Harmonic's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Harmonic Inc. ( HLIT)

Q4 2011 Earnings Conference Call

January 31, 2011 17:00 ET

Executives

Carolyn Aver – Chief Financial Officer

Patrick Harshman – Chief Executive Officer

Analysts

Mark Sue – RBC Capital Markets

Mark Mckechnie – ThinkEquity

Blair King – Avondale Partners

Larry Harris – CL King & Associates

Simon Leopold – Morgan Keegan

William Stein – Credit Suisse

James Kissner – Jefferies & Company

Presentation

Operator

Good afternoon. My name is (Jarrett) and I will be your conference operator today. At this time, I would like to welcome everyone to the Harmonic Fourth Quarter and Fiscal Year End 2011 Earnings 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 will now turn the call over to Ms. Carolyn Aver, Chief Financial Officer. Ms. Aver, you may begin your conference.

Carolyn Aver Chief Financial Officer

Thank you, operator and good afternoon everyone. I am Carolyn Aver, the CFO at Harmonic. With me at our headquarters in San Jose is Patrick Harshman, our CEO.

I’d like to point out that in addition to the audio portion of this call we have also provided slides, which you can see by going to the harmonicinc.com and clicking on the fourth quarter earnings call button in the Events section of the homepage.

Turning to slide two, let me remind you that during this call, we will provide projections and other forward-looking statements regarding future events or the future financial 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 documents that Harmonic files with the SEC including our most recent 10-Q report and the forward-looking statements 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. Revenues described as pro forma include Omneon as if they had 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.

Patrick Harshman – Chief Executive Officer

Thank you, Carolyn, and thank you everyone for joining us today. Turning now to our slide three, today, we reported record fourth quarter revenue of approximately $144 million, up 4% from the same period last year and up 3% sequentially from the prior quarter.

In the fourth quarter, we saw continued strong international growth and continued broadening of our customer base. Our international revenue represented 57% of our total sales. Notably, no single customer was 10% of our total sales and our top 10 customers represented only 34% of total revenue. Fourth quarter bookings were approximately $142 million as we continue to see strong competitive momentum across the growing base of global customers, media applications, and markets. At the same time, the lack of budget flush we saw in the final period of the year seems to indicate some continued customer caution with respect to the global economic environment.

Our operating performance has continued to improve. We’ve realized gross margins of 51% and delivered an operating margin of 13% and our non-GAAP earnings were $0.12 per share and we generated approximately $20 million of cash during the period.

So, let’s now turn to slide four to take a look at our full year results. We had record revenue of approximately $549 million, up 8% from 2010 on a pro forma basis. Our international revenue represented 55% of our total sales and our top 10 customers represented only 35% of total revenue. We’ve realized annual gross margins of 51% and delivered an annual operating margin of 12%.

Our non-GAAP earnings were $0.41 per share and we generated approximately $41 million of cash during the year. It’s important to consider these results in the context of the year when growth in the U.S. market and cable market in particular was challenging industry wide. In this environment, we attributed our ability to grow to our strategic focus on leveraging our video strengths across an increasingly broad base of global customers.

More specifically and turning now to slide five, throughout the year we’ve highlighted three areas of strategic focus, instrumental to our evolution to new kind of video company. First, we have anticipated an expanding international market opportunity. And consequently, we have been very focused on strengthening our sales and marketing position overseas. Second, in the internet era, we see broadcast and media companies as well positioned for significant growth. And we have been working hard to strengthen our customer relationships and product offerings for this market. And third, particularly in developed markets, we see a new wave of video applications and services for both traditional video networks and over-the-top delivery creating tremendous opportunities for innovative new products and solutions.

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