Harmonic Announces Second Quarter 2020 Results

SAN JOSE, Calif., Aug. 3, 2020 /PRNewswire/ — Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the second quarter…

SAN JOSE, Calif., Aug. 3, 2020 /PRNewswire/ — Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the second quarter of 2020.

“Harmonic executed well, exceeding expectations despite challenging market conditions,” said Patrick Harshman, president and chief executive officer of Harmonic. “Our Cable Access revenue and Video SaaS customer base both grew solidly in the quarter, and we strengthened our cash position. Looking ahead, we are capitalizing on this momentum around the world and anticipate delivering a profitable second half of 2020.”

Q2 Financial and Business Highlights

Financial

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

Business

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

Select Financial Information



GAAP


Non-GAAP

Key Financial Results


Q2 2020


Q1 2020


Q2 2019


Q2 2020


Q1 2020


Q2 2019



(in millions, except per share data)

Net revenue


$

74.0



$

78.4



$

84.9



$

74.0



$

78.4



$

84.9


Net loss


$

(15.4)



$

(22.0)



$

(11.8)



$

(5.9)



$

(9.8)



$

(4.0)


Diluted EPS


$

(0.16)



$

(0.23)



$

(0.13)



$

(0.06)



$

(0.10)



$

(0.04)















Other Financial Information

Q2 2020


Q1 2020


Q2 2019


(in millions)

Adjusted EBITDA

$

(2.8)



$

(7.0)



$

(0.3)


Bookings for the quarter

$

77.0



$

76.3



$

92.6


Backlog and deferred revenue as of quarter end

$

210.2



$

207.9



$

194.7


Cash and cash equivalents as of quarter end

$

77.7



$

71.7



$

58.1


Explanations regarding our use of non-GAAP financial measures and related definitions, and reconciliations of our GAAP and non-GAAP measures, are provided in the sections below entitled “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations”.

Financial Guidance

GAAP Financial Guidance


Q3 2020


Q4 2020


2020


Low


High


Low


High


Low


High

(in millions, except percentages and per share data)

Net Revenue


$

75.0



$

87.0



$

122.0



$

142.0



$

349.5



$

381.5



Video


$

40.0



$

47.0



$

87.0



$

97.0



$

229.0



$

246.0



Cable Access


$

35.0



$

40.0



$

35.0



$

45.0



$

120.5



$

135.5


Gross Margin %


50.0

%


51.5

%


50.0

%


53.0

%


49.5

%


51.0

%

Operating Expenses


$

50.0



$

52.0



$

50.0



$

54.0



$

202.5



$

208.5


Operating Income (Loss)


$

(14.5)



$

(5.5)



$

11.0



$

21.0



$

(31.5)



$

(12.5)


Tax Expense


$

(0.6)



$

(0.6)



$

(0.6)



$

(0.6)



$

(3.4)



$

(3.4)


EPS


$

(0.19)



$

(0.10)



$

0.07



$

0.17



$

(0.50)



$

(0.31)


Shares


97.6



97.6



98.5



98.5



97.0



97.0


Cash


$

80.0



$

90.0



$

80.0



$

90.0



$

80.0



$

90.0



Non-GAAP Financial Guidance


Q3 2020


Q4 2020


2020


Low


High


Low


High


Low


High

(in millions, except percentages and per share data)

Net Revenue


$

75.0



$

87.0



$

122.0



$

142.0



$

349.5



$

381.5



Video


$

40.0



$

47.0



$

87.0



$

97.0



$

229.0



$

246.0



Cable Access


$

35.0



$

40.0



$

35.0



$

45.0



$

120.5



$

135.5


Gross Margin %


50.5

%


52.0

%


50.0

%


53.0

%


50.0

%


51.5

%

Operating Expenses


$

45.0



$

47.0



$

45.0



$

49.5



$

181.5



$

187.5


Operating Income (Loss)


$

(9.0)



$

0.0



$

16.0



$

26.0



$

(7.5)



$

11.5


Adjusted EBITDA


$

(6.0)



$

3.0



$

19.0



$

29.0



$

3.0



$

22.0


Tax rate


10

%


10

%


10

%


10

%


10

%


10

%

EPS


$

(0.09)



$

(0.01)



$

0.13



$

0.22



$

(0.12)



$

0.05


Shares


97.6



97.6



98.5



98.5



97.0



98.1


Cash


$

80.0



$

90.0



$

80.0



$

90.0



$

80.0



$

90.0


 

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

Conference Call Information

Harmonic will host a conference call to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern) on Monday, August 3, 2020. The live webcast will be available on the Harmonic Investor Relations website at http://investor.harmonicinc.com. An audio version of the webcast will be available by calling +1.574.990.1032 or +1.800.240.9147 (passcode 7493165). A replay will be available after 5:00 p.m. PT on the same web site or by calling +1.404.537.3406 or +1.855.859.2056 (passcode 7493165).

About Harmonic Inc.

Harmonic (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, enables media companies and service providers to deliver ultra-high-quality broadcast and OTT video services to consumers globally. The Company has also revolutionized cable access networking via the industry’s first virtualized cable access solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers’ homes and mobile devices. Whether simplifying OTT video delivery via innovative cloud and software-as-a-service (SaaS) technologies, or powering the delivery of gigabit internet cable services, Harmonic is changing the way media companies and service providers monetize live and VOD content on every screen. More information is available at www.harmonicinc.com.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations regarding: GAAP net revenue, GAAP gross margins, GAAP operating expenses, GAAP operating income (loss), GAAP tax expense, GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), Adjusted EBITDA, non-GAAP tax rate and non-GAAP EPS and cash. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: the market and technology trends underlying our Video and Cable Access businesses will not continue to develop in their current direction or pace; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the potential impact of the Covid-19 pandemic on our operations or the operations of our supply chain or our customers; the impact of general economic conditions on our sales and operations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite, telco, broadcast and media industries; customer concentration and consolidation; our ability to develop new and enhanced products in a timely manner and market acceptance of our new or existing products; losses of one or more key customers; risks associated with our international operations; exchange rate fluctuations of the currencies in which we conduct business; risks associated with our CableOS® and VOS® product solutions; dependence on market acceptance of various types of broadband services, on the adoption of new broadband technologies and on broadband industry trends; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in our markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; and the effect on our business of natural disasters. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic’s filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K for the year ended December 31, 2019, our most recent Quarterly Report on Form 10-Q and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.

Use of Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP” or referred to herein as “reported”). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business, establish operating budgets, set internal measurement targets and make operating decisions.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Harmonic’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Harmonic’s results of operations in conjunction with the corresponding GAAP measures.

The Company believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company’s reported results prepared in accordance with GAAP.

The non-GAAP measures presented here are: revenue, segment revenue, gross profit, operating expenses, income (loss) from operations, non-operating expenses and net income (loss) (including those amounts as a percentage of revenue), Adjusted EBITDA and net income (loss) per diluted share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements provided with this press release. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures.

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

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

Stock-based compensation – Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We believe that management is limited in its ability to project the impact stock-based compensation would have on our operating results. In addition, for comparability purposes, we believe it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies.

Amortization of intangibles – A portion of the purchase price of our acquisitions is generally allocated to intangible assets, and is subject to amortization. However, Harmonic does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition’s purchase price allocated to intangible assets and the term of its related amortization can vary significantly and is unique to each acquisition. Therefore, we believe that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.

Restructuring and related charges – Harmonic from time to time incurs restructuring charges which primarily consist of employee severance, one-time termination benefits related to the reduction of its workforce, lease exit costs, and other costs.  These charges are associated with material business shifts. We exclude these items because we do not believe they are reflective of our ongoing long-term business and operating results.

Loss on debt extinguishment – In the second quarter of fiscal 2020, we recorded a debt extinguishment loss of $0.8 million resulting from the exchange of $37.7 million in aggregate principal amount of our convertible notes due in 2020 for $37.7 million in aggregate principal amount of convertible notes due in 2022. We have excluded this loss from our non-GAAP financial measures because we do not believe the loss is reflective of our ongoing long-term business and operating results.

Non-cash interest expense and other expenses related to convertible notes and other debt – We record the accretion of the debt discount related to the equity component and amortization of issuance costs as non-cash interest expense. We believe that excluding these costs provides meaningful supplemental information regarding operational performance and liquidity, along with enhancing investors’ ability to view the Company’s results from management’s perspective. In addition, we believe excluding these costs from the non-GAAP measures facilitates comparisons to our historical operating results and comparisons to peer company operating results.

Accounting impact related to warrant amortization – We issued a warrant to a customer, Comcast Corporation, in September 2016 pursuant to which Comcast may purchase up to 7.8 million shares of Harmonic common stock. In July 2019, in connection with Comcast’s election of enterprise license pricing for the Company’s CableOS software, all warrant shares were fully vested as of July 1, 2019. As a result of Comcast’s election of enterprise license pricing, we no longer excluded the effect of warrant amortization in our non-GAAP financial measures beginning with the third quarter of fiscal 2019.

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

 

Harmonic Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except per share data)



June 26, 2020


December 31, 2019

ASSETS




Current assets:




   Cash and cash equivalents

$

77,744



$

93,058


   Accounts receivable, net

74,781



88,500


   Inventories, net

32,097



29,042


   Prepaid expenses and other current assets

23,255



40,762


Total current assets

207,877



251,362


Property and equipment, net

41,341



22,928


Operating lease right-of-use assets

25,292



27,491


Goodwill

239,816



239,780


Intangibles, net

1,993



4,461


Other long-term assets

41,202



41,305


Total assets

$

557,521



$

587,327






LIABILITIES AND STOCKHOLDERS’ EQUITY




Current liabilities:




   Other debts and finance lease obligations, current

$

6,323



$

6,713


   Accounts payable

27,235



40,933


   Income taxes payable

1,017



1,226


   Deferred revenue

47,605



37,117


   Accrued and other current liabilities

55,366



62,535


   Convertible notes, short-term

7,855



43,375


Total current liabilities

145,401



191,899


Convertible notes, long-term

126,554



88,629


Other debts and finance lease obligations, long-term

13,994



10,511


Income taxes payable, long-term

182



178


Other non-current liabilities

41,108



41,254


Total liabilities

$

327,239



$

332,471






Convertible notes



2,410


Stockholders’ equity:




   Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued or

outstanding




   Common stock, $0.001 par value, 150,000 shares authorized; 96,863 and 91,875

shares issued and outstanding at June 26, 2020 and December 31, 2019, respectively

97



92


   Additional paid-in capital

2,342,856



2,327,359


   Accumulated deficit

(2,109,295)



(2,071,940)


   Accumulated other comprehensive loss

(3,376)



(3,065)


Total stockholders’ equity

230,282



252,446


Total liabilities and stockholders’ equity

$

557,521



$

587,327


 

 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)



Three months ended


Six months ended


June 26, 2020


June 28, 2019


June 26, 2020


June 28, 2019

Revenue:








     Appliance and integration

$

42,224



$

54,417



$

89,976



$

106,782


     SaaS and service

31,770



30,448



62,435



58,189


Total net revenue

73,994



84,865



152,411



164,971


Cost of revenue:








     Appliance and integration

22,784



29,312



49,071



56,366


     SaaS and service

13,437



11,625



28,829



22,828


Total cost of revenue

36,221



40,937



77,900



79,194


Total gross profit

37,773



43,928



74,511



85,777


Operating expenses:








   Research and development

19,498



21,313



41,621



42,714


   Selling, general and administrative

27,005



29,319



58,223



57,330


   Amortization of intangibles

742



784



1,512



1,572


   Restructuring and related charges

82



276



758



333


Total operating expenses

47,327



51,692



102,114



101,949


Loss from operations

(9,554)



(7,764)



(27,603)



(16,172)


Interest expense, net

(3,062)



(2,956)



(5,965)



(5,862)


Loss on debt extinguishment

(834)





(834)




Other expense, net

(373)



(428)



(646)



(739)


Loss before income taxes

(13,823)



(11,148)



(35,048)



(22,773)


Provision for income taxes

1,578



697



2,307



378


Net loss

$

(15,401)



$

(11,845)



$

(37,355)



$

(23,151)










Net loss per share:








   Basic and diluted

$

(0.16)



$

(0.13)



$

(0.39)



$

(0.26)


Shares used in per share calculations:








   Basic and diluted

96,727



88,931



96,255



88,554


 

 

Harmonic Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Six months ended


June 26, 2020


June 28, 2019

Cash flows from operating activities:




Net loss

$

(37,355)



$

(23,151)


Adjustments to reconcile net loss to net cash provided by (used in) operating activities:




   Amortization of intangibles

2,462



4,162


   Depreciation

5,535



5,716


   Stock-based compensation

9,807



4,623


   Amortization of discount on convertible and other debt

3,785



3,262


   Amortization of non-cash warrant

868



48


   Loss on debt extinguishment

834




   Deferred income taxes, net

1,116



(145)


   Provision for doubtful accounts, returns and discounts

662



500


   Provision for excess and obsolete inventories

723



384


   Other non-cash adjustments, net

118



79


   Changes in operating assets and liabilities:




      Accounts receivable

13,024



10,699


      Inventories

(4,032)



(2,440)


      Prepaid expenses and other assets

19,182



(1,526)


      Accounts payable

(14,963)



(1,752)


      Deferred revenues

11,241



4,989


      Income taxes payable

(181)



(292)


      Accrued and other liabilities

(11,936)



(9,802)


Net cash provided by (used in) operating activities

890



(4,646)


Cash flows from investing activities:




   Purchases of property and equipment

(20,753)



(2,939)


Net cash used in investing activities

(20,753)



(2,939)


Cash flows from financing activities:




   Payments of convertible debt

(25)




   Payment of convertible debt issuance costs

(35)




   Proceeds from other debts and finance leases

9,398



4,503


   Repayment of other debts and finance leases

(6,342)



(6,162)


   Proceeds from common stock issued to employees

3,000



2,147


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

(1,049)



(828)


Net cash provided by (used in) financing activities

4,947



(340)


Effect of exchange rate changes on cash and cash equivalents

(398)




Net decrease in cash and cash equivalents

(15,314)



(7,925)


Cash and cash equivalents at beginning of the year

93,058



65,989


Cash and cash equivalents at end of the year

$

77,744



$

58,064


 

 

Harmonic Inc.

Preliminary Revenue Information

(Unaudited, in thousands, except percentages)



Three months ended


June 26, 2020


March 27, 2020


June 28, 2019


GAAP

Adjustment(1)

Non-GAAP


GAAP

Adjustment(1)

Non-GAAP


GAAP

Adjustment(1)

Non-GAAP

Geography















Americas

$

42,307


$


$

42,307


58%


$

37,650


$


$

37,650


48%


$

42,437


$

23


$

42,460


50%

EMEA

24,714



24,714


33%


27,816



27,816


35%


25,203



25,203


30%

APAC

6,973



6,973


9%


12,951



12,951


17%


17,225



17,225


20%

Total

$

73,994


$


$

73,994


100%


$

78,417


$


$

78,417


100%


$

84,865


$

23


$

84,888


100%
















Market















Service Provider

$

42,169


$


$

42,169


57%


$

43,759


$


$

43,759


56%


$

43,438


$

23


$

43,461


51%

Broadcast and Media

31,825



31,825


43%


34,658



34,658


44%


41,427



41,427


49%

Total

$

73,994


$


$

73,994


100%


$

78,417


$


$

78,417


100%


$

84,865


$

23


$

84,888


100%




Six months ended


June 26, 2020


June 28, 2019


GAAP

Adjustments(1)

Non-GAAP


GAAP

Adjustments(1)

Non-GAAP

Geography










Americas

$

79,957


$


$

79,957


53%


$

76,625


$

48


$

76,673


46%

EMEA

52,530



52,530


34%


53,281



53,281


32%

APAC

19,924



19,924


13%


35,065



35,065


22%

Total

$

152,411


$


$

152,411


100%


$

164,971


$

48


$

165,019


100%











Market










Service Provider

$

85,928


$


$

85,928


56%


$

87,650


$

48


$

87,698


53%

Broadcast and Media

66,483



66,483


44%


77,321



77,321


47%

Total

$

152,411


$


$

152,411


100%


$

164,971


$

48


$

165,019


100%


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

 

 

Harmonic Inc.

Preliminary Segment Information

(Unaudited, in thousands, except percentages)



Three months ended June 26, 2020


Video


Cable Access


Total Segment

Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP

Measures

Net revenue

$

47,453



$

26,541



$

73,994



$



$

73,994


Gross profit

26,024



12,128



38,152



(379)



37,773


Gross margin%

54.8

%


45.7

%


51.6

%




51.0

%

Operating loss

(4,237)



(878)



(5,115)



(4,439)



(9,554)


Operating margin%

(8.9)

%


(3.3)

%


(6.9)

%




(12.9)

%


Three months ended March 27, 2020


Video


Cable Access


Total Segment

Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP

Measures

Net revenue

$

54,372



$

24,045



$

78,417



$



$

78,417


Gross profit

27,907



10,414



38,321



(1,583)



36,738


Gross margin%

51.3

%


43.3

%


48.9

%




46.8

%

Operating loss

(6,267)



(3,265)



(9,532)



(8,517)



(18,049)


Operating margin%

(11.5)

%


(13.6)

%


(12.2)

%




(23.0)

%


Three months ended June 28, 2019


Video


Cable Access


Total Segment

Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP

Measures

Net revenue

$

71,625



$

13,263



$

84,888



$

(23)


*

$

84,865


Gross profit

41,444



4,086



45,530



(1,602)



43,928


Gross margin%

57.9

%


30.8

%


53.6

%




51.8

%

Operating income (loss)

4,459



(7,243)



(2,784)



(4,980)



(7,764)


Operating margin%

6.2

%


(54.6)

%


(3.3)

%




(9.1)

%


Six months ended June 26, 2020


Video


Cable Access


Total Segment

Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP

Measures

Net revenue

$

101,825



$

50,586



$

152,411



$



$

152,411


Gross profit

53,931



22,542



76,473



(1,962)



74,511


Gross margin%

53.0

%


44.6

%


50.2

%




48.9

%

Operating loss

(10,504)



(4,143)



(14,647)



(12,956)



(27,603)


Operating margin%

(10.3)

%


(8.2)

%


(9.6)

%




(18.1)

%


Six months ended June 28, 2019


Video


Cable Access


Total Segment

Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP

Measures

Net revenue

$

138,801



$

26,218



$

165,019



$

(48)


*

$

164,971


Gross profit

80,046



9,179



89,225



(3,448)



85,777


Gross margin%

57.7

%


35.0

%


54.1

%




52.0

%

Operating income (loss)

6,427



(13,040)



(6,613)



(9,559)



(16,172)


Operating margin%

4.6

%


(49.7)

%


(4.0)

%




(9.8)

%


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


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

 

 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations (Unaudited)

(in thousands, except percentages and per share data)



Three months ended June 26, 2020


Revenue

Gross Profit

Total

Operating

Expense

Loss from Operations

Total Non-operating expense, net

Net Loss

GAAP

$

73,994


$

37,773


$

47,327


$

(9,554)


$

(4,269)


$

(15,401)


  Stock-based compensation


312


(3,236)


3,548



3,548


  Amortization of intangibles


65


(742)


807



807


  Restructuring and related charges


2


(82)


84



84


  Loss on convertible debt extinguishment





834


834


  Non-cash interest and other expenses related to convertible

notes and other debt





1,950


1,950


  Discrete tax items and tax effect of non-GAAP adjustments






2,238


Total adjustments


379


(4,060)


4,439


2,784


9,461


Non-GAAP

$

73,994


$

38,152


$

43,267


$

(5,115)


$

(1,485)


$

(5,940)


As a % of revenue (GAAP)


51.0

%

64.0

%

(12.9)

%

(5.8)

%

(20.8)

%

As a % of revenue (Non-GAAP)


51.6

%

58.5

%

(6.9)

%

(2.0)

%

(8.0)

%

Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.16)


  Diluted net loss per share-Non-GAAP






$

(0.06)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






96,727










Three months ended March 27, 2020


Revenue

Gross Profit

Total

Operating

Expense

Loss from Operations

Total Non-operating expense, net

Net Loss

GAAP

$

78,417


$

36,738


$

54,787


$

(18,049)


$

(3,176)


$

(21,954)


  Stock-based compensation


771


(5,488)


6,259



6,259


  Amortization of intangibles


885


(770)


1,655



1,655


  Restructuring and related charges


(73)


(676)


603



603


  Non-cash interest and other expenses related to convertible

notes and other debt





1,835


1,835


  Discrete tax items and tax effect of non-GAAP adjustments






1,816


Total adjustments


1,583


(6,934)


8,517


1,835


12,168


Non-GAAP

$

78,417


$

38,321


$

47,853


$

(9,532)


$

(1,341)


$

(9,786)


As a % of revenue (GAAP)


46.8

%

69.9

%

(23.0)

%

(4.1)

%

(28.0)

%

As a % of revenue (Non-GAAP)


48.9

%

61.0

%

(12.2)

%

(1.7)

%

(12.5)

%

Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.23)


  Diluted net loss per share-Non-GAAP






$

(0.10)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






95,575










Three months ended June 28, 2019


Revenue

Gross Profit

Total

Operating

Expense

Loss from Operations

Total Non-operating expense, net

Net Loss

GAAP

$

84,865


$

43,928


$

51,692


$

(7,764)


$

(3,384)


$

(11,845)


  Accounting impact related to warrant amortization

23


23



23



23


  Stock-based compensation


193


(2,317)


2,510



2,510


  Amortization of intangibles


1,295


(784)


2,079



2,079


  Restructuring and related charges


91


(277)


368



368


  Non-cash interest and other expenses related to convertible

notes and other debt





1,656


1,656


  Discrete tax items and tax effect of non-GAAP adjustments






1,238


Total adjustments

23


1,602


(3,378)


4,980


1,656


7,874


Non-GAAP

$

84,888


$

45,530


$

48,314


$

(2,784)


$

(1,728)


$

(3,971)


As a % of revenue (GAAP)


51.8

%

60.9

%

(9.1)

%

(4.0)

%

(14.0)

%

As a % of revenue (Non-GAAP)


53.6

%

56.9

%

(3.3)

%

(2.0)

%

(4.7)

%

Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.13)


  Diluted net loss per share-Non-GAAP






$

(0.04)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






88,931




Six months ended June 26, 2020


Revenue

Gross Profit

Total

Operating

Expense

Loss from Operations

Total Non-

operating

Expense

Net Loss

GAAP

$

152,411


$

74,511


$

102,114


$

(27,603)


$

(7,445)


$

(37,355)


  Stock-based compensation


1,083


(8,724)


9,807



9,807


  Amortization of intangibles


950


(1,512)


2,462



2,462


  Restructuring and related charges


(71)


(758)


687



687


  Loss on convertible debt extinguishment





834


834


  Non-cash interest and other expenses related to convertible

notes and other debt





3,785


3,785


  Discrete tax items and tax effect of non-GAAP adjustments






4,054


Total adjustments


1,962


(10,994)


12,956


4,619


21,629


Non-GAAP

$

152,411


$

76,473


$

91,120


$

(14,647)


$

(2,826)


$

(15,726)


As a % of revenue (GAAP)


48.9

%

67.0

%

(18.1)

%

(4.9)

%

(24.5)

%

As a % of revenue (Non-GAAP)


50.2

%

59.8

%

(9.6)

%

(1.9)

%

(10.3)

%








Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.39)


  Diluted net loss per share-Non-GAAP






$

(0.16)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






96,255




Six months ended June 28, 2019


Revenue

Gross Profit

Total

Operating

Expense

Loss from Operations

Total Non-

operating

Expense

Net Loss

GAAP

$

164,971


$

85,777


$

101,949


$

(16,172)


$

(6,601)


$

(23,151)


  Accounting impact related to warrant amortization

48


48



48



48


  Stock-based compensation


418


(4,205)


4,623



4,623


  Amortization of intangibles


2,590


(1,572)


4,162



4,162


  Restructuring and related charges


392


(334)


726



726


  Non-cash interest and other expenses related to convertible

notes and other debt





3,262


3,262


  Discrete tax items and tax effect of non-GAAP adjustments






1,572


Total adjustments

48


3,448


(6,111)


9,559


3,262


14,393


Non-GAAP

$

165,019


$

89,225


$

95,838


$

(6,613)


$

(3,339)


$

(8,758)


As a % of revenue (GAAP)


52.0

%

61.8

%

(9.8)

%

(4.0)

%

(14.0)

%

As a % of revenue (Non-GAAP)


54.1

%

58.1

%

(4.0)

%

(2.0)

%

(5.3)

%








Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.26)


  Diluted net loss per share-Non-GAAP






$

(0.10)


Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






88,554


 

 

Harmonic Inc.

Preliminary Adjusted EBITDA Reconciliation (Unaudited)

(In thousands)



Three months ended


June 26,

2020

March 27,

2020

June 28,

2019

Net loss – GAAP

$

(15,401)


$

(21,954)


$

(11,845)


Provision for income taxes

1,578


729


697


Interest expense, net

3,062


2,903


2,956


Depreciation

2,692


2,843


2,870


Amortization of intangibles

807


1,655


2,079


EBITDA

(7,262)


(13,824)


(3,243)






Adjustments




Accounting impact related to warrant amortization



23


Stock-based compensation

3,548


6,259


2,510


Loss on convertible debt extinguishment

834




Restructuring and related charges

84


603


368


Adjusted EBITDA

$

(2,796)


$

(6,962)


$

(342)





Six months ended


June 26,

2020

June 28,

2019

Net loss – GAAP

$

(37,355)


$

(23,151)


Provision for income taxes

2,307


378


Interest expense, net

5,965


5,862


Depreciation

5,535


5,716


Amortization of intangibles

2,462


4,162


EBITDA

(21,086)


(7,033)





Adjustments



Accounting impact related to warrant amortization


48


Stock-based compensation

9,807


4,623


Loss on convertible debt extinguishment

834



Restructuring and related charges

687


726


Adjusted EBITDA

$

(9,758)


$

(1,636)


 

 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations on Financial Guidance

(In millions, except percentages and per share data)



Q3 2020 Financial Guidance


Revenue

Gross Profit

Total

Operating

Expense

Income (Loss)

from

Operations

Total Non-

operating

Expense, net

Net Loss

GAAP

$75.0 to

$87.0

$37.4 to

$44.7

$50.0 to $52.0

$(14.5) to $(5.5)

$(3.0) to $(3.2)

$(18.2) to $(9.4)

  Stock-based compensation

0.3

(3.8)

4.1

4.1

  Amortization of intangibles

(0.7)

0.7

0.7

  Restructuring and related charges

0.2

(0.6)

0.8

0.8

  Non-cash interest and other expenses related to

convertible notes and other debt

1.7

1.7

 Tax effect of non-GAAP adjustments

$0.7 to $1.6

Total adjustments

0.5

(5.1)

5.6

1.7

$8.0 to $8.9

Non-GAAP

$75.0 to

$87.0

$37.9 to

$45.2

$45.0 to $47.0

$(9.0) to $0.0

$(1.3) to $(1.5)

$(9.3) to $(1.4)

As a % of revenue (GAAP)


50.0% to

51.5%

57.8% to 69.3%

(19.5)% to (6.4)%

(3.4)% to (4.3)%

(24.2)% to (10.7)%

As a % of revenue (Non-GAAP)


50.5% to

52.0%

52.0% to 62.5%

(12.0)% to 0.0%

(1.5)% to (2.0)%

(12.4)% to (1.6)%

Diluted net loss per share:







  Diluted net loss per share-GAAP






$(0.19) to $(0.10)

  Diluted net loss per share-Non-GAAP






$(0.09) to $(0.01)

Shares used to compute diluted net loss

per share:







  GAAP and Non-GAAP






97.6




Q4 2020 Financial Guidance


Revenue

Gross Profit

Total

Operating

Expense

Income from

Operations

Total Non-

operating

Expense, net

Net Income

GAAP

$122.0 to

$142.0

$60.7 to

$75.1

$50.0 to

$54.0

$11.0 to $21.0

$(3.0) to $(3.3)

$7.3 to $17.1

  Stock-based compensation

0.3

(3.8)

4.1

4.1

  Amortization of intangibles

(0.7)

0.7

0.7

  Restructuring and related charges

0.2

(0.2)

0.4

0.4

  Non-cash interest and other expenses related to

convertible notes and other debt

1.7

1.7

 Tax effect of non-GAAP adjustments

$(1.9) to $(1.0)

Total adjustments

0.5

(4.7)

5.2

1.7

$5.0 to $5.9

Non-GAAP

$122.0 to

$142.0

$61.2 to

$75.6

$45.0 to

$49.5

$16.0 to $26.0

$(1.3) to $(1.6)

$13.2 to $22.1

As a % of revenue (GAAP)


50.0% to

53.0%

40.9% to

38.2%

8.9% to 14.7%

(2.1)% to (2.6)%

6.0% to 12.1%

As a % of revenue (Non-GAAP)


50.0% to

53.0%

37.0% to

34.9%

13.1% to 18.4%

(0.9)% to (1.3)%

10.8% to 15.6%

Diluted net income per share:







  Diluted net income per share-GAAP






$0.07 to $0.17

  Diluted net income per share-Non-GAAP






$0.13 to $0.22

Shares used to compute diluted net income

per share:







  GAAP and Non-GAAP






98.5




2020 Financial Guidance


Revenue

Gross Profit

Total

Operating

Expense

Income (Loss)

from

Operations

Total Non-

operating

Expense, net

Net Income

(Loss)

GAAP

$349.5 to

$381.5

$172.5 to

$194.2

$202.5 to $208.5

$(31.5) to $(12.5)

$(13.4) to $(13.9)

$(48.5) to $(29.8)

  Stock-based compensation

1.7

(16.4)

18.1

18.1

  Amortization of intangibles

1.0

(3.0)

4.0

4.0

  Restructuring and related charges

0.4

(1.5)

1.9

1.9

  Non-cash interest and other expenses related to

convertible notes and other debt

7.2

7.2

  Loss on debt extinguishment

0.8

0.8

 Tax effect of non-GAAP adjustments

$2.9 to $4.8

Total adjustments

3.1

(20.9)

24.0

8.0

$34.9 to $36.8

Non-GAAP

$349.5 to

$381.5

$175.6 to

$197.3

$181.5 to $187.5

$(7.5) to $11.5

$(5.4) to $(5.9)

$(11.7) to $5.1

As a % of revenue (GAAP)


49.5% to

51.0%

57.9% to 54.6%

(9.0)% to (3.3)%

(3.5)% to (4.0)%

(13.9)% to (7.8)%

As a % of revenue (Non-GAAP)


50.0% to

51.5%

51.9% to 49.2%

(2.2)% to 3.0%

(1.4)% to (1.7)%

(3.3)% to 1.3%

Diluted net income (loss) per share:







  Diluted net loss per share-GAAP






$(0.50) to $(0.31)

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






$(0.12) to $0.05

Shares used to compute diluted net income (loss)

per share:







  GAAP and Non-GAAP






97.0

  Non-GAAP






98.1

 

 

Harmonic Inc.

Adjusted EBITDA Reconciliation on Financial Guidance

(In millions)






Q3 2020 Financial

Guidance

Q4 2020 Financial

Guidance

2020 Financial

Guidance

Net income (loss) – GAAP

$(18.2) to $(9.4)

$7.3 to $17.1

$(48.5) to $(29.8)

Provision for income taxes

0.6

0.6

3.4

Interest expense, net

2.7

2.8

11.5

Depreciation

3.4

3.3

12.2

Amortization of intangibles

0.7

0.7

4.0

EBITDA

$(10.8) to $(2.0)

$14.7 to $24.5

$(17.4) to $1.3





Adjustments




Stock-based compensation

4.1

4.1

18.1

Restructuring and related charges

0.8

0.4

1.8

Loss on debt extinguishment

0.8

Adjusted EBITDA

$(6.0) to $3.0

$19.0 to $29.0

$3.0 to $22.0

 

 

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SOURCE Harmonic Inc.