HLIT - Earnings call transcript Q1 2019

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Operator

Welcome to the Q1 2019 Harmonic Earnings Conference Call. My name is Gigi and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference 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 first XXXX With earnings call. are Harshman, for joining for

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

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

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

Patrick Harshman

welcome EPS to to million, Starting of our with positive top forward a today. and we're you XX.X%, initiative CableOS financial was we everyone Nicole headlines, minus Strategically, from cash the generated was At million call. there was and our to Well looking that thanks activity was $XX.X updating lot of revenue on progress. $X.XX, margin the continues operations. QX gross $X.X level,

material Our lead tier multiple good in in deal In cable quarter served over quarter our pipeline a and in global both first CableOS launches total segment, with progress one wave our SaaS and seventh saw their customers at cities, XXX,XXX while and SaaS customers profitability. cable Video midsize for preparing end. segment in modems we step-up delivered of made of new further QX expanded consecutive our deployments customers QX Video we

European momentum no four CableOS cable and is number Now, commercial segment, North bellwether our and closer and top operators. to Cable We've customer Among deployments Access at a there's trials Tier American question of field continued taking strong several are end. XX these at The expand of global was the quarter and our Xs building. including eight diversify look base.

XXX the As jointly to unnoticed Television has CableOS an other quarter, agreement activity the and offer new anticipated, to operators signed Cable Cooperative the this during co-op's important National by operator with not gone over members. we cable

new with we've sequentially their incredibly in extend continued virtualized CableOS competitive fully the core as distributed strong beginning scale. several focused intellectual tier the residential of architectures. access DOCSIS And up ongoing and operators, distributed to to XX% year made broadband further our business demonstrating both unique of strengthening virtualized we're our turning of of out We've X.X work the that roll whom technology now For can is Since and are to and new already planning deployed initiatives. patent cable one and CableOS subscribers, architecture service over through were QX, new property outlook, access DAA our innovations. this the advantage also filings position for on powering operated the end deployments being each eight CMTS our paid year, at or XXX,XXX

fully Now, that end-to-end has the acknowledge getting designing our CableOS this anticipated. of both taken we process network with customers and originally and integrating architecture than these also jointly longer technology full qualified lead distributed

customer this see tier Xs the QX light end where quarter one two rollouts. driving beginning With at one the are hard deployments However, of we tunnel. aggressive QX tier other volume toward

you contract. last having we is than we a these international operator about One announced greater year signed when the told million of $XX

operator ramped up this has further company's booking and been customer QX, was chain to largest now our supply During them. support our

Sanjay don't this recognizing momentarily, as from expect half year. will discuss much Although the until second of we customer revenue the

NCTC-member the our outlook our March operators Cable So, by maintain one Access tier view and Conference to just latest big way several CMTS XXXX. We picture our distributed to and to virtualized unequivocally is segment. just midsized for view, our with on pivoting that dominated Cable cable shows customers, that market this positive become trendsetters. industry technologies, access are under held by therefore is really the billion path continues that presented Buckeye operators $X together these financial the now in Com Corroborating market the at research growing a announced Reading Hem and be Light previously

tide deployments the and full-year is of by scaling year half one smaller throughout the unchanged rising our and second a medium-sized guidance operators. Specifically business from powered by tier of both

that our real value our company our orders and us in poised public and own to visibility remain and on and to create XXXX cable, So, CableOS for our all beyond. summary our deployment market is confident cause customers data, into in plans, customers' detailed recent backlog

turning segment. So now Video to our

Kong, quarter-end, amazingly in weeks. well surprisingly, SaaS, the run them up COTS start business end been streaming Siminn customers our video Iceland who video of in appliance market's global SaaS. and XX% strategic this fast is perception of to strategy. include total has went our from And move the about in and more streaming. first either in cloud. up million from created both live and live possible PCCW SaaS hybrid sequentially. on-air is Recently Hong the Here XX/X to and new This operational five provides XX a services streaming terms to centers growing transformation quality providers the high-quality picture and with a were also an the both demand this with a SaaS. business steadily INDYCAR private on on aligning announced XX/X worldwide, video of best-in-class growth, Akamai provide mostly help profitable VOS efficiently transforming sports Azure's Through delivery worldwide enabling of of XX% consumers step-up pipeline. over-the-top delivered us to compelling growing percentage video and year-over-year. X.X companies deal in giving over-the-top using dollars predictable scale, was partner, first which this is the Not a impressive behind SaaS, SaaS date SaaS to we business we from announced accelerate based AWS a hold. media model scale in cloud on this will CDN partnership historically taking for at Microsoft transformation over further our access quarter, value-enhancing And video a recently and VOSXXX of now new consumer the Microsoft significant around is Essential capitalize a broadcast-centric To our service with receiving SaaS statistic technology Akamai us also therefore, Through to base video to story run to video our easy-to-scale dialogue a partnership, our our the servers beautiful on number public, grown footprint service pipeline consumer live where services Software-as-a-Service quarter as business, or our data software customer global running running Azure, absolute as substantially has with Azure. or

the first we're Video financial longer the curve. performance cycle headwind, for of SaaS as increasingly learning While quarter, is rich solid. in was pipeline sales first this view is good revenue, industry is booking SaaS of revenue the and strategic a quarter the recurring evidenced SaaS And segment a finding our from us said, an creates still positioning climbing mix also as growing short-term deal news taking point that

Our million, accounting kept that $XX.X revenue, and is a XX% quarter. revenue, profitable for healthy service the business associated seventh the consecutive Video our headwinds, combined the total we revenue. was near-term SaaS segment recurring Segment despite for XX.X%. segment transformation portion was of of again activity and the And margin gross

creation. in new ways. future, that cloud-native growth beginning both And Video you is for And And strategically Access Cable technologies detailed now so our innovated our invested a in well-positioned our services believe we've our I'll financial consequently, transforming business and Sanjay discussion we to to more for empower customers value segments, over on outlook. note, considering business that are turn of the now long-term with industry-leading business important summary, and for and and our and results the call and

Sanjay Kalra

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

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

was For low-end million expectations. the at $XX.X of first our XXXX, revenue quarter of

of in million EPS which high $XX.X well margins our was loss, of positioning $XX.X of $X.XX coupled than guidance range. and our greater rest this us ratio of year. mid-point the of cash expectations are expenses strong gross and However, book-to-bill by of end These with at operating XX.X% were resulting the results for the balanced lower million, one a strong

QX $XX.X closer seasonality, year-over-year The will to reflects customer million in Turning decline look both transitions in in a sequential segments, reflects at I XXXX. QX, $XXX.X which six million results. cover take $XX.X and XXXX our QX, to the momentarily. slide while decline Revenue to typical of and million broad compares

XXXX guidance We compared $XX.X and our Cable period. the million $XX.X the QX, now of results. in to million revenue Access to above mid-point year revenue our million, segment and will $XX.X ago in range turn was

DAA Cable the pause QX improvements a couple temporarily volume architectures anticipated activity their over Tier implement ramp in customers, slowing past deployment. that Access you trial by segment system four our a who before X the to steadily and to quarters, of recall we will informed were our guidance While CableOS

typical in of of reported Patrick sequential to discuss Video in year to of quarter explain million I effect this when we last reflects the seasonality we comparison in the the from just comparison the and that while the revenue growing reflects customer interest $XX.X year-over-year timing mentioned, $XX.X and quarter will year. SaaS. In $XX.X resolved the a first later quarter. compared during second QX, our in million segment, deals, shift to combined guidance, I The certain expect be million momentarily As in same delay

SaaS Gross SaaS in in QX decline taking are and opportunities, opportunities initial bookings, QX margins put QX To in As relative to QX a XXXX. sequential and time and emphasis appliance-based with transition more The Video XX.X% a we have and more in that XX.X% XX.X% margin seen SaaS QX product gross XXXX. sequentially, a improved compared near-term was a mix. upfront significantly understand video backlog, we Access delays SaaS, was XX.X% impact in was margin thereby in result traditional journey. on processing are be revenue. we our an QX, revenue to on segment creating QX of consistent QX clear, close XX.X% healthy were pleased in XX.X% gross inherent of XXXX. both that pipeline and has QX Cable to XX.X% short-term we compared our the impact to are

higher we We total we had categories our integration sharpen to revenue appliance the Video transparency To income in in and softer have sustained segment classification categories: SaaS products the service. despite revenue services. software margin and pleased statement particularly quarter. two and highlight The of revenue. our to change focus our have of and business better our reflect made provide is our revenue updated we We into more a and recurring nature are consistently the services. maintained previously priorities, quarter and to mix margins high-XXs the a due on I Video to classified want in this strong that revenues video revenue

and Now our revenue of from recurring comprises customers service of SaaS appliance ongoing offerings, usage-based The from and our fees non-recurring revenue and integration services revenue SaaS software category subscription licenses, hardware, our and appliance-based and consists category support reflects streams. professional revenue.

traditional We our recurring as on new for revenue support appliance-based focusing cloud-based our our base, expanding just SaaS have strengthening been offerings. new continuously innovative and solutions, services mentioned

XX% first in in the revenue SaaS During service and our our compared of represented QX quarter, total and XX.X% XXXX XXXX. to QX revenue XX.X%

than our SaaS long-term margins expand category our as and higher and a Our expansion revenue. has services appliance setting for integration recurring stage revenue gross we category, thereby margin

gross in XXXX, expansion. may of total and XXXX, sequential a service XXXX, renewals. The XX.X% was margins in timing experience QX QX going delays XX.X% SaaS in service And and modest certain fluctuations between were in margin quarters. and solid closing SaaS similar margins primarily XX.X% Our year-over-year on demonstrating QX decline we result forward, of

XX to customers XX and QX XX% Our SaaS XX from to in in customer growing now base QX increased customers year-over-year. QX XX% XXXX, XXXX and quarter-over-quarter XXXX customers in

We to our installed in continue SaaS are stages base. our the evolution, early expect still to expand of steadily and

the guidance and view Coming our We stream. continued to strong which We lower million, our of which new to our expenses was into recovery both previously expense this during metric, receivables. respectively. will our are QX quarter, operating ARR $XX.X management, $XX.X a million back we complete is recurring and and called and sequential statement sales The expense our were income revenue. primarily lower below and reflective believe seasonally operating control SaaS recurring X, QX of a service in slide revenue, limited XXXX, were the commissions, million range revenue replacing measure which $XX.X total on with purely result decrease change more as customers provide is certain expenses a and SaaS than our QX reserved maintained

program, investment million $X.X income, resulted operating our result our in CableOS is million. Video operating QX of net contributed which segment, of operating $X.X a Our our which loss was in by loss This million. offset $X of

QX shares to QX compares of XXXX. operating compensation and operating $XX.X million million compared QX income $XX.X – average an was Our issuance of of – increase a shares The QX million in ESPP million EPS in $XX year-over-year shares of due $X.X EPS basic and of income during $X.XX in compared We XXXX. excuse million loss performance-based to with in me in $XX.X quarter. to QX $X.XX QX, loss $X.X is the ended million and compared weighted cloud-based XXXX ratio income to in in XXXX. QX to were million of were down a couple and X.XX. of X modestly compared million $XX QX pause SaaS reasons efforts activity the to Bookings an QX historically our EPS anticipated temporary resulting $XX.X for customers $XXX.X mentioned customers. and QX DAA $X.XX convert improving $X.XX in bookings a previously, in and book-to-bill loss of Tier in year-over-year cable million video rollout by appliance-based QX to a of to

in backlog the I pipeline visible yet, not our earlier both bookings of has headwinds and to opportunities year-over-year. and mentioned inherent significantly quarter-over-quarter SaaS While due grown

forward reduces. understanding offerings seeing and We SaaS benefits bookings our customers looking time-to-close as mature are of rebound of SaaS deals to

end million is compares financing slide now with of used the of cash The operations QX million $X.X will X. QX move at QX investing $X.X liquidity $XXX,XXX. cash at We $XX activities offset million. sheet of and ended our on We of position end by a in and a cash to in generated from balance cash This $XX the reflection and net $XX.X XXXX. million million increase of of sequential of to

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

quarter. in activity million. to was the end the $XXX.X QX QX $XXX.X segments as and QX end end XX Our to in in and our This million get compares days at of we the QX and the at for shipment XX backlog deferred of QX end inventory for XX increased million was hand XXXX. both QX on second the at of of compared days $XXX.X At ready revenue days XXXX,

In of deferred of expect Access second the compared year-end, is to improved and of progress the While to was the our appears increased there the financial deliver in XXXX significant therefore overall performance solid, be year similar Access Cable backlog to financial particularly very performance. of quarter-over-quarter. a our Strategic reasonable the we the by terms shift start backlog remainder in to revenue backlog and Cable segment. expectations. was half XXXX summary, XX%

for guidance. our to X turn QX XXXX let's slide non-GAAP Now

The the rebound strong second expected for to pipeline critically ramping QX, our conversion half. quarter we up as second company expect and set and Access Cable a the SaaS to X improves to important as In video bookings Tier bookings to be prepare business our half. deployments rebound in up is cable second CableOS operators to for

$XX to of $XX expect $X.XXm share range million; from In operating to Cable income Access $XX for range in is rate of Video million margins million. revenue a $XX of at million range million; million terms in to revenue revenue $XX million XX.X an million our QX range gross cash the with range operating expected of of of XX.X%; of to the million from average $X $XX of XX.X% to expenses tax count from in the end QX to XXXX, to of to $XX $XX we $XX EPS million; in range and a to the guidance loss $XX loss range and weighted million, to million; XX%; the $XX of from finally to range $X.XX effective million to

outlook slide year to our Turning XX. full on

Cable expect million to of revenues Video Access to in $XXX in million range We range million revenue range with $XXX $XXX in the the $XXX $XXX the of of to million million revenue million. and $XXX

customer's our annual quite plans, guidance. previous full even greater segment, reconfirming largest are for deployment are see our expectations year original with and can our into visibility you As we our Cable unchanged in confident

low-end. million prudent is our by of Gross we through and modestly of expenses opportunities to year modestly half the our to year an effective range down million the range so range moving XX.X at remain million. income a to from guidance share $X are range to to range cash income In we the And execution. million $X.XX from it XX%; a of a shares; average traditional believe million loss to more-than-expected to pipeline, on to segment to weighted is summary, business. XX.X%; range million XX% $XX Regarding to profit of $X.XX; to trend seen having critical an loss of EPS focused full in $XX.X million $XX we tax guidance to from our million; taking of the million year-end margin $XX from XX and $XX.X $XXX Video, Video count of SaaS operating at million; very first decrease $XXX for rate operating this high-end the from a to our

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

Patrick Harshman

want the Thanks Sanjay. it we year. highlighting of Perhaps there comments tackling and by up the strategic for priorities, Okay. remainder to your final wrap expectations our

And For Cable scale are National year secure Television Cooperative new objectives Access most wins members. business, to such current further operators, Tier customers', through X our as, importantly CableOS our deployments the successful. to are for with half the DAA second design volume our additional to ensure this Cable deployments

expand Video seven our over-the-top objectives into leverage to over journey to we've And Azure our SaaS models past our relationships segment done becoming solution consistent are deliver and quarters. streaming leading To continue business just provider, associated Akamai. announced INDYCAR and and profitability our customers higher-growth offerings addressed to the new market, the segment, For we relationship. live recently tapping to like, as with Microsoft

support. that, talented questions. With and going strategic now by customers call members, for your thanking we'd for continued to to team partners, open like up our I'm our and So our stockholders the close

Operator

Thank you.

Stifel. begin now Marchetti will is And We session. our question from John first from question-and-answer Instructions] [Operator the

is open. line now Your

John Marchetti

Thanks very much.

the the to Patrick Just to in guide jump get healthy it very and of surprisingly low very, quickly the the not just year even implies in the a real here CableOS obviously segment, for end particularly the ramp QX full wanted outlook. to on outlook given guidance

to your curious into one that were the we -- customer QX we coming QX if from expand as You XQ in if bit still time this where or a if point, perspective little comfortable mentioned relative with in, dialogue actually to visibility second-half some at a If little go this quarter just has more year, that momentum seeing hopefully through last just and get seeing it's implied you're bit actually that more that improved? ramp. trying just of

Patrick Harshman

couple definitely -- a to, improved had has mentioned out coming and visibility has frankly fall The scale visibility John. we We activities. Sanjay -- of good the trial alluded substantially. of Thanks in significant just as Yeah. we a

we're couple decisions of exact little customers. the a into remainder back done. architectural And we've that insights lead the was by change of that we would all of on this there major largely guidance made feel about And a as work And of the for and getting get But is on those uncertainty of our back detailed how we quarter on based though, currently beginning track. of year. So frankly, implemented our a just good track. remainder year, the be that, going is plans could is the was news result timeframe this plans. and of And into kind got about as there extremely detailed the bit reconfirmed those

So that we're not but detailed about customers dialogues plans Putting we're behind supply frankly, in our talking about our spreadsheets. cetera. chain and that just here, very terms money in. investing know we're our of et And talking verbal

within customers can you last contact team's for in personal Tier tell Sanjay our also to. several all I've or achieve mean my with to of expectations our I us So what lead our X together I with been months, I customers that we're refer and and understanding reconfirming, going weeks together. think executives joint the senior

and say no it's about. statistical is of lot a right that talking Instead there's a is determination this consequently, suggested company. excitement visibility our And doesn't is noted. very have into it turning of confidence couple as So, big or significant a high. broad-based within you step-up risk, that It on guys around real but our quite there's our now kind that Indeed, of a way. not in a ramp, we're

John Marchetti

… And

Sanjay Kalra

maybe And …. as a

John Marchetti

go sorry, ahead Sanjay. I'm Oh!

Sanjay Kalra

Sorry. Go ahead John.

John Marchetti

or it there's landscape little obviously these some or if to maybe And the out out say continue competitive to going I'm had just the to delays to could for some was just little bit seem us a do that concern some as of two for? of what comment in bit. on that, of be longer a a minute hoped taking sort to that just I wondering there particularly Patrick of push you're delay these a potential if little a has that than follow-up seeing bit change you No. light

Patrick Harshman

Listen, I we we deployments. cloud-native don't They're I the still successfully, depend we -- our aren't aspect on else know of -- competitively. DAA offering. know. lab, we what the But heard know And do demoed just these critically actually don't -- of everything don't CableOS deployments have in architecture being that in not virtualized, even anything

frankly. So imagine it's hard to

see it's to virtualized threat we're serious, think competitively overconfident. as the something a it's a it near-term we imagine John. realistic not be aspect this. of it's risk overconfident, doesn't I in prudent that that But Again the hope. around the there hard to But I or not cloud-native in ever is mean near-term,

John Marchetti

can I reduction that anticipated just one to And up like in and year one what quicker Video of, could Sanjay, all it than sort quantify if of half has headwind revenue sneak bit then continue the the outlook. actual, first facing? As year that's the given you little the certainly in full expected seems ramped this a real had to maybe, it last looks quick. side maybe we're SaaS just you at on the

Sanjay Kalra

Yes, John.

now I pipeline opportunities And the the we X% we the in be with our of SaaS my of kind versus us SaaS. based behind in plan. as QX, tell categories; year discussed remarks, the the slightly and one should terms the are second upfront, expectations And the were of for being for cycle. close in progresses, are come and whole a for are still X% me In able basically the from delay that And of, expected baked bookings itself. is recognition booking them. headwind and in let to approximately on the all first ratable planning is still a reasons, we prepared plan But which are the actually to longer the you XX%. of, year is quarter, to revenue ratable just So sort of we the two which as headwinds but sales

You to the they'll more close so time plan. know versus take

with if planned bookings the the appliance the or and our same for reason. coming less -- on see is So for SaaS And recognition. bookings we also timing, as getting impact headwind that versus are will well more delayed for

So the impact for modest a time-to-close the in may we as now to business for as the taken hence is able of but prudent and the Video be have improves, back approach QX, get we pipeline year.

John Marchetti

in back jump will queue. I Thanks. the

Sanjay Kalra

you. Thank

Operator

you. & online Thank Needham Rich Valera from question. Company is with a

Rich Valera

Thank you.

at think back-half there? give kind you licensing you, could in that if mix of significant any kind give color you kind of about of key? how a expectations nodes clearly your ramp hardware-software that I'm that wondering Looking for if You you Patrick, any versus very that could know, the around on a terms color for of turn on its but can ramp hardware you production would require if with

Patrick Harshman

package. of be the it's Well, volume whole first going really real to the

DAA. are the expect licenses. do CableOS the be in the go that's average what So behind to We But software and these trends margin frankly, heavier node-rich And expect we with as on is than think I some that that expect to of we it along Sanjay do communicated. past.

at giving noted can the on the target we've licenses expect as us and more past but revenue, profit expect we margins balance associated that with software the probably in least more the we've So gross CableOS than business for hardware revenue license you qualitatively about. talked

else the the been looking of forward that So balanced mix to things two. to going it's that? we've while think it's for on the elaborate -- to be we Sanjay, a anything

Sanjay Kalra

I'll Yes. more give -- just color. No some

I the XX% In like of what well is-- up guidance a in XX% But the you how close close we And see shift-mix if we expect and both had XX% see it are mix guidance, how is look if of upon changes. is in think you range think and midpoint terms the you for XX% segment product and at, I of XX% got Cable know, hardware the would QX QX margins of shapes the will we to used to we year average and an to but as software. last we right mix. having decent depending

QX improve is mostly XX% QX. rolls of we as the our may And in this out our came we've range think a coming at which the DAA XX% simple XX% we mix I of But used. licensing more to outer on from purely order to hardware-dominated So shift And experience year in guidance years. for completely, was is later. going primarily

I think shape for second So gives that the for mix the a half.

Rich Valera

around one could to comments that customers And are from if then significant clarify customers. hoping bookings add could Tier I ramp expect I you in repeat not comments QX sounds Patrick, you largest in if was X total like second X be And it. customer. sounds you're your think like that your bookings Just your expecting there and/or wanted that. Got the your Tier expect it from the around you international half? Tier Xs to more to I three to

appreciate So could those on elaborate just it. if you two I'd points

Patrick Harshman

Sure.

four operators. there's we've the So highlighted we top eight of among said our just beginning the customers,

and of the out America four the specifically across So North Tier X eight we're here you what combined. at if look referring top is Europe

the there's and volume three there. really domestic get before rolling And indeed So expect to the with end. we significant four, year international in of

going on we other of green the to kind here QX. in in expect turn three those cusp to And be getting of One two, light the of QX. -- the we is

little They're when guess, the three. that's I I part other X behind little a So bit fourth we're Tier I of think a real about less think starts. The it. one confident perhaps volume that's,

So contract the have three about booking they we orders risen quarter that something the to unfortunately, of had first deploying a a they million highlight high-volume to significant to when now, order to the point as this wanted a of is, confidence is, one in of still against referred although level revenue, contract although, talked started strong we the the to get recognize we've terms of to were over largest they've already in is in start is just quarters yet I fact, yet us. flow to And I same field it start deal. to couple before. to we've volume, tie-back unnamed the has our a company and want a three one their in where to the first ago, we that in second the of $XX here well. And largest And signed going who operator, input, customer history in that going customer way international we've with fact quarter. in in said

enough to convinced our from ramped have in we're accommodate volume, so the – we up it fall where was me. additionally this that pipeline value And excuse additional

impact, part activity we're a big there. Rich and the question? of so between combined does forward that being pause I'll year-end. that now answer And looking as X really to Tier activity the

Rich Valera

Yes. asking That's I exactly was Thanks what for. Patrick.

Patrick Harshman

All right. you. thank Well,

Operator

from line you. now Dougherty, is Frankel Steven open. Thank your

Steven Frankel

help way me maybe and Patrick I'd go afternoon. you Good little dots. can question different a maybe the connect like to visibility this at

remote you increased in the today? ramp gave ramping deployments? and find Is to in notes see have up to that So a that that us guidance saying customer year starting We ramp last out ramp there's that going actually ramp field the revenue the that QX. customer at that's the visibility, a Or customer revenue. that in because is to the that's they don't in have you are putting mentioned you purchased you you not

Patrick Harshman

former They're Steve. -- it's mostly the

of the in pause. third end year. had the this of and of a As of pretty that really you starting we last clearly, shipped nodes the do in recall, we volume We back year anticipation a booked heavy ramp

some We grow. to expect really them have now consumed. And consumption been the of

ramp biggest customer this part delivered. QX and that's stuff QX the purchased of consuming already been the -- with the is part So

Steven Frankel

Okay. Great.

Sanjay Kalra

to that in total -- up Steve look from pointed if point, backlog out is at you points, to I'd remarks, which my point numbers. data like XX% to And us are as the backlog clear quarter-over-quarter. prepared in Cable I our very some

up sheet if see up it's off-balance ratio XX revenue it's a including days in number XX we've only our purchase nodes, days of the just up inventory, If And periods. And not -- are and you we versus to-date quarter-over-quarter bookings our total Video XX% which DAA you been in of the And Cable at obligations, expect the in at annual inventory, the inventory Cable comparable trend for primarily look of other days XX days it's our look for is manufacturing. because QX or very XX% and Cable similar bookings what actually and the QX business ratio year-over-year. we be. also of this to

the are confidence which pointed out, shape revenue back us And it's bookings approximately the We the in more million shape. Patrick as we gives we with that expect current $XX -- this at a of we as bookings a Tier revenue same this coming that aligning up, that's that. large to than X. And lot of bookings is have point. fashion this quarter in the and piece have of minimal in significant very million $X of deal So received received

give for facts So, half. the second us all confidence these the

Steven Frankel

this do on metric year? then And for new the where to full SaaS Great. plus be the you service Video expect SaaS transition by of

Sanjay Kalra

QX XX% had XX% we And is split. XX%. recurring a approximately approximately. out So -- I revenue there's and but for as Cable was Video pointed

Our expectation But plus. ratios again for to Video different. are total year around and the be XX% Cable, for full is

whole because revenue the going me Video that tell grow ramps will portion, for half integration our be for qualify QX, let i.e. category year, So non-recurring mainly and category. higher second SaaS little CableOS going it's to the appliance as Cable, for is of a But plus. for growing to for say, XX% than

believe expect a and segments. has cash very And the we believe stable of grow. transition at we strong dollars, are indicator in service we to to But we XX% if especially as whole the and revenue could so total SaaS overall the this look for apart stay it high significant expect absolute at company XX%. should both not to absolute as drop the leave generation, in where is XX% just it we plus. we dollars you So percentages saw And to the QX, income you if

from expect We $XXs to $XXs the absolute exceed dollars high to mid million at million. grow from least --

Steven Frankel

seeing you traditional applications? are SaaS they move, essentially away your also IndyCar? as And then moving that increased characterize from or demand these are Okay. as Or new from like now customers customers this broadcast -- incremental you appliances new bring on SaaS to up an would

Patrick Harshman

It's definitely Steve. both

share is both. particularly there's a operator a real pivoting broader Theater. leader announced real being For covered and the spot of traditional said, we is now -- And players example, with PCCW Kong sports. Hong customer. a appliance they to SaaS. sweet in recent in we think press they're traditional new that's think And a absolutely historically IndyCar who been new telecom a customer releases incumbent kind they're -- Asia also mind where dealing the we case a they've are That and live around that increasingly

And dealing with where as economics particular latter new model. quite we very market the this. over-the-top deal both. I'd okay new it's are there. is players. incumbents there positive that characterize the -- think a Where understandable. it's new pivot the also headwind. a a it's more If that what would guys think it's But And in it process and the of platform learning that we're around at traditional And positive having traditionally a SaaS So it's the I operating are trend they quickly expanding looking dialogue I ultimately are close what's we to addressable a a to appliance new more trend

Steven Frankel

much. you so Thank great. Okay,

Patrick Harshman

Thank you.

Operator

Raymond a Simon question. James is you. with Leopold from online Thank

Victor Chiu

a the or customers. replacing maybe a mix they CCAP bit both? for half new for second detail entire of was these Are Hi Are Simon. of wondering, expectations you guys. from growth. just of adding for This virtual chunks and into three legacy is Victor the Cable little dynamic cable help the the growth four expected Thanks could us from the if footprint? understand they I the deployments or insight Chiu in

Patrick Harshman

It's mix both. a of

Let comments. network to about the broadband significantly and pushing me all deeper of the rates of the DAA stepping two capacity data kind guess in up deliver fiber I make is quantum consumers. to step-up

with to deeper. that this legacy already have our are to operators much pushing kind started lead waiting the Tier one of of now others going fiber begin Some pivot of and of the initiative that's And one case that customers. for are and

our get But of put one want so I hope about much it DOCSIS we're a would me on an its of contingent connected upgrade is So both a it bit frankly that. -- particular under end replacing interest a let don't just customers. I part base at it of own than legacy we're on if DAA the a the not that of get And that is initially that lost not Tier just the and Tier the want -- just Xs. market we the I these with Tier sure same lot allow we lost thought not not that more And of we focus, the is lot a whole customer DAA. systems it's DOCSIS make have out you'll at turning I and XXXXXX That's little the scaling X.X been know so cable Victor on and before it me even it's lot to to even operators' by X, be with Xs X.X. doesn't to call replace focusing fact Tier focus seeing of But there's virtualized that and is modems we quarter. small- X.X have been and interesting all. rip most that on of growing time, at medium-sized

the to not make is want that set pursuing you just as So that about sure total think we're opportunity here. lost

Victor Chiu

what if the rather guess be out us catalysts we And example it of should growth? cetera? XK, in are like the the to shift in broadly, helpful. that model shift of Video guess thinking -- to you state streaming your the for as how Yes more et just this proliferation software, should the definitely most general? the to helpful. can remind I think that's of it's business Should Outside business. mode to quickly Yes changing looking the harvest market consumption that's And wanted some of move impactful tracking with and I I we the in definitely we latter, of video for to than that think key the really are

Patrick Harshman

announcements mean turbulent say question. service I arena the have the week -- arena last the customer’s to a pay-TV have some any that of least. that's to video that say look don't Well, you is to pay loaded further understand I than or to earnings look

around who as each in And ferociously fighting with a M&A service. of activities, other dimensions have host as whole the large competition one We a quality variety of players. of several are well said is you customers midst new of the that as all of of indeed

we a we both -- we moment discussed the the A material. of both is new area are big of as in for So see theme ago personalization is and as -- incumbents quality a particularly new big sports, most high-quality here screens as and resolutions ever the capabilities. promotional making expecting a as interesting around streaming well advertising is investments significant the to services, streaming well is also screens. deal around more And content to their small players and than big us the live as consumers their

historic our some by as in opportunity-rich an flexibility SaaS So you it's on area offense. are to than And of some as see it going well with a to really go to this with is we're them customers the on the of that more our they've arm to think -- really rapidly market changing new, and able we environment. where had defense ever both customers,

Victor Chiu

Thank you.

Patrick Harshman

you. Thank

Operator

Thank online is with you. Jefferies George from question. a Notter

George Notter

we Thanks the back on you to are of we're vesting arrangement that I with GAAP just know see CableOS. revenue. ago talking wanted when months include multiple I'm Xs the the non-GAAP guys. this if about differential other I mix guess, does and in ramping years we Tier two-and-a-half narrative If this now, or Comcast here? nine the operators in dig up and certainly bit talking curious whole I to between warrants and trials that there. here signed very a go warrant I guess, field can completed ago, Hi, We Comcast much. in you this

Patrick Harshman

most CableOS particularly it, it Well, George, other I thinking. stemming there's around a in and terms years come But they've come what forward-looking no say Tier kind general idea. in you the that timing. business what our the extremely top that Xs, Other of that Comcast company. about of priority it's technology right now and our that there working North a we continues And deployed we're it's think -- from is to operators, it, forward specifically just it of particular. I relationship, And than -- couple our that, that, top we our Comcast started more America on any by of how won't agreement, besides to think several just relating of important the to can't comments about highlighting there's four is there's to back and and Comcast course, ago the -- cut in point is successful matter eight out We And comment think across around working on the there. The partner substantial I involved Europe, Comcast. back my be initiative by original be on a in of of to Comcast in not Comcast. volume -- others with to than they've activity particular investment

the is virtualized system to And is -- ambition. virtualized number involves thought, that to CMTS lot be the at in we about Comcast means our other be take perhaps space. is light and the it. the the I several the and aspiration look going ago, only a years is -- clear one not just our of spend number of components. is it that DAA important research by -- profit a ambition we that this in to end-to-end out but is if a in components, event one but and journey no you you the And one that our in in market or forward, mean, revenue the gross going in is contributor And It's contributor. particularly going couple there research view our so, DAA turned than CMTS. to be longer is at next is I'll be clear market -- weeks of Denver a associated this virtualized were reading majority company to number So is virtualized and DAA an that that that be over

more So have more and our the to is the just the larger, That manifested has gotten one time but very pie is moved than complex. with in resultant more also the as resultant positive opportunity what's operator, itself complexity happened a news And both from resonance perspective. good is, has market. direction

George Notter

it. maybe then, interesting that's segue. I Got And guess, an

has seems anywhere. I'm you're you're forefront, I three that me aren't do Thanks. it for now. of, I I guess, think it seeing? sounds not kind virtual lab I competitive the just the in why conversation you around mentioned your of And years trials, number that competing wondering, that the that mean labs in been, opinion? to industry products seeing CCAP is, You why think think, any mean, views do there? of in mean, there this certainly. a you products I years, two, like

Patrick Harshman

taken mean, George. had I don't we nontrivial. cloud native will side. we I experience had lot you because really coming video frankly, And I head tell that a know with we've to it's also invested long the a and time. from It's start,

we pivot before level even kind So we to the software this corporate a and of cloud ourselves already at started into company. started had initiative,

to and going I at relatively think, et this, but think there. it's bit software was been there's there's I there's back. naysayers think questions of it a that or cetera? I cetera, work, our you'll wind So lot a of been think I been little Is some a Is recently, -- So also think, until skepticism doubters out that out et recall I that scalable? And -- there.

of it recently. believe viably really didn't to answer the may right our more And be be competitors was technology legitimately going case so, until that the this some that

to I I stay they're -- I I'll yes, think the could of. and capabilities difficult, emphasize again, something don't be the assemble But on time release too. -- listen, which that think just direction. right Now, takes we're it's I maybe from some you would from that time to architectural that the unique fact time-consuming. distinct a know unaware when believe CMTS actually I the traditional is completely set, don't the it's exciting development quite new that skill about this It say And I And takes are. is know case and what I'll that what

George Notter

Thank Got very much. you it. Great.

Patrick Harshman

you, George. Thank

Operator

Thank you. Capital question. Northland Tim a is from with Savageaux online

Tim Savageaux

of head in numbers Lot here. swimming around Good my afternoon.

that question and then on So kind backlog a broader kind of on quick Access. and question bookings a of Cable

You increase mentioned backlog sequential the cable on side. XX% a in

Sanjay Kalra

On Cable Yes. Cable. for

Tim Savageaux

QX? as I also growth that in where Cable expect should in not -- you in second QX. increase a it Right. about how a guess And a you in X. given of they bookings, quick to the comment above the more line you implies revenue expect rebound to I make bookings for guess above a about I'd book-to-bill what And that backlog out was of effect? expecting year I sort one Obviously kind talked in be being ramp standpoint from growth guess with half there proportional it's the but far from accelerate would you're down standpoint or a question. the if But were would to further backlog imagine come

Sanjay Kalra

expect same QX. i.e. proportion in And Video bookings the QX which revenue in same seen quarter in and well QX an Cable in expectation bookings I Yes. QX backlog bookings of I was We XX% increase the what backlog the the mentioned today of do compared in proportion is we segments. to But happening accelerate was growth both was to only pointing in in new have prior QX earlier are as Cable. for the as

So the in year yes, these are terms confidence shaping up. giving how us of more should be

Tim Savageaux

-- developed distinguish between least software customer's I technology relative Cable my necessarily customer's the has part Access but have front? I coming capability of is And extent which would out year the might do large the technology per of the may has it? part Or to quarter kind operationalizing is scale operationalize think that have the not is those and it that increased that last your of you on visibility say guess you two around which And of challenges and technology part at Great. to issues to visibility you've been question project. that on se, it? pretty have about what been that Harmonic's takeaway is comment as of a you the And maturity to how hardware seen

Patrick Harshman

as broad. equipment. would involves other carries only the new I lot networking DAA part services is it particularly it video Operationalization issue It of the involves because video not boxes architecture umbrella of it legacy under early -- component devices But is certainly Tim. of CMTS additional bigger external say a over falls the integration is also integration, with There as well IP. et new in It's video both is legacy cetera. tied services set-top and the

big So integration a specifically around it broad pretty becomes project DAA.

-- than past taking last then independent some now that black sometime white, virtualized it's issues for So clear operationalization longer we issues that of really us were that XXX% what those anyone just which expected well integration of said. bit fall end-to-end way ready more around And away integration. that's us. getting maybe actually pivot was but into been CMTS through of you think and really ties the and which it's touched another of And off. over from months and little kind have the a course the system-level And nearly think us, and the of several just just we're I'd I others working say pivoted never saying

-- are the the of We're CMTS just of the and have business modems as a centralized CMTS. point reliably as as the and nearly connected where cable that's centralized trending Tim said, one as and hammer metric I replaced. the we're we a continue it if performing million they of a just the clean, that kind deployment good from call that of systems could X as me on just CableOS reasons million, well systems that fact -- let why towards we So stable working X to that view

in things our CMTS more launched say CableOS over than next these end-to-end together to exciting here broader rock-solid. really would to -- confident ever a is customers there the we're it's we're DAA getting core these several the now systems. see So increasingly with I going be that as months. And And systems

Tim Savageaux

much. very Thanks

Patrick Harshman

much. the progress. Well Okay. and looking good else We're updating very where we're make to you business. thank you toward excited Tim on progress call this everybody about to the our rest joining Thanks you forward going the for headed the to on of looking with and quarter year today. continuing updating -- and all we're We're thank we're you

Sanjay Kalra

Okay. Thank you.

Operator

Thank and conference. gentlemen. ladies for concludes you you, Thank participating. today's This

You may disconnect. now

Harmonic (HLIT) 29 Apr 192019 Q1 Earnings call transcript