Harmonic Announces Fourth Quarter and Fiscal 2019 Results

|Feb 3|magazine71 min read

SAN JOSE, Calif., Feb. 3, 2020 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the fourth quarter and fiscal year ended December 31, 2019.

"Harmonic delivered another quarter of strong financial and strategic results," said Patrick Harshman, president and chief executive officer of Harmonic. "Our industry-leading CableOS solution continued to gain market share, resulting in 78.3% revenue growth year over year. Our Video segment reported record gross margin of 60% and operating margin of 14%, reflecting our ongoing profitable transformation to live streaming software and SaaS."

Q4 Financial and Business Highlights

Financial

  • Revenue: $122.2 million, up 7.5% year over year.
  • SaaS and service revenue: $36.3 million, up 18.9% year over year.
  • Gross margin: GAAP 50.5% and non-GAAP 52.3%, compared to GAAP 53.1% and non-GAAP 54.5% in the year ago period.
  • Cable Access segment revenue: $43.0 million, up 78.3% year over year.
  • Video segment gross margin: 60.0%, compared to 57.5% in the year ago period.
  • Operating income: GAAP income $6.7 million and non-GAAP income $14.8 million, compared to GAAP income $7.3 million and non-GAAP income $12.7 million in the year ago period.
  • EPS: GAAP net income per share 6 cents and non-GAAP net income per share 12 cents, compared to GAAP net income per share 4 cents and non-GAAP net income per share 11 cents in the year ago period.
  • Cash: $93.1 million, up $27.1 million year over year.

Business

  • CableOS solution commercially deployed with 23 customers, up over 20% quarter over quarter.
  • Initial multi-million dollar CableOS purchase orders received from two new international Tier 1 operators.
  • Video SaaS customer base increased from 36 to 48 customers, up 33% quarter over quarter and 153% year over year.
  • Video SaaS annual recurring revenue of $16.3 million, up 70% year over year.

Select Financial Information



GAAP


Non-GAAP

Key Financial Results


Q4 2019


Q3 2019


Q4 2018


Q4 2019


Q3 2019


Q4 2018



(in millions, except per share data)

Net revenue


$

122.2



$

115.7



$

113.7



$

122.2



$

115.7



$

113.6


Net income


$

5.6



$

11.7



$

3.3



$

12.1



$

24.6



$

9.7


Diluted EPS


$

0.06



$

0.12



$

0.04



$

0.12



$

0.25



$

0.11















Other Financial Information

Q4 2019


Q3 2019


Q4 2018


(in millions)

Bookings for the quarter

$

140.1



$

126.5



$

92.8


Backlog and deferred revenue as of quarter end

$

210.2



$

192.5



$

186.4


Cash and cash equivalents as of quarter end

$

93.1



$

66.7



$

66.0


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


Q1 2020


2020


Low


High


Low


High




(in millions, except percentages and per share data)

Net Revenue


$

80.0



$

90.0



$

390.0



$

430.0



Video


$

60.0



$

65.0



$

260.0



$

280.0



Cable Access


$

20.0



$

25.0



$

130.0



$

150.0


Gross Margin %


47.5

%


49.0

%


49.0

%


54.0

%

Operating Expenses


$

55.5



$

57.5



$

214.0



$

226.5


Operating Income (Loss)


$

(19.5)



$

(11.0)



$

(24.0)



$

5.0


Tax Expense


$

0.7



$

0.7



$

2.9



$

2.9


EPS


$

(0.24)



$

(0.16)



$

(0.40)



$

(0.11)


Shares


95.8



95.8



97.7



97.7


Cash


$

70.0



$

80.0



$

50.0



$

60.0


 

Non-GAAP Financial Guidance


Q1 2020


2020


Low


High


Low


High




(in millions, except percentages and per share data)

Net Revenue


$

80.0



$

90.0



$

390.0



$

430.0



Video


$

60.0



$

65.0



$

260.0



$

280.0



Cable Access


$

20.0



$

25.0



$

130.0



$

150.0


Gross Margin %


50.0

%


52.0

%


50.0

%


55.0

%

Operating Expenses


$

48.0



$

50.0



$

190.0



$

202.0


Operating Income (Loss)


$

(9.5)



$

(1.5)



$

5.0



$

34.0


Tax rate


10

%


10

%


10

%


10

%

EPS


$

(0.10)



$

(0.03)



$       0.00



$

0.26


Shares


95.8



95.8



97.7



101.2


Cash


$

70.0



$

80.0



$

50.0



$

60.0


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, February 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 7278754). 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 7278754).

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), 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 trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current 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 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, 2018, 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), 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 third quarter of fiscal 2019, we recorded a debt extinguishment loss of $5.7 million resulting from refinancing a portion of our convertible notes due in 2020. 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 - 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 and exercisable as of July 1, 2019. As a result of Comcast's election of enterprise license pricing, we no longer exclude the effect of warrant amortization in our non-GAAP financial measures beginning with the third quarter of fiscal 2019.

Gain (loss) on equity investments - We exclude the change in fair value and gain (loss) from sale of our equity investments 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 $6.0 million in installments. $2.5 million was paid upfront in October 2017, $1.5 million was paid in the second quarter of 2019 and $2.0 million will be paid in 2020. 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 Consolidated Balance Sheets

(Unaudited, in thousands, except per share data)



December 31, 2019


December 31, 2018

ASSETS




Current assets:




   Cash and cash equivalents

$

93,058



$

65,989


   Accounts receivable, net

88,500



81,795


   Inventories

29,042



25,638


   Prepaid expenses and other current assets

40,762



23,280


Total current assets

251,362



196,702


Property and equipment, net

22,928



22,321


Goodwill

239,780



240,618


Intangibles, net

4,461



12,817


Other long-term assets

68,796



38,377


Total assets

$

587,327



$

510,835






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




   Other debts and capital lease obligations, current

$

6,713



$

7,175


   Accounts payable

40,933



33,778


   Income taxes payable

1,226



1,099


   Deferred revenue

37,117



41,592


   Accrued and other current liabilities

62,535



52,761


Total current liabilities

148,524



136,405


Convertible notes, long-term

132,004



114,808


Other debts and capital lease obligations, long-term

10,511



12,684


Income taxes payable, long-term

178



460


Other non-current liabilities

41,254



18,228


Total liabilities

$

332,471



$

282,585






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; 91,875 and 87,057 shares issued and outstanding at December 31, 2019 and 2018, respectively

92



87


   Additional paid-in capital

2,327,359



2,296,795


   Accumulated deficit

(2,071,940)



(2,067,416)


   Accumulated other comprehensive loss

(3,065)



(1,216)


Total stockholders' equity

252,446



228,250


Total liabilities and stockholders' equity

$

587,327



$

510,835


 

Harmonic Inc.

Preliminary Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)



Three months ended


Year ended


December 31,
2019


December 31,
2018


December 31,
2019


December 31,
2018

Revenue:








     Appliance and integration

$

85,933



$

83,179



$

275,797



$

287,564


     SaaS and service

36,245



30,476



127,077



115,994


Total net revenue

122,178



113,655



402,874



403,558


Cost of revenue:








     Appliance and integration

47,107



42,289



130,284



148,472


     SaaS and service

13,376



11,045



49,578



45,877


Total cost of revenue

60,483



53,334



179,862



194,349


Total gross profit

61,695



60,321



223,012



209,209


Operating expenses:








   Research and development

21,703



21,913



84,614



89,163


   Selling, general and administrative

30,557



30,078



119,035



118,952


   Amortization of intangibles

782



791



3,139



3,187


   Restructuring and related charges

1,947



214



3,141



2,918


Total operating expenses

54,989



52,996



209,929



214,220


Income (loss) from operations

6,706



7,325



13,083



(5,011)


Interest expense, net

(2,789)



(2,909)



(11,651)



(11,401)


Loss on debt extinguishment





(5,695)




Other income (expense), net



162



(2,333)



(536)


Income (loss) before income taxes

3,917



4,578



(6,596)



(16,948)


Provision for (benefit from) income taxes

(1,653)



1,248



(672)



4,087


Net income (loss)

$

5,570



$

3,330



$

(5,924)



$

(21,035)


Net income (loss) per share:








   Basic

$

0.06



$

0.04



$

(0.07)



$

(0.25)


   Diluted

$

0.06



$

0.04



$

(0.07)



$

(0.25)


Shares used in per share calculations:








   Basic

91,124



86,846



89,575



85,615


   Diluted

97,499



89,028



89,575



85,615


 

Harmonic Inc.

Preliminary Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Year ended


December 31,
2019


December 31,
2018

Cash flows from operating activities:




Net loss

$

(5,924)



$

(21,035)


Adjustments to reconcile net loss to net cash provided by operating activities:




   Amortization of intangibles

8,319



8,367


   Depreciation

11,287



12,971


   Stock-based compensation

12,074



17,289


   Amortization of discount on convertible debt

6,756



6,060


   Provision for non-cash warrant

13,576



1,178


   Restructuring, asset impairment and loss on retirement of fixed assets

124



1,491


   Loss on debt extinguishment

5,695




   Foreign currency adjustments

(290)



(1,906)


   Deferred income taxes, net

(2,076)



661


   Provision for doubtful accounts, returns and discounts

1,500



2,521


   Provision for excess and obsolete inventories

1,479



1,649


   Other non-cash adjustments, net

1,225



407


   Changes in operating assets and liabilities:




      Accounts receivable

(8,388)



(14,700)


      Inventories

(4,819)



(2,045)


      Prepaid expenses and other assets

(3,347)



3,227


      Accounts payable

5,086



1,018


      Deferred revenues

(3,436)



(4,808)


      Income taxes payable

(136)



440


      Accrued and other liabilities

(7,410)



(501)


Net cash provided by operating activities

31,295



12,284


Cash flows from investing activities:




   Proceeds from sales of investments



104


   Purchases of property and equipment

(10,328)



(7,044)


Net cash used in investing activities

(10,328)



(6,940)


Cash flows from financing activities:




   Proceeds from convertible debt

115,500




   Payments of convertible debt

(109,603)




   Payment of convertible debt issuance costs

(4,277)




   Proceeds from other debts and finance leases

4,684



5,066


   Repayment of other debts and finance leases

(6,913)



(7,132)


   Proceeds from common stock issued to employees

8,406



4,947


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

(1,492)



(230)


Net cash provided by financing activities

6,305



2,651


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

(203)



(763)


Net increase in cash, cash equivalents and restricted cash

27,069



7,232


Cash, cash equivalents and restricted cash, beginning of the year

65,989



58,757


Cash, cash equivalents and restricted cash, end of the year

$

93,058



$

65,989


 

Harmonic Inc.

Preliminary Revenue Information

(Unaudited, in thousands, except percentages)



Three months ended


December 31, 2019


September 27, 2019


December 31, 2018


GAAP

Adjustment(1)

Non-GAAP


GAAP

Adjustment(1)

Non-GAAP


GAAP

Adjustment(1)

Non-GAAP

Geography















Americas

$

68,869


$


$

68,869


56%


$

78,699


$


$

78,699


68%


$

63,007


$

(7)


$

63,000


55%

EMEA

39,874



39,874


33%


24,322



24,322


21%


25,880



25,880


23%

APAC

13,435



13,435


11%


12,704



12,704


11%


24,768



24,768


22%

Total

$

122,178


$


$

122,178


100%


$

115,725


$


$

115,725


100%


$

113,655


$

(7)


$

113,648


100%
















Market















Service Provider

$

83,976


$


$

83,976


69%


$

77,886


$


$

77,886


67%


$

80,325


$

(7)


$

80,318


71%

Broadcast and Media

38,202



38,202


31%


37,839



37,839


33%


33,330



33,330


29%

Total

$

122,178


$


$

122,178


100%


$

115,725


$


$

115,725


100%


$

113,655


$

(7)


$

113,648


100%




Twelve months ended


December 31, 2019


December 31, 2018


GAAP

Adjustment(1)

Non-GAAP


GAAP

Adjustment(1)

Non-GAAP

Geography










Americas

$

224,193


$

48


$

224,241


56%


$

218,900


$

1,178


$

220,078


54%

EMEA

117,477



117,477


29%


107,074



107,074


27%

APAC

61,204



61,204


15%


77,584



77,584


19%

Total

$

402,874


$

48


$

402,922


100%


$

403,558


$

1,178


$

404,736


100%











Market










Service Provider

$

249,512


$

48


$

249,560


62%


$

253,421


$

1,178


$

254,599


63%

Broadcast and Media

153,362



153,362


38%


150,137



150,137


37%

Total

$

402,874


$

48


$

402,922


100%


$

403,558


$

1,178


$

404,736


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 December 31, 2019


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

79,172



$

43,006



$

122,178



$



$

122,178


Gross profit

47,463



16,492



63,955



(2,260)



61,695


Gross margin%

60.0

%


38.3

%


52.3

%




50.5

%

Operating income

11,105



3,649



14,754



(8,048)



6,706


Operating margin%

14.0

%


8.5

%


12.1

%




5.5

%


Three months ended September 27, 2019


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

60,055



$

55,670



$

115,725



$



$

115,725


Gross profit

34,646



42,925



77,571



(2,031)



75,540


Gross margin%

57.7

%


77.1

%


67.0

%




65.3

%

Operating income (loss)

(1,696)



31,611



29,915



(7,366)



22,549


Operating margin%

(2.8)

%


56.8

%


25.9

%




19.5

%


Three months ended December 31, 2018


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

89,528



$

24,120



$

113,648



$

7


*

$

113,655


Gross profit

51,449



10,509



61,958



(1,637)



60,321


Gross margin%

57.5

%


43.6

%


54.5

%




53.1

%

Operating income (loss)

12,678





12,678



(5,353)



7,325


Operating margin%

14.2

%


%


11.2

%




6.4

%


Twelve months ended December 31, 2019


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

278,028



$

124,894



$

402,922



$

(48)


*

$

402,874


Gross profit

162,156



68,596



230,752



(7,740)



223,012


Gross margin%

58.3

%


54.9

%


57.3

%




55.4

%

Operating income

15,837



22,219



38,056



(24,973)



13,083


Operating margin%

5.7

%


17.8

%


9.4

%




3.2

%


Twelve months ended December 31, 2018


Video


Cable Access


Total Segment
Measures

(non-GAAP)


Adjustments (1)


Consolidated GAAP
Measures

Net revenue

$

313,828



$

90,908



$

404,736



$

(1,178)


*

$

403,558


Gross profit

178,170



40,207



218,377



(9,168)



209,209


Gross margin%

56.8

%


44.2

%


54.0

%




51.8

%

Operating income (loss)

26,170



(578)



25,592



(30,603)



(5,011)


Operating margin%

8.3

%


(0.6)

%


6.3

%




(1.2)

%


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


* These non-GAAP adjustments are primarily for warrant amortization for the respective periods and relate to our Cable Access segment. After applying these adjustments to the non-GAAP revenue for the Cable Access segment, our GAAP revenue for the Cable Access segment for the twelve months ended December 31, 2019 was $124,846; the GAAP revenue for the three and twelve months ended December 31, 2018 was $24,127 and $89,730, respectively.

 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations (Unaudited)

(in thousands, except percentages and per share data)



Three months ended December 31, 2019


Revenue

Gross
Profit

Total
Operating
Expense

Income
from
Operations

Total Non-
operating
expense, net

Net Income

GAAP

$

122,178


$

61,695


$

54,989


$

6,706


$

(2,789)


$

5,570


  Stock-based compensation


297


(3,059)


3,356



3,356


  Amortization of intangibles


1,295


(782)


2,077



2,077


  Restructuring and related charges


668


(1,947)


2,615



2,615


  Non-cash interest expenses related to convertible notes





1,796


1,796


  Discrete tax items and tax effect of non-GAAP adjustments






(3,303)


Total adjustments


2,260


(5,788)


8,048


1,796


6,541


Non-GAAP

$

122,178


$

63,955


$

49,201


$

14,754


$

(993)


$

12,111


As a % of revenue (GAAP)


50.5

%

45.0

%

5.5

%

(2.3)

%

4.6

%

As a % of revenue (Non-GAAP)


52.3

%

40.3

%

12.1

%

(0.8)

%

9.9

%

Diluted net income per share:







  Diluted net income per share-GAAP






$

0.06


  Diluted net income per share-Non-GAAP






$

0.12


Shares used to compute diluted net income per share:







  GAAP and Non-GAAP






97,499










Three months ended September 27, 2019


Revenue

Gross
Profit

Total
Operating
Expense

Income
from

Operations

Total Non-
operating
expense, net

Net Income

GAAP

$

115,725


$

75,540


$

52,991


$

22,549


$

(10,289)


$

11,657


  Stock-based compensation


405


(3,689)


4,094



4,094


  Amortization of intangibles


1,295


(785)


2,080



2,080


  Restructuring and related charges


331


(861)


1,192



1,192


  Loss on convertible debt extinguishment

 





5,695


5,695


  Non-cash interest and other expenses related to convertible notes





2,625


2,625


  Discrete tax items and tax effect of non-GAAP adjustments






(2,751)


Total adjustments


2,031


(5,335)


7,366


8,320


12,935


Non-GAAP

$

115,725


$

77,571


$

47,656


$

29,915


$

(1,969)


$

24,592


As a % of revenue (GAAP)


65.3

%

45.8

%

19.5

%

(8.9)

%

10.1

%

As a % of revenue (Non-GAAP)


67.0

%

41.2

%

25.9

%

(1.7)

%

21.3

%

Diluted net income per share:







  Diluted net income per share-GAAP






$

0.12


  Diluted net income per share-Non-GAAP






$

0.25


Shares used to compute diluted net income per share:







  GAAP and Non-GAAP






97,596










Three months ended December 31, 2018


Revenue

Gross
Profit

Total
Operating
Expense

Income
from
Operations

Total Non-
operating
expense, net

Net Income

GAAP

$

113,655


$

60,321


$

52,996


$

7,325


$

(2,747)


$

3,330


  Accounting impact related to warrant amortization

(7)


(7)



(7)



(7)


  Stock-based compensation


376


(2,711)


3,087



3,087


  Amortization of intangibles


1,295


(791)


2,086



2,086


  Restructuring and related charges


(27)


(214)


187



187


  Non-cash interest expenses related to convertible notes





1,577


1,577


  Discrete tax items and tax effect of non-GAAP adjustments






(593)


Total adjustments

(7)


1,637


(3,716)


5,353


1,577


6,337


Non-GAAP

$

113,648


$

61,958


$

49,280


$

12,678


$

(1,170)


$

9,667


As a % of revenue (GAAP)


53.1

%

46.6

%

6.4

%

(2.4)

%

2.9

%

As a % of revenue (Non-GAAP)


54.5

%

43.4

%

11.2

%

(1.0)

%

8.5

%

Diluted net loss per share:







  Diluted net income per share-GAAP






$

0.04


  Diluted net income per share-Non-GAAP






$

0.11


Shares used to compute diluted net income per share:







  GAAP and Non-GAAP






89,028










Twelve months ended December 31, 2019


Revenue

Gross
Profit

Total
Operating
Expense

Income
from
Operations

Total Non-
operating
expense, net

Net Income
(Loss)

GAAP

$

402,874


$

223,012


$

209,929


$

13,083


$

(19,679)


$

(5,924)


  Accounting impact related to warrant amortization

48


48



48



48


  Stock-based compensation


1,121


(10,953)


12,074



12,074


  Amortization of intangibles


5,180


(3,139)


8,319



8,319


  Restructuring and related charges


1,391


(3,141)


4,532



4,532


  Loss on debt extinguishment





5,695


5,695


  Non-cash interest and other expenses related to convertible notes





7,683


7,683


  Discrete tax items and tax effect of non-GAAP adjustments






(4,482)


Total adjustments

48


7,740


(17,233)


24,973


13,378


33,869


Non-GAAP

$

402,922


$

230,752


$

192,696


$

38,056


$

(6,301)


$

27,945


As a % of revenue (GAAP)


55.4

%

52.1

%

3.2

%

(4.9)

%

(1.5)

%

As a % of revenue (Non-GAAP)


57.3

%

47.8

%

9.4

%

(1.6)

%

6.9

%

Diluted net income (loss) per share:







  Diluted net loss per share-GAAP






$

(0.07)


  Diluted net income per share-Non-GAAP






$

0.30


Shares used to compute diluted net income (loss) per share:







  GAAP






89,575


  Non-GAAP






93,830










Twelve months ended December 31, 2018


Revenue

Gross
Profit

Total
Operating
Expense

Loss
from
Operations

Total Non-
operating
expense, net

Net Loss

GAAP

$

403,558


$

209,209


$

214,220


$

(5,011)


$

(11,937)


$

(21,035)


  Accounting impact related to warrant amortization

1,178


1,178



1,178



1,178


  Stock-based compensation


1,953


(15,336)


17,289



17,289


  Amortization of intangibles


5,180


(3,187)


8,367



8,367


  Restructuring and related charges


857


(2,918)


3,775



3,775


  Gain on equity investments





(111)


(111)


  Avid litigation settlement and associated legal fees



6


(6)



(6)


  Non-cash interest expenses related to convertible notes





6,060


6,060


  Discrete tax items and tax effect of non-GAAP adjustments






950


Total adjustments

1,178


9,168


(21,435)


30,603


5,949


37,502


Non-GAAP

$

404,736


$

218,377


$

192,785


$

25,592


$

(5,988)


$

16,467


As a % of revenue (GAAP)


51.8

%

53.1

%

(1.2)

%

(3.0)

%

(5.2)

%

As a % of revenue (Non-GAAP)


54.0

%

47.6

%

6.3

%

(1.5)

%

4.1

%

Diluted net loss per share:







  Diluted net loss per share-GAAP






$

(0.25)


  Diluted net income per share-Non-GAAP






$

0.19


Shares used to compute diluted net income (loss) per share:







  GAAP






85,615


  Non-GAAP






86,741


 

Harmonic Inc.

GAAP to Non-GAAP Reconciliations on Financial Guidance

(In millions, except percentages and per share data)



Q1 2020 Financial Guidance


Revenue

Gross Profit

Total
Operating
Expense

Loss from
Operations

Total Non-
operating
Expense, net

Net Loss

GAAP

$80.0 to $90.0

$38.0 to $44.3

$55.5 to $57.5

$(19.5) to
$(11.0)

$(3.1)

$(23.2) to
$(14.9)

  Stock-based compensation

1.2

(6.4)

7.6

7.6

  Amortization of intangibles

0.9

(0.8)

1.7

1.7

  Restructuring and related charges

0.2

(0.2)

0.4

0.4

  Non-cash interest and other expenses related to convertible notes

1.8

1.8

 Tax effect of non-GAAP adjustments

$1.0 to $1.8

Total adjustments

2.3

(7.4)

9.7

1.8

$12.5 to $13.3

Non-GAAP

$80.0 to $90.0

$40.3 to $46.6

$48.0 to $50.0

$(9.5) to $(1.5)

$(1.3)

$(9.7) to $(2.5)

As a % of revenue (GAAP)


47.5% to
49.0%

61.6% to
71.8%

(24.3)% to
(12.3)%

(3.4)% to
(3.9)%

(29.0)% to
(16.6)%

As a % of revenue (Non-GAAP)


50.0% to
52.0%

53.3% to
62.5%

(11.9)% to
(1.7)%

(1.4)% to
(1.6)%

(12.1)% to
(2.8)%

Diluted net loss per share:







  Diluted net loss per share-GAAP






$(0.24) to
$(0.16)

  Diluted net loss per share-Non-GAAP






$(0.10) to
$(0.03)

Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






95,762


2020 Financial Guidance


Revenue

Gross Profit

Total
Operating
Expense

Income (Loss)
from
Operations

Total Non-
operating
Expense, net

Net Income (Loss)

GAAP

$390.0 to
$430.0

$190.3 to
$231.2

$214.3 to
$226.3

$(24.0) to $4.9

$(12.6)

$(39.5) to
$(10.6)

  Stock-based compensation expense

2.9

(20.5)

23.4

23.4

  Amortization of intangibles

1.0

(3.0)

4.0

4.0

  Restructuring and related charges

0.8

(0.8)

1.6

1.6

  Non-cash interest expense related to convertible notes

7.4

7.4

Tax effect of non-GAAP adjustments

$0.1 to $2.9

Total adjustments

4.7

(24.3)

29.0

7.4

$36.4 to $39.3

Non-GAAP

$390.0 to
$430.0

$195.0 to
$235.9

$190.0 to
$202.0

$5.0 to $34.0

$(5.2)

$(0.2) to $25.8

As a % of revenue (GAAP)


49.0% to
54.0%

54.9% to
52.6%

(6.2)% to 1.1%

(2.9)% to
(3.2)%

(10.1)% to
(2.5)%

As a % of revenue (Non-GAAP)


50.0% to
55.0%

48.7% to
47.0%

1.3% to 7.9%

(1.2)% to
(1.3)%

(0.1)% to 6.0%

Diluted net income (loss) per share:







  Diluted net loss per share-GAAP






$(0.40) to
$(0.11)

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






$0.00 to $0.26

Shares used to compute diluted net loss per share:







  GAAP and Non-GAAP






97,659

Shares used to compute diluted net income per share:







  Non-GAAP






101,165

 

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SOURCE Harmonic Inc.