Harmonic Announces Second Quarter 2015 Results
SAN JOSE, CA -- (Marketwired) -- 07/27/15 -- Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its preliminary and unaudited results for the second quarter of 2015.
Net revenue for the second quarter of 2015 was $103.1 million, compared with $104.0 million for the first quarter of 2015 and $109.6 million for the second quarter of 2014.
Bookings for the second quarter of 2015 were $99.3 million, compared with $97.3 million for the first quarter of 2015 and $113.4 million for the second quarter of 2014.
Total backlog and deferred revenue was $120.6 million as of July 3, 2015, compared to $122.2 million as of April 3, 2015.
GAAP net loss for the second quarter of 2015 was $(1.0) million, or $(0.01) per diluted share, compared with a GAAP net loss for the first quarter of 2015 of $(2.7) million, or $(0.03) per diluted share, and a GAAP net loss of $(37.1) million, or $(0.39) per diluted share, for the second quarter of 2014.
Non-GAAP net income for the second quarter of 2015 was $4.2 million, or $0.05 per diluted share, compared with a non-GAAP net income for the first quarter of 2015 of $4.5 million, or $0.05 per diluted share, and a non-GAAP net income of $1.8 million, or $0.02 per diluted share, for the second quarter of 2014. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations" below.
GAAP gross margin was 52.7% and GAAP operating margin was (0.3)% for the second quarter of 2015, compared with 52.9% and 0.01%, respectively, for the first quarter of 2015, and 45.5% and (7.9)%, respectively, for the same period in 2014.
Non-GAAP gross margin was 53.2% and non-GAAP operating margin was 5.1% for the second quarter of 2015, compared with 53.9% and 5.9%, respectively, for the first quarter of 2015, and 50.1% and 2.2%, 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 $105.1 million at the end of the second quarter of 2015, up $3.2 million from $101.9 million at the end of the prior quarter. In the second quarter of 2015, the Company generated approximately $11.6 million of cash from operations, and used approximately $7.0 million to repurchase approximately one million shares of common stock under its share repurchase program.
"Year-over-year earnings growth and margin expansion was driven by our Video business, as demand for our new VOS platform accelerated," said Patrick Harshman, President and CEO of Harmonic. "Cable edge segment revenue softened off of a record Q1 as cable industry demand slowed. Consequently, our near-term outlook on cable industry spending is cautious, although we remain confident in mid-to-longer-term cable demand trends and in our CCAP growth strategy. Looking ahead at our Video business, which addresses a wider array of customer verticals, we are encouraged by the competitive momentum of our new VOS offering and associated growth opportunities. We remain resolved to delivering earnings growth and enhanced shareholder value."
Business Outlook
For the third quarter of 2015, Harmonic anticipates:
- Net revenue in the range of $92 million to $102 million
- GAAP gross margins in the range of 53% to 54%
- GAAP operating expenses in the range of $54 million to $55 million
- Non-GAAP gross margins in the range of 53% to 54%
- Non-GAAP operating expenses in the range of $49 million to $50 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 Monday, July 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 +1.847.619.6547 or +1.888.895.5271 (passcode 40109041). 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 40109041#).
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 second quarter ended July 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 third 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 April 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)
December 31,
July 3, 2015 2014
------------ ------------
(In thousands, except par
value amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 76,049 $ 73,032
Short-term investments 29,034 31,847
Accounts receivable, net 76,079 74,144
Inventories 31,241 32,747
Deferred income taxes, short-term 3,375 3,375
Prepaid expenses and other current assets 30,118 17,539
------------ ------------
Total current assets 245,896 232,684
Property and equipment, net 27,087 27,221
Goodwill, intangibles and other assets 216,235 220,613
------------ ------------
Total assets $ 489,218 $ 480,518
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,286 $ 15,318
Income taxes payable 112 893
Deferred revenue 46,922 38,601
Accrued liabilities 29,985 35,118
------------ ------------
Total current liabilities 98,305 89,930
Income taxes payable, long-term 4,923 4,969
Deferred tax liabilities, long-term 3,095 3,095
Other non-current liabilities 11,679 10,711
------------ ------------
Total liabilities 118,002 108,705
------------ ------------
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; 88,485 and 87,700 shares issued and
outstanding at July 3, 2015 and December 31,
2014, respectively 88 88
Additional paid-in capital 2,264,312 2,261,952
Accumulated deficit (1,891,898) (1,888,247)
Accumulated other comprehensive loss (1,286) (1,980)
------------ ------------
Total stockholders' equity 371,216 371,813
------------ ------------
Total liabilities and stockholders' equity $ 489,218 $ 480,518
============ ============
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended Six months ended
------------------ ------------------
July 3, June 27, July 3, June 27,
2015 2014 2015 2014
-------- -------- -------- --------
(in thousands, except per share
amounts)
Net revenue $103,103 $109,589 $207,119 $217,621
Cost of revenue 48,718 59,772 97,706 115,492
-------- -------- -------- --------
Gross profit 54,385 49,817 109,413 102,129
Operating expenses:
Research and development 21,816 23,485 44,145 47,373
Selling, general and administrative 31,281 32,979 62,477 66,526
Amortization of intangibles 1,446 1,718 2,892 3,668
Restructuring and related charges 185 284 229 433
-------- -------- -------- --------
Total operating expenses 54,728 58,466 109,743 118,000
Loss from operations (343) (8,649) (330) (15,871)
Interest and other income (expense),
net 76 (60) (375) 29
Loss on impairment of long-term
investment - - (2,505) -
-------- -------- -------- --------
Loss before income taxes (267) (8,709) (3,210) (15,842)
Provision for income taxes 727 28,353 441 26,630
-------- -------- -------- --------
Net loss $ (994) $(37,062) $ (3,651) $(42,472)
======== ======== ======== ========
Net loss per share:
Basic and diluted $ (0.01) $ (0.39) $ (0.04) $ (0.44)
======== ======== ======== ========
Shares used in per share
calculation:
Basic and diluted 88,426 93,966 88,541 95,899
======== ======== ======== ========
Harmonic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
--------------------
July 3, June 27,
2015 2014
--------- ---------
(In thousands)
Cash flows from operating activities:
Net loss $ (3,651) $ (42,472)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Amortization of intangibles 3,439 12,866
Depreciation 6,930 8,486
Stock-based compensation 8,018 8,368
Loss on impairment of long-term investment 2,505 -
Deferred income taxes - 27,407
Provision for excess and obsolete inventories 843 1,377
Allowance for doubtful accounts, returns and discounts (179) 600
Excess tax benefits from stock-based compensation (22) (304)
Other non-cash adjustments, net 252 847
Changes in assets and liabilities:
Accounts receivable (1,756) (5,485)
Inventories 663 5,379
Prepaid expenses and other assets (12,893) (2,424)
Accounts payable 6,415 2,324
Deferred revenue 9,833 10,873
Income taxes payable (815) 562
Accrued and other liabilities (5,994) (1,625)
--------- ---------
Net cash provided by operating activities 13,588 26,779
--------- ---------
Cash flows from investing activities:
Purchases of investments (12,986) (26,599)
Proceeds from sales and maturities of investments 15,744 30,846
Purchases of property and equipment (7,505) (6,479)
Purchases of long-term investments (85) -
--------- ---------
Net cash used in investing activities (4,832) (2,232)
--------- ---------
Cash flows from financing activities:
Payments for repurchase of common stock (12,171) (54,751)
Net proceeds from (repurchases of) common stock issued
to employees 6,491 (1,272)
Excess tax benefits from stock-based compensation 22 304
--------- ---------
Net cash used in financing activities (5,658) (55,719)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents (81) 16
--------- ---------
Net increase (decrease) in cash and cash equivalents 3,017 (31,156)
Cash and cash equivalents at beginning of period 73,032 90,329
--------- ---------
Cash and cash equivalents at end of period $ 76,049 $ 59,173
========= =========
Harmonic Inc.
Revenue Information
(Unaudited)
Three months ended Six months ended
-------------------------- --------------------------
June 27, June 27,
July 3, 2015 2014* July 3, 2015 2014*
------------ ------------ ------------ ------------
(In thousands, except percentages)
Product
Video Products(1) $ 56,096 54% $ 57,196 52% $104,810 50% $121,214 55%
Cable Edge 21,351 21% 29,332 27% 53,110 26% 53,574 25%
Services and Support 25,656 25% 23,061 21% 49,199 24% 42,833 20%
-------- --- -------- --- -------- --- -------- ---
Total $103,103 100% $109,589 100% $207,119 100% $217,621 100%
======== ======== ======== ========
Geography
Americas(2) $ 60,342 58% $ 60,066 55% $120,860 58% $124,952 57%
EMEA 27,360 27% 31,519 29% 52,033 25% 55,706 26%
APAC 15,401 15% 18,004 16% 34,226 17% 36,963 17%
-------- --- -------- --- -------- --- -------- ---
Total $103,103 100% $109,589 100% $207,119 100% $217,621 100%
======== ======== ======== ========
Market
Service Provider(3) $ 64,041 62% $ 75,048 68% $132,015 64% $146,558 67%
Broadcast and Media 39,062 38% 34,541 32% 75,104 36% 71,063 33%
-------- --- -------- --- -------- --- -------- ---
Total $103,103 100% $109,589 100% $207,119 100% $217,621 100%
======== ======== ======== ========
(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 Six months ended
-------------------- --------------------
July 3, June 27, July 3, June 27,
2015 2014 2015 2014
--------- --------- --------- ---------
(In thousands)
Net revenue:
Video $ 78,207 $ 77,311 $ 147,489 $ 158,463
Cable Edge 24,896 32,278 59,630 59,158
--------- --------- --------- ---------
Total consolidated net revenue $ 103,103 $ 109,589 $ 207,119 $ 217,621
========= ========= ========= =========
Operating income (loss):
Video $ 4,901 $ 382 $ 4,811 $ 2,817
Cable Edge 357 2,014 6,545 3,058
--------- --------- --------- ---------
Total segment operating income 5,258 2,396 11,356 5,875
Unallocated corporate expenses* (185) (284) (229) (512)
Stock-based compensation (3,884) (4,561) (8,018) (8,368)
Amortization of intangibles (1,532) (6,200) (3,439) (12,866)
--------- --------- --------- ---------
Income (loss) from operations (343) (8,649) (330) (15,871)
Non-operating income (expense) 76 (60) (2,880) 29
--------- --------- --------- ---------
Loss before income taxes $ (267) $ (8,709) $ (3,210) $ (15,842)
========= ========= ========= =========
*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
------------------------------------------
July 3, 2015
------------------------------------------
Income
Total (Loss) Net
Gross Operating from 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
------------------------------------------
April 3, 2015
------------------------------------------
Total Income Net
Gross Operating 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
------------------------------------------
June 27, 2014
------------------------------------------
Income
Total (Loss) Net
Gross Operating from Income
Profit Expense Operations (Loss)
-------- --------- ---------- --------
GAAP $ 49,817 $ 58,466 $ (8,649) $(37,062)
Stock-based compensation in
cost of revenue 623 - 623 623
Stock-based compensation in
research and development - (1,269) 1,269 1,269
Stock-based compensation in
selling, general and
administrative - (2,669) 2,669 2,669
Amortization of intangibles 4,482 (1,718) 6,200 6,200
Restructuring and related
charges - (284) 284 284
Discrete tax items and tax
effect of non-GAAP
adjustments - - - 27,863
-------- --------- ---------- --------
Non-GAAP $ 54,922 $ 52,526 $ 2,396 $ 1,846
======== ========= ========== ========
As a % of revenue (GAAP) 45.5% 53.4% (7.9)% (33.8)%
As a % of revenue (Non-GAAP) 50.1% 47.9% 2.2% 1.7%
Diluted net income (loss) per
share:
Diluted net loss per share-
GAAP $ (0.39)
========
Diluted net income per share-
Non-GAAP $ 0.02
========
Shares used to compute diluted
net income (loss) per share:
GAAP 93,966
========
Non-GAAP 95,294
========
CONTACTS:Carolyn V. Aver Chief Financial Officer Harmonic Inc. +1.408.542.2500Blair KingDirector, Investor RelationsHarmonic Inc.+1.408.490.6172
Source: Harmonic Inc.