$	697,871					$	693,686
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Convertible debt, current			$	37,657					$	36,824
Other debts, current			4,401						4,992
Accounts payable			60,892						64,429
Deferred revenue			58,023						57,226
Operating lease liabilities, current			6,591						7,346
Other current liabilities			54,378						53,644
Total current liabilities			221,942						224,461
Convertible debt, non-current			113,761						98,941
Other debts, non-current			10,095						12,989
Operating lease liabilities, non-current			24,132						29,120
Other non-current liabilities			27,320						31,379
Total liabilities			397,250						396,890
Commitments and contingencies (Note 12)
Convertible debt (Note 7)			—						883
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; 105,421 and 102,959 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively			105						103
Additional paid-in capital			2,375,529						2,387,039
Accumulated deficit			(2,052,700)						(2,087,957)
Accumulated other comprehensive loss			(22,313)						(3,272)
Total stockholders’ equity			300,621						295,913
Total liabilities and stockholders’ equity			$	697,871					$	693,686

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

4

---

Table of Contents

HARMONIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

			Three Months Ended												Nine Months Ended
			September 30, 2022						October 1, 2021						September 30, 2022						October 1, 2021
Revenue:
Appliance and integration			$	116,441					$	91,853					$	351,293					$	250,427
SaaS and service			39,297						34,468						109,330						100,918
Total net revenue			155,738						126,321						460,623						351,345
Cost of revenue:
Appliance and integration			64,932						47,326						193,655						130,310
SaaS and service			12,202						12,841						36,781						39,231
Total cost of revenue			77,134						60,167						230,436						169,541
Total gross profit			78,604						66,154						230,187						181,804
Operating expenses:
Research and development			30,466						26,552						89,219						74,863
Selling, general and administrative			36,379						34,231						109,790						102,728
Amortization of intangibles			—						—						—						507
Restructuring and related charges			335						—						2,136						43
Total operating expenses			67,180						60,783						201,145						178,141
Income from operations			11,424						5,371						29,042						3,663
Interest expense, net			(1,284)						(2,686)						(4,111)						(7,919)
Other income (expense), net			(118)						(213)						4,218						659
Income (loss) before income taxes			10,022						2,472						29,149						(3,597)
Provision for income taxes			1,282						942						7,098						3,006
Net income (loss)			$	8,740					$	1,530					$	22,051					$	(6,603)
Net income (loss) per share:
Basic			$	0.08					$	0.01					$	0.21					$	(0.07)
Diluted			$	0.08					$	0.01					$	0.20					$	(0.07)
Weighted average shares outstanding:
Basic			105,228						102,099						104,617						101,057
Diluted			113,185						106,421						110,911						101,057

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

5

---

Table of Contents

HARMONIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)

			Three Months Ended												Nine Months Ended
			September 30, 2022						October 1, 2021						September 30, 2022						October 1, 2021
Net income (loss)			$	8,740					$	1,530					$	22,051					$	(6,603)
Change in foreign currency translation adjustments			(8,840)						(2,372)						(18,150)						(5,302)
Other comprehensive loss before tax			(8,840)						(2,372)						(18,150)						(5,302)
Provision for income taxes			523						128						891						339
Other comprehensive loss, net of tax			(9,363)						(2,500)						(19,041)						(5,641)
Total comprehensive income (loss)			$	(623)					$	(970)					$	3,010					$	(12,244)

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

6

---

Table of Contents

HARMONIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

			Three Months Ended September 30, 2022
			Common Stock												Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Total Stockholders’ Equity
			Shares						Amount
Balance at July 1, 2022			105,061						$	105					$	2,371,001					$	(2,061,320)					$	(12,950)					$	296,836
Net income			—						—						—						8,740						—						8,740
Other comprehensive loss, net of tax			—						—						—						—						(9,363)						(9,363)
Issuance of common stock under stock option, award and purchase plans, net			374						—						(1,932)						—						—						(1,932)
Repurchase of common stock			(14)						—						—						(120)						—						(120)
Stock-based compensation			—						—						6,460						—						—						6,460
Balance at September 30, 2022			105,421						$	105					$	2,375,529					$	(2,052,700)					$	(22,313)					$	300,621

			Three Months Ended October 1, 2021
			Common Stock												Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Income						Total Stockholders’ Equity
			Shares						Amount
Balance at July 2, 2021			101,794						$	102					$	2,373,851					$	(2,109,344)					$	2,715					$	267,324
Net income			—						—						—						1,530						—						1,530
Other comprehensive loss, net of tax			—						—						—						—						(2,500)						(2,500)
Issuance of common stock under stock option, award and purchase plans, net			755						1						1,907						—						—						1,908
Stock-based compensation			—						—						6,534						—						—						6,534
Reclassification from equity to mezzanine equity for 2022 Notes			—						—						(1,115)						—						—						(1,115)
Balance at October 1, 2021			102,549						$	103					$	2,381,177					$	(2,107,814)					$	215					$	273,681

			Nine Months Ended September 30, 2022
			Common Stock												Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Total Stockholders’ Equity
			Shares						Amount
Balance at December 31, 2021			102,959						$	103					$	2,387,039					$	(2,087,957)					$	(3,272)					$	295,913
Cumulative effect of ASU 2020-06 adoption			—						—						(32,249)						18,339						—						(13,910)
Balance at January 1, 2022			102,959						103						2,354,790						(2,069,618)						(3,272)						282,003
Net income			—						—						—						22,051						—						22,051
Other comprehensive loss, net of tax			—						—						—						—						(19,041)						(19,041)
Issuance of common stock under stock option, award and purchase plans, net			3,033						3						1,112						—						—						1,115
Repurchase of common stock			(571)						(1)						—						(5,133)						—						(5,134)
Stock-based compensation			—						—						19,627						—						—						19,627
Balance at September 30, 2022			105,421						$	105					$	2,375,529					$	(2,052,700)					$	(22,313)					$	300,621

7

---

Table of Contents

			Nine Months Ended October 1, 2021
			Common Stock												Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Income						Total Stockholders’ Equity
			Shares						Amount
Balance at December 31, 2020			98,204						$	98					$	2,353,559					$	(2,101,211)					$	5,856					$	258,302
Net loss			—						—						—						(6,603)						—						(6,603)
Other comprehensive loss, net of tax			—						—						—						—						(5,641)						(5,641)
Issuance of common stock under stock option, award and purchase plans, net			4,345						5						9,778						—						—						9,783
Stock-based compensation			—						—						18,955						—						—						18,955
Reclassification from equity to mezzanine equity for 2022 Notes			—						—						(1,115)						—						—						(1,115)
Balance at October 1, 2021			102,549						$	103					$	2,381,177					$	(2,107,814)					$	215					$	273,681

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

8

---

Table of Contents

HARMONIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

			Nine Months Ended
			September 30, 2022						October 1, 2021
Cash flows from operating activities:
Net income (loss)			$	22,051					$	(6,603)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation			9,225						9,395
Amortization of intangibles			—						507
Stock-based compensation			19,621						18,863
Amortization of convertible debt discount			897						4,685
Amortization of warrant			1,298						1,302
Foreign currency remeasurement			(3,312)						(3,435)
Deferred income taxes			1,798						1,268
Provision for expected credit losses and returns			1,835						3,049
Provision for excess and obsolete inventories			4,521						1,849
Gains on sale of investment in equity securities			(4,370)						—
Other adjustments			419						215
Changes in operating assets and liabilities:
Accounts receivable			(22,115)						(12,470)
Inventories			(34,952)						(18,783)
Other assets			(10,371)						2,614
Accounts payable			1,305						10,144
Deferred revenues			(955)						9,978
Other liabilities			(770)						11,078
Net cash provided by (used in) operating activities			(13,875)						33,656
Cash flows from investing activities:
Proceeds from sale of investment			7,962						—
Purchases of property and equipment			(7,389)						(10,570)
Net cash provided by (used in) investing activities			573						(10,570)
Cash flows from financing activities:
Repurchase of common stock			(5,133)						—
Proceeds from other debts			3,499						3,861
Repayment of other debts			(4,480)						(6,070)
Proceeds from common stock issued to employees			6,129						11,401
Taxes paid related to net share settlement of equity awards			(5,014)						(1,619)
Net cash provided by (used in) financing activities			(4,999)						7,573
Effect of exchange rate changes on cash and cash equivalents			(9,850)						(870)
Net increase (decrease) in cash and cash equivalents			(28,151)						29,789
Cash and cash equivalents at beginning of period			133,431						98,645
Cash and cash equivalents at end of period			$	105,280					$	128,434
Supplemental schedule of non-cash investing activities:
Capital expenditures incurred but not yet paid			$	819					$	1,055

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

9

---

Table of Contents

HARMONIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: BASIS OF PRESENTATION

The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company's financial position as of balance sheet dates and its operating results and cash flows for the interim periods presented. Operating results for the three and nine-month periods ended September 30, 2022 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2022. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Certain prior period balances have been reclassified to conform to the current period’s presentation. These reclassifications did not have a material impact on previously reported financial statements.

The Company’s significant accounting policies are described in Note 2 to its audited Consolidated Financial Statements included in the 2021 Form 10-K. There have been no significant changes to these policies during the nine months ended September 30, 2022.

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06, Accounting for Convertible Instruments in an Entity’s Own Equity, which simplifies the accounting for convertible instruments and contracts on an entity’s own equity. The Company adopted ASU 2020-06 effective on January 1, 2022, using the modified retrospective method. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature. As a result, the Company no longer separately presents in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature is no longer amortized into income as interest expense over the life of the instrument. The cumulative effect of the ASU adoption was as follows:

									Adjustments from
			Balance at						Adoption of						Balance at
(in thousands)			December 31, 2021						ASU 2020-06						January 1, 2022
Liabilities
Convertible debt, current			$	36,824					$	626					$	37,450
Convertible debt, non-current			98,941						14,167						113,108
Mezzanine equity
Convertible debt			883						(883)						—
Equity
Additional paid-capital			2,387,039						(32,249)						2,354,790
Accumulated deficit			(2,087,957)						18,339						(2,069,618)

The impact of ASU adoption on the consolidated statement of operations for the three and nine months ended September 30, 2022 was to decrease net interest expense by $1.4 million and $4.2 million, respectively. This had the effect of increasing the basic and diluted net income per share for the three and nine months ended September 30, 2022 by approximately $0.01 and $0.04, respectively. The required use of if-converted method to calculate the impact of convertible notes on diluted earnings per share does not have a material impact. The Company is contractually required to settle the principal amount of 2022 Notes and 2024 Notes in cash. Accordingly, the dilutive effect of the Company's 2022 Notes and 2024 Notes will be limited to the conversion premium. The adoption of this ASU does not have any impact on the consolidated statement of cash flows.

From time to time, new accounting pronouncements are issued by the FASB, or other standards setting bodies, that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position, results of operations and cash flows upon adoption.

10

---

Table of Contents

NOTE 3: INVESTMENTS IN EQUITY SECURITIES

In May 2022, the Company sold its investment in Encoding.com, Inc. for total consideration of up to approximately $10.7 million. The Company received $7.8 million in May 2022 and recognized a gain of $4.2 million. The balance of the consideration of up to approximately $2.9 million will be payable to the Company within 18 months from the date of sale, subject to certain conditions and indemnity obligations, and will be recorded upon receipt by the Company.

NOTE 4: CONTRACT ASSETS AND DEFERRED REVENUE

Contract assets exist when the Company has satisfied a performance obligation but does not have an unconditional right to consideration (e.g., because the entity first must satisfy another performance obligation in the contract before it is entitled to invoice the customer). Deferred revenue represents the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer.

Contract assets and deferred revenue consisted of the following:

			As of
(in thousands)			September 30, 2022						December 31, 2021
Contract assets			$	5,378					$	8,101
Deferred revenue			$	76,563					$	78,167

Contract assets and the non-current portion of Deferred revenue are reported as components of “Prepaid expenses and other current assets” and “Other non-current liabilities,” respectively, on the Condensed Consolidated Balance Sheets.

Revenue recognized during the three months ended September 30, 2022 and October 1, 2021, that was included in the deferred revenue balances at December 31, 2021 and 2020 was $7.9 million and $8.2 million, respectively. Revenue recognized during the nine months ended September 30, 2022 and October 1, 2021, that was included in the deferred revenue balances at December 31, 2021 and 2020, was $42.7 million and $47.3 million, respectively.

Remaining performance obligations represent contracted revenues that had not yet been recognized and future revenue recognition is expected. The aggregate balance of the Company’s remaining performance obligations as of September 30, 2022 was $504.3 million, of which approximately 81% is expected to be recognized as revenue over the next 12 months and the remainder thereafter.

Refer to Note 11, “Segment Information” for disaggregated revenue information.

NOTE 5: LEASES

The components of lease expense are as follows:

			Three Months Ended												Nine Months Ended
(in thousands)			September 30, 2022						October 1, 2021						September 30, 2022						October 1, 2021
Operating lease cost			$	1,767					$	1,911					$	5,802					$	5,654
Variable lease cost			503						467						1395						1494
Total lease cost			$	2,270					$	2,378					$	7,197					$	7,148

Supplemental information related to leases are as follows:

			Three Months Ended												Nine Months Ended
(in thousands)			September 30, 2022						October 1, 2021						September 30, 2022						October 1, 2021
Cash paid for amounts included in the measurement of operating lease liabilities			$	1,925					$	1,987					$	5,803					$	5,744
Right-of-use assets obtained in exchange for operating lease obligations			$	—					$	194					$	206					$	5,670

11

---

Table of Contents

NOTE 6: OTHER FINANCIAL STATEMENT INFORMATION

The following tables provide details of selected balance sheet components:

Accounts receivable, net:			As of
(in thousands)			September 30, 2022						December 31, 2021
Accounts receivable			$	108,304					$	91,382
Less: allowances for expected credit losses and sales returns			(2,723)						(2,853)
Total			$	105,581					$	88,529

Inventories:			As of
(in thousands)			September 30, 2022						December 31, 2021
Raw materials			$	35,456					$	22,245
Work-in-process			3,181						3,993
Finished goods			53,689						37,545
Service-related spares			6,698						7,412
Total			$	99,024					$	71,195

Prepaid expenses and other current assets:			As of
(in thousands)			September 30, 2022						December 31, 2021
Prepaid expenses			$	5,648					$	8,074
Contract assets			5,426						8,101
Other current assets			15,724						13,797
Total			$	26,798					$	29,972

Property and equipment, net:			As of
(in thousands)			September 30, 2022						December 31, 2021
Machinery and equipment			$	81,637					$	78,461
Capitalized software			37,615						38,306
Leasehold improvements			40,048						40,658
Furniture and fixtures			2,876						2,820
Construction-in-progress			3,035						1,892
Property and equipment, gross			165,211						162,137
Less: accumulated depreciation and amortization			(124,780)						(119,416)
Total			$	40,431					$	42,721

Other current liabilities:			As of
(in thousands)			September 30, 2022						December 31, 2021
Accrued employee compensation and related expenses			$	21,521					$	26,820
Other			32,857						26,824
Total			$	54,378					$	53,644

12

---

Table of Contents

NOTE 7: CONVERTIBLE DEBT

4.375% Convertible Senior Notes due 2022 (the “2022 Notes”)

In June 2020, the Company issued the 2022 Notes with an aggregate principal amount of $37.7 million in a non-cash exchange for its 2020 Notes with an equal principal amount pursuant to an indenture, dated June 2, 2020 (the “2022 Notes Indenture”), by and between the Company and U.S. Bank National Association, as trustee. The 2022 Notes bear interest at a rate of 4.375% per year, payable in cash on June 1 and December 1 of each year. The 2022 Notes will mature on December 1, 2022, unless earlier repurchased or redeemed by the Company, or converted pursuant to their terms.

The 2022 Notes were initially convertible into cash, shares of the Company’s common stock, par value $0.001 (“Common Stock”), or a combination thereof, at the Company’s election, at an initial conversion rate of 173.9978 shares of Common Stock per $1,000 principal amount of 2022 Notes (which is equivalent to an initial conversion price of approximately $5.75 per share). Pursuant to the supplemental indenture entered into by the Company and the trustee during the fourth quarter of fiscal 2021, the Company made an irrevocable election to settle the principal amounts of the 2022 Notes solely with cash and may pay or deliver, as the case may be, any conversion value greater than the principal amount in cash, shares of common stock or a combination thereof, at the Company’s election. The conversion rate, and thus the effective conversion price, may be adjusted under certain circumstances, including in connection with conversions made following certain fundamental changes and under other circumstances as set forth in the 2022 Notes Indenture.

Prior to the close of business on the business day immediately preceding September 1, 2022, the 2022 Notes were convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ended on June 26, 2020 (and only during such fiscal quarter), if the last reported sale price of Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2022 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Common Stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. Commencing on September 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2022 Notes are convertible in multiples of $1,000 principal amount regardless of the foregoing circumstances. As of September 30, 2022, the 2022 Notes were convertible and the net carrying amount of $37.6 million was classified as a current liability.

As the 2022 Notes were issued in exchange for the 2020 Notes, which was accounted for as an extinguishment, the 2022 Notes were initially accounted for at fair value, which was estimated to be $44.4 million. In accordance with the accounting guidance on embedded conversion features, the conversion feature associated with the 2022 Notes was initially valued at $8.3 million and bifurcated from the host debt instrument and recorded in “Additional paid-in capital.” The remaining amount of $36.0 million, which represents the fair value of the liability component of the 2022 Notes, was recorded as the initial carrying value of the 2022 Notes. The initial debt discount on the 2022 Notes was $1.7 million, calculated as the difference between the stated principal amount of $37.7 million and the initial carrying value of the liability component of $36.0 million. The debt discount was being amortized, prior to adoption of ASU 2020-06, to interest expense at the effective interest rate over the contractual term of the 2022 Notes.

As discussed in the Note 2. “Recent Accounting Pronouncements”, effective January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and, as a result, accounted for the Convertible debt as a single liability measured at amortized cost.

The following table presents the components of the 2022 Notes:

			As of
(in thousands, except for years and percentages)			September 30, 2022						December 31, 2021
Liability component:
Principal amount			$	37,707					$	37,707
Less: Debt discount, net of amortization			—						(672)
Less: Debt issuance costs, net of amortization			(50)						(211)
Carrying amount			$	37,657					$	36,824
Remaining debt discount amortization period (years)			n/a						0.9
Effective interest rate on liability component			n/a						6.95		%

13

---

Table of Contents

The following table presents interest expense recognized for the 2022 Notes:

			Three Months Ended												Nine Months Ended
(in thousands)			September 30, 2022						October 1, 2021						September 30, 2022						October 1, 2021
Contractual interest expense			$	412					$	412					$	1,236					$	1,236
Amortization of debt discount			—						171						—						508
Amortization of debt issuance costs			69						54						207						159
Total interest expense recognized			$	481					$	637					$	1,443					$	1,903

2.00% Convertible Senior Notes due 2024 (the “2024 Notes”)

In September 2019, the Company issued the 2024 Notes with an aggregate principal amount of $115.5 million pursuant to an indenture (the “2024 Notes Indenture”), dated September 13, 2019, by and between the Company and U.S. Bank National Association, as trustee. The 2024 Notes bear interest at a rate of 2.00% per year, payable semiannually on March 1 and September 1 of each year. The 2024 Notes will mature on September 1, 2024, unless earlier repurchased or redeemed by the Company, or converted pursuant to their terms.

The 2024 Notes were initially convertible into cash, shares of the Company’s common stock, par value $0.001 (“Common Stock”), or a combination thereof, at the Company’s election, at an initial conversion rate of 115.5001 shares of Common Stock per $1,000 principal amount of 2024 Notes (which is equivalent to an initial conversion price of approximately $8.66 per share). Pursuant to the supplemental indenture entered into by the Company and the trustee during the fourth quarter of fiscal 2021, the Company made an irrevocable election to settle the principal amounts of the 2024 Notes solely with cash and may pay or deliver, as the case may be, any conversion value greater than the principal amount in cash, shares of common stock or a combination thereof, at the Company’s election. The conversion rate, and thus the effective conversion price, may be adjusted under certain circumstances, including in connection with conversions made following certain fundamental changes or a notice of redemption and under other circumstances, in each case, as set forth in the 2024 Notes Indenture.

The 2024 Notes will be convertible at certain times and upon the occurrence of certain events in the future, in each case, specified in the 2024 Notes Indenture. Further, on or after June 1, 2024, until the close of business on the scheduled trading day immediately preceding the maturity date, holders of the 2024 Notes may convert all or a portion of their 2024 Notes regardless of these conditions.

In accordance with the accounting guidance on embedded conversion features, the conversion feature associated with the 2024 Notes was valued at $24.9 million and bifurcated from the host debt instrument and recorded in “Additional paid-in capital”. The resulting debt discount on the 2024 Notes was being amortized, prior to adoption of ASU 2020-06, to interest expense at the effective interest rate over the contractual term of the 2024 Notes.

As discussed in the Note 2. “Recent Accounting Pronouncements”, effective January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and, as a result, accounted for the Convertible debt as a single liability measured at amortized cost.

The following table presents the components of the 2024 Notes:

			As of
(in thousands, except for years and percentages)			September 30, 2022						December 31, 2021
Liability component:
Principal amount			$	115,500					$	115,500
Less: Debt discount, net of amortization			—						(14,576)
Less: Debt issuance costs, net of amortization			(1,739)						(1,983)
Carrying amount			$	113,761					$	98,941
Remaining debt discount amortization period (years)			n/a						2.7
Effective interest rate on liability component			n/a						7.95		%

14

---

Table of Contents

The following table presents interest expense recognized for the 2024 Notes:

			Three Months Ended												Nine Months Ended
(in thousands)			September 30, 2022						October 1, 2021						September 30, 2022						October 1, 2021
Contractual interest expense			$	578					$	578					$	1,734					$	1,734
Amortization of debt discount			—						1,193						—						3,505
Amortization of debt issuance costs			220						162						654						476
Total interest expense recognized			$	798					$	1,933					$	2,388					$	5,715

NOTE 8: STOCKHOLDERS’ EQUITY

Share-based Compensation Plans

The following table sets forth the detailed allocation of the share-based compensation expense which was included in the Company’s Condensed Consolidated Statements of Operations:

			Three Months Ended												Nine Months Ended
(in thousands)			September 30, 2022						October 1, 2021						September 30, 2022						October 1, 2021
Cost of revenue			$	607					$	545					$	1,691					$	1,840
Research and development expense			2,109						2,129						5,988						5,699
Selling, general and administrative expense			3,744						3,762						11,942						11,328
Total			$	6,460					$	6,436					$	19,621					$	18,867

Restricted Stock Units:

(in thousands, except per share amounts)			Number of Shares						Weighted Average Grant-Date Fair Value Per Share
Balance at December 31, 2021			3,878						$	7.31
Granted			2,637						9.25
Vested			(2,634)						7.48
Forfeited			(120)						8.39
Balance at September 30, 2022			3,761						$	8.63

The Company’s stock benefit plans include the 2002 Employee Stock Purchase Plan (“ESPP”) and current active stock plans adopted in 1995 and 2002 (“1995 Stock Plan” and “2002 Director Plan”, respectively). Refer to Note 12, “Employee Benefit Plans” of Notes to Consolidated Financial Statements in the 2021 Form 10-K for details pertaining to each plan.

The Company’s stockholders approved an amendment to the ESPP at the 2022 annual meeting of stockholders (the “2022 Annual Meeting”) to increase the number of shares of common stock reserved for issuance under the ESPP by 1,000,000 shares. The Company’s stockholders also approved an amendment to the 1995 Stock Plan at the 2022 Annual Meeting to increase the number of shares of common stock reserved for issuance thereunder by 7,000,000 shares. As of September 30, 2022, an aggregate of 11,645,946 shares of common stock were reserved for issuance under the 1995 Stock Plan, of which 7,760,174 shares remained available for future grants. As of September 30, 2022, an aggregate of 706,377 shares of common stock were reserved for issuance under the 2002 Director Plan, of which 524,199 shares remained available for future grants.

Share Repurchase Program

On February 3, 2022, the Board of Directors authorized the Company to repurchase up to $100 million of the Company’s outstanding shares of common stock through February 2025. The Company is authorized to repurchase, from time-to-time, shares of its outstanding common stock through open market purchases and 10b5-1 trading plans, in accordance with applicable rules and regulations, at such time and such prices as management may decide. The program does not obligate the Company to repurchase any specific number of shares and may be discontinued at any time. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

During the nine months ended September 30, 2022, the company repurchased and retired approximately 0.6 million shares of the Company’s common stock for an aggregate amount of $5.1 million. As of September 30, 2022, approximately $94.9 million of the share repurchase authorization remained available for repurchases under this program.

15

---

Table of Contents

NOTE 9: FAIR VALUE MEASUREMENTS

The Company’s financial instruments not measured at fair value on a recurring basis were as follows:

			September 30, 2022																		December 31, 2021
			Carrying						Fair Value												Carrying						Fair Value
(in thousands)			Value						Level 1			Level 2			Level 3						Value						Level 1			Level 2			Level 3
2022 Notes			$	37,657					$	—		$	87,245		$	—					$	36,824					$	—		$	78,619		$	—
2024 Notes			$	113,761					$	—		$	180,358		$	—					$	98,941					$	—		$	173,419		$	—

The fair value of the Company’s convertible notes is influenced by interest rates, the Company’s stock price and stock market volatility. The difference between the carrying value and the fair value is primarily due to the spread between the conversion price and the market value of the shares underlying the conversion as of each respective balance sheet date.

NOTE 10: EARNINGS PER SHARE

The following table sets forth the computation of the basic and diluted net income (loss) per share:

			Three Months Ended												Nine Months Ended
(in thousands, except per share amounts)			September 30, 2022						October 1, 2021						September 30, 2022						October 1, 2021
Numerator:
Net income (loss)			$	8,740					$	1,530					$	22,051					$	(6,603)
Denominator:
Weighted average number of shares outstanding:
Basic			105,228						102,099						104,617						101,057
2022 Notes			3,078						2,356						2,718						—
2024 Notes			2,678						461						1,569						—
Stock options			218						311						238						—
Restricted stock units			1,920						1,185						1,725						—
Stock purchase rights under the ESPP			63						9						44						—
Diluted			113,185						106,421						110,911						101,057
Net income (loss) per share:
Basic			$	0.08					$	0.01					$	0.21					$	(0.07)
Diluted			$	0.08					$	0.01					$	0.20					$	(0.07)

The diluted net loss per share was the same as basic net loss per share for the nine months ended October 1, 2021, as the inclusion of potential common shares outstanding would have been anti-dilutive due to the Company’s net losses for the period. The following table sets forth the potential weighted common shares outstanding and anti-dilutive weighted shares that were excluded from the computation of basic and diluted net income (loss) per share:

Three Months Ended

Nine Months Ended

(in thousands)

September 30, 2022

October 1, 2021

September 30, 2022

October 1, 2021

2022 Notes

—

—

—

2,085

Stock options

—