Harmonic's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Harmonic Inc. (HLIT)

Q1 2012 Earnings Call

April 24, 2012 5:00 pm ET


Patrick Harshman – President and Chief Executive Officer

Carolyn V. Aver – Chief Financial Officer


James Kissner – Jefferies & Co.

Mark McKechnie – Thinkequity Llc

Blair King – Avondale Partners LLC



Good afternoon. My name is Diane, and I will be your conference operator today. At this time, I would like to welcome everyone to the Harmonic First Quarter 2012 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 Carolyn Aver, Chief Financial Officer. Ma’am, you may begin your conference.

Carolyn V. Aver

Thank you, Diane, hello everybody. As Diane said, this is Carolyn Aver, I’m the CFO of 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 have also provided slides, which you can see by going to harmonicinc.com and clicking on the clicking on the first quarter earnings call button on the Events section of the homepage.

Now, 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 recently filed 10-K 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 basis. 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

Thank you, Carolyn, and thank you everyone for joining us today. Turning now to our slide three, today, we reported our results for the first quarter of 2012, which were in line with the preliminary estimates that we announced earlier this month. We had disappointing first quarter revenue of approximately $128 million. We approximately got off to an unusually slow start, and our European business remains soft throughout the quarter. As one would expect, the weakness in Europe had the most significant impact on our revenue for the video processing and production and playout product categories. On the other hand, we had a very strong quarter for our cable business with particularly robust demand for edge and access products.

Our first quarter bookings tell us different story than revenue. Our bookings were record $142.5 million, up 8% from the first quarter last year; and generally in line with our original expectations. Excluding the continued softness in Europe, we saw solid momentum across every other geography, and we had record service and support bookings.

Our operating performance was also disappointing relative to recent quarters, as gross margin slipped to 47%, reflecting an unusual product mix driven by the software video processing and production and playout results in Europe and stronger edge and access sales. As a result, we realized non-GAAP earnings of $0.03 per share. And we also generated approximately $7 million of cash during the period.

Turning now to slide 4, our earnings call in January laid our three years of strategic focus for 2012. Continuing the broadband on global customer base, extending our product leadership position and then achieving operational excellence. We remained very focused on these initiatives, so let’s take a closer look at our progress over the past quarter.

Turning now to slide 5, we have indeed continued to broaden our global customer base for the first quarter. Excluding the softness in Europe, our strong bookings growth demonstrates our solid competitive momentum, in other regions worldwide. In particular we had record Latin America bookings and a strengthening Asia-Pacific business as demand from Japan is bouncing back.

At the same time, our global cable bookings where strong up 13% from the first quarter last year. As we did in 2011, we continue to expand our global footprint broadcast and media customers. Including our recent announcement from significant alliance with Modern VideoFilm, NBC, Home Depot. We also continued to expand our global footprint with video service providers driven by our broaden portfolio products and services. We will penetrate in deeper into our long-standing service provider customers and leaning over new customers, including our recently won IPTV project with a major teleco.

And turning to slide 6, well multi-screen video represents relatively small portion of today’s global video infrastructure spending, more engaged in an increasing number of deployments involving new approaches to producing and delivering over the top second screen services, this is spanning both on-demand and live broadcast.

Read the rest of this transcript for free on seekingalpha.com

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