Slide 1: Management Presentation
Management Presentation Peter Alexander Carolyn Aver December 2013
Slide 2: Forward Looking Statements
Forward Looking Statements During the course of this presentation, we may make projections or other forward looking statements regarding future events or the future financial performance of Harmonic. Such statements are only predictions and actual events or results may differ materially. We refer yo
Slide 3: Harmonic's Mission
Harmonic’s Mission Enable amazing video experiences through integrated solutions with unrivaled flexibility and efficiency
Slide 4: Customer Challenges
Customer Challenges Cost Complexity New Technology Content Consumer Video Delivery Infrastructure
Slide 5: Harmonic's Video Solutions
Harmonic’s Video Solutions Multiscreen Content Production Primary & Service & Playout Distribution Delivery Cable Edge Video Delivery Infrastructure Total Addressable Market = $4.5B
Slide 6: Where We Lead the Market
Where We Lead the Market Harmonic is the leader Content Production Primary & Service Cable Edge Multi-screen & Playout Distribution Delivery #1 in #1 in #1 in #1 in #1 in Broadcast Pay TV IPTV Cable Multi-screen Playout Servers Encoders Headends EdgeQAMs Transcoding Market Share Leadership Multi-Scr
Slide 7: Customers
Customers Broadcast & Media Satellite Telco Cable OTT / New Media
Slide 8: Expanding Global Customer Base
Expanding Global Customer Base
Slide 9: Strategic Growth Plan
Strategic Growth Plan $4X $2X MPEG-4 HEVC $X Functional collapse New technology cycles Grow marketshare TAM expansion 9
Slide 10: Grow Marketshare
Grow Marketshare $Million, Pro forma $200 Broadcast & media $176 $169 – Recent wins into 3 of top 5 $160 $151 U.S. broadcasters $136 $124 Pay TV service providers $120 – Growing subscriber base $80 internationally Competitive $40 – Fragmented market – Industry consolidation $0 2009 2010 2011 2012 Q3
Slide 11: Targeted Technology Upgrade Cycles
Targeted Technology Upgrade Cycles Next-generation video compression – New innovation for MPEG-2 and MPEG-4 (AVC) compression – First demonstration of Live HEVC at IBC – TATA launched HEVC-enabled cloud transcoding on Harmonic Ultra HD – HDMI 2.0 standard finalized – Key demonstrations included Sky
Slide 12: Targeted Technology Upgrade Cycles
Targeted Technology Upgrade Cycles Functional Collapse
Slide 13: TAM Expansion
TAM Expansion CCAP – $2B vs. $400M QAM market Multiscreen – Small but growing Emerging markets – international – Highest subscriber growth 13
Slide 14: TAM Expansion
TAM Expansion Converged Cable Access Platform (CCAP) – Estimated $2B annual market* – Downstream functionality and platform qualified – Deployments underway – Solid order pipeline – First CMTS interoperability tested *Forecast per Infonetics Feb. 2013 6
Slide 15: Cable Head End - Today
Cable Head End - Today Video (QAM) Video Downstream Data (QAM) X Data Upstream Router Data (CMTS)
Slide 16: Cable Head End – Harmonic + Cisco
Cable Head End – Harmonic + Cisco Video (QAM) Harmonic NSG 9000 Video Downstream Data (QAM) X Data Upstream Router Data (CMTS) Cisco uBR
Slide 17: Cable Head End – Harmonic + Arris
Cable Head End – Harmonic + Arris Video Harmonic (QAM) NSG 9000 Video Arris E6000 Downstream Data (QAM) X Data Upstream Router Data (CMTS)
Slide 18: Cable Head End – CCAP
Cable Head End – CCAP Video Video (QAM) (QAM) Downstream Data -OR- Downstream Data (QAM) (QAM) Upstream Upstream Router Data Router Data (CMTS) (CMTS) Routing CCAP Forwarding CCAP
Slide 19: Cable Head End – CCAP Architecture
Cable Head End – CCAP Architecture Video (QAM) Video Video (QAM) (QAM) Downstream Data Downstream (QAM) Downstream Data Data (QAM) Upstream (QAM) Router Data Upstream (CMTS) Upstream Router Router Data Router Data L3 L2 (CMTS) (CMTS) WAN WAN Router Router Networking Complexity – Networking Performan
Slide 20: Cable Head End – CCAP Alternatives
Cable Head End – CCAP Alternatives Video Video (QAM) (QAM) Downstream Data -OR- Downstream Data (QAM) (QAM) Upstream Upstream Router Data Router Data (CMTS) (CMTS) Integrated Router Any Router + Harmonic Cisco Cisco Arris Alcalu NSG cBR E6000 Huawei Pro Juniper ...
Slide 21: CCAP Status Today
CCAP Status Today Video* Video* Video (QAM) (QAM) (QAM) Downstream Downstream Downstream Data* Data Data (QAM) (QAM) (QAM) Upstream Upstream Upstream Router* Data* Router Data Data* (CMTS) (CMTS) (CMTS) Cisco Arris NSG cBR E6000 Pro *Functionality Not Yet Delivered
Slide 22: Financial Update
harmonic Financial Update 22
Slide 23: Q3 2013: Revenue Mix
Q3 2013: Revenue Mix Revenues $122.9M Geography Products Markets 20% 17% 20% 44% 39% 16% 56% 47% 41% Cable Edge Cable U.S. Video Processing Broadcast & Media International Production & Playout Services Satellite & Telco
Slide 24: Q3 2013: Financial Highlights
Q3 2013: Financial Highlights $Millions Q3 Q2 Q3 Q3 / Q2 Q3 Y / Y (except GM, OM, & EPS) 2013 2013 2012 Change Change Total Net Revenue $122.9 $117.1 $120.4 5% 2% Gross Margin % - Non-GAAP 50.8% 54.1% 50.3% -330bp 50bp Gross Margin % - GAAP 46.2% 49.4% 45.6% -320bp 60bp Operating Expense – Non-GAAP
Slide 25: Q3 2013: Balance Sheet and Cap-Ex Highlights
Q3 2013: Balance Sheet and Cap-Ex Highlights $Millions Cash $169.3M Up $7.6M from Q2 Accounts Receivable $85.1M 63 days Inventories $40.4M 6.0 turns Debt $0 Capital Expenditures $2.5M Shares Repurchased $7.7M 1.1M Shares
Slide 26: Share Repurchase Activity
Share Repurchase Activity Completed $75 million tender offer in Q2 2013 – Purchased 12.0 million shares for $6.25 per share Open market purchases – 2012: repurchased 5.1 million shares for $22.6 million – 2013: repurchased 4.5 million shares for $27.6 million thru Q3 YTD Shares outstanding on Septem
Slide 27: Q4 2013: Financial Guidance
Q4 2013: Financial Guidance Metric Q4 Revenue $115M - $125M Non-GAAP Gross Margin* 51% - 52% Non-GAAP Operating Expenses* $53M - $54M Non-GAAP Tax Rate 21% *Excludes charges for stock-based compensation, the amortization of intangibles and restructuring and related charges.
Slide 28: Building Shareholder Value
Building Shareholder Value Continued focus on growth opportunities Accelerate core market share leadership Enhance margin profile Optimize balance sheet Drive long-term earnings accretion 28
Slide 29: Thank You
harmonic w Thank You
Slide 30: Management Team Update – New Go To Market Executives
Management Team Update – New Go To Market Executives Peter Alexander Krish George Stromeyer CMO Padmanabhan SVP Sales SVP Product Marketing