Harmonic Announces Third Quarter 2018 Results

SAN JOSE, Calif. - Oct. 29, 2018 - Harmonic Inc. (NASDAQ: HLIT) today announced its unaudited results for the third quarter of 2018.

Continued execution of our CableOS and Video strategies drove double-digit growth of non-GAAP revenue and operating profit year over year, said Patrick Harshman, president and chief executive officer of Harmonic. Shipments of CableOS nodes for new distributed access architectures were up 174% sequentially, underscoring positive momentum in our Cable Access segment. Video segment gross margin of 57.2% and operating margin of 7.2% highlight our ongoing profitable transformation to software and SaaS.

Q3 Financial and Business Highlights

GAAP revenue $100.6 million, up 9% year over year; non-GAAP revenue $101.4 million, up 11% year over year.

Cable Access segment revenue: GAAP $27.3 million, up 138% year over year; non-GAAP $28.1 million, up 153% year over year.

Video segment operating margin: 7.2%, fifth consecutive quarter of positive segment operating income.

Operating income: GAAP loss $3.7 million and non-GAAP income $5.7 million, compared to GAAP loss $14.2 million and non-GAAP income $1.3 million in the year ago period.

EPS: GAAP net loss per share 9 cents and non-GAAP net income per share 4 cents, compared to GAAP net loss per share 19 cents and non-GAAP net loss per share 1 cent in the year ago period.

Ended the quarter with $61.7 million in cash and cash equivalents, compared to $54.1 million in the prior quarter.

CableOS deployments continued to scale, surpassing 480,000 served cable modems, up 20% quarter over quarter.

CableOS global design wins and execution continues with 25 deployments and trials underway, up 25% quarter over quarter.

Over 35,000 OTT channels deployed globally, up 4% quarter over quarter, powered in part by new Video SaaS wins.

Select Financial Information

GAAP

Non-GAAP

Key Financial Results

Q3 2018

Q2 2018

Q3 2017

Q3 2018

Q2 2018

Q3 2017

(in millions, except per share data)

Net revenue

$

100.6

$

99.2

$

92.0

$

101.4

$

99.4

$

91.6

Net income (loss)

$

(7.8)

$

(2.9)

$

(15.6)

$

3.4

$

4.6

$

(0.5)

Diluted EPS

$

(0.09)

$

(0.03)

$

(0.19)

$

0.04

$

0.05

$

(0.01)

Other Financial Information

Q3 2018

Q2 2018

Q3 2017

(in millions)

Bookings for the quarter

$

79.5

$

107.9

$

96.0

Backlog and deferred revenue as of quarter end

$

207.6

$

230.4

$

200.9

Cash as of quarter end

$

61.7

$

54.1

$

50.0

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 2018

2018

Low

High

Low

High

(in millions, except percentages and per share data)

Net Revenue

$

104.7

$

117.7

$

394.5

$

407.5

Video

$

80.0

$

83.0

$

304.0

$

307.0

Cable Access

$

24.7

$

34.7

$

90.5

$

100.5

Gross Margin %

48.0

%

48.5

%

50.0

%

50.5

%

Operating Expenses

$

52.5

$

53.5

$

213.7

$

214.7

Operating Income (Loss)

$

(3.2)

$

4.2

$

(15.6)

$

(8.2)

Tax Expense

$

(0.5)

$

(0.5)

$

(3.3)

$

(3.3)

EPS

$

(0.08)

$

0.01

$

(0.36)

$

(0.28)

Shares

86.8

89.2

85.7

85.7

Cash

$

55.0

$

65.0

$

55.0

$

65.0

Non-GAAP Financial Guidance

Q4 2018

2018

Low

High

Low

High

(in millions, except percentages and per share data)

Net Revenue

$

105.0

$

118.0

$

396.0

$

409.0

Video

$

80.0

$

83.0

$

304.0

$

307.0

Cable Access

$

25.0

$

35.0

$

92.0

$

102.0

Gross Margin %

49.0

%

50.0

%

52.5

%

53.0

%

Operating Expenses

$

49.0

$

50.0

$

192.5

$

193.5

Operating Income

$

2.2

$

9.6

$

15.1

$

22.5

Tax Rate

16

%

16

%

16

%

16

%

EPS

$

0.01

$

0.07

$

0.09

$

0.16

Shares

89.2

89.2

86.9

86.9

Cash

$

55.0

$

65.0

$

55.0

$

65.0

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. PT (5:00 p.m. ET) on Monday, October 29, 2018. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling 1.574.990.1032 or 1.800.240.9147 (passcode 7595808). A replay will be available after 4:30 p.m. PT on the same web site or by calling 1.404.537.3406 or 1.855.859.2056 (passcode 7595808).

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 loss, GAAP tax expense, GAAP EPS, non-GAAP revenue, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP tax rate, non-GAAP EPS, share count and ca

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