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Beauty star James Charles is in a bitter YouTube war for betraying Tati Westbrook. Here’s the history of his controversial past.

Beauty star James Charles is in a bitter YouTube war for betraying Tati Westbrook. Here’s the history of his controversial past.

james charles

James Charles attends the 2018 People’s Choice Awards.

Jon Kopaloff / Stringer / Getty Images

James Charles is widely known as one of the biggest beauty vloggers on YouTube. But after a public feud with his longtime friend Tati Westbrook on Friday, Charles has lost millions of followers overnight.

However, this isn’t the first scandal Charles has found himself involved in. The 19-year-old makeup artist has actually faced a number of controversies online throughout his career.

For example, Charles faced widespread criticism after posting an offensive tweet about the Ebola virus in 2017. He’s also been accused of editing his Instagram photos, “manipulating” people, and describing influencers as a marginalized group.

From his first scandal in 2017 to his most recent feud, here’s a look back at the beauty mogul’s controversial past.

James Charles faced his first major backlash after joking about Ebola in February 2017.

James Charles attends a Dior event in February 2017.

Donato Sardella/Getty Images

On February 16, 2017, James Charles posted a now-deleted tweet in which he joked about contracting the Ebola virus while visiting South Africa. He shared the tweet shortly after being named CoverGirl’s first CoverBoy.

“‘I can’t believe we’re going to Africa today omg what if we get Ebola.’ ‘James we’re fine we could’ve gotten it at chipotle last year’….” Charles said on Twitter, according to The Cut.

Twitter users were quick to criticize the then 17-year-old, and called his message “stereotypical and degrading.”

According to Seventeen, Charles also began to block users who called him out, and shared a tweet in which he seemingly told himself to “block and move on james block and move on.”

The makeup mogul later said on Twitter that he was “extremely sorry” for his tweet, and was “aware” that his message was “extremely offensive and degrading.” He also referred to the continent of Africa as a country.

In September 2017, Charles found himself in a middle of a feud with cast members from the horror film “It.”

James Charles (not pictured) once fought with “Stranger Things” actor Finn Wolfhard.

Frazer Harrison/Getty Images

Seven months later on September 7, 2017, Charles wrote in a tweet that he was “excited” to see the film “It.” But, according to BuzzFeed, the makeup artist quickly changed his mind about the film, and called it “awful” and “predictable” in a series of now-deleted tweets.

Fans of the movie weren’t the only ones to disagree with his tweets. Finn Wolfhard, an actor who starred in “It,” also sent Charles a message over Twitter.

“Why are you on your phone in the movie theater? Rule 1.” Wolfhard said on Twitter.

Charles first responded by saying he was “kinda honored” to be “dragged by a legendary child actor,” and then shared a two-minute-long video in which he apologized to Wolfhard and fans.

Charles also asked people on Twitter to “please shut up about using your phone during a movie,” as he felt that there were “more important things to worry about like, idk, the world ending.”

One month later, Charles was widely criticized for creating an “It”-inspired makeup tutorial on YouTube.

Charles uploaded an “It”-inspired makeup tutorial to YouTube in October 2017.

James Charles/YouTube

On October 8 2017, Charles uploaded a makeup tutorial titled “It Pennywise Glam Halloween Makeup Tutorial.” He opened the video saying, “I know everybody’s gonna say that this is the most hypocritical, ironic video of 2017 so far, and you’re probably right.”

“It would be way too good of an opportunity to pass up,” Charles continued. “Even though I personally did not enjoy the movie, Pennywise was the best.”

The following day, “It” actor Wyatt Oleff took to Twitter with a message that was seemingly about Charles, according to BuzzFeed.

“When you decide to exploit a movie that you hate for money & attention cause why not,” Oleff wrote on Twitter.

Charles faced backlash for calling Ariana Grande the “rudest celebrity” he’s ever met in March 2018.

James Charles said Ariana Grande unfollowed him on Twitter in 2017.

Evan Agostini/Invision/AP

On March 30, 2018, Charles uploaded a YouTube video in which vloggers Shane Dawson and Ryland Adams apply his makeup. Approximately 11 minutes into the video, Dawson asks Charles to name the rudest celebrity he’s ever met. He quickly replies, “Ariana Grande.”

“I haven’t really talked about it because I really like Ariana, I guess I just had a really crappy experience with her,” Charles said in his video.

According to Charles, the star followed him on Twitter, and exchanged direct messages with him following one of her concerts. But once fans called out Grande for following Charles in the midst of his “Ebola scandal,” the popstar unfollowed him so as to “not disappoint” her fans.

Grande’s fans immediately defended the star, according to Billboard, and said she did the right thing by unfollowing Charles.

Six months later, Charles found himself in another feud, this time with makeup mogul Marlena Stell.

James Charles feuded with Marlena Stell in 2018.

Jon Kopaloff / Stringer / Getty Images

YouTube’s beauty community saw tons of drama in August 2018, most notably between vloggers Jeffree Star, Manny MUA, Gabriel Zamora, Laura Lee, and Nikita Dragun.

Shortly after their feud subsided, Marlena Stell, the founder of the beauty brand Makeup Geek, took to Twitter on September 27, 2018. In a now-deleted tweet, she announced that she was working on a Netflix documentary about the beauty industry.

Charles responded to her tweet, saying, “Wait what?” He continued to tweet Netflix, saying he wanted to make an unbiased documentary “on the behind the scenes of the beauty industry and why the community is plummeting.”

He continued to say that he felt “livid” and “defeated” because “everything that [he puts his] heart and love and a ton of work into is always stolen by someone.” He then sent two tweets to Stell.

Stell first responded to Charles by saying she was approached by Netflix, and that “it would be great” to hear from an influencer for her documentary. Charles, however, did not accept her response, and the feud continued for hours, according to Dazed Digital.

Leading up to the release of his first-ever makeup product, Charles was accused by fans of creating fake eye-shadow swatches.

The James Charles x Morphe palette retails for $39.


James Charles announced his first-ever beauty product, the $39 James Charles x Morphe eye-shadow palette, in a YouTube video on November 2, 2018.

While swatching a black shade named “Spooky,” Charles is seen swiping the shadow across his arm, and appears to do so over another layer that he applied previously. Fans noticed the second layer, and began questioning Charles on Twitter.

Charles admitted to “pre-swatching” some of his eye-shadow shades on Twitter, and then conducted a live Instagram video in an attempt to prove that he created a high-quality product.

That same month, some fans said that pink shadows from the James Charles palette stained their eyelids and gave them hives.

Kodeerants describes her experience using the James Charles eye-shadow palette.


Twitter user @kodeerants uploaded a video on November 19, 2018, in which she accuses Charles of failing to advertise that some shades in his palette are not meant to be used on the eyes.

According to the Twitter user, her eyelids were stained pink and broke out in hives after she applied the shade “Skip.”

“You should never, ever, ever try to promote a product that does this to another human being,” she yelled in her video.

Charles defended himself in a tweet, saying “most pinks, purples, & reds all stain certain skin types.”

“You accusing me of lying to fans & not caring about people is a ridiculous cry for attention,” Charles continued. “If you have hives, consult your dermatologist, not me for likes on Twitter.”

Kodeerants did not accept his response, writing on Twitter: “Your lack of sympathy for someone who was harmed by a product with your name on it is truly shocking.”

Some called the makeup artist a hypocrite after he destroyed a James Charles x Morphe palette — something he criticized another YouTuber for doing.

James Charles burns his namesake Morphe palette for a YouTube video.

Jeffree Star/YouTube

At the end of December 2018, a YouTube star named Lauren Godwin shared a video of her destroying a James Charles x Morphe eye-shadow palette to TikTok.

“There are people who can’t afford the palette, can’t get it because it’s sold out, or who have been scammed by knock offs,” Charles replied in a now-deleted tweet, according to We the Unicorns. “And she’s gonna buy one just to destroy for likes… on tiktok? this ain’t it sis.”

Read more: People are destroying their James Charles makeup following his feud with fellow beauty YouTuber Tati Westbrook

Godwin followed up with a YouTube video, in which she said she had no harsh feelings towards Charles, and even bought an extra palette to use. Charles then replied in a tweet where he apologized to Godwin, saying it wasn’t that deep,” and that she shouldn’t receive hate.

A few days later, however, Charles appeared in a Jeffree Star YouTube video where the two makeup moguls are seen destroying makeup, including their own palettes. Many felt the video was hypocritical, and questioned Charles about it on Twitter.

In March 2019, Charles was accused by Reddit users of editing his Instagram photos.

The image on the left is from YouTube, and the one on the right is from Instagram.

James Charles/YouTube and Instagram

According to Revelist, people on Reddit began to accuse Charles of “faking his skill level” in March, as many of his makeup looks are extremely refined and proportional.

While the makeup artist has frequently admitted to using the photo-editing app Facetune on his photos, people on Reddit claimed that Charles was taking his editing too far.

“Photoshop absolutely can be art,” Reddit user jimmyjrdanceparty wrote. “But when you’re selling yourself specifically as a makeup artist and you’re editing your makeup to the point where it’s clearly not your skills in the final product, that’s incredibly disingenuous.”

Charles was widely criticized for saying he’s not “full gay” because he’s been attracted to women and transgender men.

Jeff Witteck does James Charles’ makeup for a YouTube video.

James Charles/YouTube

On April 12, 2019, Charles uploaded a YouTube video in which vlogger Jeff Witteck does his makeup. The two discuss dating and sexuality, among other topics, and at one point talk about the Kinsey Scale.

“So the Kinsey Scale is from like, zero to six,” Charles says to Witteck in his video. “Zero being like, completely straight, and six being like, completely gay. I truly believe the amount of people that are a flat-out zero, or flat-out six, is very, very small.”

When Charles says he would put himself on the scale at 5.5, Witteck replies, “So you’re not even full gay?”

Charles then says, “I mean, no. There have been girls in the past that I’ve thought have been really, really beautiful. There’s also been like, trans guys in the past too that I was really, really into for a moment in time.”

According to Nylon, the response from Charles upset many fans, who felt his answer was offensive, and discredited transgender men as “actual” men. Charles later apologized on Twitter.

After attending Coachella with Charles, YouTuber Gage Gomez accused the makeup artist of “manipulating” him.

Gage Gomez speaks about his experience with James Charles.

Gage Gomez/YouTube

Gage Gomez posted a YouTube video on April 29, 2019, in which he claims he was manipulated by Charles from January up until Coachella. Throughout his video, Gomez claims that Charles “pressured” him to hang out, and tried to “manipulate” him.

“James saw this as an opportunity to manipulate me as a person who may or may not have been trying to figure things out about their sexuality, after the fact that I told him I was straight multiple times,” Gomez says in his video.

Charles took to Twitter with a statement, in which he said Gomez “never” told him he was straight. Charles also claimed that Gomez was looking for “an opportunity” to spend time with influencers.

While attending the 2019 Met Gala, Charles was accused by fans of copying a red-carpet look worn by Zoë Kravitz — which he previously mocked.

Zoë Kravitz at the 2019 Vanity Fair Oscar Party, and James Charles at the 2019 Met Gala.

Evan Agostini/Invision/AP and Kevin Mazur/MG19/Getty Images

On March 11, 2019, Charles was featured in one of Tana Mongeau’s YouTube videos in which the two “brutally roast celebrity fashion.”

When discussing the gold-and-black mesh ensemble Zoë Kravitz wore to the 2019 Vanity Fair Oscar Party, both Charles and Mongeau say they don’t know who she is, and rate her outfit a zero out of 10. Charles also says Kravitz looks like “she didn’t finish getting dressed.”

But while attending the 2019 Met Gala in May, Charles arrived wearing a similar outfit, which included a mesh top and black pants.

According to Revelist, many Twitter users pointed out similarities between the two outfits and were upset with Charles for wearing a style that was similar to one he previously mocked.

Arguably his biggest scandal to date occurred on Friday, when beauty vlogger Tati Westbrook publicly ended their friendship in a YouTube video.

Tati Westbrook discusses the end of her friendship with James Charles.

Tati Westbrook/YouTube


James Charles

Read More

The 54 Best Things To Do in Seattle This Week: Feb 11-17, 2019

The 54 Best Things To Do in Seattle This Week: Feb 11-17, 2019

See troupes of artists (like Sayaka Ohtaki and Tyler Gumm, pictured) from around the world perform in the contemporary dance festival

Chop Shop: Bodies of Work

this weekend.

Christopher Peddecord

Our music critics have already chosen the

42 best music shows this week

, but now it’s our arts critics’ turn to recommend the best events in their areas of expertise. Here are their picks in every genre—from the memoir-adapted play

American Junkie

to Jacob Lawrence Gallery’s

25th Anniversary Party! Playfulness as Resistance

, and from

Noir City


Carla Hall at JuneBaby

. See them all below, and find even more evsents on our complete

Things To Do calendar


Jump to: Monday | Tuesday | Wednesday | Thursday | Friday | Saturday | Sunday

Events may be subject to change due to snow. Do consider double-checking event websites before leaving the house



140 LBS

Local theater powerhouse Sara Porkalob will direct the world premiere of Susan Lieu’s autobiographical solo show 140 LBS. When Lieu was young, her mom died two hours into a tummy tuck operation. The surgeon was charged with medical negligence, and her family struggled to move on from the loss. Decades later, Lieu decided to confront her mother’s killer, as well her mother’s and her own relationship with the “impossible ideal of Vietnamese feminine beauty.” Porkalob is known for her ability to faithfully render a handful of wildly different characters in her solo shows, so look for her to draw out a similar talent in Lieu. RICH SMITH


This show looks like a fun mess. At the beginning of Branden Jacobs-Jenkins’s Pulitzer-shortlisted revival of a 15th-century morality play, none of the actors know which role they’re going to play. Actors playing the characters God and Death randomly select the roles for the other actors, and the show gets underway. Ben Brantley at the New York Times called the first run “self-consciously whimsical and repetitive,” but he didn’t seem to say it in a mean way. Strawberry Theatre Workshop’s production features some actors who are good on their feet—Justin Huertas, Lamar Legend, MJ Sieber—and so I have every confidence that they’ll be able to turn this “work in progress,” to use Brantley’s terms, into an exuberant romp about the inevitability of death. RICH SMITH



Alfredo Arreguín: Life Patterns

This Mexican-born Seattle artist, according to his representatives at Linda Hodges Gallery “recognized as one of the originators of the Pattern and Decoration movement in painting,” imitates mosaic, tile, and floral decorations in oils. A salmon fisher and nature lover, he often depicts life in the Salish Sea. (As a side note, he was also pals with the writer Raymond Carver.) This exhibition will mount more than 30 of his works, particularly his more recent achievements.

Closing Sunday



Outstanding: Queer Comic Competition

Queerspace Magazine and Gutter Twink Productions will produce this live-taped evening of comedy from the PQUILTBAG set. Bobby Higley will host a lineup of winners of the last round: hilarious folks Claire Webber, Corina Lucas, D Martin Austin, Evelyn Jensen, Mitch Slap, and Riley McCarthy.



The Atomic Bombshells in J’ADORE!: A Burlesque Valentine

The boisterous Atomic Bombshells troupe has been instrumental in Seattle’s burlesque revival, so for lovers of feathery, busty, glitzy fun, there’s no better spectacle to attend for V-Day. Special guests Cherdonna Shinatra and local dance collective Purple Lemonade will help founder Kitten LaRue and company celebrate the showgirls’ 11th anniversary. 



Anthony White: Smoke and Mirrors

White is 24 years old and his work is maximalist to the highest degree. It has been causing waves in the Seattle art scene, and for good reason—it’s really fucking cool, and it seemingly came out of nowhere. He makes his giant, vibrant paintings on handmade wooden panels, although calling them paintings is almost a disservice to them. They occupy a unique middle ground between painting and sculpture. His work is very much of this century: blisteringly bright and loud, distinctly American, inspired by (and commenting on) technology. JASMYNE KEIMIG

Closing Saturday

Joe Rudko: Same as it ever was

Seattle-based artist Joe Rudko cuts up found photographs to create and reinterpret the way we encounter and think about images—sometimes to trippy result. Whether rearranging the shredded photos into a complex labyrinth or seemingly weaving together two different pictures into a lattice, Rudko makes you think about the physicality of the photo itself. His exhibition at Greg Kucera Gallery is sure to subvert the traditional way we view photography. JASMYNE KEIMIG

Closing Saturday



Samuel Sinyangwe: Using Data to Advance Racial Justice

Social justice-focused data scientist Sinyangwe founded the activist website We the Protestors, which helps to track police violence and advance solutions to systemic racist repression through Campaign Zero. His influence has been recognized on Forbes’s 30 Under 30 list and on the Root 100. UW Public Lectures brings him to speak to Seattleites.



‘To Sleep With Anger’ with Charles Mudede

Per Charles Mudede: ““Here are two things that cannot be contested: The greatest film made by a black American is Charles Burnett’s To Sleep with Anger, and the greatest film made by a black African is Djibril Diop Mambéty’s Hyenas. […] [To Sleep With Anger] is unknown, and was completely ignored by the Oscars, because it’s an intelligent film about black people, and yet has almost nothing to say or to do with white racism.” After the Friday screening of this masterpiece, stay on for a talk by Mudede (who’s celebrating his birthday!).  




As it turns out, Klaus Nomi wasn’t just the singer in a viral video you may have seen in college! He was a new-wave vaudevillian with a soprano that could melt the heart of even the heaviest of heavy metal rockers in the 1980s. (If you were out of the loop, look up the song “Lightning Strikes” on YouTube.) He was a fixture in New York’s underground music scene, and his German expressionist wardrobes, incredible facility with makeup, and operatic synths had a big influence on David Bowie and the Talking Heads. In Alien/Angel, Devin Bannon will bring this larger-than-life character back to the stage, with help from Annastasia Workman on piano and Kathy Moore on guitar. Boylesque dancer Waxie Moon is running the choreography for Bannon’s two backup dancers, and Keira MacDonald will direct. Enjoy this tale of a queer icon alongside a menu of pastry and pies, a nod to Nomi’s talent for baking. RICH SMITH

American Junkie

In his book American Junkie, Seattle memoirist Tom Hansen presented his no-bullshit, matter-of-fact account of heroin addiction, self-destruction, and eventual recovery in the 1990s. According to press materials, Jane Jones and Kevin McKeon’s adaptation of his story for the stage will be “a ride through Seattle’s music scene during the grunge era.” No doubt Hansen’s story will also resonate with people living through the current ravages of the opioid crisis. RICH SMITH


The slinky dancers of Pike Place’s kitschy cabaret return with another tasty show. Ever wanted to ogle athletic dancers twirling from chandeliers inches from your face? Go. There’s also a family-friendly brunch version that you can guiltlessly take your out-of-town relatives to.

Hollywood & Vine

Enjoy a vintage and magic-filled tribute to Tinseltown with the 20-year-old circus troupe Teatro ZinZanni as they perform in their new Woodinville space.

I Do! I Do!

Get ready to weep nostalgic tears at the Village Theatre’s production of a multiple Tony Award-winning musical by Tom Jones and Harvey Schmidt, which portrays 50 years of a loving marriage.

Uncle Vanya

For the last eight years, the Seagull Project has been working with ACTLab to stage all four of Anton Chekhov’s major canonical works. The production of Uncle Vanya is the fourth and final installment, marking the end of a long and theatrically fruitful partnership. This is a big deal, and a real turning point for the group, and nobody is sure what they’ll do next, but I’m real excited about their take on this hyper-melancholic doozy from the great Russian realist about unrequited love, adultery, boredom, and despair. (If you’ve been tuning in for the last several years, you’ll know those are all common themes.) This show has three of my favorite actors in town—Alexandra Tavares, Peter Crook, and Kevin Lin—so there’s no way it’s not going to be good. RICH SMITH



Bawdy Storytelling’s ‘Best of Bawdy’

Storytellers, porn stars, sex educators, and others will gush over their sexual escapades live. Think The Moth but dirtier. If you’re stumped as to where to take your date on Valentine’s Day, this event promises to be “mega-date material.” 

Comedy of Love: A Valentine’s Day Improv

Make your Valentine’s Day spontaneous and silly at this show inspired by your loves, lusts, and romantic mishaps.

Jen Kirkman

You’ve seen Jen Kirkman on Chelsea Lately, @Midnight, Conan, The Tonight Show With Jay Leno, The Late Show with Stephen Colbert, and her Netflix specials I’m Gonna Die Alone and Just Keep Livin’?, but did you know she’s also a writer on The Marvelous Mrs. Maisel? She’s also penned the bestselling books I Can Barely Take Care of Myself: Tales From a Happy Life Without Kids and I Know What I’m Doing — And Other Lies I Tell Myself.

Your Funny Valentine

Take some of the pressure off the holiday by hearing funny sets from stand-up comics. Cycle Dogs will be on site selling their vegan noshes.


The Magic Lantern of Ingmar Bergman

Swedish visionary film director Ingmar Bergman would have been 100 this year. His deeply introspective, unabashedly emotional, despairing yet strangely life-affirming oeuvre will once again be onscreen at Seattle Art Museum (in association with the Nordic Museum). Oh, hey, and they’re showing one of the most traumatizing movies about relationships ever made, Cries and Whispers, on Valentine’s Day. Happy coincidence? JOULE ZELMAN

Pr0n 4 Freakz

ScumTrust Productions and Northwest Film Forum are partnering to bring you queer and trans smut every two months. Arrive early to hang out with freaky new friends and shop the “sexy witch market.” Stay on after the dirty movie for a Q&A on sex, pleasure, queerness, and gender.


Valentine’s Day Dinner

If you plan on taking your valentine out to dinner on Valentine’s Day, your options range from classic (like a “love-inducing” menu at Tarsan i Jane and the French-inspired Valentine’s Day Romantic Dinner at Maximilien) to decidedly unconventional (like the 20-course concept-less tasting menu at addo, W Seattle’s Rosé over Roses, Darrell’s Tavern’s Valentine’s Day Insect Feast, and a beer-forward feast at Serious Pie). Other promising prixe-fixe menus can be found Adana, RN74, Super Six, Sushi Kappo Tamura, and Terra Plata.


Gold Dust Women: Drag Does Fleetwood Mac

For the past five years, Kremwerk has been welcoming the weirdest and most original drag artists in the city, and the nightclub’s fifth anniversary happily coincides with the most romantic day of the year. This evening will be devoted to the theatrical, harmonic pop of Fleetwood Mac, which will provide the score to dance/performance art/general bizarrerie by Americano, Betty Wetter, Monday Mourning, and One. The notorious Cookie Couture will host.


Capitol Hill Art Walk

Every second Thursday, rain or shine, the streets of Capitol Hill are filled with tipsy art lovers checking out galleries and special events. In February, don’t miss Love Is a Four-Letter Word.



Yes Anderson

Run out of Wes Anderson movies to watch? Scratch that quirky itch with a brand-new “film” acted out by improv performers.




Settings from the “jazz club to the apocalypse” provide the backdrop for Jerboa Dance Company’s movement exploration of “power and gender.” After each evening performance, stay on for a swing dance and after-party.

Nicola Gunn: Piece for Person and Ghetto Blaster

Fans of bone-dry British humor, moral conundrums, and experimental theater take heed. Nicola Gunn is coming to town with one of those intellectual monologue + modern dance numbers, during which she will explore a very particular situation. While walking along a canal in Belgium, a woman spots a man throwing rocks at a sitting duck. What should she do? Should she walk by? Should she confront him? Should she sneak up behind him and push him into the water? Does she even owe it to the ducks to defend them in the first place? And what if she, herself, is a duck? You’ll have to go to find out. If the glowing reviews are any indication, then I think you should. RICH SMITH

Stripped Screw Burlesque presents: Hard Love: Valentine’s Day

Mod Carousel and Stripped Screw’s “dangerous dames” will celebrate the debaucherous side of Valentine’s Day with these vaudevillian shows. 


Didier Hamey: Les Bonshommes

There’s something about Didier Hamey’s figures—or perhaps it’s better to call them entities—that’s a bit mystic but also very beautiful. These beings seem to inhabit several different planes all at once, taking forms that blend leaves, animals, and human heads to create something almost outside recognition. Inspired by the tradition of carnival across the world, in Les Bonshommes, the French artist works in his favored medium of drypoint etching to create a new cast of carnival characters. The results are a little haunting and also dreamlike, a true testament to Hamey’s expansive imagination. JASMYNE KEIMIG

Closing Saturday



Chris D’Elia

Reasonably famous for his roles on Undateable and Whitney, Chris D’Elia is a handsome T-shirt-and-jeans-wearing schlub whose comedic material is common as hell, but his animated, on-point gestures, vocal inflections, and impressions amplify his humor into some genuine ROFL bits. He has a PhD in analyzing dude-bro behavior, and some high points of his stand-up include a brutal takedown of Drake, a breakdown of the best and worst laughers, and why Russians are always angry. His staunch stance on birthday parties: “Birthday parties are like penises—I like mine and that’s it.” D’Elia’s 2015 comedy special, Incorrigible, aptly summarizes his onstage persona—yet he’s totally endearing with it. DAVE SEGAL


La Chambre de Valtesse XXX

For those with a yen for high-end kink, the performers of Valtesse will revel in opulent “couture burlesque, aerial, whips, chains, dance, and doms.” Look out for special guests like Entwined, Moth and the Masque, Porcelain (performing on V-Day weekend), 2018 Miss Exotic World Inga, and others who’ll make the evening extra titillating. Wear black, red, and/or fetish gear to fit in, and stay on after the show for a party by the fireplace.



Noir City

The 2019 edition of this excellent annual festival features classic films, many of them newly restored. It closes with the underappreciated race noir Odds Against Tomorrow, which has one of the creepiest racist scenes in all of cinema. It happens like this: White ex-con Earle (Robert Ryan) is walking down a city street. Birds are in the air and children are playing on the sidewalk. One of them, a black girl, accidentally bumps into Earle. He picks her up and says to her small and confused face: “Hey, you little pickaninny, you are going to kill yourself flying like that.” The girl smiles weakly; he smiles wickedly, puts her back down, and walks into the seedy Hotel Juno. What makes the scene so creepy is not so much that he calls the girl a pickaninny, but that he talks to her in the way one usually does to a dog or a cat. Earle can’t see the human in the black girl, but only a lower, dim animal. This unsettling scene sets us up for the bad news Earle is about to receive from the planner of a bank heist: He has to work with a black man, Johnny (Harry Belafonte). Earle hates black people. He wants nothing to do with them. But he needs the money, and the heist will not work without the decoy of a black man. The ending of this film is a full-blown race apocalypse. CHARLES MUDEDE


Twisted Cabaret Presents: My Twisted Valentine

Welcome Frank Oliver and his “retinue” of European circus stars—what? It’s just him? That’s right: Oliver plays every single juggler, acrobat, magician, musician, mime, and everyone else onstage.



25th Anniversary Party! Playfulness as Resistance

Put a spring in your rebellious step at this art party, featuring attractions by some of the most playful artists around: Colleen Louise Barry (curator of Mount Analogue) with her ball pit, Timothy Rysdyke (curator of the Factory) making drinks, and artist Claire Cowie with her temporary tattoos. Plus music by SassyBlack and Felisha Ledesma.

Gretchen Frances Bennett: Air, the free or unconfined space above the surface of the earth

Gretchen Frances Bennett’s drawings shimmer like an oil slick in the sun, seemingly capturing the full spectrum and color of light—like an image that you see just through your eyelids, an impression of something bright that unfurled before you. The Seattle artist’s use of popular media, like videos on YouTube and personal photographs, give her drawings a granular-like quality, as if they were transmitted to your eyes through radio waves. But there’s also a raw emotional charge to them. Bennett will be showing key works from the last 10 years, as well as debuting five new drawings and a collaborative slideshow. JASMYNE KEIMIG

Opening Saturday


Chain Lynx Fence

Stranger arts calendar editor Joule Zelman will host another night of all-queer, femme, and nonbinary comedians, adepts of improv, stand-up, and sketch. The idea is to concentrate the immense amount of talent in the queer scene with a focus on people who are often marginalized in comedy—still!


Carla Hall at JuneBaby

For Black History Month, JuneBaby chef Edouardo Jordan is enlisting some major talent, including the ebullient Nashville-born chef and TV personality Carla Hall, one-time cohost of ABC’s cooking-themed talk show The Chew and former contestant and fan favorite on Bravo’s Top Chef and Top Chef All-Stars. Hall—who spent years working as a runway model in Paris, Milan, and London in the 1990s, and ate her way through Europe—cooks Southern food inspired by her memories of her grandmother’s Sunday suppers and espouses a philosophy of “cooking with love,” insisting that care will come through in the finished product. (It seems to check out: The inimitable Jacques Pépin once said he could “die happy” after tasting her fresh peas.) At this event, she’ll bring her soul-food stylings to JuneBaby’s menu. JULIANNE BELL

Chef Collaborative Dinner at Marian Built Loft

Cook a multi-course meal from Julien Perry’s Seattle Cooks: Signature Recipes from the City’s Best Chefs & Bartenders, with acclaimed chefs Zoi Antonitsas (of Little Fish), Aaron Tekulve (of New American pop-up Surrell), and Perry himself.

Magnuson Winter Night Market

Careful observation tells us that If there’s one thing Seattleites love more than weed and coffee, it’s pop-up markets (have you seen this place around the holidays?). The popular Magnuson Winter Night Market brings over 100 local “makers, finders, and foodies” selling their goods in one spot. Whether you’re hunting for a late Valentine’s Day gift or you’re in the mood to find some cool stuff for yourself, you’re bound to come across something that catches your eye (or your nose). You can also bundle up for outdoor lawn games and keep warm by dancing to live DJs and drinking beer in a heated garden. Go get your thrills.

Raclette Party

It’s chilly outside. Warm up with melty cheese draped over baguettes, veggies, and charcuterie at this raclette party. Your meal will be paired with wine from Seven Hills, Double Canyon, and Archery Summit.

WineSeattle: Washington Wine Blog Critics Choice

Gaze upon the city’s skyline while you taste a stellar lineup of vintage Washington wines. 



Kremwerk has been Seattle’s mecca for queer parties for five years, and it’s celebrating this anniversary by bringing back one of its most loved events, Cathedral, for one night only. Cathedral debuted in 2014, creating a rowdy scene that featured Seattle’s best queer freaks, genre-bending drag artists, and fun DJs in an unpretentious space. This return of Cathedral will feature Amoania, Cucci Binaca, and Butylene O’Kipple as drag performers; Gag Reflex, LivWuTang, and Saturn.9 as DJs; plus some mystic visuals from Nasty.head. Dress for a photo booth and go feel your fantasy. CHASE BURNS

Live Wire Radio

Luke Burbank’s Live Wire is an NPR-type variety program based in Portland, Oregon, featuring artists, writers, filmmakers, and musicians in conversation. See it live!

Ru-Pocalypse Now!

In a third day of celebrating Kremwerk’s five years of drag shows, Baby Guuurl & Angela Visalia will host an evening of performances of tracks from RuPaul and her queens. 


Marlon James: Black Leopard, Red Wolf

Jamaican author Marlon James scooped up the Man Booker Prize in 2015 for A Brief History of Seven Killings, his polyvocal, linguistically dense novel about the attempted assassination of Bob Marley. The literary world rightfully went nuts over it—and they’re likely to do the same for his new book, Black Leopard, Red Wolf, which the New Yorker‘s Jia Tolentino described as “an African Game of Thrones.” The book is the first in a new fantasy trilogy that relies heavily on African myth. The story follows a hunter named Tracker, who is on a quest to find a lost boy. RICH SMITH



Chop Shop: Bodies of Work

This contemporary dance festival has presented performances from troupes and artists around the world, with the goal of reaching diverse audiences and connecting people of all abilities with dance instruction. The artists this year will be Lauren Horn//Subira vs. Movement Dance Company from Windsor, CT; Javier Padilla & the Movement Playground, Julia Antinozzi, and Margot Gelber & Dancers from New York; the Stone Dance Collective from Seattle and the Eastside; Lydia Relle from Phoenix and Seattle; natalya shoaf from San Francisco; and Julie Crothers from Oakland.



Match Game: Something This Way Furry Comes

Contestants will try to guess local celebrities’ answers to silly questions during this beloved, long-running, ribald series run by Richard Rugburn and Miss Moist Towelette. The theme this time is “Something This Way Furry Comes.”

Maz Jobrani: The Still Touring Tour

After George W. Bush declared North Korea, Iran, and Iraq to be the “Axis of Evil,” Tehran-born Maz Jobrani and other entertainers riposted with their Axis of Evil tour. And, as the title proclaims, Jobrani is still indeed around, drawing on the ever-streaming font of material that is Western prejudice against and misunderstanding of Middle Easterners. Now, Jobrani stars in Superior Donuts with Jermaine Fowler. He’s performed at the White House, on Showtime, and in many films, such as Jimmy Vestvood: Amerikan Hero and Friday After Next, and is a Wait Wait…Don’t Tell Me! panelist.


Cine Mexicano: ‘70s Art House

See very different Mexican art house films from the 1970s, including tonight’s Tívoli, Alberto Isaac’s attack on conservative political virtue-signaling set in a burlesque theater. Co-presented with Consulado de México en Seattle.


Alki Oyster Fest 2019

At the second annual Oyster Fest on Alki Beach, slurp fresh Hama Hama oysters alongside a glass of wine or craft beer from nearby Ampersand Cafe and West Seattle Brewing Company while listening to live music. Net proceeds benefit the Puget Sound Restoration Fund, whose mission is to “restore marine habitat, water quality, and native species in Puget Sound through tangible, on-the-ground projects.” JULIANNE BELL


Awaiting Oblivion Book Launch

Anisa Jackson and Tim Smith-Stewart will curate a book and zine fair to celebrate the launch of Tim Smith-Stewart and Jeffery Azevedo’s new book, Awaiting Oblivion, which the authors describe as “a constellation of texts that exist in dialogue with awaiting oblivion in some way.” Look forward to readings and performances by poet Manuel Arturo Abreu, Alexandre Noble, Cristien Storm, and others.

Jean Godden: Citizen Jean

In her book Citizen Jean, Seattle writer and city councilmember Jean Godden shares her perspectives on the World’s Fair, the citizen-led battle against freeways, the fight to keep Pike Place Market Seattle-owned, and other significant Seattle events. She’ll be joined in conversation by Cathy Allen. 

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Harmonic Inc (HLIT) Q4 2018 Earnings Conference Call Transcript

Harmonic Inc (HLIT) Q4 2018 Earnings Conference Call Transcript

Image source: The Motley Fool.

Q4 2018 Earnings Conference Call
Feb. 04, 2019, 5:00 p.m. ET” data-reactid=”23″ type=”text”>Harmonic Inc  (NASDAQ: HLIT)

Q4 2018 Earnings Conference Call

Feb. 04, 2019, 5:00 p.m. ET

Welcome to the Fourth Quarter 2018 Harmonic Earnings Conference Call. My name is Carmen, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.

Now, I would like to turn the call over to Evelina Kaufmann (ph) Investor Relations. Evelina, you may begin.

Thank you, operator. Hello, everyone, and thank you for joining us today for Harmonic’s fourth quarter 2018 earnings conference call. With me today are Patrick Harshman, our CEO; and Sanjay Kalra, our CFO. Before we begin, I’d like to point out that in addition to the audio portion of webcast, we’ve also provided slides to this webcast, which you’ll see by going to our webcast on our IR site.

Now turning to slide two. During this call, we will provide projections and other forward-looking statements regarding future events or future financial performance of the company. Such statements are only current expectations and actual events or results may differ materially. We refer you to documents Harmonic files with the SEC, including our most recent 10-Q and 10-K reports, and the forward-looking statements section of today’s preliminary results press release. These documents identify important risk factors, which can cause actual results to differ materially from those contained in our projections or forward-looking statements.

And please note that unless otherwise indicated, the financial metrics we provide you on this call are determined on a non-GAAP basis. These items, together with corresponding GAAP numbers and a reconciliation to GAAP, are contained in today’s press release, which we’ve posted on our website and filed with the SEC on Form 8-K. We will also discuss historical, financial and other statistical information regarding our business and operations and some of this information is included in the press release. But the remainder of information will be available on a recorded version of this call or on our website.

Well thanks, Evelina, and welcome everyone to our Q4 call. We are pleased to again be reporting a strong quarter with revenue growth and profitability driven by the ongoing success of our strategic transformation, CableOS and video streaming software. Specifically, continued CableOS momentum delivered 79% year-over-year revenue growth for our Cable Access segment. Well a combination of over-the-top streaming and ultra high definition wins drove a record 14.2% operating income for our video segment. Putting it all together, combined corporate Q4 results were 12% year-over-year revenue growth, 11.2% operating income, $0.11 EPS and $6.6 million cash generated from operations.

So taking a closer look at our Cable Access segment. We continue to expand the combined number of commercial deployments and field trials, now with 29 global customers. Among these we’re growing list of industry heavy hitters, including four of the top eight North American and European cable operators and sixth of the named cable operators, leading the new 10G or 10 gigabit initiative announced recently at CES. Focusing first on our commercial deployments to date, CableOS is now powering high speed data service for over 535,000 residential and business cable subscribers, demonstrating that our fully virtualized technology is being deployed at scale enabling substantial operational benefits relative to traditional hardware-based solutions. These initial CableOS deployments are primarily in a traditional centralized CMTS architecture, with a typical application as DOCSIS 3.1 upgrade and virtualized software economics and future distributed network migration flexibility underpinned our competitive advantage. We expect continued momentum during 2019 for these more traditional applications.

Turning next to the heavy trial activity, we’ve been involved with. Based on challenging, the groundbreaking progress made over the past several months, we expect the volume 2019 deployments of new distributed access architecture or DAA networks with multiple Tier 1 operators. During this quarter, Q1, we were still be on the on-ramp, continuing support of lead customers who are now in the process of implementing specific trial informed improvements to their deployment plans, not to the CableOS core, which has been solid for some time, but rather to ancillary networking and orchestration elements of our customers’ end-to-end DAA implementations.

For example, in one case, the customer has decided to pivot from 40 gig to 100 gig compute and networking infrastructure improving the economics of their planned large DAA rollout seamlessly supported by CableOS’ software-based architecture. While impacting the pace of deployments in Q1, we see enhancement such as this is further bolstering the scalability, resiliency and return on investment to these pending DAA rollouts, hence our conviction in the successful 2019 ramp. Indicative of this growing DAA momentum, during the quarter we shipped over 1,000 new DAA nodes which we expect to be physically deployed in the field along with still to be purchased software licenses in the coming months.

The combination of these DAA node shipments and continued centralized CMTS architecture sales drove another quarter of financial growth. As Sanjay will detail momentarily, segment revenue was $24 million, up 79% year-over-year. Segment gross margins again improved and operating profit was breakeven. So the big picture here is over $90 million of revenue we delivered in 2018, was really just the beginning. Our ongoing expansion of design wins, our deployment planning intimacy with bellwether customers and growing consensus among global cable operators, but the time is now to begin seriously working on multi-gigabit network upgrades and the cloud native and distributed access technologies pioneered by Harmonic, all the way to go, all uniquely position Harmonic for sustained growth. We remain confident and determined, that CableOS is poised to have a major impact in the global cable market, in 2019 and beyond.

So turning now to our video segment. Here also it’s clear that our strategic transformation has created a business, that is now better positioned strategically and stronger financially, driven by both competitive and new customer acquisition momentum. Video segment revenue was up sequentially and year-over-year. Gross margin was a solid 57.5%. And operating income was a record 14.2%. Central to this video strategic transformation has been the move from historically broadcast centric appliance business to more profitable and predictable over the top streaming software business.

Harmonic has now deployed over 37,000 high-quality live over-the-top streaming channels worldwide, up 5% sequentially and 20% year-over-year, a testament to truly industry-leading technology in an increasingly strong competitive position in streaming media. We’re pushing this transformation further through our nascent Video SaaS business, where the number of active customers has grown to 19, up over 170% year-over-year. Among these customers are both established and new streaming players, representing and expanding addressable market. But we’re still in the early adopter phase of our SaaS journey. Our streaming market positioning and SaaS credentials are steadily improving. Hence, consequently our 2019 business plan anticipates accelerating recurring revenue business.

One final pillar of our rejuvenated video story. We continue to see growing demand for Ultra High Definition solutions. UHD related sales in the fourth quarter were up 58% sequentially, which continues the strong sequential UHD growth trend we saw throughout the year. Frankly, it’s been a long time coming and we’re pleased to be finally taking advantage of the growing worldwide investment cycle, the deploying and monetizing, high quality, ultra high definition programming. So look, our video business has come a long way. I believe we stand head and shoulders above our competitors in terms of technology and market reputation, particularly when it comes to streaming high quality live content, and we are now establishing a corresponding track record of consistent financial performance.

So in summary, we are broadly looking at both our Cable Access and Video Business segments. After an extended investment cycle, we’ve done something really unique in transforming to industry leading cloud native technologies and empowering our customers with these new solutions. As a result, we’re delivering substantially improved financial performance, despite considerable market turbulence, and have positioned the business for a new phase of value creation.

And on that note, I’ll now turn the call over to you, Sanjay, for more detailed discussion of our financial results and our outlook.

Thanks, Patrick. And thank you all for joining our call this afternoon. Before I share with you my detailed quarterly remarks, I would like to remind you that the financial results I’ll be referring to are provided on a non-GAAP basis. As you just heard from Patrick, our fourth quarter performance was solid. We are pleased that we delivered another profitable quarter with strong results across a number of key financial metrics.

Total revenue was within our guidance range. Gross margins exceeded the high end, while our operating expenses came in at low end of our guidance range. This resulted in a profitable quarter with stronger EPS, than we have seen in several years. This was coupled with a strong balance sheet and working capital and another sequential improvement in cash. This is the sixth consecutive quarter of solid financial and strategic execution.

As we turn to slide six, to review our Q4 results. Revenue was $113.6 million. This compares to $101.4 million in Q3 ’18 and $101.1 million in Q4 ’17, resulting in a 12% quarter-over-quarter and year-over-year growth. The sequential revenue growth was primarily driven by our Video segment and year-over-year growth was primarily driven by our Cable Access segment. Cable Access revenue was $24.1 million compared to $28.1 million in Q3 and $13.5 million in the year ago period, reflecting a 14% decrease quarter-over-quarter, but a 79% year-over-year growth. This quarter brings Cable Access segment revenue to $90.9 million for the full year 2018, compared to $38.9 million for 2017, an increase of 92% after adjusting for segmental reporting change we made last year.

As you have seen, we’ve been steadily ramping the activity in our Cable Access segment over the last four quarters and are leading a fundamental capability upgrade in access architecture for cable operators. As Patrick discussed, the opportunity is a substantial global upgrade that will take time to ramp up as Tier 1 customers get rolling. As a result of both the scale and extent of these upgrades, we expect to experience some near-term ups and downs during the transition. Still there is no doubt, that we are at the forefront of driving these cable operator transitions. Of particular note, in Q4, we continue to see shipments of CableOS nodes for new distributed access architectures, underscoring and expanding addressable market opportunity for our Cable Access segment.

We are very pleased that our execution in our Video segment, reporting revenue of $89.5 million compared to $73.3 million in Q3 and $87.6 million in the same quarter last year. This reflects a 22% quarter-over-quarter growth and 2% year-over-year growth. In Q4, we had two greater than 10% revenue customers. Comcast, which contributed 15% of total revenue, and Charter, which contributed 14% of total revenue. Gross margin was 54.5% in Q4 compared to 52.1% in Q3 and 50.1% in Q4 ’17. Cable Access gross margin was 43.6% in Q4 compared to 38.7% in Q3 and 29.9% in Q4 ’17. The sequential improvement in gross margin is the result of favorable product mix and improving DAA node costs.

Video segment gross margin was 57.5% in Q4 versus 57.2% in Q3 and 53.2% in Q4 ’17. We are particularly pleased that we delivered record video margins concurrently with strong video revenues during Q4, indicating our market leadership position, our associated ability to command product pricing premium and our ongoing favor to more software and SaaS. Total subscription ARR for our SaaS deals was $9.6 million at the end of Q4 ’18 compared to $8.6 million at the end of Q4 ’17. This 12% increase in annual ARR reflects both an increase in SaaS customer base, which increased from seven customers in Q4 ’17 to 19 customers in Q4 ’18, growing 171% year-over-year and increased usage of our SaaS offerings.

We are still in our early stages of our SaaS evolution and continue to grow and expand our installed base. We believe that as both the number of customers and user grows, we will see accelerating growth in ARR. We maintain strong expense control during the quarter, without compromising of strategic growth investments. As a result, our Q4 operating expenses were $49.3 million, marginally higher than our recent operating expenses of $47.2 million in Q3 and comparable to $49.1 million in Q4 ’17. The sequential increase is primarily reflective of higher sales commissions and other incentive compensation associated with our strong results.

Please note that as a percentage of revenue, our total OpEx was only 43.4% in Q4 ’18 compared to 46.5% in Q3 and 48.6% in Q4 ’17. In fact, this was our lowest quarterly OpEx as a percentage of revenue in more than five years. Q4 operating income of $12.7 million, was driven by our Video segment, which contributed to the entire $12.7 million and the record 14.2% segment operating margin in the quarter. This marks sixth consecutive quarters of video operating profitability and full year segment operating margin of 8.3%. Also we are pleased that our Cable Access segment was breakeven this quarter, down slightly from the marginal $400,000 profit in the prior quarter. Our strong Q4 operating income of $12.7 million compares to $5.7 million in Q3 and $1.6 million in Q4 ’17. We ended Q4 with a weighted average diluted share count of 89 million compared to 87.8 million in Q3 and 82 million in Q4 ’17. The sequential increase of approximately 1.2 million shares is primarily due to 0.6 million shares of previously granted RSUs and options becoming dilutive as a result of an increase in our average stock price during the quarter. Approximately 0.5 million shares added as a result of weighted average impact of previously issued RSUs and options and approximately 0.1 million shares of additional Comcast warrants becoming in the money during Q4 as a result of an increase in our average stock price.

Q4 EPS was $0.11 compared to Q3 EPS of $0.04 and a breakeven EPS in Q4 ’17. The sequential and year-over-year improvements in EPS are a result of stronger margins and higher revenues from our new products coupled with vigilant cost management. Q4 bookings were $92.8 million compared to $79.5 million in Q3 and $122.9 million in Q4 ’17, resulting in a book-to-bill ratio of 0.8. This booking result was in line with our expected range as mentioned during our previous call. In particular, we experienced a delay in significant annual service contract renewal bookings of approximately $9 million which we booked in early January 2019. These specific bookings have historically been received in December each year. We ended with a book-to-bill ratio of 0.95 for the full year 2018, compared to 1.09 for 2017. This ratio is marginally lower than last year, primarily due to delayed annual service renewal bookings of $9 million, I just mentioned.

We will now move to our liquidity position and balance sheet on slide seven. We ended Q4 with a cash of $66 million. This compares to $61.7 million at the end of Q3 and $57 million at the end of Q4 ’17. The sequential increase in cash of $4.3 million reflects cash generated from operations of $6.6 million and net cash outflow for purchases of fixed assets of $2.3 million. Our days sales outstanding at the end of Q4 was 65 days compared to 70 days in Q3 and 62 days at the end of Q4 ’17. Our days inventory on hand was 45 days at the end of Q4 compared to 43 days at the end of Q3 and 46 days at the end of Q4 ’17.

We are pleased to share that our cash and DSO are improving sequentially and we have made material improvements in our working capital. Our working capital of approximately $60 million as of Q4 ’18 has increased 21% compared to Q3 ’18 and over 100% compared to Q4 ’17. At the end of Q4, backlog and deferred revenue was $186.4 million. This compares to $207.6 million in Q3 and $224.4 million in Q4 ’17. The backlog and deferred is down 10% sequentially and down 17% year-over-year.

Please note that ASC 606 adoption this year did not have a material impact on net revenue for the year. But it did have a significant impact on backlog and deferred revenue. Most specifically, upon adoption on January 1, 2018, we lost $10.1 million of 2018 revenue, $1 million of 2019 revenue and the corresponding $11.1 million in backlog and deferred revenue. However, under the 606 rules, we also recorded an additional $11.1 million in revenue in 2018 and reduced our backlog by the same amount. As a result, the combination of these two adjustments had a net impact of increasing total revenue by $1 million in 2018, while reducing our backlog and deferred revenue by $22.2 million. This 606 related impact combined with the $9 million in delayed SLA renewal bookings that I noted a moment ago, reduced our total backlog and deferred revenue by $31.2 million compared to prior year.

In summary, while we have work ahead of us in both of our business segment transitions, overall, I’m reassured by our solid Q4 results and full year performance in both the segments. And we remain committed to our mid and long-term value creation opportunity.

Now let’s turn to slide eight for our Q1 ’19 non-GAAP guidance. For Q1 ’19, we expect revenues in the range of $80 million to $90 million with Video revenue in the range of $70 million to $75 million and Cable Access revenue in the range of $10 million to $15 million. As a reminder, Q1 has historically been seasonally down from Q4. Gross margin in the range of 52.5% to 54.5%. Operating expenses to range from $49 million to $51 million, operating income to range from a loss of $9 million to an income of $0.1 million. EPS to range from a loss of $0.11 to a loss of $0.01. And effective tax rate of 12%. Our weighted average share count of 88.2 million. And finally, cash at the end of Q1 is expected to range between $60 million and $70 million.

Turning to our full year outlook on slide nine. We expect revenue in the range of $390 million to $440 million with Video revenue in the range of $290 million to $310 million, and Cable Access revenue in the range of $100 million to $130 million. Gross margins in the range of 50% to 53.5%. Operating expenses to range from $195 million to $205 million. Operating income to range from a loss of $10 million to an income of $40.4 million. EPS to range from a loss of $0.16 to an income of $0.33. And effective tax rate of 12%. Our weighted average share count to range from 89.5 million to 91.1 million shares. Year-end cash to range from $65 million to $85 million. We are pleased with our continued execution, and we have a solid momentum heading into 2019.

I will like to conclude by stating that we have delivered six strong consecutive quarters, both strategically and financially. And the outlook for full year 2019 remains positive. We remain focused on executing our strategic initiatives and delivering long-term profitable growth and shareholder value.

So with that, thank you. And back to you Patrick.

Okay, thanks, Sanjay. And we want to wrap it up by reviewing our strategic priorities. For Cable Access business, objective number one is to further scale our first wave of CableOS deployments. Leveraging this growing CableOS market momentum, our second objective is to secure new design wins with additional operators with international expansion becoming a key theme in 2019. And as cable operator deployment plans in DAA solidify, objective number three is to leverage our DAA technology and market-lead to further accelerate growth.

Turning to our Video segment. Our first objective is to continue to further grow our over-the-top streaming market share across both media and service provider verticals. Objective number two is to leverage our SaaS offerings to expand our addressed market, tapping into new higher growth customers and business models. And our third objective is to deliver consistent segment profitability, just as we’ve done over the past six quarters. Our commitment to these priorities enabled material strategic and financial progress throughout last year. And we entered 2019 with continuing confidence in driving growth, profitability and shareholder value. I want to close here by thanking our amazing team members and our customer partners for the results we drove together in 2018. And our stockholders for your continued support.

With that, let’s now open up the call for your questions.

Questions and Answers:

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question is from Simon Leopold with Raymond James.

Great. Thank you for taking the question. I wanted to see if maybe we could parse some of the trends in the Cable Access side of your business, and maybe update what may or may not have changed. And just to sort of lay it out, I tend to think of the Distributed Access Architecture is in the virtual CCAP initiatives, as different but sort of cousins kind of related. And my impression is DAA, you sound more upbeat and that looks like it’s ramping in the spring, whereas maybe virtual CCAP might take a little bit longer, that’s part one.

Part two, just by my rough math, you’re Access business needs to deliver $25 million to $30 million per quarter in the second through fourth quarters. I’m wondering if you can give us some thoughts on what kind of linearity you expect? I appreciate for your guidance, but just looking for a little bit more detail on how it plays out? Thank you.

Well, thanks, Simon. Appreciate the thoughtful questions. First, yes, I would agree that the idea of virtualization in DAA are cousins. I mean virtualization does not require DAA. In fact, as we’ve noted several times, the majority of our deployments to date are not DAA but they are all — by definition with us are virtualized. We actually see continued good momentum of — let me call them centralized deployments of just with a virtualized CMTS. I think the issue or the fact is, Simon, that the largest operators who are involved with, I’d say are turning their chairs hard toward DAA. So it’s not a lack of good competitive momentum with just pure virtualized, it’s just that right now most of that activity I would say is with the smaller and medium size operators.

Whereas, the larger ones, I really locked into, I’d say the battle with 5G and really pushing their broadband businesses further aggressively. You saw that in the so-called 10G announcement at the CES show. And so indeed, just because of the nature of the Tier 1 customers themselves and their increasing focus on DAA, we see, let me say over the next 24 months, probably greater volume opportunity with those kinds of deployments.

To the second part of your question about ramp, I also appreciate you kind of doing the rough math. And indeed, we anticipate a pretty busy year in total, and after a pretty slow start in Q1 and it pretty good pickup. It remains to be seen exactly what the pace is. We’re basing our full-year numbers on a fairly detailed plans that to multiple operators have shared with us and we are involved intimately with crafting those plans in the feasibility to rollout — the rollout. Exactly what Q2 looks like versus Q4, it’s too soon for us to give that kind of a detail. It will be a ramp, it will be an accelerating pace through the year.

That being said, we don’t see this as big bang in Q4, we do see a ramp, a lot of this is outside plant work but that frankly needs to begin in earnest in Q2. So I hope that helps a little bit with the qualitative picture. And all I can say beyond that is we’ll certainly keep you posted as the next level of detail of these DAA deployment plans get more solidified.

That is helpful. Just as a very quick follow-up then if there’s more DAA and less virtual CCAP, I assume that’s margin unfavorable in terms of just that the mix for you?

Well, let me back, I’m little uncomfortable, I mean you probably get it, but I’m little uncomfortable with the characterization less virtualized. All of this DAA stuff, everything we do, has got a virtualized CCAP at the core. Okay? And so, from that point of view, I mean, think about our business in two distinct blocks, there’s the centralized software piece or maybe we sell the servers with, so let’s say the pure software or let’s say high north of 60% margin stuff, if we sell servers with it. And that scales with bandwidth. And so whether it’s DAA or centralized, that doesn’t change.

I’d say DAA brings additional revenue dollars, admittedly at lower margin with these nodes. And so, yes, the blended margin goes down, but the revenue is kind of on a per subscriber or per gigabit basis, the revenue was up because we’re delivering this hardware capability out into the field, at a higher price, albeit at a lower margin than we are in the centralized scenario. So yes, in DAA blended gross margin is a little bit less. Nothing what we’ve seen historically, we still think as Sanjay said we’re in upward track there. But it is less than it would be, if we were all exclusively centralized and shipping only pure software. Does that help?

It does. Thank you very much.

All right. Thank you.

Thank you. Our next question comes from Tim Savageaux with Northland Capital.

Hi, good afternoon. Maybe first question kind of addressing that margin issue from a different direction. You did have a very strong quarter in Video and strong margins as well as in nodes, very high operating margins, I wonder you look to be guiding sort of flat to down a bit from a revenue perspective. I wonder if you can comment on what sort of margin compression — direction, sorry, not compression, you might expect from a gross and operating perspective on the video side or what’s contemplated in your annual guidance relative to what you did in ’18?

Sure, Tim. So I’ll start with Video. Video margins, we ended at 56.8% for the whole year. But, if you look at all the quarters, Q2 was 55% and Q4, we got 57.5%. So, although the mix is improving, but there is a range we have seen more recently 55% to 57%. So that’s in our guidance we baked 55% as low end and 57% as high-end for Video. And that’s similar to not only Q1 but for the whole year as well.

Coming to Cable, this year, for the full year, we ended at 44% approximate margins on cables. And the mix — and as Patrick has discussed because of the DAA and virtualization, so the mix could change quarter and for the whole year. So, while we did end at 44% for the whole year, but we have seen mid 30s to mid 40s in the year. So, for guidance purposes for Q1, we are keeping a range of mid 30s to 40s, and for the whole year we are keeping approximately 35% to 45%. We believe, by the end of the year we will catch up with what we saw this year. And blended both if you see both the margins we end at 54.5% for the whole company for both segments for the full year. And hence, 52.5% to 54.5% for Q1, again high end is exactly what we found for the whole year. And for full year 2019, the guidance is 50% to 53.5%. I hope that provides some insight.

Yes. And any follow-up on, you seem to have a fair number of tailwinds in the Video side, from streaming, from UHD. Any comments on the growth potential there, the puts and takes driving that? Can we assume that on the Video side, you would look to hold OpEx steady or maybe decrease it a little bit?

Well I should may I’ll jump in here. Tim on the — look, just like in the last part, yes, we think that we are scaled and in good shape in terms of the amount of investment we’re making in the business. And so, I wouldn’t expect any material change in OpEx as we go forward. Regarding the overall trends, as you mentioned, there is favorable things happening, market dynamic wise or competitive positioning, technology trend. I’d say that the one headwind although is the transition to SaaS. And we — to be clear, we think that overall, this is a good thing.

And frankly, it was a somewhat slower year than we expected in ’18 in terms of seeing opportunities with the sales, although the number of customers grew. And here, what’s really interesting is we’re bringing on customers that we never worked with before. So we really feel as though we’re in building almost a 20, we’re really expanding the addressed market. And the other thing we’ve seen with each of those customers although they’re modest in size at the outset, we’ve seen almost across the Board a ramp in spending, we’re kind of there on the ground floor with a lot of these guys as they’re getting going with new business models. And so we’re committed to this is the right long-term strategic business direction. That being said, when we sign up a new deal with — either with an existing customer or a new customer is a SaaS deal, that’s less revenue upfront, than it would have been in the past and that’s more in backlog that will be recognized ratably over the contract term. So, that creates a I think a positive thing strategically, but indeed a little bit of a headwind. And we do expect the pace. I don’t want to overstate it, but we do expect the pace of business tipping over to SaaS to increase somewhat in ’19. And I’d say that is a consideration that plays out on the top line for us. So keep that in mind as you look at the year-over-year comparisons.

Yes, I just add to that for video overall the way our focus is shifting to manage the video business is not only purely top line, but together with managing the SaaS transitions looking at the two key metrics, which is the gross margins as we discussed earlier, at the same time, the OpEx. So, overall, the profitability of video business is our focus. And as you saw this quarter, we received a very good operating margin on that Video segment. Similarly, our plan is to in over a longer period of time, we believe our operating margin should be in double digit and that’s the path we are marching on toward. So I think the focus is not only just top line, but OpEx as well and margins and the right mix of both.

Got it. And last quick one for me, maybe I’ll pass it on, spin on. I think quite a while since we’ve seen Charter on the 10% less. Wonder if you can comment, I mean, I’m going to — I would guess that’s likely focused on the video side. But if you had any color on kind of what brought Charter up to join Comcast, and the 10% customer list in the quarter?

I regret, we can’t give any more color on the makeup of it but I — let me just take the opportunity to concur that it’s a — we’re happy to see them there, it’s a — it’s certainly critically important to cable account. And I don’t think one can overstate the imports of the value of having a strong strategic relationship with them as well as we do with Comcast. And it’s been a little bit slow as we saw Charter and Time Warner go through an M&A process and we stayed focused closed to the account and it’s good to see the relationship paying dividends.


Thank you.

Thank you. And our next question comes from Steven Frankel with Dougherty. Please go ahead.

Good afternoon. Patrick, wonder if you could give us any insight on how you get better visibility into the pace of these nodes getting installed in the past moving from nodes to high margin software. And in that vein, I want to make — I wanted to ask if that 2020 guidance assumes that this business does have a material software component in 2019? Or do you expect that to come next year after you get through these installation issues?

Look, I want to acknowledge that it’s been a road to get here that has had more twists and turns than we anticipated. And frankly more of those out of our control than in our control. So we’re a little bit conflicted if I’m really transparent. On one hand, we think we have quite good visibility. And we think that the vast majority of issues are behind us and behind our customers. That being said, we’re very cognizant of the — he appearance for the unexpected, this gotten us to hear. So I would acknowledge that we’re straddling a line on one hand, we’re confident that these things are going to move forward.

But the exact pace and the exact volume is something that we’re, — we don’t want to get too far ahead of our skis. I think we’ve given pretty good full-year guidance, particularly when you consider the slow start in Q1. So we see even in a slow scenario, a pretty healthy ramp. And included in that ramp is probably with the volume DAA stuff is hardware first but absolutely there’s corresponding software, maybe not quite in proportion but corresponding software that this follows and gets deployed in the course of 2019. I think we have to wait and see a little further before we’re more granular or more aggressive about the exact mix of that.

And is this a ramp that begins in Q2, is that driven out of backlog with better visibility on timing or this is more about conversions of trial activity to deployments as we go through the year?

Well, it’s a little bit of both. We have shipped several thousand nodes out there that do not have companion software licenses shipped within yet. So those nodes are to be — and there’s no question is, I think we discussed on this call last quarter, they’re not much used without buying that software. So we see companion high margin revenue that is still to come with what’s already been delivered, Steve. And we see that as kind of the first shoe to drop in terms of the next phase of substantial deployment. But, frankly we think of the several thousand that have been shipped to date is really the tip of the iceberg when you think about the plans of multiple Tier 1 operators.

So, behind that is additional hardware purchases and additional software purchases coming behind that kind of in a cycle. There’s no doubt in our mind that that flywheel starts to move in Q2 and picks up pace the rest of the year. And as discussed a little earlier on this call, the exact pace of that and the timing, we’re not in a position to give precise second quarter guidance here. But we did feel comfortable giving a full-year view of what we think our customers are determined to achieve by the end of the year.

Okay. And then look back quickly on Q4. You would — had hoped to get a $100 million in Cable Access, you fell a little short of that. Would you say that shortfall really related to this issue of some of the major customers are rolling out more slowly as they — they work on issues not directly related to your business? Are you part of the puzzle?

Yes. So, essentially, yes. And again, I want to emphasize that the — I think that they are very close. But as often is the case with very complex deployments with particularly with Tier 1s who want things just so. And basically want to get something that is done right and it’s going to be scalable on a big reproducible on a massive scale. We have a couple of customers who came across things. I noted one change, 40 gig to 100 gig hardware as an example that they decided kind of 11th hour. You know what, we want to change this and it’s — and it’s the better interest of the long-term scalability of the program.

So, yes, that created a headwind on deployment in Q4. We expect that to continue through Q1 as that stuff gets worked through. But none of these things that I’m referring to the specific changes are decisions that have been made kind of late in the game, regarding deployment, none of them involve real rocket science. So we are not praying that anything is going to work out. We wouldn’t be able to give the guidance that we’re giving if we didn’t have a I think a very comprehensive understanding of the nature and the complexity in the basically the confidence in achieving what is currently being worked through.

Okay. And the margin improvement in Video, how much of that is the transition of your traditional customers from a bundled hardware, software approach to licensing pure software? Or is that benefit still to come as we work through this year and next year?

So, Steve, we have not traditionally broken out the margins that for this particular segment within video is improving, but I can tell you overall, if you look at the mix for entire gamut of our video products, overall, we see that software mix in the entire product value is increasing composition. And you know marginally every quarter, you’re seeing that improvement and they’re glad to see a very high percentage in Q4, 57.5%. But I’d say it’s spread across all of our products and we are able to actually demand market premium as I mentioned in the prepared remarks and having us strong competitive position on pricing and that’s building up because of software mix.

Okay, great. Thank you.

Thank you. Our next question is from Simon Leopold with Raymond James. Please go ahead.

I appreciate you letting me back in for — and just hopefully maybe a quick follow-up and maybe you did explain in the prepared remarks. But just wanted to look back at the actual fourth quarter. The gross margin in Cable Edge segment was particularly strong, and you upside it in the quarter. So it does look like video has been very stable throughout 2018, but we’ve seen a lot of volatility in the Cable Edge. Could you just help us understand what actually happened in your December quarter to help the Cable Edge gross margin? Thanks.

Well, so, you’re right, Simon. We’ve experienced margins in Cable at the beginning of the year versus now like for example, Q1 47%, Q2 50%, Q3 we saw 39% and Q4 coming back 44%. I think the mix delay explains among various product lines in Cable which is a mix of the nodes, the mix of software together with services we provide to the Cable customers. The mix is playing and that is just a result of that, it’s nothing which is particularly exceptional to call out. I would say it’s purely mix and that’s baked into our guidance as well.

Okay. Thank you for the follow-up.

Thank you. Our next question is from George Notter with Jefferies. Please go ahead.

Hi, this is Kyle on for George. Thanks for taking the question. Of the Distributed Access Deployments that you’re currently working on, I guess specifically those 1,000 DAA nodes that you shipped in Q4. Is there any regional focus to that deployment activity like is this US, Europe broad based, any additional color you can add there would be great?

The biggest opportunities we see right now that we’re working on are in the North America and in Europe.

Okay. In that 1,000 nodes…

I mean, to be clear, global cable industry is, I think it’s captured the imagination of the global cable industry. But in terms of those who are, say, furthest along and pursuing it most aggressively that we think will see deployed first. It’s in Europe and North America.

So there’s some subset of those 1,000 nodes that were in each of those regions?

Well, we don’t want to go — get that specific. I mean, we announced substantial nodes in Q3 as well. So, we’ve shipped several thousand nodes to-date and yes, I think we’ll keep it there.

Fine. And then, do you see Distributed Access decisions across operators holding up the cycle or the opportunity for you? I appreciate the commentary that virtualization aspect of your product is not necessarily tied to DAA, but big architecture decisions across your customers could understandably be something that takes some time. So, anything you’re seeing there across your customer engagements would help.

Well, in my prepared remarks, I noted that we are closely engaged with four out of the top eight operators in North America and in Europe. And I would say, I mean, the best of our understanding, those four are — if not working exclusively with Harmonic are — have decided to work very closely with Harmonic kind of at least a substantial part of what they’re doing. That being said, the other four are still as you’ve suggested in a discussion and a decision process and engaged to, I think with multiple of potential technology suppliers.

So we think we’ve carved out a very strong position, but it’s not across 100% of the customers. Where we’re most — where we’re most involved, we think a choice has been made and really it’s kind of operational and deployment planning, that’s going on in the sequence of advanced lab and field trials to get ready for volume deployment. Elsewhere, I think there’s customers who just not as far along in the process and yes, there is a lot of, I’d say the next wave of operators who are trying to make decisions about architecture, as well as, who their technology partner is going to be.

Okay, thanks, that’s helpful. And one last one on the video side of the business in terms of the full-year guidance. Is there something you’re expecting in terms of the headwind from the further transition to SaaS models like is there a headwind that you have baked into that guidance?

Yes, Kyle, we have. As you see there, if you take the midpoint of our annual guidance range, we are marginally down then this year, around 3% or 4% and that’s what we’ve experienced when we transitioned to SaaS. We’ve experienced it a little bit in ’18 and in ’17 we did experienced it for sure in the first half. So, yes, you’re right, SaaS transition marginally is going to impact the top line.

Okay. And consistent with the headwinds seen last year is essentially what you’re expecting?


Okay. All right, great. Thanks a lot. Thanks for taking the question.

Thank you.

Okay. Listen, I’d like to thank everyone again for joining the call today and for following our business. I hope it comes across that we’re pleased with the progress we’ve made last year but we see good opportunity ahead, and we’re excited about pursuing it. We look forward to talking with you all again soon. Thanks very much.

Okay, thank you.

And thank you, ladies and gentlemen, this concludes today’s conference. Thank you for your participating. You may now disconnect.

Call participants:

Patrick Harshman — President and Chief Executive Officer” data-reactid=”188″ type=”text”>Patrick HarshmanPresident and Chief Executive Officer

Simon Leopold — Raymond James — Analyst” data-reactid=”190″ type=”text”>Simon LeopoldRaymond James — Analyst

Steven Frankel — Dougherty — Analyst” data-reactid=”192″ type=”text”>Steven FrankelDougherty — Analyst

More HLIT analysis” data-reactid=”194″ type=”text”>More HLIT analysis

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