HLIT - Earnings call transcript Q3 2018

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Operator

Welcome to the Q3 2018 Harmonic Earnings Conference Call. My name is Candice, and I’ll 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 call is being recorded. the to turn Relations. Noutsios, now will call Nicole over Investor I you begin. Nicole, may

Nicole Noutsios

operator. thank Conference Thank us everyone, CFO. our Hello, you, and Kalra, Sanjay Harmonic’s today Patrick our Quarter CEO; me and today you Third XXXX With Earnings Call. are Harshman, for joining for

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

Slide to turning Now X.

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

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

Patrick Harshman

call. QX everyone, Nicole, to Thanks, our welcome, and

We’re financial of to transformation. with enabled again solid year-over-year Video ongoing pleased positive strategic success software SaaS a our and progress quarter business the and CableOS be reporting by and

cable week's the lot modems this Atlanta. of Access the servers. consolidation from partner a benefits up great continued ultra-high-definition customers. is in attention for residential conference up trials Specifically, XX the Access dense compelling introduction Among operational Including our and XXX% X.X% million over cable software of than corporate to has segment. delivered combination XXX,XXX steadily openly segment the to closer service the sales operating streaming in commercial Buckeye CableOS week a have efficiencies continues operational powered from CableOS last deployment customers XXX,XXX gigabit year-over-year expanded income And deployment with sites probably of single of for from the competitive garnering the as number where We CMTS both growth Buckeye's running XX% look positive announced approximately Broadband now revenue build. is delivering Video systems off-the-shelf behind reported CableOS to scenes operating study, combined XX of to to CableOS This for financial drove services last XX X.X Cable solid segment. Cable top footprint our field CableOS increase enabled broadband last migrated upgrade and business communicating Other annual service new and a DOCSIS case Buckeye center a of worldwide about is significant business broadband subscriber Broadband and who year-over-year income while growth XX% progress include Buckeye former deployments last this balance our been our over quarter. highlights at X.X our revenue a to cash CMTS industry sheet. we of notable quarter. to CableOS. X.X% the actively Taking success XXX% CableOS greater commercial these in

So through architecture x to that and The consumers is operated benefits virtualized paying delivering let takeaway receiving customers is being who and broadband and are our be service XXX,XXX over X at deployed being for is CableOS's early CableOS. business me live clear XX here the is customers. this delivered scale, key and can significant software successfully

Remote the distributed DAA. Another architectures for quarter also of access attained known of shipments was new during the milestone positive commencement X volume our as nodes

the industry the The were shipments Coming that installed revenue. of industry leader by no by software from QX's be in in were week's cable will question establishing being customers XXX% that in process major deployed going sales. part is cable's are DAA conference up future the to once followed ourselves our out of contributing become and companion no nodes last of there field QX record as we a CableOS is license Specifically CableOS materially to and DAA.

continues activity growth drive in operating a of was wins this year-over-year of XXX cable XXXX. up XXXX, and pipeline the project our our $XX sequentially. Segment financial to X.X% consecutive All second segment design approximately and revenue strategic access support positive trajectory. continue XX% And million of And was XXX% payment revenue in continued million profit to and profit.

access. and scalable all expertise virtualized solutions both our influential in recent the the and global technology generation deploying of of to cable solutions made clear it market events understanding successfully looking access of of increasing wave combination So be customers, that the our these customer in distributed wins in Harmonic market growing uniquely the feedback leader position ahead initial leadership, our during of Atlanta advantages with cable the next

segment. to now our Video turning so Okay,

software consecutive driving operating profit of mix our was initiatives consistently in an margin income Here sales. gaining strategic evidence seeing fifth improved of also QX the X.X%, quarter this momentum positive we’re consistency marketplace enabling operating reflecting segment the continuing performance. segment financial income, segment Video operating making of XX%, improving gross was

visibility enabling software carry predictable and performance we historically our backlog business appliance consistency. demonstrating the of financial transformation quality. Video SaaS track consistent linear the continue space. over strengthening business, and strong and and on now streaming worldwide. transformation more position further same in segment Underpinning over-the-top this with ahead, the Looking over-the-top to is streaming X% growing to team deferred profitable centric The forward high deployed XX% that channels year-over-year more performance and in broadcast is segment strategic premium sequentially streaming our Harmonic live quality of Up is video live the revenue XX,XXX

QX also high-definition XXX% were we we up sales when UHD QX, for which is year-over-year. demand saw the up sequentially, UHD that sales XXX% impressive in continued solutions. During were related third particularly quarter a ultra recall

and to to for in positioning beautiful capabilities a leadership technology on new of and Also monetizing installed our expanding high of NASA and a ultra in definition has Raising ultra new interest Since partnered business SaaS with advantage new content. offerings. launch land September over recently video worldwide was positioned the following we the Roku video and this based launched app on Saas leveraging Leveraging NASA world approach addressable times. take market-leading to and stunningly channel market the combination expand key high-quality development. our streaming growing a this well visibility is channel in cloud-based our our We’re to and Roku XX,XXX been strategy deploying programming. high-definition screening

nearly active video up XX number of Saas We’re to pleased has XXX% grown to revenue-generating customers year-over-year. to a the report

cable in in both access look summary business video So and our segments.

turn call results make note We our solutions the relevant differentiated in financial continue I on bringing financial improving now for a excellent outlook. as to and and detailed over progress in will to truly that of our and result And market Sanjay more to performance. discussion

Sanjay Kalra

And this all Patrick. afternoon. you thank joining our for Thanks, call

Before to the are basis. results I like to provided will we referring my you I share remarks, on detailed a with you as remind and financial quarterly non-GAAP

just you performance Patrick third our As quarter was from heard solid.

This cash a performance of both strong and consecutive segments position. we exceeding quarter a coupled solid range. that profitable our metrics. with results a Revenue of five at This execution. This in operating in margins with end gross resulted strong our by financial were marks profitable quarter and came delivered pleased guidance our in sheet strategic EPS number across We’re improved below financial while an and of sequentially expenses high balance key expectations. quarters supported was

compared year-over-year XX% to ’XX and and to was QX period. Access X, XXX.X review year This guidance. in million year-over-year growth. to Presenting the primarily QX QX in our our million million Revenue XXX% million and quarter-over-quarter our end in a XX.X Slide was high results. ’XX. As in due XX.X of segment. growth. to Access quarter-over-quarter to the XX.X top-line near Resulting growth we Cable This and XX% million X% Cable million, X.X turn XX.X ago in QX growth is revenue compared in is

market underscoring Architectures a same revenue in for Access shipments and for Access in segment. Video Cable our Of in activity last XXX% in sequential Cable Access increase progressing seen, in of XX.X the was year. million, throughout new quarter QX million note, to compared has Distributed and have was XXXX. nodes particular CableOS XX.X XX.X addressable steadily expanding our you As million opportunity segment been QX of

gross and in were the after when decrease shipments to ’XX. reminder, margins quarters. compared Consistent deployed field. QX a Comcast, one Video in X.X% were gross take XX% out up the The As no XX% year. mix of node an of door in to with in the customer, half we customers increased in been The revenue In two who margin contributed past have we just DAA QX QX seasonally. greater-than-XX% after in very XX.X% quarter Gross XX.X% Cable catch revenue software is XX.X% QX ’XX. QX revenue. which of in last a reflects prefer time QX the saw in in before first typically year and slow CableOS which go being margins a QX, compared exception to corresponding had Access sequentially weaker the the total licenses, XX.X% QX

in of up XX% compromising improve. versus clear in sequential margins So software video Video improved segment transition. strategic as as is to ramp turned ongoing growth and business Access our in strong CableOS QX controls without field access mix XX.X% ’XX. to gross Cable video The QX increase blended expected an as We software expected reflects investments. the of margin our core enabling nodes and are on in be installation QX XX.X% maintain was

range in operating million. XX.X the in was operating X.X in expenses QX million million activity QX XXX.X shares RSUs in X-K million ESPB Cable for Video our management. mainly a was We to we this ended bookings loss profitability. vested and our our million Comcast turning in QX August. sequentially million QX 'XX. was operating operating the from in context revenue segment improvement R&D becoming operating compares QX bill to are This we quarter some provide primarily QX segment in dilutive QX to expenses quarter. line in operating share profitable, driven in XX quarter million, million X.X of previously our ratio million increase sequentially booking marks XX.X QX quarter, QX seasonally some of mentioned I $XXX,XXX million QX an summer quarter. million operating X.X% quarter was by XX.X are of in $X.XX an year-over-year successfully QX this have backlog EPS cable result, XX issuance $X.XX As margin during is diluted million and still million Consistent vision five the contributed trial million QX this profit and X.X X.X timing and of by to with $X.XX and guidance QX of million prior based but operating Total especially to increasing to of of and shares XX results. million of recent million high in our QX XX.X result below with of ’XX. as XX.X a and RSUs, our of of and previously X around contract and average of typically Access end driven a differed acceptance cost a vacations quarters to since XX.X which we expectations income Cable year-over-year to our was renewals. now QX saw in approximately consecutive the loss weighted QX million overall generating money XX it's in to slow income EPS internationally near the in book of up compared performance million count primarily also of and options filed 'XX, ended Also profit to compared Access approximately 'XX. This EPS to an of and granted spending despite due profit ’XX. X% warrants compared X.X of compared The employees' which to Note a our impact and approximately support XXX.X pleased XX% segment would approximately like This in due the in due video X.X. quarter. of that $XXX,XXX million Philly X X SaaS of shares regarding and warrants on the milestone of the seen with early with We were achieved down effect we due resulting segment what historically. Video to as critical QX and

was QX. bookings for views X.X million the at end QX million Total in QX. SaaS of was value the to total million end compared Specifically to QX of at contract million X SaaS X ARR compared X.X our or of TCV

and ARR QX. to XXX,XXX Subscription is SaaS comprised based in QX in services reflects million increase both professional an X% increasing ARR Our of and related and This base from QX million professional usage offerings. increased SaaS QX ARR decreased related from to increased subscription X.X in of million in X in subscriptions customer subscription services. related X.X

by earlier out customers XXX% call SaaS grew pointed Patrick on As our the year-over-year.

in Looking for to we will are stages base. total the we year believe continue evolution and X% We grow X% bookings. be our as to approximately of XXXX to total SaaS install expand SaaS ahead bookings our continue believe still of we full that early

Cable from location in enhance As I relating operating more our Beginning segment comparable video of we the a calls attribution based any this on our increasingly methodology total during transparency and a alluded change our adopted have Since starting solutions. we precise segments. XXXX, between as those XXXX, solutions methodology XXXX. sequential operating segments quarter of to selling on financial of become QX of we Historically and supporting the without distinct previous and have the sales quarter CableOS professional and expenses adjustment. two revenues activities our services fourth video employ to directly results our fourth attribute made need revenue been Access execute was of

QX margins However loss our Video $X.X total for segment. reported of I on course XXXX now to Cable Access operating to income of retroactively of narrowing Slide revenue Without which position X. of the we our decreases company any impact basis. the adjustment comparison a and our methodology sheet and segments while liquidity results, 'XX apply need to QX our results, move by combined results, on year-over-year increased XXX% therefore with segment million attribution operating year-over-year operating this both Cable of new to the segment Access balance will

$X.X cash QX and this This million end with the deferred ended XXX.X QX XXX.X and at of QX, XXX.X The in million $X.X compares X.X was previously of million from cash generated at mentioned cash million million. XX.X of increase XX million of QX cash QX of million primarily a financing sequential net in and We generated to 'XX. end As QX from X.X end of 'XX. backlog and million. operations reflects revenue in to activities compared million of at

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

end to on we In days long-term results ahead of work end quarter while creation our of at days value our have QX our days end QX us, by committed QX compared and encouraged XX hand performance while to lot summary, Our the delivered I’m were of overall a at of mid at the XX inventory remaining opportunity. which of XX days we the to and have year-to-date third 'XX.

Now of turn QX guidance. let’s our to GAAP Slide non X

million, color in of is expenses QX, again which grow range margin For news. million of million. demand share million range shipments in to purchased nodes is 'XX, X.X software this in weighted little million cable XX.X and of associated count on will QX operating of access access of income provide on. to revenue in quarters, as associated previously with in the And and the expected field revenue beginning to quantity sequentially volume to and cable a access million is the XX%, here XX expected the learning nodes nodes we from of shipped deployed we range to finally, prior range. lesser the somewhat or expect need range million. XX revenue the than range Gross million rate in and turned positive cable pause be of XXX shipped to which to range and past and XX XXX XX% from be from steadily XX more to want DAA I million tax of curve operating XX XX revenue XX to Consistent wider be guidance XX our in core range then of the XX%, QX What to Video end DAA at at pace with which to of of to two on cash range dependent the deployment $X.XX million ramp correspondingly to million, is a effective the $X.XX quarters. from Hence, that diluted X.X EPS is average million. demands will range CableOS licenses the trend to

mature, timing expect we visibility revenue becomes improve. DAA more to As

X. Slide Moving to

range a million to million to and Access to prior million the operating expense to revenue gross guidance to XXXX, XX%; prior XXX X million our XXX.X revenue marginally, guidance with XXX of range XXX our in Operating reduced XX% million operating margins to compares of to to to $X.XX rate range million million XX% to the and our loss million revenue profit of to guidance Video where in XXX.X of access effective improved XX EPS to better to and improved XXX primarily expenses XXX XXX share million million of our average due now to XX%, XXX million, prior to XX from tax prior million. contributed XX.X total million. from XX.X from $X.XX. million a prior million, cable of of of million XXX the our from to in the expenses. in of This range contributed to to XX.X XXX $X.XX, Cable from million XXX of Gross we margins Video to million XXX from full strong profit XX.X% expect to of improved range of XXX million added For the management. guidance due revenue guidance than of range profit profit shares. our count weighted million value primarily $X.XX million and of XX a improved An of range

to expect million. of million to We cash XX prior million, million improved XX range to guidance from XX from XX our

high-end. and million. X.X by Improving at narrowing of X.X increasing As range with in our at and operating call in the a year our July, low-end X our cash last the by at we the range guidance X X income EPS and by our earnings high-end to which million $X.XX, Video at range million notable provided the by million full changes high-end, low-end at change low-end no result, the the only guidance narrowing revenue our million

no is million million. our annual to there to reminder, a guidance of Cable change As XXX XX

not to conclude planning to I our impact potential the executing delivering quarters any remains results. stating we inform delivered both tariff positive. tariff, that like proactive QX expect financial and significant remain do from by would that around strategically Before our to I on and you with profitable and consecutive initiatives have financially conclude, like growth for and our long-term value. we focused shareholder strategic five outlook We strong I’d

So and Patrick. to back with all that, thank you you

Patrick Harshman

priorities. by highlighting wrap I Okay, our strategic again up want thanks Sanjay. to it

technology is first number secure to scale momentum, Access number X and objective our new three our wins CableOS in Tier CableOS in is two the solidify, market such is of as as Buckeye Cable wave share and business our objective growing For Leveraging Broadband. as to And customers plans additional leader to both midsized design ourselves operator continue investment clear with one deployments. successfully operators, market objective number DAA we cable DAA. establish

higher is Objective Turning solutions media continue streaming to objective the to our number our top objective quarters. provider new five to expand segment to over business to Video and our the is our consistent done profitability three we verticals. addressed number grow models. deliver and segments, offerings as SaaS number service over market, to growth across have past tapping leverage into two customers one And is

profitability and our quarters shareholder like priorities these has financial partnership creativity in customers first and to three and the for their for our clear enabled to value. their progress renewed strategic continuing continued and thank commitment for employees XXXX through Our confidence shareholders global commitments, support. of driving their I would growth, strategic our and

up for now open questions. the call Let's

Operator

you. Thank

will of We James begin now our comes first session. Kisner Instructions] from Markets. the Capital question-and-answer question Loop And [Operator

Your is open. now line

James Kisner

there first revenue slugs So more clarify recognition some just those the guidance dynamics? revenue comments significant that understand are Cable and wide wide as Or want in I the range to Access of inter-quarter in for there range. winning regarding are I bookings? size that just of QX that of kind to related Is your

Sanjay Kalra

which million we we clarity about. there bit little this in it's in out are nodes are but which two things of my ship going is range. we the DAA we talked to on for the things within One quantity progress a will get The pointed the as we which quarter, going believe prepared nodes fall entails and more provide remarks two I color. I'll XX to think I range of

go At are are we it seen those up also trying on QX which going and to the down customers the QX come go a the how and to up, software that still nail to deployment to going once corresponding the is follow continues would much quantity And then also to to nodes from we deploy that’s at certain which the We we expect dependent in will way QX field. that’s something precision. nodes QX QX have time shift but to to our sequentially that. also is up QX. the after pace, will going more same the license that

million nodes quantity So, the both as CableOS only these are of entails in the well completed. things, software will XX this range which deployments kick of after

James Kisner

experience correct? that Also CableOS quarters video QX be temporary guess that you business from CableOS wondering until margin going I longer quarter. given How we this you it about could retention, this like up about guidance just gross they sounds and stay CableOS. for margin in a sort it the ramps? it that’s basis? an on anomalous that it you several of your seems at to the gross like don’t I here, too sort Is should really the flattish modeling of term XX% edge I'm a in are level margin seems lot should like Like could think mean given have something that's of that have cable for

Sanjay Kalra

Yes, you are James, so, right.

which temporary would we this. anticipating you period return to includes nodes we’ve in a we mix Currently, totally or QX. well. not in the well in in is with what starts terms to quarters, to QX, XX% XXs gross as we throughout you terms in video that’s are XX%, we to entail XX% we are XX% far software shown XX.X% quarter, of and in reasonable. back for video is believe the as And XX% for software. and together is we margins as QX XX.X% shift is the couple as to And of in close range have to QX over component high getting QX a that rebound total this and the get software But we digging experienced to I In as of what guiding component But of guidance are expect and cable, right, range because of QX and think earlier calculation. margins close of know as as seen revenue

James Kisner

about just on might any been Just a quick point mean, I Do for couple and you're thoughts think, QX, brand weak I have this have I'll -- pass this thoughts more seasonal ones on pretty than at usually any it. thoughts but cycle nodes, new are at less seasonality is typical? seasonality? you, or all more you in seasonally QX

Sanjay Kalra

QX, point year. In and we’re and for will So, making year year. not giving more we’re precise, full our our James, at more color on next in for provide call guidance next next year, next and this we’re guidance we giving QX early

James Kisner

hard completed? Okay, this to any about actual XX acceptance. rate, I more, that see I a is trials, five that and like to of mean, meaning these of just Do there just of are some this I last add can guess of progressing one, feel increase it's number within it conversion how kind you XX. nice point from maybe that to number been of understand kind have Or on talking there's just you your does guess more a wins? interest give us of trials towards

a in it. Thank going this of point, reported? And significant last deployed, you’re just you Or point on that inflection you. higher of to to some in it there couple and cable recognized? I'll you way Just have has much is is how quarters? pass pretty to terms And number think the just modems going modems see slowly also of grind

Sanjay Kalra

million we operator, at hard I So, end a clear, be differently. half consumers regret being that we addressed nearly James, here. half little live talked Every cable a things than it's goes the to milestone. is trials are generalize. by customers of through business To a CableOS, kind a about about bit of think XX operator less maternal Indeed deployments or pretty actually and being served that is little volume advanced

cases, XX over and million recall, deployment consumers. all they towards latent quarter So, or reflect see even to the about significant the some In of we’re of of I customer they'll aren't XX, contract can’t in customer, business we assuming at there working talked under that I in still volume large we a all initial the think deployment, move two a ago, umbrella a XXX,XXX amount pipeline.

other said, footprints On Buckeye XXX% of they that and hand, it's as pretty their along to Broadband CableOS. I volume a deployment in come exciting the flipped

of deploying So testing it's evaluating that and in operators bag little bit a mixed a to CableOS. different in field terms different cable have of approach then the a

And thing to terms going who its take engaged I trials deployment working industry. us getting of number scale it fairly think significant is of sure. that is on real in deeply number. is advanced the to two a field that’s with After full be it's customers the either away one number is all, it's the concentrated for or a number whether

to So by CableOS, be we view excited earlier, early Sanjay the we’re into we as continue activity but that to where real we to that you uptake, and and future on XXXX, pipeline customers bright definitely think of time this that deployments the our think are continues I energy said CableOS. of putting not evaluate the quantitative said we giving look for

Operator

George Jefferies. And the comes question Notter with next from

open. Your line now is

George Notter

I on guess CableOS. keep I going wanted to

stay talked new with called you back and progress for in back of XXX. is field of got think which and one think wanted marquee through think drove then well. XXX the it million potential the opportunities to was you said additional and But terms customer you delta deferred what go breaching for with milestones to about I that out would And balance you’ve there trials. that as Can your the guys deal year? I obviously, you about anything coming deferred in backlog thresholds August in you warrant a milestones, I talk the backlog? there revenue one think or also guys versus the figure, sequentially up down customer with revenue it the Any I largest of there

Patrick Harshman

where which a George. Well, comment we on beyond regrettably, as other of part, and disclose Comcast first publicly. executives were at filing spoke you’ll their the of what I detail that I’ll at they’re would deploying commentary that, a as we in can find the number We just learned a hit that reflecting force, in CMTS. some executives today, there Atlanta though going show milestone resulted interesting as investing in X-K take Comcast. the and warrants. can’t on pretty is interesting in And they’re part with length as virtualized cable did fact a technologically. of that what lot recent brief the several think aiming about again any from Unfortunately, Telecom And of I operators in conference. for, of And in light-up doing say nothing on what’s Fierce well Comcast lessons there’s

is some stuff the to to situation is out this part think news have from. the let speak where for is So, there, be themselves, going going turn to to you I’ll there interesting but And them second a we’re good I Sanjay. over

Sanjay Kalra

Yes, so, I’ll your back on get question George, warrants. to

we originally milestones, signed deal, business. which were The all the the technology September the acceptance when filed and one, milestones other commercial remaining So vested. detailed at was all in They’re related. one based the we in two second on field acceptance XXXX X-K commercially, not

build warrants on other and for as remaining QX, previous has cover other about once drop It’s QX XXX.X. vest it all the us. has technology low has book is they backlog was up we to totally from the part a we've dropped we is part normal trend the and well. of QX to is expectations, the up. But it seasonality the XXX.X was risk QX bookings our a generally quarter a of The usually deployment we been of and the seen. vesting. in continue for yet the QX. from QX, as within question make up bill backlog So it expecting the big Also and backlog. And vested at as million actually public in do on QX mentioned than as backlog seasonally it so in in well, we are I not actually ratio prepared announcement that ease eat one, will But have But remarks. it's more been We behind

George Notter

backlog is the And think deferred I this up metric. an is year-over-year, important

Sanjay Kalra

definitely. year-over-year, up is X% It over

George Notter

then sorry. would sequentially seasonally? backlog revenue deferred in course be I’m of anticipate up you Okay. And would QX

Sanjay Kalra

of book range it's guide be and don’t X.X, to to X.X. the see, bookings it bill be but the Well, could could number, in we We X X.X and generally X.X it going between X.X. it's be will but the to X.X seasonally, or to usually -- ratio or have to fluctuates

Operator

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

line open. now Your is

Simon Leopold

expectations access touch the mix the cable on to on I wanted business.

again. more therefore get that and is the you of to for you on a be segment, what sort about to trying the Or that just margin Access gross? Access range by XX you should mix get to the want the the struggling when the if higher Cable dilutive? margin would about of of understanding about have you You I with, talked the in implication XX licenses if it net gross within So being end? Cable just have think quarter, million assumption you I'm high question. get I'm talked I think wide gross And and of do a is gross the high better to be should fourth that because that margin think that we XXs were million, mix suggesting

Patrick Harshman

takes what, understand the Well, demand could struggle is is just a scenario really then give building node, off there There on I'll imagine you node assignment. model, and XX answer and -- I'll terms the one of but where is the that your tell a answer getting we nodes. truth to largely in the I not the

me licenses. scenario, scenario progress in the yet There made nodes, upside because let associated those purchases in a deploying is tilted but software hardware. upside actually is modest different it modest nodes then so of there of also kind incremental still So, high it's hardware and on are end see a but where we is revenue we good is margin low the towards call

getting to is and would transparent of for different there we result. to formula different margin a what about out with of is and I see also this DAA. operational associated that are our days, issues you customers They still again own think early lot a the the the And slightly I very high give working from So, gross think range end a be statements. that mix are trying it's

is of play number a so, And out. scenarios that different mix can there

those acknowledging to margin So, as correspond a it's can that there gross different we this scenarios scenarios that is of days well. yes, actually ranges different deployments different slightly And couple underpin early are range. scenarios still

shipments QX think not of all I frankly, step years to acknowledge challenge just a I a possible. and a for is that take it's that off DAA bit goodness it and long So were train next mean back ago not exchange today that I creates the but talking DAA like the fact all being this it people uncertainty fact ramping saying still little reality modeling want a that precisely two I for or think of recent will its of several we us think that station. it's any the at quarter the sitting are are the that here leaving of in reality we tradeshow. about customers being And day it's talking about our the a take feels I

Simon Leopold

this mix customer competitors' different How be mix yourself gaining you And upbeat sounds that industry more you and into seeing sort overall might which your wondering customers. would quarter it about industry to question period than June is ending DAA might that the think about happening. into customer for to at of about is actually, you trend? company you your are or you share be talked nicely characterize out versus like last opportunities the what the are probably of your what than can my simply I'm earnings your sliding dovetails look and do different following one degree extent DAA XXXX specific competitors

Patrick Harshman

and but and for answers the not coming Kagen couple and of is and step super customers is pointed modeling I referenced. our but recent is that coming dig for DAA mean that I think by the good candidly who wide me want industry one to Simon those let There back. we I question crisp industry to all take specifically deeper, no have been done questions a

but see couple nontrivial we new recent customer DAA. are do at paces, different in have leading certainly by the the leaning next some proportion who that a any means, in said, we access webinar, they large going projected there don't spend the are a it I volume beginning there think this into heavy think year. are think MSO it of flush one rolling different quarter that's cable I into every fourth progressing customers are out leaning over of heavily. and who So We so years into to underneath

I about brand-new scenario. it's guess of also I kind me, to So, a market mean blue this water asked share. you kind of is

We question I significant bit if little a is our it mean So I a it's of space, start of deployment grab head technological advantages of don't analogy least it's got but a as around. know an from operators. initially land we couple also the share that perspective, it's sloshing market new operational we a more the think think at it we've adopter best think experience and we early got with

And of fact it a it specifically, pushing speak are aggressive. space it's So, that positioned pull kind the product in it's growing to uniformly think that kind see out QX right across from that that results think ones but service of moving. a all be it's And activity. we perfect, there's couple does at day one place a And capturing our the new this of who but a can growing, to not we’re quite big position mean operators, is of mean the we the I visibility here. the doesn’t our door were kind

Operator

next Steven Thank And our Dougherty. question from comes Frankel of you.

line is Your now open.

Steven Frankel

with been completed and XX to talking deployment cases the us I that of notion deployment? And like have for feel customers trial. to field not back And doing a have of moving of some if to in and would their there you many you about go any the customer maybe or form this field can CableOS how you, customers have forward give trials?

Patrick Harshman

being XX they for fed far. pace minority operators with be will we're talked a exactly XXX,XXX a out. so engaged that said, quickly with end and about are for the We more of there -- part several rolling what but answer The last is not no. some that's the are Nobody that than who yes, be out and is question majority of Steve question the consumers is think to to of there moving that's the others. clear, us the But aggressively I

those that have only volume, I'd have that the the building really in the and were encouraged those hit engagement that field we by volume in real of that. deployed number So, both couple towards are but

the consumers being you little board And logos all said commercially but if hit a So, milestone now. operators, the having will. this volume X.X fed the across over as by I it's bit of progress the we're million we're with encouraged map different receiving -- it's nearly as encouraging right active well as earlier

Steven Frankel

guidance order about visibility know into or your you’ve they talked in actually from to one you handle on and that's around up Are you deployed going that lot feedback a any getting is this be, or issue you feedback And simply visibility kind how a to any software your do next? obviously inter-quarter? being and you call How moved node of milestone nodes. get the

Patrick Harshman

painful. discovery bleeding I that’s the we happens The acquiring this. lot It’s learning good on. go. But what working will certainly that very think On and is with I about this. leading you’re on value there’s our we’re are fact we new little it’s those it and so, part is edge, think And mean, when the leading a operationally a going a news that are closely experiences proposition. bit calls, of We’re open but technology edge. I learning the of as be the customers I think I our and customers we think few

next be bringing to line of will customers. We the

all we’re what’s our happening across actively the engaged in in fields accounts. no, So of customer

there’s support, rest the management heavy a team, so our and deployment the And support of account our Company. dialogue field our between team, organization

Steven Frankel

I numbers commodities and Is And and like don't nodes and that talking we care you’re every if can? beginning now to at Harmonic sounds want get least end, good overtime you that in the a really discussions changed of in business here. the sell mindshare some But if in the long this I node that as you lot nodes it we year, to you’ve the the we and node there case software. and you captured as of others notion that some back get are go had with was

Patrick Harshman

days, in the business lot however nodes been customers it of lower are solution. We’re no margin, to That and that in to testing. a grow although elements just we want There’s interoperability The the profit of said, doubt looking the we’ve particularly early being gross early involved can. work. lower

bringing So the in end-to-end whole of a value think lot solution. I there’s

piece the license. in volume a blended going a But from only that that’s every and the because out of CMTS profit So But the node DAA that these, think perspective, of Sanjay come we And software front we’re but node that on software because business to blended happy piece attractive for license companion and interesting. margin associated steady this going of days, virtualized state also about of is will if blended forward Not another one so was out business node believe it. and certainly basis. it. that’s to deliver come; early saying to licenses the we we get systems itself, on with license earlier, early piece business. that point the it of get you it’s there’s the them And going. see and quite The margin there to is of of gross curve a an

Sanjay Kalra

time for it example margin approximately QX we nodes to is of And this margin still the our as accretive in are just add the very that I'll to Cable line. Access, a like bottom dollars to for much as XX% well XX. saw

well. for nodes to go of should mix and as bottom we and and we far as the those a they’re scale software always And margins accretive improve will it. as adding it’s line, So, more we as

So think in. to be a good it’s business I

Steven Frankel

Sanjay don’t leave out. you want I to then And

the cash end? not guidance like if the QX, in me would to what So necessarily be quarter in seem I that’s a terms It guidance, your QX, low implied to numbers gets but cash of for have scenario your would correct? generation

Sanjay Kalra

end. and range that’s entails. seeing It which working reserve what should that well, if we there working are works close much piece otherwise clear Steve. should cash middle there to would But the for equation to of we changes something capital a range for What high the need is keep be on are we not in we million is the are very we a this is keeping be capital as that how XX

Steven Frankel

this And this way that kind your able around visibility you tariff. gross to you you or sacrificing you're to the gross year come had have of cost do mentioned that engineered margin? margin without at any enough Has

Sanjay Kalra

no at on gross Not all, impact margin.

Operator

of from And our next question Tim comes Capital Markets. Northland Savageaux

Your line is now open.

Tim Savageaux

question to ramp, of which being is my the focus kind cable why say. on Congrats ongoing that’s of first

saw conclude or If could increase. facts large aggregate and Access in important operators looks business are be the And was X of slightly, overall what seem pretty sharp you look your business at what bit? so I will growing X growth, overall customer opportunities up terms the if diversifying in Comcast expectations is that was to look over for as It Cable X Tier look even too? like a your in pretty be be Access if a could just sequentially at Cable time versus those a how that mix Tier and of Tier we wondered there they two number material which of type operator that the you

Patrick Harshman

forward-looking the influential. we volume not is, operator a respected good said, Tier because only the question were the early this great study I and focus but Buckeye U.S. X because the being quite is that and says team on expanded I here highly actually is industry that’s the out money a good That also great case the or bank who operator observation. clear influential. win think and are in think particular us in biggest the it’s medium-size have in Tier engineering Xs was like We and robber where very on that’s for a Yes, and one,

real revenue So couple we is a is Certainly, aim are. market smaller and call more the really are term would but in industry embracing big definitely players many But domestically I big be those smaller is, can the operators. the what operators the you. the in longer wings in somewhat half XG, least our what proportional they're who to spreading instances, with have half And aggressive it's at players do Europe, a be terms -- midsized the players. et to where competing newer telco of dynamics of biggest our of to I the ones well concentrated is have coming equally efficiencies. in And couple expect of a cetera, taking market technology, about with services, to and advantage the fight hardest many answer, our the subscribers easy competitive cases an maybe in against

countries. actually this we’re so, in impressed And the smaller seeing call operators, medium by with country resonance both we're what I'd the and and size in other

time over the well as it's Tier excited so, other the we're not as question your opportunity, about guys X suggests. only And but

Tim Savageaux

basis significant lot noises do really QX it deployment. operationalizing of cable should making out So, How week up the and back to a we your contrast swing and is commitments accelerating my on the in and maybe more for I observation Tier distinguish the has the maybe show I that the quarter-to-quarter range you itself. and let around the Access of you me pretty vocal guidance article referenced on their and regard more today, in in it’s that between to been The if here? the technology of there Cable versus Comcast sort technology guess with Xs show focus factor your think roll setting certainly to this your to a commentary with really commitment is been real

Patrick Harshman

this and architecture, if candid one is the the that. my out you doing Fierce to understand as at I operational something you of on Telecom a reading twofold. check comments. it time the Number all say article, of challenges do acknowledgment guess we but two One, commitment new think I of strong broader same

MSOs over any is And from an or focus the just is of there's years, that focused the quarter. And tightly we operators the executives shouldn't frankly don't so, this on is sight They're understand couple recent about of I of over being years. those be their arc and quarter-to-quarter, in really next But coming ramping couple from to quarters other large the of that speaks -- talking the couple next that and we're the is executing opportunity I the executives too lose ramping of think focused cable think will to fact commentary I of that. obviously, where

the a tooling the you service residential to there at out not press new know the technology not is for of we and that and obviously sure makes you just the the you business call up to impressed manage So Atlanta investments build. customers. opportunity opportunity, customers, make And be are through commitment it that mean broader trees, I cable will, capability of some operators opportunity of broadband terms that and for that I maximizing collective it the And up forest webinars kind only a you think is rolling almost that have say, X.X, business and our objective the to but in step miss most the quarter-to-quarter to the that clear and they real several as but is to if recent out, also event architectures. looking in are they that clearly leading to commentary at

Tim Savageaux

that, I trends, back finish you just to I question and to But Sanjay. preface order Great, up I want had I and pretty was in QX strong, with to ’XX said you sure or very book bookings so, strong make for really quarters will a last one strong bookings one moving understand the order very above including number. a five think to what driven bills video booking something to

to back point when been You sequential about there no historically XX% was look business. your you've back CableOS also in down QX

come on in Is most I don’t Cable you And any trend in continue I five the building book for have to want or seasonality Sanjay want side? but if your quarter? working quarters? on heard to the the come video or back previous just just the seasonally think you of was Access of and that you cadence infer I that back question, that. historically that or bill side? QX about it that, through saw should And trend booking the expected so know I of from to the kind I I bookings the backlog that to question had, weakness So, to comment but the answer, decline

Sanjay Kalra

first XXXX second half trend the than different the the we was and saw XXXX, So, half. very in just because that's

se So as would same sense for range the fall time, be. should is say trends at in what our forward. business not if see mentioned will CableOS we XXXX leave prior make that’s But go is But I I'll to of not exactly historical per representative years, the also which the earlier. directly ratios back ramps total you revenue I year like the going acknowledge we last and up, QX of may that bookings trends total to

of to the and So, bill needed business conversion. the there’s ratio cable that entire a bit book for is in little how playing adjustment

QX. So, But hence, the it’s hope side, I QX, don’t what some we clear, on the color was reason bookings. provides on for more earlier. for we very not mentioned saw which into is video guide it definitely that as seasonal I

Operator

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

Patrick Harshman

to again Well, with left us. joining speaking support, we you to you the all appreciate for soon. we thank Good it's afternoon. us all and just look Today, for forward

Operator

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

Harmonic (HLIT) 29 Oct 182018 Q3 Earnings call transcript