Harmonic Inc. (Nasdaq:HLIT), the worldwide leader in video delivery
infrastructure, announced today unaudited results for the second
quarter of 2014 which are in line with the preliminary results
disclosed in the Company's press release dated July 14, 2014.
Net revenue for the second quarter of 2014 was $109.6 million,
compared with $108.0 million for the first quarter of 2014 and
$117.1 million for the second quarter of 2013. As previously
announced, revenue for the second quarter of 2014 was adversely
impacted by a global slowdown in the Company's video products
business, particularly in EMEA and among North American Broadcast
and Media customers, partially offset by demand for the Company's
cable edge products.
Bookings for the second quarter of 2014 were $113.4 million,
compared with $126.3 million for both the first quarter of 2014 and
the second quarter of 2013.
Total backlog and deferred revenue was $132.1 million as of June
27, 2014, compared to $126.4 million as of March 28, 2014.
GAAP net loss from continuing operations for the second quarter
of 2014 was $37.1 million, or $(0.39) per diluted share, compared
with a GAAP net loss from continuing operations for the first
quarter of 2014 of $5.4 million, or $(0.06) per diluted share, and
a GAAP net loss of $3.4 million from continuing operations, or
$(0.03) per diluted share, for the second quarter of 2013. In the
second quarter of 2014, Harmonic recorded a $24.5 million tax
charge associated with a higher valuation allowance. The valuation
allowance was a result of a history of operating losses in recent
years that has led to uncertainty with respect to the Company's
ability to realize certain of its net deferred tax assets.
Non-GAAP net income from continuing operations for the second
quarter of 2014 was $1.8 million, or $0.02 per diluted share,
compared with non-GAAP net income of $2.8 million from continuing
operations, or $0.03 per diluted share, for the first quarter of
2014, and a non-GAAP net income of $5.6 million from continuing
operations, or $0.05 per diluted share, for the second quarter of
2013. See "Use of Non-GAAP Financial Measures" and "GAAP to
Non-GAAP Reconciliations" below.
GAAP gross margin was 45.5% and GAAP operating margin was (7.9)%
for the second quarter of 2014, compared with 48.4% and (6.7)%,
respectively, for the first quarter of 2014, and 49.4% and (3.9)%,
respectively, for the same period in 2013.
Non-GAAP gross margin was 50.1% and non-GAAP operating margin
was 2.2% for the second quarter of 2014, compared with 53.3% and
3.2%, respectively, for the first quarter of 2014, and 54.1% and
6.2%, respectively, for the same period in 2013. See "Use of
Non-GAAP Financial Measures" and "GAAP to Non-GAAP Reconciliations"
below.
Total cash, cash equivalents and short-term investments were
$134.4 million at the end of the second quarter of 2014, down $13.3
million from $147.7 million at the end of the prior quarter. In the
second quarter of 2014, the Company generated approximately $15.5
million of cash from operations, and used approximately $25.7
million to repurchase approximately 3.6 million shares of common
stock under its share repurchase program.
Conference Call Information
Harmonic does not intend to hold a conference call to discuss
its second quarter results. Harmonic held its conference call on
July 14, 2014 to discuss its preliminary results and a webcast of
the conference call is available at the Company's website at
www.harmonicinc.com until July 14, 2015.
About Harmonic Inc.
Harmonic (Nasdaq:HLIT) is the worldwide leader in video delivery
infrastructure for emerging television and video services. The
Company's production-ready innovation enables content and service
providers to efficiently create, prepare, and deliver
differentiated services for television and new media video
platforms. 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 June 27, 2014 and our expectations
concerning quarter-on-quarter growth. 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 the possibility, in no particular order, that: the
trends toward more high-definition, on-demand and anytime, anywhere
video will not continue to develop at its current pace or will
expire; 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 product
initiative, dependence on market acceptance of several 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, 2013, our Quarterly Report on Form 10-Q for the
quarter ended March 28, 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 margin,
operating expenses, income (loss) from operations, 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 and non-cash items, such as stock-based
compensation expense, amortization of intangibles, and adjustments
that normalize the tax rate. 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) |
|
|
|
|
June 27, 2014 |
December 31,
2013 |
|
(In thousands, except par value amounts) |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 59,173 |
$ 90,329 |
Short-term investments |
75,238 |
80,252 |
Accounts receivable, net |
79,937 |
75,052 |
Inventories |
30,170 |
36,926 |
Deferred income taxes |
6,746 |
24,650 |
Prepaid expenses and other current
assets |
23,766 |
21,521 |
Total current assets |
275,030 |
328,730 |
|
|
|
Property and equipment, net |
32,781 |
34,945 |
Goodwill, intangibles and other assets |
224,632 |
242,409 |
Total assets |
$ 532,443 |
$ 606,084 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 24,630 |
$ 22,380 |
Income taxes payable |
664 |
331 |
Deferred revenue |
38,017 |
27,020 |
Accrued liabilities |
33,676 |
35,349 |
Total current liabilities |
96,987 |
85,080 |
|
|
|
Income taxes payable, long-term |
12,734 |
15,165 |
Other non-current liabilities |
17,913 |
11,673 |
Total liabilities |
127,634 |
111,918 |
|
|
|
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; 92,475 and 99,413 shares issued and outstanding
at June 27, 2014 and December 31, 2013, respectively |
92 |
99 |
Additional paid-in capital |
2,289,187 |
2,336,275 |
Accumulated deficit |
(1,884,471) |
(1,841,999) |
Accumulated other comprehensive loss |
1 |
(209) |
Total stockholders' equity |
404,809 |
494,166 |
Total liabilities and stockholders'
equity |
$ 532,443 |
$ 606,084 |
|
Harmonic
Inc. |
Condensed Consolidated
Statements of Operations |
(Unaudited) |
|
|
|
|
|
|
Three months
ended |
Six months
ended |
|
June 27, 2014 |
June 28, 2013 |
June 27, 2014 |
June 28, 2013 |
|
(in thousands, except per share
amounts) |
Net revenue |
$ 109,589 |
$ 117,128 |
$ 217,621 |
$ 218,800 |
Cost of revenue |
59,772 |
59,236 |
115,492 |
114,743 |
Gross profit |
49,817 |
57,892 |
102,129 |
104,057 |
Operating expenses: |
|
|
|
|
Research and development |
23,485 |
25,820 |
47,373 |
51,071 |
Selling, general and administrative |
32,979 |
34,424 |
66,526 |
67,693 |
Amortization of intangibles |
1,718 |
2,010 |
3,668 |
4,098 |
Restructuring and related charges |
284 |
242 |
433 |
666 |
Total operating expenses |
58,466 |
62,496 |
118,000 |
123,528 |
Loss from operations |
(8,649) |
(4,604) |
(15,871) |
(19,471) |
Interest and other income (expense), net |
(60) |
(103) |
29 |
(206) |
Loss from continuing operations before income
taxes |
(8,709) |
(4,707) |
(15,842) |
(19,677) |
Provision for (benefit from) income
taxes |
28,353 |
(1,303) |
26,630 |
(6,770) |
Loss from continuing operations |
(37,062) |
(3,404) |
(42,472) |
(12,907) |
Income (loss) from discontinued operations,
net of taxes (including gain on disposal of $14,819, net of taxes,
for the six months ended June 28, 2013) |
— |
(396) |
— |
15,528 |
Net income (loss) |
$ (37,062) |
$ (3,800) |
$ (42,472) |
$ 2,621 |
Basic and diluted net income (loss) per share
from: |
|
|
|
|
Continuing operations |
$ (0.39) |
$ (0.03) |
$ (0.44) |
$ (0.11) |
Discontinued operations |
$ 0.00 |
$ 0.00 |
$ 0.00 |
$ 0.14 |
Net income (loss) |
$ (0.39) |
$ (0.03) |
$ (0.44) |
$ 0.02 |
Shares used in per share calculation: |
|
|
|
|
Basic and diluted |
93,966 |
109,938 |
95,899 |
112,534 |
|
Harmonic
Inc. |
Revenue
Information |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Three months
ended |
Six months
ended |
|
June 27, |
June 28, |
June 27, |
June 28, |
|
2014 |
2013 |
2014 |
2013 |
|
(In thousands, except
percentages) |
Product |
|
|
|
|
|
|
|
|
Video Products(1) |
$ 57,196 |
52% |
$ 83,746 |
72% |
$ 121,214 |
55% |
$ 148,882 |
68% |
Cable Edge |
29,332 |
27% |
13,031 |
11% |
53,574 |
25% |
30,370 |
14% |
Services and Support |
23,061 |
21% |
20,351 |
17% |
42,833 |
20% |
39,548 |
18% |
Total |
$ 109,589 |
100% |
$ 117,128 |
100% |
$ 217,621 |
100% |
$ 218,800 |
100% |
Geography |
|
|
|
|
|
|
|
|
Americas(2) |
$ 60,066 |
55% |
$ 66,811 |
57% |
$ 124,952 |
57% |
$ 117,371 |
54% |
EMEA |
31,519 |
29% |
34,618 |
30% |
55,706 |
26% |
67,333 |
31% |
APAC |
18,004 |
16% |
15,699 |
13% |
36,963 |
17% |
34,096 |
15% |
Total |
$ 109,589 |
100% |
$ 117,128 |
100% |
$ 217,621 |
100% |
$ 218,800 |
100% |
Market |
|
|
|
|
|
|
|
|
Service Provider(3) |
$ 75,048 |
68% |
$ 70,532 |
60% |
$ 146,558 |
67% |
$ 133,045 |
61% |
Broadcast and Media |
34,541 |
32% |
46,596 |
40% |
71,063 |
33% |
85,755 |
39% |
Total |
$ 109,589 |
100% |
$ 117,128 |
100% |
$ 217,621 |
100% |
$ 218,800 |
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 include
Cable and Satellite and Telco. |
* NOTE : The prior period
information has been reclassified to conform to the current period
presentation. |
|
|
|
|
|
|
|
|
|
The prior six period revenue
information can be found by accessing the below link. |
|
|
|
|
|
|
|
|
|
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjQ0MzQ5fENoaWxkSUQ9LTF8VHlwZT0z&t=1 |
|
|
|
Harmonic
Inc. |
Condensed Consolidated
Statements of Cash Flows |
(Unaudited) |
|
|
|
|
Six months
ended |
|
June 27, 2014 |
June 28, 2013 |
|
(In thousands) |
Cash flows from operating
activities: |
|
|
Net income (loss) |
$ (42,472) |
$ 2,621 |
Adjustments to reconcile net income (loss) to
net cash provided by operating activities: |
|
|
Amortization of intangibles |
12,866 |
13,805 |
Depreciation |
8,486 |
8,140 |
Stock-based compensation |
8,368 |
8,008 |
Gain on sale of discontinued operations, net
of tax |
— |
(14,819) |
Loss on impairment of fixed assets |
— |
149 |
Deferred income taxes |
27,407 |
(9,307) |
Provision for excess and obsolete
inventories |
1,377 |
2,143 |
Allowance for doubtful accounts, returns and
discounts |
600 |
1,062 |
Excess tax benefits from stock-based
compensation |
(304) |
— |
Other non-cash adjustments, net |
847 |
777 |
Changes in assets and liabilities: |
|
|
Accounts receivable |
(5,485) |
(1,390) |
Inventories |
5,379 |
7,167 |
Prepaid expenses and other assets |
(2,424) |
3,541 |
Accounts payable |
2,324 |
(2,929) |
Deferred revenue |
10,873 |
3,937 |
Income taxes payable |
562 |
(877) |
Accrued and other liabilities |
(1,625) |
(2,946) |
Net cash provided by operating
activities |
26,779 |
19,082 |
Cash flows from investing
activities: |
|
|
Purchases of investments |
(26,599) |
(39,117) |
Proceeds from sales and maturities of
investments |
30,846 |
64,344 |
Purchases of property and equipment |
(6,479) |
(8,755) |
Proceeds from sale of discontinued
operations, net of selling costs |
— |
43,638 |
Net cash (used in) provided by investing
activities |
(2,232) |
60,110 |
Cash flows from financing
activities: |
|
|
Payments for repurchase of common stock |
(54,751) |
(95,372) |
Proceeds from (repurchases of) common stock
issued to employees |
(1,272) |
2,818 |
Excess tax benefits from stock-based
compensation |
304 |
— |
Net cash used in financing activities |
(55,719) |
(92,554) |
Effect of exchange rate changes on cash and
cash equivalents |
16 |
(105) |
Net decrease in cash and cash
equivalents |
(31,156) |
(13,467) |
Cash and cash equivalents at beginning of
period |
90,329 |
96,670 |
Cash and cash equivalents at end of
period |
$ 59,173 |
$ 83,203 |
|
|
|
|
|
Harmonic
Inc. |
GAAP to Non-GAAP
Reconciliations (Unaudited) |
(in thousands, except
percentages and per share data) |
|
|
|
|
|
|
Three months ended |
|
June 27,
2014 |
|
Gross Profit |
Total Operating
Expense |
Income (Loss) from
Operations |
Net Income
(Loss) |
GAAP from continuing
operations |
$ 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 from continuing
operations |
$ 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
from continuing operations: |
|
|
|
|
Diluted net loss per share from
continuing operations-GAAP |
|
|
|
$ (0.39) |
Diluted net income per share from
continuing operations-Non-GAAP |
|
|
|
$ 0.02 |
Shares used to compute diluted net
income (loss) per share from continuing operations: |
|
|
|
|
GAAP |
|
|
|
93,966 |
Non-GAAP |
|
|
|
95,294 |
|
|
|
|
|
|
Three months ended |
|
March 28,
2014 |
|
Gross Profit |
Total Operating
Expense |
Income (Loss) from
Operations |
Net Income
(Loss) |
GAAP from continuing
operations |
$ 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 from continuing
operations |
$ 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
from continuing operations: |
|
|
|
|
Diluted net loss per share from
continuing operations-GAAP |
|
|
|
$ (0.06) |
Diluted net income per share from
continuing operations-Non-GAAP |
|
|
|
$ 0.03 |
Shares used to compute diluted net
income (loss) per share from continuing operations: |
|
|
|
|
GAAP |
|
|
|
97,921 |
Non-GAAP |
|
|
|
99,256 |
|
|
|
|
|
|
Three months ended |
|
June 28,
2013 |
|
Gross Profit |
Total Operating
Expense |
Income (Loss) from
Operations |
Net Income
(Loss) |
GAAP from continuing
operations |
$ 57,892 |
$ 62,496 |
$ (4,604) |
$ (3,404) |
Stock-based compensation in cost of
revenue |
622 |
— |
622 |
622 |
Stock-based compensation in research and
development |
— |
(1,121) |
1,121 |
1,121 |
Stock-based compensation in selling,
general and administrative |
— |
(2,279) |
2,279 |
2,279 |
Proxy contest consultant expenses in
selling, general and administrative |
— |
(750) |
750 |
750 |
Amortization of intangibles |
4,762 |
(2,010) |
6,772 |
6,772 |
Restructuring and related charges |
65 |
(242) |
307 |
307 |
Discrete tax items and tax effect of
non-GAAP adjustments |
— |
— |
— |
(2,803) |
Non-GAAP from continuing
operations |
$ 63,341 |
$ 56,094 |
$ 7,247 |
$ 5,644 |
As a % of revenue (GAAP) |
49.4% |
53.4% |
(3.9)% |
(2.9)% |
As a % of revenue (Non-GAAP) |
54.1% |
47.9% |
6.2% |
4.8% |
Diluted net income (loss) per share
from continuing operations: |
|
|
|
|
Diluted net loss per share from
continuing operations-GAAP |
|
|
|
$ (0.03) |
Diluted net income per share from
continuing operations-Non-GAAP |
|
|
|
$ 0.05 |
Shares used to compute diluted net
income (loss) per share from continuing operations: |
|
|
|
|
GAAP |
|
|
|
109,938 |
Non-GAAP |
|
|
|
110,909 |
CONTACT: Carolyn V. Aver
Chief Financial Officer
Harmonic Inc.
+1.408.542.2500
Blair King
Investor Relations
Harmonic Inc.
+1.408.490.6172
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