HLIT
$3.90
Harmonic
Earnings Details
1st Quarter March 2018
Monday, April 30, 2018 4:05:00 PM
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Summary

Harmonic Lowers Guidance, but Remains In-line with Estimates

Harmonic (HLIT) reported a 1st Quarter March 2018 loss of $0.08 per share on revenue of $90.1 million. The consensus estimate was a loss of $0.10 per share on revenue of $88.3 million. Revenue grew 8.7% on a year-over-year basis.

The company said it expects second quarter non-GAAP results to range from a loss of $0.07 per share to earnings of $0.02 per share on revenue of $88.0 million to $98.0 million. The current consensus estimate is earnings of $0.01 per share on revenue of $98.1 million for the quarter ending June 30, 2018. The company also said it now expects 2018 results to range from a loss of $0.22 per share to earnings of $0.18 per share on revenue of $375.0 million to $425.0 million. The company's previous guidance was results to range from a loss of $0.18 per share to earnings of $0.25 per share on revenue of $380.0 million to $430.0 million and the current consensus estimate is earnings of $0.10 per share on revenue of $402.6 million for the year ending December 31, 2018.

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
($0.08)
Earnings Whisper
-
Consensus Estimate
($0.10)
Reported Revenue
$90.1 Mil
Revenue Estimate
$88.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Harmonic Announces First Quarter 2018 Results

SAN JOSE, Calif., April 30, 2018 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, today announced its unaudited results for the first quarter of 2018.

Harmonic logo (PRNewsfoto/Harmonic Inc.)

"We continue to execute on our strategic initiatives, evidenced by 17% year over year gross profit expansion," said Patrick Harshman, president and chief executive officer of Harmonic. "Our CableOS program continues to gain momentum, delivering 37% sequential revenue growth and a major new Tier 1 customer contract. Our Video segment has been profitable for three consecutive quarters, as gross margin expanded to 57.5% in the current quarter, driven by our ongoing transition to software and SaaS."

Q1 Financial and Business Highlights

  • GAAP revenue of $90.1 million, up 9% year over year; non-GAAP revenue of $90.2 million, up 8% year over year.
  • Cable Access segment revenue: GAAP $18.4 million; non-GAAP $18.5 million, up over 70% year over year.
  • Video segment operating profit: $2.0 million, up $7.7 million year over year.
  • Gross margin: GAAP 52.4% compared to 48.7% in the year ago period; non-GAAP 55.3% compared to 52.1% in the year ago period.
  • Record backlog and deferred revenue of $224.4 million, up 21.8% year over year.
  • New CableOS multi-year supply agreement worth over $50 million awarded by a Tier 1 international cable operator.
  • Surpassed 32,500 OTT channels deployed globally, up over 50% in past six months.

Select Financial Information



GAAP


Non-GAAP

Key Financial Results


Q1 2018


Q4 2017


Q1 2017


Q1 2018


Q4 2017


Q1 2017



(in millions, except per share data)

Net revenue


$

90.1



$

101.0



$

82.9



$

90.2



$

101.1



$

83.5


Net loss


$

(13.7)



$

(11.8)



$

(24.0)



$

(1.1)



$

(0.4)



$

(11.2)


Diluted EPS


$

(0.16)



$

(0.14)



$

(0.30)



$

(0.01)



$        0.00


$

(0.14)















Other Financial Information

Q1 2018


Q4 2017


Q1 2017


(in millions)

Bookings for the quarter

$

102.6



$

122.9



$

82.1


Backlog and deferred revenue as of quarter end

$

224.4



$

224.4



$

184.2


Cash as of quarter end

$

52.0



$

57.0



$

55.3


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".

Q2 Financial Guidance and Outlook for 2018

GAAP Financial Guidance


Q2 2018


2018


Low


High


Low


High




(in millions, except percentages and per share data)

Net Revenue


$

88.0



$

98.0



$

375.0



$

425.0



Video


$

70.0



$

76.0



$

285.0



$

315.0



Cable Access


$

18.0



$

22.0



$

90.0



$

110.0


Gross Margin %


50.5

%


52.5

%


48.5

%


50.5

%

Operating Expenses


$

52.5



$

54.5



$

217.0



$

225.0


Operating Income (Loss)


$

(10.2)



$

(1.2)



$

(43.2)



$

(2.2)


Tax Benefit (Expense)


$

(0.7)



$

(0.7)



$

(2.8)



$

(2.8)


EPS


$

(0.17)



$

(0.06)



$

(0.69)



$

(0.21)


Shares


85.4



85.4



86.0



86.0


Cash


$

45.0



$

55.0



$

45.0



$

55.0



Non-GAAP Financial Outlook


Q2 2018


2018


Low


High


Low


High




(in millions, except percentages and per share data)

Net Revenue


$

88.0



$

98.0



$

375.0



$

425.0



Video


$

70.0



$

76.0



$

285.0



$

315.0



Cable Access


$

18.0



$

22.0



$

90.0



$

110.0


Gross Margin %


52.0

%


54.0

%


51.0

%


52.0

%

Operating Expenses


$

49.0



$

51.0



$

197.0



$

205.0


Operating Income (Loss)


$

(5.0)



$

4.0



$

(15.0)



$

26.0


Tax Rate


16

%


16

%


16

%


16

%

EPS


$

(0.07)



$

0.02



$

(0.22)



$

0.18


Shares


85.4



86.0



86.0



87.0


Cash


$

45.0



$

55.0



$

45.0



$

55.0


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

Effective January 1, 2018, we adopted the new revenue recognition standard entitled Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("ASC 606"). The 2018 Outlook reflects the effects of adopting this new accounting standard for 2018, with an expected net decrease in 2018 revenue of approximately $5 million and an increase in 2018 operating expense of approximately $1.0 million.

Conference Call Information

Harmonic will host a conference call to discuss its financial results at 2:00 p.m. PT (5:00 p.m. ET) on Monday, April 30, 2018. 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 6987705). A replay will be available after 4:30 p.m. PT on the same web site or by calling +1.404.537.3406 or +1.855.859.2056 (passcode 6987705).

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 CCAP 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 loss, GAAP tax expense, GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP tax rate, non-GAAP EPS, share count and cash. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite, telco, broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions on our sales and operations; our ability to develop new and enhanced products in a timely manner and market acceptance of our new or existing products; losses of one or more key customers; risks associated with our international operations; exchange rate fluctuations of the currencies in which we conduct business; risks associated with our CableOS™ and VOS™ product solutions; dependence on market acceptance of various types of broadband services, on the adoption of new broadband technologies and on broadband industry trends; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in our markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; and the effect on our business of natural disasters. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic's filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K for the year ended December 31, 2017, 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, gross profit, operating expenses, income (loss) from operations, non-operating expenses and net income (loss) (including those amounts as a percentage of revenue), and net income (loss) per diluted share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements provided with this press release. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures.

Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

Cable Access inventory charge - Harmonic from time to time incurs inventory impairment charges associated with material business shifts, such as the repositioning of our Cable Access segment. We exclude these items, because we do not believe they are reflective of our ongoing long-term business and operating results.

Stock-based compensation - Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We believe that management is limited in its ability to project the impact of 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 are 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.

TVN acquisition- and integration-related costs - As a result of the Company's acquisition of Thomson Video Networks (TVN) in February 2016, the Company incurred acquisition- and integration-related expenses, including legal, accounting and other professional services as well as integration-related costs that are not expected to generate future benefits once the integration is fully consummated. We exclude these transaction and integration expenses because we believe these expenses have no direct correlation to the operation of our business, and because we believe that the non-GAAP financial measures excluding these costs provide meaningful supplemental information regarding our operational performance and liquidity. In addition, excluding these costs from the non-GAAP measures facilitates comparisons to our historical operating results and comparisons to peer company operating results.

Inventory fair value adjustment - Purchase accounting requires us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company's cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustments to our cost of revenues exclude the expected profit margin component that is recorded under purchase accounting associated with our acquisitions. We believe the adjustments are useful to investors as an additional means to reflect cost of revenues and gross margin trends of our business.

Deferred revenue fair value adjustment - We define non-GAAP net revenues as net revenues excluding the impact of purchase accounting. In connection with our acquisitions, the acquired deferred revenue balances were required to be written down due to purchase accounting in accordance with GAAP. The impact on revenues related to purchase accounting as a result of these transactions, limits the comparability of revenues between periods. We do not expect revenues generated from new contracts to be similarly impacted by purchase accounting adjustments. Accordingly, we believe presenting non-GAAP net revenues to exclude the impact of purchase accounting adjustments aids in the comparability between periods and in assessing our overall operating performance.

Non-cash interest expense related to convertible notes - We record the accretion of the debt discount related to the equity component and amortization of issuance costs as non-cash interest expense. We believe that excluding these costs provides meaningful supplemental information regarding operational performance and liquidity, along with enhancing 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. Vesting of the warrant shares is subject to Comcast achieving certain milestones and purchase volume commitments, and therefore the accounting guidance requires that the value of the warrant be recorded as a reduction in the Company's net revenues. Until final vesting, changes in the fair value of the warrant share will be marked to market and any adjustment as such will also be recorded in revenue. The change in fair value together with vested warrant shares are amortized to revenue using a ratio of revenue recognized from the customer in the period compared to total revenue expected from the customer. We have excluded the effect of warrant amortization in our non-GAAP financial measures. Management believes it is useful to exclude the charge for the fair value of the warrant shares in order to better understand the effects of these items on our total revenues and gross margin.

Loss on impairment of long-term investments - We exclude the effect of any other-than-temporary impairment of a cost method investment in calculating our non-GAAP financial measures. We exclude these items because we do not believe they are reflective of our ongoing long-term business and operating results.

Avid litigation settlement and associated legal fees - In the third quarter of fiscal 2017, we settled the patent litigation with Avid Technology, Inc. by entering into a settlement and patent portfolio cross-license agreement with Avid. Under the agreement, we agreed to pay Avid a one-time non-recurring amount of $6 million in installments. $2.5 million was paid upfront in October 2017 and $1.5 million and $2.0 million will be paid in 2019 and 2020, respectively. Also, the Avid litigation costs of approximately $1.4 million and $0.7 million in the third and fourth fiscal quarter of 2017, respectively, were significantly higher compared to prior periods. We excluded these expenses from our non-GAAP results because we do not believe they are reflective of our ongoing long-term business and operating results.

Discrete tax items and tax effect of non-GAAP adjustments - The income tax effect of non-GAAP adjustments relates to the tax effect of the adjustments that we incorporate into non-GAAP financial measures in order to provide a more meaningful measure of non-GAAP net income.

 

Harmonic Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except per share data)



March 30, 2018


December 31, 2017

ASSETS




Current assets:




   Cash and cash equivalents

$

52,045



$

57,024


   Accounts receivable, net

74,760



69,844


   Inventories

25,074



25,976


   Prepaid expenses and other current assets

29,967



18,931


Total current assets

181,846



171,775


Property and equipment, net

27,703



29,265


Goodwill

243,805



242,827


Intangibles, net

19,233



21,279


Other long-term assets

43,647



42,913


Total assets

$

516,234



$

508,059






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




   Other debts and capital lease obligations, current

$

7,551



$

7,610


   Accounts payable

27,573



33,112


   Income taxes payable

481



233


   Deferred revenue

57,629



52,429


   Accrued and other current liabilities

49,202



48,705


Total current liabilities

142,436



142,089


Convertible notes, long-term

110,201



108,748


Other debts and capital lease obligations, long-term

15,424



15,336


Income taxes payable, long-term

927



917


Other non-current liabilities

21,273



22,626


Total liabilities

290,261



289,716






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; 85,194 and 82,554 shares issued and outstanding at March 30, 2018 and December 31, 2017, respectively

85



83


   Additional paid-in capital

2,280,847



2,272,690


   Accumulated deficit

(2,060,075)



(2,057,812)


   Accumulated other comprehensive income

5,116



3,382


Total stockholders' equity

225,973



218,343


Total liabilities and stockholders' equity

$

516,234



$

508,059


 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)



Three months ended



March 30,
2018


March 31,
2017


Revenue:





Product

$

55,374



$

50,404



Service

34,753



32,539



Total net revenue

90,127



82,943



Cost of revenue:





Product

26,609



26,102



Service

16,335



16,433



Total cost of revenue

42,944



42,535



   Gross profit

47,183



40,408



Operating expenses:





   Research and development

23,457



24,882



   Selling, general and administrative

31,163



34,631



   Amortization of intangibles

804



774



   Restructuring and related charges

1,086



1,279



      Total operating expenses

56,510



61,566



Loss from operations

(9,327)



(21,158)



Interest expense, net

(2,757)



(2,590)



Other expense, net

(532)



(511)



Loss before income taxes

(12,616)



(24,259)



Provision for (benefit from) income taxes

1,078



(232)



Net loss

$

(13,694)



$

(24,027)



Net loss per share:





   Basic and diluted

$

(0.16)



$

(0.30)



Shares used in per share calculation:





   Basic and diluted

83,912



79,810



 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Three months ended


March 30, 2018


March 31, 2017

Cash flows from operating activities:




Net loss

$

(13,694)



$

(24,027)


Adjustments to reconcile net loss to net cash used in operating activities:




   Amortization of intangibles

2,099



2,069


   Depreciation

3,456



3,599


   Stock-based compensation

5,757



3,251


   Amortization of discount on convertible debt

1,453



1,316


   Amortization of non-cash warrant

111



416


   Restructuring, asset impairment and loss on retirement of fixed assets

40



187


   Foreign currency adjustments

835



182


   Provision for excess and obsolete inventories

458



387


   Allowance for doubtful accounts, returns and discounts

1,122



2,700


   Other non-cash adjustments, net

132



72


   Changes in operating assets and liabilities, net of effects of acquisition:




      Accounts receivable

(5,925)



14,388


      Inventories

424



942


      Prepaid expenses and other assets

(6,511)



(3,151)


      Accounts payable

(5,710)



(6,687)


      Deferred revenue

10,009



5,435


      Income taxes payable

253



6


      Accrued and other liabilities

(933)



(4,181)


Net cash used in operating activities

(6,624)



(3,096)


Cash flows from investing activities:




   Proceeds from maturities of investments



3,106


   Proceeds from sale of investments

 



3,792


   Purchases of property and equipment

(1,775)



(3,217)


Net cash provided by (used in) investing activities

(1,775)



3,681


Cash flows from financing activities:




  Repayment of other debts and capital leases

(448)



(953)


   Proceeds from common stock issued to employees

2,347



2,114


   Payment of tax withholding obligations related to net share settlements of restricted stock units



(2,383)


Net cash provided by (used in) financing activities

1,899



(1,222)


Effect of exchange rate changes on cash, cash equivalents and restricted cash

73



347


Net decrease in cash, cash equivalents and restricted cash

(6,427)



(290)


Cash, cash equivalents and restricted cash at beginning of period

58,757



57,420


Cash, cash equivalents and restricted cash at end of period

$

52,330



$

57,130


The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same amounts presented in the Condensed Consolidated Statements of Cash Flows (in thousands):


March 30, 2018


December 31, 2017

Cash and cash equivalents

$

52,045



$

57,024


Restricted cash included in prepaid expenses and other current assets

285



530


Restricted cash included in other long-term assets



1,203


    Total cash, cash equivalents and restricted cash

$

52,330



$

58,757


 

Harmonic Inc.

Preliminary Revenue Information

(Unaudited, in thousands, except percentages)



Three months ended


March 30, 2018


December 31, 2017


March 31, 2017


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP

Product















Video Products

$

47,412


$


$

47,412


53%


$

59,882


$


$

59,882


59%


$

45,518


$


$

45,518


55%

Cable Access

7,962


67


8,029


9%


6,106


50


6,156


6%


4,886


$

191


5,077


6%

Services and Support

34,753


44


34,797


39%


34,986


65


35,051


35%


32,539


336


32,875


39%

Total

$

90,127


$

111


$

90,238


100%


$

100,974


$

115


$

101,089


100%


$

82,943


$

527


$

83,470


100%
















Geography















Americas

$

48,856


$

111


$

48,967


54%


$

44,563


$

115


$

44,678


44%


$

37,906


$

416


$

38,322


46%

EMEA

23,202



23,202


26%


39,209



39,209


39%


25,439


111


25,550


31%

APAC

18,069



18,069


20%


17,202



17,202


17%


19,598



19,598


23%

Total

$

90,127


$

111


$

90,238


100%


$

100,974


$

115


$

101,089


100%


$

82,943


$

527


$

83,470


100%
















Market















Service Provider

$

52,217


$

111


$

52,328


58%


$

53,052


$

115


$

53,167


53%


$

48,028


$

416


$

48,444


58%

Broadcast and Media

37,910



37,910


42%


47,922



47,922


47%


34,915


111


35,026


42%

Total

$

90,127


$

111


$

90,238


100%


$

100,974


$

115


$

101,089


100%


$

82,943


$

527


$

83,470


100%


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

 

Harmonic Inc.

Preliminary Segment Information

(Unaudited, in thousands, except percentages)



Three months ended March 30, 2018


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

71,748



$

18,490



$

90,238



$

(111)



$

90,127


Gross profit

41,226



8,640



49,866



(2,683)



47,183


Gross margin%

57.5

%


46.7

%


55.3

%




52.4

%

Operating income (loss)

1,995



(1,513)



482



(9,809)



(9,327)


Operating margin%

2.8

%


(8.2)

%


0.5

%




(10.3)

%


Three months ended December 31, 2017


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

87,596



$

13,493



$

101,089



$

(115)



$

100,974


Gross profit

46,639



4,034



50,673



(2,101)



48,572


Gross margin%

53.2

%


29.9

%


50.1

%




48.1

%

Operating income (loss)

5,752



(4,192)



1,560



(9,651)



(8,091)


Operating margin%

6.6

%


(31.1)

%


1.5

%




(8.0)

%


Three months ended March 31, 2017


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

74,453



$

9,017



$

83,470



$

(527)



$

82,943


Gross profit

40,884



2,626



43,510



(3,102)



40,408


Gross margin%

54.9

%


29.1

%


52.1

%




48.7

%

Operating loss

(5,725)



(5,664)



(11,389)



(9,769)



(21,158)


Operating margin%

(7.7)

%


(62.8)

%


(13.6)

%




(25.5)

%


(1) See "Use of Non-GAAP Financial Measures" above 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 March 30, 2018


Revenue

Gross
Profit

Total
Operating
Expense

Income
(loss) from
Operations

Total Non-
operating
Expense, net

Net Loss

GAAP

$

90,127


$

47,183


$

56,510


$

(9,327)


$

(3,289)


$

(13,694)


  Accounting impact related to warrant amortization

111


111



111



111


  Stock-based compensation


515


(5,242)


5,757



5,757


  Amortization of intangibles


1,295


(804)


2,099



2,099


  Restructuring and related charges


762


(1,086)


1,848



1,848


  Avid litigation settlement fees and associated legal fees



6


(6)



(6)


  Non-cash interest expenses related to convertible notes





1,454


1,454


  Discrete tax items and tax effect of non-GAAP adjustments






1,294


Total adjustments

111


2,683


(7,126)


9,809


1,454


12,557


Non-GAAP

$

90,238


$

49,866


$

49,384


$

482


$

(1,835)


$

(1,137)


As a % of revenue (GAAP)


52.4

%

62.7

%

(10.3)

%

(3.6)

%

(15.2)

%

As a % of revenue (Non-GAAP)


55.3

%

54.7

%

0.5

%

(2.0)

%

(1.3)

%

Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.16)


  Diluted net loss per share-Non-GAAP






$

(0.01)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






83,912










Three months ended December 31, 2017


Revenue

Gross
Profit

Total
Operating
Expense

Income
(loss) from
Operations

Total Non-
operating
Expense, net

Net Loss

GAAP

$

100,974


$

48,572


$

56,663


$

(8,091)


$

(3,938)


$

(11,845)


  Accounting impact related to warrant amortization

115


115



115



115


  Stock-based compensation


747


(4,756)


5,503



5,503


  Amortization of intangibles


1,295


(795)


2,090



2,090


  Restructuring and related charges


(56)


(1,223)


1,167



1,167


  TVN acquisition- and integration-related costs



(84)


84



84


  Avid litigation settlement fees



(692)


692



692


  Loss on impairment of long-term investment





530


530


  Non-cash interest expenses related to convertible notes





1,429


1,429


  Discrete tax items and tax effect of non-GAAP adjustments






(121)


Total adjustments

115


2,101


(7,550)


9,651


1,959


11,489


Non-GAAP

$

101,089


$

50,673


$

49,113


$

1,560


$

(1,979)


$

(356)


As a % of revenue (GAAP)


48.1

%

56.1

%

(8.0)

%

(3.9)

%

(11.7)

%

As a % of revenue (Non-GAAP)


50.1

%

48.6

%

1.5

%

(2.0)

%

(0.4)

%








Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.14)


  Diluted net loss per share-Non-GAAP






$

0.00


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






82,014










Three months ended March 31, 2017


Revenue

Gross
Profit

Total
Operating
Expense

Loss from
Operations

Total Non-
operating
Expense, net

Net Loss

GAAP

$

82,943


$

40,408


$

61,566


$

(21,158)


$

(3,101)


$

(24,027)


  Cable Access inventory charge


(15)



(15)



(15)


  Acquisition accounting impacts related to TVN deferred revenue

111


111



111



111


  Accounting impact related to warrant amortization

416


416



416



416


  Stock-based compensation


445


(2,806)


3,251



3,251


  Amortization of intangibles


1,295


(774)


2,069



2,069


  Restructuring and related charges


508


(1,279)


1,787



1,787


  TVN acquisition-and integration-related costs


342


(1,808)


2,150



2,150


  Non-cash interest expenses related to convertible notes





1,316


1,316


  Discrete tax items and tax effect of non-GAAP adjustments






1,744


Total adjustments

$

527


$

3,102


$

(6,667)


$

9,769


$

1,316


$

12,829


Non-GAAP

$

83,470


$

43,510


$

54,899


$

(11,389)


$

(1,785)


$

(11,198)


As a % of revenue (GAAP)


48.7

%

74.2

%

(25.5)

%

(3.7)

%

(29.0)

%

As a % of revenue (Non-GAAP)


52.1

%

65.8

%

(13.6)

%

(2.1)

%

(13.4)

%








Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.30)


  Diluted net loss per share-Non-GAAP






$

(0.14)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






79,810


 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations on Business Outlook

(In millions, except percentages and per share data)



Q2 2018 Financial Guidance


Revenue

Gross
Profit

Total
Operating
Expense

Income
(Loss) from
Operations

Total Non-
operating
Expense,
net

Net Income
(Loss)

GAAP

$88.0 to
$98.0

$44.3 to
$51.3

$52.5 to
$54.5

$(10.2) to
$(1.2)

$(3.3)

$(14.0) to
$(5.0)

  Stock-based compensation

0.3

(2.6)

2.9

2.9

  Amortization of intangibles

1.3

(0.8)

2.1

2.1

  Restructuring and related charges

0.1

(0.1)

0.2

0.2

  Non-cash interest expense related to convertible notes

1.5

1.5

  Tax effect of non-GAAP adjustments

$0 to $1.5

Total adjustments

1.7

(3.5)

5.2

1.5

$6.7 to $8.2

Non-GAAP

$88.0 to
$98.0

$46.0 to
$53.0

$49.0 to
$51.0

$(5.0) to
$4.0

$(1.8)

$(5.8) to
$1.7

As a % of revenue (GAAP)


50.5% to
52.5%

53.5% to
62%

(11.5)% to
(1)%

(3.5)%

(16)% to
(5)%

As a % of revenue (Non-GAAP)


52% to
54%

50% to
58%

(5.5)% to 4%

(2)%

(6.5)% to
1.5%

Diluted net income (loss) per share:







  Diluted net loss per share-GAAP





$(0.17) to $(0.06)

  Diluted net (loss) income per share-Non-GAAP





$(0.07) to $0.02

Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP





85.4

Shares used to compute diluted net income per share:







  Non-GAAP





86.0

 


2018 Outlook


Revenue

Gross
Profit

Total
Operating
Expense

Loss from
Operations

Total Non-
operating
Expense,
net

Net Income
(Loss)

GAAP

$375.0 to
$425.0

$184.8 to
$216.8

$217.0 to
$225.0

$(43.2) to
$(2.2)

$(13.3)

$(59.3) to
$(18.3)

  Stock-based compensation

2.0

(15.4)

17.4

17.4

  Amortization of intangibles

5.2

(3.2)

8.4

8.4

  Restructuring and related charges

1.0

(1.4)

2.4

2.4

  Non-cash interest expense related to convertible notes

6.1

6.1

  Tax effect of non-GAAP adjustments

$0 to $6

Total adjustments

8.2

(20.0)

28.2

6.1

$34.3 to
$40.3

Non-GAAP

$375.0 to
$425.0

$190.0 to
$223.0

$197.0 to
$205.0

$(15.0) to
$26.0

$(7.2)

$(19.0) to
$16.0

As a % of revenue (GAAP)


48.5% to
50.5%

51% to
60%

(11.5)% to
(0.5)%

(3)%

(15.5)% to
(4)%

As a % of revenue (Non-GAAP)


51% to
52%

46.5% to
54.5%

(4)% to 6%

(2)%

(5)% to 4%

Diluted income (loss) per share:







  Diluted net loss per share-GAAP





$(0.69) to $(0.21)

  Diluted net (loss) income per share-Non-GAAP





$(0.22) to $0.18

Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP





86.0

Shares used to compute diluted net income per share:







  Non-GAAP





87.0

 

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SOURCE Harmonic Inc.