HLIT - Earnings call transcript Q4 2018

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Operator

Welcome to the Fourth Quarter 2018 Harmonic Earnings Conference Call. My name is Carmen, 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.

to call like Kauffman, to will Relations. Investor I turn over the Avelina Now begin. may you Avelina,

Avelina Kauffman

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

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

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

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Patrick Harshman

be Well, strategic strong by thanks, with QX growth our again video revenue transformation, reporting a everyone our pleased to success driven and CableOS, welcome Avelina, software. quarter streaming of profitability and to the ongoing call. We're and

CableOS continued corporate generated wins Cable EPS, segment, for operating XX% a QX combination income record were of from Access and a while $X.X revenue growth, year-over-year streaming income, our XX% growth operations. over-the-top $X.XX results momentum all drove segment. it Video operating XX.X% million for Specifically, combined together, delivered ultra-high-definition cash year-over-year revenue XX.X% Putting and our

XX segment, continue combined So, of taking XX trials a Access we including a four were eight deployments Cable six the number North and to of initiative Among expand or and closer at hitters, field global list leading heavy CES. industry the the operators gigabit the commercial new look operators, and XX-G growing cable recently European our at named announced with of customers. top American these of cable now

operational benefits competitive Focusing technology date, is first subscribers and deployed enabling on our relative is a CMTS future and traditional software initial cable high-speed network XXX,XXX These DOCSIS a service centralized and being at primarily powering substantial that demonstrating business our flexibility over commercial architecture for distributed to data to are CableOS hardware-based fully-virtualized migration solutions. virtualized residential scale now economics, deployments upgrade, X.X in deployments underpinned CableOS and with application as typical our traditional advantage.

more these traditional for XXXX during momentum continued applications. expect We

new deployments on that or X progress with. the months, we've several been the heavy operators. DAA next networks Distributed past multiple Based over XXXX challenging made of involved we volume to with Architecture Access trial Turning tier activity the expect groundbreaking the

been the are the trial support deployment informed of of orchestration solid to rather on implementations. of end-to-end to be DAA which time, and customers lead not for QX, quarter, networking in elements to now some their improvements plans, our this has customers’ the ancillary specific During still process continuing who we but implementing will CableOS on-ramp, core,

case, For to economics DAA CableOS' XX networking large the decided software-based rollout, their seamlessly example, architecture. planned of in and supported customer improving pivot XXX has one infrastructure, from the gig gig compute by to

QX, successful While on enhancements impacting the to quarter, the such resiliency, pace of DAA momentum, during scalability, growing bolstering pending Indicative our these is of conviction ramp. hence, further deployments this and we in in see the return DAA this as architecture physically field investment CMTS the quarter rollouts, the The be and financial we months. software shipped shipments along another which still-to-be-purchased drove of DAA DAA centralized expect growth. over new the coming with we licenses node continued X,XXX nodes, combination deployed in sales to in these of XXXX

Sanjay detail and improved, year-over-year, XX% revenue breakeven. again segment gross $XX was segment operating margins momentarily, will As million, was profit up

big $XX we the picture revenue in was delivered really over XXXX the the million So just here, of beginning.

technologies seriously the bellwether determined wins, is ongoing of consensus Our global now begin confident position impact CableOS pioneered planning growing We in expansion and customers, cable design in market deployment working network and intimacy multi-gigabit is poised the XXXX go, uniquely distributed cloud-native and that sustained access on remain are have cable by to our operators, way to upgrades to growth. the for but with the Harmonic and time all major beyond. global and Harmonic among a

and deployed broadcast-centric that operating to from Video year-over-year. our over and position a Video The up established this high-quality, and players, positioned profitable a over-the-top appliance an and Gross the media. predictable Among representing Central is competitive X% year-over-year, transformation increasingly was this grown has more industry-leading over XX,XXX XX, business and XX.X%. strong of up segment, truly segment business. was XX.X%, technology year-over-year. margin streaming to strategic over-the-top and record revenue through is So, customers acquisition has a solid better transformation addressable driven financially, streaming to competitive business, and where now software to a worldwide, move testament Harmonic strategic market. up it's sequentially business both been further a here streaming video streaming that channels our We're income live, expanding historically to our has active also transformation momentum. XXX% video SaaS has new in by are clear the customers nascent number strategically the stronger new now created both XX% these customer sequentially and turning pushing now

UHD Although Definition of hence growing we're anticipates story, revenue adopter final in recurring the business still early credentials we phase plan market SaaS our our streaming continue rejuvenated steadily we SaaS saw quarter of and it's to and XXXX One and sequentially, Solutions. trend high demand Ultra a High throughout video accelerating positioning business. and pillar our XX% fourth for our improving, finally see pleased the up journey, strong Definition are year. longtime consequently, worldwide of Frankly, which cycle deploying be the Ultra in quality sales advantage UHD-related were the sequential programming. investment and been growing taking monetizing High we're continues coming, the growth to

come comes video our track establishing particularly long quality believe look, we performance. stand financial streaming to live of competitors has business and our market So, consistent content, a when I reputation, above corresponding record a head-and-shoulders and terms now high of it way. technology in we're

cloud-native Access with and really at in an So, broadly investment extended leading new technologies customers done looking solutions. unique segments. empowering to Business something industry After we’re both we've and our our Cable Video these transforming cycle, in summary,

that As turbulence, call phase new market for business I'll on the a and our for of of our outlook. have performance, a creation. position results result, detailed now to financial a you, we're delivering considerable And turn substantially value Sanjay, more over improved note, despite financial and the discussion

Sanjay Kalra

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

results with I'll I Before quarterly provided I share remind you on referring remarks, the be are to to would basis. a non-GAAP that my like financial detailed you

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

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

to $XX.X compares by 'XX, million period, compared revenue year-over-year our sequential and turn to growth million million QX in segment. in quarter-over-quarter, $XX.X year-over-year and in a segment to year-ago driven The review six, Access This our million but year-over-year growth and Video revenue was driven XX% 'XX, Cable in primarily QX was the $XXX.X results, As $XXX.X $XXX.X was was Cable XX% revenue resulting QX XX% QX, growth. a our growth. in and $XX.X million. decrease a slide reflecting primarily we to quarter-over-quarter by Access million,

XXXX, full-year Cable brings increase we segmental million after to of reporting million quarter compared XXXX, $XX.X for revenue the Access an for XX% last made segment to for year. adjusting $XX.X change This

we've the capability in ramping been activity a As Access our and you access steadily fundamental have of four over for last leading architecture segment operators. the upgrade are quarters, cable seen, Cable

upgrade tier As customers take time up is ramp global a Patrick X substantial that will opportunity discussed, rolling. the as to get

Access near-term both upgrades, downs transition. As result experience at underscoring forefront we that and addressable opportunity we ups of distributed particular see a Still, of is market to the expanding segment. driving new Cable the shipments for these for transitions. during and are Of there of we doubt these cable scale note, no continue QX, nodes in architectures the our expect operator to CableOS of some access extend and

in $XX.X revenue. QX compared XX% execution segment reflects and reporting XX% XX.X% 'XX. to in $XX.X in a QX a XX% which and revenue, compared QX than QX QX node and 'XX. In QX, and in $XX.X XX.X% improvement quarter-over-quarter of pleased growth. margin XX.X% is QX was customers; same margin XX% in contributed XX.X% DAA Video year. million of QX are growth million sequential total Gross XX.X% million contributed last Access XX.X% our we This and in in was Comcast, in and gross two Charter, our revenue that in quarter XX.X% mix in was of in QX, and X% total QX, margin margin XX.X% the We 'XX. product favorable compared to in in had year-over-year Video The segment of XX.X% gross result cost. improving to very gross greater QX, which versus revenue Cable

delivered XXX% premium, revenues position, we to video that the pivot leadership in and particularly increase ability to margins SaaS million at increase QX, with year-over-year, base, and concurrently to SaaS. deals command product reflects for from ARR of strong our QX pleased growing XX% XX SaaS end $X.X compared ARR 'XX offerings. with our at in during market associated 'XX, of video QX record customers more of SaaS million users both, seven to the 'XX. QX indicating subscription was customer our increased increasing software are end QX our annual in $X.X ongoing This our customers Total an We pricing 'XX, in

We still accelerating believe We evolution early customers in of our grows, the continue SaaS and compromising and the that our maintain number our see we to will strong in We expense grow the as without quarter user both base. stages control and strategic install of investments. are ARR. expand growth during growth

XX.X% operating to associated were QX operating in XX.X% higher increase commissions, compared our revenue, of to sequential Please results. higher as sales $XX.X QX incentive of and a QX our than and our million, The only result, expenses percentage compensation expenses QX, a note strong QX, and in of primarily 'XX. our reflective in that in OpEx recent total million is QX $XX.X marginally XX.X% in comparable $XX.X 'XX. 'XX, with million was As other

of in from in operating quarters profit margin than video quarter, income lowest profitability X.X%. the a five Also, prior segment full-year OpEx quarter. our to was of In and as was record segment $XXX,XXX the in down which was contributed Cable $XX.X the our million million entire years. our a operating driven segment of quarterly Access XX.X% quarter. This and marks operating operating more marginal of slightly sixth by percentage QX pleased segment, margin fact, that this the we are consecutive this $XX.X revenue Video breakeven

value and result X expected call. and $XX.X as in weighted X.X. a book-to-bill X operating significant added as have X.X our particular, line with result to of experienced in count in million received X.X book-to-bill XXXX, I a average income compared was resulting ended options, in compares average to for during breakeven during of in and sequential primarily annual 'XX. historically are ratio delayed This a of impact of January, year. Comcast compared average bookings service to previous These X.X due share a full-year In issued and QX booking specific in result to in QX in and options to an XX.X million $X.X booked in and million, last new stronger with warrants shares of which just with QX and to each dilutive million The price. We shares increase $X.XX, vigilant million during revenues an million early becoming bookings sequential in renewal delay bookings average our primarily million million, to our in margins approximately Our and in QX weighted service of $XX million, X.XX annual of year-over-year QX X.XX QX in XXX.X of RSUs million cost $X.XX additional with been million QX of management. 'XX, of we to $XX quarter. increase EPS strong 'XX. QX the $X.X result due We previously The QX improvements the a of increase previously $XX.X million than was for 'XX. is mentioned. our shares EPS price granted in we marginally ratio approximately million EPS stock approximately the a QX, ratio of bookings from of result QX and as of in compared compared QX year, lower becoming EPS contract were a XXXX. XXXX. ended stock our RSUs December million Approximately is of product high XX.X as million a in coupled money range shares renewal This X.X mentioned QX a

$XX.X with million. will slide and QX $XX liquidity The This at our QX, cash and $X.X ended of of million We million. seven. $XX cash from to the on in balance and now increase million move of million end sheet We operations position sequential outflow to at $X.X fixed a the end million $X.X of of of generated QX cash of cash 'XX. net assets reflects compares

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

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

sequentially, our our pleased working and are We cash that have to we made share in capital. material improving DSO improvements are and

'XX. Most XXX million Our million increased of corresponding 'XX, approximately QX ASC compares deferred 'XX $XXX.X to in revenue. on in backlog $XX.X year-over-year. and revenue, year, January This sequentially, revenue. $XXX.X deferred working upon down deferred as capital we $XXX.X of a $XX specifically, million revenue, was down XXX% for deferred on million. and is X, of and QX over that did QX, to of and XX% and million and significant has year impact QX have end XX% the QX, the option QX note XX% million million XXXX, on The XXXX adoption and compared revenue backlog compared 'XX. At net revenue lost to not but $X backlog of this did XXXX and material $XX.X the a in have it backlog impact an Please

by backlog an XXX reduced also recorded in in the rule, revenue XXXX the under our and However, amount. additional $XX.X we million same

full-year compared a SLA have noted combined by opportunity. while by In X revenue As million. revenue net overall the segment million a we deferred both creation XXX-related value by bookings to that combination our solid impact remain $XX.X of two million deferred work by summary, in XXXX, of of committed while reducing a year. This million, the reassured and of reduced ahead in revenue backlog backlog with mid renewal to we and I in ago, us our prior and adjustments long-term moment $X total result, in QX the these our business both total and transitions, I'm performance our impact delayed had increasing $XX.X and our segments, results

non-GAAP guidance. to Now, for let's 'XX QX our slide turn eight

of Access expect the million, 'XX, revenue range $XX of range $XX revenues For Video the $XX revenue in the million to we million. to in million million $XX to QX of $XX in range Cable $XX million, and

EPS reminder, historically million, to million down the income XX.X% from a from to of range of income QX QX. $X.X from $X XX.X%, Gross operating was As $XX expenses seasonally of in been a range to to million loss an loss effective the range margin to operating $XX QX million, to between range $XX XX%, finally, is a average at and million, $XX to million end weighted of to share of $X.XX, from of tax of million. cash expected a count our $X.XX range XX.X rate and of loss and

full-year to income $X.XX of weighted from $XXX from loss range XX%, $XXX in of to Video $XX on our of slide we million range rate to to million, the to a $XX to from revenue million, of an outlook XX.X $XXX tax year-end million, million. $X.XX, and from of $XX million $XXX gross of the cash a range $XX.X to count our revenue range million and nine, average $XXX to the expect margins the XX% operating income to range range range $XXX million effective million operating $XXX EPS revenue million, in an range in million, with million of Access Cable $XXX Turning in XX.X%, million share to of to of to loss from shares, to range XX.X to expenses income million to

consecutive we initiatives that our remains profitable and with full-year have We shareholder to focused heading on and delivering outlook for I financially, XXXX. are strong momentum execution, long-term conclude remain our strategic a We and growth both executing strategically into pleased have like XXXX solid positive. delivered we stating value. and quarters, and continued six by will

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

Patrick Harshman

reviewing And Okay. to we Thanks, want strategic Sanjay. it up by priorities. wrap our

one technology to our additional Access CableOS with further and deployment. Leveraging operators our objective becoming secure international plans three to number lead our in growing expansion to growth. CableOS a number And operator wins this new Cable theme to accelerate is objective is is market business, with XXXX. scale second objective deployment DAA momentum, DAA leverage solidify, For key cable further market wave of first as design and

is our service higher to new tapping our SaaS two across our expand our media Turning to leverage And over objective number market verticals. Objective provider third to addressed have our and consistent into market, is grow objective further to the is Video segment, as to models. profitability continue segment we to over-the-top both share first offerings customers past streaming six quarters. growth business done just and deliver our

XXXX commitment I year, throughout and to and close support. these not continuing call our strategic for XXXX amazing open that, stockholders progress our we up let's With your partners the for for we our enabled members priorities drove value. customer growth, want enter driving your Our in financial and team the last questions. by results thanking and here and with continued shareholder to profitability, together confidence material in

Operator

Thank you.

begin now will our And We first Instructions] Simon question Raymond from Leopold [Operator James. with question-and-answer session. the is

Simon Leopold

math, virtual architectures sound we you lay if looks like and I to the the longer. could more expect kind or two, think wondering spring, and if take and but bit wanted you taking in rough I out. initiative us Thank just in Great. linearity some bit per part different, it is maybe Cable guidance, not to appreciate the what access give related, update the may $XX but thoughts I whereas quarters. of impression have of kind distributed might by how DAA, virtual your detail full-year may some quarter CCAP Thank on of CCAP in as upbeat, million second fourth to one. $XX changed, That's plays I'm -- a and parse you business cousins tend through my you. a you maybe can Part just of the of trends in looking little deliver access just that little of it ramping to side on maybe for Access needs your for it's business more sort question. my million see the the sort of out, what to

Patrick Harshman

Appreciate Simon. the thoughtful Well, thanks, questions.

mean, idea First, I yes, virtualization the of not and are does require virtualization agree would that I DAA,. DAA cousins.

several fact, -- actually not of of majority are noted times, to continued -- me virtualized our as we've the momentum We are just call good DAA, the with all deployments with deployments definition centralized date but them by virtualized. let In they CMTS. us see

DAA. or chairs is, fact say Simon, issue the the that hard are operators that their think involved the I we're with towards turning largest I'd

activity, just So operators. it's further good would of aggressively. momentum with pushing a not really medium-sized larger that it's the is smaller, are and say, businesses with competitive battle now, of say Whereas with locked I lack the right ones the into, pure broadband just virtualized, that really I'd their most and XG,

the You that in saw at XXG show. CES so-called Announcement the

math, good indeed seen slow year tier needs a earnest pretty QX looks QX numbers so it a exactly the involved pick busy question be and a of X an the will it nature of kind see will the is. us of on DAA, me plant this of being us, our be the those ramp. We appreciate shared let of full-year indeed, That QX. remains rollout. basing next also is the bang months, probably deployments. we in their up. to we increasing but anticipate too and of ramp, Exactly XX outside focus do over after pretty a see said, for of that on give that the it's We're pretty kind volume about say, And in versus To and to frankly part fairly begin operators in what with don't like with a ramp, I intimately QX, It in see we -- rough opportunity start as soon this plans the accelerating of kinds doing A you your in plans, through greater and total, have second those themselves pace the because customers we year. pace are to work, detailed with feasibility the be a crafting big what QX. lot and multiple detail, just

the all a of picture, say that I plans beyond you I of the and So, keep bit more can next little that we'll these with solidified. get helps deployment detail qualitative is as certainly hope level DAA posted

Simon Leopold

That is helpful.

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

Patrick Harshman

I Well, so sell we pure I'd me up. north software distinct and it, All centralized that it. of with these doesn't high margin let with XX% uncomfortable, centralized, from that you mean, I'm say, And additional stuff the I'm think "Less at we virtualized so has scales at or change. this bandwidth, back get brings let's with, if say the in everything piece lower with little okay, nodes. margin we let's revenue dollars and admittedly whether virtualized." of about it's little DAA There’s but maybe business our or I a servers or so the CCAP of sell DAA a with mean, a point DAA servers say characterization, stuff software got that probably do view, core, the or uncomfortable two blocks.

up hardware price, margin we're the a on the into this lower a gigabit subscriber per And revenue a kind per centralized margin than at yes, albeit capability out is the delivering at is basis, but are field so, in the or a blended because down, higher of scenario. we goes revenue

on what yes, DAA, and but track little Sanjay if still it's we as software. be exclusively seen pure than we Does less would So, there, that we're shipping an margin help? only all in think bit a nothing blended upward less, historically, it is gross said, we've were centralized

Simon Leopold

you much. thank does, It very

Patrick Harshman

thank you. right, All

Operator

Thank you.

next comes Capital. Tim Our Savageaux from question Northland with

Tim Savageaux

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

Sanjay Kalra

Tim. Sure,

I'll Video you the we XX% for was XX.X%. So at but year, video. all start we you know, XX.X% QX ended margins, quarters, and got at with the QX look if whole

only ended low-end year cable, as and the you is and recently, the at mix XX% as So, for change our this the although XX%, as we we is whole end but Coming to mid QX, in whole so on and because to XX% to mix year, so virtualization, XX% but the year more we for did the so baked, of we improving, -- are XX% XXs to as XX% have the in well. not and year. and high-end year, seeing you but know, margins could for mid approximate whole know at Patrick while DAA has you there full-year, a seen, guidance and range that's discussed, mix the for cables, video, that's XXs we for the know, quarter similar

segments We by approximately So keeping what you range blended if a XX. year, the end XX whole QX, for the see year, we'll are we year. we for know catch XXs to up both we you believe with guidance of mid the both, And purposes of and keeping are to XXs both this for and saw for guidance whole XXXX, for whole I found the for -- for company the provides the what XX whole exactly the for to XX.X. And a margins high-end at is hence QX we XX.X that again, XX.X full-year year. insight. end year, hope XX.X% to we for is the decent

Tim Savageaux

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

Patrick Harshman

jump and terms scaled, making I'll look, investment that last maybe any yes, of change in material part, I the Well, here, wouldn't we we go and shape the good we're as expect forward. Tim, in in on we business, the just in amount the -- of OpEx are think in so, taking

happening, headwind I'd you the Frankly, it is the expected slower as terms what's although overall think that with never one mentioned, in that really be grew. trends, is transition thing. customers good a customers was though overall the than to things say and 'XX there before. market technology is year we wise, in clear, SaaS, of bringing interesting And of this is we're somewhat here trend, Saas to opportunities positioning, number favorable Regarding to dynamic on a worked seeing the we we with competitive

as as floor with business in kind that's rampant each customer deal, new in So size though customers, the existing direction. outset, sign-up and they're new thing either in across a And of past, this SaaS although more revenue contract that's we be we're with That almost deal strategic so, with when recognized seen we that addressed and we've we've spending, the would we as ground business at over expanding backlog those of models, than other market. have the to being really customer, less going XX, or the the seen there new said, committed lot long-term a a are will these term. with it an the right guys almost ratably feel the they're of the upfront a we're been really modest building the we're on board getting to

indeed a thing that a over a do the creates that to business bit the we expect that of but positive in don't to somewhat of overstate headwind, And top the in it, is SaaS, increase we for us. So, I I say strategically, but 'XX. out do pace plays want -- little consideration line and tipping a pace expect would

year-over-year in that look as comparisons. you the keep So mind at

Tim Savageaux

Yes…

Sanjay Kalra

to that… just add Yes, I'll

Tim Savageaux

Okay.

Sanjay Kalra

focus shifting And purely looking overall line, video should that period this earlier, which are achieved is time as the our margin key the the -- a our that's the good of gross double-digit. transactions towards. OpEx, business operating discussed operating to -- same on way margin the path very we but so you are our marching at is we And is video longer there margin be top SaaS the our the together - on believe at Similarly, is manage metrics, managing for video overall, business two in of SaaS over quarter, not saw time, we focus. segment. is to the only profitability we plan video

the So focus not mix but I think the both. is well just line, of top and and right margins OpEx as only

Tim Savageaux

up on color if on I customer while Charter kind had Comcast to And the -- you on, what likely it join it. I'm in of Got I'll pass wonder that's if it's since side, one to and I list last you quick but have quarter? think on been from XX% would -- in comment quite seen Charter XX% any me, a can guess video the we the the focused going brought list,

Patrick Harshman

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

Tim Savageaux

Thanks.

Patrick Harshman

Thank you.

Operator

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

Steven Frankel

expect Good past installed to of if XXXX afternoon. that Patrick, a XXXX, any us after in get visibility do guidance come assumes ask insight you installation component you nodes wonder the issues? software want the from next getting you give I year can in margin through or material have into the that this does that vein high you these these to business get how in to better software, moving no I pace and if in

Patrick Harshman

in our we been that than to get out to Look, more anticipated, twist has here turns a control. road frankly, and our than acknowledge that control more of I want it's had and of those

to So majority unexpected one very the the are good -- we quite of we we vast us said, bit this appearance primarily we conflicted, think are the is have transparent. On cognizant and and of are cognizant being That behind hand, little that think visibility hear. of issues our we behind customers.

are acknowledge don't exact but are pace one we would and exact volume of I to is that line, skis. that the move the our these are that hand, confident ahead things too something to far going get startling the on we So we want forward,

the when pretty QX. I have slow full-year given in think start good consider particularly guidance, you we

So XXXX. even there volume hardware not the in ramp. software but that with proportion, is DAA ramp course but and scenario, in software, is stuff in the corresponding a is a corresponding we of maybe healthy first, And absolutely see that gets deployed pretty slow included quite probably in follows

I wait we're think we before or mix more see to of aggressive granular more that. the exact have little further about and a

Steven Frankel

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

Patrick Harshman

Well, it's of both. bit a little

out We have yes, software nodes have do that several thousand with not shipped companion them, shipped there yet. licenses

we without there's discussed I use this think to that not So and question much on last no are nodes they're buying as those quarter, call be -- software.

terms margin see of in that high to that still and delivered, see the shoe first next Steve, companion is phase drop kind thousand the But come is the operators. So shipped as of the with substantial the we you already of multiple revenue think several -- we of to what's about the deployment. to think of X that tip we iceberg date been have tier really frankly, plans of been

behind is pace to starts that for our additional and in that years. rest hardware There's flywheel move in QX purchases of in mind no of purchases doubt the that behind coming software kind cycle. So up the a additional and picks

a of to little giving a precise end in our quarter view we're achieve pace earlier know, the feel full-year give you second As by to timing, year. determined what position a the exact did call, we that but comfortable think of and guidance here, of discussed, this on we the not customers the are

Steven Frankel

And would they issue a part on to some are a as issues you'd back on out slowly that, more major to Cable hoped to the work QX, say of then puzzle? the quickly you fell Okay. customers you or of short business, this look that related little shortfall hit not related of rolling your in $XXX really Access, million of your directly

Patrick Harshman

think with very is with that tier Yes, again, deployments emphasize going to -- to are so, with and the just as it's on the so, essentially, I particularly that very done who basically is big on close, scale. often but want complex yes. they want right, Xs And and I -- massive reproducible a something want -- things a to be get that case scalable

decided gig know change example they We kind it's the have want one noted and scalability came XXX couple the of program. to to of the interest of change, that as across what, customers long-term who an hour, I you gig eleventh we hardware this, better things, a XX

deployment So, a in headwind yes, created that QX. on

worked understanding what out. worked the that guidance of anything of nature -- complexity give is none through. I'm science a to work were continue achieving wouldn't We the if been giving We of game rocket able referring -- the in or gets going didn't them and in we're confidence through that that that decisions but we as made we think regarding praying I to have stuff -- comprehensive the the so deployment, being these the changes expect that be have the late through, that very or none basically, not to to specific of is things real QX involved a of kind currently

Steven Frankel

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

Sanjay Kalra

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

Steven Frankel

Okay, great, thank you.

Operator

you. Thank

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

Simon Leopold

Edge just it prepared quarter. in in Hey, but hopefully and quarter, for margin actual at in I a the maybe back Cable I and in back fourth appreciate you letting upside to segment a you gross me the wanted maybe you look the -- just the was did remarks, explained strong -- and quick follow-up, particularly

XXXX, the Cable December in your very volatility in us just Edge. help So to been we've stable of has quarter what help Could actually but it lot understand video Cable does the seen Thanks. happened throughout margin? look gross a like Edge you

Sanjay Kalra

now. you're XX. right, XX, we in experienced QX coming Well, of for beginning Simon, at saw margins cable QX QX so we the back XX, example, like, It's and versus the XX, year QX

I way particularly product into we cable, the cable I that think customers. the the a provide is mix would the to mix is mix, the playing of is our well. services to lines just together and of call which among result exceptional as baked that and the various purely which software, guidance say, mix out, the that, is of playing, it's is nothing, it's The mix in nodes, with

Simon Leopold

Okay. Thank you for the follow-up.

Operator

you. Thank

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

Unidentified Analyst

will Kyle is I should be that nodes is you're you that Thanks deployment those for you access distributed that thousand for Of any in this this you U.S., the deployments add working color Hi, great. DAA guess that regional question. currently on, specifically George. focus additional any there can broad-based, thank for, is Europe, to taking activity, the like,

Patrick Harshman

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

Unidentified Analyst

the thousand nodes… And Okay.

Patrick Harshman

think pursuing and that and furthest captured And most those Europe cable but the who clear, it global terms the industry, safe it's North global we cable in to I be it's first, aggressively imagination see along is deployed of in America. of we'll industry think are

Unidentified Analyst

there's those those of were of each regions? nodes in that So some subset thousand

Patrick Harshman

We don't mean, want in to I well. go specific. nodes that substantial QX announced we get as

and to date, So we've it thousand we'll nodes there. shipped keep several

Unidentified Analyst

cycle be the the then, distributed of virtualization but customers your tied holding big appreciate necessarily access that understandably do or architecture your across decisions up some for the across the something opportunity DAA, time. product aspect could takes that operators decisions I and not is to Fine, commentary you see you.

customer So, help. anything would you're engagements seeing there across your

Patrick Harshman

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

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

Unidentified Analyst

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

Sanjay Kalra

Yes, Kyle have. we

we range, around we've in we in -- bit to transitioned did As our this if 'XX, for SaaS. than experienced experienced 'XX sure when the we you and X% you marginally or take the in the year annual what little first-half. experienced of a are and see X%, it that's midpoint it down guidance We

yes, top are SaaS you So, right, transition line. the impact marginally

Unidentified Analyst

headwinds seen consistent last year you is are with and what the essentially Okay, expecting?

Sanjay Kalra

Yes.

Unidentified Analyst

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

Sanjay Kalra

Thank you.

Patrick Harshman

today, like Okay. the and everyone would again our to call thank for for I Listen, joining business. following

So, made We soon. I have hope we we are pursuing progress it the with you it. last Thanks look talking but pleased see we comes across, much. are good about year, but we excited forward again opportunity all with to ahead, and very

Sanjay Kalra

Okay, thank you.

Operator

And thank participating. you, conference. ladies and your concludes for today's you gentlemen, Thank this

now disconnect. You may

Harmonic (HLIT) 4 Feb 192018 Q4 Earnings call transcript