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					Nine months ended
	September 28, 2018 ⁽¹⁾		September 29, 2017			September 28, 2018			September 29, 2017
Video
Revenue	$	73,344	$	84,155		$	224,300		$	231,876
Gross profit	41,937		48,283			126,721			126,776
Operating income (loss)	5,258		7,009			13,492			(7,774		)
Cable Access
Revenue	$	28,062	$	7,859		$	66,788		$	25,396
Gross profit	10,871		1,064			29,698			4,973
Operating income (loss)	395		(5,357		)	(578		)	(18,848		)
Total
Revenue	$	101,406	$	92,014		$	291,088		$	257,272
Gross profit	52,808		49,347			156,419			131,749
Operating income (loss)	5,653		1,652			12,914			(26,622		)

(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 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 nine months ended September 29, 2017 compared to the Company’s historical approach was a decrease in operating income of $2.7 million and an increase in operating loss of $5.9 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						Nine months ended
	September 28, 2018			September 29, 2017			September 28, 2018			September 29, 2017
Total segment operating income (loss)	$	5,653		$	1,652		$	12,914		$	(26,622	)
Amortization of warrants	(790		)	—			(1,185		)	—
Unallocated corporate expenses	(994		)	(10,050		)	(3,582		)	(18,825		)
Stock-based compensation	(5,433		)	(3,720		)	(14,202		)	(11,107		)
Amortization of intangibles	(2,087		)	(2,088		)	(6,281		)	(6,232		)
Income (loss) from operations	(3,651		)	(14,206		)	(12,336		)	(62,786		)
Non-operating expense, net	(3,237		)	(3,292		)	(9,190		)	(9,892		)
Loss before income taxes	$	(6,888	)	$	(17,498	)	$	(21,526	)	$	(72,678	)

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.