Harmonic Revenue Dips 2 Percent in Q3 2012

Posted by Joe Zaller
Oct 24 2012

Harmonic announced that its revenue for the third quarter of 2012 was $136.7m, down 2% versus the same period a year ago, and up 3% versus the previous quarter.

The GAAP net loss for the quarter was $8.2m, or $(0.07) per share, compared with a GAAP net income $3.5m or $0.03 per share last year, and GAAP net income of $17,000, or $0.00 per share last quarter.

Non-GAAP net income for the third quarter was $8.1m or $0.07 per share, versus non-GAAP net income of $12.7m, or $0.11 per share last year, and non-GAAP net income of $7.2m or $0.06 per share last quarter

The results were in-line with the company’s previously issued guidance of revenue in the range of $130m to $140m, and also in-line with the consensus expectations of equity analysts.

On a GAAP basis, gross margins and operating margins for the quarter were 44% and -1%, compared to 46% and 3%, respectively, for the same period of 2011, and 43% and -2% respectively last quarter.

Non-GAAP gross margins and operating margins for the quarter were 48% and 8%, versus 51% and 12%, respectively last year, and 48% and 7%, respectively last quarter.

Company CFO Carolyn Aver attributed the decrease in gross margins to product mix in the quarter, as well as shift of revenue to emerging markets where ASPs are lower.

 

On a product-line basis:

  • Video processing represented 37% of total revenue versus 41% last year, and 45% last quarter

 

  • Production and playout (Omneon) represented 17% of total revenue versus 19% last year and 16% last quarter

 

  • Edge and access revenue represented 29% of total revenue versus 28% last year and 25% last quarter.

 

  • Services represented 17% of total revenue, versus 12% last year and 14% last quarter.  This represents record service revenue for the company.  Aver said that service revenue grew 20% from the second quarter and 35% from last year’s third quarter. “Services in general and professional services specifically have been an area of focus for us. This quarter’s revenue represents the successful completion of several projects. I do expect that service revenue will decrease slightly in Q4,” she said.

 

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On a segment basis,

  • Cable was 50% of revenue, versus 45% last year and 48% last quarter.  The company said that demand from cable operators was particularly strong for its edge & products, and it believes it is gain market share in this area

 

  • Satellite & telco accounted was 20% of revenue versus 25% last year and 21% last quarter

 

  • Broadcast and media was 3o% of revenue, versus 30% last year, and 31% last quarter

 

Although the company did say it had won some multi-screen deals in the quarter, Harmonic CEP Patrick Harshman said that “customers are generally still struggling to find the right business model necessary to justify volume investments in multi-screen and over the top capabilities.”

International sales accounted for 58% of revenue in the quarter versus 51% during the same period a year ago, and 54% last quarter. This company said the increase is primarily a result of strong growth in Asia-Pacific and some emerging market growth, offset in part by year-over-year declines in Europe.

Harshman said that Harmonic continues to see strong growth in US from cable and telco customers, but that demand from US satellite and media companies was down year-over-year.

Bookings in the quarter were approximately $128.7m, down 9% versus last year, and down 8% versus last quarter.  The company said that new orders from Europe were down over 15% year-over-year, but that it gained market share in Europe, in cable, edge & access, and in multi-screen. Order growth in Asia and other emerging markets was “solid.”

Total backlog and deferred revenue was $137.7m at the end of the quarter, up 10% versus last year, and down 6% versus the previous quarter when it was an all-time high for the company.

  

Guidance:

Harmonic anticipates net revenue in the range of $132 million to $142 million for the fourth quarter of 2012. GAAP gross margins and operating expenses for the fourth quarter of 2012 are expected to be in the range of 44% to 46% and $60 million to $61.5 million, respectively. Non-GAAP gross margins and operating expenses for the fourth quarter of 2012, which will exclude stock-based compensation and the amortization of intangibles, are anticipated to be in the range of 48% to 50% and $55 million to $56.5 million, respectively.

 

“Harmonic delivered sequential revenue and earnings growth, and more than $20 million of cash from operations, in what continues to be a challenging economic environment,” said Harshman. “Our competitive position remains strong, and we believe we gained market share in both domestic and international markets. We also made significant progress on new product developments that position Harmonic to capitalize on the next wave of investment by our customers, including cable access (CCAP), high efficiency video coding (HEVC) for next-generation Internet-delivered and Ultra HD video, and a further strengthened solution portfolio enabling multiscreen video services.”

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Related Content:

Press release: Harmonic Announces Third Quarter 2012 Results

Harmonic Q3 2012 Earnings Call Presentation

Harmonic Q3 2012 Conference Call Transcript

Previous Quarter: Euro Weakness Offsets Strength in US for Harmonic in Q2 2012

Previous Year: Harmonic Reports Strong Q3 2011 Results, Driven by Strong Performance in Americas

 

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