Harmonic Inc. CAPEX jumped on 212% while Revenue decreased on 6.0%
02/01/2021 • About Harmonic Inc. (
$HLIT) • By InTwits
Harmonic Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Harmonic Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2016-2020 was 0.0% while average EBITDA Margin was -0.6% for the sames years
- Harmonic Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.9%. At the same time it's in pair with industry average of 3.7%
- CAPEX is quite volatile: $32m in 2020, $10m in 2019, $7m in 2018, $11m in 2017, $15m in 2016
- The company has unprofitable business model: ROIC is -2.3%
- It operates with high leverage: Net Debt/EBITDA is 6.5x while industry average is 0.1x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Harmonic Inc.'s Revenue decreased on 6.0%. Annual revenue decline showed slowdown in 20Q4 - revenue increased on 7.7%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 7.4 pp from 10.5% to 3.1% in 2020.
Gross Margin decreased on 3.9 pp from 55.4% to 51.5% in 2020. SG&A as a % of Revenue increased on 2.0 pp from 29.5% to 31.6% in 2020.
Net Income margin decreased on 6.3 pp from -1.5% to -7.7% in 2020.
Investments (CAPEX, working capital and M&A)
In 2020 the company had CAPEX/Revenue of 8.5%. Harmonic Inc.'s CAPEX/Revenue increased on 5.3 pp from 3.2% in 2017 to 8.5% in 2020. It's average CAPEX/Revenue for the last three years was 4.3%. Battling declining revenue the company made large investments to CAPEX (277% of EBITDA) but that didn't help at least in this year. During 2016-2020 CAPEX as a % of Revenue bottomed in 2018 at 1.7% and was growing since that time.
Return on investment
The company operates at negative ROIC (-2.3%) and ROE (-11.4%). ROIC decreased on 6.3 pp from 3.9% to -2.3% in 2020. ROE decreased on 9.0 pp from -2.5% to -11.4% in 2020.
Leverage (Debt)
Debt level is 6.5x Net Debt / EBITDA and 15.0x Debt / EBITDA. Net Debt / EBITDA surged on 4.6x from 1.9x to 6.5x in 2020. Debt increased slightly on 0.77% while cash increased on 6.0%.
Harmonic Inc. has no short term refinancing risk: cash is higher than short term debt (515.8%).
Management team
Patrick J Harshman is a the company's CEO. Patrick J Harshman has spent 14 years with the company. Harmonic Inc.'s CFO is Sanjay Kalra. Sanjay Kalra has 3 years tenure at the company.
Financial and operational results
FY ended 12/31/2020
Harmonic Inc. ($HLIT) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 405.9 | 358.2 | 403.6 | 402.9 | 378.8 | -6.0% |
| Gross Profit | 200.7 | 169.8 | 209.2 | 223.0 | 195.0 | -12.6% |
| SG&A | 144.4 | 136.3 | 119.0 | 119.0 | 119.6 | 0.5% |
| EBITDA | -33.4 | -48.0 | 16.3 | 42.3 | 11.6 | -72.5% |
| Net Income | -72.3 | -83.0 | -21.0 | -5.9 | -29.3 | |
Balance Sheet
|
|---|
| Cash | 55.6 | 57.0 | 66.0 | 93.1 | 98.6 | 6.0% |
| Short Term Debt | 7.3 | 7.6 | 7.2 | 59.0 | 19.1 | -67.6% |
| Long Term Debt | 103.3 | 108.7 | 114.8 | 114.4 | 155.6 | 36.0% |
Cash flow
|
|---|
| Capex | 15.1 | 11.4 | 7.0 | 10.3 | 32.2 | 211.8% |
Ratios
|
|---|
| Revenue growth | 7.7% | -11.7% | 12.6% | -0.2% | -6.0% | |
| EBITDA growth | -591.3% | 43.7% | -134.0% | 158.9% | -72.5% | |
|
|---|
| Gross Margin | 49.5% | 47.4% | 51.8% | 55.4% | 51.5% | -3.9% |
| EBITDA Margin | -8.2% | -13.4% | 4.0% | 10.5% | 3.1% | -7.4% |
| SG&A, % of revenue | 35.6% | 38.0% | 29.5% | 29.5% | 31.6% | 2.0% |
| Net Income Margin | -17.8% | -23.2% | -5.2% | -1.5% | -7.7% | -6.3% |
| CAPEX, % of revenue | 3.7% | 3.2% | 1.7% | 2.6% | 8.5% | 5.9% |
|
|---|
| ROIC | -16.7% | -19.5% | -1.4% | 3.9% | -2.3% | -6.3% |
| ROE | -24.2% | -33.9% | -9.4% | -2.5% | -11.4% | -9.0% |
| Net Debt/EBITDA | | | 3.4x | 1.9x | 6.5x | 4.6x |
Harmonic Inc. ($HLIT) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 78 | 74 | 95 | 132 | | -2.1% | -12.8% | -18.0% | 7.7% |
| EBITDA | -11 | -4 | 4 | 22 | | - | - | -86.2% | 56.7% |
| Net Income | -22 | -15 | -5 | 13 | | - | - | -146.2% | 141.7% |
Balance Sheet
|
|---|
| Cash | 72 | 78 | 71 | 99 | | 2.6% | 33.9% | 6.2% | 6.0% |
| Short Term Debt | 59 | 22 | 26 | 19 | | 231.4% | 86.4% | 58.6% | -67.6% |
| Long Term Debt | 115 | 151 | 152 | 156 | | -13.2% | 4.2% | -2.4% | 36.0% |
Ratios
|
|---|
| Gross Margin | 46.8% | 51.0% | 51.6% | 54.4% | | -5.4% | -0.7% | -13.7% | 3.9% |
| EBITDA Margin | -13.9% | -5.5% | 4.4% | 17.0% | | -12.0% | -4.8% | -21.6% | 5.3% |
| Net Income Margin | -28.0% | -20.8% | -5.7% | 10.2% | | -13.9% | -6.9% | -15.7% | 5.7% |
Peers in Communications Equipment
Below you can find Harmonic Inc. benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | - | 116.2% | -19.8% | 40.3% | 329.9% |
| Franklin Wireless Corp ($FKWL) | - | -18.8% | -38.1% | 21.3% | 105.9% |
| Ribbon Communications Inc. ($RBBN) | - | 30.6% | 75.2% | -2.6% | 49.8% |
| Inseego Corp. ($INSG) | - | -10.0% | -7.7% | 8.4% | 43.0% |
| Casa Systems, Inc. ($CASA) | - | 11.2% | -15.5% | -5.0% | 39.3% |
| |
|---|
| Median (35 companies) | 7.5% | 5.6% | 2.8% | 3.7% | 4.4% |
|---|
| Harmonic Inc. ($HLIT) | - | -11.7% | 12.6% | -0.2% | -6.0% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| F5 Networks, Inc. ($FFIV) | 83.1% | 83.1% | 83.3% | 84.1% | 82.6% |
| Radware Ltd. ($RDWR) | 81.8% | 81.3% | 82.2% | 82.1% | 82.0% |
| Radcom Ltd. ($RDCM) | 69.6% | 71.8% | 74.0% | 70.0% | 71.4% |
| AudioCodes Ltd. ($AUDC) | 60.7% | 62.4% | 62.8% | 47.4% | 67.9% |
| Arista Networks, Inc. ($ANET) | 64.0% | 64.5% | 63.8% | 64.1% | 63.9% |
| |
|---|
| Median (33 companies) | 43.7% | 41.0% | 40.5% | 43.2% | 44.9% |
|---|
| Harmonic Inc. ($HLIT) | 49.5% | 47.4% | 51.8% | 55.4% | 51.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| InterDigital, Inc. ($IDCC) | 73.6% | 67.3% | 41.9% | 37.5% | 39.5% |
| EchoStar Corporation ($SATS) | 40.3% | 38.1% | 37.4% | 36.4% | 35.0% |
| Arista Networks, Inc. ($ANET) | 23.3% | 29.8% | 14.0% | 35.7% | 33.1% |
| Motorola Solutions, Inc. ($MSI) | 22.2% | 25.5% | 22.0% | 26.7% | 25.9% |
| F5 Networks, Inc. ($FFIV) | 30.3% | 29.9% | 30.1% | 26.2% | 22.9% |
| |
|---|
| Median (32 companies) | 5.9% | 6.5% | 5.4% | 3.1% | 9.3% |
|---|
| Harmonic Inc. ($HLIT) | -8.2% | -13.4% | 4.0% | 10.5% | 3.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | 132.5% | 124.8% | 245.2% | 109.7% | 22.3% |
| EchoStar Corporation ($SATS) | 39.9% | 30.9% | 26.5% | 22.2% | 21.7% |
| KVH Industries, Inc. ($KVHI) | 3.2% | 8.0% | 9.3% | 7.9% | 8.9% |
| Applied Optoelectronics, Inc. ($AAOI) | 19.0% | 17.5% | 26.9% | 15.1% | 6.7% |
| PC-Tel, Inc. ($PCTI) | 2.0% | 2.9% | 3.3% | 2.5% | 5.3% |
| |
|---|
| Median (32 companies) | 1.9% | 1.8% | 1.6% | 2.4% | 2.0% |
|---|
| Harmonic Inc. ($HLIT) | 3.7% | 3.2% | 1.7% | 2.6% | 8.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Franklin Wireless Corp ($FKWL) | 12.2% | 4.7% | -14.9% | -13.0% | 37.5% |
| Motorola Solutions, Inc. ($MSI) | 26.4% | 39.5% | 35.3% | 34.0% | 26.4% |
| Arista Networks, Inc. ($ANET) | 25.7% | 33.9% | 14.5% | 33.3% | 23.5% |
| AudioCodes Ltd. ($AUDC) | 6.1% | 8.6% | 16.1% | -7.7% | 20.8% |
| F5 Networks, Inc. ($FFIV) | 43.1% | 46.9% | 47.9% | 34.1% | 16.5% |
| |
|---|
| Median (35 companies) | 2.4% | 2.2% | 0.7% | -1.6% | 2.3% |
|---|
| Harmonic Inc. ($HLIT) | -16.7% | -19.5% | -1.4% | 3.9% | -2.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inseego Corp. ($INSG) | - | - | 3.9x | 82.5x | 26.9x |
| CommScope Holding Company, Inc. ($COMM) | 4.3x | 4.6x | 4.4x | 27.0x | 10.5x |
| Ribbon Communications Inc. ($RBBN) | -17.2x | - | - | - | 3.5x |
| Casa Systems, Inc. ($CASA) | -0.2x | 0.3x | 0.2x | 32.1x | 3.2x |
| EchoStar Corporation ($SATS) | 1.5x | 1.7x | 3.3x | 1.4x | 2.5x |
| |
|---|
| Median (24 companies) | -0.9x | -0.7x | -0.3x | -0.4x | -0.5x |
|---|
| Harmonic Inc. ($HLIT) | - | - | 3.4x | 1.9x | 6.5x |
