Attached files
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| 8-K - 8-K - HARMONIC INC | hlit-201403288xk.htm |
Exhibit 99.1
 |  |
FOR IMMEDIATE RELEASE
Harmonic Announces First Quarter 2014 Results
SAN JOSE, Calif.-April 22, 2014-Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its preliminary and unaudited results for the first quarter of 2014.
Net revenue for the first quarter of 2014 was $108.0 million, compared with $120.2 million for the fourth quarter of 2013 and $101.7 million for the first quarter of 2013.
Bookings for the first quarter of 2014 were $126.3 million, compared with $113.3 million for the fourth quarter of 2013 and $110.1 million for the first quarter of 2013.
Total backlog and deferred revenue was $126.4 million as of March 28, 2014, compared to $114.0 million as of December 31, 2013.
GAAP net loss from continuing operations for the first quarter of 2014 was $5.4 million, or $(0.06) per diluted share, compared with a GAAP net loss from continuing operations for the fourth quarter of 2013 of $2.2 million, or $(0.02) per diluted share, and a GAAP net loss of $9.5 million from continuing operations, or $(0.08) per diluted share, for the first quarter of 2013.
Non-GAAP net income from continuing operations for the first quarter of 2014 was $2.8 million, or $0.03 per diluted share, compared with non-GAAP net income of $8.3 million from continuing operations, or $0.08 per diluted share, for the fourth quarter of 2013, and a non-GAAP net loss of $2.7 million from continuing operations, or $(0.02) per diluted share, for the first quarter of 2013. See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations” below.
GAAP gross margin was 48.4% and GAAP operating margin was (6.7)% for the first quarter of 2014, compared with 49.6% and (0.8)%, respectively, for the fourth quarter of 2013, and 45.4% and (14.6)%, respectively, for the same period in 2013.
Non-GAAP gross margin was 53.3% and non-GAAP operating margin was 3.2% for the first quarter of 2014, compared with 54.3% and 8.9%, respectively, for the fourth quarter of 2013, and 51.0% and (3.3)%, 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 $147.7 million at the end of the first quarter of 2014, down $22.9 million from $170.6 million as of the end of the prior quarter. In the first quarter of 2014, the Company generated approximately $11.2 million of cash from operations, and used approximately $29.1 million to repurchase approximately 4.4 million shares of common stock under its share repurchase program.
“Our first quarter results reflect increased demand in the US, offset by softer performance in Europe,” said Patrick Harshman, President and Chief Executive Officer. “Bookings grew 15% year-on-year, and an improved margin trend across all products drove blended gross margin above our expected range. We also made significant progress on our buyback program, purchasing 4.4 million shares, or approximately 4.5%, of Harmonic’s stock.”
“Looking ahead, our book-to-bill is indicative of the early momentum we’re seeing in our next generation cable edge and video processing platforms. Converged Cable Access (CCAP), Ultra HD, HEVC and multiscreen remain promising initiatives for the company, and we believe our recent introduction of the VOS virtualized media processing software platform further extends our leadership position as the industry prepares itself to commence deployments of these exciting new technologies.”
Today, Harmonic also announced it will hold its Investor and Analyst Conference at NASDAQ MarketSite, 4 Times Square in New York City on Thursday, May 15, 2014 from 9:30 a.m. to 2:00 p.m. ET. The meeting is open to all interested investors and analysts. All interested parties must register by clicking here, or by accessing the following url: http://www.media-server.com/m/p/wz2cnsgj in advance.
Business Outlook
For the second quarter of 2014, Harmonic anticipates:
• | Net revenue in the range of $113.0 million to $123.0 million |
• | GAAP gross margins in the range of 49.5% to 50.5% |
• | GAAP operating expenses in the range of $61.0 million to $62.0 million |
• | Non-GAAP gross margins in the range of 52.5% to 53.5% |
• | 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 April 22, 2014. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling +1.847.619.6547 or +1.888.895.5271 (passcode# 37084726). 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# 37084726).
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 first quarter ended March 28, 2014; our expectations concerning quarter-on-quarter growth; and net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the second quarter of 2014. 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 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 and 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. 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 | Blair King |
Chief Financial Officer | Investor Relations |
Harmonic Inc. | Harmonic Inc. |
+1.408.542.2500 | +1.408.490.6172 |
Harmonic Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
March 28, 2014 | December 31, 2013 | ||||||
(In thousands, except par value amounts) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 69,192 | $ | 90,329 | |||
Short-term investments | 78,547 | 80,252 | |||||
Accounts receivable, net | 77,515 | 75,052 | |||||
Inventories | 30,304 | 36,926 | |||||
Deferred income taxes | 25,831 | 24,650 | |||||
Prepaid expenses and other current assets | 28,216 | 21,521 | |||||
Total current assets | 309,605 | 328,730 | |||||
Property and equipment, net | 34,103 | 34,945 | |||||
Goodwill, intangibles and other assets | 231,041 | 242,409 | |||||
Total assets | $ | 574,749 | $ | 606,084 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 19,847 | $ | 22,380 | |||
Income taxes payable | 98 | 331 | |||||
Deferred revenue | 33,528 | 27,020 | |||||
Accrued liabilities | 31,848 | 35,349 | |||||
Total current liabilities | 85,321 | 85,080 | |||||
Income taxes payable, long-term | 15,353 | 15,165 | |||||
Other non-current liabilities | 11,594 | 11,673 | |||||
Total liabilities | 112,268 | 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; 95,735 and 99,413 shares issued and outstanding at March 28, 2014 and December 31, 2013, respectively | 96 | 99 | |||||
Additional paid-in capital | 2,309,955 | 2,336,275 | |||||
Accumulated deficit | (1,847,409 | ) | (1,841,999 | ) | |||
Accumulated other comprehensive loss | (161 | ) | (209 | ) | |||
Total stockholders' equity | 462,481 | 494,166 | |||||
Total liabilities and stockholders' equity | $ | 574,749 | $ | 606,084 | |||
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended | |||||||
March 28, 2014 | March 29, 2013 | ||||||
(in thousands, except per share amounts) | |||||||
Net revenue | $ | 108,032 | $ | 101,672 | |||
Cost of revenue | 55,720 | 55,507 | |||||
Gross profit | 52,312 | 46,165 | |||||
Operating expenses: | |||||||
Research and development | 23,888 | 25,251 | |||||
Selling, general and administrative | 33,547 | 33,269 | |||||
Amortization of intangibles | 1,950 | 2,088 | |||||
Restructuring and related charges | 149 | 424 | |||||
Total operating expenses | 59,534 | 61,032 | |||||
Loss from operations | (7,222 | ) | (14,867 | ) | |||
Interest and other income (expense), net | 89 | (103 | ) | ||||
Loss from continuing operations before income taxes | (7,133 | ) | (14,970 | ) | |||
Benefit from income taxes | (1,723 | ) | (5,467 | ) | |||
Loss from continuing operations | (5,410 | ) | (9,503 | ) | |||
Income from discontinued operations, net of taxes (including gain on disposal of $14,956, net of taxes, for the three months ended March 29, 2013) | — | 15,924 | |||||
Net income (loss) | $ | (5,410 | ) | $ | 6,421 | ||
Basic net income (loss) per share from: | |||||||
Continuing operations | $ | (0.06 | ) | $ | (0.08 | ) | |
Discontinued operations | $ | 0.00 | $ | 0.14 | |||
Net income (loss) | $ | (0.06 | ) | $ | 0.06 | ||
Diluted net income (loss) per share from: | |||||||
Continuing operations | $ | (0.06 | ) | $ | (0.08 | ) | |
Discontinued operations | $ | 0.00 | $ | 0.14 | |||
Net income (loss) | $ | (0.06 | ) | $ | 0.06 | ||
Shares used in per share calculation: | |||||||
Basic | 97,921 | 115,219 | |||||
Diluted | 97,921 | 115,219 | |||||
Harmonic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended | |||||||
March 28, 2014 | March 29, 2013 | ||||||
(In thousands) | |||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (5,410 | ) | $ | 6,421 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Amortization of intangibles | 6,666 | 7,033 | |||||
Depreciation | 4,227 | 4,040 | |||||
Stock-based compensation | 3,807 | 3,986 | |||||
Gain on sale of discontinued operations, net of tax | — | (14,956 | ) | ||||
Loss on impairment of fixed assets | — | 101 | |||||
Deferred income taxes | 3,510 | (204 | ) | ||||
Provision for excess and obsolete inventories | 722 | 567 | |||||
Allowance for doubtful accounts, returns and discounts | (536 | ) | 1,116 | ||||
Excess tax benefits from stock-based compensation | (185 | ) | — | ||||
Other non-cash adjustments, net | 462 | 408 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (1,927 | ) | (10,888 | ) | |||
Inventories | 5,900 | 6,832 | |||||
Prepaid expenses and other assets | (6,671 | ) | (8,597 | ) | |||
Accounts payable | (2,533 | ) | (2,796 | ) | |||
Deferred revenue | 6,382 | 2,667 | |||||
Income taxes payable | 278 | (1,257 | ) | ||||
Accrued and other liabilities | (3,447 | ) | (216 | ) | |||
Net cash provided by (used in) operating activities | 11,245 | (5,743 | ) | ||||
Cash flows from investing activities: | |||||||
Purchases of investments | (14,084 | ) | (25,908 | ) | |||
Proceeds from sales and maturities of investments | 15,382 | 20,249 | |||||
Purchases of property and equipment | (3,431 | ) | (4,274 | ) | |||
Proceeds from sale of discontinued operations, net of selling costs | — | 44,336 | |||||
Net cash (used in) provided by investing activities | (2,133 | ) | 34,403 | ||||
Cash flows from financing activities: | |||||||
Payments for repurchase of common stock | (29,075 | ) | (9,268 | ) | |||
Proceeds from (repurchases of) common stock issued to employees | (1,377 | ) | 2,508 | ||||
Excess tax benefits from stock-based compensation | 185 | — | |||||
Net cash used in financing activities | (30,267 | ) | (6,760 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 18 | (106 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (21,137 | ) | 21,794 | ||||
Cash and cash equivalents at beginning of period | 90,329 | 96,670 | |||||
Cash and cash equivalents at end of period | $ | 69,192 | $ | 118,464 | |||
Harmonic Inc.
Revenue Information
(Unaudited)
Three months ended | |||||||||||||
March 28, 2014 | March 29, 2013 | ||||||||||||
(In thousands, except percentages) | |||||||||||||
Product | |||||||||||||
Video Processing | $ | 46,683 | 43 | % | $ | 42,906 | 42 | % | |||||
Production and Playout | 17,335 | 16 | % | 22,230 | 22 | % | |||||||
Cable Edge | 24,242 | 23 | % | 17,339 | 17 | % | |||||||
Services and Support | 19,772 | 18 | % | 19,197 | 19 | % | |||||||
Total | $ | 108,032 | 100 | % | $ | 101,672 | 100 | % | |||||
Geography | |||||||||||||
United States | $ | 53,625 | 50 | % | $ | 42,350 | 42 | % | |||||
International | 54,407 | 50 | % | 59,322 | 58 | % | |||||||
Total | $ | 108,032 | 100 | % | $ | 101,672 | 100 | % | |||||
Market | |||||||||||||
Cable | $ | 44,799 | 41 | % | $ | 39,191 | 39 | % | |||||
Satellite and Telco | 26,711 | 25 | % | 23,322 | 23 | % | |||||||
Broadcast and Media | 36,522 | 34 | % | 39,159 | 38 | % | |||||||
Total | $ | 108,032 | 100 | % | $ | 101,672 | 100 | % | |||||
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(in thousands, except percentages and per share data)
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 | ||||||||||||
December 31, 2013 | ||||||||||||
Gross Profit | Total Operating Expense | Income (Loss) from Operations | Net Income (Loss) | |||||||||
GAAP from continuing operations | $ | 59,596 | $ | 60,594 | $ | (998 | ) | $ | (2,179 | ) | ||
Stock-based compensation in cost of revenue | 574 | — | 574 | 574 | ||||||||
Stock-based compensation in research and development | — | (1,031 | ) | 1,031 | 1,031 | |||||||
Stock-based compensation in selling, general and administrative | — | (2,531 | ) | 2,531 | 2,531 | |||||||
Amortization of intangibles | 4,763 | (1,997 | ) | 6,760 | 6,760 | |||||||
Restructuring and related charges | 293 | (496 | ) | 789 | 789 | |||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | (1,220 | ) | |||||||
Non-GAAP from continuing operations | $ | 65,226 | $ | 54,539 | $ | 10,687 | $ | 8,286 | ||||
As a % of revenue (GAAP) | 49.6 | % | 50.4 | % | (0.8 | )% | (1.8 | )% | ||||
As a % of revenue (Non-GAAP) | 54.3 | % | 45.4 | % | 8.9 | % | 6.9 | % | ||||
Diluted net income (loss) per share from continuing operations: | ||||||||||||
Diluted net loss per share from continuing operations-GAAP | $ | (0.02 | ) | |||||||||
Diluted net income per share from continuing operations-Non-GAAP | $ | 0.08 | ||||||||||
Shares used to compute diluted net income (loss) per share from continuing operations: | ||||||||||||
GAAP | 100,372 | |||||||||||
Non-GAAP | 101,937 | |||||||||||
Three months ended | ||||||||||||
March 29, 2013 | ||||||||||||
Gross Profit | Total Operating Expense | Loss from Operations | Net 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 | |||||||
Discrete tax items and 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 (GAAP) | 45.4 | % | 60.0 | % | (14.6 | )% | (9.3 | )% | ||||
As a % of revenue (Non-GAAP) | 51.0 | % | 54.3 | % | (3.3 | )% | (2.7 | )% | ||||
Diluted net 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 net loss per share from continuing operations: | ||||||||||||
GAAP | 115,219 | |||||||||||
Non-GAAP | 115,219 | |||||||||||