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8-K - FORM 8-K - HARMONIC INCd571300d8k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

Harmonic Announces Second Quarter 2013 Results

Expands Repurchase Plan

SAN JOSE, Calif.—July 23, 2013—Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its preliminary and unaudited results for the second quarter 2013.

On March 5, 2013, Harmonic completed the sale of its Cable Access HFC business and, accordingly, the following pertains only to its continuing operations.

Net revenue for the second quarter of 2013 was $117.1 million, compared with $101.7 million for the first quarter of 2013 and $122.1 million for the second quarter of 2012.

Bookings in the second quarter of 2013 were $126.3 million, compared with $110.1 million for the first quarter of 2013 and $128.5 million for the second quarter of 2012.

Total backlog and deferred revenue was $132.5 million as of June 28, 2013, compared to $126.3 million as of March 29, 2013.

GAAP net loss for the second quarter of 2013 was $3.4 million, or ($0.03) per diluted share, compared with a GAAP net loss for the first quarter of 2013 of $9.5 million, or $(0.08) per diluted share, and a GAAP net loss of $3.9 million, or ($0.03) per diluted share, in the second quarter of 2012.

Non-GAAP net income for the second quarter of 2013 was $5.6 million, or $0.05 per diluted share, compared with a non-GAAP net loss of $2.7 million, or ($0.02) per diluted share, for the first quarter of 2013, and a non-GAAP net income of $6.5 million, or $0.06 per diluted share, for the second quarter of 2012. See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations” below.

GAAP gross margin was 49% and GAAP operating margin was (4%) for the second quarter of 2013, compared with 45% and (15%), respectively, for the first quarter of 2013, and 45% and (3%), respectively, for the same period of 2012.

Non-GAAP gross margin was 54% and non-GAAP operating margin was 6% for the second quarter of 2013, compared with 51% and (3%), respectively, for the first quarter of 2013, and 50% and 7%, respectively, for the same period of 2012. See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations” below.

Total cash, cash equivalents and short-term investments were $161.7 million at the end of the second quarter 2013, down $66.6 million from $228.3 million in the prior quarter, primarily due to the repurchase of the Company’s common stock in the second quarter under its tender offer, which closed on May 24, 2013, and its share repurchase program. The Company generated approximately $24.8 million of cash from operations in the second quarter, and used approximately $85.6 million, excluding related costs, for its repurchase of approximately 12.0 million shares in the tender offer and approximately 1.8 million shares under its previously announced share repurchase program.

The Company also announced it will expand its existing share repurchase program by $85 million, providing for a total of approximately $100 million of share repurchases going forward. Since April 2012, Harmonic has authorized the repurchase of $220 million of its common stock, and has repurchased approximately $120 million of its common stock to date.

“Harmonic’s results in the second quarter reflected a return to the quarterly trajectory we expected coming into the year,” said Patrick Harshman, President and Chief Executive Officer. “Penetration into the broadcast and media market with our video processing technology drove the return to revenue growth and helped drive margins above our target for the quarter. We are also encouraged by customer feedback for our technology growth drivers: converged cable access platform, or CCAP, next-gen video compression and playout, Ultra HD, over-the-top and multiscreen. Specific to CCAP, we received our first order and made our first shipment of the NSG Pro during the quarter. Overall, our improved financial performance and expanded share repurchase commitment demonstrate our continuing focus on creating shareholder value.”


Business Outlook

For the third quarter of 2013, Harmonic anticipates:

 

   

Net revenue in the range of $115 million to $125 million

 

   

GAAP gross margins in the range of 45.0% to 46.0%

 

   

GAAP operating expenses in the range of $60.5 million to $61.5 million

 

   

Non-GAAP gross margins in the range of 50.0% to 51.0%

 

   

Non-GAAP operating expenses in the range of $54.5 million to $55.5 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 Tuesday, July 23, 2013. A listen-only broadcast of the conference call can be accessed either from the Company’s website at www.harmonicinc.com or by calling +1.847.944.7317 or +1.866.297.6395 (passcode 35192172). 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 35192172).

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 28, 2013; our expectations concerning quarterly growth during 2013; our continuing focus on creating shareholder value; customer feedback for our technology growth drivers; and net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the third quarter of 2013. 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, including as a result of recent turmoil in the global financial markets, particularly in Europe, 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; 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; the risks that our international sales and support center will not provide the operational or tax benefits that we anticipate or that its expenses exceed our plans; 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 Annual Report on Form 10-K for the year ended December 31, 2012, our Quarterly Report on Form 10-Q for the quarter ended March 29, 2013, 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, the Company excludes 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, net income and net income per 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 contained in this presentation. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures. These adjustments are costs related to consulting fees associated with a potential proxy contest, restructuring and related charges 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.

CONTACTS:

 

Carolyn V. Aver    Michael Bishop   
Chief Financial Officer    Investor Relations   
Harmonic Inc.    +1.408.542.2760   
+1.408.542.2500      


Harmonic Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

     June 28, 2013     December 31, 2012  
     (In thousands)  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 83,203      $ 96,670   

Short-term investments

     78,478        104,506   

Accounts receivable, net

     86,248        85,920   

Inventories

     44,381        64,270   

Deferred income taxes

     20,145        21,870   

Prepaid expenses and other current assets

     19,727        23,636   
  

 

 

   

 

 

 

Total current assets

     332,182        396,872   

Property and equipment, net

     37,436        38,122   

Goodwill, intangibles and other assets

     257,372        282,537   
  

 

 

   

 

 

 

Total assets

   $ 626,990      $ 717,531   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 22,850      $ 25,447   

Income taxes payable

     496        1,797   

Deferred revenue

     32,976        33,235   

Accrued liabilities

     38,931        42,415   
  

 

 

   

 

 

 

Total current liabilities

     95,253        102,894   

Income taxes payable, long-term

     50,546        49,309   

Other non-current liabilities

     11,675        11,915   
  

 

 

   

 

 

 

Total liabilities

     157,474        164,118   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock

     2,346,885        2,432,904   

Accumulated deficit

     (1,876,405     (1,879,026

Accumulated other comprehensive loss

     (964     (465
  

 

 

   

 

 

 

Total stockholders’ equity

     469,516        553,413   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 626,990      $ 717,531   
  

 

 

   

 

 

 


Harmonic Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

     Three months ended     Six months ended  
     June 28, 2013     June 29, 2012     June 28, 2013     June 29, 2012  
     (In thousands, except per share amounts)  

Net revenue

   $ 117,128      $ 122,060      $ 218,800      $ 238,499   

Cost of revenue

     59,236        66,979        114,743        132,956   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     57,892        55,081        104,057        105,543   

Operating expenses:

        

Research and development

     25,820        24,856        51,071        51,619   

Selling, general and administrative

     34,424        31,327        67,693        62,730   

Amortization of intangibles

     2,010        2,190        4,098        4,369   

Restructuring and related charges

     242        —          666        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     62,496        58,373        123,528        118,718   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (4,604     (3,292     (19,471     (13,175

Interest and other income (expense), net

     (103     (4     (206     518   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income taxes

     (4,707     (3,296     (19,677     (12,657

Provision for (benefit from) income taxes

     (1,303     579        (6,770     (47
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (3,404     (3,875     (12,907     (12,610

Income (loss) from discontinued operations, net of tax (including gain on disposal of $14,819, net of tax, for the six months ended June 28, 2013)

     (396     3,892        15,528        5,099   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (3,800   $ 17      $ 2,621      $ (7,511
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net income (loss) per share from:

        

Continuing operations

   $ (0.03   $ (0.03   $ (0.11   $ (0.11
  

 

 

   

 

 

   

 

 

   

 

 

 

Discontinued operations

   $ 0.00      $ 0.03      $ 0.14      $ 0.04   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (0.03   $ 0.00      $ 0.02      $ (0.06
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation:

        

Basic and diluted

     109,938        117,056        112,534        117,162   


Harmonic Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

     Six months ended  
     June 28, 2013     June 29, 2012  
     (In thousands)  

Cash flows from operating activities:

    

Net income (loss)

   $ 2,621      $ (7,511

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Amortization of intangibles

     13,805        14,777   

Depreciation

     8,140        7,519   

Stock-based compensation

     8,008        9,502   

Gain on sale of discontinued operations, net of tax

     (14,819     —     

Loss on impairment of fixed assets

     149        —     

Deferred income taxes

     (9,307     1,330   

Provision for inventories

     2,143        1,735   

Allowance for doubtful accounts, returns and discounts

     1,062        2,275   

Excess tax benefits from stock-based compensation

     —          (75

Other non-cash adjustments, net

     777        398   

Changes in assets and liabilities:

    

Accounts receivable

     (1,390     4,867   

Inventories

     7,167        907   

Prepaid expenses and other assets

     3,541        (3,184

Accounts payable

     (2,929     (684

Deferred revenue

     3,937        4,448   

Income taxes payable

     (877     (2,560

Accrued and other liabilities

     (2,946     (5,605
  

 

 

   

 

 

 

Net cash provided by operating activities

     19,082        28,139   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of investments

     (39,117     (57,661

Proceeds from sales and maturities of investments

     64,344        42,593   

Acquisition of property and equipment

     (8,755     (6,708

Proceeds from sale of discontinued operations, net of selling costs

     43,638        —     
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     60,110        (21,776
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Payments for repurchase of common stock

     (95,372     (6,953

Proceeds from issuance of common stock, net

     2,818        2,016   

Excess tax benefits from stock-based compensation

     —          75   
  

 

 

   

 

 

 

Net cash used in financing activities

     (92,554     (4,862
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (105     (38
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (13,467     1,463   

Cash and cash equivalents at beginning of period

     96,670        90,983   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 83,203      $ 92,446   
  

 

 

   

 

 

 


Harmonic Inc.

Revenue Information

(Unaudited)

 

     Three months ended     Six months ended  
     June 28, 2013     June 29, 2012     June 28, 2013     June 29, 2012  
     (In thousands, except percentages)  

Product

                    

Video Processing

   $ 62,409         53   $ 59,300         49   $ 105,315         48   $ 111,981         47

Production and Playout

     21,337         19     20,663         17     43,567         20     41,541         17

Cable Edge

     13,031         11     23,389         19     30,370         14     49,328         21

Services and Support

     20,351         17     18,708         15     39,548         18     35,649         15
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 117,128         100   $ 122,060         100   $ 218,800         100   $ 238,499         100
  

 

 

      

 

 

      

 

 

      

 

 

    

Geography

                    

United States

   $ 55,620         47   $ 56,583         46   $ 97,970         45   $ 112,801         47

International

     61,508         53     65,477         54     120,830         55     125,698         53
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 117,128         100   $ 122,060         100   $ 218,800         100   $ 238,499         100
  

 

 

      

 

 

      

 

 

      

 

 

    

Market

                    

Cable

   $ 42,291         36   $ 53,659         44   $ 81,482         37   $ 104,131         44

Satellite and Telco

     28,241         24     27,870         23     51,563         24     53,729         22

Broadcast and Media

     46,596         40     40,531         33     85,755         39     80,639         34
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 117,128         100   $ 122,060         100   $ 218,800         100   $ 238,499         100
  

 

 

      

 

 

      

 

 

      

 

 

    


Harmonic Inc.

GAAP to Non-GAAP Reconciliations (Unaudited)

(In thousands, except percentages and per share data)

 

     Three months ended  
     June 28, 2013  
     Gross
Profit
    Operating
Expense
    Operating
Income
(Loss)
    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   

Income 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

     54.1     47.9     6.2     4.8

Diluted 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 income (loss) per share from continuing operations:

        

GAAP

           109,938   
        

 

 

 

Non-GAAP

           110,909   
        

 

 

 
     Three months ended  
     March 29, 2013  
     Gross
Profit
    Operating
Expense
    Operating
Income
(Loss)
    Net Income
(Loss)
 

GAAP from continuing operations

   $ 46,165      $ 61,032      $ (14,867   $ (9,503

Stock-based compensation in cost of revenue

     611        —          611        611   

Stock-based compensation in research and development

     —          (1,203     1,203        1,203   

Stock-based compensation in selling, general and administrative

     —          (2,085     2,085        2,085   

Amortization of intangibles

     4,945        (2,088     7,033        7,033   

Restructuring and related charges

     141        (424     565        565   

Income tax effect of Non-GAAP adjustments

     —          —          —          (4,738
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP from continuing operations

   $ 51,862      $ 55,232      $ (3,370   $ (2,744
  

 

 

   

 

 

   

 

 

   

 

 

 

As a % of revenue

     51.0     54.3     -3.3     -2.7

Diluted income (loss) per share from continuing operations:

        

Diluted net loss per share from continuing operations-GAAP

         $ (0.08
        

 

 

 

Diluted net loss per share from continuing operations-Non-GAAP

         $ (0.02
        

 

 

 

Shares used to compute diluted income (loss) per share from continuing operations:

        

GAAP

           115,219   
        

 

 

 

Non-GAAP

           115,219   
        

 

 

 
     Three months ended  
     June 29, 2012  
     Gross
Profit
    Operating
Expense
    Operating
Income
(Loss)
    Net Income
(Loss)
 

GAAP from continuing operations

   $ 55,081      $ 58,373      $ (3,292   $ (3,875

Stock-based compensation in cost of revenue

     764        —          764        764   

Stock-based compensation in research and development

     —          (1,650     1,650        1,650   

Stock-based compensation in selling, general and administrative

     —          (2,169     2,169        2,169   

Amortization of intangibles

     5,048        (2,190     7,238        7,238   

Income tax effect of Non-GAAP adjustments

     —          —          —          (1,467
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP from continuing operations

   $ 60,893      $ 52,364      $ 8,529      $ 6,479   
  

 

 

   

 

 

   

 

 

   

 

 

 

As a % of revenue

     49.9     42.9     7.0     5.3

Diluted 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

         $ 0.06   
        

 

 

 

Shares used to compute diluted income (loss) per share from continuing operations:

        

GAAP

           117,056   
        

 

 

 

Non-GAAP

           117,493