HLIT - Earnings call transcript Q4 2017

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Operator

Welcome to the Q4 2017 Harmonic Earnings Conference Call. My name is Candice 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. call Blair the of Harmonic’s turn Relations. Investor now over King, to Director I’ll may begin. you King, Blair

Blair King

Thank Hello, earnings today Jose, Sanjay for me you, Kalra, joining our California Harmonic’s for Candice. at our fourth everyone are and our Patrick quarter CEO; in CFO. XXXX headquarters conference Harshman, With you call. San thank and us

this can call, that the audio to by we I’d we’ve provided the Page Before also addition Investor begin, you like on in to webcast, slides to going harmonicinc.com. for of see point this which out Relations portion

These to on could Form determined to note materially indicated, on actual financial basis. otherwise that results provide And our our on differ we Turning and We results Harmonic forward-looking together GAAP, regarding non-GAAP provide forward-looking to or are Slide Website future company. may documents press release. which SEC X, including during or current XX-K factors, in unless events items, from are numbers those refer and the this financial SEC, please statements we metrics which events reconciliation GAAP X-K. XX-Q posted the call, we’ve documents preliminary expectations most forward-looking the identify this a statements of reports risk with and actual are with projections or you today’s the with will press Such results to today’s and other the our a of corresponding call release, cause performance files recent contained projections in and filed future These only important section the differ and you contained statements. on statement materially.

the the website. operations on regarding this other will release, call our also available historical, And information be on CEO, turn press is and in but over a discuss included business Patrick to Harshman. and of call recorded our We and statistical remainder the the I’ll of Patrick? this information of some will information financial our version

Patrick Harshman

joining the Thanks, Okay. Blair, and today. you call for all thank

turn was XX%, above our up high second guidance our get X capping were The was tough Let's generated million, come as non-GAAP approximately several positive first just million financial together. year, our been we end a were quarter operations. and EPS cash business $X Behind of starting after margin really of half from started. the strong pretty and $X.XX are the revenue to a we've Slide the and XX% in strategic headlines, transforming developments, half. to fourth Gross sequentially, making business investments in these $XXX

more software, New product to growth saw several strongest but of by and principally the centric software-as-a-service business our The anticipated and This video further quarter earlier year, services originally we CapEx continuing input million about totaled service in of our model. rents. driven with million and years. where sequentially, and $XXX also XX% over-the-top of deferred X.X a deals SaaS was the book-to-bill bookings catch-up ratio, this new continuing strong segment to our in transformation close order $XXX backlog reflecting bookings translates to revenue positioning up record making

with happening let's is take here they design second initiative, look. important wins stable our backlog. fourth quarter, also were number and not closer for and over page And services as including software with commercial turn a also As advanced video and and see but during an CableOS trials new a a to and margin video backlog, increased strong to X.X% quarter good we segment greater a than SaaS business, increasingly several achieved It's our operating to deployments so of only There the a bring CableOS the field lot result, segment row. the profitable drove turning business cable milestones in the XX.

So, to gain turning globe momentum. the really around started CableOS X, activity has Slide to

there now, to among of Com there back broadband all fierce we our broadband operator fighting X.X you've service hotbed by market. CableOS deployment consumption. and of deal suppliers at a been Competition new and off-the-shelf including Sweden superhigh investment is seen providers network is servers. Access in is serving applications. because cable so-called the among and win hope Harmonic home well-respected access community I watched recently the the As is Com dense deployment announced Swedish much fully world's misperception household for Intel-based big that the network. DAA a has CableOS its roughly deploying Architecture industry Distributed fiber performance, core a efficient software-based virtualized that some cable by CMTS deployment Hem, a This process across is it's running of the Hem exclusively connected is virtualized Not first a on targeted with and and million or

couple really case a the in be. minutes, solution in also in CableOS powerful as that CableOS scenarios, most legacy hardware to software CableOS X.X milestone the upgrade in the DOCSIS is shines swap-out the The certainly solution we'll at it's success CCAP today. clearly very Hem architecture Indeed, on with running with is where Com industry. centralized servers true our replaced While validating just DAA in deploying hardware for the of now based traditional is study used CableOS software centralized of important CMTS market it's true a discuss located scale to is this

doing do from well So, formally and here. go Com we announced and Hem where

most and established XX global with secured Hem make an leadership. that operator and smaller long-term know very over influential like deployments midsized a have our trials and But CableOS XX now top you goal together, it's also operator quarter. third from we've customer pleased guys. fourth it am be not engagements both solid strategic purchase Tier Xs, on of a wins let advanced three foundation to the quarter, order about While top and continues we operators efforts of starting during largest revenue-generating with active a revenue field initial with encouraging market our to two and progress new focus I world's yielded operators the cable additional growth top-XX and Putting fourth additional these only we underway in big Com CableOS the newer currently for go-to-market new XXXX inroads to all ultimate worldwide. the We're and couple

on driving is customers originally cable I've longer certainly network. while potential my further our I is acknowledge this in anticipated. launchpad never have to innovation before for a than In plus the that the good and retrospect, Now customers years Harmonic to the collaborative an with significant to do all-software that are in want virtualized XX progress, move in been this, virtualization, of there unleash CableOS seen industry, way our access reason

and work deep customers to virtual of really active cloud-based access on our key door you deep, distributed opening customers. have the recent such work consolidation, facility routing areas some to access CableOS which the life. are this with network, to of emerging of example doing innovation may partner all segmentation, between is A fiber the bring several earnings of with collaborative Arista's next-generation of we're fiber cognitive marriage cable is integration Now including good digital architectures call, Harmonic and fiber, heard the virtualization reinvention of as architectures

our CableOS in is to Hem's just and opportunities Stockholm second revolutionary and speeds being testing this our of qualified a X.X unlocking were key with example During highlight mentioned five new notes above quarter, remote the a the between system CableOS hardware competitors. deployment moment beyond core the and of the devices collaborative during I scale and the trial fourth and and There Harmonic DAA remote truly is quarter available another from want site successfully trial to a recent and network. is innovation field ago currently service the by first fiber customer broadband new Com the was complete home of in find this service, customers. we Also, interoperability solutions. own commercial per Shipments exceeding deployed successfully a completed key these gigabit symmetrical live around end-to-end commenced notes for the was announcement time

of As Com its cable release operator trial global in quite noted the generated Hem this, and among a press community. excitement on this bit own has discussion

it, seen release X. Hem's out Com issued February press I to you not you've If check on encourage

segment, million. This market $X continue the of support while Cable introduction on to to and to view to just financial about invest loss build, we CableOS and response the revenue ramping functionality heavily to in new in our business increased $XX.X I've extending service revenue starts both million Edge our Turning CableOS and up to capacity. an narrowed in architectures customer touched operating

commercial to deployments. from ahead, we're one of investments seeing wins story CableOS in design pivot and the field trials Looking

in operators now necessary value forecast pipeline let's continue their hardware first product we fast-growing and the of that the As just market Harmonic virtualized at approximately upgraded and we an wave and and being spending architectures growth growing creation years penetration of Recently do market, maturity worldwide a from a to customers published is and are questioning about DAA believe lead. wins me, possible. going new our in capture versus $XXX software part of customer to to where to with wisdom to DAA by Harmonic's making revenue the both CCAP innovation, with this as billion CMTS market we XX% opportunity $X.X are activity this XXX% there dynamics why longer-range of and upgrade upgrading of increasing creation, we up deployment the target elements, their move XXXX new a brand-new believe product discussion have million corporate wherever and And objectives. of of support who Further result, CableOS a market strong a regarding broader couple observations real this planned categories strategies our hardware value planned wrap X.X we we DOCSIS looking player lot suggest, an CCAP of the number DOCSIS this CableOS software old for research innovative to XXXX have of excuse two there of space. number that while over to believe to do will market native into incredible cloud embrace and combined expect move suddenly grow to not X.X

signature based still our wins favorable I'll you, of tell XXXX we're to do but increasingly customer confidence, market an and of CableOS momentum expanding and hit we to a trends. entering targets, real with look, foundation So, have lot on work

So, and our let's X about Slide talk video business. now turn to

video Revenue performance sustained in operating the key income. we was in income, message segment is here video which up second first healthy has quarter. backlog exceeding quarter were positive strong $XX deferred of here revenue the sequentially, operating growth enabled $XX book-to-bill and sales The message our turn and saw we're million lines video new the the revenue. XXXX X.X% in component across And X.X% Video segment that financial and than consecutive earlier, key that quarter well product X% with our our fourth is sequential noted million is as third XXXX. over-the-top means in the business with bookings second improvement streaming and of greater entering approximately performing regions

just and the approximately over of in enabling were and quarter with expanded million software-as-a-service over-the-top engagements. grew $X a bookings $XX this still this from bookings last up up us over-the-top XX% half and year Second subset activity over-the-top an to year, revenue million ago. modest from important $X enter growth came annual momentum $X form to base year first A SaaS were of recurring but million year strategically corresponding of new the of during Total half million approximately strong the last customers. over over-the-top

gaining SaaS video Although with and is this customers to traction see headwind, the TV Internet market first expanding increasing cloud X technology direction strategic to creates our timing transition Pay and an we're entrants. encouraged capabilities software-as-a-service earnings providers new the Tier right

example new Our for is our over-the-top still business broadcast Technology much video opportunity over-the-top TV an with pay-as-you-go to from key market SaaS new address customers into, [indiscernible] Pay video recently The great traditional transition, in but deal rich, expanded models. opportunity as of models third very the message. and evolve service Global which we're me is the beginning to market brings announced innovative Group a to tap we

targeted And advertising. targeted Specifically, clear and to to of finally, video a platforms both we delivery call broadcast early, and XK and I customer but the of like live these Pay next over-the-top ongoing is wave is of be enable services, to a pick unified telecom generation and that screen associated linked We're new services over-the-top large really still migration investment over-the-top is mobile a inextricably next from pleased premium exploiting family devices, emphasize here. X.X Ultra poised traditional premium this with Additive reliability. room that and M&A in quality be global finally to over-the-top that services, seeing trigger personal new enabling and TV will of want quality up a and demand. what services live streaming video the to HD media wave to advertisements generation

have underscoring to reinvention strong While in customer Harmonic global in the and unquestionably timing enabling a key platforms in resulted greater M&A endgame play pay processes the and our video model. this uncertainty, can investment to streaming brand leverage technology next-generation over-the-top for is business platform opportunity global the investment of role

software-as-a-service delivered investments another side So, side and competitive of pivot from as software and of with to strategy over-the-top summary, in as in bearing succeeding TV traditional house strategic X.X. clearly with and and the been our cable Pay segment heading market the the are backlogs over-the-top into transformation momentum transition profitable video We're video the the hear continues strong with to We've growth business, we've fruit. XXXX making quarter.

So, outlook more with of guidance first detailed our full over for and the turn discussion our for call that, year. a for fourth results, I'll the to quarter financial our you now Sanjay quarter the

Sanjay Kalra

you, and this you thank our for afternoon. Patrick all joining Thank call

XXXX ratio means margin middle our heard just came quarter. X.X solid range we you generation a of high-end good entering range, the than we're of a guidance we Revenue As our dollars, at in from gross and financial had with foundation. Patrick, the our around earnings drove cash and expenses good guidance book-to-bill and greater was

compared our million upper be end So, get $XXX.X numbers range. started X results. I'll turn our Please on QX This recall exceeding and are of to review let's a non-GAAP to to the Revenue Slide $XX.X guidance referring the high-end was 'XX basis. $XXX.X $XX.X quarter was QX QX the million compares of million to also last above revenue year. the in 'XX. same diet and and $XXX.X million to $XX.X Video in QX in in million our million

QX XX.X% we the Looking Edge versus QX the a from million percentage was segments. compared video close QX solid in to couple 'XX. mix $X.X in in segment ago a XX.X% This XXXX and Video of XX.X% segment, both of was period. year Gross product 'XX. was reason XX.X% of margin gross for XX.X% This QX down revenue segment our of in million the XX.X% QX and margin out for $XX.X QX was in Cable result hardware-based as decline million in a revenue temporary to projects as of QX was a and finish in appliance. in $X that lower high mix margin older had a legacy QX

cable in in and QX, of year-over-year levels, gross for $XX.X declining and QX QX recent With our Operating by $X.X a count million QX of a loss QX ended these in million access 'XX. video of careful QX 'XX. share QX segment heavy 'XX, the $X.X combination expect QX in was average cost compared We program. million range. QX's to video in 'XX. in operating encouraging our $XX.X compares strongest quarter to with the at QX quarter deployment to million booking of our us, in basic the the QX driven to $XX.X distributed sales and in $XX.X profit $XX a million our QX compared operating controls $X.X and new midpoint million X.X% Cable we Perhaps million 'XX. continuing to margins a quarter, weighted compared QX new margin The and bookings X.X% million of sequential income and $X.XX million reduction and our $X.XX operating was $X.XX EPS of of particularly revenue. gross in XXXX line Operating Edge the reflects in legacy first by of to the variability were of in since is QX behind our $XX more back million quarter $XXX.X of metric stronger. our million execution QX in in a QX we legacy income virtualized million $X.X to million to $XXX.X $X.X up of said, primarily introduction to were offset QX in in CableOS strengthening the of XX%, in X% gross XX.X% in improvement rebound on expenses XX%. OTT early, increase so demonstrate which continuation expect company. guidance up contributed that XX% Comparing operating margin is modest first still see near-term, continue The sequential due while and fourth product segment, investment revenues on down increase XX% a systems, and tight news QX were good initiative. OpEx halves commission bookings Cable in materializing. margin Edge was with QX 'XX. related That in we business increase The is following was of volumes in market million some XX%, CMTS These and in seen year-over-year expenses to strategy product results cost, the and quarter $XX.X business. in services much is transition throughout QX, expenses second our decline up and income XXXX, focus the and dollars

a have ahead and progress opportunities of the us, I am us. about lot front of encouraged in While we still excited our work of by

SaaS fourth or total and contract our our business $XX.X our recurring million modest This of bookings, here annual associated was expectation quarter some that TCV by Slide our end of with total new of X%. expectation to at just revenue SaaS million Total to SaaS new company and Moving marginally context ARR, growing the provide TCV million. deals our results. annual grew pause OTT above business XXXX year X.X% or our or impacted how over year signed X%. full-year and value pretty to bookings, X.X% full QX our with brought X, in of OTT I'd much regarding line like in $X.X to SaaS called $X it

CapEx As Year-over-year, will to first Applying perspective which shift to end Harmonic's from rule of current recap our contract put reduce the backlog that purchase XXX% the is rule revenue this basis, fourth general the last this in general approximately periods. each resulted quarter's difference in business. $X $X.X traditional again, To million or XXXX margin our approximately quarter. operating annualized thumb, full in $XX a SaaS about at SaaS million revenue broadcast $XXX,XXX and video this $X and for of a reminder, of non-GAAP the from by of income. grew our was moving $XXX,XXX we of business, year year SaaS will recognition by a of I here with XXXX, ARR $XX the million for delay million our provided delayed year traditional of on into future linear of on activity thumb, an call, full million delayed operating

the our or and a to the SaaS move between and segment. business results term and become new the XXXX. CableOS operating reduction the compared course these our methodology revenues transition in our We highlight to digits segments. offering our to and of One income based of segments. expand revenues of to of can to we allocation a on of fourth selling our changed income regarding a of us the as expenses our activities a is booking track change and attribute those want quarter our our employed $X.X aggregate transparency financial enabling net-net video of company percentage SaaS operating profitability actually this distinct precise supporting service is of QX, enhanced of attribution our other activities of Cable expect mid-single is making profiles in historical The Cable the segment in I Now operating Edge Historically, of professional more have to total total long and addressable remain precisely. throughout two Beginning video to to as Edge solution series and this in from be we mid market the corresponding from gradual enhance in increasingly more million approach sales video methodology and our now other have impact increase solutions. and change

to combined total results. Of course, company without any impact

operating Looking our faster to metrics both grow ahead Cable of internal our both video segment. revenues and Edge business methodology This segment. are Cable our than expenses allocation enhanced and ensures there Edge updated regarding expected video of those clarity

the end end and million in QX guidance, working We or of to Slide turning from that we high still QX continued intend not balance not Note of established the to operating working and million In generated compared $XX.X of end above our focus Valley QX Now QX the used of million capital. access the this $X was at XXXX. on cash we ended capital sheet the $XX to million Silicon currently QX million $XX cash $XX activities. X. QX do at the on, Applying this strong managing in facility. band facilities of during

outstanding The of efforts continue was last sales XX to QX XX throughout compared declines days the days year improvements day organization. the and QX of we and the end to end working sequential to drive over at are at QX Our end year the year. underscore of days the at XX making

and $XXX.X XX in QX, of new associated was trend million and the 'XX. $XXX.X inventory and SaaS. evolution due increase broadcast products days moral, deferred related was our inventory to the is designs the new of centric This to CableOS new receipt XXXX. QX network high increase service Our software new record QX due to quarter. for including days CableOS of latest $XXX.X and operations of QX for the just the million of OTT mentioned, third consecutive a The business QX record execution days and and XX our for in and to we reduction. At ramp the backlog of booking sequential the to continue setting services, decrease solution. more services the This professional wins, we million this The a supply will to revenue and compares ongoing video Considering owners reflects was end expect QX XX business end driven and at compared management by year-over-year 'XX. were the services end on good material end on-hand specifically Patrick demand at throughout and strong

objective revenue exceeding to Cable company. full $XXX for segment the continues year million Our in be Edge our combined and growth

bring items the Slide Turning to I’d to of with like impact beginning X, your attention to two recent the on brief overview reform. tax

benefit Our and full fourth respectively. year quarter the $XXX,XXX less and XXXX million or are GAAP tax for $X.X more

re-measurement for benefit full years. tax of resulting against prior new include GAAP our allowance or asset Our all for onetime accumulated result Considering our loss deferred tax a and for new tax taxes negative million the on not discrete periods a of U.S. tax $X.X allows of in premium foreign expense both refunds valuation earnings alternate transition of deferred tax as tax assets cash unremitted paid from do tax taxable to legislation earnings, a see which impact legislation. of the we benefit position, on recognition expect tax

We impact period. new law the within tax one-year management the allowed will finalize of

year unchanged at non-GAAP XX%. was rate Our the for

that ASEXXX. The years. is the the standards to taking X, note recognition revenue we is guidance utilize item revenue prior ASEXXX place for XXXX is that standard of XXXX recognition as second known the important will a and important provide momentarily January accounting new beginning will It adoption

for accounting for due finalizing to under present both the ASEXXX and QX process of the result ASEXXX impact of in the and the report revenue first ASEXXX when we are quarter We XXXX. will

of recognition of We revenue modified the adoption the of to commission. including both, cost on an have ASEXXX The will effect and adopt method. retrospective more ASEXXX could using contract the recognition obtain timing

in with to Cable market the million Now expect of range range revenue to QX in $XX revenue XX, turn million for to QX, EPS Gross million $XX the million. tax of with operating approximately slide we video XX.X let’s million gross range effective sequential count business dynamics profit million million, Edge video range from from the weighted in and $XX range XXXX, shares. non-GAAP a basic million. $XX expense $XX average $X.XX improvement. to of Cable share $X.XX, range considering both XX% $X.X loss from a million a margins the of to profit to million have margin $XX range showing and Edge $X loss to to revenue to and $XX of on guidance of in a of rate million recent XX% of and or $XX XX% Operating to

Finally, is expected between to million. to cash end at $XX of the million $XX QX range

Slide our all year XX. full to Turning outlook on

on range Cable of of XX%, range profit tax rate and range the a $X.XX, in and We million of effective weighted from profit $XXX million million million the Edge. and to a our of expect $XXX Operating XX% an Gross million hardware Edge the $X.XX revenue range mix $XXX million $XXX $XX.X to to to million range range XX% range shares share to revenue largely XX.X to from software million a revenue a dependent in to of to in to to diluted loss of basic the the million to in to from $XXX with loss of Cable of shares. a $XX of expenses Video $XXX million. count operating $XXX in $XX EPS profit margins million, XX average of million. range from

to and remain back from the over focused our on to execution conclude With results by saying, half by now encouraged will momentum We maintaining now are million Patrick. to throughout I second range expect XX turn XXXX we operational that XXXX. cash our call million. XX I will

Patrick Harshman

Thank Sanjay. Okay. you,

strategic priorities. reply now our by to Turning XX, Slide reiterating to we close want

growth. is For secure to momentum, first market continue wins business both a small design is leadership additional growing wave positioning architectures. our as X deployments Tier and as on Cable $XXX to centralized further to revenue second profitable is for this our scale Leveraging this and objective increasingly Edge both with And distribute operators of business target, to XXXX and objective CableOS industry well new operators. both number compelling million midsize number CableOS deliver one newer three encompassing objective successfully

SaaS number or thereby segment And house side and Video accelerate the enhancing further in our in three further objective value addressable the extend media to regions is of and two over growth second market provider first proposition. our did consistent offerings across Turning to objective just to as to top half of platform, is the success service profitability the to deliver of the expanding and XXXX. continue Objective we number is verticals. customer

in Sanjay 'XX just our renewed growth, solid confident focus the backlog to and and XXXX. head and remain committed shareholder we healthy As of highlighted half as into second our profitability and pipeline together driving priorities execution on enabled with value project these we

So, with for open to up call your that, now the I'd like questions.

Operator

our first Dougherty. comes question And of Steven from Instruction] [Operator Frankel

Your now open. is line

Steven Frankel

Patrick, get if follow guide. CableOS material as might QX begin the afternoon. doesn't you I that, deployment where Good And deployments take like any in in value up the a on us to the by dollar updating wonder It are there to backlog. does it then seem started?

this expect So up the scale to hit going year if $XXX million bogie? you're should we how to

Patrick Harshman

second, amount of the backlog that get as to revenue. burned we quarter that to There's quarter, way ago. unchanged, from backlog revenue go things to was through I've some the that a happens start that's we work segment work things breadth coming million the of The and in are underway the not given Steve first increasing lot year. which where and confidence. third expect increasing an increasingly amount the $XX sign highlighted of working the quarters cross business think the to begins There's a to it is huge lot and the old uptick there We the in as definitely number in of we're in into flip depth a in seeing of of - burned the We us the in fourth booked increased really course actually on more four-year and approximately of the quarter roughly confidence that but manifest a the and we’ve XXXX target. has our was is we're

Steven Frankel

to taken How deployment. it? that, think and given while how do feeling your And you you get you your are have lead maintain you competitive about how to today it's

Patrick Harshman

offers the deployment and been of performance, of com virtualize the we're hand, access other the new solution is that the their products their our that we've any out raw hand. released more of the minds one market, not that seen or Once reemphasize software-based the us getting and to the newer that aware about terms the hardware-based consumption, on the it's behind technology. around solution quite density, capability to really And I quite at the expectations I virtualized advanced and delay thinking on there we've Well now a mature relative able readiness not is to in like. just products what efficiency done. want power are other ready about think to and announce about be Indeed, scale network. to less can start you being speaks and all arms customers product earlier

global is of of that to bear how a lot out software roll though figure game. convinced that I we that, the the is name way are think to bringing a to want their of we've lot to solution the they go. are ideas what out to in But customers increasingly the virtualization and is who got seeing

me mind wireless necessary leading in and target you cable moment going ultimate actually don't that networks platform a in in we're analogy banded the And of on of I absolutely a to growth the strong for a XG is have innovation XG. there's virtualization and seeing which news to what saw think proposition is unified success and that the area arena. five agility think their to the I with of If today's digressing together credo and I just operators in all of global the the core

fact is we're additional our competitive makes feel I regret - doing about with better the mousetrap, thinking about the us strongly positioning. walked this a be better it's our different So more customers it's time about And lead, competitive it's a deploying not this our to out about access we're work feel us --it into competitors while our number actually has whole increasing the of of half a better think to okay change in sense planned but and a market, of admittedly given that is retrospect makes to and a that ago to we get as actually by just year in first with an of magnitude way think contemplated bear. taken customers. makes an And I bringing CMT architecture it being and just turned that's I number

Sanjay Kalra

would XX% just of total a I know increased that Right. backlog of say the I this million the by backlog in of I not of radio. just itself. split like terms has increase year that over and $XX of backlog to add XX% question, the is and cable approximately I you is to the if year approximately is look

see since of you burn with time of is QX QX, So the totally converted is has year. orders coming all video bookings and business we of this the is were cable that are Compared cable see faster how in. last to both know we revenue and by you doesn't progressing Cable businesses much but revenue and if backlog no mean XX% backlog than QX. during that new rate the cable XX% video XX video, At there percent on the CableOS more directionally new business, year. last XX% aligns backlog video in it the same the increase but and on like Rather for XX to

backlog in this we we confidence we fact, our video see seeing. increase are in you is we aligning with In increase of in And the to the and in that close see or are year one the cable. the proportion our guidance in forecasting and underpins way book business the the same whole trend revenue the ’XX backlog XX/XX

Steven Frankel

of get in get kind business stabilized to it them more it revenue the digits, need take you digits, here does to double what margins operating double And mid-single how do the to you've video much digits? in to

Sanjay Kalra

OpEx. Well gross as of is - mix to margins margins is so operating of gross a well a the getting as margins it's mix

it's XXX minimum It is where dollars. OpEx If margin XXX, I a X.X%. quarter believe revenue close as of in be how last also how time, of this transitions other seen XX%. will the in SaaS a OpEx benchmark But is a get million how you've is the at just current you same mix its to the the and whole on year level and the at to the market do see matter play XXX transitions this video which to we they equation? gross met have that

Steven Frankel

I'll being cash in And guidance. in in implied XXXX hardware CableOS shift thought that's or that's Are there to of deployments I going last would material the to back with generate your then my generation it your to a and the amount is XXXX? jump not cash would have conservative side you in be queue. expectations question more hinder remote

Sanjay Kalra

Yeah.

RX the as ended would ramp this turns mentioned around at during the year the seen because are you we've and up the will DSOs similar made significant mean But we the I capital during year, the and in that's in improvements seen revenue towards towards. bookings quarter. this over that - how and We if where this year. some as investments momentum We this working in believe for move up upon and driving we've believe end we whole the quarter end notes depending the what we've how to in So, there momentum should of XX. be we inventory CableOS, continues

slightly continue but are needs that high if all working we improvements small you quarters. see end with the So, even I know cash working hence will together be about the though ended RX out capital, for in that not million capital that we the and are in If reserve RX keeping year. met may set will of if some XX high we we which notes to deployed Notes the for room, this you out capital our be needs come play DSO end, working portion some surprised million, XX up a

Steven Frankel

you. Thank Okay.

Operator

And next Simon Leopold of question you. from James. Raymond comes Thank

Your line now open. is

Victor Sze

in guys, a Simon to Leopold. this wanted CableOS for on Sze circle Hi the for back is I Victor second.

be So just you your specific expecting relative your for opportunities you $XXX on XXXX deployments be million just to in target? CableOS XXXX targeting? you're are of clear cable it expectations some to to material that know how are contingent And sales

Patrick Harshman

and say we've the we've vector As active trials a over and growing. seeing growing mature field we let’s pipeline got XX highlighted of commercial got deployments

isn't feedback So, insights course them, work doing as with of I one think the the begin turn is dependent the volume our it's we're to will volume of the our the course level into see customer, greater but year. for assumes over from their based plans, a on foundation adequate over this year. of the And....... a And the any these into on into certainly the good turn customers, that number greater particular news forecast. this providing activities the we …to

Victor Sze

are any made Virtual Hem Com there but any that Okay. targeting? other wanted That's you be is and I guess might that speak announcement the CCAP similar specific to that there is can you encouraging, Hem are operators you deployments Com other any helpful. about guess And I opportunities discussing – you see if certainly have that outside are -- of I

Patrick Harshman

doing we're Well clarify. is to me Everything giving the thanks CCAP. for opportunity Virtual

So, when CCAP mature have we deployments I say trials. mean XX for field we've got I XX Virtual commercial trials, and/or field mature deployments

name are to Spanning well begin game Hem of into them, deployments, Com both which centralized the stuff. distributed which Victor. for as others of and that's the as So some us several get

in the value with virtualized that coming So market. bringing market the to scale. to field that's proposition working. We're solution at is It's the demonstrably we're a working

deployments, and and in extra replacing are way brand of core fully in apples-to-apples of software terms functionality We bringing and CMTS efficiency with we're a kind but a extra platform. capacity

to sure clear. is really make So, I that's not if that clear, please ask want as continue to that

Victor Sze

deployments or…? these Are U.S. the in global

Patrick Harshman

terms the a right got for real in activity of engagements relationships biggest globe, been of of and years strong globally, Europe dialogues means in in is with customers we've in We're the that around having market the with world. but having America the and concentration -- up cable North one our now, working benefits the around leg operators of and

in biggest We're North Latin the activity in Europe. So, America in America. is but in active Asia, we're concentration today active and of

Victor Sze

to be the general, need interoperability integration start Okay. Great. guess, order And network think that in very guess addressed to XX, thing helpful. for aspects if one That's of what are outside I deployment what more just carriers I you just last different solutions? of considering the in

Patrick Harshman

they're that there their the dealing increasingly think real no their Tier there's for issues technology there and now that think and with frankly is particularly aspects we've business I I cloud etcetera. no risk applications operators, -- shown X other native are fundamental and of

etcetera. area not is this are I aren’t it else. and so CTO's magic think no solved saying, it our doing kind of we some doing So, stuff. problem access to Why everywhere there Increasingly be is of in fundamental black kind we're

high-speed look, customers. data think platform is the extremely I strategic it's our extremely profitable, for

is understandable no We're that careful there a vetting there's is anything. undertake, operators, process, before in Each with technology, or bit different fashions a to different absolutely they or of it's integration process operator being but that little not careful or different. the etcetera. problems next-generation a they is fundamental as we're physics are There So, moving midst solved. in seeing forms

So, across it's on these going pretty much straightforward that integration is work engagements. different

Victor Sze

you much. Thank very

Patrick Harshman

Well, thank you.

Operator

question next from Bernstein Jeff comes our you. Thank Cowen. And of

Your line is now open.

Jeff Bernstein

hi. Yeah

the the their the as are competitors you competitors front. theirs. side. sale I and hope the for traditional could see businesses Amazon a Ericsson give about already video that. on you would little see BAMTech star much more or can in took about Ericsson gold Sanjay that. market just I to to like We bit want detail environment competitive for Are just or The as guess hoping management Cisco detail a off note now First elemental and like guys us give us Disney you seems the you was capital that on

Patrick Harshman

an We that indeed AWS. partner, we've on most date excellent I one difficult it's fragmented. are AWS strategic that question cloud bit so answer just an to it's because public Well, to important running a it's it's of the deployments little done and as consider regret

than indeed partner well, So, and got but more that another competitor. business we with see compete BAMTech of Google to we of connectivity tend a a as part some on we is

the to and evolving much top day wishy-washy system turnkey to And its bear. part and bear the another where I we're the footprint of player area picking bringing not transition up I offer share growth to said, a business kind doing partnering. hanging year environment seen there with being we're but traditional a I'd bringing challenge big some an we're front-coding, of it OTT no we've of some on not just one streaming I to leaning that we somewhat hope and of large and like heavily, shoulder weather has is market results the service there. the space, That doubt too traditional competitive is legacy competing second under is the the our just it's Amazon that's become Pay competitive are the in said, of Jeff, side We're of us particularly hope of encoding, of to indicative over Were the healthy what video think models. managed business it's wheel the the and it that answer, a in and be I a part capability fragmented the SaaS to for our opportunities It's one So in and service the new we're TV traditional clear, hat from whole of made of the the on bear. a of think presents bringing it and more that I bit being expanding situation fast-moving but of competitors That footprint. not lot of the of that's benign. that part about and half but evolving the think other the elements on part We're really our in discussion. a us legacy space, of we're little reality expanding indicative expanding We're business. broadcast ability doing what indeed our

Jeff Bernstein

separate as So, it's just a Disney and out as little bit are a area to it competitors sounds commit technology sorting as seen just Amazon to the are. still customers like is that resistance they as competitive or as the DC from therefore a like you and it's changing and vendor or

Patrick Harshman

my a to of It's are potential hold we're thinking think thought hit seeing going my well, are they're service where large you've so you so some that to service to saying platform? more service from So, the is evolution CapEx moving a on because customers They're buying evolving put frankly. we're a this then who is of real where that's the partner question. companies way evolving considering media so interesting indeed an higher a I think very time and got business. I really the to at I think competitor's about on and than Do operating model their all real want on. level

partner is big companies with a thinking it a media about thing You've is etcetera. it is or competitor? Same Disney got Amazon,

also said, situation. pretty that fluid So is that a

arena. that mileage hey saying disclosing had think there. names, we we other not Without made and the business move large the who Harmonic's chips a regard, in us position went we pretty with ourselves someone we real we the competes on down for technology started companies the think and strategies is the to that players, for who in context, as with we we've prefer I sphere, that in management platform managed out, attractive that media one that neutral of to think another those positioning there's of turn came best-in-class us clearly dollars of one actually actually with with do their certainly the but them we wary is is are or content in word service, customers competing company putting ad some to specific table the think doing what of we're to service

one it's market. the is given we fluid positioned again, we're a of that's that circuitous the answer. So situation, see we're in opportunity sorry, the way am way for a -- I kind but rich Again,

all video if thing we we video. by in all headwinds, is look this saw continuing year, The being this backlog booking add their M&A, other quarter, to that primarily only environment because not foundation a SaaS voice-leading bookings this record of customer like driven despite and our but at business

So very a strong backlog on ahead of strong year very us video. which positions

Jeff Bernstein

the gone Com number that on just was North be but going while then American and guidance, significantly, you've it that have year you quite single to for bracketed the number guys the the driver pretty back was expanded a hasn't Cable Edge, but And pipeline on a Great. of $XXX not up. that customer million Hem now, going really

So, what's their with American problem the guy North the and deployment?

Patrick Harshman

Look, I is I talk can't the being room. customer about That any specificity. alternate any said, guess with in the one

that I've is used while, we've etcetera and for I being out or I there tell appreciate like and We've this as theory that something this There that horse is categorically, Harmonic around. been my a a So, is the that to want been you case. stalking team, question. heard not industry I around the

way timing. That that are change, cloud We to It's to up over the as convinced It's particularly time things and gear for we're and highlighted make solution, routing. for is think XX rest have your It's so Tier X the that earlier, paradigms bigger over virtualized of the that's us. said, about cloud-based can this is investing it's co-locate about control learnt last we which a management. significant become to I've that returns, new this infrastructure that the being the native than I yield the of you have energy engagements customers move exact what are we sure. over full doing, go a cloud-based and we've we're parts going about as in moving don't months don't with control beyond what there unfortunately lot our whole therefore

the conviction is in, indicative complexity of a long-term and be is guidance talking every not taught of has about how guidance box scale that from the you. the the our of control. going we've out we've it also because elements I frustrating of looking away off opportunity and group probably us gives So, are rather activity careful us here that given for I our of see know at view, that strength and hearing quarter-to-quarter, that in the years, customers, for a it's black customer is am leadership think however but that any seriousness what's opportunity in timing backing complexity continuing of can our the and or on our with timing the on. the recognized the you're from us to all opportunity today But position and it’s are blow outside us long-term I I in any certain what there one but recognition about here. It

year On the given the can we've and are. I we've see XXXX. still It's calling hopefully earlier yeah, just it and not our us other it the in best in hand, we you and way at making aired stab

go more to we're that and though in back million and think and with market If that this front. $X.X there's to research about than fact XXXX is is little game want the in brand-new go revenue. spend, of discussion a XX% necessary allow billion that way latest me step, you this to a to billion further a out says XX% the but next be think this lot I know $X.X is I $XXX I for all estimated we a we're product of where that categories that

piece by skis this of I we the thinking and looking business Board a how you 'XX, if our of of but of far management want tell to in too major to and Directors $X.X is well don't have are billion we're team playing getting So, this I about beyond spent you for and get know terms our XXXX.

we're going So, bigger -- the here confidence hopefully our in execute, and talking we're in the beat is sure making fully real and bigger the meet that we're on to engagements we're we're what undiminished. to belief XXXX, position involved you or thing I the customer really our to but in in a is assure capitalize about pie here going that

Jeff Bernstein

That's great.

happy get If Casa revenues, really I'd those a with be too. that on you multiple can

Patrick Harshman

Well, they’ve done them. extremely well. We're with impressed

keep are XX-year-old take great, and if currently a I'm Gerry mind us team right, XX recall years. going company but they're not I to that the plus and it's saying think in I

five in of five cash, four is says on throwing you're to to means. them, for hand, not it you're game that But they throw the the didn't into actually five any we're in towel think mean by goodness four in slowdown this. and years that that over the off I years. other doesn't kind if Thank it or

not years protecting I'm another So, any means. five by

great where market making is feel here. shape we're a very in progress but is case that great the Casa and really think I instructive study going, I we're

Jeff Bernstein

Thanks for taking questions. the

Patrick Harshman

Thank you.

Operator

turn question-and-answer Harshman the and Patrick to over like you. closing that conference session concludes to Thank for back any our today. I'd for remarks.

Patrick Harshman

much. very Thanks

strategic on premium new the and we're plan up both as highlighting to agile here bandwidth and been just that wrap transformation and Let's networks. executing and and also virtualized global these discussing distributed going flow more our access over-the-top cable centralized to over new this by investment we've on capitalize access services wave new this that quality networks higher customer of are

quarter real Our announcements and second strategic think demonstrate and fourth that recent financial and I we're half clearly making results progress.

Thank going while build the call new differentiated services profitable joining also delivering technologies long-term highlighted value the to both focused just appreciate market your Thanks Looking thank will as We flow ahead, very growth much. remain support to and we're Sanjay and as on cash that and all has you. we've really discussed. today. for you

Operator

disconnect. and you participating you conclude Everyone, for great thank all in the program gentlemen, does day. This and may today's conference. a Ladies have

Harmonic (HLIT) 28 Feb 182017 Q4 Earnings call transcript