0000851310-20-000021.txt : 20201026 0000851310-20-000021.hdr.sgml : 20201026 20201026161436 ACCESSION NUMBER: 0000851310-20-000021 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20201026 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20201026 DATE AS OF CHANGE: 20201026 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARMONIC INC CENTRAL INDEX KEY: 0000851310 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 770201147 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25826 FILM NUMBER: 201260871 BUSINESS ADDRESS: STREET 1: 4300 NORTH FIRST STREET CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4084906242 MAIL ADDRESS: STREET 1: 4300 NORTH FIRST STREET CITY: SAN JOSE STATE: CA ZIP: 95134 FORMER COMPANY: FORMER CONFORMED NAME: HARMONIC LIGHTWAVES INC DATE OF NAME CHANGE: 19950404 8-K 1 hlit-202009258xk.htm 8-K Document
false0000851310 0000851310 2020-10-26 2020-10-26


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K

 CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): October 26, 2020
  
HARMONIC INC.
(Exact name of Registrant as specified in its charter)
 
 
Delaware
000-25826
77-0201147
(State or other jurisdiction of
incorporation)
Commission
File Number
(IRS Employer
Identification No.)
2590 Orchard Parkway
San Jose, CA 95131
(Address of principal executive offices, including zip code)

(408542-2500
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
HLIT
NASDAQ Global Select Market




Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐




Item 2.02.
Results of Operations and Financial Condition.
On October 26, 2020, Harmonic Inc. (“Harmonic” or the “Company”) issued a press release regarding its preliminary unaudited financial results for the quarter ended September 25, 2020. In the press release, Harmonic also announced that it would be holding a conference call on October 26, 2020 to discuss its financial results for the quarter ended September 25, 2020. A copy of the press release is furnished as Exhibit 99.1 hereto, and the information in Exhibit 99.1 is incorporated herein by reference.
The information in this Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and this Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 furnished herewith shall not be incorporated by reference into any filing by Harmonic under the Securities Act of 1933, as amended (the “Securities Act”), or under the Exchange Act.

Item 9.01.
Financial Statements and Exhibits.
(d)
Exhibits.
Exhibit
Number
  
Description

  
104

 
Cover Page Interactive Data File (embedded within the Inline XBRL document)



3



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
Date: October 26, 2020
 
 
 
HARMONIC INC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
 
/s/ Sanjay Kalra
 
 
 
 
 
 
Sanjay Kalra
 
 
 
 
 
 
Chief Financial Officer



4
EX-99.1 2 hlit-20200925pressrele.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
logopra08.jpg
pressreleasea30.jpg
FOR IMMEDIATE RELEASE
Harmonic Announces Third Quarter 2020 Results
Cable Access Segment Earns 14.6% Operating Margin
Video Segment Revenue up 15.1% quarter over quarter

SAN JOSE, California, October 26, 2020 - Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the third quarter of 2020.
“Harmonic’s third quarter results were driven by strong performance in both our Cable Access and Video segments,” said Patrick Harshman, president and chief executive officer of Harmonic. “Our Cable Access segment delivered solid sequential revenue growth and operating margin. Complementing this, Video segment revenue rebounded strongly quarter over quarter, reflecting increased customer activity. We continue to execute well on our strategic priorities, and we expect this strong business momentum will continue through the balance of the year.”
Q3 Financial and Business Highlights

Financial

Revenue: $94.9 million, down 18.0% year over year.
SaaS and service revenue: $31.6 million, down 3.1% year over year.
Gross margin: GAAP 51.6% and non-GAAP 52.2%, compared to GAAP 65.3% and non-GAAP 67.0% in the year ago period.
Cable Access segment revenue: $40.3 million, down 27.7% year over year.
Video segment revenue: $54.6 million, down 9% year over year.
Cable Access segment gross margin: 48.9% compared to 77.1% in the year ago period.
Video segment gross margin: 54.6%, compared to 57.7% in the year ago period.
Adjusted EBITDA: $7.2 million compared to $32.0 million in the year ago period.
Operating income (loss): GAAP loss $1.6 million and non-GAAP income $4.2 million, compared to GAAP income $22.5 million and non-GAAP income $29.9 million in the year ago period.
EPS: GAAP net loss per share $0.06 cents and non-GAAP net income per share $0.03 cents, compared to GAAP net income per share $0.12 cents and non-GAAP net income per share $0.25 cents in the year ago period.
Cash: $70.8 million, up $4.1 million year over year.

Business

CableOS solution commercially deployed with 38 customers as of October 14, 2020 (the date of Cable-Tec Expo 2020, a leading industry conference), up 100% compared to the third quarter of the prior year.
CableOS deployments scaled to 2.1 million served cable modems, up 122% year over year.
Over 48,000 live-streaming channels deployed globally, up 15% year over year.
Received first multi-million-dollar order for the new 5G bandwidth reclamation solution.



1



Select Financial Information
 
 
GAAP
 
Non-GAAP
Key Financial Results
 
Q3 2020
 
Q2 2020
 
Q3 2019
 
Q3 2020
 
Q2 2020
 
Q3 2019
 
 
(in millions, except per share data)
Net revenue
 
$
94.9

 
$
74.0

 
$
115.7

 
$
94.9

 
$
74.0

 
$
115.7

Net income (loss)
 
$
(5.4
)
 
$
(15.4
)
 
$
11.7

 
$
2.6

 
$
(5.9
)
 
$
24.6

Diluted EPS
 
$
(0.06
)
 
$
(0.16
)
 
$
0.12

 
$
0.03

 
$
(0.06
)
 
$
0.25

 
 
 
 
 
 
 
 
 
 
 
 
 
Other Financial Information
Q3 2020
 
Q2 2020
 
Q3 2019
 
(in millions)
Adjusted EBITDA for the quarter
$
7.2

 
$
(2.8
)
 
$
32.0

Bookings for the quarter
$
100.7

 
$
77.0

 
$
126.5

Backlog and deferred revenue as of quarter end
$
216.2

 
$
210.2

 
$
192.5

Cash and cash equivalents as of quarter end
$
70.8

 
$
77.7

 
$
66.7

Explanations regarding our use of non-GAAP financial measures and related definitions, and reconciliations of our GAAP and non-GAAP measures, are provided in the sections below entitled “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations”.
Financial Guidance
GAAP Financial Guidance
 
Q4 2020
 
2020
 
Low
 
High
 
Low
 
High
 
 
 
(in millions, except percentages and per share data)
Net Revenue
 
$
120.0


$
130.0


$
367.5


$
377.5

 
Video
 
$
80.0


$
85.0


$
236.5


$
241.5

 
Cable Access
 
$
40.0


$
45.0


$
131.0


$
136.0

Gross Margin %
 
50.0
%
 
54.0
%
 
50.0
%
 
51.0
%
Operating Expenses
 
$
53.0

 
$
55.0

 
$
205.5

 
$
207.5

Operating Income (Loss)
 
$
6.5

 
$
15.0

 
$
(22.0
)
 
$
(15.0
)
Tax Expense
 
$
(0.3
)
 
$
(0.3
)
 
$
(3.4
)
 
$
(3.4
)
EPS
 
$
0.03

 
$
0.11

 
$
(0.40
)
 
$
(0.33
)
Shares
 
98.8

 
98.8

 
97.0

 
97.0

Cash
 
$
80.0

 
$
90.0

 
$
80.0

 
$
90.0


2



Non-GAAP Financial Guidance
 
Q4 2020
 
2020
 
Low
 
High
 
Low
 
High
 
 
 
(in millions, except percentages and per share data)
Net Revenue
 
$
120.0


$
130.0


$
367.5


$
377.5

 
Video
 
$
80.0


$
85.0


$
236.5


$
241.5

 
Cable Access
 
$
40.0


$
45.0


$
131.0


$
136.0

Gross Margin %
 
50.5
%
 
54.5
%
 
51.0
%
 
52.0
%
Operating Expenses
 
$
48.0

 
$
50.0

 
$
184.5

 
$
186.5

Operating Income
 
$
12.5

 
$
21.0

 
$
3.0

 
$
10.0

Adjusted EBITDA
 
$
15.5

 
$
24.0

 
$
13.5

 
$
20.5

Tax rate
 
10
%
 
10
%
 
10
%
 
10
%
EPS
 
$
0.10

 
$
0.18

 
$
(0.03
)
 
$
0.04

Shares
 
98.8


98.8

 
97.0

 
98.2

Cash
 
$
80.0


$
90.0

 
$
80.0

 
$
90.0


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, October 26, 2020. The live webcast will be available on the Harmonic Investor Relations website at http://investor.harmonicinc.com. An audio version of the webcast will be available by calling +1.574.990.1032 or +1.800.240.9147 (conference ID 2445329). A replay will be available after 5:00 p.m. PT on the same web site or by calling +1.404.537.3406 or +1.855.859.2056 (conference ID 2445329).
About Harmonic Inc.
Harmonic (NASDAQ: HLIT), the worldwide leader in video delivery technology and services, enables media companies and service providers to deliver ultra-high-quality broadcast and OTT video services to consumers globally. The Company has also revolutionized cable access networking via the industry’s first virtualized cable access solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers’ homes and mobile devices. Whether simplifying OTT video delivery via innovative cloud and software-as-a-service (SaaS) technologies, or powering the delivery of gigabit internet cable services, Harmonic is changing the way media companies and service providers monetize live and VOD content on every screen. 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: GAAP net revenue, GAAP gross margins, GAAP operating expenses, GAAP operating income (loss), GAAP tax expense, GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), Adjusted EBITDA, non-GAAP tax rate and non-GAAP EPS and cash. 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 market and technology trends underlying our Video and Cable Access businesses will not continue to develop in their current direction or pace; 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 potential impact of the Covid-19 pandemic on our operations or the operations of our supply chain or our customers; the impact of general economic conditions on our sales and operations; 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, telco, broadcast and media industries; customer concentration and consolidation; 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; exchange rate fluctuations of the currencies in which we conduct business; risks associated with our CableOS® and VOS® product solutions; 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

3



on contract manufacturers and sole or limited source suppliers; and the effect on our business of natural disasters. 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, 2019, our most recent Quarterly Report on Form 10-Q 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
The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP” or referred to herein as “reported”). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business, establish operating budgets, set internal measurement targets and make operating decisions.
These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Harmonic's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Harmonic's results of operations in conjunction with the corresponding GAAP measures.
The Company believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company’s reported results prepared in accordance with GAAP.
The non-GAAP measures presented here are: revenue, segment revenue, gross profit, operating expenses, income (loss) from operations, non-operating expenses and net income (loss) (including those amounts as a percentage of revenue), Adjusted EBITDA 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.
Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
Cable Access inventory charge - Harmonic from time to time incurs inventory impairment charges associated with material business shifts, such as the repositioning of our Cable Access segment. We exclude these items, because we do not believe they are reflective of our ongoing long-term business and operating results.
Stock-based compensation - Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We believe that management is limited in its ability to project the impact stock-based compensation would have on our operating results. In addition, for comparability purposes, we believe it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies.
Amortization of intangibles - A portion of the purchase price of our acquisitions is generally allocated to intangible assets, and is subject to amortization. However, Harmonic does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition’s purchase price allocated to intangible assets and the term of its related amortization can vary significantly and is unique to each acquisition. Therefore, we believe that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.
Restructuring and related charges - Harmonic from time to time incurs restructuring charges which primarily consist of employee severance, one-time termination benefits related to the reduction of its workforce, lease exit costs, and other costs. These charges are associated with material business shifts. We exclude these items because we do not believe they are reflective of our ongoing long-term business and operating results.

4



Loss on debt extinguishment - In the second quarter of fiscal 2020, we recorded a debt extinguishment loss of $0.8 million resulting from the exchange of $37.7 million in aggregate principal amount of our convertible notes due in 2020 for $37.7 million in aggregate principal amount of convertible notes due in 2022. In the third quarter of fiscal 2019, we recorded a debt extinguishment loss of $5.7 million resulting from refinancing a portion of our convertible notes due in 2020. We have excluded these losses from our non-GAAP financial measures because we do not believe the losses are reflective of our ongoing long-term business and operating results.
Non-cash interest expense and other expenses related to convertible notes and other debt - We record the accretion of the debt discount related to the equity component and amortization of issuance costs as non-cash interest expense. We believe that excluding these costs provides meaningful supplemental information regarding operational performance and liquidity, along with enhancing investors’ ability to view the Company’s results from management’s perspective. In addition, we believe excluding these costs from the non-GAAP measures facilitates comparisons to our historical operating results and comparisons to peer company operating results.
Accounting impact related to warrant amortization - We issued a warrant to a customer, Comcast Corporation, in September 2016 pursuant to which Comcast may purchase up to 7.8 million shares of Harmonic common stock. In July 2019, in connection with Comcast's election of enterprise license pricing for the Company's CableOS software, all warrant shares were fully vested as of July 1, 2019. As a result of Comcast's election of enterprise license pricing, we no longer excluded the effect of warrant amortization in our non-GAAP financial measures beginning with the third quarter of fiscal 2019.

Discrete tax items and tax effect of non-GAAP adjustments - The income tax effect of non-GAAP adjustments relates to the tax effect of the adjustments that we incorporate into non-GAAP financial measures in order to provide a more meaningful measure of non-GAAP net income.

CONTACTS:
 
Sanjay Kalra
David Hanover
Chief Financial Officer
Investor Relations
Harmonic Inc.
Harmonic Inc.
+1.408.490.6031
+1.212.896.1220
investor@harmonicinc.com
 

 
 

5



Harmonic Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except per share data)

 
September 25, 2020
 
December 31, 2019
ASSETS
 
 
 
Current assets:
 
 
 
   Cash and cash equivalents
$
70,817

 
$
93,058

   Accounts receivable, net
81,353

 
88,500

   Inventories, net
36,802

 
29,042

   Prepaid expenses and other current assets
25,071

 
40,762

Total current assets
214,043

 
251,362

Property and equipment, net
41,915

 
22,928

Operating lease right-of-use assets
24,531

 
27,491

Goodwill
241,425

 
239,780

Intangibles, net
1,256

 
4,461

Other long-term assets
36,252

 
41,305

Total assets
$
559,422

 
$
587,327

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
   Other debts and finance lease obligations, current
$
11,402

 
$
6,713

   Accounts payable
31,555

 
40,933

   Income taxes payable
826

 
1,226

   Deferred revenue
42,729

 
37,117

   Accrued and other current liabilities
51,286

 
62,535

   Convertible notes, short-term
7,972

 
43,375

Total current liabilities
145,770

 
191,899

Convertible notes, long-term
128,018

 
88,629

Other debts and finance lease obligations, long-term
9,707

 
10,511

Income taxes payable, long-term
185

 
178

Other non-current liabilities
41,204

 
41,254

Total liabilities
$
324,884

 
$
332,471

 

 
 
Convertible notes
81

 
2,410

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; 97,732 and 91,875 shares issued and outstanding at September 25, 2020 and December 31, 2019, respectively
98

 
92

   Additional paid-in capital
2,348,638

 
2,327,359

   Accumulated deficit
(2,114,676
)
 
(2,071,940
)
   Accumulated other comprehensive income (loss)
397

 
(3,065
)
Total stockholders’ equity
234,457

 
252,446

Total liabilities and stockholders’ equity
$
559,422

 
$
587,327



6



Harmonic Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
 
Three months ended
 
Nine months ended
 
September 25, 2020
 
September 27, 2019
 
September 25, 2020
 
September 27, 2019
Revenue:
 
 
 
 
 
 
 
     Appliance and integration
$
63,251

 
$
83,082

 
$
153,227

 
$
189,864

     SaaS and service
31,641

 
32,643

 
94,076

 
90,832

Total net revenue
94,892

 
115,725

 
247,303

 
280,696

Cost of revenue:
 
 
 
 
 
 
 
     Appliance and integration
32,082

 
26,812

 
81,153

 
83,178

     SaaS and service
13,886

 
13,373

 
42,715

 
36,201

Total cost of revenue
45,968

 
40,185

 
123,868

 
119,379

Total gross profit
48,924

 
75,540

 
123,435

 
161,317

Operating expenses:
 
 
 
 
 
 
 
   Research and development
20,206

 
20,197

 
61,827

 
62,911

   Selling, general and administrative
28,773

 
31,148

 
86,996

 
88,478

   Amortization of intangibles
752

 
785

 
2,264

 
2,357

   Restructuring and related charges
814

 
861

 
1,572

 
1,194

Total operating expenses
50,545

 
52,991

 
152,659

 
154,940

Income (loss) from operations
(1,621
)
 
22,549

 
(29,224
)
 
6,377

Interest expense, net
(2,807
)
 
(3,000
)
 
(8,772
)
 
(8,862
)
Loss on debt extinguishment

 
(5,695
)
 
(834
)
 
(5,695
)
Other expense, net
(167
)
 
(1,594
)
 
(813
)
 
(2,333
)
Income (loss) before income taxes
(4,595
)
 
12,260

 
(39,643
)
 
(10,513
)
Provision for income taxes
786

 
603


3,093


981

Net income (loss)
$
(5,381
)
 
$
11,657

 
$
(42,736
)
 
$
(11,494
)
 
 
 
 
 
 
 
 
Net income (loss) per share:
 
 
 
 
 
 
 
   Basic
$
(0.06
)
 
$
0.13

 
$
(0.44
)
 
$
(0.13
)
   Diluted
$
(0.06
)

$
0.12


$
(0.44
)

$
(0.13
)
Shares used in per share calculations:
 
 
 
 
 
 
 
   Basic
97,563


89,964


96,623


89,030

   Diluted
97,563


97,596


96,623


89,030



7



Harmonic Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
Nine months ended
 
September 25, 2020
 
September 27, 2019
Cash flows from operating activities:
 
 
 
Net loss
$
(42,736
)
 
$
(11,494
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

   Amortization of intangibles
3,214

 
6,242

   Depreciation
8,683

 
8,480

   Stock-based compensation
13,737

 
8,719

   Amortization of discount on convertible and other debt
5,451

 
4,960

   Amortization of non-cash warrant
1,307

 
13,137

   Loss on debt extinguishment
834


5,695

   Deferred income taxes, net
1,527

 
75

   Foreign currency adjustments
2,537


(1,719
)
   Provision for excess and obsolete inventories
1,390


704

   Provision for doubtful accounts, returns and discounts
1,966


988

   Other non cash adjustments, net
177


1,235

Changes in operating assets and liabilities


 


      Accounts receivable
5,436


(20,521
)
      Inventories
(9,301
)

(4,170
)
      Prepaid expenses and other assets
23,685


(5,703
)
      Accounts payable
(11,047
)

(2,839
)
      Deferred revenues
6,066


8,002

      Income taxes payable
(384
)

(114
)
      Accrued and other liabilities
(14,961
)

(10,536
)
Net cash provided by (used in) operating activities
(2,419
)
 
1,141

Cash flows from investing activities:
 
 
 
   Purchases of property and equipment
(26,176
)

(4,973
)
Net cash used in investing activities
(26,176
)
 
(4,973
)
Cash flows from financing activities:
 
 
 
   Proceeds from convertible debt


115,500

   Payments of convertible debt
(25
)

(109,603
)
   Payment of convertible debt issuance costs
(672
)

(3,465
)
   Proceeds from other debts and finance leases
9,398


4,684

   Repayment of other debts and finance leases
(6,342
)

(6,387
)
   Proceeds from common stock issued to employees
5,227


5,573

   Payment of tax withholding obligations related to net share settlements of restricted stock units
(1,384
)

(1,278
)
Net cash provided by financing activities
6,202

 
5,024

Effect of exchange rate changes on cash and cash equivalents
152


(486
)
Net increase (decrease) in cash and cash equivalents
(22,241
)

706

Cash and cash equivalents at beginning of the year
93,058


65,989

Cash and cash equivalents at end of the year
$
70,817


$
66,695



8



Harmonic Inc.
Preliminary Revenue Information
(Unaudited, in thousands, except percentages)
 
Three months ended
 
September 25, 2020
 
June 26, 2020
 
September 27, 2019
 
GAAP
Adjustment(1)
Non-GAAP
 
GAAP
Adjustment(1)
Non-GAAP
 
GAAP
Adjustment(1)
Non-GAAP
Geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
$
54,521

$

$
54,521

58%
 
$
42,307

$

$
42,307

58%
 
$
78,699

$

$
78,699

68%
EMEA
29,771


29,771

31%
 
24,714


24,714

33%
 
24,322


24,322

21%
APAC
10,600


10,600

11%
 
6,973


6,973

9%
 
12,704


12,704

11%
Total
$
94,892

$

$
94,892

100%
 
$
73,994

$

$
73,994

100%
 
$
115,725

$

$
115,725

100%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service Provider
$
59,083

$

$
59,083

62%
 
$
42,169

$

$
42,169

57%
 
$
77,886

$

$
77,886

67%
Broadcast and Media
35,809


35,809

38%
 
31,825


31,825

43%
 
37,839


37,839

33%
Total
$
94,892

$

$
94,892

100%
 
$
73,994

$

$
73,994

100%
 
$
115,725

$

$
115,725

100%

 
Nine months ended
 
September 25, 2020
 
September 27, 2019
 
GAAP
Adjustments(1)
Non-GAAP
 
GAAP
Adjustments(1)
Non-GAAP
Geography
 
 
 
 
 
 
 
 
 
Americas
$
134,478

$

$
134,478

55%
 
$
155,324

$
48

$
155,372

54%
EMEA
82,301


82,301

33%
 
77,603


77,603

28%
APAC
30,524


30,524

12%
 
47,769


47,769

18%
Total
$
247,303

$

$
247,303

100%
 
$
280,696

$
48

$
280,744

100%
 
 
 
 
 
 
 
 
 
 
Market
 
 
 
 
 
 
 
 
 
Service Provider
$
145,011

$

$
145,011

59%
 
$
165,536

$
48

$
165,584

59%
Broadcast and Media
102,292


102,292

41%
 
115,160


115,160

41%
Total
$
247,303

$

$
247,303

100%
 
$
280,696

$
48

$
280,744

100%

(1) See “Use of Non-GAAP Financial Measures” above and “GAAP to Non-GAAP Reconciliations” below.


9



Harmonic Inc.
Preliminary Segment Information
(Unaudited, in thousands, except percentages)
 
Three months ended September 25, 2020
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
54,641


$
40,251


$
94,892


$


$
94,892

Gross profit
29,825


19,682


49,507


(583
)

48,924

Gross margin%
54.6
 %

48.9
 %

52.2
 %



51.6
 %
Operating income (loss)
(1,699
)

5,876


4,177


(5,798
)

(1,621
)
Operating margin%
(3.1
)%

14.6
 %

4.4
 %



(1.7
)%
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 26, 2020
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
47,453


$
26,541


$
73,994


$


$
73,994

Gross profit
26,024


12,128


38,152


(379
)

37,773

Gross margin%
54.8
 %

45.7
 %

51.6
 %



51.0
 %
Operating loss
(4,237
)

(878
)

(5,115
)

(4,439
)

(9,554
)
Operating margin%
(8.9
)%

(3.3
)%

(6.9
)%



(12.9
)%
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 27, 2019
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
60,055


$
55,670


$
115,725


$


$
115,725

Gross profit
34,646


42,925


77,571


(2,031
)

75,540

Gross margin%
57.7
 %

77.1
 %

67.0
 %



65.3
 %
Operating income (loss)
(1,696
)

31,611


29,915


(7,366
)

22,549

Operating margin%
(2.8
)%

56.8
 %

25.9
 %



19.5
 %

10



 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 25, 2020
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
156,466


$
90,837


$
247,303


$


$
247,303

Gross profit
83,756


42,224


125,980


(2,545
)

123,435

Gross margin%
53.5
 %

46.5
%

50.9
 %



49.9
 %
Operating income (loss)
(12,203
)

1,733


(10,470
)

(18,754
)

(29,224
)
Operating margin%
(7.8
)%

1.9
%

(4.2
)%



(11.8
)%
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 27, 2019
 
Video
 
Cable Access
 
Total Segment Measures
(non-GAAP)
 
Adjustments (1)
 
Consolidated GAAP Measures
Net revenue
$
198,856


$
81,888


$
280,744


$
(48
)
*
$
280,696

Gross profit
114,692


52,104


166,796


(5,479
)

161,317

Gross margin%
57.7
 %

63.6
%

59.4
 %



57.5
 %
Operating income
4,731


18,571


23,302


(16,925
)

6,377

Operating margin%
2.4
 %

22.7
%

8.3
 %



2.3
 %

(1) See “Use of Non-GAAP Financial Measures” above and “GAAP to Non-GAAP Reconciliations” below.
* This non-GAAP adjustment is for warrant amortization and relates to our Cable Access segment. After applying this adjustment to the non-GAAP revenue for the Cable Access segment, our GAAP revenue for the Cable Access segment for the nine months ended September 27, 2019 was $81,840. 


11



Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(in thousands, except percentages and per share data)
 
Three months ended September 25, 2020
 
Revenue
Gross Profit
Total Operating Expense
Income (Loss) from Operations
Total Non-operating expense, net
Net Income (Loss)
GAAP
$
94,892

$
48,924

$
50,545

$
(1,621
)
$
(2,974
)
$
(5,381
)
  Stock-based compensation

281

(3,649
)
3,930


3,930

  Amortization of intangibles


(752
)
752


752

  Restructuring and related charges

302

(814
)
1,116


1,116

  Non-cash interest and other expenses related to convertible notes and other debt




1,666

1,666

  Discrete tax items and tax effect of non-GAAP adjustments





499

Total adjustments

583

(5,215
)
5,798

1,666

7,963

Non-GAAP
$
94,892

$
49,507

$
45,330

$
4,177

$
(1,308
)
$
2,582

As a % of revenue (GAAP)
 
51.6
%
53.3
%
(1.7
)%
(3.1
)%
(5.7
)%
As a % of revenue (Non-GAAP)
 
52.2
%
47.8
%
4.4
 %
(1.4
)%
2.7
 %
Diluted net income (loss) per share:
 
 
 
 
 
 
  Basic 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
 
 
 
 
 
97,563

  Non- GAAP
 
 
 
 
 
98,361

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 26, 2020
 
Revenue
Gross Profit
Total Operating Expense
Loss from Operations
Total Non-operating expense, net
Net Loss
GAAP
$
73,994

$
37,773

$
47,327

$
(9,554
)
$
(4,269
)
$
(15,401
)
  Stock-based compensation

312

(3,236
)
3,548


3,548

  Amortization of intangibles

65

(742
)
807


807

  Restructuring and related charges

2

(82
)
84


84

  Loss on convertible debt extinguishment




834

834

  Non-cash interest and other expenses related to convertible notes and other debt




1,950

1,950

  Discrete tax items and tax effect of non-GAAP adjustments





2,238

Total adjustments

379

(4,060
)
4,439

2,784

9,461

Non-GAAP
$
73,994

$
38,152

$
43,267

$
(5,115
)
$
(1,485
)
$
(5,940
)
As a % of revenue (GAAP)
 
51.0
%
64.0
%
(12.9
)%
(5.8
)%
(20.8
)%
As a % of revenue (Non-GAAP)
 
51.6
%
58.5
%
(6.9
)%
(2.0
)%
(8.0
)%
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$
(0.16
)
  Diluted net loss per share-Non-GAAP
 
 
 
 
 
$
(0.06
)
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
96,727


12



 
Three months ended September 27, 2019
 
Revenue
Gross Profit
Total Operating Expense
Income from Operations
Total Non-operating expense, net
Net Income
GAAP
$
115,725

$
75,540

$
52,991

$
22,549

$
(10,289
)
$
11,657

  Stock-based compensation

405

(3,689
)
4,094


4,094

  Amortization of intangibles

1,295

(785
)
2,080


2,080

  Restructuring and related charges

331

(861
)
1,192


1,192

  Loss on convertible debt extinguishment




5,695

5,695

  Non-cash interest and other expenses related to convertible notes and other debt




2,625

2,625

  Discrete tax items and tax effect of non-GAAP adjustments





(2,751
)
Total adjustments

2,031

(5,335
)
7,366

8,320

12,935

Non-GAAP
$
115,725

$
77,571

$
47,656

$
29,915

$
(1,969
)
$
24,592

As a % of revenue (GAAP)
 
65.3
%
45.8
%
19.5
 %
(8.9
)%
10.1
 %
As a % of revenue (Non-GAAP)
 
67.0
%
41.2
%
25.9
 %
(1.7
)%
21.3
 %
Diluted net income per share:
 
 
 
 
 
 
  Diluted net income per share-GAAP
 
 
 
 
 
$
0.12

  Diluted net income per share-Non-GAAP
 
 
 
 
 
$
0.25

Shares used to compute diluted net income per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
97,596


 
 
 
 
 
 
 
 
Nine months ended September 25, 2020
 
Revenue
Gross Profit
Total Operating Expense
Loss from Operations
Total Non-operating Expense
Net Loss
GAAP
$
247,303

$
123,435

$
152,659

$
(29,224
)
$
(10,419
)
$
(42,736
)
  Stock-based compensation

1,364

(12,373
)
13,737


13,737

  Amortization of intangibles

950

(2,264
)
3,214


3,214

  Restructuring and related charges

231

(1,572
)
1,803


1,803

  Loss on convertible debt extinguishment




834

834

  Non-cash interest and other expenses related to convertible notes and other debt




5,451

5,451

  Discrete tax items and tax effect of non-GAAP adjustments





4,553

Total adjustments

2,545

(16,209
)
18,754

6,285

29,592

Non-GAAP
$
247,303

$
125,980

$
136,450

$
(10,470
)
$
(4,134
)
$
(13,144
)
As a % of revenue (GAAP)


49.9
%
61.7
%
(11.8
)%
(4.2
)%
(17.3
)%
As a % of revenue (Non-GAAP)


50.9
%
55.2
%
(4.2
)%
(1.7
)%
(5.3
)%
 
 
 
 
 
 
 
Diluted net loss per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$
(0.44
)
  Diluted net loss per share-Non-GAAP
 
 
 
 
 
$
(0.14
)
Shares used to compute diluted net loss per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
96,623



13



 
 
 
 
 
 
 
 
Nine months ended September 27, 2019
 
Revenue
Gross Profit
Total Operating Expense
Income from Operations
Total Non-operating Expense
Net Income (Loss)
GAAP
$
280,696

$
161,317

$
154,940

$
6,377

$
(16,890
)
$
(11,494
)
   Accounting impact related to warrant amortization
48

48


48


48

  Stock-based compensation

823

(7,894
)
8,717


8,717

  Amortization of intangibles

3,885

(2,357
)
6,242


6,242

  Restructuring and related charges

723

(1,195
)
1,918


1,918

  Loss on debt extinguishment




5,695

5,695

  Non-cash interest and other expenses related to convertible notes




5,887

5,887

  Discrete tax items and tax effect of non-GAAP adjustments





(1,179
)
Total adjustments
48

5,479

(11,446
)
16,925

11,582

27,328

Non-GAAP
$
280,744

$
166,796

$
143,494

$
23,302

$
(5,308
)
$
15,834

As a % of revenue (GAAP)
 
57.5
%
55.2
%
2.3
%
(6.0
)%
(4.1
)%
As a % of revenue (Non-GAAP)
 
59.4
%
51.1
%
8.3
%
(1.9
)%
5.6
 %
 
 






Diluted net income (loss) per share:
 







  Diluted net loss per share-GAAP
 





$
(0.13
)
  Diluted net income per share-Non-GAAP
 





$
0.17

Shares used to compute diluted net income (loss) per share:
 






  GAAP
 





89,030

  Non-GAAP
 




92,579





14



Harmonic Inc.
Preliminary Adjusted EBITDA Reconciliation (Unaudited)
(In thousands)
 
Three months ended
 
September 25, 2020
June 26, 2020
September 27, 2019
Net loss - GAAP
$
(5,381
)
$
(15,401
)
$
11,657

Provision for income taxes
786

1,578

603

Interest expense, net
2,807

3,062

3,000

Depreciation
3,148

2,692

2,764

Amortization of intangibles
752

807

2,080

EBITDA
2,112

(7,262
)
20,104

 



Adjustments
 
 
 
Stock-based compensation
3,930

3,548

4,094

Loss on convertible debt extinguishment

834

5,695

Non-cash expenses related to convertible note


927

Restructuring and related charges
1,116

84

1,192

Adjusted EBITDA
$
7,158

$
(2,796
)
$
32,012


 
Nine months ended
 
September 25, 2020
September 27, 2019
Net loss - GAAP
$
(42,736
)
$
(11,494
)
Provision for income taxes
3,093

981

Interest expense, net
8,772

8,862

Depreciation
8,683

8,480

Amortization of intangibles
3,214

6,242

EBITDA
(18,974
)
13,071

 
 
 
Adjustments
 
 
Accounting impact related to warrant amortization

48

Stock-based compensation
13,737

8,717

Loss on convertible debt extinguishment
834

5,695

Non-cash expenses related to convertible note

927

Restructuring and related charges
1,803

1,918

Adjusted EBITDA
$
(2,600
)
$
30,376



15



 
Q4 2020 Financial Guidance
 
Revenue
Gross Profit
Total Operating Expense
Income from Operations
Total Non-operating Expense, net
Net Income
GAAP
$120.0 to $130.0
$59.7 to $70.0
$53.0 to $55.0
$6.5 to $15.0
$(3.3)
$3.0 to $11.3
  Stock-based compensation
0.3
(3.7)
4.0
4.0
  Amortization of intangibles
(0.8)
0.8
0.8
  Restructuring and related charges
0.6
(0.5)
1.1
1.1
  Non-cash interest and other expenses related to convertible notes and other debt
1.7
1.7
 Tax effect of non-GAAP adjustments
$(1.5) to $(0.7)
Total adjustments
0.9
(5.0)
5.9
1.7
$6.1 to $6.9
Non-GAAP
$120.0 to $130.0
$60.6 to $70.9
$48.0 to $50.0
$12.5 to $21.0
$(1.6)
$9.9 to $17.4
As a % of revenue (GAAP)
 
50.0% to 54.0%
44.2% to 42.3%
5.5% to 11.5%
(2.5)% to (2.8)%
2.5% to 8.7%
As a % of revenue (Non-GAAP)
 
50.5% to 54.5%
40.0% to 38.5%
10.5% to 16.1%
(1.2)% to (1.3)%
8.3% to 13.4%
Diluted net income per share:
 
 
 
 
 
 
  Diluted net income per share-GAAP
 
 
 
 
 
$0.03 to $0.11
  Diluted net income per share-Non-GAAP
 
 
 
 
 
$0.10 to $0.18
Shares used to compute diluted net income per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
98.8
 
2020 Financial Guidance
 
Revenue
Gross Profit
Total Operating Expense
Income (Loss) from Operations
Total Non-operating Expense, net
Net Income (Loss)
GAAP
$367.5 to $377.5
$183.7 to $192.6
$205.5 to $207.5
$(22.0) to $(15.0)
$(13.8)
$(39.1) to $(32.2)
  Stock-based compensation
1.7
(16.1)
17.8
17.8
  Amortization of intangibles
1.0
(3.0)
4.0
4.0
  Restructuring and related charges
0.9
(2.1)
3.0
3.0
  Non-cash interest and other expenses related to convertible notes and other debt
7.2
7.2
  Loss on debt extinguishment
0.8
0.8
 Tax effect of non-GAAP adjustments
$3.1 to $3.7
Total adjustments
3.6
(21.2)
24.8
8.0
$35.9 to $36.5
Non-GAAP
$367.5 to $377.5
$187.3 to $196.2
$184.5 to $186.5
$3.0 to $10.0
$(5.8)
$(2.6) to $3.7
As a % of revenue (GAAP)
 
50.0% to 51.0%
56.0% to 55.0%
(6.0)% to (4.0)%
(3.7)% to (3.8)%
(10.6)% to (8.5)%
As a % of revenue (Non-GAAP)
 
51.0% to 52.0%
50.2% to 49.4%
0.8% to 2.6%
(1.5)% to (1.6)%
(0.7)% to 1.0%
Diluted net income (loss) per share:
 
 
 
 
 
 
  Diluted net loss per share-GAAP
 
 
 
 
 
$(0.40) to $(0.33)
  Diluted net income (loss) per share-Non-GAAP
 
 
 
 
 
$(0.03) to $0.04
Shares used to compute diluted net income (loss) per share:
 
 
 
 
 
 
  GAAP and Non-GAAP
 
 
 
 
 
97.0
  Non-GAAP
 
 
 
 
 
98.2

16



Harmonic Inc.
Adjusted EBITDA Reconciliation on Financial Guidance
(In millions)
 
 
 
 
Q4 2020 Financial Guidance
2020 Financial Guidance
Net income (loss) - GAAP
$3.0 to $11.3

$(39.1) to $(32.2)

Provision for income taxes
0.3

3.4

Interest expense, net
2.8

11.6

Depreciation
3.3

11.9

Amortization of intangibles
0.8

4.0

EBITDA
         $10.2 to $18.5
        $(8.2) to $(1.3)
 
 
 
Adjustments
 
 
Stock-based compensation
4.0

17.8

Restructuring and related charges
1.2

3.0

Loss on debt extinguishment

0.8

Adjusted EBITDA
         $15.5 to $24.0
       $13.5 to $20.5

17
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Document and Entity Information Document
Oct. 26, 2020
Cover [Abstract]  
Document Type 8-K
Document Period End Date Oct. 26, 2020
Entity Registrant Name HARMONIC INC.
Entity Incorporation, State or Country Code DE
Entity File Number 000-25826
Entity Tax Identification Number 77-0201147
Entity Address, Address Line One 2590 Orchard Parkway
Entity Address, City or Town San Jose
Entity Address, State or Province CA
Entity Address, Postal Zip Code 95131
City Area Code 408
Local Phone Number 542-2500
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, par value $0.001 per share
Trading Symbol HLIT
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Amendment Flag false
Entity Central Index Key 0000851310
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