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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________
Form 10-Q
_____________________________________________________
(Mark One)
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 28, 2024

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File No. 000-25826
_____________________________________________________
HARMONIC INC.
(Exact name of registrant as specified in its charter)
_____________________________________________________
Delaware77-0201147
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification Number)
2590 Orchard Parkway
San Jose, CA 95131
(408) 542-2500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
____________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.001 par valueHLITNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☒Accelerated Filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  ☒
The number of shares of the registrant’s Common Stock, $0.001 par value, outstanding on July 29, 2024 was 116,326,955.


TABLE OF CONTENTS
 
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HARMONIC INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except par value)
June 28, 2024December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$45,850 $84,269 
Restricted cash2,827 — 
Accounts receivable, net119,999 141,531 
Inventories84,133 83,982 
Prepaid expenses and other current assets31,742 20,950 
Total current assets284,551 330,732 
Property and equipment, net29,603 36,683 
Operating lease right-of-use assets15,244 20,817 
Goodwill237,884 239,150 
Deferred income taxes112,906 104,707 
Other non-current assets33,508 36,117 
Total assets$713,696 $768,206 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Convertible debt$— $114,880 
Current portion of long-term debt944 — 
Current portion of other borrowings8,348 4,918 
Accounts payable30,017 38,562 
Deferred revenue53,142 46,217 
Operating lease liabilities6,166 6,793 
Other current liabilities53,284 61,024 
Total current liabilities151,901 272,394 
Long-term debt113,805 — 
Other long-term borrowings5,245 10,495 
Operating lease liabilities, non-current16,594 18,965 
Other non-current liabilities33,343 29,478 
Total liabilities320,888 331,332 
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued or outstanding
— — 
Common stock, $0.001 par value, 150,000 shares authorized; 115,998 and 112,407 shares issued and outstanding at June 28, 2024 and December 31, 2023, respectively
116 112 
Additional paid-in capital2,416,152 2,405,043 
Accumulated deficit(2,013,333)(1,962,575)
Accumulated other comprehensive loss(10,127)(5,706)
Total stockholders’ equity392,808 436,874 
Total liabilities and stockholders’ equity$713,696 $768,206 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
 Three Months EndedSix Months Ended
 June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Revenue:
Appliance and integration$94,184 $111,127 $175,779 $225,921 
SaaS and service44,556 44,836 85,021 87,691 
Total net revenue138,740 155,963 260,800 313,612 
Cost of revenue:
Appliance and integration50,878 57,437 93,952 117,185 
SaaS and service14,405 13,586 30,310 27,433 
Total cost of revenue65,283 71,023 124,262 144,618 
Total gross profit73,457 84,940 136,538 168,994 
Operating expenses:
Research and development28,784 32,205 59,489 65,714 
Selling, general and administrative39,821 42,773 78,686 82,055 
Lease-related asset impairment and other charges9,000 — 9,000 — 
Restructuring and related charges11,482 — 14,519 83 
Total operating expenses89,087 74,978 161,694 147,852 
Income (loss) from operations(15,630)9,962 (25,156)21,142 
Interest expense, net(1,424)(800)(2,147)(1,506)
Other income (expense), net619 (136)330 (429)
Income (loss) before income taxes(16,435)9,026 (26,973)19,207 
Provision for (benefit from) income taxes(3,903)7,471 (6,352)12,559 
Net income (loss)$(12,532)$1,555 $(20,621)$6,648 
Net income (loss) per share:
Basic$(0.11)$0.01 $(0.18)$0.06 
Diluted$(0.11)$0.01 $(0.18)$0.06 
Weighted average shares outstanding:
Basic115,030 111,462 113,705 111,130 
Diluted115,030 119,255 113,705 118,508 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands)
 Three Months EndedSix Months Ended
 June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Net income (loss)$(12,532)$1,555 $(20,621)$6,648 
Foreign currency translation adjustments(1,367)667 (4,281)2,626 
Other comprehensive income (loss) before tax(1,367)667 (4,281)2,626 
Provision for (benefit from) income taxes47 (25)140 (97)
Other comprehensive income (loss), net of tax(1,414)692 (4,421)2,723 
Total comprehensive income (loss)$(13,946)$2,247 $(25,042)$9,371 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands)
Three Months Ended June 28, 2024
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive Loss		Total
Stockholders’
Equity
SharesAmount
Balance at March 29, 2024111,946 $112 $2,410,094 $(1,992,339)$(8,713)$409,154 
Net loss— — — (12,532)— (12,532)
Other comprehensive loss, net of tax— — — — (1,414)(1,414)
Issuance of common stock under award and purchase plans, net225 — (839)— — (839)
Repurchase of common stock(751)(1)— (8,372)— (8,373)
Excise tax on share repurchases— — — (90)— (90)
Stock-based compensation— — 6,954 — — 6,954 
Issuance of common stock upon conversion of 2024 Notes4,578 5 (57)— — (52)
Balance at June 28, 2024115,998 $116 $2,416,152 $(2,013,333)$(10,127)$392,808 
Three Months Ended June 30, 2023
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive Loss		Total
Stockholders’
Equity
SharesAmount
Balance at March 31, 2023111,332 $111 $2,384,806 $(2,041,476)$(7,655)$335,786 
Net income— — — 1,555 — 1,555 
Other comprehensive income, net of tax— — — — 692 692 
Issuance of common stock under stock option, award and purchase plans, net252 1 (1,292)— — (1,291)
Stock-based compensation— — 6,059 — — 6,059 
Balance at June 30, 2023111,584 $112 $2,389,573 $(2,039,921)$(6,963)$342,801 
Six Months Ended June 28, 2024
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive Loss		Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 2023112,407 $112 $2,405,043 $(1,962,575)$(5,706)$436,874 
Net loss— — — (20,621)— (20,621)
Other comprehensive loss, net of tax— — — — (4,421)(4,421)
Issuance of common stock under award and purchase plans, net1,422 1 (2,711)— — (2,710)
Repurchase of common stock(2,409)(2)— (30,047)— (30,049)
Excise tax on share repurchases— — — (90)— (90)
Stock-based compensation— — 13,877 — — 13,877 
Issuance of common stock upon conversion of 2024 Notes4,578 5 (57)— — (52)
Balance at June 28, 2024115,998 $116 $2,416,152 $(2,013,333)$(10,127)$392,808 
6
Six Months Ended June 30, 2023
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive Loss		Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 2022109,871 $110 $2,380,651 $(2,046,569)$(9,686)$324,506 
Net income— — — 6,648 — 6,648 
Other comprehensive income, net of tax— — — — 2,723 2,723 
Issuance of common stock under award and purchase plans, net1,713 2 (4,561)— — (4,559)
Stock-based compensation— — 13,483 — — 13,483 
Balance at June 30, 2023111,584 $112 $2,389,573 $(2,039,921)$(6,963)$342,801 
The accompanying notes are an integral part of these condensed consolidated financial statements.

7

HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Six Months Ended
 June 28, 2024June 30, 2023
Cash flows from operating activities:
Net income (loss)$(20,621)$6,648 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation6,311 6,089 
Lease related asset impairment and other charges9,000 — 
Stock-based compensation13,877 13,483 
Foreign currency remeasurement2,469 991 
Deferred income taxes, net(8,897)1,321 
Provision for excess and obsolete inventories2,152 3,383 
Other adjustments354 1,292 
Changes in operating assets and liabilities:
Accounts receivable, net20,765 (10,392)
Inventories(3,929)6,894 
Other assets(6,761)2,060 
Accounts payable(8,680)(30,527)
Deferred revenues6,179 1,223 
Other liabilities(7,553)(12,717)
Net cash provided by (used in) operating activities4,666 (10,252)
Cash flows from investing activities:
Purchases of property and equipment(3,856)(3,833)
Net cash used in investing activities(3,856)(3,833)
Cash flows from financing activities:
Proceeds from long-term debt115,000 — 
Repayment of convertible debt(115,500)— 
Payments for debt issuance costs(332)— 
Repurchase of common stock(30,047)— 
Proceeds from other borrowings— 3,829 
Repayment of other borrowings(1,334)(4,721)
Proceeds from common stock issued to employees3,542 3,084 
Taxes paid related to net share settlement of equity awards(6,252)(7,643)
Net cash used in financing activities(34,923)(5,451)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(1,391)981 
Net decrease in cash and cash equivalents and restricted cash(35,504)(18,555)
Cash and cash equivalents and restricted cash at beginning of period84,269 89,586 
Cash and cash equivalents and restricted cash at end of period$48,765 $71,031 
Cash and cash equivalents and restricted cash at end of period
Cash and cash equivalents$45,850 $71,031 
Restricted cash included in prepaid expenses and other current assets2,827 — 
Restricted cash included in other non-current assets88 — 
Total cash, cash equivalents and restricted cash as shown in the condensed consolidated statement of cash flows$48,765 $71,031 

8

HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
June 28, 2024June 30, 2023
Supplemental cash flow disclosure:
Net cash paid for income taxes$11,407 $5,008 
Cash paid for interest$1,895 $1,015 
Supplemental schedule of non-cash investing activities:
Capital expenditures incurred but not yet paid$282 $1,189 
Supplemental schedule of non-cash financing activities:
Shares of common stock issued upon redemption of the 2024 Notes4,578— 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
HARMONIC INC.
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, 2023 (“2023 Form 10-K”). 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, 2024. 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 2023 Form 10-K. There have been no significant changes to these policies during the six months ended June 28, 2024.
NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024; this ASU allows for early adoption. The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.
In December 2023, the FASB issued 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. This ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

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:
As of
(in thousands)June 28, 2024December 31, 2023
Contract assets$3,700 $4,772 
Deferred revenue$65,762 $59,705 
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 28, 2024 and June 30, 2023, that was included within the deferred revenue balance at January 1, 2024 and January 1, 2023, was $10.3 million and $14.1 million, respectively. Revenue recognized during the six months ended June 28, 2024 and June 30, 2023, that was included within the deferred revenue balance at January 1, 2024 and January 1, 2023, was $26.6 million and $35.3 million, respectively.
10
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 28, 2024 was $613.1 million, 52% 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:
Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Operating lease cost$1,759 $1,761 $3,488 $3,525 
Variable lease cost416 425 807 850 
Total lease cost$2,175 $2,186 $4,295 $4,375 
Supplemental information related to leases are as follows:
Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Cash paid for operating lease liabilities$1,773 $1,778 $3,568 $3,606 
In the second quarter of fiscal 2024, we reviewed the right-of-use lease assets and other fixed assets associated with our San Jose headquarters and our facilities in the United Kingdom (“UK”) for potential impairment due to an intended change in the use of these spaces. Following our analysis, we recorded total lease-related impairment and other charges of $9.0 million which primarily consisted of right-of-use asset impairment charges of $2.9 million, related leasehold improvement impairment charges of $4.2 million, and fair value of other unrecoverable facility costs of $1.9 million.
For asset groups where impairment was triggered, the Company utilized an income approach to value the asset groups by developing discounted cash flow models. The significant assumptions used in the discounted cash flow models for each of the asset groups included projected sublease income over the remaining lease terms, expected downtime prior to the commencement of future subleases, expected lease incentives offered to future tenants, and discount rates that reflected the level of risk associated with these future cash flows.
NOTE 5: OTHER FINANCIAL STATEMENT INFORMATION
The following tables provide details of selected balance sheet components:
Accounts receivable, net:As of
(in thousands)June 28, 2024December 31, 2023
Accounts receivable$124,069 $144,731 
Less: allowances for expected credit losses and sales returns(4,070)(3,200)
Total$119,999 $141,531 
Inventories, net:As of
(in thousands)June 28, 2024December 31, 2023
Finished goods$41,456 $43,987 
Raw materials30,487 27,806 
Work-in-process4,286 5,056 
Service-related spares7,904 7,133 
Total$84,133 $83,982 
11
Prepaid expenses and other current assets:As of
(in thousands)June 28, 2024December 31, 2023
Prepaid expenses$9,592 $3,789 
Contract assets3,700 4,772 
Other current assets18,450 12,389 
Total$31,742 $20,950 
Property and equipment, net:As of
(in thousands)June 28, 2024December 31, 2023
Machinery and equipment$75,300 $74,659 
Capitalized software26,992 27,129 
Leasehold improvements36,797 40,931 
Furniture and fixtures2,561 2,547 
Construction-in-progress2,349 1,789 
Property and equipment, gross143,999 147,055 
Less: accumulated depreciation and amortization(114,396)(110,372)
Total$29,603 $36,683 
During the second quarter of fiscal 2024, we recorded an impairment charge of $4.2 million related to our leasehold improvements. Refer to Note 4, “Leases” for more details.

Other current liabilities:As of
(in thousands)June 28, 2024December 31, 2023
Accrued employee compensation and related expenses$22,225 $22,779 
Other31,059 38,245 
Total$53,284 $61,024 
12
NOTE 6: DEBT
2.00% Convertible Senior Notes due 2024 (the “2024 Notes”)
In September 2019, the Company issued $115.5 million 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 bore interest at a rate of 2.00% per year, payable semi-annually on March 1 and September 1 of each year, beginning March 1, 2020. 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.
The 2024 Notes were initially convertible into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election, at an initial conversion rate of 115.5001 shares of the Company’s common stock per $1,000 principal amount of the 2024 Notes (which is equivalent to an initial conversion price of approximately $8.66 per share). Pursuant to the supplemental indenture entered into by the Company and the trustee during the fourth quarter of the fiscal year ended December 31, 2021, the Company made an irrevocable election to settle the principal amounts of the 2024 Notes solely with cash and would pay or deliver, as the case may be, any conversion value greater than the principal amount in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. The 2024 Notes are recorded at face value less unamortized debt issuance costs. Amortization costs are reported as a component of interest expenses and are computed using the effective interest method.
On April 18, 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.
The following table presents interest expense recognized for the 2024 Notes:
Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Contractual interest expense$334 $578 $912 $1,156 
Amortization of debt issuance costs53 224 282 447 
Total interest expense recognized$387 $802 $1,194 $1,603 
Revolving and Term Facilities
In December 2023, the Company entered into a five-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. The Credit Agreement provides for a secured revolving credit facility in an aggregate principal amount of up to $120.0 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 must be used to repurchase, redeem, acquire or otherwise settle the 2024 Notes. The Credit Agreement also includes an uncommitted accordion feature whereby the Company may increase the Revolving Facility by an aggregate amount not to exceed $100 million, subject to certain conditions, including lender consent.
Loans under the Revolving and Term Facilities bear interest, at a floating rate per annum equal to an adjusted Term Secured Overnight Financing Rate (“SOFR”) rate (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% (“Adjusted Term SOFR Loans”), 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 28, 2024, the Company was in compliance with the covenant under the Credit Agreement.
As of June 28, 2024, the Company had borrowings of $75.0 million and $40.0 million under the Revolving Facility and the Term Facility, respectively.
13
Beginning December 31, 2024, the principal amount of the term loans shall be repaid in quarterly installments equal to 1.25% of the principal amount of such Term Loans outstanding as of September 1, 2024, increasing to 1.875% beginning December 31, 2025, and to 2.50% beginning December 31, 2027. As of June 28, 2024, $1.0 million of such installment payments were due in twelve months and therefore classified as current portion of long-term debt on the condensed consolidated balance sheet. The carrying value of the borrowings under the Credit Agreement approximate their fair value because they bear interest at a market rate.
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:
 Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Cost of revenue$273 $439 $796 $1,289 
Research and development expense1,523 1,731 3,478 3,830 
Selling, general and administrative expense5,158 3,889 9,603 8,364 
Total$6,954 $6,059 $13,877 $13,483 
Restricted Stock Units:
(in thousands, except per share amounts)Number
of
Shares		Weighted Average
Grant-Date Fair Value
Per Share
Balance at December 31, 20233,242 $12.42 
Granted2,046 13.12
Vested(1,577)11.91
Forfeited(732)14.08
Balance at June 28, 20242,979 $12.77 
The Company’s stock benefit plans include the 2002 Employee Stock Purchase Plan (“ESPP”) and current active stock plans adopted in 1995 and 2002 (“1995 Stock Plan” and “2002 Director Plan”, respectively). Refer to Note 12, “Employee Benefit Plans” of Notes to Consolidated Financial Statements in the 2023 Form 10-K for details pertaining to each plan.
At the Company’s 2024 annual meeting, the Company’s stockholders approved amendments to the 1995 Stock Plan and the 2002 ESPP, increasing the number of shares of common stock reserved for issuance by 5,000,000 shares and 400,000 shares, respectively. As of June 28, 2024, an aggregate of 7,009,404 shares of common stock were reserved for issuance under the 1995 Stock Plan, of which 3,691,826 shares remained available for future grants. As of June 28, 2024, an aggregate of 588,191 shares of common stock were reserved for issuance under the 2002 Director Plan, of which 387,581 shares remained available for future grants.
Share Repurchase Program
In February 2022, the Board of Directors of the Company (“Board”) authorized the Company to repurchase up to $100 million of the Company’s outstanding shares of common stock through February 2025. 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 28, 2024, the company repurchased and retired approximately 2.4 million shares of the Company’s common stock for an aggregate amount of $30.0 million. As of June 28, 2024, approximately $64.8 million of the share repurchase authorization remained available for repurchases under this program.
14
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, short-term investments, 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):
June 28, 2024December 31, 2023
(in thousands)
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents
Money market funds$19,342 $— $— $19,342 $23,683 $— $— $23,683 
The Company’s financial instruments not recorded at fair value on a recurring basis were as follows:
June 28, 2024December 31, 2023
CarryingFair ValueCarryingFair Value
(in thousands)
ValueLevel 1Level 2Level 3ValueLevel 1Level 2Level 3
2024 Notes$— $— $— $— $114,880 $— $177,405 $— 
Long-term debt$114,749 $— $114,749 $— $— $— $— $— 
Current portion of other borrowings$8,348 $— $8,348 $— $4,918 $— $4,918 $— 
Other long-term borrowings$5,245 $— $5,245 $— $10,495 $— $10,495 $— 
15
NOTE 9: NET INCOME (LOSS) PER SHARE
Basic earnings per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares and potentially dilutive securities outstanding during the period using the treasury stock method for the Company’s stock options, restricted stock units, and shares issuable under the ESPP, and the if-converted method for the 2024 Notes.
As noted in Note 6, “Debt,” the principal amount of the 2024 Notes was settled in cash while the conversion spread value was settled in shares.
The following table sets forth the computation of the basic and diluted net income per share:
 Three Months EndedSix Months Ended
(in thousands, except per share amounts)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Numerator:
Net income (loss)$(12,532)$1,555 $(20,621)$6,648 
Denominator:
Weighted average number of shares outstanding:
Basic115,030 111,462 113,705 111,130 
2024 Notes— 6,144 — 5,554 
Restricted stock units— 1,573 — 1,786 
Stock purchase rights under the ESPP— 76 — 38 
Diluted115,030 119,255 113,705 118,508 
Net income (loss) per share:
Basic$(0.11)$0.01 $(0.18)$0.06 
Diluted$(0.11)$0.01 $(0.18)$0.06 
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:
 Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
2024 Notes1,157 — 2,722 — 
Restricted stock units2,794 37 2,996 55 
Stock purchase rights under the ESPP306 — 311 150 
   Total4,257 37 6,029 205 
16
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 regularly 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 of two 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. A measure of assets by segment is not applicable as segment assets are not included in the discrete financial information provided to the CODM. 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 telecommunications (“telco”) Pay-TV service providers.
The following table provides summary financial information by reportable segment:
Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Broadband
Revenue$92,937 $97,096 $171,834 $197,447 
Operating income13,781 18,066 22,375 38,179 
Video
Revenue$45,803 $58,867 $88,966 $116,165 
Operating income (loss)(1,569)90 (8,920)(1,336)
Total
Revenue$138,740 $155,963 $260,800 $313,612 
Operating income12,212 18,156 13,455 36,843 
A reconciliation of the Company’s consolidated segment operating income to consolidated income before income taxes is as follows:
Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Total consolidated segment operating income$12,212 $18,156 $13,455 $36,843 
Stock-based compensation (1)
(6,954)(6,059)(13,877)(13,483)
Restructuring and related charges (1)
(11,482)— (14,979)(83)
Lease-related asset impairment and other charges (1)
(9,000)— (9,000)— 
Unallocated corporate expenses (1)
(406)(2,135)(755)(2,135)
Consolidated income (loss) from operations(15,630)9,962 (25,156)21,142 
Non-operating expense, net(805)(936)(1,817)(1,935)
Income (loss) before income taxes$(16,435)$9,026 $(26,973)$19,207 
(1) Together with stock-based compensation, the Company does not allocate restructuring and related charges, lease-related asset impairment and other non-recurring expenses to the operating income (loss) for each segment because management does not include this information in the measurement of the performance of the operating segments.
17
Disaggregation of Revenues
The following table provides a summary of total revenues disaggregated by type:
Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
Product sales$87,441 $99,594 $161,357 $207,418 
Professional services6,743 11,533 14,422 18,503 
Total Appliance and integration94,184 111,127 175,779 225,921 
SaaS14,02313,584 26,887 25,167 
Support services30,533 31,252 58,134 62,524 
Total SaaS and services44,556 44,836 85,021 87,691 
Total revenue$138,740 $155,963 $260,800 $313,612 
The following table provides a summary of total revenues by geographic region:
Three Months EndedSix Months Ended
(in thousands)June 28, 2024June 30, 2023June 28, 2024June 30, 2023
United States (1)
$100,829 $101,908 $182,821 $207,649 
Other countries (1)
37,911 54,055 77,979 105,963 
Total revenue$138,740 $155,963 $260,800 $313,612 
(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 28, 2024 and June 30, 2023, respectively.
NOTE 11: RESTRUCTURING AND RELATED CHARGES
The Company has implemented several restructuring plans in the past few years. The goal of these plans was to bring operational expenses to appropriate levels relative to the Company’s net revenue, while simultaneously implementing extensive company-wide expense control programs. The restructuring plans have primarily been comprised of severance payments and termination benefits related to headcount reductions.
During the first quarter of 2024, management initiated restructuring plans to further improve the Video business efficiencies in order to drive long-term growth and profitability. The total restructuring cost associated with these 2024 restructuring activities is currently estimated to be $15.4 million and will primarily be recorded to the restructuring expense line item within our condensed consolidated statements of operations. We recorded $11.5 million of restructuring expense in the second quarter of fiscal 2024 and we expect to incur substantially all of the remaining restructuring expense through the end of fiscal 2024.
The following table summarizes the activities related to the Company’s restructuring plans accrual:
(in thousands)Severance and Benefits
Balance at December 31, 2023$313 
Charges for current period14,979 
Cash payments(6,389)
Other adjustments (1)
1,235 
Balance at June 28, 2024$10,138 
Included in other current liabilities$4,263 
Included in other non-current liabilities5,875 
Balance at June 28, 2024$10,138 
(1) Other adjustments include $1.6 million transfer from pension liabilities and $(0.4) million foreign exchange impact.
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NOTE 12: COMMITMENTS AND CONTINGENCIES
Legal proceedings
From time to time, the Company is involved in lawsuits as well as subject to various legal proceedings, claims, threats of 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: 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 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.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The terms “Harmonic,” “Company,” “we,” “us,” “its,” and “our,” as used in this Quarterly Report on Form 10-Q (this “Form 10-Q”), refer to Harmonic Inc. and its subsidiaries and its predecessors as a combined entity, except where the context requires otherwise.
Some of the statements contained in this Quarterly Report on Form 10-Q are forward-looking statements that involve risk and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Acts”), and Section-21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future. In some cases, you can identify forward-looking statements by terminology such as, “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “believes,” “intends,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements regarding:
•developing trends and demands in the markets we address, particularly emerging markets;
•macroeconomic conditions, including inflation, changes in interest rates, volatility and uncertainty in the banking and financial services sector, supply chain disruptions, and volatile capital markets and foreign currency fluctuations, particularly in certain geographies;
•the impact of geopolitical events, including the conflicts in the Middle East and Russia-Ukraine conflicts and risks of escalation and broader regional conflicts, and tensions between China and Taiwan and China and the United States, on our business and the markets in which we operate;
•new and future products and services;
•spending of our customers;
•our strategic direction, future business plans and growth strategy, including our plans with respect to the Video Business;
•industry and customer consolidation;
•expected demand for and benefits of our products and services;
•concentration of revenue sources;
•expectations regarding our Broadband and Video solutions;
•potential future acquisitions and dispositions;
•anticipated results of potential or actual litigation;
•our competitive environment;
•the impact of our restructuring plans;
•the impact of governmental regulations, including with respect to tariffs and economic sanctions;
•anticipated revenue and expenses, including the sources of such revenue and expenses;
•expected impacts of changes in accounting rules;
•expectations regarding the usability of our inventory and the risk that inventory will exceed forecasted demand;
•expectations and estimates related to goodwill and its associated carrying value; and
•use of cash, cash needs and ability to raise capital, including repurchasing our common stock.
These statements are subject to known and unknown risks, uncertainties and other factors, any of which may cause our actual results to differ materially from those implied by the forward-looking statements. Important factors that may cause actual results to differ from expectations include those discussed in “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date thereof, and we assume no obligation to update any such forward-looking statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled “Risk Factors” and in other parts of this Quarterly Report on Form 10-Q.
OVERVIEW
We are a leading global provider of (i) broadband solutions that enable broadband operators to more efficiently and effectively deploy high-speed internet, for data, voice and video services for their customers and (ii) versatile and high performance video delivery software, products, system solutions and services that enable our customers to efficiently create, prepare, store, playout and deliver a full range of high-quality broadcast and streaming video services to consumer devices, including televisions, personal computers, laptops, tablets and smart phones.
We classify our total revenue in two categories, “Appliance and integration” and “SaaS and service.” The “Appliance and integration” revenue category includes hardware, licenses and professional services and is reflective of non-recurring revenue, while the “SaaS and service” category includes usage fees for our SaaS platform and support service revenue from our appliance-based customers and reflects our recurring revenue stream.
We conduct business in three geographic regions—the Americas, EMEA and APAC—and operate in two segments, Broadband and Video. Our Broadband business sells broadband access solutions and related services, including our cOS™ software-based broadband access solutions, to broadband operators globally. Our Video business sells video processing, production and playout solutions, and services worldwide to cable operators and satellite and telco Pay-TV service providers, which we refer to collectively as “service providers,” as well as to broadcast and media companies, including streaming media companies. Our Video business infrastructure solutions are delivered either through shipment of our products, software licenses or as SaaS subscriptions.
Historically, our revenue has been dependent upon spending in the cable, satellite, telco, broadcast and media industries, including streaming media. Our customers’ spending patterns are dependent on a variety of factors, including but not limited to: economic conditions in the United States and international markets, and impact of factors such as the conflict in the Middle East and Russia-Ukraine conflicts, inflation, changes in interest rates, potential supply chain disruptions, volatility in capital markets and foreign currency fluctuations; volatility and uncertainty in the banking and financial services sector; access to financing; annual budget cycles of each of the industries we serve; impact of industry consolidations; customer end-market conditions; customers suspending or reducing spending in anticipation of new products or new standards; and new industry trends and/or technology shifts. If our product portfolio and product development plans do not position us well to capture an increased portion of the spending in the markets in which we compete, our revenue may decline. As we attempt to further diversify our customer base in these markets, we may need to continue to build alliances with other equipment manufacturers and suppliers, cloud service providers, content providers, resellers and system integrators, managed services providers and software developers; adapt our products for new applications; take orders at prices resulting in lower margins; and build internal expertise to handle the particular operational, payment, financing and/or contractual demands of our customers, which could result in higher operating costs for us.
More recently, the United States has experienced high levels of inflation, which has resulted, and may continue to result, in decreased demand for our products and services, increases in our operating costs including our labor costs, constrained credit and liquidity, reduced customer spending and volatility in financial markets. The Federal Reserve has raised, and may continue to raise, interest rates in response to concerns over inflation risk. There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the Federal Reserve and other government agencies, related to macroeconomic conditions, adverse business conditions and liquidity concerns, or bank failures or instability in the financial services sector, geopolitical disruptions and concerns over inflation risk.
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Our Broadband strategy is focused on continuing to develop and deliver software-based broadband access technologies, which we refer to as our cOS solutions, to our broadband operator customers. We believe our cOS software-based broadband access solutions are superior to hardware-based systems and deliver unprecedented scalability, agility and cost savings for our customers. Our cOS solutions, which can be deployed based on a centralized, DAA or hybrid architecture, enable our customers to migrate to multi-gigabit broadband capacity and the fast deployment of DOCSIS and/or FTTH data, video and voice services. We believe our cOS solutions resolve space and power constraints in broadband operator facilities, eliminate dependence on hardware upgrade cycles and significantly reduce total cost of ownership, and are helping us become a major player in the broadband access market. In the meantime, we believe our Broadband segment will continue to gain momentum in the marketplace as our customers adopt and deploy our virtualized DOCSIS, CMTS and FTTH solutions and distributed access architectures. We continue to make progress in the development of our cOS solutions and in the growth of our Broadband business, with expanded commercial deployments, lab and field trials, and customer engagements.
We believe a material and growing portion of the opportunities for our Video business are linked to the industry and our customers (i) continuing to adopt streaming technologies to capture, process and deliver video content to consumers and, increasingly, utilizing public cloud solutions like our VOS SaaS platform to do so; (ii) transforming existing broadcast infrastructure workflows into more flexible, efficient and cost-effective operations running in public clouds; and (iii) for those customers maintaining on-premise video delivery infrastructure, continuing to upgrade and replace aging equipment with next-generation software-based appliances that significantly reduce operational complexity. Our Video business strategy is focused on continuing to develop and deliver products, solutions and services to enable and support these trends. In recent quarters, we have seen a slow-down in capital spending by some of our Video business customers, which has caused delays for some of our appliance-based projects. While market activity leads us to believe these near-term headwinds for our Video business may be receding, the capital spending slow-down may persist longer than expected.
CRITICAL ACCOUNTING ESTIMATES
Our unaudited condensed consolidated financial statements and the related notes included elsewhere in this report are prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Our critical accounting estimates are disclosed in our 2023 Annual Report on Form 10-K, as filed with the SEC. There have been no significant changes to these estimates during the three months ended June 28, 2024.
ACCOUNTING PRONOUNCEMENTS
For a summary of recent accounting pronouncements applicable to our condensed consolidated financial statements, refer to Note 2 to the Condensed Consolidated Financial Statements in Item 1, which is incorporated herein by reference.
RESULTS OF OPERATIONS
Net Revenue
Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Appliance and integration$94,184 $111,127 $(16,943)(15)%$175,779 $225,921 $(50,142)(22)%
as % of total net revenue68 %71 %67 %72 %
SaaS and service44,556 44,836 (280)(1)%85,021 87,691 (2,670)(3)%
as % of total net revenue32 %29 %33 %28 %
Total net revenue$138,740 $155,963 $(17,223)(11)%$260,800 $313,612 $(52,812)(17)%
Appliance and integration net revenue decreased by $16.9 million during the three months ended June 28, 2024, compared to the corresponding period in 2023, primarily due to a decrease of $12.2 million in our Video segment revenue and a decrease of $4.8 million in our Broadband segment revenue.
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Appliance and integration net revenue decreased by $50.1 million during the six months ended June 28, 2024, compared to the corresponding period in 2023, primarily due to a decrease of $25.1 million in our Video segment revenue and a decrease of $25.0 million in our Broadband segment revenue. The decrease in our Video segment revenue in the fiscal 2024 periods presented, relative to corresponding prior fiscal year periods, was primarily attributed to lower sales across most regions due to order and project delays by our customers. The decrease in our Broadband segment revenue in the fiscal 2024 periods presented, relative to the corresponding prior fiscal year periods, was primarily attributed to a customer adjusting its shipment schedule to later periods in the current fiscal year due to a technology transition that will ramp throughout 2024.
Total SaaS and service net revenue decreased by $0.3 million during the three months ended June 28, 2024, compared to the corresponding period in 2023, primarily due to a decrease of $0.6 million in support services mainly driven by lower contract renewals in Video segment, partially offset by an $0.4 million increase in SaaS revenue, mainly due to the acquisition of new customers.
Total SaaS and service net revenue decreased by $2.7 million during the six months ended June 28, 2024, compared to the corresponding period in 2023, primarily due to a decrease of $4.4 million in support services mainly driven by lower contract renewals in the Video segment, partially offset by an increase in SaaS revenue of $1.7 million, mainly due to the acquisition of new customers.
Gross Profit
Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Gross profit$73,457 $84,940 $(11,483)(14)%$136,538 $168,994 $(32,456)(19)%
as % of total net revenue (“gross margin”)52.9 %53.5 %52.4 %53.9 %
Our gross margins are dependent upon, among other factors, the proportion of software sales, product mix, supply chain impacts, customer mix, product introduction costs, price reductions granted to customers and achievement of cost reductions.
Our gross margin decreased by 60 basis points and 150 basis points in the three and six months ended June 28, 2024, respectively, compared to the corresponding periods in 2023, primarily from margin contraction in our Broadband segment, mainly due to unfavorable product mix. This decrease was partially offset by margin expansion in our Video segment, mainly due to an increase in SaaS and services as a percentage of segment revenue.
Research and Development Expenses
 Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Research and development$28,784 $32,205 $(3,421)(11)%$59,489 $65,714 $(6,225)(9)%
as % of total net revenue21 %21 %23 %21 %
Our research and development expenses consist primarily of employee salaries and related expenses, contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all of which are associated with the design and development of new products and enhancements of existing products. The research and development expenses are net of French Research and Development (“French R&D”) credits.
Research and development expenses decreased by $3.4 million and $6.2 million in the three and six months ended June 28, 2024, respectively, compared to the corresponding periods in 2023. The primary reasons for these decreases include headcount reductions related to restructuring activities, which resulted in $1.3 million and $1.5 million decreases in the Video business for the three and six-month periods, respectively. Additionally, there were $2.1 million and $4.3 million decreases in the Broadband business for the three and six-month periods, respectively, due to resources being redeployed to support certain customer projects.
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Selling, General and Administrative Expenses
 Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Selling, general and administrative$39,821 $42,773 $(2,952)(7)%$78,686 $82,055 $(3,369)(4)%
as % of total net revenue29 %27 %30 %26 %
Selling, general and administrative expenses decreased by $3.0 million in the three months ended June 28, 2024, compared to the corresponding period in 2023, primarily due to a reduction in spending resulting from headcount reductions related to restructuring activities in the Video business.
Selling, general and administrative expenses decreased by $3.4 million in the six months ended June 28, 2024, compared to the corresponding period in 2023, primarily due to lower spending of $2.0 million resulting from headcount reductions related to restructuring activities in the Video business and a decrease of $1.4 million in non-recurring advisory fees incurred for the strategic review of the Video business. These decreases were partially offset by higher stock-based compensation primarily related to the acceleration of expenses for the awards granted to our former CEO.
Lease Related Impairment and Other Charges
 Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Impairment charges$9,000 $— $9,000 *$9,000 $— $9,000 *
*Not meaningful
In the second quarter of fiscal 2024, we reviewed the right-of-use lease assets and other fixed assets associated with our San Jose headquarters and our facilities in the UK for potential impairment due to an intended change in the use of these spaces. Following our analysis, we recorded total lease-related impairment and other charges of $9.0 million which primarily consisted of right-of-use asset impairment charges of $2.9 million, related leasehold improvement impairment charges of $4.2 million, and the fair value of other unrecoverable facility costs of $1.9 million. Refer to Note 4, “Leases”, of the Notes to our condensed consolidated financial statements for additional information.
Restructuring and Related Charges
We have implemented several restructuring plans in the past few years. The goal of these plans is to bring operational expenses to appropriate levels relative to our net revenues, while simultaneously implementing appropriate expense control programs. We account for our restructuring plans under the authoritative guidance for exit or disposal activities. The restructuring and related charges are primarily included in “Operating expenses-restructuring and related charges” in the condensed consolidated statement of operations. Refer to Note 11, “Restructuring and Related Charges”, of the Notes to our condensed consolidated financial statements for additional information regarding our restructuring activities.
 Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Total restructuring and related charges$11,482 $— $11,482 *$14,979 $83 $14,896 *
*Not meaningful
Restructuring and related charges increased in the three and six months ended June 28, 2024, compared to the corresponding periods in 2023, primarily driven by higher severance and employee benefit costs recorded in 2024, in connection with the 2024 restructuring activities. Refer to Note 11, “Restructuring and Related Charges”, of the Notes to our condensed consolidated financial statements for additional information.
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Interest Expense, Net
Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Interest expense, net$(1,424)$(800)$(624)78 %$(2,147)$(1,506)$(641)43 %
Interest expense, net in the three and six months ended June 28, 2024 increased by $0.6 million, compared to the corresponding periods in 2023, primarily due to higher interest rates for the borrowings under the Credit Agreement compared to the interest rate for the 2024 Notes. Refer to Note 6, “ Debt”, of the Notes to our condensed consolidated financial statements for additional information regarding the interest rates applicable to our outstanding loans.
Other Income (Expense), Net
 Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Other income (expense), net$619 $(136)$755 (555)%$330 $(429)$759 (177)%
Other income (expense), net in the three and six months ended June 28, 2024 increased by $0.8 million compared to the corresponding periods in 2023, primarily due to the fluctuation of foreign exchange gains and losses.
Income Taxes
 Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Provision for (benefit from) income taxes$(3,903)$7,471 $(11,374)(152)%$(6,352)$12,559 $(18,911)(151)%
The changes in provision for (benefit from) income taxes during the three and six months ended June 28, 2024, compared to the corresponding periods in 2023, were primarily due to the year-to-date pre-tax losses in the current fiscal year, which resulted in a tax benefit since there is no longer a full valuation allowance in the United States. The Company is forecasting pre-tax book income for the year, and anticipates recording tax expense during the remainder of 2024. The mandatory capitalization and amortization of research and development expenses in the United States were required starting January 1, 2022, by the Tax Cuts and Jobs Act, which resulted in income tax expense in the United States in the prior period due to the full valuation allowance in the United States at that time.
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Segment Financial Results
Below is a table of our segment financial results.
 Three Months EndedSix Months Ended
(in thousands, except percentages)June 28, 2024June 30, 2023ChangeJune 28, 2024June 30, 2023Change
Broadband
Revenue$92,937 $97,096 $(4,159)(4)%$171,834 $197,447 $(25,613)(13)%
as % of total revenue67 %62 %5 %66 %63 %3 %
Operating income (1)
13,781 18,066 (4,285)(24)%22,375 38,179 (15,804)(41)%
Operating margin % (1)
15 %19 %(4)%13 %19 %(6)%
Video
Revenue$45,803 $58,867 $(13,064)(22)%$88,966 $116,165 $(27,199)(23)%
as % of total revenue33 %38 %(5)%34 %37 %(3)%
Operating income (1)
(1,569)90 (1,659)(1,843)%(8,920)(1,336)(7,584)568 %
Operating margin % (1)
(3)%— %(3)%(10)%(1)%(9)%
Total
Revenue$138,740 $155,963 $(17,223)(11)%$260,800 $313,612