HLIT
$5.25
Harmonic
$.50
10.53%
Earnings Details
3rd Quarter September 2016
Wednesday, November 09, 2016 4:03:07 PM
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Summary

Harmonic Misses

Harmonic (HLIT) reported breakeven results for the 3rd Quarter September 2016 on revenue of $101.4 million. The consensus earnings estimate was $0.02 per share on revenue of $107.1 million. The Earnings Whisper number was $0.04 per share. Revenue grew 21.7% on a year-over-year basis.

The company said it expects fourth quarter non-GAAP earnings of $0.05 to $0.07 per share on revenue of $106.0 million to $110.0 million. The current consensus earnings estimate is $0.13 per share on revenue of $115.0 million for the quarter ending December 31, 2016.

Harmonic Inc designs, manufactures and sells video products and system solutions that enable service providers to efficiently deliver the next generation of broadcast and on-demand services.

Results
Reported Earnings
$0.00
Earnings Whisper
$0.04
Consensus Estimate
$0.02
Reported Revenue
$101.4 Mil
Revenue Estimate
$107.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Harmonic Announces Third Quarter 2016 Results

SAN JOSE, CA--(Marketwired - November 09, 2016) - Harmonic Inc. (HLIT), the worldwide leader in video delivery infrastructure, announced today its unaudited results for the third quarter of 2016.

GAAP net revenue for the third quarter of 2016 was $101.4 million, compared with $109.6 million for the second quarter of 2016 and $83.3 million for the third quarter of 2015.

Non-GAAP net revenue for the third quarter of 2016 was $101.7 million, compared with $110.4 million for the second quarter of 2016 and $83.3 million for the third quarter of 2015.

Bookings for the third quarter of 2016 were $97.3 million, compared with $117.3 million for the second quarter of 2016 and $74.6 million for the third quarter of 2015.

GAAP net loss for the third quarter of 2016 was $(16.0) million, or $(0.21) per diluted share, compared with a GAAP net loss for the second quarter of 2016 of $(20.7) million, or $(0.27) per diluted share, and a GAAP net loss of $(4.8) million, or $(0.05) per diluted share, for the third quarter of 2015.

Non-GAAP net loss for the third quarter of 2016 was $(1.1) million, or $(0.01) per diluted share, compared with non-GAAP net loss for the second quarter of 2016 of $(0.2) million, or $0.00 per diluted share, and non-GAAP net loss of $(0.2) million, or $0.00 per diluted share, for the third quarter of 2015. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.

Total cash, cash equivalents and short-term investments were $52.7 million at the end of the third quarter of 2016, down $12.6 million from $65.3 million at the end of the prior quarter, primarily due to timing of receipts from our customers and payments of restructuring and integration charges. In the third quarter of 2016, the Company used approximately 4.6 million of cash from operations.

"Our third quarter results reflect our ongoing business transformations, as Cable Edge segment revenue declined in advance of the pending release of our new CableOS products," said Patrick Harshman, President and CEO of Harmonic. "Although our outlook for fourth quarter Cable Edge spending is therefore cautious, our recently executed warrant agreement with Comcast and our first CableOS revenue shipments bolster our confidence in our CableOS growth strategy. Turning to our Video segment, our transformational VOS™ offering drove a stronger-than-forecasted mix of software- and services-related orders, impacting third quarter revenue recognition while maintaining near-record backlog and deferred revenue. We are encouraged by the competitive momentum of our transformational initiatives, and remain focused on revenue growth, improving profitability and enhancing shareholder value."

Third Quarter 2016 Highlights

Soft legacy cable edge demand and a stronger mix of video software and services orders impacted revenue.

Near record backlog and deferred revenue of $181.1 million.

Launched CableOS, the industry’s first software-based CMTS core.

Executed Comcast warrant agreement validating our investment strategy in CableOS.

Exceeding annualized cost savings targets from the combination of Harmonic and TVN. We now expect to realize annualized cost savings in a range of $24-25 million by the end of calendar year 2016, up from our initial target of $20-$22 million.

Several key trials underway on our recently announced VOS Cloud and VOS 360 software-as-a-service offerings with new cloud partners and tier 1 media and pay TV companies.

Business Outlook

Fourth Quarter 2016 GAAP Financial Guidance

For the fourth quarter of 2016, Harmonic anticipates:

Net revenue to be $105.8 million to $110.8 million, which includes Video revenue of $96.8 million to $99.8 million and Cable Edge revenue of $9.0 million to $11.0 million

Gross margin to be 48.0% to 49.0%

Operating expense to be $64.5 million to $66.5 million

Operating loss to be $(13.5) million to $(11.5) million

EPS to be $(0.20) to $(0.18)

Share count for EPS calculation to be approximately 79.0 million shares of Harmonic common stock

Cash and short-term investments at quarter-end to be $60.0 million to $65.0 million

Fourth Quarter 2016 Non-GAAP Financial Guidance

For the fourth quarter of 2016, Harmonic anticipates:

Net revenue to be $106.0 million to $111.0 million, which includes Video revenue of $97.0 million to $100.0 million and Cable Edge revenue of $9.0 million to $11.0 million

Gross margin to be 53.0% to 54.0%

Operating expense to be $50.0 million to $52.0 million

Operating income to be $6.0 million to $8.0 million

EPS to be $0.05 to $0.07

Tax rate to be approximately 15%

Share count for EPS calculation to be approximately 79.0 million shares of Harmonic common stock

Cash and short-term investments at quarter-end to be $60.0 million to $65.0 million

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

Conference Call Information

Harmonic will host a conference call to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern) on Wednesday, November 9, 2016. A listen-only broadcast of the conference call can be accessed either from the Company’s website at www.harmonicinc.com or by calling +1.574.990.1032 or +1.800.240.9147 (passcode 8557770). The replay will be available after 4:30 p.m. Pacific at the same website address or by calling +1.404.537.3406 or +1.855.859.2056 (passcode 8557770).

About Harmonic Inc.

Harmonic (HLIT) is the worldwide leader in video delivery infrastructure for emerging television and video services. Harmonic enables customers to produce, deliver, and monetize amazing video experiences, with unequalled business agility and operational efficiency, by providing market-leading innovation, high-quality service, and compelling total-cost-of-ownership. More information is available at www.harmonicinc.com.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations regarding: GAAP net revenue, GAAP gross margins, GAAP operating expenses, GAAP operating income (loss), GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP EPS, and tax rate for the fourth quarter of 2016, as well as cash and short-term investments at the end of the fourth quarter of 2016. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: unexpected delays, difficulties and/or costs relating to integrating TVN with Harmonic; anticipated business opportunities and operational efficiencies for the combined company do not fully materialize; the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; a strong U.S. dollar may have a negative impact on our business in certain international markets; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite and telco and broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions on our sales and operations; our ability to develop new and enhanced products in a timely manner and market acceptance of our new or existing products; losses of one or more key customers; risks associated with our international operations, including in Ukraine; risks associated with our CableOS and VOS™ product initiatives; dependence on market acceptance of various types of broadband services, on the adoption of new broadband technologies and on broadband industry trends; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of fluctuations in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in our markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; the effect on our business of natural disasters; and risks associated with our outstanding convertible notes. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic’s filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K for the year ended December 31, 2015, our recent Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.

Use of Non-GAAP Financial Measures

In establishing operating budgets, managing its business performance, and setting internal measurement targets, we exclude a number of items required by GAAP. Management believes that these accounting charges and credits, most of which are non-cash or non-recurring in nature, are not useful in managing its operations and business. Historically, the Company has also publicly presented these supplemental non-GAAP measures in order to assist the investment community to see the Company "through the eyes of management," and thereby enhance understanding of its operating performance. The non-GAAP measures presented here are: revenue, gross profit, operating expenses, income (loss) from operations, total non-operating income (expense), net and net income (loss), and net income (loss) per diluted share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements provided with this press release. The types of non-GAAP adjustments described below have historically been excluded from our GAAP financial measures: acquisition accounting impacts to TVN deferred revenue and TVN inventory valuation; TVN acquisition-and integration-related costs; Cable Edge inventory charge in connection with certain product lines; restructuring and related charges; and non-cash items, such as impairment of long-term investment, stock-based compensation expense, amortization of intangibles and non-cash interest expenses related to convertible debt and adjustments that normalize the tax rate.

 
 
Harmonic Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)
 
   
     
 
 
  September 30, 2016
    December 31, 2015
 
ASSETS
   
 
       
 
Current assets:
   
 
       
 
 
Cash and cash equivalents
  $
44,741
    $
126,190
 
 
Short-term investments
   
7,931
      26,604
 
 
Accounts receivable, net
   
99,078
      69,515
 
 
Inventories
   
35,828
      38,819
 
 
Prepaid expenses and other current assets
   
38,519
      25,003
 
Total current assets
   
226,097
      286,131
 
Property and equipment, net
   
35,145
      27,012
 
Goodwill
   
239,880
      197,781
 
Intangibles, net
   
33,121
      4,097
 
Other long-term assets
   
31,218
      9,936
 
Total assets
  $
565,461
    $
524,957
 
 
   
 
       
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
   
 
       
 
Current liabilities:
   
 
       
 
 
Other debts and capital lease obligations, current
  $
6,825
    $
-
 
 
Accounts payable
   
31,407
      19,364
 
 
Income taxes payable
   
545
      307
 
 
Deferred revenue
   
54,319
      33,856
 
 
Accrued liabilities
   
50,369
      31,354
 
Total current liabilities
   
143,465
      84,881
 
Convertible debt, long-term
   
101,964
      98,295
 
Other debts and capital lease obligations, long-term
   
15,949
      -
 
Income taxes payable, long-term
   
2,863
      3,886
 
Deferred tax liabilities, long-term
   
2,163
      -
 
Other non-current liabilities
   
17,604
      9,727
 
Total liabilities
   
284,008
      196,789
 
 
   
 
       
 
Stockholders’ equity:
   
 
       
 
 
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued or outstanding
   
-
      -
 
 
Common stock, $0.001 par value, 150,000 shares authorized; 78,311 and 76,015 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively    
78
      76
 
 
Additional paid-in capital
   
2,249,857
      2,236,418
 
 
Accumulated deficit
   
(1,965,779 )
    (1,903,908 )
 
Accumulated other comprehensive loss
   
(2,703
)
    (4,418
)
Total stockholders’ equity
   
281,453
      328,168
 
Total liabilities and stockholders’ equity
  $
565,461
    $
524,957
 
 
   
 
       
 
 
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
 
   
     
 
 
  Three months ended
    Nine months ended
 
 
  September 30,
    October 2,
    September 30,
    October 2,
 
2016
2015
2016(1)
2015
 
     
 
Net revenue
  $
101,406
    $
83,305
    $
292,809
    $
290,424
 
Cost of revenue
    50,043
      37,074
      149,752
      134,780
 
 
Gross profit
    51,363
      46,231
      143,057
      155,644
 
Operating expenses:
                               
 
Research and development
    24,202
      21,679
      74,272
      65,824
 
 
Selling, general and administrative
    36,112
      28,966
      105,498
      91,443
 
 
Amortization of intangibles
    3,009
      1,446
      9,606
      4,338
 
 
Restructuring and asset impairment charges
    (27
)
    397
      4,488
      626
 
 
 
Total operating expenses     63,296
      52,488
      193,864
      162,231
 
Loss from operations
    (11,933
)
    (6,257
)
    (50,807
)
    (6,587
)
Interest (expense) income, net
    (2,734
)
    30
      (7,806
)
    102
 
Other (expense) income, net
    (328
)
    148
      (5
)
    (299
)
Loss on impairment of long-term investment
    (1,259
)
    -
      (2,735
)
    (2,505
)
Loss before income taxes
    (16,254
)
    (6,079
)
    (61,353
)
    (9,289
)
(Benefit from) provision for income taxes
    (242
)
    (1,268
)
    518
      (827
)
Net loss
  $
(16,012
)
  $
(4,811
)
  $
(61,871
)
  $
(8,462
)
Net loss per share:
                               
 
Basic and diluted
  $
(0.21
)
  $
(0.05
)
  $
(0.80
)
  $
(0.10
)
Shares used in per share calculation:
                               
 
Basic and diluted
    78,092
      87,991
      77,475
      88,359
 
 
 
                               

(1) On February 29, 2016, Harmonic closed the acquisition of TVN and as a result, our 2016 results for the nine months ended September 30, 2016 include TVN results beginning on February 29, 2016.

 
 
Harmonic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
   
 
 
  Nine months ended
 
 
  September 30,
    October 2,
 
2016
2015
Cash flows from operating activities:
               
Net loss
  $
(61,871
)
  $
(8,462
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
               
 
Amortization of intangibles
    12,711
      4,971
 
 
Depreciation
    13,198
      10,143
 
 
Stock-based compensation
    8,542
      11,845
 
 
Amortization of discount on convertible debt
    3,669
      -
 
 
Restructuring, asset impairment and loss on retirement of fixed assets
    1,476
      354
 
 
Loss on impairment of long-term investment
    2,735
      2,505
 
 
Provision for excess and obsolete inventories
    6,246
      1,234
 
 
Allowance for doubtful accounts, returns and discounts
    1,222
      576
 
 
Other non-cash adjustments, net
    251
      -
 
 
Changes in assets and liabilities, net of effects of acquisition:
               
 
 
Accounts receivable
    (12,869
)
    9,440
 
 
 
Inventories
    2,225
      (7,936
)
 
 
Prepaid expenses and other assets
    (5,938
)
    (13,817
)
 
 
Accounts payable
    2,505
      1,772
 
 
 
Deferred revenue
    20,038
      5,237
 
 
 
Income taxes payable
    (827
)
    (1,372
)
 
 
Accrued and other liabilities
    (6,230
)
    (7,926
)
Net cash (used in) provided by operating activities
    (12,917
)
    8,564
 
Cash flows from investing activities:
               
 
Acquisition of business, net of cash acquired
    (75,669
)
    -
 
 
Purchases of investments
    -
      (20,714
)
 
Proceeds from sales and maturities of investments
    18,692
      26,534
 
 
Purchases of property and equipment
    (11,423
)
    (10,393
)
 
Purchases of long-term investments
    -
      (85
)
 
Restricted cash
    -
      (1,091
)
Net cash used in investing activities
    (68,400
)
    (5,749
)
Cash flows from financing activities:
               
 
Payment of convertible debt issuance costs
    (582
)
    -
 
 
Proceeds from other debts and capital leases
    5,968
      -
 
 
Repayment of other debts and capital leases
    (8,038
)
    -
 
 
Payments for repurchase of common stock
    -
      (20,007
)
 
Proceeds from common stock issued to employees
    3,736
      9,255
 
 
Payment of tax withholding obligations related to net share settlements of restricted stock units
    (1,313
)
    (3,288
)
Net cash used in financing activities
    (229
)
    (14,040
)
Effect of exchange rate changes on cash and cash equivalents
    97
      (236
)
Net decrease in cash and cash equivalents
    (81,449
)
    (11,461
)
Cash and cash equivalents at beginning of period
    126,190
      73,032
 
Cash and cash equivalents at end of period
  $
44,741
    $
61,571
 
 
               
 
Harmonic Inc.
Revenue Information
(Unaudited, in thousands, except percentages)
 
   
 
  Three months ended
 
  September 30, 2016
  July 1, 2016
  October 2, 2015
 
  GAAP
  Adjustment
  Non-GAAP
  GAAP
  Adjustment
  Non-GAAP
  GAAP and Non-GAAP(2)
(1)
(1)
Product
                                                     
Video Products
  $
63,288
  $
-
  $
63,288
  62%
  $
61,660
  $
205
  $
61,865
  56%
  $
48,629
  59%
Cable Edge
    6,997
    -
    6,997
  7%
    15,751
    -
    15,751
  14%
    8,616
  10%
Services and Support     31,121
    325
    31,446
  31%
    32,160
    575
    32,735
  30%
    26,060
  31%
Total
  $
101,406
  $
325
  $
101,731
  100%
  $
109,571
  $
780
  $
110,351
  100%
  $
83,305
  100%
 
                                                     
Geography
                                                     
Americas
  $
47,856
  $
166
  $
48,022
  47%
  $
57,680
  $
143
  $
57,823
  52%
  $
44,926
  54%
EMEA
    32,405
    106
    32,511
  32%
    33,456
    467
    33,923
  31%
    19,269
  23%
APAC
    21,145
    53
    21,198
  21%
    18,435
    170
    18,605
  17%
    19,110
  23%
Total
  $
101,406
  $
325
  $
101,731
  100%
  $
109,571
  $
780
  $
110,351
  100%
  $
83,305
  100%
 
                                                     
Market
                                                     
Service Provider
  $
53,459
  $
97
  $
53,556
  53%
  $
65,733
  $
329
  $
66,062
  60%
  $
46,451
  56%
Broadcast and Media
    47,947
    228
    48,175
  47%
    43,838
    451
    44,289
  40%
    36,854
  44%
Total
  $
101,406
  $
325
  $
101,731
  100%
  $
109,571
  $
780
  $
110,351
  100%
  $
83,305
  100%
 
                                                     
 
   
 
  Nine months ended
 
  September 30, 2016
  October 2, 2015
 
  GAAP
  Adjustment(1)
  Non-GAAP
  GAAP and Non-GAAP(2)
Product
                               
Video Products
  $
169,162
  $
560
  $
169,722
  58%
  $
153,439
  53%
Cable Edge
    36,180
    -
    36,180
  12%
    61,726
  21%
Services and Support     87,467
    1,168
    88,635
  30%
    75,259
  26%
Total
  $
292,809
  $
1,728
  $
294,537
  100%
  $
290,424
  100%
 
                               
Geography
                               
Americas
  $
154,513
  $
390
  $
154,903
  53%
  $
165,786
  57%
EMEA
    85,716
    974
    86,690
  29%
    71,302
  25%
APAC
    52,580
    364
    52,944
  18%
    53,336
  18%
Total
  $
292,809
  $
1,728
  $
294,537
  100%
  $
290,424
  100%
 
                               
Market
                               
Service Provider
  $
170,462
  $
575
  $
171,037
  58%
  $
178,466
  61%
Broadcast and Media
    122,347
    1,153
    123,500
  42%
    111,958
  39%
Total
  $
292,809
  $
1,728
  $
294,537
  100%
  $
290,424
  100%
 
                               

(1) Non-GAAP revenue for the three months ended September 30, 2016 and July 1, 2016 and for the nine months ended September 30, 2016 include $0.3 million, $0.8 million and $1.7 million adjustments relating to TVN deferred revenue as a result of acquisition accounting, respectively.

(2) There is no revenue adjustment for the three months and nine months ended October 2, 2015.

 
 
Harmonic Inc.
Segment Revenue and Operating Income (Loss)
(Unaudited, in thousands)
 
   
 
 
  Three months ended
 
 
  September 30, 2016
    July 1, 2016
    October 2, 2015
 
 
  GAAP
    Adjustments
  Non-
    GAAP
    Adjustments
  Non-
    GAAP
    Adjustments
  Non-
 
(1)
GAAP
(1)
GAAP
(1)
GAAP
Net revenue:
                                                                 
 
Video
  $
91,353
    $
325
  $
91,678
    $
90,588
    $
780
  $
91,368
    $
71,889
    $
-
  $
71,889
 
 
Cable Edge
    10,053
      -
    10,053
      18,983
      -
    18,983
      11,416
      -
    11,416
 
Total consolidated net revenue
  $
101,406
    $
325
  $
101,731
    $
109,571
    $
780
  $
110,351
    $
83,305
    $
-
  $
83,305
 
 
                                                                 
Operating income (loss):
                                                                 
 
Video
  $
4,886
    $
325
  $
5,211
    $
518
    $
780
  $
1,298
    $
3,575
    $
-
  $
3,575
 
 
Cable Edge
    (4,767
)
    -
    (4,767
)
    (498
)
    -
    (498
)
    (3,963
)
    -
    (3,963
)
Total segment operating income (loss)
    119
      325
    444
      20
      780
    800
      (388
)
    -
    (388
)
 
Unallocated corporate expenses     (4,983
)
    4,983
    -
      (9,831
)
    9,831
    -
      (510
)
    510
    -
 
 
Stock-based compensation
    (2,680
)
    2,680
    -
      (2,768
)
    2,768
    -
      (3,827
)
    3,827
    -
 
 
Amortization of intangibles
    (4,389
)
    4,389
    -
      (5,539
)
    5,539
    -
      (1,532
)
    1,532
    -
 
Income (loss) from operations
    (11,933
)
    12,377
    444
      (18,118
)
    18,918
    800
      (6,257
)
    5,869
    (388
)
Non-operating (expense) income, net
    (4,321
)
    2,609
    (1,712
)
    (2,319
)
    1,233
    (1,086
)
    178
      -
    178
 
Income (loss) before income taxes
  $
(16,254
)
  $
14,986
  $
(1,268
)
  $
(20,437
)
  $
20,151
  $
(286
)
  $
(6,079
)
  $
5,869
  $
(210
)
 
                                                                 
 
   
 
 
  Nine months ended
 
 
  September 30, 2016
    October 2, 2015
 
 
  GAAP
    Adjustments
  Non-GAAP
    GAAP
    Adjustments
  Non-GAAP
 
(1)
(1)
Net revenue:
                                           
 
Video
  $
246,949
    $
1,728
  $
248,677
    $
219,378
    $
-
  $
219,378
 
 
Cable Edge
    45,860
      -
    45,860
      71,046
      -
    71,046
 
Total consolidated net revenue
  $
292,809
    $
1,728
  $
294,537
    $
290,424
    $
-
  $
290,424
 
 
                                           
Operating income (loss):
                                           
 
Video
  $
(1,943
)
  $
1,917
  $
(26
)
  $
8,386
    $
-
  $
8,386
 
 
Cable Edge
    (7,118
)
    -
    (7,118
)
    2,582
      -
    2,582
 
Total segment operating income (loss)
    (9,061
)
    1,917
    (7,144
)
    10,968
      -
    10,968
 
 
Unallocated corporate expenses     (20,493
)
    20,493
    -
      (739
)
    739
    -
 
 
Stock-based compensation
    (8,542
)
    8,542
    -
      (11,845
)
    11,845
    -
 
 
Amortization of intangibles
    (12,711
)
    12,711
    -
      (4,971
)
    4,971
    -
 
Income (loss) from operations
    (50,807
)
    43,663
    (7,144
)
    (6,587
)
    17,555
    10,968
 
Non-operating (expense) income, net
    (10,546
)
    6,505
    (4,041
)
    (2,702
)
    2,505
    (197
)
Income (loss) before income taxes
  $
(61,353
)
  $
50,168
  $
(11,185
)
  $
(9,289
)
  $
20,060
  $
10,771
 
 
                                           

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

 
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
 
   
 
 
  Three months ended
 
 
  September 30, 2016
 
 
  Revenue
  Gross
    Total Operating Expense     Income
    Total Non-operating Income (expense), net     Net loss
 
Profit
(loss) from Operations
GAAP
  $
101,406
  $
51,363
    $
63,296
    $
(11,933
)
  $
(4,321
)
  $
(16,012
)
Cable Edge inventory charge
    -
    (159
)
   
-
     
(159
)
   
-
      (159
)
 
Acquisition accounting impact related to TVN deferred revenue
    325
    325
     
-
     
325
     
-
      325
 
 
Stock-based compensation in cost of revenue
    -
    360
     
-
     
360
     
-
      360
 
 
Stock-based compensation in research and development
    -
    -
     
(771
)
   
771
     
-
      771
 
 
Stock-based compensation in selling, general and administrative
    -
    -
     
(1,549
)
   
1,549
     
-
      1,549
 
 
Amortization of intangibles
    -
    1,380
     
(3,009
)
   
4,389
     
-
      4,389
 
 
Restructuring and related charges
    -
    (1
)
   
27
     
(28
)
   
-
      (28
)
 
TVN acquisition-and integration-related costs
    -
    119
     
(5,051
)
   
5,170
     
98
      5,268
 
 
Loss on impairment of long-term investment
    -
    -
     
-
     
-
     
1,259
      1,259
 
 
Non-cash interest expenses related to convertible notes
    -
    -
     
-
     
-
     
1,252
      1,252
 
 
Discrete tax items and tax effect of non-GAAP adjustments
    -
    -
     
-
     
-
     
-
      (52
)
Non-GAAP
  $
101,731
  $
53,387
    $
52,943
    $
444
    $
(1,712
)
  $
(1,078
)
As a % of revenue (GAAP)
          50.7
%
   
62.4
%
   
(11.8
)%
   
(4.3
)%
    (15.8
)%
As a % of revenue (Non-GAAP)
          52.5
%
   
52.0
%
   
0.4
%
   
(1.7
)%
    (1.1
)%
Diluted net loss per share:
                 
 
     
 
     
 
         
 
Diluted net loss per share-GAAP
                 
 
     
 
     
 
    $
(0.21
)
 
Diluted net loss per share-Non-GAAP
                 
 
     
 
     
 
    $
(0.01
)
Shares used to compute diluted net loss per share:
                 
 
     
 
     
 
         
 
GAAP and Non-GAAP
                 
 
     
 
     
 
      78,092
 
 
                 
 
     
 
     
 
         
 
  Three months ended
 
 
  July 1, 2016
 
 
  Revenue
  Gross
    Total Operating Expense     Income
    Total Non-operating Income (expense), net     Net Loss
 
Profit
(loss) from Operations
GAAP
  $
109,571
  $
51,040
    $
69,158
    $
(18,118
)
  $
(2,319
)
  $
(20,679
)
Cable Edge inventory charge
    -
    4,519
     
-
     
4,519
     
 
      4,519
 
 
Acquisition accounting impacts related to TVN deferred revenue
    780
    780
     
-
     
780
     
-
      780
 
 
Stock-based compensation in cost of revenue
    -
    424
     
-
     
424
     
-
      424
 
 
Stock-based compensation in research and development
    -
    -
     
(841
)
   
841
     
-
      841
 
 
Stock-based compensation in selling, general and administrative
    -
    -
     
(1,503
)
   
1,503
     
-
      1,503
 
 
Amortization of intangibles
    -
    1,307
     
(4,232
)
   
5,539
     
-
      5,539
 
 
Restructuring and related charges
    -
    6
     
(1,903
)
   
1,909
     
-
      1,909
 
 
TVN acquisition-and integration-related costs
    -
    433
     
(2,970
)
   
3,403
     
-
      3,403
 
 
Non-cash interest expenses related to convertible notes
    -
    -
     
-
     
-
     
1,233
      1,233
 
 
Discrete tax items and tax effect of non-GAAP adjustments
    -
    -
     
-
     
-
     
-
      285
 
Non-GAAP
  $
110,351
  $
58,509
    $
57,709
    $
800
    $
(1,086
)
  $
(243
)
As a % of revenue (GAAP)
          46.6
%
   
63.1
%
   
(16.5
)%
   
(2.1
)%
    (18.9
)%
As a % of revenue (Non-GAAP)
          53.0
%
   
52.3
%
   
0.7
%
   
(1.0
)%
    (0.2
)%
Diluted net loss per share:
                 
 
     
 
     
 
         
 
Diluted net loss per share-GAAP
                 
 
     
 
     
 
    $
(0.27
)
 
Diluted net loss per share-Non-GAAP
                 
 
     
 
     
 
    $
0.00
 
Shares used to compute diluted net loss per share:
                 
 
     
 
     
 
         
 
GAAP and Non-GAAP
                 
 
     
 
     
 
      77,342
 
 
                 
 
     
 
     
 
         
 
  Three months ended
 
 
  October 2, 2015
 
 
  Revenue
  Gross
    Total Operating Expense     Loss from Operations
    Total Non-operating Income (expense), net     Net Loss
 
Profit
GAAP
  $
83,305
  $
46,231
    $
52,488
    $
(6,257
)
  $
178
    $
(4,811
)
 
Stock-based compensation in cost of revenue
    -
    433
     
-
     
433
     
-
      433
 
 
Stock-based compensation in research and development
    -
    -
     
(1,074
)
   
1,074
     
-
      1,074
 
 
Stock-based compensation in selling, general and administrative
    -
    -
     
(2,320
)
   
2,320
     
-
      2,320
 
 
Amortization of intangibles
    -
    86
     
(1,446
)
   
1,532
     
-
      1,532
 
 
Restructuring and related charges
    -
    113
     
(397
)
   
510
     
-
      510
 
 
Discrete tax items and tax effect of non-GAAP adjustments
    -
    -
     
-
     
-
     
-
      (1,224
)
Non-GAAP
  $
83,305
  $
46,863
    $
47,251
    $
(388
)
  $
178
    $
(166
)
As a % of revenue (GAAP)
          55.5
%
   
63.0
%
   
(7.5
)%
   
0.2
%
    (5.8
)%
As a % of revenue (Non-GAAP)
          56.3
%
   
56.7
%
   
(0.5
)%
   
0.2
%
    (0.2
)%
Diluted net income (loss) per share:
                 
 
     
 
     
 
         
 
Diluted net loss per share-GAAP
                 
 
     
 
     
 
    $
(0.05
)
 
Diluted net loss per share-Non-GAAP
                 
 
     
 
     
 
    $
0.00
 
Shares used to compute diluted net loss per share:
                 
 
     
 
     
 
         
 
GAAP and Non-GAAP
                 
 
     
 
     
 
      87,991
 
 
                 
 
     
 
     
 
         
 
   
  Nine months ended
 
 
   
  September 30, 2016
 
 
  Revenue
  Gross
    Total Operating Expense     Income
    Total Non-operating Income (expense), net     Net Loss
 
Profit
(loss) from Operations
GAAP
  $
292,809
  $
143,057
    $
193,864
    $
(50,807
)
  $
(10,546
)
  $
(61,871
)
Cable Edge inventory charge
    -
    4,360
     
-
     
4,360
     
-
      4,360
 
Acquisition accounting impacts related to TVN deferred revenue
    1,728
    1,728
     
-
     
1,728
     
-
      1,728
 
Acquisition accounting impacts related to TVN fair value of inventory
    -
    189
     
-
     
189
     
-
      189
 
 
Stock-based compensation in cost of revenue
    -
    1,011
     
-
     
1,011
     
-
      1,011
 
 
Stock-based compensation in research and development
    -
    -
     
(2,581
)
   
2,581
     
-
      2,581
 
 
Stock-based compensation in selling, general and administrative     -
    -
     
(4,950
)
   
4,950
     
-
      4,950
 
 
Amortization of intangibles
    -
    3,105
     
(9,606
)
   
12,711
     
-
      12,711
 
 
Restructuring and related charges
    -
    (24
)
   
(4,488
)
   
4,464
     
-
      4,464
 
 
TVN acquisition-and integration-related costs
    -
    610
     
(11,059
)
   
11,669
     
98
      11,767
 
 
Loss on impairment of long-term investment
    -
    -
     
-
     
-
     
2,735
      2,735
 
 
Non-cash interest expenses related to convertible notes
    -
    -
     
-
     
-
     
3,672
      3,672
 
 
Discrete tax items and tax effect of non-GAAP adjustments
    -
    -
     
-
     
-
     
-
      2,197
 
Non-GAAP
  $
294,537
  $
154,036
    $
161,180
    $
(7,144
)
  $
(4,041
)
  $
(9,506
)
As a % of revenue (GAAP)
          48.9
%
   
66.2
%
   
(17.4
)%
   
(3.6
)%
    (21.1
)%
As a % of revenue (Non-GAAP)
          52.3
%
   
54.7
%
   
(2.4
)%
   
(1.4
)%
    (3.2
)%
 
                 
 
     
 
     
 
         
Diluted net loss per share:
                 
 
     
 
     
 
         
 
Diluted net loss per share-GAAP
                 
 
     
 
     
 
    $
(0.80
)
 
Diluted net loss per share-Non-GAAP
                 
 
     
 
     
 
    $
(0.12
)
Shares used to compute diluted net loss per share:
                 
 
     
 
     
 
         
 
GAAP and Non-GAAP
                 
 
     
 
     
 
      77,475
 
 
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Business Outlook
(In millions, except percentages and per share data)
 
   
 
  Q4 2016 Financial Guidance
 
  Revenue
  Gross
  Total
  Income (loss)
  Total Non-operating Income (expense),   Net
Profit
Operating Expense
from
net
Income (loss)
Operations
GAAP
  $105.8 to $110.8   $51.0 to $55.0   $64.5 to $66.5   $(13.5) to $(11.5)   $(2.6)
  ($16.0) to ($14.0)
 
Acquisition accounting impact related to TVN deferred revenue
  0.2
  0.2
  -
  0.2
  -
  0.2
 
Stock-based compensation expense
  -
  0.6
  (3.8)
  4.4
  -
  4.4
 
Amortization of intangibles
  -
  1.4
  (1.0)
  2.4
  -
  2.4
 
Restructuring and related charges and TVN acquisition/integration costs   -
  2.8
  (9.8)
  12.6
  -
  12.6
 
Non-cash interest expense related to convertible notes
  -
  -
  -
  -
  1.3
  1.3
 
Discrete tax items and tax effect of non-GAAP adjustments
  -
  -
  -
  -
  -
  (0.8)
 
  0.2
  5.0
  (14.6)
  19.6
  (1.3)
  20.1
 
   
   
   
   
   
   
Non-GAAP
  $106.0 to $111.0
  $56.0 to $60.0   $50.0 to $52.0   $6.0 to $8.0
  $(1.3)
  $4.0 to $6.0
As a % of revenue (GAAP)
   
  48% to 49%
  60% to 61%
  (13)% to (11)%
  (2%)
  (15)% to (13)%
As a % of revenue (Non-GAAP)
   
  53% to 54%
  46% to 47%
  6% to 7%
  (1%)
  4% to 5%
Diluted income (loss) per share:
   
   
   
   
   
   
 
Diluted net loss per share-GAAP
   
   
   
   
   
  $(0.20) to $(0.18)
 
Diluted net income per share-Non-GAAP
   
   
   
   
   
  $0.05 to $0.07
Shares used to compute diluted income (loss) per share:
   
   
   
   
   
   
 
GAAP and Non-GAAP
   
   
   
   
   
  79.0
 
   
   
   
   
   
   

CONTACTS: Harold Covert Chief Financial Officer Harmonic Inc. +1.408.542.2500 Blair King Director, Investor Relations Harmonic Inc. +1.408.490.6172