HLIT - Earnings call transcript Q1 2020

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Operator

Welcome to the First Quarter 2020 Harmonic Earnings Conference Call. My name is Olivia and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

the to turn Relations. Smiley, now will call Michael over Investor I you begin. Michael may

Michael Smiley

Olivia. you Financial conference Thank today everyone, Sanjay President Hello, you, thank Officer; Executive first today Patrick and XXXX and me Chief for our for quarter financial With results Chief call. Kalra, are Harshman, Officer. Harmonic's us joining

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

Now, turning X. to slide

forward-looking this regarding performance will During statements with and we reports provide including call, Company. and results or may recent the XX-Q events projections the most in press are financial the and SEC of refer differ future release. event other current Harmonic expectations actual materially. We statements today's XX-K our or only Such future results statements you forward-looking section to preliminary files of documents

X-K. a risk reconciliation press posted corresponding cause unless together These basis. numbers on and otherwise website and in GAAP projections financial factors And call our that or note These on SEC our documents we provide please metrics which a forward-looking in on metrics to Form identify release, the determined to actual differ are indicated, on contained non-GAAP are we’ve GAAP from with contained can today's this important which statements. those materially with you results the filed

recorded the on release. of financial, information of or information our included and and this operations, We remainder and is on be call website. statistical available this business our press the some will other a will also discuss information version historical, regarding in of The

call over Harshman. our Now Patrick? I’ll Patrick turn CEO, the to

Patrick Harshman

thanks Well, to quarter and first welcome everyone call. our Michael

and all for and recent people business deeply I'd grateful Harmonic are ourselves their governments the employees extraordinary essential our address briefly sympathies the our providers like the been of and situation we're received the those into crisis. a first from outlook, and business to most by with find results service have we families support in. delving Before our is have around who and local globe impacted

of proud by partnerships and business streaming vital and continue our our and suppliers. many to appreciative video continuing worldwide services in our play the drive broadband role enabling of our employees We're efforts with for extraordinary thankful and customers I'm we made being the strong to support customers the forward. particularly

services. new you years a embarked technology native most and as know, be as for to transformative our for cloud several Harmonic ago It on company our journey own As can through of reinvent business. our customers

operational crisis customers increased also respond opportunities. the to COVID-XX heavy has providing expansion unexpected under on virtualized held shining power and up cloud-based and have utilization as unprecedented a extremely network of presented well video challenges. agility real-time streaming It's our which solutions, and While light our scalability, CableOS pressures, they

customers is Solutions. Although have and particularly Access real our overcome, position healthy to and our technology our near-term and Video Cable unique are key both we fundamentally powerful challenges SaaS

even and stronger positioned. crisis better this from emerge to is objective Our

sheet. nonetheless year-over-year the Turning Resulting quarter. COVID-XX the first was of our final our We the million, business revenue $X.XX. and a now $XX.X global weeks maintained throughout entire solid in was to during down March Asia-Pacific impacted non-GAAP business quarter results. X.X% EPS negative three and balance

disruption deployment revenue key segment the late quarter and metrics Access both well relatively with up strongly year-over-year. Cable Our performed despite

March projects Video planned impacted for Our several were shipments was as appliance heavily and more segment integration performance delayed. video

recurring well. other in hand, the On services our Video SaaS and quite revenue support performed

good over $XX and solid deployed million, segment, now XX% X.X Revenue XX% cable sequentially sequentially. with actively up modems, did was we are restarts million precautions. at implementation quarter. impacted initially a in and somewhat Taking slower pace cable look COVID-XX; and slow of following operators, commercially XX serving deployments quarter at proceed March year-over-year. both appropriate now These specifically XX% the a shipments Access closer seasonally and a over then somewhat our that up up were deployments typically ongoing Cable have by CableOS paused, CableOS were a is we We're is results for saw several safety

quarter. Looking already new a significant and continued is XX healthy deployment a ahead, several Cable expansion pipeline, is XX we're million evidenced end of market design outlook operators cable the addressable do remains and by customers. served for wind and with fortunate project line qualified we to expect the velocity a mid to CableOS impact positive and sight our service long-term modest strong in CableOS, the although second have industry leaders footprint creating onboard as customers. already modem considering deployed who opportunity over only foundational have clear broadband now

and has modest saw can rollout a a of our of The March only disruption CableOS advantages remotely industry testament operated in never our core software and fact teams way CableOS and seen commitment before. customers a that we the both activities configured, to the which this be in is supported

of XX% that Elaborating The peak doubled accelerating upstream March, the the traffic for see from as such significantly and broadband NCTA demand of upspring data since differentiation. is on applications indicates this over nearly U.S. further this up network latest downstream traffic peak XX%. early segmentation cable address Zoom. increased important competitive growth in terms is to We from

tools more is techniques. this is downstream costly gigabit expansion shines. complex and and upstream historically requires and This CableOS different really much where Unlike expansion

Our coupled cable traditional in for scaleable centralized by are changers upstream the coincidence our core first across PHY our and new game absolute planning purchase the the deployment product It's our road significant material to expansion, shell The we milestone our for one during entire no customers. customers. industry expansion received first when centralized architectures. CMTS including one that tier our operators quarter is two new footprints centralized only order the of from on virtualized shell four remote with node of

CableOS modestly part slow with more year, upstream continue Based on through accounts aggressive rollout that extensive the will the expectation even work half second the quarter is customer bandwidth by outlook somewhat tactically reaccelerating is near-term conversations, our second but slow driven to existing they it current activities of working qualification when to accounts new comes to at seen these we're still couple a in we accounts operational challenges. The variable as have urgent open respond investment. of more

challenges happening We've who the several larger also executing broadband and continuing second is manage seen with terms anticipate game-changer originally to also on unique equipped with the customers able in of board strategic customers, while to bring initial excellent the year. are initiatives. half be to a CableOS made in deployment, target particular of patient progress continue Again acceleration other We the rollout tactical being the foundation trials technology in to advance new prospects with of well second qualifications on likely quarter, remotely. software slower in then new well planned these a

summarizing strong we delivered this So CableOS first update quarter. a

creates and for in of with Our term plan the favorably more continues and Cable mid outlook strategic likely business fundamentals growth Access are for to near-term accelerated even well trend our the solutions. COVID-XX now headwind positive be virtualization risk, execute while clearly

now to segments. Video Turning our

year-over-year COVID-XX as Here well expectations. down original was Segment million, impact. we a revenue below fell greater XX% sales and our our integration saw video appliances $XX.X

deals we so unable possible. has but the the field been saw became confidence during as were projects were customer customers that signed as high to We closed delayed. situations some deals Specifically March weren't shipments where several warehouse encountered deployment get facilities complete We closed.

And contended shipment supply with a costs. in significant on chain jump realm, the we and server constraints

TV broad players, range news with including business a Video over of does first companies Our media segment and world the types traditional all broadcasters, streaming pay customers. customer traditional

these, categories was it hit. in companies business well Asia of of customer Among broadcast media across as all that were higher broadcasters our sales as service margin and hardest

not will in far do believe do competitive back lost couple appliance deals to anticipated in April, We of booked. delayed activity up a now for seen parts so reasons of we Asia. subsequently permanently deals we've pick were deals disappear. believe begin seeing these that we We're nor Indeed

our rebounding the all second as facility expectation channel extensive As continue second we quarter at current of together look before lockdown the a will sales that year facts is planned ahead level customer considering customer and partner activity loosen. these with half depressed conversations, of

and contrast our activity, integration run solid component services. public and on quarter. Now clouds the Video support That throughout to associated onsite of business is the private offerings our that recurring revenue and remains appliances in SaaS our

fact In we're of for for our SaaS seeing demand an video acceleration services. streaming

these telecommunications company. company During the SaaS a new and nine added broadcast XX% sequentially players, wins of domestic prominent streaming Among new the year-over-year. two where tier XX% other one international we a media prominent quarter one and customers new

consumers. premium to already why accelerate is the international This industry and running efficiency tier the on video and now Microsoft deal turn, March speed cloud-based further services service remarkably, and for strategy. why in transformation SaaS segment we're was models. Azure video current in interest streaming In our So growing core signed to we on air, rollout and seeing highlights SaaS will one crisis the accelerating platforms we anticipate

building stable upfront sales headwinds, which is recurring profitable, term deals are more and of appliance SaaS revenue revenue the exacerbates come ultimately we without traditional While profit enhancing. and revenue near value model the our term long

cloud premium ever. up Harmonic more sequentially. market into based end, globally, we positioned At leaning streaming than XX% the deployed is channels video quarter to we're SaaS X,XXX aggressively over opportunity the uniquely lead and linear had

data additional that underpin I video want a to of momentum. this points couple share SaaS

on During up we various month and platforms year-over-year; over XX a of which scale. strong cloud screened growth over is the XXX% quarter average statement petabytes from a

cloud capability redesigned a gains part marketing increase Cable expertise deployment Access. to platform out our streaming both highlighting And relationships and check our leverage We with cloud our the revamped partnerships and of together Azure, leveraging video unique strategic continue as with on word-of-mouth and outbound Google Microsoft I customer you push. to in recently multi AWS. website encourage and scale we're

dialog in video and for on summary, part on our our customer we the based catch same in quarter up traditional second rebound followed pent-up the first the impacted and of more by extensive appliances the a business In of segment. quarter expect demand. COVID-XX

see a confident come determined the will and SaaS execution challenging side the In navigate we parallel, we're further our stronger of conditions streaming and now value even out strategy. through pickup to current other seeing and video We're successfully opportunity accelerate business. and we an creation demand that

discussion detailed for outlook. more call of With Sanjay turn our over you that to and the results financial a I'll

Sanjay Kalra

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

would you with that basis. results referring non-GAAP as I and remind our Before on a provided are to results share to financial outlook, quarterly you I the like

effects the million loss. For by and EPS had COVID-XX, of revenue $X.XX first XXXX, the impacted reporting quarter mixed financial we results of of $XX.X

gross reasonable this overall services and are on of health million. We reflecting clear year-over-year, bright pandemic some were of with by Further total balance margins in. unused and maintained there of available $XX.X in XX improved strong revenue XX.X% million, the us million pandemic we results, SaaS at the solid at While we by backlog deferred impact a XX.X% $XXX.X for available financial disappointed million maintained and cash spots. recurring revenueof $XX.X of a our our sheet challenging a credit are cash positioning well we environment have line

significant slide and X, of segment strong QX revenue reflecting cover progress gross fourth $XX.X the million after to to QX, the million both ago was margin. look Revenue past impact $XX.X take ‘XX and $XXX.X revenue to our very CableOS Cable let's and Turning and quarter. reflects a sequential in which compared seasonality in The over year compared the $XX revenue Access expected and $XX will ‘XX ramping COVID-XX closer momentarily. QX at million ‘XX. decline a decline million QX, million period in million I year in typical was $XX.X

to by we Together as business in we of compared segment, March. strongly million $XX.X demand experience applied ago impacted revenues more and with million reported the seasonality, In year was our in reduced in Video period. $XX.X typical $XX.X QX our million the video COVID-XX

anticipated as the line video ongoing and to Additionally, in top appliance resulted backlog transition SaaS from year-over-year impacts.

Video profitable transitioning and As recurring business. a more been our and steadily to SaaS successfully services a segments have we reminder

‘XX two had reflecting and In in Vodafone this XX.X% quarter in compared of strategic customers Access contributed mix. and to margin again XX% XX.X% total XX.X% another in solid contributed margin the gross QX compared XX.X% and QX XX.X% QX, of revenue regard, than in ‘XX. was Comcast period execution. in came during ago XX% greater software year XX% the revenue. quarter. Gross QX ‘XX to in was QX Cable XX.X% improved in ‘XX at QX We

experienced to both; gross margin the increased and margins decrease operating of was We impact costs XX.X% particularly QX margin significantly Video freight charges services due to a appliance QX XX.X% COVID-XX. lower higher XX% March. in segment ago year period. and during compared primarily in high is in contribution video The from and integration

and be a video base Our cloud-based our recurring CableOS growing for SaaS. expanding services continues through CableOS revenue to highlight support so customer support

and SaaS and $XX.X and During in million the was up $XX.X our in QX first $XX.X quarter, compared and XX.X% services total XX.X% ‘XX QX recurring ‘XX. million SaaS ‘XX. revenue, from of services ‘XX QX revenue in in QX QX revenue to was in XX.X% million

‘XX, support support in ‘XX driven decline XX.X% expenses Cable QX ‘XX increasing ramp anticipation The in significant of seasonality the renewals was the video were cable sequential and service reflecting QX while of principally in in of growth and the by mix support. gross XX.X% further CableOS Access XX.X% year-over-year SaaS and with by growth. both; services decrease SaaS in QX and driven margins services associated

incremental impacted support Our freight video also margins March. including services by incurred costs during were

We base which element backlog in base; will feed revenue of of SaaS will our quarter, strong revenue made the substantial deferred further progress our customer momentarily. an videos position, growth in I discuss recurring and expanding important

SaaS customers, QX in customers ’XX, from XX growing year-over-year. XX from ‘XX and deployments and up quarter-over-quarter to in XXX% XX up QX XX% increased

control our of decrees incremental As segment income statement $XX.X expense go-to-market slide expense $XX.X million with $XX.X Cable to our travel are ‘XX. QX for in QX to at coupled during work. the we operating million management to maintain we to and expense is year-over-year in Access sequential X, The of due drive additional primarily on compared million rest the ‘XX look Most continued ‘XX QX of expenses expenses attributable quarter. future savings. the cost good modest

loss the The cost operating negative from in top impacts line resulted an and quarter. COVID-XX in

$X.XX and $X.X compared million profit operating was operating $X.X to loss our QX of This QX an share translated ’XX of Video and in compares QX, operating QX EPS of loss XX.X comprised from from operating our loss in of loss XX. in $X.X QX million of EPS segment $X.X EPS Cable Our to QX and million million million million profit of segment. loss to $X.X This ‘XX. QX per $X.XX $X.XX Access

the quarter to to weighted exercise employee of compensation QX to shares XX.X year. X.X share warrants XX.X in Comcast XX.X count compared and million during million million million shares year-over-year purchase a is We the due million performance-based with plan for and ‘XX. of average ended stock of increase QX our The in and the issuance X.X for

to $XXX.X QX bookings X.XX $XX.X due the product year-over-year of lower ‘XX in decline a bookings were felt largest QX a in on video and was COVID-XX million compared Sequentially regions. million in book to million the APAC QX impacts our ratio of ‘XX and appliances in QX. in $XX bill resulting result seasonality the biggest and X.X% EMEA impact with to and were

at comprised and XX. million fixed this $XX.X of We end million decrease capital the our to was construction. of move headquarter $XX.X This and operations as at $XX to is Approximately million $XX.X million on We new with of $XX QX, slide $XX.X under QX which Valley ‘XX. is purchases purchases, for cash $XX.X million a primarily related the will Silicon cash use this in assets. million, of of use now of planned to the million our liquidity ended end sheet compares balance position QX of

generated auction primarily from cash ESPP million stock $X.X of exercises Net financing and purchases. activities,

for of lease have set leasehold April headquarter facility our of the a month-to-month XXXX headquarter was and and making the we are consequently Jose asset still we San additions COVID-XX entered current extension lease. because current phased new of Our process aspire in in to improvements

lease and by a million expected ‘XX $XX in total lease facility will be for year incurred our we XX previously with to by the outflow a expect of annual we remaining $X QX, of $X move in rent incurred was and CapEx new XXXX. incur For million cash million the OpEx we’ve $X disclosed, million signed was million to facility $X million. incurred $XX as pre-depreciation reduce annual which Once in new the XXXX. QX

us. accretive for So to this move location strongly continues be headquarter

of increase XX of customers. outstanding receivable in days the the QX XX compared at days days The XXX end significant reflects timing difference Our at days sales and QX sequential accounts from of was ‘XX. to end QX

DSO in to return expect next We to levels the normal quarter.

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

compared of end decline sequentially revenue strong $XXX.X modest QX, the million of million deferred At and and at year-over-year. increase million reflecting XX.X% the at total $XXX.X our end and X.X% a QX, was QX the end of of ‘XX ’XX, to a $XXX.X backlog

of of revenue backlog note QX XX% one-year period. and end deferred of and XX% within indicating the compared backlog of the the ‘XX at pace revenue XX% happening deferred QX end total at the our QX Please is a that deferred to approximately expected. our to at represents converted of that end revenue Historically, at the gets conversion revenue revenue ‘XX and rolling XX%

I would matrix we contracts CableOS of that business previously not this yet included X remind discussed. approximately backlog also $XXX in have million like X to is contracted which associated you tier with CableOS

position picture complete future have If $XXX.X million contracts, and contracted aggregate revenues had deferred a in at recent CableOS in backlog of you than look hand, in we history. we including much the stronger have these revenue

forward, impacted and COVID-XX impact our significant the and our remains QX revenues. primarily and business integration will video uncertainty it pandemic appliances looking regarding undoubtedly results how

XX. to quarter turn slide let second Now over me for on non-GAAP guidance

of the for on in the a range revenue this $XX and million the million. than to $XX the for of impact in we to million. to While QX. assumption March we entire primarily million COVID-XX impact Based video the the following QX quarter to in million guidance. The in range the Access felt impact expect $XX month greater QX are in of resulting but had we Revenue be in million crisis providing of $XX range revenue Cable in $XX $XX of

fortunate recurring the into million expenses range have range visibility XX%. strong $XX as million $X approximately revenues to of We from the XX.X we from Operating have weighted of loss base rate revenue loss. Gross from are XX% to to of in range of and a into range of quarter. margins $X.XX today $XX Operating to to share tax total $XX.X million million. to XX% to loss to of million. range million a $XX to XX%. $X.X of EPS $X.XX. And effective Adjusted to of from EBITDA a loss count average loss million. heading A

expected finally is at $XX the be And cash $XX in QX of of the million range to to end million.

activity of million $X headquarters quarter second payments approximately The our outlook to includes lease. new relating

As remain intact mid discussed, business we we believe in long-term well-positioned to our both drivers Patrick and segments. our of are

is uncertainty However, from to is near-term previously economic due arising full XXXX year COVID-XX issued the Harmonic the withdrawing guidance. crisis its

this will the quarter. clarity We reassess second end macroeconomics the recovery position of at of based on the

CableOS insights relatively good That the concentrated of whose half our we into, group XXXX. we is Access have activity rollout plans revenue to a for said outlook customers small since updated provide an of among are able Cable second

in to $XX expect have full be of to half we QX $XX guidance provided, in the second of million. Beyond the range access the our XXXX just now revenues I cable million

with revenue segments growing and capital that healthy ones, and highlight we I to Video historically backlog a working base, strategic Access the and and well-positioned global revenue healthy stream. with contracts, our Finally, strong both recurring Cable cash in position customer tier strong relationships summary, deferred customer a are want

as and financially profitable are We return and crisis. the entire markets this growths to current our our of to in operations ability depth across emerge from remain solid confident therefore healthy business to

and thank you that back to you Patrick. With all

Patrick Harshman

finish emphasizing said Okay. just the the strategic Thanks unchanged. growth remain near that our want to our Sanjay. core the for challenges despite drivers and We by year therefore term fact priorities are Sanjay as intact

one global focused additional wins across deployments the with addressed new scaling very business customer and our our tier solutions Access that remain new market. launching footprints, Cable on securing operators expand For we design

to get business addressed to our our objectives market streaming our especially finally, growth segments, cloud-based consistent our recognize the expanding support And we're platform during customers again extraordinary we come profitability. the live non-traditional streaming For to Video return through positioned. SaaS, out even and our to and want company of employees accelerating be through other these stronger and this together new our customers I and of include trying continue our also the confident to But times. our side efforts better SaaS that will

open your up now Let's for call questions. you. Thank the

Operator

Thank you.

We Stifel. first from question-and-answer begin Instructions] now comes the Marchetti question John session. will with Our [Operator

John Marchetti

understand think maybe the maybe curious about do much. how spend stands I just more a some through just wondering now? should there, video appliance kind video, was can through working your you really look go focus Patrick, this of Thanks we little I going lasts the bit weakness this through about a on minute takeaways that of very on we better you transition? to so in the that particularly that get could thoughts right SaaS with if this kind as the worry of your side. and that on what's we you're business where as business Just longer mean, or

Patrick Harshman

do referred arose business, confidence mentioned, encountered where do in primarily -- these these to not were warehouses due So the just We customers' for permanently impacted to -- deals were saw but deals not these competitive purely shipments believe reasons, it. we you had we COVID-XX. several appliances by reasons That situations demand Patrick signed, impact nor impacts disappear. were lost as was there Video primarily deals possible. COVID-XX was will We closed, John, delayed. said, are are so high the believe

deals of couple in subsequently have and coming far getting these we a So booked. back April, seen

expect was for business. to to business. significant converted expect our orders traction growth our seen ramp those we pipeline COVID-XX there be months And we we the impact. So lot it to At in in SaaS time, a SaaS come, guidance, for and in same is purely into business, relative SaaS have of and

John Marchetti

year, and with like business Sanjay, follow-up maybe, that, still and for that SaaS expected as the things in we do more through margins progress just drop think gross about those that of growth SaaS out how should come to we we through look remainder we of 'XX? curious, given how margins, a quarter the normalized the to the assuming piece this of as a about as sort Just revenue? contribution to that that, think big then in it And software

Sanjay Kalra

So our John, SaaS we would as video say SaaS SaaS look SaaS itself, stream Services our SaaS our recurring margins, I revenue. still part separately. and a a disclose And of that. business. and SaaS at should we together don't SaaS good But growing our is margins of expand we we, definitely asked, as of part we now, is that Services piece Services, scale, revenue. gross as to particularly track But which of improve, a time. seen and and improvement SaaS, we recurrent and period happening have over a is which the margin as of you of

in period. have they of basically SaaS of although less SaaS. were we bookings than plan. And a and it than in margins services And from are is million Services, and disclose bookings our of $XX margins ramp in in hence, higher million, separately. in from at don't our Year-over-year, composition QX still for ramp saw good we of with the significant we year-ago -- dollars, we in ended the $XX services total, But have well. as SaaS together the higher Actually, are seen quarter, cable, terms seen less This And SaaS those cable was than that services a video increasing. plan, that bookings we which ahead XX%. are

Operator

James. Next question Leopold is from Raymond Simon from

Simon Leopold

the Thanks for taking question.

I prepared you the apologies missed around get the try I is asking understanding But better One to if something two a clarified. things evaluation. I'm beginning to to so on. So remarks, want disruption

nicely a being when that's you've the new in So got awards being CableOS saw we in about up. evaluations XX pipeline, now, I product, a think so

understand Just gets or mechanics of trials, trying the disruption etc.? to evaluations, of certifications, what disrupted

Patrick Harshman

the a did particularly scrambled customers urgent of we a of down Patrick. mixed see processes was kind a smaller this operationally our after with the me, pause, Sanjay they We couple momentary larger -- evaluation up saw excuse If evaluations, It well. with really Simon, of qualification generalize, picture. as actually seen really moment. continue I is to customers with deal we've tactics slow

observation is MSOs Our that larger capable. are

on impressed their to ability attend well issues initiatives. with forward keep to focus strategic both actually as as pushing operational We're tactical

important guess additional that all that software. I Simon, are I number here, is comments, of aided is that the color think two the significantly by one, core fact

I of of CableOS is service. strong the always other be think can tack any remote that one like connected software-based attributes our

core, all the our complete ability so to of a testing, in configurations, that support to capacity. on And stuff remote have software we ability that do

been significant. And so that's quite

that around of a surge the it repeatedly. things one we've the of context upstream. other think anticipated of is about I now thing to attractive agility, is mention the architecture, work the as this in talked about And particularly

importance value have, is really to sharper that that teams. the even of particularly for larger me focus, coming agility, let say, sophisticated who the of engineering think I agility MSOs

move pressure ongoing. process the think keeping we that is And the qualification competitive rationale you helped so differentiation, if to think situation. in we keep, that on process, the will, more highlighted even to And current this wanting architecture this has evaluation for

Simon Leopold

they was follow-up that operator actually up from an So buy to me was do business? nicely maybe your what happens set when What What capacity. add of Harmonic? the wants happens to to for trying upstream the understand mechanics

Patrick Harshman

same segmentation infrastructure. two another And software then pieces. network. that the level, core. of shelf, -- capacity the deep piece In adding at on or either a it's to the happens case, through there, typically, server case, there's fact, in the bandwidth known provisioned PHY running There's our that a our centralized license something Typically, architecture in in more be it's upstream in needs right the licensing additional

additional well a as And additional it's hardware sales as us, so for licensing. of appliance combination

let's key upstream. to traditional is that head-end break the historic particularly of say, And new that lot of solutions, or, rewiring, out there's the a kind you relative on as

that's into And all rewiring. the no the there's think risk beauty getting process our upstream. of solution software-driven is where, It I I much such completely the too guess, at the detail, is of you the being server to key we that's differentiation to the agility able transitions really on virtualized of flexibility, core think a off-the-shelf farm. upstream truly have running when of these manage on

Simon Leopold

That's what helpful, and sort thought. I of that's

just one. the So appreciate I last clarification. One

you've On types are in challenged I advertising business. Video customer and the dependent such their your being And in on a business there. is To presume may the content business, what mixture affects that be sell that of business you. customers customers aspect Video one for health those segment? that Thank video the extent and got therefore,

Patrick Harshman

that's think great question. the seen such have it's think That is we term, a with that the count. for said, any not down. loss being broadcaster a I relationships is, back, sports, etc. I particularly not revenue we've clear The of kind answer down is is of with Yes, Indeed, impact. data if, sports advertising any that when, they're belief comes the question just that a There sync short don't a of

viewing. including content More And video in streaming meantime, through been generally linear live streaming has the roof. the content,

a fundamental don't part talking of the So some all model the way that about or we're advertising But believe the the their in have -- business. of in change anyone is. themselves business bumps see to customers may talking the we the they near-term consumer-facing

more make and and cloud-based that starting a think sense. scale-down do solution software perhaps We minute, are to wait more customers a scale-up, may more think,

some let around and call softness though, me solutions softness. companies, to long-term of revenue seeing demand a In growth we substantial them, mentioned we we're there. more direct prepared and pretty going line media although the in ad traditional and as case, broadcast for, mid seeing no already remarks, cloud-based the that's think pipeline between drive greater I are demand

work. the conversations with companies how -- media confident, quickly spun to of a why Frankly, to get across done, our back and how broadcast and operations globe, talking do up kind the we're and medium-sized get smaller about lot all of their they was follow-up quickly quite here, question catch of they really able be that we're that can to the and around can needs pipeline up get It's globe just particularly and stuff to in a demand. after that's they're customers pent-up the back on going

of question So fundamental seems a again, question, it timing be terms in viability businesses. shift to a these of not

Simon Leopold

maybe finish I'll clarify, and the yield point then to on that So just and to floor. up then

for it's business, segment next this not quarter of softened the health Video guidance their factor if the was in and major video So sales what quarter? the the the that

Patrick Harshman

Operational video is disruption. market And our half U.S. of exclusively for over well the Video for business a Remember, far so outside Asia is of example. almost us,

labs. lot Sooner that countries than shutting to severe take saw of U.S., of home, the people to shutting down, a sending more included from work starting down action we and

where is U.S. last appliances of center, some an March. into the the for of that doing saw than weeks more pronounced particularly U.S. customer's We shipping operational integration the engineer on-site where of inside in doing of slow some outside you're you're integration. So all the on-site

the So new really just operational adjustment business any to fundamental or model, not retrenching. strategic and

Operator

Next question, Rich Valera & Company. from Needham

a question. online with Now

Rich Valera

-- going to at looks a what's the $XXX Thank of your midpoint little guidance. -- mainly sort not that's there, low on like could of just add give baked you're kind $XXX been physically that? now half, just and assuming Is why of about this an that's for then you. your million basis. you if to any year? business the you're the can around color lost push level into of Any on down guidance next taken just deploy Wondering your hardware, annual around time to into kind color having Taking you previous it versus a midpoint midpoint million with is second cable XQ

Patrick Harshman

Richard, originally there's delayed half, they're going were us, they're on the although or is up. than it's catch we this out rolling but customers simplest a hard going new answer slower we customers in think the already lot to year. with first The to anticipated work bringing largely up, roll-out that are of moving a they're to among parts, catch

of minimal current kind view. only there impact our is So

half more think -- We the is pace simply contrast, customers. those of to of we confident think we -- the customers In I new the We first a we're with question doing year year. no so more ramp We're think, around bit We up slowly. pick way the we a deals. quite ability And those that have there's of think brand just bit a that customers. little the going the don't remain losing just in any initial way, planned time is think a in we it. qualification in lost proceed of slowly. proceed It's bit little to our new quite little on to going this process

Sanjay Kalra

does Rich, that's million. guidance bring half, to to additional we like I close that will the XX% Comcast the if just the midpoint whole guidance add exclude we one-time we for for up year second $XXX gave gave still pickup. I bigger year-over-year it that a the would Rich, -- But or add

Rich Valera

XX about then sounds win need just It customers. it. you've have Got like is that? been customers customers today. make deployments talking to do new really those You And with said to you you everything many

So new to involve to the customer really say lot safe -- doesn't of kind guidance it your wins? is of that your a of midpoint need

Patrick Harshman

because the new that would think say opportunity. guidance and modest seeing original customers more -- it's or saying of not bit please trying I don't roll-out of of modest stopped relatively on accounts. modest heavily newer and toward relative less same the we lost little tilted with we've simply basis, we're contribution now delay from mix a than -- time. existing And mistake by much It's we're contribution average. looks some a time wins expansion But more the delay time or yes,

Rich Valera

combination on the and if the is Got SaaS actually guess It's of it. now. I more, on business. one just both Video revenue, could, a And Service which I

roughly million down you And to So in attributed renewals. I $X quarter-over-quarter. think, service that was Sanjay, volatility that

there. you. it was that's a more Is COVID-related? Thank Or could a you business just that lost? is provide timing color hoping any issue? that And Just of little

Sanjay Kalra

Well, to timing. believe it's it's we COVID-related If think delays due we we experienced. the purely primarily

in, We part a the April it's stuff have coming seen we of timing related, but purely it, think.

Rich Valera

that of sorry. service? renewals? am Or maintenance are professional those kind I Is

Sanjay Kalra

It's little bit of a both.

Operator

Morgan. coming from JP question Samik Chatterjee Next from

Samik Chatterjee

the indicate side way view seeing you're My as cable's characterize more segment. because as that now going that capacity spending the Hey that add return some And higher manage to and kind taxes incumbents CableOS the as share taking back the a of I or looking from needs normalcy, to of on a gaining on have of they're customers you question. from kind kind that starts you wanted cable Does it? kind guys, through just of run to of capacity to of expect thanks that's would bandwidth some of work lot kind to for the as kind home. resume working to needs assumption to was again? fits of is when that the of generally fair Is the deployment. disruption? here And

Patrick Harshman

do any No, see we're pace, losing a we etc. What seed forward. we're expected going distancing, slightly slower do and of in share share, we we simply don't nor kind the that process believe to going of social because is believe this

heading a Our way. were in customers safe

As biggest probably we of ago, probably associated ramp was and discussed volume the our a and biggest CableOS business the accounts. already moment customers more existing of piece, won year this piece with roll-outs

as as into all really of And those it could. were hard they leaning frankly, they cases,

the example, It mean they're doing they're -- XX% simply I'll time. make of for realities current throughput doesn't that it the that efficiency simple loss So means situation. things sake a with accommodating operational other up of of

to what the a slower the pace that's that think is already simply customers. half existing the loosens continue prevalent the of with in going be we expectation And pretty of was to quarter. back our in pace It's a particularly healthy improves And or second year.

of a a And on those top enough, deployment conservative confirmed, will pace go is with again, of a how say, therefore, is is not qualification once of in happening bit clearly launch quickly of rest quickly wins on terms view layered we're see also general, seeing, the new that slowdown And how those through in although, labs. we've well, mentioned, how we accounts wins qualifications into the the little in second continue but quickly that design that's of perhaps the field taken, somewhat translate and I year. would to

bit little it's but pace, was we what already planned, fairly which, -- So a lower frankly, relative -- aggressive. was to slightly a

and the the revenue us can of in even long-term cable. And that opportunity. upstream needed, We demand not bandwidth Now we established really etc. some our prominently a installation underpins at guidance we've little more year. given that long-term indeed, a into later impact the point that think being in to positively this too I accounts, favoring do But bit with upside the full-year mid and -- see more for that think we for consider

Samik Chatterjee

the going this, follow that costs missed any into still or I you it. higher XQ? I supply incremental Got if of navigating And chain can calendar issues maybe because just you're are and up, expecting operating

Sanjay Kalra

But well, expect in other point. are experienced we than the guidance cost captured have and do this when Well, additional which as other any we QX that incremental our additional gross we freight well into as we charges not QX came expecting we for freight margins. charges, at

Operator

Dougherty. Next on from from a line Steven Frankel with question

open. Your line now is

Steven Frankel

of in I for opportunity XX overall wonder talking included that a couple might addressing and million relative you're the does size help if for the CableOS, modems you about Maybe us the new create opportunity. that Or is how of Good you. shelf to opportunity? a minutes that afternoon. today? incremental big spend Thank Patrick, is that that

Patrick Harshman

Essentially, million, an said of that. end. who've included XX I'll modems. even point the in deploy win, network, part selected collectively, additional start to over million the the and with without in their serve and design CableOS they look, people already is, XX We started it's

million We're modems. X.X only at

headroom So there's a lot of there.

I or about be DAA that's to if only going isn't been, to DAA, think paraphrase well, and the questions concerns only been, isn't one of hey, seen I us that customers' remains but access great much has be back how has subset how will used be deep be centralized. exactly of our will distributed for And much footprint. it fiber or of footprint and a CableOS ultimately really to

now that with with is together we've point our the shelf with is, deep shelf, the solution whole covered. got fiber and But the our thing

for not the for of think of so extremely relevant that CableOS of subset And being question solution, well just entirety the a we we're the footprint. positioned a it's

for solution footprints. think integrated occupying And don't rather but customers' ourselves the this entirety takeaway that to subset, offering, see an a so solution, I addition the is with a of a we nature our key that's our

Steven Frankel

Okay, into generating what's And ready the those products of on to maybe when back that might the you installed update to And the be base, to kind incremental would the product? timing start revenue? the might an have great. on notion modules home software sell fiber

Patrick Harshman

questions. for Well, those thank you

mention attention. important You're but the paying close context on. not didn't I because in they're of else not either in the script, going of everything definitely those just

additional into of here. be And So from -- expect this definitely we this indeed, our bearing board the product. by And a quarter is view point our multi-pronged software field the we strategy our with trials well to second coming capability -- revenue of fiber-to-home end growth of on is half year.

the or -- taken guidance come the we fairly it the of areas. moving capability to incremental with specifically, said, to being was functionality a software-based be the conservative our back I'd in thought opportunity lot overly modeling conservative, to That the is features for we license a ahead we have platform. of new both areas Frankly, is say, not that get idea but that continue given, from on to we've not just said, ourselves do being view. we a in and All in view of parts prudent of those additional continue CableOS onto quite those additional have contribution coming software from point here. about specific features, to bullish And be projection general,

particularly complement And DOCSIS the at cable excuse on Access to home, fiber -- what the of with on Cable targeted top we're that doing to me, operators.

those quite discussions couple half, things make modeling yet we with significant but that more trialing to of customers steps. but very see to under way, some only a expecting of not the continue until in a be both active, active, way testing second in So now and not

Steven Frankel

products, the to to new incentives this to anything has get do the and to there try but understand I COVID-XX this hardware different accelerate frustrating appliances last can the the Any business, couple away try or of end-of-lifting impact move of for bunch for the Great. force to the world financial a reasons. and Video from business And Is anything you years kind business out of been business? to on SaaS? of

Patrick Harshman

Yes.

much indeed, are it's think ourselves a aspects, the a the have to broadcast and if I There's -- to little we revamp in that we're bit isn't prepared a remarks it market. good frankly, And broke, media as of fix we customers. challenging that are our challenging question. I don't mentioned as landscape it. go

definitely much And of coming of kind that viewpoints that mindset. and this is some as us I crisis think perspectives, changing with as think new I

happen forcing to is cloud rethink well core this So can aggressively how broadcast customers our streaming as on functions. us opportunity think really some the both to and a I transition infrastructure, as for

here, see been impressive. that the recently to revealing report. So entire progress has more us quite you've thinking like indeed, I'd earlier, mentioned to a Sanjay But bit suggested. aggressively playbook pipeline hard without we're have that is our lines little and developed along as I results and the both and

-- is going internal It's our business not ahead we acceleration And be that's a over a long to that quite there this activity promising term. for mid think the do real to of plan. just it's hyperbole, of

Steven Frankel

you've with business? more And insight they more small happening in as that what's Or marketplace? any getting sizes gotten still Are the side you on deals SaaS today? deal into the significant presence are of relatively

Patrick Harshman

a We're the a two, seeing X insurgent in quarter, nine prepared that we number large-name new broadcast that remarks new, both. being telecom That the said, of and Tier of also standards. brought board those more one we ones of both accounts. expansion I mentioned are definitely one large operator, historic wins, TAM kind had by among and call large what international player, I media a in on the

this important, both. both the at we're And think, is world sides. important. very build small tip we're are a Tier sizable TAM, long success up both very vitally X expanding the that very important. time, seeing accounts with I'm that and on domestically also the even And tail, will internationally, But seeing same large getting we to encouraged So is

Operator

with from Northland question Markets. Next Tim is Savageaux Capital

Tim Savageaux

see on I Thanks side. your either cable want increased of in network here. kind major or That's customers' incremental me first fact, in look traffic expedited interest the increases in on one QX for did as in from any current you up business? to Good CableOS March of back quarter the afternoon. to question capacity response your of into follow you, question. squeezing here, I kind guess footprint

And them needs downstream think those upstream, address referenced I small? really terms footprint what trying the to of issues, discern whether date capacity, of tactical in you secondly, relatively that given I the your of sort can network it's guess the to to then and in it's operators degree or still whether help nature

that new referenced along if of short-term plans increased the will I meet to more a or fashion it's lines they kind in indeed be it does you traffic? these to whether enough of as upstream established especially a demands technologies pinch relatively in paradigms. you bandwidth? Can mode timely to increase done Or accelerated triage guess for the deployment turn of in pull-in,

that's question. bigger a So

on the first did you in any whether The one first today. increased in see here capacity half demand

Patrick Harshman

The a to kind they've of I short absorbed the sort lot set hit. of answer is capacity. the the and yes, is of in general, But Tim. Look, headroom lost they cable -- the just -- general, the absorbed what network think context, in happened

ceiling may just least it's hours. contemplate needs to the lost they forward, video our new be landscape long-term at you the It's capacity to a the that actually home if there XX within become of of is behavior -- what understanding, now, going not needs indefinitely not and and conferencing readjustment it's next headroom, the particularly added work their from part So be.

from and upstream. we require It our an rescaling band-aid. of need we're perspective, there that's network us, maybe urgent that think not the are interesting market particularly, some or real we -- the we so, And think think fundamental to but given band-aid, kind the today, well doesn't of the that share And a opportunities, extremely positioned. that situations small probably

think there that conversations well extremely during And quarter. absolutely, we And positioned. there about the we're was heavy

accelerating we're the to product new sale, the part use really about and customers. use CableOS in that's is first shelf of order from excited things about one expanding being upstream. of X footprint for first One across Tier accelerating the CableOS our large able that large entire of this of And our all

Tim Savageaux

Okay.

follow-up. a Just

whatever the of kind of say first I half larger then new your in of like pace sounds established customers kind seen guess it unchanged outside the through have might delays evaluations you you So, as customer out relatively of outside slower logistical seeing short-term and of you're of that is CableOS wins what here?

Patrick Harshman

correct. That's

Operator

Next from question Notter from George Jeffrey. is

Your line is open.

Unidentified Analyst

the lot for a for thanks George. is on question. This Hey, Kyle

is it Is regarding the is you much to that it margin of this appliance is I the of not than Video Can one the business, Video us for something like So, that, business a mentioned, business I XX% higher guess about type with sales would broadcasters the broadcasters. much give how to expect? revenue sense that SaaS, tied smaller or activity? you that's

said maybe that can that us in activity, to out timelines your you a of for with that regarding are whether conversations to there can the may versus pushing you? they've orders you, that? then us you for that give customers or anything And understand Is sense lost updated be customers they've help anything terms that get you would given

Sanjay Kalra

the that's we the part been the first views question, broadcast the saw mix broadcast approximately And in up and is a represents Patrick pick which XX% quarter, we QX little although has saw and mentioned we delayed, off. this has marginal now after, providers. a piece seen bit. since which media shifting getting the the balance But Kyle, that kicked So just have of of business. media And for service our terms of

Patrick Harshman

don't as reasons, of we've believe part any then the that the as case a also have told we by off feel these is case, an on -- told It the a And might not been exhaustive have is don't really though In done Kyle, table. of competitive timing. second been customer for the in have single we lost and question, being nor we've deals taken feel. question we our scrub of deal worldwide. that you every imagine, We

around globe really area of we're lot different and of hundreds talking a countries. customers across Now, this about the in

is business U.S. of of As mentioned outside over I the half this earlier,

channel for and about and is and our timing question customers reintegrate centers partners operation really So, getting to new really reopened the product. about and for us labs

sense when, we that that fundamental believe of they're general, And question need has driven not And received not don't across really the message we've of us, think because if, gone out and these we that a the in -- the to -- need makes necessity. simply it's projects board, it and the are is in general away.

Unidentified Analyst

video? us large of helpful. there Okay. that is Is Video can it to you Great. as sense a component give that And half? than XX% is as business? That's for Is of anything how general a the less

Patrick Harshman

Sanjay for it's a and media the as broadcast company, the So we said, publish business, video, whole exclusively which full company. about for is XX%

kind if says you about two-thirds media the math broadcast it So XX%, of is about of just do XX%, backwards, business. our video and

overall an category, pretty as significant. so And it's

was size push it So out. a and across was and saw a to medium this happened And broadcast where wasn't players, media It subset kind of what the you of particularly can see ones. of that subset that, smaller board. to we

to what home small have sophisticated clerical a with of you medium-sized -- And or the companies, customers have to from readapt we In couple home. or execute same working have struggle some purchase don't whatever. who struggle work seen we perhaps indeed, to from particularly systems had kind small people cases, and IT from of and orders

of logistical kind there's challenges. So myriad

what own internal of these well in to as of able we etc. point regulations being challenges overcome. that From have view companies' see logistical to their countries, be is operations as And work, general, on the

overcome, is become situations begin belief these or another, [indiscernible], that our you believe these logistical will one deals as as flow way if we that challenges the to become So will, again.

in a half in continuing the the is year slowdown current Our earnest quarter. second second in happens that of the expectation despite

Operator

to not remarks. Mr. Patrick the back at time. closing Harshman I'm showing for turn further this like I call questions would over any to

Patrick Harshman

the healthy. feedback. Okay. drivers Well, time. all after The thank fundamental We you We very business much the very of questions appreciate much. are and went

push forward. to continue We

you. soon. we're We we to in good Have appreciate a with your all And forward very Thank everything much talking to we continue and support. again believe doing, you look day.

Operator

today's and you. Thank conference. for participation. gentlemen this you Thank Ladies concludes

all may day. You disconnect. Good

Harmonic (HLIT) 27 Apr 202020 Q1 Earnings call transcript