HARMONIC INC

Previous wording

Some of the statements contained in this Quarterly Report on Form 10-Q are forward-looking statements that involve risk and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Acts”), and Section-21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future. In some cases, you can identify forward-looking statements by terminology such as, “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “believes,” “intends,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements regarding:

Current wording

Some of the statements contained in this Quarterly Report on Form 10-Q are forward-looking statements that involve risk and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Acts”), and Section-21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future. In some cases, you can identify forward-looking statements by terminology such as, “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “believes,” “intends,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements regarding:

Previous wording

•macroeconomic conditions, including inflation, changes in interest rates, volatility and uncertainty in the banking and financial services sector, supply chain disruptions, and volatile capital markets and foreign currency fluctuations, particularly in certain geographies;

Current wording

•macroeconomic conditions, including inflation, changes in interest rates, volatility and uncertainty in the banking and financial services sector, supply chain disruptions, tariffs, and volatile capital markets and foreign currency fluctuations, particularly in certain geographies;

Previous wording

We conduct business in three geographic regions—the Americas, EMEA and APAC—and operate in two segments, Broadband and Video. Our Broadband business sells broadband access solutions and related services, including our cOS™ software-based broadband access solutions, to broadband operators globally. Our Video business sells video processing, production and playout solutions, and services worldwide to cable operators and satellite and telco Pay-TV service providers, which we refer to collectively as “service providers,” as well as to broadcast and media companies, including streaming media companies. Our Video business infrastructure solutions are delivered either through shipment of our products, software licenses or as SaaS subscriptions.

Current wording

We conduct business in three geographic regions—the Americas, Europe, the Middle East, and Africa (EMEA), and Asia-Pacific (APAC)—and operate in two segments, Broadband and Video. Our Broadband business sells broadband access solutions and related services, including our cOS™ software-based broadband access solutions, to broadband operators globally. Our Video business sells video processing, production and playout solutions, and services worldwide to cable operators and satellite and telco Pay-TV service providers, which we refer to collectively as “service providers,” as well as to broadcast and media companies, including streaming media companies.

Previous wording

Historically, our revenue has been dependent upon spending in the cable, satellite, telco, broadcast and media industries, including streaming media. Our customers’ spending patterns are dependent on a variety of factors, including but not limited to: economic conditions in the United States and international markets, and impact of factors such as the Middle East and Russia-Ukraine conflicts, inflation, changes in interest rates, potential supply chain disruptions, volatility in capital markets and foreign currency fluctuations; volatility and uncertainty in the banking and financial services sector; access to financing; annual budget cycles of each of the industries we serve; impact of industry consolidations; customer end-market conditions; customers suspending or reducing spending in anticipation of new products or new standards; and new industry trends and/or technology shifts. If our product portfolio and product development plans do not position us well to capture an increased portion of the spending in the markets in which we compete, our revenue may decline. As we attempt to further diversify our customer base in these markets, we may need to continue to build alliances with other equipment manufacturers and suppliers, cloud service providers, content providers, resellers and system integrators, managed services providers and software developers; adapt our products for new applications; take orders at prices resulting in lower margins; and build internal expertise to handle the particular operational, payment, financing and/or contractual demands of our customers, which could result in higher operating costs for us.

Current wording

Historically, our revenue has been dependent upon spending in the cable, satellite, telco, broadcast and media industries, including streaming media. Our customers’ spending patterns are dependent on a variety of factors, including but not limited to: economic conditions in the United States and international markets, and impact of factors such as the Middle East and Russia-Ukraine conflicts, inflation, changes in interest rates, potential supply chain disruptions, volatility in capital markets and foreign currency fluctuations; volatility and uncertainty in the banking and financial services sector; access to financing; annual budget cycles of each of the industries we serve; impact of industry consolidations; customer end-market conditions; customers suspending or reducing spending in anticipation of new products or new standards; impact of heightened, new, or proposed tariffs; and new industry trends and/or technology shifts. If our product portfolio and product development plans do not position us well to capture an increased portion of the spending in the markets in which we compete, our revenue may decline. As we attempt to further diversify our customer base in these markets, we may need to continue to build alliances with other equipment manufacturers and suppliers, cloud service providers, content providers, resellers and system integrators, managed services providers and software developers; adapt our products for new applications; take orders at prices resulting in lower margins; and build internal expertise to handle the particular operational, payment, financing and/or contractual demands of our customers, which could result in higher operating costs for us.

Previous wording

Our Broadband strategy is focused on continuing to develop and deliver software-based broadband access technologies, which we refer to as our cOS solutions, to our broadband operator customers. We believe our cOS software-based broadband access solutions are superior to hardware-based systems and deliver unprecedented scalability, agility and cost savings for our customers. Our cOS solutions, which can be deployed based on a centralized, distributed access architecture (DAA) or hybrid architecture, enable our customers to migrate to multi-gigabit broadband capacity and the fast deployment of DOCSIS and/or fiber-to-the-home (FTTH) data, video and voice services. We believe our cOS solutions resolve space and power constraints in broadband operator facilities, eliminate dependence on hardware upgrade cycles and significantly reduce total cost of ownership, and are helping us become a major player in the broadband access market. In the meantime, we believe our Broadband segment will continue to gain momentum in the marketplace as our customers adopt and deploy our virtualized DOCSIS, CMTS and FTTH solutions and distributed access architectures. We continue to make progress in the development of our cOS solutions and in the growth of our Broadband business, with expanded commercial deployments, lab and field trials, and customer engagements.

Current wording

Our Broadband strategy is focused on continuing to develop and deliver software-based broadband access technologies, which we refer to as our cOS solutions, to our broadband operator customers. We believe our cOS software-based broadband access solutions are superior to hardware-based systems and deliver unprecedented scalability, agility and cost savings for our customers. Our cOS solutions, which can be deployed based on a centralized, distributed access architecture (DAA) or hybrid architecture, enable our customers to migrate to multi-gigabit broadband capacity and the fast deployment of DOCSIS and/or fiber-to-the-home (FTTH) data, video and voice services. We believe our cOS solutions resolve space and power constraints in broadband operator facilities, eliminate dependence on hardware upgrade cycles and significantly reduce total cost of ownership, and are helping us to be a major player in the broadband access market. In the meantime, we believe our Broadband segment will continue to experience strong long-term growth as our customers adopt and deploy our virtualized DOCSIS, CMTS and FTTH solutions and distributed access architectures.

Previous wording

We believe a material and growing portion of the opportunities for our Video business are linked to the industry and our customers (i) continuing to adopt streaming technologies to capture, process and deliver video content to consumers and, increasingly, utilizing public cloud solutions like our VOS SaaS platform to do so; (ii) transforming existing broadcast infrastructure workflows into more flexible, efficient and cost-effective operations running in public clouds; and (iii) for those customers maintaining on-premise video delivery infrastructure, continuing to upgrade and replace aging equipment with next-generation software-based appliances that significantly reduce operational complexity. Our Video business strategy is focused on continuing to develop and deliver products, solutions and services to enable and support these trends. In recent quarters, we have seen a slow-down in capital spending by some of our Video business customers, which has caused delays for some of our appliance-based projects. While market activity leads us to believe these near-term headwinds for our Video business may be receding, the capital spending slow-down may persist longer than expected.

Current wording

We believe a material and growing portion of the opportunities for our Video business are linked to the industry and our customers (i) continuing to adopt streaming technologies to capture, process and deliver video content to consumers and, increasingly, utilizing public cloud solutions like our VOS SaaS platform to do so; (ii) transforming existing broadcast infrastructure workflows into more flexible, efficient and cost-effective operations running in public clouds; and (iii) for those customers maintaining on-premise video delivery infrastructure, continuing to upgrade and replace aging equipment with next-generation software-based appliances that significantly reduce operational complexity. Our Video business strategy is focused on continuing to develop and deliver products, solutions and services to enable and support these trends.

Previous wording

Our critical accounting estimates are disclosed in our 2023 Annual Report on Form 10-K, as filed with the SEC. There have been no significant changes to these estimates during the three months ended September 27, 2024.

Current wording

Our critical accounting estimates are disclosed in our 2024 Annual Report on Form 10-K, as filed with the SEC on February 14, 2025. There have been no significant changes to these estimates during the three months ended March 28, 2025.

Previous wording

Appliance and integration net revenue increased by $68.9 million during the three months ended September 27, 2024, compared to the corresponding period in 2023, primarily due to an increase of $70.2 million in our Broadband segment revenue, partially offset by a decrease of $1.3 million in our Video segment revenue.

Current wording

Appliance and integration net revenue increased by $9.9 million during the three months ended March 28, 2025, compared to the corresponding period in 2024. The growth was primarily driven by a $5.9 million increase in our Broadband segment revenue, reflecting higher sales to existing customers due to increased deployments. The remaining $4.0 million increase was attributable to the Video segment, also driven by increased sales to existing customers.

Previous wording

Our gross margin improved by 500 basis points in the three months ended September 27, 2024, compared to the corresponding period in 2023, driven by contributions from both the Broadband and the Video segments. The margin expansion in the Broadband segment was primarily due to benefits from cost savings related to manufacturing and the supply chain contributing 150 basis points, and benefits from a favorable product mix contributing 51 basis points. The margin expansion of 190 basis points in the Video segment was primarily due to favorable appliance product mix and an increase in SaaS as a percentage of segment revenue. There was an additional benefit of 56 basis points related to prior period restructuring related charges.

Current wording

Our gross margin improved by 730 basis points in the three months ended March 28, 2025, compared to the corresponding period in 2024, driven by contributions from both the Broadband and the Video segments. The margin expansion of 540 basis points in the Broadband segment was primarily due to benefits from a favorable product mix. The margin expansion of 190 basis points in the Video segment was also primarily due to a favorable appliance product mix.

Previous wording

Research and development expenses were relatively flat, compared to the corresponding period in 2023. Research and development expenses decreased by $6.5 million in the nine months ended September 27, 2024, compared to the corresponding period in 2023. The decrease was primarily driven by a $4.0 million decrease in the Broadband business due to resources being redeployed to support certain customer projects. Additionally, there was a $2.5 million decrease in the Video business due to headcount reductions related to restructuring activities.

Current wording

Research and development expenses increased by $0.6 million, compared to the corresponding period in 2024. The increase was primarily driven by a $3.0 million increase in investments to support the growth of our Broadband business, partially offset by a $2.4 million decrease in the Video business due to headcount reductions from 2024 restructuring activities.

Previous wording

Selling, general and administrative expenses decreased by $3.4 million in the three months ended September 27, 2024, compared to the corresponding period in 2023, primarily due to a reduction in spending resulting from headcount reductions related to restructuring activities in the Video business.

Current wording

Selling, general and administrative expenses decreased by $1.8 million in the three months ended March 28, 2025, compared to the corresponding period in 2024, primarily due to a $4.0 million decrease in the Video business resulting from headcount reductions related to 2024 restructuring activities, partially offset by a $2.2 million increase in spending to support the growth of the Broadband business.

Previous wording

We have implemented several restructuring plans in the past few years. The goal of these plans is to bring operational expenses to appropriate levels relative to our net revenues, while simultaneously implementing appropriate expense control programs. We account for our restructuring plans under the authoritative guidance for exit or disposal activities. The restructuring and related charges are primarily included in “Operating expenses-restructuring and related charges” in the condensed consolidated statement of operations. Refer to Note 11, “Restructuring and Related Charges”, of the Notes to our condensed consolidated financial statements for additional information regarding our restructuring activities.

Current wording

We have implemented several restructuring plans in the past few years. The goal of these plans is to bring operational expenses to appropriate levels relative to our net revenues, while simultaneously implementing appropriate expense control programs. We account for our restructuring plans under the authoritative guidance for exit or disposal activities. The restructuring and related charges are primarily included in “Operating expenses-restructuring and related charges” in the condensed consolidated statement of operations.

Previous wording

Restructuring and related charges decreased in the three months ended September 27, 2024, compared to the corresponding period in 2023, primarily driven by higher severance and employee benefit costs recorded in 2023. Restructuring and related charges increased in the nine months ended September 27, 2024, compared to the corresponding periods in 2023, primarily driven by higher severance and employee benefit costs recorded in 2024, in connection with the 2024 restructuring activities. Refer to Note 11, “Restructuring and Related Charges”, of the Notes to our condensed consolidated financial statements for additional information.

Current wording

Restructuring and related charges in the three months ended March 28, 2025 decreased by $3.5 million compared to the corresponding period in 2024, primarily due to higher severance and employee benefits costs recorded in connection with 2024 restructuring activities in the prior period. Refer to Note 11, “Restructuring and Related Charges,” of the Notes to our condensed consolidated financial statements for additional information.

Previous wording

Interest expense, net in the three and nine months ended September 27, 2024 increased by $2.1 million and $2.7 million, respectively, compared to the corresponding periods in 2023, primarily due to higher interest rates for the borrowings under the Credit Agreement compared to the interest rate for the 2024 Notes. Refer to Note 6, “Debt”, of the Notes to our condensed consolidated financial statements for additional information regarding the interest rates applicable to our outstanding loans.

Current wording

Interest expense, net in the three months ended March 28, 2025 increased by $0.8 million compared to the corresponding period in 2024, primarily due to higher interest rates for the borrowings under the Credit Agreement compared to the interest rate for the 2024 Notes. Refer to Note 6, “Debt,” of the Notes to our condensed consolidated financial statements for additional information regarding the interest rates applicable to our outstanding loans.

Previous wording

The changes in other income (expense), net in the three and nine months ended September 27, 2024, compared to the corresponding periods in 2023, were primarily due to higher unrealized foreign exchange losses resulting from the strengthening of the Euro against the U.S. dollar in 2024.

Current wording

The changes in other expense, net in the three months ended March 28, 2025, compared to the corresponding period in 2024, were primarily due to lower unrealized foreign exchange losses resulting from the fluctuation of the Euro against the U.S. dollar.

Previous wording

Our principal uses of cash will include repayments of debt and related interest, purchases of inventory, stock repurchases, payments for payroll, restructuring expenses, and other operating expenses related to the development and marketing of our products, purchases of property and equipment, facility leases, and other contractual obligations for the foreseeable future.

Current wording

Our principal uses of cash include repayments of debt and related interest, purchases of inventory, stock repurchases, payments for payroll, restructuring expenses, and other operating expenses related to the development and marketing of our products, purchases of property and equipment, facility leases, and other contractual obligations for the foreseeable future.

Previous wording

As of September 27, 2024, we had outstanding $129.5 million in aggregate principal amount of indebtedness, consisting of our $75.0 million Revolving Facility and our $40.0 million Term Facility loan under our Credit Agreement, and other debts, of which $7.2 million is scheduled to become due in the 12-month period following September 27, 2024. As of September 27, 2024, our total minimum lease payments are $25.4 million, of which $1.8 million is due before December 31, 2024, and $6.3 million is due within 12 months.

Current wording

As of March 28, 2025, we had outstanding $128.1 million in aggregate principal amount of indebtedness, consisting of our $75.0 million Revolving Facility and our $39.0 million Term Facility loan under our Credit Agreement, and other debts, of which $7.6 million is scheduled to become due in the 12-month period following March 28, 2025. As of March 28, 2025, our total minimum lease payments are $23.9 million, of which $4.6 million is due before December 31, 2025, and $5.9 million is due within 12 months of March 28, 2025.

Previous wording

In February 2022, the Board of Directors authorized us to repurchase, from time to time, up to $100 million of our outstanding shares of common stock through February 2025, at such time and such prices as management may decide. The program does not obligate us to repurchase any specific number of shares and may be discontinued at any time. As of September 27, 2024, approximately $64.8 million of the share repurchase authorization remained available for repurchases under this program.

Current wording

In February 2025, the Board of Directors authorized us to repurchase, from time to time, up to $200 million of our outstanding shares of common stock through February 2028 (the “Share Repurchase Authorization”), at such time and such prices as management may decide. The program does not obligate us to repurchase any specific number of shares and may be discontinued at any time. As of March 28, 2025, approximately $163.9 million of the Share Repurchase Authorization remained available for repurchases under this program.

Previous wording

As of September 27, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $58.2 million, net accounts receivable of $173.7 million, $30.0 million from our Master Receivables Purchase Agreement (described below), and $45.0 million remaining available under the Revolving Facility of our Credit Agreement, and financing from French government agencies.

Current wording

As of March 28, 2025, our principal sources of liquidity consisted of cash and cash equivalents of $148.7 million, net accounts receivable of $98.6 million, $30.0 million from our Master Receivables Purchase Agreement (described below), and $82.0 million remaining available under the Revolving Facility of our Credit Agreement, and financing from French government agencies.

Previous wording

Our cash and cash equivalents of $58.2 million as of September 27, 2024 consisted of bank deposits held throughout the world and money market funds, of which $46.0 million was held outside of the United States. At present, such foreign funds are considered to be indefinitely reinvested in foreign countries to the extent of indefinitely reinvested foreign earnings. In the event funds from foreign operations are needed to fund cash needs in the United States and if U.S. taxes have not already been previously accrued, we may be required to accrue and pay additional U.S. and foreign withholding taxes in order to repatriate these funds.

Current wording

Our cash and cash equivalents of $148.7 million as of March 28, 2025 consisted of bank deposits held throughout the world and money market funds, of which $50.8 million was held outside of the United States. At present, such foreign funds are considered to be indefinitely reinvested in foreign countries to the extent of indefinitely reinvested foreign earnings. In the event funds from foreign operations are needed to fund cash needs in the United States and if U.S. taxes have not already been previously accrued, we may be required to accrue and pay additional U.S. and foreign withholding taxes in order to repatriate these funds.

Previous wording

Net cash provided by operating activities increased by $12.6 million during the first nine months of fiscal 2024, compared to the corresponding period in fiscal 2023. The increase was primarily due to higher net income, adjusted for non-cash asset impairment and other charges in fiscal 2024.

Current wording

Net cash provided by operating activities increased by $56.8 million during the first three months of fiscal 2025, compared to the corresponding period in fiscal 2024. The increase was primarily due to a decrease in cash used in our working capital, and net income of $5.9 million in the current period, compared to a net loss of $8.1 million in the prior period.