Harmonic Announces First Quarter 2015 Results
SAN JOSE, CA -- (Marketwired) -- 04/28/15 -- Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its preliminary and unaudited results for the first quarter of 2015.
Net revenue for the first quarter of 2015 was $104.0 million, compared with $107.9 million for the fourth quarter of 2014 and $108.0 million for the first quarter of 2014.
Bookings for the first quarter of 2015 were $97.3 million, compared with $121.1 million for the fourth quarter of 2014 and $126.3 million for the first quarter of 2014.
Total backlog and deferred revenue was $122.2 million as of April 3, 2015, compared to $128.7 million as of December 31, 2014.
GAAP net loss for the first quarter of 2015 was $(2.7) million, or $(0.03) per diluted share, compared with a GAAP net loss for the fourth quarter of 2014 of $(4.9) million, or $(0.06) per diluted share, and a GAAP net loss of $(5.4) million, or $(0.06) per diluted share, for the first quarter of 2014.
Non-GAAP net income for the first quarter of 2015 was $4.5 million, or $0.05 per diluted share, compared with a non-GAAP net income for the fourth quarter of 2014 of $5.3 million, or $0.06 per diluted share, and a non-GAAP net income of $2.8 million, or $0.03 per diluted share, for the first quarter of 2014. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.
GAAP gross margin was 52.9% and GAAP operating margin was 0.01% for the first quarter of 2015, compared with 52.6% and (2.0)%, respectively, for the fourth quarter of 2014, and 48.4% and (6.7)%, respectively, for the same period in 2014.
Non-GAAP gross margin was 53.9% and non-GAAP operating margin was 5.9% for the first quarter of 2015, compared with 54.1% and 6.2%, respectively, for the fourth quarter of 2014, and 53.3% and 3.2%, 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 $101.9 million at the end of the first quarter of 2015, down $3.0 million from $104.9 million at the end of the prior quarter. In the first quarter of 2015, the Company generated approximately $2.0 million of cash from operations, and used approximately $5.2 million to repurchase approximately 0.7 million shares of common stock under its share repurchase program.
"Highlights of the quarter included record Cable Edge business revenue, 54% gross margin and $0.05 non-GAAP earnings per share, up 67% from a year ago," said Patrick Harshman, President and CEO of Harmonic. "Video business revenue was soft, as video service provider customers continued to pause spending in advance of major technology and business model transitions. The good news is that Harmonic is out in front on these transitions, and secured several tier one service provider wins with our latest virtualized video technology. Looking ahead, we see good opportunities to capture more Video market share during this period of industry change while also continuing to drive growth in our Cable Edge business, and we remain focused on both earnings growth and enhanced shareholder value."
Business Outlook
For the second quarter of 2015, Harmonic anticipates:
- Net revenue in the range of $97 million to $107 million
- GAAP gross margins in the range of 51.0% to 52.0%
- GAAP operating expenses in the range of $55 million to $56 million
- Non-GAAP gross margins in the range of 52.0% to 53.0%
- Non-GAAP operating expenses in the range of $49.5 million to $50.5 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, April 28, 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 +1.847.619.6547 or +1.888.895.5271 (passcode 39443414). 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 39443414#).
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 first quarter ended April 3, 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 second 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 Annual Report on Form 10-K for the year ended December 31, 2014 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)
April 3, 2015 December 31, 2014
----------------------------------
(In thousands, except par value
amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 79,656 $ 73,032
Short-term investments 22,203 31,847
Accounts receivable, net 75,864 74,144
Inventories 31,518 32,747
Deferred income taxes 3,375 3,375
Prepaid expenses and other current assets 30,526 17,539
-------------- -------------------
Total current assets 243,142 232,684
Property and equipment, net 27,140 27,221
Goodwill, intangibles and other assets 216,565 220,613
-------------- -------------------
Total assets $ 486,847 $ 480,518
============== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,497 $ 15,318
Income taxes payable 320 893
Deferred revenue 48,124 38,601
Accrued liabilities 29,248 35,118
-------------- -------------------
Total current liabilities 96,189 89,930
Income taxes payable, long-term 5,032 4,969
Deferred tax liabilities, long-term 3,095 3,095
Other non-current liabilities 11,007 10,711
-------------- -------------------
Total liabilities 115,323 108,705
-------------- -------------------
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; 88,750 and 87,700
shares issued and outstanding at April
3, 2015 and December 31, 2014,
respectively 89 88
Additional paid-in capital 2,265,055 2,261,952
Accumulated deficit (1,890,904) (1,888,247)
Accumulated other comprehensive loss (2,716) (1,980)
-------------- -------------------
Total stockholders' equity 371,524 371,813
-------------- -------------------
Total liabilities and stockholders'
equity $ 486,847 $ 480,518
============== ===================
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended
------------------------------
April 3, 2015 March 28, 2014
------------------------------
(in thousands, except per
share amounts)
Net revenue $ 104,016 $ 108,032
Cost of revenue 48,988 55,720
-------------- ---------------
Gross profit 55,028 52,312
Operating expenses:
Research and development 22,329 23,888
Selling, general and administrative 31,196 33,547
Amortization of intangibles 1,446 1,950
Restructuring and related charges 44 149
-------------- ---------------
Total operating expenses 55,015 59,534
Income (loss) from operations 13 (7,222)
Interest and other income (expense), net (451) 89
Loss on impairment of long-term investment (2,505) -
-------------- ---------------
Loss before income taxes (2,943) (7,133)
Benefit from income taxes (286) (1,723)
-------------- ---------------
Net loss $ (2,657) $ (5,410)
============== ===============
Net loss per share:
Basic $ (0.03) $ (0.06)
============== ===============
Diluted $ (0.03) $ (0.06)
============== ===============
Shares used in per share calculation:
Basic 88,655 97,921
============== ===============
Diluted 88,655 97,921
============== ===============
Harmonic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
------------------------------
April 3, 2015 March 28, 2014
------------------------------
(In thousands)
Cash flows from operating activities:
Net loss $ (2,657) $ (5,410)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of intangibles 1,907 6,666
Depreciation 3,493 4,227
Stock-based compensation 4,134 3,807
Loss on impairment of long-term investment 2,505 -
Deferred income taxes - 3,510
Provision for excess and obsolete inventories 454 722
Allowance for doubtful accounts and returns (367) (536)
Excess tax benefits from stock-based
compensation (120) (185)
Other non-cash adjustments, net 154 462
Changes in assets and liabilities:
Accounts receivable (1,353) (1,927)
Inventories 775 5,900
Prepaid expenses and other assets (13,062) (6,671)
Accounts payable 3,380 (2,533)
Deferred revenue 10,105 6,382
Income taxes payable (501) 278
Accrued and other liabilities (6,819) (3,447)
-------------- ---------------
Net cash provided by operating activities 2,028 11,245
-------------- ---------------
Cash flows from investing activities:
Purchases of investments - (14,084)
Proceeds from sales and maturities of
investments 9,497 15,382
Purchases of property and equipment (3,651) (3,431)
Purchases of long-term investments (85) -
-------------- ---------------
Net cash provided by (used in) investing
activities 5,761 (2,133)
-------------- ---------------
Cash flows from financing activities:
Payments for repurchase of common stock (5,182) (29,075)
Net proceeds from (repurchases of) common
stock issued to employees 4,032 (1,377)
Excess tax benefits from stock-based
compensation 120 185
-------------- ---------------
Net cash used in financing activities (1,030) (30,267)
-------------- ---------------
Effect of exchange rate changes on cash and
cash equivalents (135) 18
-------------- ---------------
Net increase (decrease) in cash and cash
equivalents 6,624 (21,137)
Cash and cash equivalents at beginning of
period 73,032 90,329
-------------- ---------------
Cash and cash equivalents at end of period $ 79,656 $ 69,192
============== ===============
Harmonic Inc.
Revenue Information
(Unaudited)
Three months ended
---------------------------------
April 3, 2015 March 28, 2014*
---------------- ----------------
(In thousands, except
percentages)
Product
Video Products(1) $ 48,714 47% $ 64,018 59%
Cable Edge 31,759 30% 24,242 23%
Services and Support 23,543 23% 19,772 18%
--------- ------ --------- ------
Total $ 104,016 100% $ 108,032 100%
========= =========
Geography
Americas(2) $ 60,518 58% $ 64,886 60%
EMEA 24,673 24% 24,187 22%
APAC 18,825 18% 18,959 18%
--------- ------ --------- ------
Total $ 104,016 100% $ 108,032 100%
========= =========
Market
Service Provider(3) $ 67,974 65% $ 71,510 66%
Broadcast and Media 36,042 35% 36,522 34%
--------- ------ --------- ------
Total $ 104,016 100% $ 108,032 100%
========= =========
(1) Video Products now include Video Processing and Production and Playout.
(2) Americas now include U.S., Canada and Latin America.
(3) Service Provider now includes Cable and Satellite and Telco.
* NOTE : The prior period information has been reclassified to conform to
the current period presentation.
Harmonic Inc.
Segment Revenue and Operating Income (Loss)
(Unaudited)
Three months ended
------------------------------
April 3, 2015 March 28, 2014
------------------------------
(In thousands)
Net revenue:
Video $ 69,282 $ 81,152
Cable Edge 34,734 26,880
-------------- ---------------
Total consolidated net revenue $ 104,016 $ 108,032
============== ===============
Operating income (loss):
Video $ (90) $ 2,435
Cable Edge 6,188 1,044
-------------- ---------------
Total segment operating income 6,098 3,479
Unallocated corporate expenses* (44) (228)
Stock-based compensation (4,134) (3,807)
Amortization of intangibles (1,907) (6,666)
-------------- ---------------
Income (loss) from operations 13 (7,222)
Non-operating income (expense) (2,956) 89
-------------- ---------------
Loss before income taxes $ (2,943) $ (7,133)
============== ===============
*Unallocated corporate expenses include certain corporate-level operating
expenses and charges such as restructuring and asset impairment charges and
proxy contest related expenses.
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
Three months ended
----------------------------------------------
April 3, 2015
----------------------------------------------
Total Net
Gross Operating Income from Income
Profit Expense Operations (Loss)
----------------------------------------------
GAAP $ 55,028 $ 55,015 $ 13 $ (2,657)
Stock-based compensation in
cost of revenue 528 - 528 528
Stock-based compensation in
research and development - (1,148) 1,148 1,148
Stock-based compensation in
selling, general and
administrative - (2,458) 2,458 2,458
Amortization of intangibles 461 (1,446) 1,907 1,907
Restructuring and related
charges - (44) 44 44
Loss on impairment of long-
term investment - - - 2,505
Discrete tax items and tax
effect of non-GAAP
adjustments - - - (1,472)
----------------------------------------------
Non-GAAP $ 56,017 $ 49,919 $ 6,098 $ 4,461
==============================================
As a % of revenue (GAAP) 52.9% 52.9% 0.01% (2.6)%
As a % of revenue (Non-GAAP) 53.9% 48.0% 5.9% 4.3%
Diluted net income (loss) per
share:
Diluted net loss per share-
GAAP $ (0.03)
==========
Diluted net income per
share-Non-GAAP $ 0.05
==========
Shares used to compute
diluted net income (loss)
per share:
GAAP 88,655
==========
Non-GAAP 90,100
==========
Three months ended
----------------------------------------------
December 31, 2014
----------------------------------------------
Total Income Net
Gross Operating (Loss) from Income
Profit Expense Operations (Loss)
----------------------------------------------
GAAP $ 56,791 $ 58,953 $ (2,162) $ (4,854)
Stock-based compensation in
cost of revenue 608 - 608 608
Stock-based compensation in
research and development - (1,255) 1,255 1,255
Stock-based compensation in
selling, general and
administrative - (2,704) 2,704 2,704
Amortization of intangibles 696 (1,446) 2,142 2,142
Restructuring and asset
impairment charges 220 (1,941) 2,161 2,161
Discrete tax items and tax
effect of non-GAAP
adjustments - - - 1,251
----------------------------------------------
Non-GAAP $ 58,315 $ 51,607 $ 6,708 $ 5,267
==============================================
As a % of revenue (GAAP) 52.6% 54.6% (2.0)% (4.5)%
As a % of revenue (Non-GAAP) 54.1% 47.8% 6.2% 4.9%
Diluted net income (loss) per
share:
Diluted net loss per share-
GAAP $ (0.06)
==========
Diluted net income per
share-Non-GAAP $ 0.06
==========
Shares used to compute
diluted net income (loss)
per share:
GAAP 88,012
==========
Non-GAAP 89,342
==========
Three months ended
----------------------------------------------
March 28, 2014
----------------------------------------------
Total Income Net
Gross Operating (Loss) from Income
Profit Expense Operations (Loss)
----------------------------------------------
GAAP $ 52,312 $ 59,534 $ (7,222) $ (5,410)
Stock-based compensation in
cost of revenue 516 - 516 516
Stock-based compensation in
research and development - (1,101) 1,101 1,101
Stock-based compensation in
selling, general and
administrative - (2,190) 2,190 2,190
Amortization of intangibles 4,716 (1,950) 6,666 6,666
Restructuring and related
charges 79 (149) 228 228
Discrete tax items and tax
effect of non-GAAP
adjustments - - - (2,471)
----------------------------------------------
Non-GAAP $ 57,623 $ 54,144 $ 3,479 $ 2,820
==============================================
As a % of revenue (GAAP) 48.4% 55.1% (6.7)% (5.0)%
As a % of revenue (Non-GAAP) 53.3% 50.1% 3.2% 2.6%
Diluted net income (loss) per
share:
Diluted net loss per share-
GAAP $ (0.06)
==========
Diluted net income per
share-Non-GAAP $ 0.03
==========
Shares used to compute
diluted net income (loss)
per share:
GAAP 97,921
==========
Non-GAAP 99,256
==========
CONTACTS: Carolyn V. Aver Chief Financial Officer Harmonic Inc. +1.408.542.2500 Blair KingInvestor Relations Harmonic Inc. +1.408.490.6172
Source: Harmonic Inc.