HLIT - Earnings call transcript Q1 2018

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Operator

Welcome to the Q1 2018 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. And please note that this conference is being recorded. call Nicole the Investor turn now over Noutsios, to Relations. I’ll may begin. you Nicole,

Nicole Noutsios

Thank you call. and today everyone CEO; you, Hello, Operator. our Kalra, thank are Harshman, first CFO. XXXX and Sanjay today for quarter for earnings me conference With Patrick our Harmonic’s us joining

IR addition see webcast also begin, to provided I’d in this point by portion our audio website. webcast, out to we the our of you'll going slides on to Before that which like to webcast, we’ve

to turning Now Slide X.

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

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

Patrick Harshman

everyone the welcome to and call Thanks, Nicole, today.

growing to our improvement We strategic with positive year-over-year initiatives. pleased success of reporting be a quarter solid by key financial are enabled was that

the secured very gain formal momentum first year-over-year our profit software underlie in revenue CableOS competitive driver as pivotal $XX financial supply million to which were operating than X marketplace. in quarter financial involved on X%, compete was win income $XX a new the achieved up and by and milestones international approximately I'm fact, video In a up key transformations. XX%, was the momentum, this up ability with meaningful announce our quarter marketplace. this The in the to headlines leadership is strategic we bookings multiyear was was performance million. The result agreement both that and substantiating both initiative of our very continuing pleased we XX% improved to our CableOS technology operator. To a greater have effectively the process today This cable RFP Tier gross

maturing. raise quarter. program. CableOS up commercial to consumer addition win in filing several the our this XXX% While anticipate aggregate, advanced this important in major over we On including patents continue technology we strategic impact up, quarter. trials trials now and devices that the deployments as the were discussed served last to we both commercial centralized XX early architecture the ramps distributed call XXX,XXX nearly behind engagement architectures earnings we from over our scenes, have an forward virtualization five last In And step XXXX be to in field is remote additional and underway CableOS and currently modest deployments bar with financial during a for

million and it. be our for in a by on secured our Switching you our X that our increase Frankly, second our and of dollar our we the market these consumers solution now which rapidly success as business. seeing pace team million prior network live video as scalable pipeline, reflecting The deployments than and of advanced clear name technology our CableOS is CableOS, be up architecture financial end and quarter toward addressing, reach I'm to first this just pumped continue target pleased is continuing leadership scale me we in is a solutions, certain distributed the announce exciting Access quarter, here, in up have visibility, and For access we that expanding deployed uniquely stone number system. our just developing Cable for cover of position from distributed believe space When first transforming quarter a commercial business and market segment view of Harmonic Sanjay segment It’s let year-over-year. like for the growing we $XXX to Harmonic we was deploying target. critically both $XXX we to note segment gears profit for side project encouraged our year-over-year, we’re this expertise Tier order time ultimate clear, these, getting cable results revenue was But a I Cable revenue. this orders and objective. discuss segment XXXX and remote and renamed the XX% technologies now, access. charging purchase will up considering guidance gross Thanks of stepping leader next-generation part XX% combination first to also leadership our all important demand momentarily, to a access a five market CableOS. revenue the to for over and wins, deployment not cable we’re objective look In new can the are quite virtualized access million track Edge. tell of our greater

increased the third historically first consecutive during that our was quarter jumped And quarter over-the-top reminder, profit more and gross revenue business centric million has we profit centric in margin evidence SaaS business video transformation a and video XX.X% our saw profitable where QX was to $X.X objective modestly as a income. segment our good over lower, been of As and track video to positive appliance up transition broadcast model. making predictable result this segment operating gross operating on is year-over-year software

market video As Through been quarter first linear you channels over is is the in technology. What the applications. in XX% just worldwide know, from has our ago. deployed Harmonic broadcast six now over-the-top up new which streaming leader has over XX,XXX months high-quality growing leadership over-the-top is Harmonic

environments our So ago. months native running successfully XXX% over XXXX linear private these over six at and and public channels cloud up from cloud hybrid

deferred video globally final for streaming carry-forward we healthy With to and unique comment video record video public the consumer backlog live expectations financial in video bookings continue growth. stability one of quality new our enabling video software, first per wave increase, solutions into visibility and as Harmonic's industry-leading Looking ahead, continue as and quarter for and rest SaaS, over-the-top And applications on and incorporate more enabled shift business of head as and to platform a linear improved business. continuing services revenue XXXX. to we cloud

results a we’re work outlook. video the As progress over with Sanjay turn financial more to have for discussion detailed I’ll and business. our pleased do the with and call of we now CableOS, our to but certainly more

Sanjay Kalra

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

all just delivered of Revenue, of are metrics. means We We expenses in number or at were a we you strong of gross year. greater this results book-to-bill start a financial and across we low position near X.X guidance came head range As heard, XXXX. EPS cash which rest the delivered the end. margins the than and good ended our strong at to backlog a and we strong maintained maintaining ratio a as with the quarter into high-end a

year million like remind be results, our 'XX. million referring a you in million period. that QX $XX.X X million to was year-over-year As the revenue QX $XX.X in the and in premium $XX.X ago Cable We 'XX access in segment are non-GAAP $X would access million $XX.X by segment to basis. in we quarter to to was to I'd strength compared million driven delivered the and I turn cable QX to edge. Slide in compared Revenue on cable from growth review QX numbers $XXX.X

segment in As access revenue we begun. cable ramp previously communicated, the has

QX reflect segment the quarter year $XX.X of $XX.X revenue million access sequential in and new while inherent to products million throughout and million difference more Video and see year. in revenue from contribute variability SaaS continues XXXX. to to shift to services of comparison this but we also ramp, continue the comparison to lower $XX.X last year-over-year in product cable relating was typical XXX professional the to same compared mix As expect software. reflects The in expect bookings services streams timing quarter seasonality the to revenue segment this million

from QX quarter revenue margin made progress total in of and margin strong is XX.X% segment XX.X% result greater video momentarily, Cable 'XX. QX success. and This and XX% to Comcast who and XX.X% year-over-year. margins QX discuss in increase of the in contributed QX were 'XX. in access gross in had QX strong XX.X% XX% were profit will XX.X% in growing this QX one margins than Gross We sequential year-over-year I As compared up million primarily gross CableOS $XX.X increased customer and revenue.

margin business 'XX. and in delivered guidance software margin that investment million expense and intensive QX recall, the $XX.X million in cable 'XX. throughout investments of quarter our control in low-end operating million was in our controls to which due Operating operating gross was careful of operating our QX without a the QX a model. expected continuation strong $XX.X 'XX. a a our reduction were predominantly result, a QX in XX.X% video of in product of our million is CableOS in segment with QX income than product. video development oriented our by growth loss cost operating X.X% million more may quarter million of compromising margins to were higher video program. $X.X you This million in of and QX This this a XX.X% transition. our CableOS in transformation and higher by of driven segment $X.X as year-over-year as ongoing offset XX.X% expenses strategic from the As versus hardware continued expense to capital video maintained segment a reflects in contributed business development at QX in $X.X X QX income income the our Video compares software $XX.X historical mix software future and services We company operating operating QX QX million range. composition R&D expenses $XX.X from XX% to of model and QX

shares OTT is increase compensation in QX weighted improvement in was a year-over-year due in 'XX. the strong improved of quarter. in and both shares focus in loss and with and to $X.XX execution. of compares with careful as to margins the ended in cost ESPP The QX market is million issuance This basic EPS QX QX growth and QX $XX.X our of year-over-year driven and $XXX.X throughout expected management basic share QX strong million based the a alignment sequential compared 'XX. in $X.XX to count Our and The of loss bookings to segment million to million and we materializing 'XX. by $XX.X $X.XX million virtualized in opportunity compared reflects during average QX $XXX.X $XX We the company. $XX.X million QX bookings gross and were systems transition of performance

and by have long-term creation While results over a lot our of we I'm encouraged work first to mid-and quarter value still ahead us, opportunity. committed of leveraging

Slide like announced and to change the competitive new last our would provide X, some standard, context or and segment of SaaS growing the regarding cost location I revenue impact business quarter. to Moving ASEXXX

standard, have ASEXXX. new Regarding revenue the we implemented

under not $XX.X $XX.X revenue by During business would previous backlog million ASEXXX equity of our sheet new the our our with of the equity. a while which the standard during XXXX of perspective, revenue in as From by decreased revenue standard, revenue. have impact $X.X of we adopting thereby note this The the our standard picking increase legacy million material partially quarter, revenue offsetting impact million in first anticipate reflects adoption a result and revenue our XXX adoption was the recognizable result Please lost the reduced some XXXX impact balance standard. million QX. been additional we a under anticipated $X.X was a to as be million. up Revenue corresponding $XX.X that deferred would XXX on the we not

the standard In periods. by caused relating applicable addition, will new expense this approximately $X.X service our future adoption SaaS amortized commissions over us capitalize to of be million of business. previously These to primarily

I'll which to timing ASEXXX customer ASEXXX I in or change with want everyone does billings, is of underlying these accounting remind XXXX of purely business. is terms cash covering revised our considers operating a accordance Our of be health and guidance an that in in not our few expectations. minutes recognition and the flows change of

Regarding from XXXX during of $X.X ARR by the total recurring OTT SaaS QX value revenue million followed with quarter to $X.X or SaaS, million with contract or the new X% deal or the end grew annual million $X X% at the this end Total associated of signed was SaaS XXXX. TCV our at bookings. the first of

first during year than variability expectation in SaaS company. SaaS in than streams revenue anticipated the quarter annual QX was and our our new X%, the While experienced this the inherent bookings of It initiative is we for of softness XXXX. products from the services lower also as

year bookings total X% and slowly For XXXX, SaaS to stay close expect bookings. to ramp full the we of

any last we noted quarter and Since cable those of from the become change adopted activities of have precise more and distinct allocation I our solutions. as Historically this a our on are comparable services employed made XXXX, of quarter operating segment financial video segments. video we and solution between total directly selling segments the XXXX, the CableOS to to adjustments. access results expenses aggregate in our attribution quarter sequential call, an for Beginning operating methodology we during of by relating was sales fourth fourth our our fourth the revenue attribute transparency our increasingly of enhanced on professional two need without supporting methodology revenue As XXXX. during based

we $X.X impact comparison, combined However, to attribution the adjustment, revenue with QX I year-over-year basis. end for record our margins which year-over-year of loss operating new of consecutive cable backlog was Slide on loss cable our by of without video the need respectively for of this Therefore our we methodology a by and $XXX.X will deferred move with QX, QX This 'XX segment ratio of QX 'XX for our We decreasing million. our million QX to of capital our used were of bookings the not million the established mentioned. investments just ended still for million QX and the in decrease impact we with $XX.X has revenue million a $X end at the been due book-to-bill reflects million 'XX. our a At quarter. results. revenue now correspondingly liquidity and and compares financial increase our the approximately would while the at total the results and and sheet cash in segment a Bank in XX% X.X $XXX.X million XX% over facility any to first high $XX $XX QX results intend $XX segment access never and access deferred to X. and segments in the to ASEXXX currently deduction our to operating access would quarter. apply end position of offset and of million QX facility. operating our working reported fourth increased this XXXX to sequential This balance access that do compared course cash the on Valley million, Note working I backlog $XXX.X during company to is The in capital of the in a quarter Silicon

end to 'XX. XX days of and the QX at outstanding days sales the end was at of XX Our QX the day at of end XX compared QX

XX end XX were 'XX. QX of Our at days end at compared of end and the QX QX days inventory days on of at days XX the hand to

from on to million margins XX%, that million. guidance range recent effective standard. $X XX% $XX $XX range the cable $X Please to of Note the share to count of XX%, rate tax their the XXX of range Now range let's $XX to profit expenses a million $XX to million. Considering and under range million, of and revenue loss a $XX.X weighted EPS range XX%. and to to and operating note range XXXX growth a $XX an to $X.XX X. Slide of is loss $XX midpoint the new with in our basic million guidance to a average approximately our this revenue $XX of range reflects Gross from for of non-GAAP $XX operating of QX million of video approximately of the million, share million profit to of profit in approximately of dynamics from access in business the $X.XX, a year-over-year count guidance, million million diluted to $XX of at market we turn revenue million QX expect in

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

Set expected Moving which to below annual ASEXXX. previously revised guidance our changes annual is a to under Slide ASEXXX. guidance was XX, the out incorporate due

guidance profit $X expenses. Specifically negative annual commission changes XXX million in in related our impact the XX% to XXX million with million range range $XXX a profit weighted shares of video million as in dependent incorporates guidance from Revenue access not the They a to million no now of million, million ASEXXX to the of $XX on of average expect these other margins of access EPS diluted an are to range count million to annual shares. a XX% the $XXX tax from typical cable $X operating range sales revenues a on basic a to $XX of software to and of We on expenses and million, million from range in in $XX rate to $XX to $X.XX cable and business. XX%, of the in anticipated than share in our $XX business we operating our range cable revenue linearity to mix revenue revenue million profit to of larger XXX the access range do the from ramp effective of and and segment, loss loss hardware million. $XXX of to million $X.XX range Gross XXX impacts.

results. to range strong that from a $XX and stating $XX cash expect I'd conclude solid to We by million. we financial had delivered quarter million to like

We over continue will initiative. back call long-term profitable delivering and to our remain I driving growth focused now the turn Patrick. growth to on

Patrick Harshman

by Sanjay. We Thanks to priorities. strategic reviewing close want our

continue business, operators Leveraging both to CableOS access is objective secure this wins to number architectures. and XXXX both million distributed with to midsize centralized deployments for both profitable and two scale additional first one X to on and and CableOS Tier is our is this cable cable revenue our of leadership customers. target deliver smaller third momentum Sanjay says For access segment growing number And industry growth. our wins position encompassing successfully new $XXX market further as a design objective business objective

the objective of is of growth in side one number media platform, further to service over the Turning and accelerate verticals. provider Video house, the and top success regions to across

objective market SaaS customer our our continue we’ve deliver the to proposition. over value quarters. objective thereby further is our and our profitability to three enhancing done third segment consistent extend as And offerings past expanding second Our addressable just is to

together into backlog shareholder tangible value project profitability and head the remainder quarter in and remain these financial Our renewed growth, continued and the of and healthy focus as priorities we confident XXXX. and committed on progress we strategic enabled pipeline with driving to our first

questions. So, open the with for your that, call let’s now

Operator

from question of comes Sidoti. our Galinko And Instructions] Matthew [Operator first

line now Your open. is

Matthew Galinko

update was I us SaaS an you quarter, could that give think metric? I if ARR out you started last breaking on wondering

Sanjay Kalra

continuation rate end and at with the bookings got the $X.X moving that’s $X we from with year quarterly million we the The approximately ended booked SaaS the the ARR QX year run last of our time increase revenues to of of and previously same additional deals. in is at million XXXX

approximately X% increase So the quarter. it’s in

Matthew Galinko

kind in you do targeting? expectation still the looks XXXX of And have what could just SaaS on are the your like or you expectation you or what mix update

Sanjay Kalra

and I fell remarks. year we X% SaaS and like mentioned the that this So expecting are able year as we But the to short XXXX last QX a back X%. approximately prepared around bookings little complete in although full bring you X% believe year see be for my as X% still we’ll was to throughout capture

grow still believe that happening should So overall in growth our expect how expectation every believe also going XXXX quarter-over-quarter that's is ARR the the in and to continuously saw ARR. we the we our quarter we XXXX same we and

Matthew Galinko

CableOS, you don’t think Do One that Tier mind, I you any any X into in with starting about more ongoing you quarter on if last operators? trials Tier a talked deployments X field or have updates operators initiative?

Patrick Harshman

it’s but smaller the Tier commercial matures of guys. hardens room our been we've with XX strategic - represents Matt going well. technology we’re and continues X making But main little good highlighted is a progress and just from say more be the the wings smaller here get and business, Frankly deployments focus engagements, mixture medium-size I some X Tier breathing Tier and the a bit as to we And advanced that a some trials and of over spread and the further that X continuously. of to to able operators.

progress, so encouraged its far mid yes work the see part we of and size in progress So the long-term the smaller being have driven QX. by a with guys - opportunity we’re big and we in

Operator

Steven comes from of Frankel question next our And Dougherty.

Your line is now open.

Steven Frankel

it large a and why think going technology? start the be replace won is deploying you for rip planning let’s to that is CableOS how this maybe - this Greenfield international new Patrick characterize or and us win, on is Is how you deal with this customer deployed. the

Patrick Harshman

worldwide. fair Look the is function et parts broader the platform. what network we have and vision other of said pushing technology so their several aligned I done behind with it’s what with we’ve operators cetera powerful the push quite we’ve strategically and resonate things virtualization so strong the Tier with questions. done of broader times, a X as technology So It’s the think

world. right So we’re engaged Tier the with around X’s

mapping and technology combination in ERP with on we top out it’s proving exciting their to us the this come their out of see up the and think their us capability process customer of so lab. particular vision to with And

So it's facts down, themselves vision a they it's that tested banged and compelling that real. just not convinced but in

the we of the is to Part part be it and and network. rip the expected deeper, gigabyte mix pushing question, of of into fiber second the to service is a Greenfield connected So replace. deeper opportunity indeed

part see Greenfield rip fiber common if you'll being you'll is for will, so the And other our technology which hybrid there essentially you but and element as another is all its deeper the will deployment areas going we operational of that and you think in and see plan say efficiency understanding in areas that some replace. advantages of virtualization, be

Steven Frankel

us you now? can And is the business update on backlog the in where CableOS

Sanjay Kalra

historically So break out Steve by the backlog we not haven't and segment that. video we generally done cable do

However, the our QX. up expectation right fact to and right to will our guidance in QX QX support well going share increased which the It’s has for and in quantity I’m that directionally annual our backlog we the as growth. in for would happy from direction expect as

Steven Frankel

not And that - element? like to a was a and five mix the piece this deployment that’s with remote big may go that remote sounds piece five another back have this of

Patrick Harshman

different reminder patterns, Yes, kind or traffic et part the That's of the consumer you software the have profiles deep a it's different the different the down whether in subregions, agnostic different its system indeed center I can push beauty or whether of locations five network. in cetera. stack for to of a data is, centralized of where the five the mean next door heart is CableOS system as a

remotely our is more conventionally or parts software stack in terminology it’s centrally to network into the five the and applied centrally some have plan so-called So deep network deployed of the as parts other goes. and long-term the

Steven Frankel

been next stage that of happening us for the kind and relationship tell customer, can waiting about process? what your trial What's we’ve And that with major develop. to of field development

Patrick Harshman

are can news. you're I good Sanjay are and than is XX% which customer greater think customer referring they represent been obligated to operator we've report is customer frankly revenue key world as that that And we Well, the XX% a we cable business sometime news mentioned positive one Comcast since to XX% were doing they of obviously is and us. There them were report because the revenue. be a customer very the so of any it's for number in with I to very had think volume

detail last can can think the it change, simply share. broadly that but it's that's doing capture conversation Tier is we what tell you and we going represents win, we’re most to in worldwide. of a that More that the that So X’s of the the beyond new I really back international imaginations

on And we think good isn’t know that, we’re specifically comment board. so and in it's any and leave have our we're I to please across other I I hard it’s operator. view at really but of a progress if when pushing making question the or more And Comcast understand think any can’t you specific

Steven Frankel

cable quarter? of More access or cable quickly so the in on that video mix this cheaply revenue the was Comcast access again, of that that XX% and is

Sanjay Kalra

particular not mix revenue in that’s No, total. segment a of total any but

Steven Frankel

was contribution I’m But on backlog, asking there both businesses? from

Sanjay Kalra

is contribution both. from there Yes,

Steven Frankel

QX is on And revenue XXX in how then of that guide? headwind the much impact

Sanjay Kalra

small very we QX to in X very are very we’ve So impact that’s well. million net learn on taken already for but what we an QX as similar K what expecting of around the as And guidance experienced in insignificant impact XXX QX. the QX baked XXX/XXX impact approach similar in the more guidance the we QX a piece is

Steven Frankel

scale is back impacts in the…? of anticipated year the up obviously if the So the

Sanjay Kalra

like into would and QX the split equally for QX suggest purposes modeling terms quarters. so Exactly purposes easy two back I in in

Operator

Northland. Savageaux Tim question next from comes our And of

is open. Your line now

Tim Savageaux

some that congratulations to well. And back and Tier for with average maybe sense announced of within of the you international notable solid as as up add is what the maybe across of what said of we on Comcast field I’ll recall quarter can a deployments try and unusually and X I of you're that international the trials XX award indicative Tier on mentioned pursuing think kind several of but milestones to that opportunity us What the of look also X a guess my you properly as XX. large early of deployments in of opportunity be but international give universe and operator opportunity you base that to with you you announced follow up pursuing operator, this today opportunities looks from universe an and If announced typical well times. trials? size kind I the and several you want here I having is trials relate Tier X I referenced what expanding that assume you you’re group

Patrick Harshman

is where $X Well I think place billion the this think that market. evolving you - we towards have start a

that's call we worldwide big frames we’re the really Cable X the So are they is by opportunity we that Tier what the dominated guy. pursuing. think

And spend amongst million. the operators certainly this so in of north category the cable XX top $XX is

as cases to eventual billion about after think RFP be grow, with really absolutely number us or with constructed this the more project not as pursuing grow, X is about design and it’s size. the get probably pursuing objective our opportunities Tier to of are certain even its always wins and the is really for leveraging and a in of we it’s than case indicative opportunity. being smaller the maybe So we’re formally were the the minority space. That gaining said and that this $X And for an certain one footprints grow opportunity

It’s and what X we we and Tier we've small as bit think than us side smaller of dozens that So, see we I of the bigger or about for think front operators. not the representative its it got opportunities. midsize in tens the is a little opportunity of our fetch think

not great So finding Tim a because kind cable customer and a community. in that sizes all shapes and of is but because but step and it small of it win we’re coming only forward it's

And we so footprint building with a here as were operator. as is anyone well what credibility

that by billion think step encouraged $X we’re forward. pretty so this we And coming to on happen but a it’s And out going be progress to top that step-by-step. is overnight going is it's encouraging in not space

Tim Savageaux

Got and… it

Sanjay Kalra

for does only gross we it's with the but And as like deal Tim very the of size, margin important and ramp. just the just I what that our growth add not is come we expect us profile also

with this margins within expectations but expecting the in CableOS which only not for on our deal we’re deal this success. size, of the So falls terms exactly

Tim Savageaux

in we’re that of while related Appreciate in they’re way. notably and quarter some first margins mix and imagine I that color strong CableOS the sort

begin? like the But through I note come if of you in throughout looks CableOS maybe the the moderating mix indeed what implicit can might expect of to that hardware a could greater you in more while whether about there as in see you terms kind drivers it the margin of imagine guidance QX or a little of strength expectations baseline Although down the you're and oriented have shipments you deployments you. of year aspects bit that for bit might if

Sanjay Kalra

whole range for And quarter So variability line last our it’s QX the if expectation you great, but to coming are the for within XX%. of how not the XX% at like guidance you only but year said look during same quarter that up, approximately expected at like to up mix with with yes while The in the in the among this vary year, were for we have and some expectations. each year CableOS XX% with considered together but it XX%. is our less There QX to stay margins quarters. we among and definitely could XX% is than margins XX.X% or margins coming happen the as time our ramp the plays

Tim Savageaux

that. could it that you the you to kind over for try around you there for sort in guide margins margins I side the key your And of is potential gross a side few profitability final of expectations what's implied side more video And put be question to on segment? as the double-digit wonder given a of margin annual end targets does metrics if with maintain year maybe video high seem video XXs there regard and mentioned time the objective through margin if you and operating on could on the over the thoughts look achievable operating your out operating update now or

Sanjay Kalra

both QX in can X.X% be segment I an profitable fact expect I that standpoint. we the in mean good to while from be operating in profitable share segments to expect and got margins in profit we we video

will various than or that will less around some to be terms I they but within fluctuate close variability percentages we be each quarters, the In they among at believe time X% X% of same among the overall year would quarter.

Tim Savageaux

Thanks I very pass it much on.

Patrick Harshman

it’s that that a was to the broadcast traditional important remember to business. and what in or on I transition business of add think into Sanjay, overtime we’re streaming just midst from me a software Let more appliance much centric SaaS over-the-top

and walk of we to objective think I our way kind the run. in is I of terms is see you'll the before So some variability working think model

see executing think right and that longer-term margin year even this a I is where are beyond in we look continuing profiles you're objective continue line doing and stable. profitability we way the we’re and transition the that and absolutely I and mean a keeping the improve bottom healthy overall business we gross to see improve. near-term if

kind we’ll I’d do running operating phase of say we in on forward will a keep to that profile posted or with but So we’re higher you there, the objective. walk but if ultimately look long-term margin

Operator

Simon question And from James. our Raymond of next comes Leopold

line open. now Your is

Simon Leopold

that one these quarter verify I is gross that to correctly. the access wanted down believe first I Just cable was the got of XX.X% for margin correct? numbers

Sanjay Kalra

Yes.

Simon Leopold

lower to quarter? lower that so with to strong there contribution guess Is would customers on. would shipped surprisingly significant when would understand led a trending? sort what right I'm aspect about contribution the would is then follow a previous question. up tail that in margin flow example, something March the the trying help how initially are as as that For new the onto margin think gross I specific the Is business it And to I gross the gross that you margin maybe sign in customer a about falling software us the hardware nodes just of you think about there hence think boost the way new

Patrick Harshman

it to not same vary going of Every working So, we would as which be would products, a result. service margin time in these our dollar that's towards what different of question of not is have so to would your timing vary terms surprised there timing expected go margins will how terms margins different the came pretty customer of is need, the quarter-to-quarter. but each we I we're in have this the and only of among of during revenue part Honestly, vary. think timing the licensing earlier were and value the expectations. in The the in would back play, going much sync on within and I mix shipments a they came of but also because software gave guidance think to the the up, quarter the quarter, at

of I the So us CableOS piece are also there is software, customers from but support phase which are is pretty definitely in in margins well. strong these whole are think well, things year how software there deployment services in which a a needs additional are for this so for expectation playing our and early margin healthy of big a services as our all and mix all as and compared to it's year together the coming last

Simon Leopold

sense we period. thought into think, Patrick of quantify objectives referred if transition margin sort could be this of a gross company? what in profile of and you I which for the terms margin long term lot XX So as I'm year would operating a to a XX bridge transition a if wondering of or your sort as makes

Sanjay Kalra

things. long quantify is this I be same as time this term cable higher XX% year definitely Yes, how give at segment we time. said hard XX% access to is it's to mix expectation the but objective guidance and than which margin for a XX% earlier much the At have to going of various

expectation I as but Patrick to rather before we to said we this more then play on would how quarter successful once based now we to ahead can think way that things I I guiding results not delivered have will want we we so think walk the set and be have guiding this over is a or high right about run, think year out. behind us

Simon Leopold

and the just of the driving products on, the is result that the over-the-top about, it and I within to we check over what's business revenue. if material top wanted you've the And should production that not in think primarily how out of about terms talked overall play

Patrick Harshman

side. the primarily not on play consumer and It's delivery to production it's the actually out, more

drivers our trying bundle big are new two Simon to are NPPD domestically see being So to internationally. where so-called virtual and skinny out place bit rolled you

are starting We direct-to-consumer these production player the to services owners also direct in play maybe we question touching an where increasingly out have with virtue role of a also a go services. with of kinds and those and relationships historic we're involved you're to lot of companies consumer, content who going and P&P by your enabling area and this is streaming top media in playing over are our

are a fast, water broadcast top declining. key over over The the position, for of two we're traditional those driver making the net-net topline us. growing infrastructure our So, type striving our expand so for activity. drivers by we net we're the it stuff and overact growth capability is of think treading top, continuing but Admittedly, is to kind the

Simon Leopold

the nodes, back you. one last could one aspects environment competitive Thank the today? CableOS to And business switching the where see and with this of the you CCAP just talk you about

Patrick Harshman

me relates margin risk you back a flooding of because just it's is a the take let it further Simon the to It itself half is architecture. me our question so-called step on CableOS on If I whether architecture follow question. kind would think distributed the a that whole centralized understand allow to water software of at or important the agnostic

that whole certainly we'll come is disruption the if space Now distributed big think will you networks. the around cable to access into I starting

clearly I strongly going think playing we we have can leadership a can see there. that we're forecast to and there more position

of to business key of we over always towards understand that will success putting have bit question on exclusively it’s wholly part software indeed deployments there majority a and access network think bit geared towards if to-date done we've a have and I higher our what of predicated have or and our - the be its the that not centralized. out the redoing nodes But most geared of mix. you activities is mark component uncertainty is I little the a relatively which will actually market successful a little of the and how capturing more time, think that is forecasting that's centralized will

our mature Now had and are CMTS about remote we've software being to know the competitors with virtualized about five. question I and we enhance working leading platform. don't all don't been in we further around your but specifically said, to then that our and was customer XXXX feverishly know, since think what what working advance - We up first the

whole it that part the belief our other and all as we've market companies feedback overconfidence this like things piece in in we're there's we’re that focused virtualized recent things. on the So lead that is the but a into participating talked of putting remarks back in the based mentioned we've we're good well getting area maintained of of a quite remote hope five RFP as I about and I the field very design doesn't we're mindful in completely as the to prepared cycle. learning a customers with strong this both in we've like here our and from equation, win at the continued file patents that lot sound -

maintain pretty maintain we that forward. go as that to is a understanding very this will hard market our lead strong So, we the something and working be in

Operator

George from Jefferies. Notter of And our next question comes

now line is open. Your

Unidentified Analyst

cable for for us any Carl the color I trials segment revenue is that if deployment on that mainly assume be you you the George. the that here mentioned. could question. give from wonder customers commercial field some would would and how Thanks additional driving large many had access the additional in you improvement now. your then that in This right year-over-year I quarter taking the are

Patrick Harshman

emphasis disclosed even a mix a represents smaller It advanced while continues of let’s accounts. be that deployments trials medium we our mix, commercial Tier is say and a here X, worldwide strategic of larger and and to couple on and XX

global the still it's it's total think, continues but still of to relatively something that a I cross-section landscape a cable expand. it's So, modest

platform then and on build that Of success the use a strategy is customers. course to real as our in players more drive bring and early with

Unidentified Analyst

versus And field deployment trials anything the there the collection would guess mostly on that? to is of you how - can the would or I commercial that sense be are big get deployments, further a give commercial us I'm for trying

Patrick Harshman

revenue not clear but be it me let is multiple - commercial XX outlook on that it's contributing. quarter for of the deployments, coming coming mix were a the customers revenue the just relies Of driving definitely year one the this or two

Unidentified Analyst

And just about you should of could prepared give any do savings mentioned us if I'm a - dollar forward. wondering in target savings and just platforms a or slower think that products? you're becoming or should than initiatives for SaaS and the cost me, revenue you you to one on in How getting a going we from smaller we revenue Is the for kind software have R&D remarks. your given think think sense percentage a cost growing about R&D of last of should going quarter. we your how R&D to there value

Sanjay Kalra

those kicked QX, initiatives for time At this same Carl in year the are already. realizing quarter. theses whole last QX our guidance so savings the in QX we that and benefits around the savings these even entails off we’re well as year we saw as benefits

for save you in of and whole should take maybe use the already. to address guidance it year, XX OpEx savings the midpoint that XX if a the and the as run-rate So that

in playing it's an that’s and year well those with initiative So accordance expectations. took we last

Unidentified Analyst

results? into a And of the or we kind year the of trajectory next the is one point think how that of when duration are there continuing backed like trend should you what's into think savings that and - fully those financial

Sanjay Kalra

expect we as go would are I’m and specifically beyond for while and even have been for Well beyond XXXX those put color give the time, in at XXXX out reluctant to XXXX. place this to we into more that but continue really point in R&D benefits realizing initiatives

in XX quarter R&D think well I where range should piece XX are is we a XXXX year. store the continue but directionally a the So definitely to of every savings big

Operator

Northland. of comes question next our And from Savageaux Tim

Your line is now open.

Tim Savageaux

win. I want to want again follow-up comment about the international Tier briefly to or X

we like customer along on was of million want but a that in assume perhaps back your of of that you the that revenue from diversifying $XXX expectation and mentioned target sort calendar pretty modest kind some to comes a you largest questions reiterate think impact seems and of your the about, as look here, polarity just can lines XXXX, that previous of focus nicely. I it I for your think

So that but that target as influence XXXX what you on kind doesn't XXXX reiterate in thing. that’s about from win new or anything more $XXX you of you than have target any new of if million supporting and kind talk expect that your it this seals can do win whether

Sanjay Kalra

basically this and more million $XXX there is right direction that the implementations, color and its backlog said some how now modest to this on as agreement business the million backlog have we next we a we definitely same target in that got also but up there continues, our ready not it to this It come for some is CableOS is years although most provide start reason this heading for At provide signed. going basically have which XXXX XXXX and as multiyear Yes, supporting. XXXX. to we so $XX on only see agreement is right time being year time related and that lag in underpins and be customer a they will technology the to And when revenue. ramps to revenue and I’d that are shipments a purpose. building the to and it’s then like see and it a between it for going for the drills the as This for shift of the in as but year the get’s we ramps year will prepares confidence and some

Patrick Harshman

participation joining with the forward today. talking to for that and all Thank Q&A. you we soon. look We So us ends all appreciate your you

Sanjay Kalra

much. very you Thank

Operator

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

Harmonic (HLIT) 30 Apr 182018 Q1 Earnings call transcript