Q2 2021 Harmonic Inc Earnings Call
[music].
Welcome to the Q2, 'twenty or 'twenty, 1 harmonic earnings conference call. My name is Sarah and I'll be your operator for today's call.
At this time all participants in a listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time.
Anyone should require assistance during the conference. Please press star zero on your Touchtone telephone as a reminder, on this conference call is being recorded.
I'll now turn the call over to David and over Investor Relations, David You may begin.
Thank you operator, Hello, everyone and thank you for joining us today for harmonic second quarter 2021 financial results Conference call.
With me today are Patrick Harshman, President and Chief Executive Officer, and Sanjay Kalra Chief Financial Officer.
Before we begin I'd like to point out that in addition to our audio portion of the webcast. We've also provided slides to this where tests, which you may see by going to our webcast on our Investor Relations website.
Okay.
Now turning to slide 2 during this call we will try to provide for projections and other forward looking statements regarding future events or future financial performance for the company.
Such statements are only current expectations and actual events or results may differ materially.
We refer you to documents harmonic harmonic filed with the SEC, including our most recent 10-Q and 10-K reports on the forward looking statements section of today's preliminary results press release.
These documents identify important risk factors, which can cause actual results to differ materially from those contained in our projections or forward looking statements.
And please note that unless otherwise indicated these financial metrics. We provide you on this call are determined on a non-GAAP basis.
These metrics together with corresponding GAAP numbers and a reconciliation to GAAP are contained in today's press release, which we posted on our website and filed with the SEC on form 8-K.
We will also discuss historical financial and other statistical information regarding our business operation and some of this information is included in the press release, the remainder of the information will be available on a recorded version of this call for on our website.
And now I'll turn the call over to our CEO Patrick Harshman Patrick.
Well, thanks, David and welcome everyone to our second quarter call on.
Harmonic delivered an excellent quarter with strong year over year revenue and earnings growth and book to Bill of 1.6, resulting in record backlog and deferred revenue.
Both our cable access and video segments again contributed materially to these results each with double digit revenue growth and positive operating income.
Comparable book to Bill.
The cable access business delivered 89% topline growth, while also making great progress extending our addressed market and global leadership position through multiple new design wins.
Our video business was up 34% year over year as demand for both on latest broadcast edge and streaming SaaS solutions group.
With streaming SaaS revenue up an impressive 68% year over year.
2 months ago harmonic laid out detailed multiyear growth plans for our 2 businesses.
The financial and strategic results for this quarter demonstrate that we continue to be firmly on track and well positioned to seize the compelling broadband in streaming video opportunities ahead of us and to deliver on our associated financial objectives.
Taking a closer look now at our cable access segment. It was another really strong quarter.
Segment revenue was $50.1 million up 89% from a year ago, and we finished the quarter commercially deployed with 62 cable operators worldwide up 114% from the second quarter of 2020.
These deployments scale to serve over $3.3 million cable modems up 94% year over year.
With these results we anticipate soon moving into second place in terms of total CMT is market share.
For the Virtualized <unk> MTS market subset that we lead continues to gain traction globally.
As anticipated last quarter aggregate gross margin is being impacted by temporarily higher costs and at the same time accelerating demand for our DAA nodes reflection of our expanding market leader position in DAA deployments.
In early June we laid out our 3 year vision for the strategic evolution and financial growth for this business, we identified a greater than $2 billion addressable market and a path for us to leverage on cloud native and DAA technology leadership to drive a greater than 40% annual growth rate for the next several years targeting over $500 million of <unk>.
Revenue by 2024.
An essential element to this growth plan as adoption of our cloud native cable a solution like cable operators here in the U S and around the globe, both tier ones and smaller operators.
During the second quarter, we added 2 new tier ones for a list of those was selected cable or Wes brings.
Bringing the global <unk>.
Total number of tier 1 customers, we've disclosed to 8 including suite out of the top 5 in North America of course, including Comcast the largest in Europe, Vodafone and 2 of the largest in Latin America, Claro, Telmex and Millicom, all blue chip endorsements.
We have a solid pipeline of additional tier 1 engagements are confident that we will continue to see new design wins and deployments with leading names in the industry.
Well on this momentum has us on a great path to lead the roughly billion dollar addressable cable broadband market.
We're also actively engaged in complementary initiatives that in aggregate we're on.
On another billion dollars of addressable market by 2024.
The largest and nearest term of these initiatives is fiber to the home for our strategy is to provide a software based cloud native solution, that's fully converged with our Virtualized <unk> M. T S application.
During the quarter, we had a major product release significantly grew our sales opportunity pipeline and perhaps most significantly so very positive progress with a couple of large hybrid cable and fiber operators.
As noted on the recent press release, we did with new customer Claro in Latin America.
The unique feature of our <unk> solution is the flexible on demand extension from DOCSIS to fiber to the home PON.
Every single day know that we've deployed can also hauser remote LTE module and receive fiber to the home PON traffic from our unified software headed.
And therefore seamlessly support targeted extension an overlay of a cable network with a fiber to the home network node by node flexibility that is unique in the industry increasingly resonating with customers worldwide.
Big picture Global broadband market trends remained favorable near term demand is healthy.
<unk> market leadership position on opportunities have never been stronger.
And we're doing what we said we'd do executing on our immediate opportunities. While also investing in complementary new initiatives that will expand our addressable market and create further competitive differentiation.
We're pleased to be again, raising our full year revenue guidance comfortably meeting our 40% annual growth rate target in 2021, while also making demonstrable progress on our longer range broadband gross initiatives.
Turning now to our video segment recent momentum continued with another solid quarter.
Second quarter segment revenue was $63.3 million.
Up 34% year over year and segment gross margin expanded to 59, 3% a near record for this business and clearer indication of ongoing successful transformation to a more software and services centric model.
Recurring streaming SaaS revenue grew 68% year over year, driven by both scaling existing customer usage and new customer additions.
As for the cable access business 2 months ago, we laid out for strategic growth plan for our video business.
For video business plan has 2 core elements, capturing a leading position on the growing billion dollar screaming infrastructure market.
And maximizing revenue and profit from the still larger but slowly declining broadcast infrastructure market.
On the streaming SaaS side of the business, 68% revenue growth was complemented by 55 per cent year over year growth in the number of customers, bringing the total number of SaaS customers to 102.
Approximately 20 of these signed customers are still on the process of fully launching we're migrating to a streaming services towards the U S platform and therefore still pre revenue.
Looking ahead, we remain confident about hitting our SaaS revenue growth targets for several reasons for streaming market continues to grow for technology differentiation streaming brand awareness and sales pipeline all continued to improve.
Seeing consistent usage and revenue growth from existing SaaS customers with targeted AD insertion, where our revenue scales without volume driving the most pronounced expansion.
Turning to the second element of our video strategic plan. We're pleased to see continued resurgence in broadband project activity worldwide.
Our strong second quarter results reflected overall broadcast market resilience.
That happened with nearly no 5 G bandwidth reclamation contribution as Q2 was between 5 day driven projects.
That said for very strong second quarter video bookings and sales pipeline do reflect additional <unk> driven demand and more generally in emerging multi year opportunity for new video edge processing technology that enables for transition of video transport from satellite to terrestrial IPO for fiber networks.
An opportunity we believe we're uniquely positioned to capitalize on through our new software based ex Atlas platform.
Considering our growing streaming SaaS and broadcast infrastructure backlog and opportunity pipeline.
We're again, raising our full year segment revenue and adjusted EBITDA guidance with result in revenue guidance, reflecting anticipated growth over both 2020 and 2019.
In summary, we delivered another strong video quarter characterized by solid revenue growth gross margin expansion operating profit new wins and bookings.
And the outlook for the remainder of the year is positive.
Looking further ahead, we laid out a compelling multi year strategy and we're continuing to make targeted strategic and financial progress for delivering on this plan.
With that I'll now turn the call over to you Sanjay for a closer look at our financial results and outlook.
Thanks, Patrick.
Thank you all for joining us today.
Before I discuss our quarterly results and outlook I'd like to remind everyone that the financial results I'll be referring to are provided on a non-GAAP basis.
As David mentioned earlier on.
For Q2 press release and earnings presentation includes reconciliations of the non-GAAP financial measures to GAAP.
Matters discussed on this call.
Both of these are available on our website.
Turning to slide 7.
Let's start with an overview on second quarter financial highlights.
We delivered solid results above our guidance ranges, including revenue of $113.4 million up 53.2% year over year.
Gross margin on 53, 9%.
230 basis point improvement year over year.
Adjusted EBITDA of $9.5 million or 8.4% of revenue.
And EPS all 5 cents.
We also had record second quarter bookings with a book to bill ratio of 1.6.
As a result, we ended Q2 with record backlog and deferred revenue of $347.2 million up 65% year over year.
Cash flow is under $15.2 million up 48 per cent year over year positioning us well for the remainder of this year and into 'twenty to 'twenty 2.
Okay.
Now, let's review our second go on for financials in more detail.
Turning to slide 8.
Total company revenue wasn't going to $13.4 million up 53.2% increase compared to 74 million in Q2 'twenty 'twenty.
Cable access revenue was 50.1 million compared to 41.3 million in Q1, 'twenty, 1 on 26.5 million in the year ago period.
Reflecting our continuing market share gains.
In our video segment, we reported revenue of 63.3 million compared to $70.3 million in Q1, and 47.5 million in the year ago period.
The year over ear gorilla reflects improving business in all regions worldwide.
Aided by both solid broadcast demand and strong SaaS revenue growth.
We had 1 customer representing greater than 10 per cent of Goldman revenue during the quarter Comcast contributed 31% of total revenue.
As mentioned earlier gross margin improved quarter over quarter to 53, 9% in Q2, 'twenty, 1 compared to 54 per cent in Q1, 21, and 51, 6% in Q2 'twenty.
Cable access gross margin came in at 47% in Q2 'twenty 1.
Compared to 42, 2% in Q1 'twenty 1.
And 45, 7% in Q2 'twenty.
If lifting a higher software mix this period.
As a reminder, the higher cable hardware supply chain costs, we discussed in the last quarter had a modest impact in first half.
As already inventory was partially secured before the recent cost run up.
And continue to be expected to have a bigger impact in the second half.
Video segment gross margin was 59, 3% in Q2, 'twenty, 1 compared to 55, 1% in Q1, 21, and 54.8 per cent in the year ago period.
This reflects both an improved software mix within our appliance category and our expanding SaaS business.
Moving down the income statement on slide 9.
Q2, 'twenty 1 on operating expenses on $54.6 million compared to 51.1 million in Q1, 21, and $43.3 million in Q2 'twenty.
The sequential and year over year and Greensville is primarily due to in Greens cable access to research and development services and sales and marketing for both segments.
We continue to invest in a low growth initiatives.
Adjusted EBITDA for the second quarter was $8.4 per cent of revenue at $9.5 million.
Reflecting contributions from 6.1 billion from cable access entry point for million from video.
This compares to an adjusted EBITDA of $9.1 million in Q1, 21, and an adjusted EBITDA loss of 2.8 million in Q2 'twenty.
And translates to kill do Glen do you on EPS of 5 cents per share compared to 4 cents per share in Q1, and an EPS loss of fixed cents in Q2 last year.
We ended the quarter for the diluted weighted average share count for 103.8 million compared to 103.2 million in Q1, 'twenty, 1 and $96.7 million in Q2 'twenty.
The sequential increase reflects the weighted effect of stock issued to employees.
The year over year increase is primarily due to the issuance of 4.2 million shares for all of our employee stock restricted stock.
E S P D and performance based compensation during the year.
And 1.6 million shares for convertible debt dilution.
This was at a low double would've increased average stock price.
Q2 bookings were $186.9 million a record second quarter, representing a 94.1% sequential increase compared to $96.3 million in Q1, 'twenty, 1 and a 142, 7% increase from $77 million in Q2.
Wendy.
During the quarter, we saw double digit sequential and annual bookings growth in every geographic region to be operating.
Following an outstanding Q4, 'twenty bookings quarter.
We are pleased to report another very strong quarter of new bookings.
Demonstrating robust demand for our differentiated technology solutions.
Turning to slide 10.
I will now discuss our liquidity position and balance sheet.
We ended Q2 with cash of 115.2 million.
Compared to 100.8 million at Q1, 'twenty, 1 and $77.7 million at the end of Q2 'twenty 'twenty.
The $14.4 million sequential cash and Greens is comprised of $16.8 million cash generated from operations.
Primarily attributable to both cable access and video segment profits.
Net of $4 million cash used in proteins on fixed assets and 1.6 million received primarily through our employee stock purchase plan and from stock option exercises.
All of our day sales outstanding at the end of Q2 was 80 day as compared to 69 days at the end of Q1 and 91 day is in Q do plenty.
The sequential increase reflects a timing difference of certain large receivables and the ear over ear degrees reflects continued overall collection improvements.
Our days inventory on hand was 74 days at the end of Q2 compared to 58 days at the end of Q1 and 81 day is at the end of Q2 'twenty.
Reflecting in breathing inventory at the end of Q do as they prepare for heavy second half of the ear shipments associated with them or backlog.
At the end of Q2 total backlog and deferred revenue was a record 347.2 million.
Compared to $274.3 million at the end of Q1 'twenty 1.
And the 110.2 million at the end of Q2 'twenty.
Our 27% sequential increase.
And 65 per cent year over year gross.
This record backlog and deferred revenue reflects increasing can mcmahon from our large cable customers growing demand for new broadcast edge appliances, including 5 G bandwidth reclamation projects.
And growing media streaming SaaS volume commitments.
No debt historically about 80 to 90 per cent of the whole or backlog and deferred revenue gets converted into revenue within a rolling 1 year period.
As mentioned on previous calls not included in our backlog as additional contractually agreed cable edge business.
With 3 of our initial tier 1 cable customers.
At the end of Q2, 'twenty, 1 this incremental amount losses.
Approximately 145 million.
Now on from 156 million last quarter, and approximately 11 million went to the price. She gets older process and therefore moved into bookings.
Taking these cable Louis contracts into account <unk>.
We have total future contracted revenues of approximately 492.2 million.
This provides us with a very solid foundation for the remainder of 2020, 1 and into 'twenty to 'twenty 2.
Now I'll turn to over non-GAAP guidance for 2020, 1 beginning on slide 11.
While COVID-19 related uncertainty and volatility is still exists.
Our customer activity and pipeline have recovered substantially since the height of the pandemic.
Having said that we are still navigating through an unprecedented global supply chain situation.
Which creates both cross selling as compared to 2020.
And production timing challenges to our cable guidance for 2020.1.
I will now review guidance for all of our cable segment for Q3, Q4, and the full year.
For Q3, we currently expect cable access revenue in the range of $50 million to $55 million.
Gross margin in the range of 41.5 per cent to $43.5 per cent.
Operating expenses to range from $18.5 million to $19 million.
Didn't EBITDA to range from 4.7 to $5.2 million.
For Q4, we currently expect cable access revenue on the range of $50 million to $60 million.
With the upside limited by the supply chain issues I mentioned earlier.
Gross margin in the range of 45% to 47%.
Operating expenses to range from 20 to 21 million.
Adjusted EBITDA to range from 4.9 to $7.6 million.
For the full year 2020, 1 we now expect cable access revenue in the range of 190 due to $207 million.
At midpoint of our guidance this reflects a $12 million increase versus our prior guidance.
This growth is driven by strong momentum with our existing tier 1 cable customers.
As the accelerated deployments.
As well as new customer growth and still modest converged fiber to the home revenue.
Gross margins in the range of 44 per cent to 45 per cent flat versus prior guidance at the midpoint.
There is no change in the supply chain related and back to all of our gross margins compared to what we guided in our prior earnings call in April.
We have been working hard to contain the supply chain costs in back at these revenue levels.
In our guidance gross margins.
Operating expenses are expected to be between 73 point due to $74.7 million.
An increase of 1 million versus prior guidance.
Most of the increases Youre doing Greens research and development, primarily related to fiber to the home initiatives and sales and marketing expenses.
Adjusted EBITDA in the range of 18.7 to $21.9 million.
And in Green zone, $4.2 million versus prior guidance at the midpoint.
On slide 12.
I will now discuss guidance for our video segment for Q3, Q4, and the full year.
For Q3, we currently expect video revenue in the range of $62 million to $67 million.
Video gross margin in the range of 55 to 58 per cent.
Operating expenses to range from $35 million to $36 million.
Adjusted EBITDA to range from 1.12 for $9 million.
For Q4, we expect video revenue in the range of $82 million to $87 million.
Video gross margin in the range of 54% to 56%.
Operating expenses to range from 35 to 36 million.
Adjusted EBITDA to range from $11 million to $15 million.
For the full year 2021 we now expect video revenue in the range of $278 million to $288 million.
At the midpoint of our guidance this reflects a $13 million increase versus prior guidance.
Actually beautiful day, both they've owning broadcast market demand and growth in streaming says.
Gross margins in the range of 55, 5% to 57%.
At the midpoint of our guidance. This represents a 25 basis point improvement over prior guidance, mainly due to improved product mix and expanding fast margins.
Operating expenses are expected to be between $141 million to $143 million.
And in Grease on 1.5 million versus prior guidance at midpoint.
This increase is largely due to sales related expenses associated with higher revenues.
Adjusted EBITDA in the range of 21.7 to $29.5 million, an increase of $6.3 million compared to prior guidance at the midpoint.
Slide 13 presents the consolidated total company guidance for Q3, Q4, and full year 2021 because simply the sum of the 2 segment charges. We just reviewed.
For Q3, we expect revenue on the range of $112.222 million.
Gross margin in the range of 49, 9% to 56 per cent.
Operating expenses to range from 53.5 to 55 million.
Adjusted EBITDA to range from $5.8 million to $10.1 million.
EPS to range from 1 to 5 cents per share.
Our weighted average diluted share count of approximately $105.8 million.
At the end of Q3 cash is expected to range from 115 to 1 on day $25 million.
Gross margin in the range of 58% to 51, 5%.
Operating expenses to range from $55 million to $57 million.
Adjusted EBITDA to range from $15.9 to $22.6 million.
E B S Inc. From 9 cents to 15 cents.
Our weighted average diluted share count of approximately $106.6 million.
At the end of Q4 GAAP.
Cash is expected to range from 1 day $25 million to $145 million.
For the full year, we now expect total company revenue in the range of $470 million to $495 million.
Please note we have raised our expectations at both the low end and high end of the range due to the continued strong demand we saw in the second quarter and our updated growth expectations for both segments.
Gross margin in the range of 51.2 per cent.
1.6%.
At the midpoint of our guidance. This represents an increase of 8 basis points versus prior guidance at midpoint.
Operating expenses to range from 214 point due to $217.7 million.
An increase of 2.5 million from our previous annual guidance.
Adjusted EBITDA to range from $40.4 million to $51.4 million.
An increase of 30% versus prior guidance at midpoint.
EPS to range from 19 cents to <unk> 29 cents per share.
60 per cent increase compared to the midpoint of prior guidance.
And effective tax rate of 10%.
Weighted average diluted share count of approximately 100 for $9 million.
And finally cash at the end of the year is expected to come in between $125 million to $145 million.
In closing during the second quarter, we continued to execute on our strategic priorities.
Those listening on the cable access and video streaming businesses for long term success.
Yeah.
This is in line with the multi year revenue and operating models to be shared with you during our June video and cable access segment investor events.
With that thank you, everyone and now I'll turn it back to Patrick for final remarks, before we open up the call for questions.
Okay. Thanks Sanjay.
Sanjay just mentioned our strategic priorities, so let's wrap it up by reviewing those priorities for the remainder of this year.
For cable access business objectives are accelerated volume deployments with a growing list of tier 1 customers entering new global operators, particularly additional tier ones and.
And expanding on our dress market for cable versus new converged DOCSIS and fiber to the premises capabilities.
For video segment, our objectives are accelerating the growth of our streaming SaaS customer base and per customer usage capitalizing on the coming transformation of traditional broadcast media infrastructure globally, particularly the new edge processing opportunity.
And delivering consistent margin expansion recurring revenue growth and profitability.
Putting it all together, we continue to aim to deliver industry, leading solutions to enable superior subscriber experiences.
And to create value for our customers and our shareholders.
Thank you all for your support.
And with that let's now open up the call for questions.
Ladies and gentlemen, if you have a question at this time. Please press the star on their number 1 key on your Touchtone telephone if for a question has been answered or you wish to remove yourself from the queue. These Brexit banki again, ladies and gentlemen, if you have a question at this time based press Star and then the number 1 key.
On you touched on the telephone.
Just a moment to compile the Q&A roster.
Your first question comes from the line of Simon on your part from Raymond James Your line is open.
Great. Thanks for taking the question.
I just first wanted to start with the gross margin you reported for the second quarter.
Both of your reporting segments, where we're better than we expected and my recollection was last quarter. It sounded like gross margin was going to get hit pretty hard.
From supply chain constraints and it actually was pretty meaningful improvement could you unpack that a bit in terms of what was different from your original expectations.
Sure Simon So yeah, let me start with gave US I think gave on we saw a good software makes this time, although you know we when we guided we were expecting from supply chain and backs and they they did happen. It gave me the garden for the guidance, but we saw a good mix of software. So that's the improvement we saw on the cable margins.
In terms of video gross margin what we guided you know these are strong mix as I said in my prepared remarks vs. All improved mix of software and.
SaaS revenues and <unk>.
Margins there.
And in terms of where we stand today with the supply chain constraints, what what's what sort of being baked into your guidance by segment and how are you thinking about.
Essentially the supply chain getting worse or staying the same as it was before.
So Simon in terms of our supply chain impact you know whatever be considered in the past guidance that remains the same.
For full year, the gross margins for cable are exactly the same on midpoint of the guidance of 44.5 previously we are at for the waterborne 5 now so all of the supply chain is the costs have remained the same for the whole year.
And in the past we've talked about opportunities for you coming from government stimulus programs can.
Could you give us an update have you seen progress.
Have you any of these new awards are they related to what we would consider government stimulus type programs and what's your assessment of that particular opportunity as you look out longer than just a quarter.
Uh huh.
There has been no material contribution to our business from from projects that have the government stimulus behind them.
That being said, where we're certainly pursuing opportunities.
That may have government stimulus I think particularly on the cable fiber to the home side that's relevant.
So it's part of the opportunity pipeline, but it's not part of the.
The revenue or bookings results, we reported today.
I guess, what I'm, just trying to confirm and my impression is that no decisions have been made and I just want to confirm that that's correct assumption.
Decisions on what regard well in terms of debt the operators, making selections and signing contracts I think it varies.
I think it varies frankly, there are some opportunities out there that we think we're too late for others, we think that where we're in plenty of time for <unk>.
So we.
Yeah.
I can't give you on over a complete blanket statement on assignment.
But there is certainly plenty of still available opportunities that we're competing for.
Okay, well, thank you very much for taking the questions.
Alright, thank you.
Next question comes from the line of charge naphtha or from Jefferies. Your line is open.
Hi, guys. Thanks, very much I was very impressed by the bookings number this quarter I think you said the book to Bill was similar across both sides of the business. If you could just confirm that that would be great and then I guess I was just hoping to go another layer deeper in those bookings on on each side of the business I assume that.
C band Reclamation was a big piece of the narrative on video.
With the second wave of that activity out in front of us, but maybe you could just confirm that also and just give us any more flavor you can for for the nature of the bookings. Thanks.
Well, let me confirm both George Ah, Yes on both aboard both segments had similar book to Bill.
And I confirm the other piece as well.
Got it and then.
So on the cable access side it was at.
Was it broad based among many different cable operators that you have in your customer base or was it was it more narrow amongst some of your biggest tier ones and anything else you could give us there.
It's fairly broad based on both sides, So George yes.
Cable we benefited from.
Both new orders from existing customers as well as strong order input from them from newer customers.
So I'd say that was.
Cable was strong broad based indeed, some part on the video side. There Sanjay just confirmed was related to 5 G. But as he also mentioned earlier in his remarks, we actually saw strong bookings across geographies and to date.
<unk> activity.
Has been limited to still to the U S.
So that it would be incorrect to to attribute to your video strength exclusively.
2.
Hi, Jay.
Got it Okay. That's helpful and then.
I guess.
Just to kind of follow on to the prior question.
You guys are doing a lot of development work on the fiber to the Prem.
Piece of the solution can you talk about kind of where you are on that development, just curious updated versus 3 months ago.
And how do you see yourself kind of aligning.
Product wise with some of the opportunities that are out there on on fiber to the Prem and all the stimulus.
Out there these days.
Well.
Let me take a step back in.
<unk>.
And reminder, clarified that our initial strategy and where we're focused is not you know we're not going after Verizon AT&T or frankly any exclusively.
Historical telco player.
On a real I think value add is a converged DOCSIS and fiber solution and we believe that just the subset of operators, who will be deploying both DOCSIS and fiber and either the same or different parts of the network.
It creates a compelling let's say initial or phase 1 opportunity for us.
And it's those customers, who were making progress with those customers, who with whom we have on initial deployments.
And it's it's some of the larger of those customers, where we're starting to make some some real good progress on their labs and they're in the mere testing.
And.
I would say that the value of what we're proposing is coming into greater focus on at the same time, we're better understanding the different use cases and how these things will be deployed I mean, the market is evolving.
Just late last week for example, Virgin media in the UK kind of made a splash by talking about some aggressive new fiber to the to the home plans there in the U K market and that there were further clarified on their earnings call, where they talked about fiber and cable kind of moving forward and coexistence with.
Maybe the fiber.
Serving the higher end customers or the being the premium tier of service I think that's a picture of that for us has become into sharper focus on its <unk>.
US steer on the way we position the technology, both technologically and commercially.
So we're making good progress on both fronts, So George where we're quite encouraged by the <unk>.
Work, we're doing with our customers as well as the I'd.
I'd say the strategic thinking of.
Customers large and small on this area so were we.
Obviously, we continue to invest in it and what we'll continue to keep you posted on our progress.
Great. Thank you very much.
Next question comes from the line of Ryan <unk> from Needham and company. Your line is open.
Thanks for the question first a clarification if I could on your prepared remark about bookings you commented that.
80% to 90% of your typical backlog is shippable in the next year.
Were you implying that that's still the case with this new surge in bookings as well, but that same characteristics would apply.
That's right Ryan.
All historical trend that 80% to 90% of deferred revenue on backlog gets converted within the next 12 months and we expect the same trend to continue.
Perfect. Thank you and then just looking at your are your set of 8 tier 1 wins, obviously are critical and very strategic could you maybe.
Characterize well, where those customers are now in their path towards volume deployment.
On your in volume deployment today and and.
For the balance kind of sit in that processes operations integration or field trials on sort of thing.
Out of the 8 that we've discussed we have for who I'd say really in volume deployment today.
Okay within those I'd say various.
Various maturation nobody is probably completely moving at the pace and volume they would ultimately like to but.
But I think we could safely call for on volume.
The other 4 are in various.
Stages of <unk>.
Startup.
Helpful. Thank you both.
Alright, thank you.
And ladies and gentlemen, if you have questions at this time. Please press star and then the number 1 key on your Touchtone telephone.
Next question comes from the line of teams salvage ex from Northland Capital. Your line is open.
Hi, good afternoon, and congrats on the on the bookings in particular.
And I did want to follow up there on a little bit around the.
Kind of topic of new versus existing customers and you mentioned.
A virgin call, where they were talking about fiber to the home actually Comcast had some pretty.
Interesting things to say about virtualization and accelerating nextgen technology deployment on their call.
I don't know if that's coincident I mean, you obviously saw a fair bit of growth here in the quarter with Comcast.
And so you know as you look at that as you know are you seeing.
Can you comment I guess on those comments or if you are seeing a meaningful acceleration there.
And despite that it does look like from a bookings standpoint, you did add some meaningful new orders there. So any further color on the specific comments and then.
With regard to whether Youre seeing you might have seen a few of those for tier ones you mentioned.
Go into volume deployment.
Pretty much last quarter and that might have accounted for for some of the strength in bookings.
But beyond Comcast.
Yeah.
I would attribute the step up in bookings in the second quarter.
Actually have the breakdown in front of me and non or if you've got a comments on Jamie.
I think it certainly wasn't dominated by existing customers new customers contributed materially Tim. So I think it's probably safer to think about the booking number is an equal balance between healthy orders from existing customers and new customer order inflow.
I forgot that that's a decent mix between new and existing.
We're gratified to hear some of the leading operators in the.
And the space talk openly about.
About their thinking.
They've been talking about I think that the.
Leaders on the cable industry began talking about 10 G. Maybe 2 years ago at the CES Conference.
And with increased worldwide competition from fiber.
On the coming I think that the topic of of competing next generation broadband thinking through.
What next generation broadband looks like.
And here I'm, just talking about going beyond just symmetric egg to really symmetric multi gigabit services and ultimately symmetric 10 gigabit services. This is a this is not science fiction anymore. This is a very relevant topic.
And.
Our view is that those who have selected us early we're really.
Among the operators, who are out-front earliest thinking about this and who have put the greatest importance on uninsured that their networks, we're going to be competitive not just on the next 18 months.
But over the next decade.
So for them from that perspective, it's not it's not news to us So Tim I think the news is if you will but there is more open discussion about it and and perhaps the element of news. There is is the extent to which we're now seeing.
Mix of advanced DOCSIS, Virtualized, Virtualized, DOCSIS DAA together with fiber.
As really coming into focus as a.
As a attractive blend of capabilities for.
Meeting. These are these next.
This kind of next phase of competition and consumer demand on the industry.
Does that help for.
Got it.
The color that's fantastic.
Yeah I appreciate it thanks, very much I'll pass it on alright, well. Thank you.
Next question comes from the line of Steven Frankel from Cowen Your line is open.
Turning Patrick in the spectrum reallocation.
The video business, there was an opportunity to not just <unk>.
And sell from hardware into those customers, but build a recurring revenue relationship around maybe from some of your SaaS offerings as well could you update us on on how that mission might be going.
Hum.
It continues to be an attractive opportunity I would say fairly well, but we have we still have work to do if I had to summarize it Steve I mean, taking a step back overall, we're quite pleased with the progress, we're making and says.
Certainly on the discussions with operators involved in the whole <unk> thing or are on our part of that mix, but I wouldn't put disproportionate weight on it.
But it is a.
It's attractive opportunity more generally I think our brand is really strengthening from.
From a SaaS perspective, more and more media companies around the globe are starting to understand what we're doing in that space, both those who might have an opportunity to reallocate stuff.
Between satellites or in fact takes it off entirely and move to fiber.
Sure.
I think everybody is understanding better debt that harmonic is bringing both some of the traditional network capability as well as streaming SaaS capabilities to the party and so.
It's because it's continuing to be pretty fun and exciting to work on.
And how is the <unk>.
And the typical SaaS engagement changed over the last year or are you are you getting larger initial deal sizes or these deal sizes growing overtime is that an element that comes in and the customer ramps.
Well, it's all of the above on 1 hand definitely part of the growing pipeline includes a bigger deals than we've had before and I'd say that end of the spectrum is bigger at the same time, though as our brand becomes stronger where we're kind of doing a better job of addressing what I'd call the long tail.
On an aggregate, particularly when you think about content generation worldwide, there's a lot of opportunity under that long tail. So.
Through for sales force investments and Sanjay mentioned through new channel development as well as direct sales what we're trying to go after both ends of the spectrum and we're seeing we're seeing more success on both ends of the spectrum, both the bigger deals and smaller.
Thinking about the AD stuff in particular, I would say there.
Yes.
Most impressive so far has been some of the maturation of that stuff, maybe maturation is too far along but some of the development of that with some of the larger engagements that we have particularly in North America. So engagements with larger media companies, who perhaps have more mature advertising models is where we're we're seeing.
Inc.
So very encouraging uptick there and.
And hence we're increasingly optimistic about that target to that model.
Getting more traction with the other large ones as well as the longer tail that I mentioned a moment ago.
Great and then on cable edge.
Now that.
That market is starting to mature.
On such a strong reputation in the market.
Do you have any more visibility into that.
They havent launched into kind of the velocity of their launch once they get started.
I think it's improving it's still work in progress, but it's still improving particularly on large tier 1 every 1 of them has their own kind of unique.
Environment operating.
Paradigms et cetera. So I think there is no such thing as a turnkey.
15 day tier 1 turn on.
That being said, we are getting better and we're getting more sophisticated.
R. R. R lab integration field service professional services teams are excellent I think it's a big part of the value, we're bringing to the party now it's not only the technology, but the knowhow and that's that's serving us well, but but to be clear, it's still it's still heavy lifting.
And.
That's okay I mean these are.
We're all broadband customers. So the fact that our consumers I mean, the fact that our customers are taking it carefully.
People checking everything to make sure of the services fully robust etcetera etcetera.
Makes complete sense.
But we're seeing good progress and I think youre seeing that show up in our numbers.
Great and Ted.
Tremendous quarter, so congratulations and I look forward to the back half for the year.
Alright, well. Thank you very much just as we appreciate it.
Showing no further question at this time I would now like to turn the conference back to CEO, Patrick Harshman for closing remarks.
Okay.
Thank you all for joining US today, we've had a strong quarter for the outlook is strong we're executing the plan we've discussed.
We're excited about our business, we're encouraged by the market conditions and.
We look forward to continuing to make progress in the can you continue to communicate with you. So we look forward to talking with you. All next time until then have a good day.
Great. Thank you all right.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation and have a wonderful thing you may all disconnect.
Okay.
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