SOURCE: Harmonic Inc.

Harmonic Inc.

November 09, 2016 16:03 ET

Harmonic Announces Third Quarter 2016 Results

SAN JOSE, CA--(Marketwired - November 09, 2016) - Harmonic Inc. (NASDAQ: 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 (NASDAQ: 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,
2016
  October 2,
2015
  September 30,
2016
(1)
  October 2,
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,
2016
  October 2,
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
(1)
 Non-GAAP  GAAP  Adjustment
(1)
 Non-GAAP  GAAP and Non-GAAP(2)
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
(1)
 Non-
GAAP
  GAAP   Adjustments
(1)
 Non-
GAAP
  GAAP   Adjustments
(1)
 Non-
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
(1)
 Non-GAAP   GAAP   Adjustments
(1)
 Non-GAAP  
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
Profit
  Total Operating Expense   Income
(loss) from Operations
  Total Non-operating Income (expense), net   Net loss  
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
Profit
  Total Operating Expense   Income
(loss) from Operations
  Total Non-operating Income (expense), net   Net Loss  
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
Profit
  Total Operating Expense   Loss from Operations   Total Non-operating Income (expense), net   Net Loss  
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
Profit
  Total Operating Expense   Income
(loss) from Operations
  Total Non-operating Income (expense), net   Net Loss  
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  
                               
                               
                               
                               
      Nine months ended  
      October 2, 2015  
   Revenue  Gross
Profit
  Total Operating Expense   Income
(loss) from Operations
  Total Non-operating Income (expense), net   Net
Income (Loss)
 
GAAP  $290,424  $155,644   $162,231   $(6,587 ) $(2,702 ) $(8,462 )
 Stock-based compensation in cost of revenue   -   1,383    -    1,383    -    1,383  
 Stock-based compensation in research and development   -   -    (3,249 )  3,249    -    3,249  
 Stock-based compensation in selling, general and administrative   -   -    (7,213 )  7,213    -    7,213  
 Amortization of intangibles   -   633    (4,338 )  4,971    -    4,971  
 Restructuring and related charges   -   113    (626 )  739    -    739  
 Loss on impairment of long-term investment   -   -    -    -    2,505    2,505  
 Discrete tax items and tax effect of non-GAAP adjustments   -   -    -    -    -    (3,089 )
Non-GAAP  $290,424  $157,773   $146,805   $10,968   $(197 ) $8,509  
As a % of revenue (GAAP)       53.6 %  55.9 %  (2.3 )%  (0.9 )%  (2.9 )%
As a % of revenue (Non-GAAP)       54.3 %  50.5 %  3.8 %  (0.1 )%  2.9 %
                               
Diluted net loss per share:                              
 Diluted net loss per share-GAAP                          $(0.10 )
 Diluted net income per share-Non-GAAP                          $0.10  
Shares used to compute diluted net income (loss) per share:                              
 GAAP                           88,359  
 Non-GAAP                           89,410  
                         
 
Harmonic Inc.
GAAP to Non-GAAP Reconciliations on Business Outlook
(In millions, except percentages and per share data)
    
   Q4 2016 Financial Guidance
   Revenue  Gross
Profit
 Total
Operating Expense
 Income (loss)
from
Operations
 Total Non-operating Income (expense),
net
 Net
Income (loss)
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
             

Contact Information

  • CONTACTS:

    Harold Covert
    Chief Financial Officer
    Harmonic Inc.
    +1.408.542.2500

    Blair King
    Director, Investor Relations
    Harmonic Inc.
    +1.408.490.6172