HARMONIC INC

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except par value)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as our annual consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments, which are necessary for the fair statement of our financial information. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”) as filed with the SEC on February 14, 2025. Operating results for interim periods are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2025. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The Company’s significant accounting policies are described in Note 2 to its audited Consolidated Financial Statements included in the 2024 Form 10-K. There have been no significant changes to these policies during the six months ended June 27, 2025.

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS AND INCOME TAX LEGISLATION

New Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Improvements to Income Tax Disclosures. This ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024 and early adoption is permitted. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted in the fourth quarter of fiscal 2025.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“ASU 2024-03”). The ASU aims to improve financial reporting by requiring additional disclosure about specific expense categories in the notes to the financial statements at interim and annual reporting periods. ASU 2024-03 is effective on a prospective basis for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027 with early adoption permitted. The Company is currently assessing the impact of this ASU on its consolidated financial statements and related disclosures.

Income Tax Legislation

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The OBBBA adjusted a number of provisions affecting businesses including the immediate expensing of domestic research and development costs, limitations on deductions for interest expense, and accelerated fixed asset depreciation. The Company is still in the process of evaluating the OBBBA and an estimate of the financial impact cannot be made at this time.

From time to time, new accounting pronouncements are issued by the FASB, or other standards setting bodies, which are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position, results of operations and cash flows upon adoption.

NOTE 3: CONTRACT ASSETS AND DEFERRED REVENUE

Contract assets exist when the Company has satisfied a performance obligation but does not have an unconditional right to consideration (e.g., because the entity first must satisfy another performance obligation in the contract before it is entitled to invoice the customer). Deferred revenue represents the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer.

Contract assets and deferred revenue consisted of the following:

Contract assets and the non-current portion of deferred revenue are reported as components of “Prepaid expenses and other current assets” and “Other non-current liabilities,” respectively, on the condensed consolidated balance sheets.

Revenue recognized during the three months ended June 27, 2025 and June 28, 2024 that was included within the deferred revenue balance at January 1, 2025 and January 1, 2024, was $11.3 million and $10.3 million, respectively. Revenue recognized during the six months ended June 27, 2025 and June 28, 2024, that was included within the deferred revenue balance at January 1, 2025 and January 1, 2024, was $30.4 million and $26.6 million, respectively.

Remaining performance obligations represent contracted revenues that have not yet been recognized and include deferred revenue and unbilled amounts that will be recognized as revenue in the future. The aggregate balance of the Company’s remaining performance obligations as of June 27, 2025 was $504.5 million,51% of which is expected to be recognized as revenue over the next 12 months and the remainder thereafter.

Refer to Note 10, “Segment Information” for disaggregated revenue information.

NOTE 4: LEASES

The components of lease expense are as follows:

Supplemental information related to leases are as follows:

During the second quarter of fiscal year 2025, the Company recorded additional lease-related impairment and other charges of $1.6 million. These adjustments were driven by changes in underlying assumptions, including updated estimates of space utilization, sublease recoverability, and expected cost obligations. The charges consisted of $0.4 million in right-of-use asset impairments, $0.3 million in leasehold improvement asset impairments and $0.9 million related to the fair value of other unrecoverable facility costs.

NOTE 5: OTHER FINANCIAL STATEMENT INFORMATION

The following tables provide details of selected balance sheet components:

During the second quarter of 2025, the Company recognized impairment charges of $0.3 million related to leasehold improvements. Refer to Note 4, “Leases” for more details.

NOTE 6: DEBT

2.00% Convertible Senior Notes due 2024 (the “2024 Notes”)

In September 2019, the Company issued $115.5 million in aggregate principal amount of the 2024 Notes pursuant to an indenture (the “2024 Notes Indenture”), dated September 13, 2019, by and between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee. The 2024 Notes would have matured on September 1, 2024, unless earlier repurchased by the Company, redeemed by the Company or converted pursuant to their terms.

In April 2024, the Company settled the conversion of the entire $115.5 million in aggregate principal amount of the 2024 Notes. In accordance with the provisions of the 2024 Notes Indenture, the Company settled such conversions of the 2024 Notes by paying and delivering, as applicable, a combination of $115.5 million in cash and 4.6 million shares of the Company’s common stock.

Revolving and Term Facilities

In December 2023, the Company entered into afive-year Credit Agreement (the “Credit Agreement”), by and among the Company, certain subsidiaries of the Company from time to time party thereto, the lenders from time to time party thereto, and Citibank N.A., as administrative agent for the lenders. As amended, the Credit Agreement provides for a secured revolving credit facility in an aggregate principal amount of up to $160.0 million (“the Revolving Facility”), with a $10.0 million sublimit for the issuance of letters of credit, and a secured delayed draw term loan facility in an aggregate principal amount of up to $40.0 million (the “Term Facility”). The Revolving Facility and the Term Facility both mature on December 21, 2028. The proceeds of the loans under the Revolving Facility may be used for general corporate purposes. The proceeds of the loans under the Term Facility were required to be used to repurchase, redeem, acquire or otherwise settle the 2024 Notes. In April 2024, the Company borrowed all $40.0 million under the Term Facility in connection with settling conversions of the 2024 Notes. The Credit Agreement also includes an uncommitted accordion feature whereby the Company may increase the Revolving Facility and/or establish one or more new term loan facilities by an aggregate amount not to exceed $100.0 million, during the term of the Credit Agreement, subject to certain conditions, including lender consent.

Loans under the Revolving Facility and Term Facility bear interest, at a floating rate per annum equal to an adjusted Term Secured Overnight Financing Rate (“SOFR”) (based on one-, three- or six-month interest periods), plus a SOFR premium fee of 0.1% and an applicable margin of between 2.00% to 2.75%, determined based on the Company’s consolidated net leverage ratio. Unused commitments under the Revolving Facility are subject to a quarterly fee ranging from 0.25% to 0.35%, determined based on the Company’s consolidated net leverage ratio.

The Credit Agreement contains customary affirmative and negative covenants. The Company is also required to maintain compliance with a maximum consolidated net leverage ratio and a minimum fixed charge coverage ratio, in each case, determined in accordance with the terms of the Credit Agreement. As of June 27, 2025, the Company was in compliance with the covenants under the Credit Agreement.

Repayment of the principal amount of the term loans began on December 31, 2024, in quarterly installments equal to 1.25% of the initial borrowing of $40.0 million, increasing to 1.875% beginning December 31, 2025, and to 2.50% beginning December 31, 2027. As of June 27, 2025, the Company had repaid $1.5 million of these installments, and $2.8 million were due in twelve months and therefore classified as current portion of long-term debt on the condensed consolidated balance sheet. As of June 27, 2025, the Company had outstanding borrowings of $38.5 million under the Term Facility, $75.0 million under the Revolving Facility, $3.0 million of letters of credit issued, and $82.0 million of remaining capacity under the Revolving Facility. The carrying value of the borrowings under the Credit Agreement approximate their fair value because they bear interest at a market rate.

For the three and six months ended June 27, 2025, the Company incurred interest expenses of $1.7 million and $3.5 million on these borrowings, respectively.

NOTE 7: STOCKHOLDERS’ EQUITY

Share-based Compensation Plans

The following table sets forth the detailed allocation of the share-based compensation expense which was included in the Company’s condensed consolidated statements of operations:

Restricted Stock Units

The Company’s stock benefit plans include the 2002 Employee Stock Purchase Plan (as amended and restated, the “ESPP”) and current active stock plans adopted in 1995 and 2002 (as amended and restated, the “1995 Stock Plan” and “2002 Director Plan”, respectively). Refer to Note 11, “Employee Benefit Plans” of Notes to Consolidated Financial Statements in the 2024 Form 10-K for details pertaining to each plan.

On June 12, 2025, at the Company’s annual meeting of shareholders, stockholders approved the 2025 Equity Incentive Plan (the “2025 Stock Plan”) to replace the 1995 Stock Plan and 2002 Director Plan. Stockholders also approved an amendment to the 2002 ESPP, increasing the number of shares of common stock reserved for issuance by 500,000 shares.

As of June 27, 2025, an aggregate of 6,799,081 shares of common stock were reserved for issuance under the 2025 Stock Plan, of which 6,775,531 shares remained available for future grants.

Share Repurchase Program

In February 2025, the Board of Directors terminated the Company’s existing stock repurchase program and authorized a new program under which the Company may repurchase up to $200 million of its outstanding shares of common stock through February 2028. The Company is authorized to repurchase, from time-to-time, shares of its outstanding common stock through open market purchases and 10b5-1 trading plans, in accordance with applicable rules and regulations, at such time and such prices as management may decide. The program does not obligate the Company to repurchase any specific number of shares and may be discontinued at any time. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

During the six months ended June 27, 2025, the Company repurchased and retired approximately 5.1 million shares of the Company’s common stock for an aggregate amount of $50.1 million. As of June 27, 2025, approximately $149.9 million of the share repurchase authorization remained available for repurchases under this program.

NOTE 8: FAIR VALUE MEASUREMENTS

The applicable accounting guidance establishes a framework for measuring fair value and requires disclosure about the fair value measurements of assets and liabilities. This guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. This guidance requires the Company to classify and disclose assets and liabilities measured at fair value on a recurring basis, as well as fair value measurements of assets and liabilities measured on a nonrecurring basis in periods subsequent to initial measurement, in a three-tier fair value hierarchy as follows:

•Level 1 - Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

•Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying value of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their short maturities.

The following table sets forth the fair value of the Company’s financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):

The Company’s financial instruments not recorded at fair value on a recurring basis were as follows:

NOTE 9: NET INCOME (LOSS) PER SHARE

Basic earnings per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares and potentially dilutive securities outstanding during the period using the treasury stock method for the Company’s restricted stock units, shares issuable under the ESPP, and the if-converted method for the 2024 Notes.

As noted in Note 6, “Debt,” the principal amount of the 2024 Notes was settled in cash while the conversion spread value was settled in shares.

The following table sets forth the computation of the basic and diluted net income per share:

The following table sets forth the potential dilutive shares that were excluded from the computation of diluted net income (loss) per share, because their effects were anti-dilutive:

NOTE 10: SEGMENT INFORMATION

Operating segments are defined as components of an enterprise that engage in business activities for which separate financial information is available and evaluated by the Company’s Chief Operating Decision Maker (the “CODM”), which for the Company is its Chief Executive Officer, in deciding how to allocate resources and assess performance. Based on the internal reporting structure, the Company consists oftwo operating segments: Broadband and Video. The operating segments were determined based on the nature of the products offered. The Broadband segment provides broadband access solutions and related services to broadband operators globally. The Video segment provides video processing, production and playout solutions and services worldwide to broadcast and media companies, new streaming media companies, broadband operators, and satellite and telco Pay-TV service providers.

The Company’s CODM allocates resources to and assesses the performance of each operating segment using information about the operating segment’s revenue and income (loss) from operations. Our CODM does not evaluate operating segments using asset or liability information.

The following tables set forth our segment information of revenue, expense, and income (loss) from operations:

A reconciliation of the Company’s consolidated segment operating income to consolidated income (loss) before income taxes is as follows:

(1) Together with stock-based compensation, the Company does not allocate restructuring and related charges, lease-related asset impairment and other non-recurring advisory fees to the operating income for each segment because management does not include this information in the measurement of the performance of the operating segments.

Disaggregation of Revenues

The following table provides a summary of total revenues disaggregated by type:

The following table provides a summary of total revenues by geographic region:

(1) Revenue is attributed to countries based on the location of the customer.

No single country, other than the United States, accounted for 10% or more of the Company’s net revenues for the three and six months ended June 27, 2025 and June 28, 2024, respectively.

NOTE 11: RESTRUCTURING AND RELATED CHARGES

The Company has undertaken multiple restructuring plans in recent years to align operating expenses with revenue and implement broad expense controls. These plans have primarily involved severance and termination benefits from headcount reductions. The total restructuring costs associated with these restructuring activities in 2025 are currently estimated to be $2.0 million and will primarily be recorded to the restructuring expense line item within our condensed consolidated statements of operations. We recorded $0.7 million and $15.0 million of restructuring expenses during the six months ended June 27, 2025 and June 28, 2024, respectively. We expect to incur substantially all of the remaining restructuring expense through the end of fiscal 2025.

NOTE 12: COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company is involved in lawsuits and is subject to various legal proceedings, claims, threatened litigation, and investigations in the ordinary course of business, including claims of alleged infringement of third-party patents and other intellectual property rights, commercial, employment, and other matters. The Company assesses potential liabilities in connection with each lawsuit and threatened lawsuits and accrues an estimated loss for these loss contingencies if both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements, and (ii) the amount of loss can be reasonably estimated. While certain matters to which the Company is a party specify the damages claimed, such claims may not represent reasonably probable losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably estimated.

NOTE 13: SUBSEQUENT EVENTS

Subsequent to June 27, 2025, on July 3, 2025, the Company used cash on hand to repay its $40.0 million outstanding loans under the Revolving Facility. As of July 4, 2025, $35.0 million in borrowings remained outstanding, and the Company had $122.0 million available to borrow under the Revolving Facility.