Harmonic Inc. (HLIT) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Harmonic Inc. 2020 Annual Meeting. I would like to turn the call over to Patrick Harshman, President and Chief Executive Officer of Harmonic Inc.

All right. Well, thank you very much, and good morning. I am Patrick Harshman, President and CEO of Harmonic, and welcome to our 2020 Annual Meeting of Stockholders. We're pleased that you could join our virtual annual meeting, with our stockholders participating exclusively via our web portal and by telephone. Your interest in Harmonic is very much appreciated. I'll now call the meeting to order. First, I would like to introduce members of the Harmonic team that are with me today: Sanjay Kalra, Harmonic's Chief Financial Officer; and Timothy Chu, Harmonic's General Counsel, Senior Vice President of Human Resources and Corporate Secretary. I would also like to introduce the Harmonic Board members attending the annual meeting: Debbie Clifford, Patrick Gallagher, David Krall, Mitzi Reaugh, Sue Swenson, and Nikos Theodosopoulos. In addition, joining us today are Matt Perreault, our audit partner from Armanino LLP; and [ Kathy Weeden ], the inspector of elections. As President, I will preside over the meeting and Tim Chu will act as Secretary. I'll now turn the meeting over to Tim.

Thank you, Patrick. Before I begin, I would like to remind participants that recording of this meeting on any device is prohibited. I will first report on the presence of quorum at this meeting. The record date for the determination of holders of Harmonic's common stock entitled to vote at this meeting was April 15, 2020. Copies of the notice of annual meeting, proxy statement and form of proxy were duly and properly mailed to stockholders on or about April 29, 2020. I have been given affidavits of mailing by the company's transfer agent, which will be filed with the minutes of this meeting. As of the close of business on the record date, there were 96,578,662 shares of common stock entitled to be voted at this meeting. Each share is entitled to 1 vote. A quorum exists if the holders of a majority in voting power of Harmonic's common stock issued and outstanding and entitled to vote at this meeting is present in person or represented by proxy. There are no other securities entitled to vote at this meeting. On a preliminary count, the holders of the majority in voting power of Harmonic's common stock issued and outstanding and entitled to vote at this meeting are present at this meeting in person or by proxy. Accordingly, the meeting is duly convened and may proceed. Next, regarding our inspector of election, [ Ms. Weeden ] has been appointed as inspector of election to supervise the vote at this meeting, and she has taken the oath of office, which will be filed with the minutes of this meeting. [ Ms. Weeden ] has been appointed for the purpose of determining the validity of proxies and ballots, counting all votes and ballots and certifying the determination of the number of shares represented at this meeting and the count of all votes and ballots. We will now proceed with the formal business of the meeting. I will now briefly review the procedures that will be followed during this meeting. There are 5 items of business to be voted on today. Information concerning these items was contained in Harmonic's proxy statement furnished in connection with this meeting. After I introduce the items of business to be voted on, there will be an opportunity for your questions and comments concerning the proposals to be voted on. As a reminder, only stockholders as of the record date who have entered their control numbers will be able to submit questions via our meeting web portal. After the question and comment period, the polls will be open for voting online through our meeting web portal. If you have previously voted by proxy and do not wish to change your vote, you will not need to take further action. Once the formal portion of the meeting has concluded, Patrick Harshman will provide a brief overview of Harmonic's business. We will then address questions related to our business that have been submitted through our web portal. The first item of business at this meeting is the election of 7 directors, each to serve a term of 1 year. The nominees for election designated by Harmonic's Board of Directors in alphabetical order are Deborah Clifford, Patrick Gallagher, Patrick Harshman, David Krall; Mitzi Reaugh, Susan Swenson and Nikos Theodosopoulos. All of these individuals are currently members of the Board of Directors. The Board of Directors recommends a vote for Ms. Clifford, Mr. Gallagher, Mr. Harshman, Mr. Krall, Ms. Reaugh, Ms. Swenson and Mr. Theodosopoulos. The second item of business at this meeting is an advisory vote on Harmonic's named executive officer compensation. The Board of Directors recommends a vote in favor of Harmonic's executive compensation. The third item of business is an amendment to Harmonic's 2002 Employee Stock Purchase Plan to increase the number of shares of common stock reserved for issuance thereunder by 1 million shares. The Board of Directors recommends a vote in favor of the amendments to Harmonic's 2002 Employee Stock Purchase Plan. The fourth item of business is an amendment to Harmonic's 1995 Stock Plan to increase the number of shares of common stock reserved for issuance thereunder by 4 million shares. The Board of Directors recommends a vote in favor of the amendments to Harmonic's 1995 Stock plan. The fifth item of business at this meeting is the ratification of Armanino LLP as Harmonic's independent registered public accounting firm for its fiscal year ending December 31, 2020. The Board of Directors recommends a vote in favor of the ratification of Armanino LLP. And I will turn the meeting back to you, Patrick.

Okay. Thank you, Tim. We'll now proceed to the question and comment period related to the 5 items of business to be considered at this meeting. If you have a question, please submit it through the meeting web portal. We will pause briefly to allow for any submissions. Tim, do we have any questions coming in?

There are no questions. There are no questions.

Okay, we're now ready to vote. All right. We are now ready to vote on the matters before this meeting. The polls are now open. You may vote via our meeting portal by following the instruction on the site. Please be reminded that if you have previously voted by proxy and do not wish to change your vote, you do not need to take any further action at this time. [Voting]

Now that everyone has had an opportunity to vote, I declare the polls closed. At this time, all the proxies and ballots are in the custody of the inspector of election. I now ask the Secretary to report on the results of voting.

Based on the preliminary report of the inspector of election, stockholders: one, have voted to elect all 7 nominees to the Board of Directors; two, have approved on an advisory basis Harmonic's executive compensation; three, have approved an amendment to Harmonic's 2002 Employee Stock Purchase Plan; four, have approved an amendment to Harmonic's 1995 Stock Plan; and five, have ratified the appointment of Armanino LLP. The inspector of election will execute a certificate as to the results of the voting, and that certificate will be filed with the minutes of this meeting.

Well, thank you. The final voting tabulations will be included in the filing with the Securities and Exchange Commission, which will be made available shortly. This concludes the formal portion of the meeting, and the meeting is now adjourned. I'll now provide just a brief overview of Harmonic's business in this challenging and historic time. As most of you know, several years ago, Harmonic embarked on a journey to reinvent our company through new cloud-native technology and services that can be as transformative for our customers as for our own business. While the COVID-19 crisis has presented unexpected challenges, it's also shining a light on the power of our virtualized CableOS and cloud-based video streaming solutions, which have held up extremely well under increased operational pressures, providing our customers unprecedented real-time agility and scalability as they respond to heavy network utilization and expansion opportunities. Although it's true, like much of the market, we have real near-term challenges to overcome. Our key customers are fundamentally healthy, and our technology position is both powerful and unique, particularly our Cable Access and video SaaS solutions. Our objective is to emerge from this crisis stronger and even better positioned. With that brief introduction, I'd like to open the call to any questions that any participants may have. And Tim, I'm not seeing anything. Are you seeing anything coming through on the portal?

No, there have been no submissions.

All right. Well, this concludes our proceedings. We express our sincere appreciation to those stockholders who attended this meeting via the Internet or by telephone as well as those who submitted their proxies. We're grateful for your support for Harmonic. Good day.

This concludes today's conference call. You may now disconnect. Thank you for participating.