Shares of video delivery infrastructure provider Harmonic Inc. (NASDAQ:HLIT) slumped on Thursday following the release of the company's third-quarter report. Harmonic missed analyst estimates across the board and provided guidance that was well below expectations, leading the stock to drop 16% by 2:45 p.m. EST.
Harmonic reported third-quarter non-GAAP revenue of $101.7 million, up 22% year over year but about $5.5 million below the average analyst estimate. Bookings rose 30.4% year over year to $97.3 million, but were down about $20 million compared to the second quarter.
Harmonic CEO Patrick Harshman blamed soft legacy cable edge demand and a mix-shift toward video software and services for the revenue shortfall: "Turning to our Video segment, our transformational VOS offering drove a stronger-than-forecasted mix of software- and services-related orders, impacting third quarter revenue recognition while maintaining near-record backlog and deferred revenue."
Non-GAAP EPS came in at a loss of $0.01, down from essentially breakeven during the prior-year period and $0.04 below analyst expectations. The earnings shortfall occurred despite annualized cost savings from the company's acquisition of Thomson Video Networks are now expected to exceed the company's previous target.
Harmonic expects to produce fourth-quarter non-GAAP revenue between $106 million and $111 million, below analyst expectations of $116.1 million. Non-GAAP EPS is expected in the range of $0.05 to $0.07, far short of analyst expectations of $0.13.
While Harmonic performed worse than expected during the third quarter, leading to the steep drop in the stock price, Harshman is looking to the future: "We are encouraged by the competitive momentum of our transformational initiatives, and remain focused on revenue growth, improving profitability and enhancing shareholder value."