Harmonic Inc. (
Q3 2011 Earnings Call
October 27, 2011 5:00 PM ET
Carolyn Aver – Chief Financial Officer
Patrick Harshman – Chief Executive Officer
Mark McKechnie – ThinkEquity
Simon Leopold – Morgan, Keegan
Blair King – Avondale Partners
Larry Harris – CL King & Associates
James Kissner– Jefferies & Co.
William Stein – Credit Suisse
Mark Sue – RBC Capital Markets
Paul McWilliams – Next Inning Technology Research
Previous Statements by HLIT
» Harmonic's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Harmonic's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Harmonic CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Harmonic CEO Discusses Q3 2010 Results – Earnings Call Transcript
Good evening. My name is [Vivian], and I will be your conference operator today. At this time, I would like to welcome everyone to the Harmonic Third Quarter 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions)
Thank you. I would now like to turn the call over to Ms. Carolyn Aver. Ma’am, you may begin your conference.
Thank you, Operator, and good afternoon, everyone. I’m Carolyn Aver, the CFO at Harmonic. With me at our headquarters in San Jose, California is Patrick Harshman, our CEO. I’d like to point out that in addition to the audio portion of this call, we also have provided slides, which you can see by going to the harmonicinc.com and clicking on the third quarter earnings call button in the Event section on the home page.
Let me remind you that during this call, we will provide projections and other forward-looking statements regarding future events or the future performance of the company. We must caution you that such statements are only current expectations and that actual events or results may differ materially.
We refer you to the documents that Harmonic files with the SEC, including our most recent 10-Q report and the forward-looking statement section of today’s earnings press release. These documents identify important risk factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.
Please note that unless otherwise indicated, the financial metrics we provide you on this call are determined on a non-GAAP and pro forma basis. Revenue described as pro forma include Omneon as if they have been part of our results for the period stated.
These items, together with corresponding GAAP numbers and a reconciliation to GAAP, are contained in today’s earnings press release, which we have posted on our website and filed with the SEC on Form 8-K. We will also discuss historical, financial and other statistical information regarding our business and operations. Some of this information is included in the press release and the remainder of the information will be available in a recorded version of this call on our website.
With that, let me turn the call over to Patrick.
Thank you, Carolyn, and thank you, everybody for joining us today. Turning now to our slide number three, today we reported third quarter revenue of approximately $139 million, up 7% from the same period last year and up 4% sequentially from the second quarter. In the second quarter you will recall that we saw some delays in expected domestic business.
In the third quarter we were pleased to see our domestic business rebound, up 24% sequentially, as we recognize revenue from several key projects. With these third quarter results our year-to-date business in aggregate was up approximately 10% from the same period in 2010 on a pro forma basis. That is assuming a full contribution from Omneon last year.
Third quarter bookings were approximately $141.4 million as we awarded several strategic deals and more generally as we continue to see strong competitive momentum across a growing base of global customers and media applications.
We realize gross margins of 51% and delivered an improved operating margin of 12%. Our non-GAAP earnings were $0.11 per share and we generated approximately $6.6 million of cash during the period.
Turning now to slide four, let’ look at the business dynamics that underlie these results. During the third quarter the rebounded domestic demand was powered principally by a number of new video processing wins spanning high-definition television to mobile and web applications. As we noted last quarter many of our U.S. customers are still thoughtfully planning their next steps toward unifying the delivery of traditional video services with next-generation mobile and web services.
However, the healthier demand during the third quarter is indicative that many media, cable, satellite and telco customers are moving forward on a variety of new video initiatives and that they are increasingly turning to Harmonic as a strategic partner.
As you know international expansion is also a key strategic priority for us and we’re very pleased to see our international business continue to deliver results. Well, not quite as robust in the third period, international revenue for the year-to-date 2011 was up 16% from the same period in 2010, again on a pro forma basis and our international bookings remained quite healthy. New international projects span a wide range of video applications from traditional standard definition TV production and origination and fast growing emerging markets to cutting-edge mobile video wins.
Looking ahead, our international business outlook remains healthy across geographies, market segments and product categories. However, as we discussed last quarter, the consequence of our rapid international expansion and market share gains continues to be competitive pricing pressure and the associated impact on gross margins.
Turning now to slide five, another area of strategic focus is our expanding customer base of media and broadcast companies. Year-to-date, media and broadcast sales have generated 31% of our total revenue and have grown an impressive 19% year-to-date from the same period of 2010 on a pro forma basis. This excess span traditional video production and delivery, as well as new medial application driven by powerful new solutions built from a combination of historic Harmonic, Scopus and Omneon technologies.