HLIT - Earnings call transcript Q3 2020

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Operator

Welcome to the Q3 2020 Harmonic Earnings Conference Call. My name is Jimmy and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to David Hanover, Investor Relations. begin. may you David,

David Hanover

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

on we would you slides provided webcast point to to webcast, which like Before see website. out to by addition our also in begin, we Investor portion audio have I may going our of to Relations that our the webcast, this

to Slide turning X. Now,

with GAAP, our press together numbers metrics, These cause most During section indicated, and actual And unless X-K. on call with regarding forward-looking this differ identify refer and the statements Form non-GAAP may today’s actual in recent differ and reconciliation release, of important reports to call, that can determined the financial forward-looking you we the and release. in GAAP basis. filed documents will including a XX-Q are risk provide results which Such projections contained future performance filed materially. and and We we to note XX-K website please forward-looking These we those statements otherwise Harmonic other 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 Patrick? historical Patrick in information this will and of our call I CEO, on release. remainder the financial website. this our available recorded discuss information our or of the other and will over regarding operations to Harshman. included now, statistical some be a of the business And press turn The on is call will and We information also

Patrick Harshman

everyone pandemic gain our Cable Harmonic the delivered welcome to solid as business to and third and third rebounded from call. momentum Video a market Thanks, the QX David continued was sequentially. and we revenue our quarter, was our $X.XX highlighting business quarter momentum Access head strongly execution $XX.X XX% up million, quarter. greater slowdown. as EPS than strong into and Corporate fourth X, book-to-bill was

has company that and to brought. year responded Our really the opportunities challenges this has

We are well. executing

was when license software revenue products and customer million; Revenue are XX% sequentially we and than now recognized financial closer Our our see QX relationships a deal over Taking of was look a Comcast. with $XX.X operating we another had Access both and quarter. strongest we our for competitive at year segment Video ever healthy segment, quarter-to-date and from our differentiation stronger Cable up one-time strong ago the Access income demand services. XX%, and with our exception Cable foundational

As XX operators mid-October, up were second year Expo, worldwide, ago. a of from XXX% the Cable-Tec X cable we commercially QX quarter deployed the with and from

being continue Harmonic’s the communicate to additional Correspondingly, strong top end remains X.X North As cable a able anticipate quarter, fact both million ago, increasingly of serving were up the modems, of of CableOS over actively and end year. U.S. through XXX% of from platform. we was our are Europe software-based, cable operator and Cable the pipeline X architectures, the new in largest market million which premier over industry’s indicative The at cable distributed year by distributed Expo, CableOS out our Cable-Tec is served the the consensus was leveraging technology recent conference, the Harmonic Access of momentum. industry America was of clear. future and through to transforming the momentum an access architecture, all customer This a deployment the a access operator largest the underscored where evident rolling by X.X in strong

of generally. service platform architecture raised Americas, Associated and video Cable-Tec bandwidth new a that and customer we groundbreaking Asia. network coordination not our leadership. providers, technology a spanning significant operators symmetric gigabit more context and simultaneous for only school-from-home XG way further in our OpenRAN now We the including and broadband announcements the competitively that a for that conferencing. and and cable differentiated upstream through we with solution in work can deployments, And containerized video core delivering the software, on breaks announced highlighted leverage Comcast, applications, announcing Cable’s bottleneck, bar crucial demonstrating PON, market that a several powerful of we multiple made vision this cloud-native innovation increased is for Europe but cloud-native event, caching, from several extend In with the

The first and PON have attacked these for XXG are fiber-to-the-home. of applications we cloud-native XGS

cloud-native and We applications order. we’ve field extensibility to is opportunity pleased report market. for large our first our and volume are purchase fiber-to-the-home Harmonic This the are trials CableOS traditional important beyond well platform specifically, our first to growing that fiber-to-the-home received address cable strategic milestone, the going of the demonstrating and an

this initiative. update to you growth continue on important will additive We

our access We expanding advantages we’re for cable proposition include to powerful around that and technologies summarizing We world we operators further value network addressable and Access, delivered So the additional our Cable and new are CableOS. applications. moving announced market provided another strong competitive quarter. that are fiber-to-the-home to evidence extending

and excited of accomplishments proud about are where We is this business our headed.

our of $XX.X projects Turning began Segment we sooner million, solid months sequentially, after Video resume, previously delayed pandemic-related to as segment, revenue we in cases several now to expected. was slowdown. saw XX% some up than rebound

healthy software a was appliance, margin revenue. of mix gross license SaaS Associated indicating and XX.X%,

second continue revenue to our with guidance. half stronger line fourth with previous combined even quarter an anticipate in we ahead, Looking

will step Specifically, up revenue operating quarter. as million fourth momentarily, to anticipate further associated the discuss a million $XX in profit we to $XX Sanjay solid and

during live both of new premium cloud-based growth is companies. quarter, pleased sales continued and and nine brand in are we the customers channels the this competitive Last software space, Live year-over-year. with exceeded XX% solution differentiation both mix worldwide, strongest signed of cloud where streaming growth our reclamation end through streaming SaaS we opportunity of see and we deployed content We for up on-premises streaming position quarter, the particularly streaming and communicated Highlighting where We media streaming public of to live our XX,XXX quarter, see mandated FCC the a and business XG. an associated satellite expanding appliance through solutions. new sustainable is traditional of incremental opportunity. C-band spectrum

our we estimated sales. substantial to years, out additional broadcast As that streaming traditional and a several a dollar hundred couple global complement you that category play be recall, of may the solution next will opportunity million this over live will

to you the will announced the SES all The expect dollar order momentum XG said that the C-band opportunity leader, fourth strong our fourth of fourth also in saw and beginning a we satellite into customer summary associated reclamation this XG profitable expanding this In partnership projects on and during business, contributing quarter solid carrying activity track. we third the quarter. I’m that and of revenue quarter. new Video the tell for project live in traditional to third be a still with streaming commence We demand are broadcast, expect we year. strong rebound quarter. what quarter of continue the we recognize to bandwidth first we and and associated pleased is all We with revenue received multi-million quarter our to to in

the second for are and drive the success technology ahead, our profitable opportunity to by further customer our to to over strengths relationships detailed of brand, streaming half outlook. seeing year, Video more call Looking we growing financial the turn growth. and point resilience in our you, compelling Sanjay, our the with underscored to results and that, platforms of I’ll the discussion With of now

Sanjay Kalra

for thank all you joining Patrick. today. And us Thanks,

and a I would everyone results discuss to that I’ll are the basis. non-GAAP provided like referring outlook, results Before remind our on quarterly be to financial I

QX and As discussed earnings presentation earlier, financial measures press David includes release of non-GAAP that are to reconciliations this call. our GAAP on mentioned

above we Video quarter by our third the guidance range, and delivered of solid driven results both segments. Cable our Access For XXXX,

demonstrate headwinds with the COVID-XX diminishing as are resilient and business. these We pleased they results,

We Before quarter basis growth. reported Gross XX.X%, sequentially. in quarter. was through Cable the Further, reflecting points operating detail, XX.X% briefly million, EPS. our million notably $X.X of I $XX.X some we more I QX adjusted XX of the Also, will for was in margin of margin sequential Access reported run quarterly the up $X.XX highlights. EBITDA financials review revenue XX.X% and

X.XX. saw we growing business quarter, momentum the During in ratio book-to-bill a resulting of

of for this As backlog deferred $XXX.X year. million, strongest seasonally with sequentially a and into quarter we well revenue our positioning us head as ended result, we QX higher

will more Now, of I in quarter financials for the our detail. review

XX.X% Access up to of million of from year-over-year, XX.X% segment In Expo our we agreement conference initial million in revenue Access was closed I million of the $XX.X XXX.X% reflecting earlier. $XX.X of that year-over-year QX million Cable through our upfront performance Cable compared ‘XX, addition million to software compared up X, one-time license with million XXXX, QX traction excluding up $XX.X the QX revenue business, date segment, QX was ‘XX, In the in million from with XX.X% growth sequentially excluding in Access license $XXX up and $XX.X period. we increased new Slide $XX.X to revenue deployments was $XX and $XX.X one-time in CableOS to customers. and XXX% million Video $XX.X the by XX.X% we QX last Comcast ‘XX, is sequentially see after ‘XX. XX, sequentially and Cable reported to which Turning software million after continue commercial up mentioned million of year the QX, leading revenue Cable-Tec ago compared of industry existing penetration revenue October $XX.X XX driven $XX in QX, deployments revenue a increased customer million in year.

quarter, COVID-XX see relaxed worldwide, to this restrictions. to increasing segment During primarily the steadily activity attributable continued

anticipated. in we came to expected earlier Additionally, sales some fruition to than QX occur actually

all fourth and contributed We related revenue two contributed total XX% XX% we expect this XX% across as the As rebound XG quarter, we C-band satellite of quarter. to of greater additional continue markets, our as Vodafone the during for than revenue. activity. well had customers demand enter Comcast

due primarily QX and the product in to million As revenue, year XX.X% in XX.X%, in compared gross XX.X% Access as margins was and in XX.X% is software QX and stage the improved year $XX.X were to owing as Video compared in earlier, QX SaaS lower at in in XX.X% and license excluding the of and software mix QX I improved compared QX, ‘XX very ‘XX. and product ‘XX year-over-year revenue. XX.X% relatively and The one-time was were QX revenue in ‘XX, in the SaaS gross million flat Cable to portion margins. year-over-year mentioned XX.X% to XX.X% line margins top the XX.X% gross ‘XX period. growing XX.X% XX.X% Access QX Video in was to service and was QX operating $XX.X Cable segment, QX license and both previously margin due Also margins and revenue slight margin mix. QX ‘XX than higher QX to improved a reflecting excluding SaaS healthy in in marginally to one-time XX.X% is prior in are margin mentioned, margin. quarter-over-quarter ago margin mix. gross decline of sequentially QX SaaS in $XX.X ‘XX gross XX.X% to SaaS in early QX in decrease compared million service ‘XX. service services

profit see we during The were $XX.X million. expenses profit in to loss year-over-year Moving due down reported QX sales average sequential operating $XX.X the EPS operating of of and $X.X The of of after in issued QX share to XX.X excluding $X.X loss bookings $X.XX year-over-year EPS ‘XX X.X to million pandemic sequential a million the is our of QX reduced increased and software profit million driven the third quarter and $XX.X plan in weighted owing as overall decrease license during quarter as segments to the We and and was the million that broadcast X.X previously $X.X million operating million EPS of the million effect dilutive quarter careful the to for million the We $XXX.X stock to issued one-time rebound growth license of reflecting income $X.X the in were $XX $X.X compares million a issuance of the third profit and loss in $X.X X.XX. ability from the was as a one-time shares ‘XX. units America loss and of and to with contribution increase an to North to of to compares control reflects ‘XX to confidence strong the exercise revenue period, sequential $XX from from after million better-than-expected earlier. compared ‘XX the QX adjusted and Adjusted operating software to modest million quarter’s is show million $X.X of This in million, operating operating third Access QX share compared $XX.X profit excluding in $X.XX operating reflects primarily a expenses loss came during XX.X in QX excluding encouraging X.X ‘XX company’s a the employees as QX maintain current in not restricted excluding resulting grew shares The profit entertainment of increase in $XX.X EBITDA revenue It million million of ‘XX license quarter. during the impact The to compared and EBITDA million expense performance-based and ratio of ‘XX stock $X.X APAC, our to Video. in ended QX bookings QX million revenue trade Access Video in into XX.X% QX and of QX million shares noted stock of in ‘XX. increase XX.X effect under for ‘XX strong the compensation mainly after QX The by $X.X third X, offset QX quarter. due Cable the money and for shares in earlier. $X.XX an well of building Slide book-to-bill count both of noted management. to a compared of expenses ‘XX up $X.X weighted loss and reduced and for diluted year per translates the profit million $X.X million, travel, year-over-year The million of million in to quarter. compared QX the our QX markets. of million in of result million on good XX.X% and an increased bookings quarter. ESPP increase statement of during quarter. in employees the an money EBITDA adjusted year-ago mentioned. in warrants, software Comcast to loss media Bookings Cable ‘XX continue expense slowdown current QX the operating

Cable at in with purchases, both used our million purchases $XX.X primarily headquarters, Slide ‘XX. million research of $X.X cash quarter comprised and the assets, of ESPP. during decrease will the in related ended approximately higher and and Access which which development position which million. were million from the construction as QX million end at end working generated and proceeds fixed purchase the Silicon to $X.X liquidity capital business, We cash capital for for million of Cable financing from of our we capital $XX.X equipment $X.X the completed of The in This sequential the Access the to under we primarily for primarily attributable was to used cash our $X.X now operations, balance Valley needs business, was third and is net compares Video new cash activities, division of scale discuss our $X.X and X, $XX.X QX to Turning QX a million our sheet. million of

‘XX million going treasury our dilution conversion money shares $X.X in are will Also shares also by this the During quarter, our expense retirement debt an X.X X% the reported count will we using This $X.XX is the share million December, diluted annual in reduce its This benefiting debt million due shares and $X.X approximately immediately XXXX. forward. calculated the in X.X diluted this basis. method. hence, million convertible in approximately our potential of the now QX by start debt using payoff price remaining that note to committed fourth our total if-converted reduce interest and will by from

we and last arrangement a April delays to call, our our in old on new mentioned with month-to-month due facility. headquarters San lease completing extended headquarters As COVID-XX-related Jose our

million we our QX, The moved previous vacated clearly and $X current in pre-depreciation by million, the headquarters. lease lease quarter. new by During cash us approximately the opex and beginning will annual facility, reduce outflow $X terminated approximately old into accretive for our strongly new our annual

QX the compared improvements. the XX sequential reflects at outstanding of The in continued and QX decrease days QX to was at ‘XX. of end DSO XX sales days days Our days in end XX collection

backlog total XX.X% ‘XX, inventory QX to end at deferred at QX, XX% the million the $XXX.X XX% at rolling and end of QX revenue of a our period. million the QX of reflecting compared the consistent was days of days Historically, the XX represented end deferred of our at with ‘XX Our XX of compared days million of at to compared total converted and revenue of revenue QX at about end to XX $XXX.X XX% and year-over-year. QX the revenue of of revenue our hand within increase end an QX, backlog gets the XX% note our on to revenue expectations. QX and the QX conversion at end Please of was one-year deferred of days and at At end and end end $XXX.X the backlog deferred ‘XX, ‘XX.

in customers CableOS these under CableOS purchase account, I have with for $XXX $XXX.X backlog contracted Tier contract CableOS revenues of into approximately is million on million, we calls, a total previous contrast foundation strong which of future associated moving Taking provides pending included in X figure not us mentioned this three As orders. business forward.

non-GAAP I to XX. for guidance turn will Slide the year on Now, our full

uncertainty expect through customer environment, exists, current analysis has the the onset continue activity the and our pipeline of and While still of we on the degree XXXX. rebounded our of since to COVID-XX-related rebound the pandemic. this certainly remainder Based

expect Specifically million revenue Access with $XXX.X $XXX.X to for of of the range Cable to million in million the in This range full top the million. to year, line Video Video the in $XXX.X previous revenue million revenue and of approximately end $XXX Moreover, raising we our now only $XXX.X million than $XXX million, $X.X revenue segment, end by the million. by guidance midpoint of the by have our year $X.X and expectations. higher is guidance, the guidance million full tightened our $X.X low we thereby reducing increasing high range

XX.X%, to have approximately $X.XX. from expenses with And to shares weighted $X.X revenues. our prior to the effective of of to consistent $X.XX $XXX.X from For increasing operating guidance range we midpoint million, of an XX%, $XXX.X to of $XX of expect million profit XX% million, share higher million, EPS the to from XX.X count to Operating our in loss shares, materially from by $X profit a midpoint segment, XX of XX% prior million improved $X.XX, raised million, low $XX a $X.XX operating gross $X.X an our and revenue our income loss margin $XX.X diluted a rate of guidance. high from the $X.X of a operating million the $XX million prior by our reflecting Cable end year-end increase $XX.X range of to of second-half we cash end to range from an prior Access million increased the by improvement the as million, significantly from loss XX%, of million guidance improved of to guidance, in from guidance a to income guidance $X million. million of range range at prior to tax million of average thereby

QX Moving XXXX to Slide XX, updated we provide corresponding the guidance.

EPS we Cable million the $XX $XX margin of in of Video $XX $XXX range Specifically and the while range revenue per at with in $X.XX in Access of share rate Gross Access entered and how down weighted range of expected $XX expect end a revenue million the from to range around incredibly we for our share million. $XX to income $XXX ongoing million on to finally, million. XX.X million of we executed $XX COVID-XX, and QX, QX Video range million to such range tax from XX%, to million $X.XX of range some long-term to cash to focused to diluted million are million of streaming million effective to positioning $XX of $XX operating adjusted revenue to the success expenses our for QX $XX proud operating period. summary, range the XX.X%, to uncertainty share and of per million and businesses the XX.X% Cable to EBITDA teams impact $XX from million, million, range with in challenging to to million, from from $XX.X a during is average In $XX.X

is grow revenue. to XXXX the to in the after same of Our improvement as software Cable approximately Video base At time, midpoint license showed just full-year on QX. our we expand gave, customers. to I XX% penetrate XXXX grow segment one-time Access solid by our Access segment the existing rapidly, our expected guidance and customer revenue Cable excluding compared ‘XX continues further QX in Based business

customer driving and this continue generation cash the segments. for see and in of to year, continue increased We our rebound activity balance expect will both the business profitability of

to you, Regarding time, detailed more to be in strategic At earnings on its quite we back XXXX and for been is delivering to in our position Cable thank the to have the execute profitable able we next this be results we Access while expectations, market and In and in process leadership segments XXXX, that positive. Patrick. With share strengthening are our video our will live of Company segments, planning summary, both that, guidance in middle call. both expect priorities continuing streaming. on both you

Patrick Harshman

very XXXX and much execution to emphasizing want our core We for by Okay. are intact. growth Thanks, priorities drivers conclude Sanjay. that

incredibly new deployments of Tier their across on expand Xs range For a customer growing scaling securing especially fiber-to-the-home. launching new solutions additional Cable that design additional focused remain with particularly and operators, extensive Access products services, with global footprints addressable X market, our wins we our and Tier business,

For streaming our continue customers, cloud-based our through drive services, streaming growth the to of bandwidth expanding be include objectives our growth market non-traditional XG and reclamation especially live and addressable our Video we to accelerating remain these as to segment, both projects initiatives. deployments, profitable,

echoing our conviction, Finally, comments, let’s With thank with questions. to push place who passion despite I continue and open in recognize their Sanjay’s and Harmonic. again want to employees year’s so call challenges continue forward this and to shareholders our to up that, who customers I our also for confidence now the want

Operator

with Our you. Marchetti Thank Instructions] Stifel. John comes first question [Operator from

now Your line is open.

John Marchetti

of Thanks do Sanjay ‘XX, of very the some guidance know think taking business that and in that business? should for and takes yet wrong look I similar giving CableOS that we you I the giving as to year am appreciate is ‘XX full obviously out XX% CableOS is not are I even ‘XX, think a even rate, we growth you are what both you what have that – in as be that there not mentioned north in gotten the you about and or are you the you just as give of we Patrick, impact Is assume what next looking to the this of type quarter growth necessarily once on not puts growth for but backlog, we about it out looking fully the outlook, question. year year, that and last rate or much. into there at adjust start we yet. that’s in curious chunk given Comcast call, into

Patrick Harshman

for and very and it’s apparent thanks it even more the We feel puts, John. from with new the will. be question competitive we on-board Well, headed is, is scale in way, spending feel we perspective, we and can quickly of a that our pace those. terms of market technological about if question, and the open Really, the what will our – strongly customers position how you investment

we I think as have what you know seen.

We variety a have of results. seen

come longer start quickly, have amount bit We of some scaling customers others have time. a board seen and little on taken

to not simply if is more So is our from kind be John, and against a we planning – and we through share, working of right can on. what now question we how are working – are against gain one quickly of that’s clear, in mind market but perspective market our the fundamentals question what it’s

John Marchetti

And then to you a a a Cable-Tec the discussions of follow-up times Okay. remotely were lot maybe of the just in as couple participating there. then certainly and panels mentioned we and that,

your shaping the up and now? as Just curious talking curious that competitive you they being landscape but take what curious the just right coming quarters, had several market, to a last how you customers, get think wins to on obviously, this are perspective, you competitive landscape, some very nice deployment are here over the into from about lot others more shared activity seeing trial

Patrick Harshman

pivoting specific brought any weren’t of for by our what means, emphasized we the in not announcements in other, about but we what to marketing the than let’s cloud-native are of really times, the have been we what technological as are trade overconfident We and we as front well at to us that we event show not tell as on certainly new say, I have We didn’t know place. to and any first didn’t access continue and know we came we we good. industry out virtualization, to we back the observers by anything a and several well continue a competitors, to comfortable we other ideas of here. – to that messages expect we not kind architecture lead while, the out feel we get distributed so we the close know learn feedback competitively, But as market – have the don’t talking that – from strongly feeling customers pretty don’t though were competitively are continues

John Marchetti

maybe if then, Sanjay, And last question. could one just Great. ask I

gross margin Access nice line. some the seen Cable have improvement We here on

of improvement about Just into in curious think or there fewer if no terms mix last should how we of to deployments that over the the reading be a quarters? several

Sanjay Kalra

said, decent software good margin, business and Well, Tier Xs is mix of plus. as a as to forward, overall. actually and Tier good quarter, Xs, mix the gross as going get Xs I Tier hardware are XX% our and did fruition we a have this software seeing to mix we improvements generated expected is think which are and we of in all hardware and is the scaling overall, is as and we experience we in mix long-term and coming improving yes, getting And and goal the

on think the I marching are path. right we

John Marchetti

Thank taking the you for questions.

Patrick Harshman

Thank Alright. you.

Operator

Thank you.

question with Simon Raymond next from comes Our James. Leopold

line now open. Your is

Simon Leopold

taking the for Thanks question.

to bit something more fourth you that of First, expected? you you expected that than the the give I that Could originally this you that occurred in see quarter. could satellite sooner the different? a help just detail recognized opportunity on had or what revenue you was part quarter talked understand had wanted if Was that about little this you us

Patrick Harshman

not It satellite any XG the of revenue. Simon. was Yes,

any received quarter, We the in have order an order, revenue. first to we have we yet not our third recorded – order although multimillion dollar

as quarter. transition frankly, At projects, slip out. well, We ago X As anticipate mentioned sure to you that we several may in is end months high-confidence would anticipated fairly quarter. from kind our we weren’t out quarter several get a saw and the we guidance. – fourth of call year, of the we recall it anticipated And we third QX, saw projects we what to the close are fields, it into so actually in able were the the but – of our in by those confident we fourth put we

me don’t I other pandemic been it’s in that variety them the – earlier lockdowns. let Video more delayed things call So know, simply garden had really

Sanjay Kalra

would Yes, I just add...

Simon Leopold

Sure, go ahead.

Sanjay Kalra

Simon, that add, quarter just increasing would regions I to board, this all in we across the the in experienced revenues last compared quarter.

Simon Leopold

the quarter. how you the than XG XXXX? when the about presume the expecting contribution seeing timing are And in are of think thinking satellite you I some are about should about the opportunity there spectrum you Okay. fourth as opportunity to opportunity. in some we whole is in folks struggling I to guess How you tied think the

Sanjay Kalra

QX Well, take the in it’s to opportunity XXXX going starts – generating as its through pace and revenue then well. in

QX followed in XXXX. say then of would and portion a revenue I it So is by

Simon Leopold

zero at guess brightly does XXXX am and is, question something a goes is to burns to really with I then XXXX I in have my get in it long what tail? or that trying it

Patrick Harshman

on in jump me Let that, Sanjay.

I think for us, days early it’s still Simon.

are later We we specific half let’s to sites other call the tail opportunities are the are that even opportunities, we the there very couple be in fourth – I XXXX, and will pursuing out That we in of quarter said, play in our say, which believe being in the will front going XXXX. opportunities first XXXX. drive of that – would have and in revenue end of a ‘XX

play the fact, In this different what in of country also international there deadlines a that is into looking is at. that couple of and part we opportunity are

in much America unfortunately premature play that will are is it’s nascent X kind business, expect the over it’s for a very the yes, which, outside few let’s But million opportunities there’s so stuff, several So included which is high we thing there mature relatively next years. mentioned of in of more say, the forward that still confidence still, approximately our opportunity to sites, broader of North hundred in carry quarters. dollar I couple out, total that

picture further some of on runway, So is we stuff. unexpectedly out slightly do hazy, although the still that not see more

Simon Leopold

things little turning Great. we you. to them, Could to you those order around size at revenue we OpenRAN. if least if call And bit where ready last not opportunities help are Thank rank talk opportunities? like terms then of just you seeing in maybe I one them, us could will are the, about one, maybe fiber-to-the-home, a evolutionary

Patrick Harshman

the for is first. Definitely question. PON thanks fiber-to-the-home Yes,

In we we although we – revenue, didn’t our quarter. order purchase take the have fact, first material third in

that’s So first. go we where we were going to said

that field was ongoing architecture really on were really it think we we trials very so later year that we I year beginning your a this successful are cloud-native order – in we growing the and we a suggests, But revenue here our a question leveraging first and work announced pipeline. are ago as some here. to with

cloud-native recent other So lot nothing interested feedback the And the from did we a that very of at events, customer showcased kind special a of Cable of and PON another to application applications. about couple we successfully. perspective, there is

technology a we to this around here cloud-native forecast and and So after second do, that ourselves I – work would say built it I going is what for PON having platform time. business CableOS we have very a that to good to you we DOCSIS with monetize that, have we get is too opportunity-rich platform to don’t developed, would we think do but to with are early development opportunity us revenue first, coming and a watch we so is application say of a access is monetize kind it that and – there good give number – have partners but leverage, for think we – this over of we extensive, very that a cloud-native flexible just working are but space, it’s core

Simon Leopold

in see And that as your who particular competitors you do opportunity?

Patrick Harshman

we a a evolving I Well, an access think in within more to the very, other understand, for that’s quantify. But a space, something nobody early bit around really same pack talking a to with we far we are players of an really I done opportunity. It’s the know little think a is we and alliances yes, have the opportunity. of really interesting see It’s – broader ahead and even ecosystem working very cable say, are language. mean, space. we broad we – us is I don’t much trying wireline are on we that just as working our get question. there yet. is number are as in It’s a let’s getting don’t and that. for clear And feel there we building arms the

Simon Leopold

taking questions. for my you Thank

Patrick Harshman

Alright. Thank you.

Operator

Thank you.

Our next question comes Needham from & Company. Valera Rich with

is line Your now open.

Rich Valera

the trying where would received I perspective. pretty from to Question of the them, gauge presuming I you. customers out and generation half? Any much CableOS the am over I relatively potential terms about significantly, to we customers are the a over, think, quarter. from number some look how from revenue XX next which to how us new for revenue way a actually we understand these XX those jumped as XX was Thank this on maybe you have next mean think customers could this revenue of year, say, in incrementally, year months? but

Patrick Harshman

there talked Sanjay, in to that two I I in and the first – you emphasize terms take I do step the but then of the think want business, more is parts pickup. on of Maybe the about you question. just the model, can will

because I trade about message is the gave the and talked We end at as date – of number the the of the the past the way Rich. we the show, think by main had of number quarter. of trade we was past when that this of kind that and show, the was number show,

customers also relatively is of So some are selected growing include October And customers. we up begins a And in really doing so really being to couple momentum it – a well, October our own just including our with deployments did is what early having convey customers rollout. building days. of portfolio see as what bigger wanted and market to – we that the

to I you, context. talk it into I bit how waterfalls a give to pass will So Maybe, Sanjay, revenue. that about little that wanted to

Sanjay Kalra

significant X, of the non-Tier at come time mean, and quarter contribution our quarter-over-quarter. they the contribution, X same definitely. but customer, Tier there I that’s portion X, a every increasing Rich, decent revenues Tier good Yes, Tier is from contributing other are Xs, from

to revenue as the I going we reap not as as initial and and longer. as becoming of and increase expand as deployments, significant it’s the scale, I But we deployments think well. we count, the the in head periods. And in they benefits they think do into the start ‘XX we contribute, margins

quarter this going getting going be every to So ahead. we forward significant you move as expect is

Rich Valera

Got it.

XXXX you probably more Tier more, be it, And continue you just Xs of it it will you those versus but Tier how other percentage obviously but or do adding think small. add customers, mix, kind Xs, Tier thinking as to Does that Tier contribution of the mix just are say term current X meaningful about sounds Xs, wondering they a ramping. the Tier the one X, maintained you So, a of from are am mean, are like call and levels? I Tier longer or its it shift I way Xs?

Sanjay Kalra

become the in slight contribution the X is think Tier Tier term, would there as do passes, over material I overall significant where change time longer market. X, remain Tier the a but from Xs the

Rich Valera

reiterated to you carrier a expected customer a think within I new you X more, as one year. that just And top name U.S. this it. Got

still to hope just a and Just clarify to to you to of by you that that? understand customer a currently the customer that or hope – trying is a year win end win customer the wanted

Patrick Harshman

take Rich, I one. will that

It’s next say, confident for be to Let’s premature communicate, able will in are fairly with we us the we are process. you. speak to communicate we time but we by

want – think here making don’t point of we we variety good reasons, progress. but is reasons, So to that say the we I a and real good are including for traction more competitive

Rich Valera

questions. for That’s you great. my taking Thank

Patrick Harshman

you. thank Alright,

Operator

you. Thank

question next Samik Our comes from Chatterjee with JPMorgan.

Your is line open. now

Samik Chatterjee

quite somewhat, Sanjay, now XG this I of you excluding get Hi, have but you to you growth might Patrick, continue that repeat couple your that and expecting just of on sorry, video there be jumped be to to to last over late, taking my question. quarters. expecting decent what – XXXX? the the yourself wanted in are kind reclamation sequentially, into kind thanks for Are do to uptick of seems relation opportunity so you

Patrick Harshman

We regardless admittedly down projects streaming slowed reclamation. that got on the is is see of earlier XG catch-up fourth quarter or the delayed it of part a strong the or Part organic and initiative in without this year. growth of

into quarter. year fourth pleased and is there again well, projects and a, somewhat been surprise, continue us tumultuous no has again to active we the really, with and this getting quarter see the customers are So third starting in

and underlying XK where component scale, HD, top we Video, a doing layer at and growing streaming higher say, work that all our of significant increasing this then reclamation opportunity around dominating, half bolstered position would it think, technology is fourth about we in see around XXXX live the growing and which to Video of head competitive XG business it’s where I of incremental may is Those is that on trend that talk resolutions, strong piece that we so So the into and in think said think specialize the encouraging you to doing by specific higher growth we well strong in streaming opportunity. guidance, nothing around overall, XG not happy of think we the see momentum with to we is believers continues the but but for the fact missed, as things business Sanjay impact XXXX. second have the streaming we in us this I a is differentiating are are earlier we that as particularly well premature but quarter. and content, – on a really incremental and the as business together, but Video we put have and is it

Samik Chatterjee

Got it.

Sanjay Kalra

Samik, I have will just add you as few may a things, missed.

Samik Chatterjee

Yes, go ahead.

Sanjay Kalra

high. Video our ratio For was business, book-to-bill

quarter very a with strong the exiting are We backlog.

are we so seasonally QX Our orders. strong, is more getting

all signs a up quarter-over-quarter the Our strong we pipeline winding of is and – expecting are QX. quarter, is

Samik Chatterjee

this reclamation follow-up the business, what opportunity, revenue, have line? gross that can actually, the similar of that converting we mean Sanjay, on kind of a you mixed you it this more benefit because, particularly Is more Video it. if Video gross does the execute the on margin for and should is margin what segment, at? business Got this that that on of are is to just see XG corporate you I kind

Sanjay Kalra

very Video It margins, to similar our be high-XXs. segment should

Samik Chatterjee

Okay, great. Thank you.

Patrick Harshman

you. Thank

Operator

Thank you.

question from Colliers. next of comes Our Steven Frankel

now Your line is open.

Steven Frankel

you sell also one? that, to execute to on the also an if to there is what Patrick, reclamation opportunity, just and afternoon. plan on is for but hardware customers, these is not opportunity this Good sell software there

Patrick Harshman

market, of for case to Steve. solution everything part Frankly, bringing we Video the these is big are we the a is in do that Software that days.

just profile, margin me, comes from. mentioned that’s so Sanjay where excuse that of And part the

of component. is both, would servers. intently to the, rate. bird and the looking is it I So win a software The hand rest expanding the there are working is say, it’s server off-the-shelf on it we in ahead and Frankly,

Steven Frankel

the opposed as on an opportunity And customers server? customers might is to SaaS there go those that perpetual to make package that

Patrick Harshman

SaaS a are solution. us replacement yes. but that is, initial we that how we customers, solutions, generally go have SaaS answer possible different. And software, we satellite will any to both option, solution My other so, a wherever this more vanilla market these a days. it’s we license and in the offer kind complements, those let’s call front The mid-term with perpetual it, of but license be bring companies to We try to perpetual not have see with opportunity opportunities opportunities we longer-term of

Steven Frankel

the then a CableOS, past. And issue in there’s visibility been Great. on

have With than now product you you you maturing do of bit, little the a these more momentum the ramps have into new rollout in market a have customer visibility and ago? the the might year had

Sanjay Kalra

visibility. X more we X and and more Yes, are X, Tier Steve, Tier we Tier are as getting adding customers

timing shipments is In visibility fact, chain the the of of the the in deployment getting and timings. involved whole supply

So, our at well. the improving in time, we guidance that as same helping for We and revenue scale that’s as the our we definitely as gain our customers, methodology we process business. visibility are more believe is good expectations

Steven Frankel

customers or XX-odd Tier the still field Okay, more great. the year-end. you X company field and between another trial? penetrating of of customer you or is trial a about Patrick, you by their is had ‘XX What’s sequentially like are growing basis? X pipeline the some this terms look U.S. in number And great about top now Or talking wins, then the story have and of that in year the behind end serving have

Patrick Harshman

the in the solution Steve. growing and seeing platform, are We interest

the time newer – scaling exit half growing number really of see customers is touched a say, and initial of will thereafter. I would of be between we the number learned Cable-Tec extend first a customers forward credited as revenue the for if here, in us will are already of What that so to line and have and and sales dominated times revenue, further and of volume marketing the worldwide have as say, a deployment ‘XX is from look XXXX, kind platform couple engagements, event trial revenue be that. will we and trials recent there though I we is customer by the then the So lag to, good let’s on as we the coming

one to So things of of we’re that. both on virtuous execution It’s really try summary the sides of our I circle our it’s in kind focused highlight a of and priorities.

We do both. have to got

hand. the hand gets really of We the those and on in do around, as pipeline existing More successful word the have mouth grows of And strong. things the etcetera., deployments got to and work keep scaling pipeline more etcetera. customers work

we think good have So we momentum.

is get think the but get uncertainty I timing, numbers bigger, statistics inherent as there better. in the

competitively, the your of to continues question, it’s be been. we better previous path we reliability strong position think better scale of numbers a I as are as in ever continue to strategically, terms think as a I path to on from

Steven Frankel

was Great. And What talked then one product about or ago. the from last on Cable-Tec? shelf introducing you the a the one, quarter feedback so shelf products the

Patrick Harshman

product A and positive. the in We the it. did the the market positive third also on well with the quarter was feedback at show in

significant We advantages, is there has think shelves other it opportunity really that showcase us We received. and to good advantages. think out show gave some are was ours well a aware the there. We

Steven Frankel

much. thank you so Great,

Patrick Harshman

Alright, thank you.

Operator

you. Thank

George comes Notter with from question Jefferies. Our next

Your line now open. is

George Notter

as reclamation C-band Hi, the are C-band transition thanks guys. a other to about outside projects is of you right lot the Thanks internationally you, obviously, for U.S. there how a lot. know you We Canada have about going like opportunity. in about the I it? you terms question there there think talked something guess wanted could U.S. that example, now. and be of revenue another what well. about an year Is you on I next opportunity? could talk C-band And see do ask

Patrick Harshman

to Yes, We in market. North qualification international out have now, development are are and get play to But we phase right how in act, trying it’s those many but of pipeline secure me, companies – in excuse how internationally characterize early countries, business overseas. we opportunities. we George, very handful a come in in, to every opportunity very America of other early fruition would same, into international still and certainly The don’t a well is successful opportunity regard, head on say, technology I as process a relatively that we remains let’s will in are helps see to focused do I be but and the kind positioned of start it the think, the us things definitely we still we and feel it’s phenomena. and competitively opportunity know from an a that markets perspective

George Notter

you. Thank

Patrick Harshman

you. Alright, thank

Operator

you. And Tim next Thank our question Capital Savageaux comes from with Northland Markets.

is Your line now open.

Tim Savageaux

couple. good on I afternoon. made Hi, will and have a I Glad do the quickly. on to I congrats results. try it

You you access majority out took mean, network? to? follow-up the favorable had this are might which I those vast the additional should can revenue some gross of locations Comcast comments of in that technology Access I if the of looks as what if would in by Cable-Tec on I whether populating say you to relate be two relate in margins kind mix and wonder Wonder activity majority what one pretty Comcast their where hub activity to Cable a uptick portends as end about kind quick we of talking you heavy the virtualized and quarter. decent we events head-end in relative had that there and there. context executive higher, of currently show And vast your seeing maybe the a ‘XX. head-end what that any they also with upside. well offer of I sort not, something if activity that, increase the with to mix from distributed out be plant And outside and driving

Patrick Harshman

the Okay. Thanks, Tim, for question.

that speak the obviously, are just we zoom but on of X.X the in while have are can’t of modems, the mind never million I proud percentage Vodafone plus of very one I hand, if think about footprint other it’s plus out, we ones announced. customers Comcast – fact the haven’t a we announced, total Comcast you serving we particular, small now

think very we Indeed, out, in we are a perception access, terms are so is that in very and the setup is our for, see think fronts. you that one context days, impactful distributed relatively this of days point still the virtualized there innings we the we understanding on of and as early exclusively early cloud-native point what I was doing transition. powerful the two this say, opportunity we we let’s both of opportunity, early so mix is So of see growing that operationally and a pipeline the architectures still centralized working are equally in rich more it’s at

you think we got I runway mixed, do stronger have alluded quarters forward, a more a the centralized long we you distributed, but sides sides, may some both lot have certain going So and outside architectures opportunity is both see have slightly both that to on that the plant in to. expect on both are

Tim Savageaux

drove company side your activity sequentially I you is a just a big Can segments? about nature Cable too? probably and it’s on increase increase on you Access like do that there customer, primarily maybe some on was – what seems the that game Video two fair mean, that follow-up as obviously, of the between characterize And so you particular to say sequentially. to there going Okay. or it Comcast point, that think XX% report Can

Patrick Harshman

consolidated broken so we historically give revenue that segments. out haven’t out total across Tim, both it to spans percentage,

Tim Savageaux

announce the to view my follow-up competitive with that Remote Comcast you of sort competitors Would on did the a the both solutions? and specifically where among sure and more customer referencing, couple product on general? are referenced Is And and are between going where was a And have in can Great. the doing of side, us be what you you you from differentiation what at before show, you PHY maybe are you significant CommScope bit and as shelf developments. engagement side specific, of out there. points for the give you an maybe distinct actual saying that virtualized then and

Patrick Harshman

this and the devices, architecture only a out, devices, So to it then our picture I is beginning node could and mental also Remote is case. but be be the our a of to there from clear not it competitors our as deal There of out for shelves, think in is talks virtualized nodes, been we should. could our PHY with let have Remote remote there software potential mean, appreciate in and parts you, zoom have our I I shelf, just think very that question. core, two the PHY these that which Comcast I paint the Tim, ensure big done a we me the

– dimensions two are we So different if of those are competition, you will.

are that On fact out the I first, a virtualized think be good talk Harmonic that news. lost So our here. competitors core that with coming products should that is front, to not

competitive that show. what Remote nothing We us. with are stuff PHY And that that saw is, was on nothing means at announced the the we head to think then and saw so we we is head competing strongly

XXX% very the in is on numbers. that we both say to we PHY about feel the positioned technology the and yes, centralized strong there. from nodes in our and to we choose of PHY point there pretty competitive are were but position. think feel stuff. view what competitive the Yes, not going to see a So, CableOS the Remote is it well not will and our end And reflection to are is other saw of guys PHY is That kind feeling, shelves But a out it of customer still well, show I surprise of cooking we what effectively out purchase. sales we Remote and came competitive continue

Tim Savageaux

Thanks. Thanks very much.

Patrick Harshman

Alright. Tim. Thank you,

Operator

I further like And turn the Patrick any back questions Harshman would am to this for closing I time. showing at to the call you. remarks. Thank in no queue

Patrick Harshman

joining for thank we out all wanted simply today. are I think time. Well, of to you We Okay. us

to are we the We been with able third do in here quarter. very work have pleased the

the ahead of as about challenges updating in we on XXXX head the fourth We excited In progress the take our and us Thanks soon. day. to care, meantime, are quarter good in all you forward and the we opportunity, everyone. look

Sanjay Kalra

Thank you.

Operator

you conclude does your and This gentlemen, now today’s program disconnect. and in conference. for thank may participation you your Ladies

Harmonic (HLIT) 26 Oct 202020 Q3 Earnings call transcript