SEGMENT INFORMATION

Operating segments are defined as components of an enterprise that engage in business activities for which separate financial information is available and evaluated by the Company’s Chief Operating Decision Maker (the “CODM”), which for Harmonic is its Chief Executive Officer, in deciding how to allocate resources and assess performance. Based on our internal reporting structure, the Company consists of two operating segments: Video and Cable Access. The operating segments were determined based on the nature of the products offered. The Video segment sells video processing and production and playout solutions and services worldwide to broadcast and media companies, streaming new media companies, cable operators, and satellite and telecommunications (telco) Pay-TV service providers. The Cable Access segment sells cable access solutions and related services to cable operators globally.

The following table provides summary financial information by reportable segment (in thousands):



	Three months ended					Six months ended
	June 29, 2018 ⁽¹⁾		June 30, 2017			June 29, 2018			June 30, 2017
Video
Revenue	$	79,208	$	73,379		$	150,956		$	147,721
Gross profit	43,558		37,720			84,784			78,493
Operating income (loss)	6,239		(8,947		)	8,234			(14,783		)
Cable Access
Revenue	$	20,236	$	8,936		$	38,726		$	17,537
Gross profit	10,187		1,699			18,827			3,909
Operating income (loss)	540		(7,411		)	(973		)	(13,491		)
Total
Revenue	$	99,444	$	82,315		$	189,682		$	165,258
Gross profit	53,745		39,419			103,611			82,402
Operating income (loss)	6,779		(16,358		)	7,261			(28,274		)

(1) The Company has historically employed an aggregate allocation methodology based on total revenues to attribute professional services revenue and sales expenses between its Video and Cable Access segments. Beginning in the fourth quarter of 2017, the Company has prospectively changed to a more precise attribution methodology as the activities of selling and supporting the CableOS solution have become increasingly distinct from those of Video solutions. The impact of making this change in the three and six months ended June 30, 2017 compared to the Company’s historical approach was an increase in operating loss of $2.1 million and $3.2 million, respectively, from the Video segment and a corresponding decrease in operating loss of the Cable Access segment. The Company believes that the updated allocation methodology will provide greater clarity regarding the operating metrics of the Video and Cable Access business segments.

A reconciliation of the Company’s consolidated segment operating income (loss) to consolidated loss before income taxes is as follows (in thousands):



	Three months ended						Six months ended
	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017
Total segment operating income (loss)	$	6,779		$	(16,358	)	$	7,261		$	(28,274	)
Amortization of warrants	(284		)	—			(395		)	—
Unallocated corporate expenses	(746		)	(4,853		)	(2,588		)	(8,775		)
Stock-based compensation	(3,012		)	(4,136		)	(8,769		)	(7,387		)
Amortization of intangibles	(2,095		)	(2,075		)	(4,194		)	(4,144		)
Income (loss) from operations	642			(27,422		)	(8,685		)	(48,580		)
Non-operating expense, net	(2,664		)	(3,499		)	(5,953		)	(6,600		)
Loss before income taxes	$	(2,022	)	$	(30,921	)	$	(14,638	)	$	(55,180	)

Unallocated Corporate Expenses

Together with amortization of intangibles and stock-based compensation, the Company does not allocate restructuring and related charges, TVN acquisition- and integration-related costs, and certain other non-recurring charges to the operating income (loss) for each segment because management does not include this information in the measurement of the performance of the operating segments. A measure of assets by segment is not applicable as segment assets are not included in the discrete financial information provided to the CODM.