Harmonic on Song
Fusion Investing Portfolio constituent Harmonic (HLIT) turned in a solid quarter. The market rewarded this video delivery darling with a 12% thank you very much, HLIT closed at $6.93.
Net sales of $81.3 million, compared to $89.3 million in the second quarter of 2008 and $67.8 million for the first quarter of 2009. For the first six months of 2009, net sales were $149.0 million, compared to $176.6 million in the same period of 2008.
The Company had strong sequential growth in quarterly sales and bookings, particularly in domestic markets, although lower year-over-year sales continued to reflect relative weakness in global customer spending [international revenue was lower than in Q1, but they say Scopus acquisition has bought increased bookings, so check this in Q3]. Domestic sales represented 57% of revenue for the second quarter of 2009, compared to 47% in the first quarter of 2009. Bookings were approximately $81.3 million, up from $56.6 million in the previous quarter.
The Company reported a GAAP net loss for the second quarter of 2009 of $7.9 million, or $0.08 per diluted share, compared to net income of $25.5 million, or $0.27 per diluted share, for the same period of 2008. GAAP results for the second quarter of 2009 include charges for restructuring and excess facilities related to the recent acquisition of Scopus Video Networks Limited. Excluding these charges and non-cash accounting charges for purchase accounting adjustments to inventory, stock-based compensation expense, the amortization of intangibles and certain tax adjustments, the non-GAAP net income for the second quarter of 2009 was $3.1 million, or $0.03 per diluted share, compared to $15.0 million, or $0.16 per diluted share, for the same period of 2008. See “Use of Non-GAAP Financial Measures” and “GAAP to non-GAAP Reconciliation” below.
As of July 3, 2009, the Company had cash, cash equivalents and short-term investments of $252.8 million, compared to $261.8 million as of April 3, 2009.
In the second quarter of 2009, Harmonic recognized approximately $4.6 million of revenue related to the installation and deployment of a video headend project begun in 2008. While this project represented a significant competitive and technological achievement, it generated no gross profit, and reduced the Company’s GAAP and non-GAAP gross margins for the second quarter by approximately 2.5%.
“We’re pleased with our sequential growth in net sales and bookings and our continued execution in managing operating expenses,” said Patrick Harshman, President and Chief Executive Officer. “Although we continue to see softness in global customer spending compared to last year, our customers are responding well to our new products and solutions and we remain confident in our long-term growth prospects.”
Business Outlook
Harmonic anticipates that net sales for the third quarter of 2009 will be in a range of $82.0 to $88.0 million. GAAP gross margins and operating expenses are expected to be in a range of 43% to 45% and $37.5 to $38.5 million, respectively. Non-GAAP gross margins and operating expenses for the third quarter, which exclude charges for stock-based compensation, the amortization of intangibles and additional charges related to the continuing integration of Scopus, are anticipated to be in a range of 48% to 50% and $33.0 to $34.0 million, respectively.
Conference Call Transcript SNIPS
- encouraged by healthier domestic cable spending and strong customer interest across markets and geographies and our expanding portfolio of products and solutions
- also pleased with our internal execution as evidence by our continued discipline and managing operating expenses, realizing cost synergies from our focus acquisition. Improving our inventory management as well as excellent progress [it's good to verify these statement against the financial accounts]
- In our core application areas, this was a very successful quarter for our newest products. The high definition video continues to be a key market driver and our new Electra 8000 encoder platform is getting strong traction on the market.
- our newest generation NSG Edge QAM continues to gain important market share in video and demand, switched digital video, modular CMTS, and new IPTV over Cable applications
- on our Q1 earnings call, we said we have started to see a recovery in the early part of Q2. These trends continue throughout the second quarter and bookings for Q2 were $81 million up from $57 million in Q1
- domestic sales represented 57% of revenue for the second quarter of 2009 compared to 48% in the first quarter
- cable customers accounted for 66% of revenue in the second quarter, our satellite customers 14% and Telco and others 20%
- Comcast, representing 19% of revenue [customer concentration is always a concern]
- by product category, edge and access represented 40% of revenue in the second quarter, video processing 39%, and software services and others 21%
- receivables increased to $64.5 million at the end of the second quarter up from $52.7 million at the end of the previous quarter, reflecting our higher revenue levels
- DSOs were 72 days essentially unchanged from the previous period
Business Outlook (same as above)
- Based on our improved bookings and the seasonal patterns, we anticipate another sequential increase in net sales in the third quarter and a range of $82 million to $88 million.
- We also expect our non-GAAP gross margins for the third quarter of 2009 to return the levels comfortable with recent periods in the range of 48% to 50%
- While we will always see some pricing pressure, our margin trends are positive and our contract manufacturing model provides us with flexibility. We believe our product roadmap and strategy on the right track and our long term gross margin targets continue to exceed 50%.
END SNIPS
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