Harmonic Announces Third Quarter 2015 Results
/EINPresswire.com/ -- SAN JOSE, CA--(Marketwired - October 27, 2015) - Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its preliminary and unaudited results for the third quarter of 2015.
Net revenue for the third quarter of 2015 was $83.3 million, compared with $103.1 million for the second quarter of 2015 and $108.1 million for the third quarter of 2014.
Bookings for the third quarter of 2015 were $74.6 million, compared with $99.3 million for the second quarter of 2015 and $97.8 million for the third quarter of 2014.
Total backlog and deferred revenue was $110.8 million as of October 2, 2015, compared to $120.6 million as of July 3, 2015.
GAAP net loss for the third quarter of 2015 was $(4.8) million, or $(0.05) per diluted share, compared with a GAAP net loss for the second quarter of 2015 of $(1.0) million, or $(0.01) per diluted share, and a GAAP net income of $1.1 million, or $0.01 per diluted share, for the third quarter of 2014.
Non-GAAP net loss for the third quarter of 2015 was $(0.2) million, or $0.00 per diluted share, compared with a non-GAAP net income for the second quarter of 2015 of $4.2 million, or $0.05 per diluted share, and a non-GAAP net income of $5.1 million, or $0.06 per diluted share, for the third quarter of 2014. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.
GAAP gross margin was 55.5% and GAAP operating margin was (7.5)% for the third quarter of 2015, compared with 52.7% and (0.3)%, respectively, for the second quarter of 2015, and 49.4% and (3.3)%, respectively, for the same period in 2014.
Non-GAAP gross margin was 56.3% and non-GAAP operating margin was (0.5)% for the third quarter of 2015, compared with 53.2% and 5.1%, respectively, for the second quarter of 2015, and 53.6% and 6.2%, respectively, for the same period in 2014. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.
Total cash, cash equivalents and short-term investments were $87.6 million at the end of the third quarter of 2015, down $17.5 million from $105.1 million at the end of the prior quarter. In the third quarter of 2015, the Company used approximately $5.0 million of cash from operations, and used approximately $7.8 million to repurchase approximately 1.3 million shares of common stock under its share repurchase program.
Business Outlook
For the fourth quarter of 2015, Harmonic anticipates:
- Net revenue in the range of $78 million to $88 million
- GAAP gross margins in the range of 53% to 54%
- GAAP operating expenses in the range of $52 million to $53 million
- Non-GAAP gross margins in the range of 54% to 55%
- Non-GAAP operating expenses in the range of $46 million to $47 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 Tuesday, October 27, 2015. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling +1.847.619.6397 or +1.800.708.4540 (passcode 40861736). A replay of the conference call will be available after 4:30 p.m. Pacific at the same website address or by calling +1.630.652.3042 or +1.888.843.7419 (passcode 40861736#).
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: our final results for the third quarter ended October 2, 2015 and our expectations concerning quarter-on-quarter growth; and net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the fourth quarter of 2015. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; 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 CCAP 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 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; the effect on our business of natural disasters; and the risk that our share repurchase program will not continue to result in material purchases of our common stock. 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 Quarterly Report on Form 10-Q for the quarterly period ended July 3, 2015 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: gross profit, operating expenses, income (loss) from operations 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. These adjustments are restructuring and related charges, impairment of long-term investment and non-cash items, such as stock-based compensation expense, amortization of intangibles, and adjustments that normalize the tax rate. With respect to our expectations under "Business Outlook" above, reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures. The effects of stock-based compensation expense specific to common stock options are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant impact on our GAAP financial results.
Harmonic Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
October 2, December 31,
2015 2014
---------------------------
(In thousands, except par
value amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 61,571 $ 73,032
Short-term investments 25,990 31,847
Accounts receivable, net 64,128 74,144
Inventories 39,873 32,747
Deferred income taxes, short-term 3,375 3,375
Prepaid expenses and other current assets 31,709 17,539
------------ ------------
Total current assets 226,646 232,684
Property and equipment, net 26,619 27,221
Goodwill, intangibles and other assets 213,643 220,613
------------ ------------
Total assets $ 466,908 $ 480,518
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,626 $ 15,318
Income taxes payable 176 893
Deferred revenue 43,350 38,601
Accrued liabilities 29,139 35,118
------------ ------------
Total current liabilities 89,291 89,930
Income taxes payable, long-term 4,296 4,969
Deferred tax liabilities, long-term 3,095 3,095
Other non-current liabilities 10,358 10,711
------------ ------------
Total liabilities 107,040 108,705
------------ ------------
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; 87,477 and 87,700 shares issued and
outstanding at October 2, 2015 and December 31,
2014, respectively 87 88
Additional paid-in capital 2,259,757 2,261,952
Accumulated deficit (1,896,709) (1,888,247)
Accumulated other comprehensive loss (3,267) (1,980)
------------ ------------
Total stockholders' equity 359,868 371,813
------------ ------------
Total liabilities and stockholders' equity $ 466,908 $ 480,518
============ ============
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended Nine months ended
------------------- -------------------
October September October September
2, 2015 26, 2014 2, 2015 26, 2014
--------- --------- --------- ---------
(in thousands, except per share amounts)
Net revenue $ 83,305 $108,061 $290,424 $325,682
Cost of revenue 37,074 54,633 134,780 170,125
--------- --------- --------- ---------
Gross profit 46,231 53,428 155,644 155,557
Operating expenses:
Research and development 21,679 22,803 65,824 70,176
Selling, general and administrative 28,966 32,114 91,443 98,640
Amortization of intangibles 1,446 1,661 4,338 5,329
Restructuring and related charges 397 388 626 821
--------- --------- --------- ---------
Total operating expenses 52,488 56,966 162,231 174,966
Loss from operations (6,257) (3,538) (6,587) (19,409)
Interest and other income (expense),
net 178 (214) (197) (185)
Loss on impairment of long-term
investment - - (2,505) -
--------- --------- --------- ---------
Loss before income taxes (6,079) (3,752) (9,289) (19,594)
(Benefit from) provision for income
taxes (1,268) (4,830) (827) 21,800
--------- --------- --------- ---------
Net income (loss) $ (4,811) $ 1,078 $ (8,462) $(41,394)
========= ========= ========= =========
Net income (loss) per share:
Basic $ (0.05) $ 0.01 $ (0.10) $ (0.44)
========= ========= ========= =========
Diluted $ (0.05) $ 0.01 $ (0.10) $ (0.44)
========= ========= ========= =========
Shares used in per share
calculation:
Basic 87,991 90,618 88,359 94,113
========= ========= ========= =========
Diluted 87,991 91,800 88,359 94,113
========= ========= ========= =========
Harmonic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
---------------------------
October 2, September
2015 26, 2014
------------ ------------
(In thousands)
Cash flows from operating activities:
Net loss $ (8,462) $ (41,394)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of intangibles 4,971 18,378
Depreciation 10,143 12,641
Stock-based compensation 11,845 12,720
Loss on impairment of long-term investment 2,505 -
Deferred income taxes - 31,782
Provision for excess and obsolete inventories 1,234 2,013
Allowance for doubtful accounts, returns and
discounts 576 (116)
Excess tax benefits from stock-based compensation - (194)
Other non-cash adjustments, net 354 1,108
Changes in assets and liabilities:
Accounts receivable 9,440 (472)
Inventories (7,936) 2,401
Prepaid expenses and other assets (13,817) (5,321)
Accounts payable 1,772 (786)
Deferred revenue 5,237 7,770
Income taxes payable (1,372) (8,292)
Accrued and other liabilities (7,926) (4,717)
------------ ------------
Net cash provided by operating activities 8,564 27,521
------------ ------------
Cash flows from investing activities:
Purchases of investments (20,714) (26,599)
Proceeds from sales and maturities of investments 26,534 50,644
Purchases of property and equipment (10,393) (8,859)
Purchases of long-term investments (85) (5,867)
Restricted cash (1,091) -
------------ ------------
Net cash (used in) provided by investing
activities (5,749) 9,319
------------ ------------
Cash flows from financing activities:
Payments for repurchase of common stock (20,007) (86,407)
Net proceeds from common stock issued to
employees 5,967 1,241
Excess tax benefits from stock-based compensation - 194
------------ ------------
Net cash used in financing activities (14,040) (84,972)
------------ ------------
Effect of exchange rate changes on cash and cash
equivalents (236) (169)
------------ ------------
Net decrease in cash and cash equivalents (11,461) (48,301)
Cash and cash equivalents at beginning of period 73,032 90,329
------------ ------------
Cash and cash equivalents at end of period $ 61,571 $ 42,028
============ ============
Harmonic Inc.
Revenue Information
(Unaudited)
Three months ended Nine months ended
----------------------------- -----------------------------
October 2, September 26, October 2, September 26,
2015 2014 2015 2014
-------------- -------------- -------------- --------------
(In thousands, except percentages)
Product
Video Products $ 48,629 59% $ 60,668 56% $153,439 53% $181,882 56%
Cable Edge 8,616 10% 23,915 22% 61,726 21% 77,488 24%
Services and
Support 26,060 31% 23,478 22% 75,259 26% 66,312 20%
--------- ---- --------- ---- --------- ---- --------- ----
Total $ 83,305 100% $108,061 100% $290,424 100% $325,682 100%
========= ========= ========= =========
Geography
Americas $ 44,926 54% $ 60,007 56% $165,786 57% $184,959 57%
EMEA 19,269 23% 27,430 25% 71,302 25% 83,136 25%
APAC 19,110 23% 20,624 19% 53,336 18% 57,587 18%
--------- ---- --------- ---- --------- ---- --------- ----
Total $ 83,305 100% $108,061 100% $290,424 100% $325,682 100%
========= ========= ========= =========
Market
Service Provider $ 46,451 56% $ 67,497 62% $178,466 61% $214,055 66%
Broadcast and
Media 36,854 44% 40,564 38% 111,958 39% 111,627 34%
--------- ---- --------- ---- --------- ---- --------- ----
Total $ 83,305 100% $108,061 100% $290,424 100% $325,682 100%
========= ========= ========= =========
Harmonic Inc.
Segment Revenue and Operating Income (Loss)
(Unaudited)
Three months ended Nine months ended
------------------ -------------------
October September October September
2, 2015 26, 2014 2, 2015 26, 2014
-------- --------- --------- ---------
(In thousands)
Net revenue:
Video $71,889 $ 81,360 $219,378 $239,823
Cable Edge 11,416 26,701 71,046 85,859
-------- --------- --------- ---------
Total consolidated net revenue $83,305 $108,061 $290,424 $325,682
======== ========= ========= =========
Operating income (loss):
Video $ 3,575 $ 6,609 $ 8,386 $ 9,426
Cable Edge (3,963) 120 2,582 3,178
-------- --------- --------- ---------
Total segment operating income (loss) (388) 6,729 10,968 12,604
Unallocated corporate expenses* (510) (403) (739) (915)
Stock-based compensation (3,827) (4,352) (11,845) (12,720)
Amortization of intangibles (1,532) (5,512) (4,971) (18,378)
-------- --------- --------- ---------
Loss from operations (6,257) (3,538) (6,587) (19,409)
Non-operating income (expense) 178 (214) (2,702) (185)
-------- --------- --------- ---------
Loss before income taxes $(6,079) $ (3,752) $ (9,289) $(19,594)
======== ========= ========= =========
*Unallocated corporate expenses include certain corporate-level operating expenses and charges such as restructuring and related charges.
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
Three months ended
----------------------------------------------
October 2, 2015
----------------------------------------------
Total
Gross Operating Loss from
Profit Expense Operations Net loss
----------------------------------------------
GAAP $ 46,231 $ 52,488 $ (6,257) $ (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 $ 46,863 $ 47,251 $ (388) $ (166)
==============================================
As a % of revenue (GAAP) 55.5% 63.0% (7.5)% (5.8)%
As a % of revenue (Non-GAAP) 56.3% 56.7% (0.5)% (0.2)%
Diluted net 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 87,991
============
Non-GAAP 87,991
============
Three months ended
----------------------------------------------
July 3, 2015
----------------------------------------------
Total Income
Gross Operating (loss) from Net Income
Profit Expense Operations (Loss)
----------------------------------------------
GAAP $ 54,385 $ 54,728 $ (343) $ (994)
Stock-based compensation in
cost of revenue 422 - 422 422
Stock-based compensation in
research and development - (1,027) 1,027 1,027
Stock-based compensation in
selling, general and
administrative - (2,435) 2,435 2,435
Amortization of intangibles 86 (1,446) 1,532 1,532
Restructuring and related
charges - (185) 185 185
Discrete tax items and tax
effect of non-GAAP
adjustments - - - (393)
----------------------------------------------
Non-GAAP $ 54,893 $ 49,635 $ 5,258 $ 4,214
==============================================
As a % of revenue (GAAP) 52.7% 53.1% (0.3)% (1.0)%
As a % of revenue (Non-GAAP) 53.2% 48.1% 5.1% 4.1%
Diluted net income (loss) per
share:
Diluted net loss per share-
GAAP $ (0.01)
============
Diluted net income per
share-Non-GAAP $ 0.05
============
Shares used to compute diluted
net income (loss) per share:
GAAP 88,426
============
Non-GAAP 89,444
============
Three months ended
----------------------------------------------
September 26, 2014
----------------------------------------------
Total Income
Gross Operating (Loss) from
Profit Expense Operations Net Income
----------------------------------------------
GAAP $ 53,428 $ 56,966 $ (3,538) $ 1,078
Stock-based compensation in
cost of revenue 612 - 612 612
Stock-based compensation in
research and development - (1,219) 1,219 1,219
Stock-based compensation in
selling, general and
administrative - (2,521) 2,521 2,521
Amortization of intangibles 3,851 (1,661) 5,512 5,512
Restructuring and related
charges 15 (388) 403 403
Discrete tax items and tax
effect of non-GAAP
adjustments - - - (6,198)
----------------------------------------------
Non-GAAP $ 57,906 $ 51,177 $ 6,729 $ 5,147
==============================================
As a % of revenue (GAAP) 49.4% 52.7% (3.3)% 1.0%
As a % of revenue (Non-GAAP) 53.6% 47.4% 6.2% 4.8%
Diluted net income per share:
Diluted net income per
share-GAAP $ 0.01
============
Diluted net income per
share-Non-GAAP $ 0.06
============
Shares used to compute diluted
net income per share:
GAAP 91,800
============
Non-GAAP 91,800
============
CONTACTS:
Hal Covert
Chief Financial Officer
Harmonic Inc.
+1.408.542.2500
Blair King
Director, Investor Relations
Harmonic Inc.
+1.408.490.6172
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