Q1 2022 Harmonic Inc Earnings Call
Welcome to the Q1 2022 harmonic earnings conference call. My name is Valerie and I'll be operate on today's call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question at that time. Please press Star then one on your Touchstone telephone.
Please note that this conference is being recorded.
I will now turn the call over to David hearing over Investor Relations, David You may begin.
Thank you operator, Hello, everyone and thank you for joining us today for harmonics first quarter 2022 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 for this webcast, which you may see by going through our webcast on our Investor Relations website.
Now going to slide two.
Yeah.
During this call we will provide projections and other forward looking statements regarding future events or future financial performance of the company such statements are only current expectations.
And actual events or results may differ materially.
We refer you to documents harmonic filed with the SEC, including our most recent 10-Q and 10-K reports and 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.
Please note that unless otherwise indicated the 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.
He will also discuss historical financial and other statistical information regarding our business and operations and some of this information is included in this press release, the remainder of the information will be available on a recorded version of this call or on our website.
Now I'll turn the call over to our CEO Patrick Harshman Patrick.
Yeah.
Well, thanks, David and welcome everyone to our first quarter call.
During the first quarter of 2022 harmonics carry forward the strong business momentum we achieved in 2021.
Revenue was up 32% year over year to $147 $4 million EPS was eight book.
The book to Bill was one four.
All of which drew drove further growth of our backlog and deferred revenue to a record level quarterly.
Among the business highlights, enabling these corporate results were cable access segment revenue growth of 98%.
Video segment, SaaS revenue growth of 75% year over year and.
And solid bottom line contributions from both segments.
The robust demand to continue to see for our solutions and our consistent execution, despite significant supply chain and global geopolitical challenges make a strong statement about the health and management of our business.
Confidence in delivering sustained market leadership growth and value creation for our customers and stockholders because we continue in 2022 and beyond.
Okay.
Taking a closer look at our cable access segment.
We delivered another exceptional quarter.
Segment revenue was up 98% year over year like quarter, Randy 77 broadband service providers, we're deploying on cable OS up 45% year over year.
Broadband modems served grew to $6 1 million up 100% year over year.
It's still only about 10% of the currently addressable footprint defined by our wins to date.
Sanjay will discuss momentarily adjusted segment EBITDA margin was approximately 12%.
An impressive result, considering the persistent supply chain cost capacity headwinds.
Despite these challenges overall market conditions are trending favorably for broadband access business.
Tumor and enterprise demand for broadband capacity is strong and growing.
And competition between broadband service provider, just keeping up worldwide.
Against this market backdrop, our competitive position has never been stronger.
The distributed architectures, we invented and become the de facto industry standard. It is becoming clearer that are continuing technology advances spanning cloud native software and digital hardware.
Out in front of the competition.
Consequently demand for our NDA and systems encompassing software and hardware continue.
<unk> continues to exceed previous expectations.
Looking ahead to the remainder of 2022, we anticipate the existing customers will continue to aggressively scale and of course. We will also we will also remain very focused on winning new accounts, both large and small.
Well multi gigabit DOCSIS based services remain the foundation of the business.
Recently bullish about our fiber to the home opportunities.
We have successfully launched fiber to the home with several smaller customers.
Good progress qualifying our solution with tier one accounts.
At last week's cable labs N G showcase in Denver, we allowed attendees with our latest cloud native platform developers, demonstrating DOCSIS four <unk>, reaching $8 five gigabits per second downstream and five gigabits per second upstream.
We also showcased converged multi gigabit DOCSIS three one and symmetric 10 gig fiber to the home services deployed through our cable less ripple outboard motor platform.
Our unique harmonic capability illustrating both strategic value and widely deploying our outdoor no platforms and through our innovations the cable industry's ability to compete effectively with competitive fiber offerings.
Putting it altogether, we remain confident that our broadband access business is uniquely positioned for strong profitable growth for the foreseeable future.
So to be clear this positive outlook incorporates what we know about the Russian warranty credit.
We anticipate no sales of broadband access systems in Russia.
Our updated guidance contemplates continued disruption and possibly additional expense associated with our personnel in Ukraine.
Subset of our global R&D team.
Looking beyond 2022, we now forecast 2020 for topline revenue.
<unk> dollars and EBITDA percentage for the broadband access segment will be ahead of the plan we communicated to you during our Investor day in June last year.
We're planning another investor day in the coming months during which time, we will further flush out this multiyear update.
In the meantime.
Excited about the broadband market and demand trends we see.
We're fully focused on execution in 2022.
Turning now to our video segment.
Here, we also delivered a solid quarter and start to the fiscal year.
First quarter segment revenue was $65 $8 million down six 4% year over year, while segment gross margin was 58, 8% up 370 basis points year over year, resulting in approximately flat segment gross profit.
We achieved strong streaming SaaS revenue growth for the quarter up 75% year over year, which was offset by expected slowly declining legacy video appliance sales.
As a reminder June last year, we also laid out a multiyear video business strategic plan similar to what we did for cable access business.
Our video plant has two core elements, taking a leading position in the growing streaming SaaS market, particularly for live sports and maximizing revenue and profit from the declining video appliance broadcasts.
Our first quarter results highlight continuing execution of this plan.
On the broadcast the client side of the business demand and outlook continues largely as anticipated.
In contrast for broadband access business, we have historically sold video appliances and related services in Russia in.
And that was a result of the war in Ukraine, we anticipate losing approximately $6 million of previously forecasted Russian video business during 2022.
Fortunately, we expect this rush of gap to be largely filled by video appliance and streaming says upsides in other parts of the world, where we're seeing stronger than originally forecast demand.
Streaming SaaS upside in the coming quarters is due in part to a major new sports driven win during the first quarter with a tier one streaming media company.
Well as continued expansion of live streaming sports delivery for customers that have already launched.
During the quarter, we set several new internal records for loss content delivered and advertisements inserted in there.
Our reputation for enabling best in class live streaming continues to grow.
Looking ahead, we remain confident that our transformation and video to streaming SaaS is working.
Considering our strong first quarter start and robust sales pipeline, we expect our streaming SaaS revenue to grow over 50% again in 2022.
We remain on track to achieve the 2020 for screening says targets, we laid out for you in our Investor day last year.
In summary for our video segment continued profitability gross margin expansion and streaming sales growth all point to a successful transformation and value creation story.
With that I'll turn it over to you know Sanjay for closer look at our financial results and outlook.
Yeah.
Thanks, Patrick.
And 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, our Q1 press release and earnings presentation.
Reconciliations of non-GAAP financial measures to GAAP.
That are discussed on this call.
Both of these are available on our website.
For the first quarter of 2020, do we delivered solid financial results.
That were near or above the top of our guidance ranges.
These results demonstrate the strength of our businesses.
Which continued to perform well despite challenges related to the war integrate the pandemic and our supply chain.
Before I run through our quarterly financials in more detail I believe leaves review key highlights here on slide seven.
We reported record first quarter revenue of $147 4 million, along with solid EPS up eight cents.
The concentrate business momentum we saw in 2020. One continued in the first quarter of 'twenty to 'twenty, two with bookings of $205 5 million and a book to bill ratio of one four.
Digital another record backlog and deferred revenue position at quarter end of $497 3 million.
Considering the strong Susquehanna the performance and the positive market and competitive trends as mentioned by Patrick we are raising our full year revenue adjusted EBITDA and EPS guidance.
Now lets review of our first quarter financials in more detail.
Turning to slide eight as I just mentioned total company Q1 revenue was $147 4 million.
I'll tell you the one 1% year over year and down five 4% sequentially from a seasonally strong Q4.
Looking first at our cable access business segment revenue for the quarter was $81 6 million up 97, 8% year over year and 17% sequentially.
<unk> boats, the continued ramp up of existing customers and new customer wins.
Including some early success, we are seeing with our fiber to the home application.
In our video segment, we reported total Q1 revenue of $65 8 million balance this one 4% year over ear off leash SaaS revenues.
$6 $7 million up 75, 3% year over year.
This modest decline was primarily due to timing a few broadcast projects and the impact of season sales in Russia.
Later on I will share more details on the anticipated impact on our video business off season sales in Russia.
We had three customers representing greater than 10% of total revenue during the quarter.
<unk> contributed 31%.
Intelsat contributed 13%.
And Vodafone contributed 10% of total revenue.
Total company gross margin declined by 320 basis points to 47, 2% compared to 55% in Q4, 'twenty one and.
And by 310 basis points versus Q1 'twenty one.
This decline is due to elevated cable access segment supply chain related costs.
An increased mix of cable access segment revenue.
Cable access segment revenue was 55, 4% of total company revenue in the quarter.
Cable access gross margin for Q1 blended two was at the high end of our expectations at 38%.
Compared to 43% in Q4, 'twenty, one and 42, 2% in Q1 'twenty one.
As anticipated extra ordinary supply chain costs weighed on margins in the first quarter of 2020 do relative to the prior year.
Also as anticipated we forecast cable access gross margins improving in the second quarter of <unk>.
As these nonrecurring premium costs.
They have now largely flowed through.
Video segment gross margin was 58, 8% in Q1 'twenty two.
370 basis points compared to 55, 1% in the year ago period.
Flat sequentially.
The annual improvement reflects an improved software mix with another appliance category as well as our expanding SaaS business.
Moving down the income statement on slide nine.
Q1, 'twenty do operating expenses of $58 4 million compared to $58 million in Q4, 'twenty, one and $51 1 million in Q1 'twenty one.
The year over year increase is primarily due to increased research and development as well as he isn't marketing activities.
To support the growth of our cable access business.
Operating expenses represented 39, 6% of revenue in Q1 'twenty two.
Compared to 45, 8% of revenue in Q1, 'twenty, one demonstrating operating leverage as revenues continue to ramp.
Adjusted EBITDA for Q1, <unk> was nine 8% of revenue at $14 5 million.
Comprised of $9 7 million from cable axis and full blinded millions from video.
This compares to an adjusted EBITDA of $23 $8 million or 15, 3% of revenue in Q4 'twenty one.
Year over year improvement compared to $9 1 million or eight 2% of revenue in Q1 'twenty one.
This all translated into Q1, 'twenty do EPS of <unk> <unk> per share compared to <unk> 16 per share in Q4, 'twenty, one and <unk> <unk> per share for Q1 'twenty one.
Excuse me.
We ended the quarter with a diluted weighted average share count of $110 6 million compared to $110 5 million in Q4, 'twenty, one 800 people and 2 million in Q1 'twenty one.
The sequential increase is primarily due to the issuance of $1 3 million shares to employees for vested restricted stock units ESB purchases and performance based compensation.
All set by reduction in convertible debt dilution of <unk> 8 million shares.
And the dilutive effect of outstanding issues and options.
As you would have one 4 million shares.
Both of those being from the decrease in our average stock price in the quarter.
And by share repurchases of 223000 shares in the quarter.
At an average price of $9.18.
The year over year increase reflects dilution of our convertible debt by $2 5 million shares.
And the dilutive effect of outstanding honest using options by 0.8 million shares.
Both resulting from an increase in our average stock price during the year.
And Bob one 2 million shares due to the effect of stock issued to employees and ESOP shares.
Yeah.
In early February 2022, we announced a stock repurchase program under which we appreciate is up $200 million of our outstanding shares of common stock through February 2025.
We intend to fund the share repurchase uses from cash on hand, and cash generated from operations.
Repurchases under the program may be made from time to time through open market purchases and then B <unk> one trading plan in accordance with applicable securities laws.
The timing and amount of any repurchases will depend on a variety of factors.
The price of our common stock market conditions corporate needs and regulatory requirements.
Turning now to the order book.
We are pleased to report yet another quarter of strong new bookings as noted earlier Q1 bookings were a record $105 5 million.
Compared to $267 2 million in Q4 'twenty one.
And up 113, 4% from Q1, 'twenty, one demonstrating continued robust demand for our solutions.
Demand for our cable access products was the biggest driver although Q1 bookings for both segments were up year over year in all regions worldwide.
The book to Bill ratio was $1 40 in the quarter compared to $1 seven in Q4, 'twenty, one and <unk> nine in Q1 'twenty one.
On the cable access side of the business.
We see cable operators buying ahead in anticipation of accelerating 2020 due in early 2023 broadband network deployment.
Turning to slide 10, you will now discuss our liquidity position and balance sheet.
We ended Q1 with a cash of $100 7 million compared to 130 people and $4 million at the end of Q4 'twenty one.
$808 million in Q1 last year.
Yes.
The $32 7 million sequential cash decrease is primarily comprised of $27 5 million of cash used in working capital.
Largely in accounts receivable and inventories to support business growth.
Offset by operating profits of both cable access and video segments.
$2 1 billion of share repurchases as I just mentioned.
And $2 4 million of cash used in the purchase of fixed assets.
Our days sales outstanding at the end of Q1 was 71 days compared to 51 days at the end of Q4, 'twenty, one and 69 days in Q1 or do you want.
We expect collections and therefore accounts receivable to improve in Q2.
Our days inventory on hand was 95 days at the end of Q1 compared to 83 days at the end of Q4 91 and.
And 58 days at the end of Q1 'twenty one.
Reflecting increasing inventory at the end of the quarter as you prepare for heavy shipments for the rest of the year.
We continue to build inventory at higher than normal levels to proactively manage the supply chain.
At the end of Q1 total backlog and deferred revenue was a record $497 3 million.
Up 13% sequentially from $441 million in Q4, 'twenty, one and up 81% year over year from $274 3 million at Q1 'twenty one.
This latest backlog in deferred revenue reflects continued growing demand from our large scale customers.
An increase in video streaming SaaS commitments.
Note that more than 80% of our backlog and deferred revenue.
Has customer request dates for shipments of products.
And providing services within the next 12 months.
Excuse me.
As mentioned on previous calls.
Not included in our backlog as additional contractually agreed cable Louis business with.
With three of our initial tier one cable customers.
At the end of Q1 do I do this incremental amount was approximately $98 million.
Down from 104 million last quarter and approximately $6 million.
Two the purchase order process, and therefore moved into bookings.
Taking these cable Louis contracts into account, we have total future contracted revenues of approximately $595 million.
Which continues to provide us with a very solid base as we move ahead into 2022.
Now I'll turn to our revised non-GAAP guidance for 2022, beginning on slide 11.
I would also give brief commentary on key changes from our prior annual guidance we gave in January .
For the total company for full year 2020, do we now expect revenue in the range of $585 million to $625 million.
The 4% midpoint increase some of our previous guidance.
It was driven by an ingredient expected cable segment revenues.
Gross margin in the range of 49, 1% to 52%.
Marginally up five basis points at the midpoint versus prior guidance.
Profit to range from 287% to $340 million.
Up 4% at midpoint versus prior guidance.
Operating expenses to range from $238 million to $251 million.
1% at the midpoint of our prior guidance driven primarily by increased compensation expenses.
If possible relocation costs related to older contract engineering resources in Ukraine.
Adjusted EBITDA to range from 60 million to $74 million.
This represents a 16% increase at the midpoint versus prior guidance.
Given by the expected ingredient gaming revenues discussed earlier.
EPS to range from 34 to <unk> 45.
At the midpoint this is a 20% increase versus prior guidance.
And effective tax rate of 13%.
Our weighted average diluted share count of approximately $110 8 million.
A decline of $1 8 million shares from prior guidance.
This was primarily due to reduced dilution on that.
Given a softer average stock trading price.
Finally cash at the end of 2020 due as expected to come in between $100 million to $110 million.
In line with our prior guidance.
Turning to slide 12, I will review, our total company outlook for the second quarter of 2022.
We expect revenue in the range of $144 million to $154 million.
Margin in the range of $49 three to 51, 2%.
Gross profit in the range of $71 million to $79 million.
Operating expenses to range from $61 million to $64 million.
Adjusted EBITDA to range from $13 million to $18 million.
Our weighted average diluted share count of approximately $110 8 million.
EPS to range from seven to 11 cents.
At the end of Q2 cash is expected to range from 100 $110 million.
Okay.
Excuse me.
On Slide 13, I will first review guidance for both the full year and second quarter of 2022 for our cable segment.
For the full year 2022 bands one of our progress to date, we expect cable access to achieve revenue between $310 million to $338 million.
And 8% increase from midpoint of flat guidance.
Implying full year revenue growth of 48% at the midpoint.
Given our success navigating capacity constraints through the first four months of the year.
More comfortable expanding the high end of forward outlook.
Although to be clear challenges remain necessitating a wide range.
Gross margins between 42% to 42, 4%.
Margin and 40 basis point improvement from prior guidance.
Due to unexpected increase in software and services contributions.
Gross profit between $130 million to $147 million.
Up 9% from prior guidance at the midpoint.
Operating expenses between $93 million to $101 million up 3% from prior guidance at the midpoint.
Adjusted EBITDA between 43 million to $51 million.
Up 22% from prior guidance at the midpoint.
Part of our cable access segment in Q2, we expect revenue in the range of $74 million to $80 million gross margin in the range of 42% to 44%.
Gross profit in the range of 31% to $35 million.
Operating expenses in the range of $24 million to $26 million.
Adjusted EBITDA to range from $8 million to $11 million.
Now moving on to slide 14.
We will review full year and second quarter 2020, do video segment guidance.
I don't really expect revenue in the range of $275 million to $287 million.
Nearly consistent with prior guidance, despite an approximately $6 million negative revenue drag.
<unk> sales in Russia.
Gross margins in the range of 57 to 58, 3%.
Is it 25 basis point improvement over prior guidance at midpoint.
Gross profit in the range of 157 to 167 million basically flat with prior guidance at midpoint.
Operating expenses in the range of 145 to 150 million slightly better than prior guidance at the midpoint.
Adjusted EBITDA in the range of 17 will be undergoing a $3 million a slight improvement from prior guidance.
For our video segment in Q2.
We expect revenue in the range of $70 million to $74 million.
Gross margins in the range of 57% to 59%.
Gross profit in the range of 40% to $44 million.
Operating expenses in the range of 77% to $38 million.
Adjusted EBITDA to range from 4 million to $7 million.
In summary, we continue to build on our momentum from 2021 with a strong first quarter and drew a record backlog and deferred revenue balance even further.
Positioning ourselves well for the balance of 2022.
And the trajectory to execute our long term model.
Patrick earlier shared key financial highlights some of our updated long term model for the cable segment.
And we are in process of planning another investor day in the coming months.
During which we refer to provide further details on this positive multiyear abate.
So please stay tuned for additional details on our Investor day.
Thank you everyone for your attention today and now I'll turn it back to Patrick for final remarks, before we open up the call for questions.
Okay. Thanks, Sanjay we'd like to conclude by summarizing our priorities for the remainder of the year, but the corporate level in 2022, we intend to extend our market reach leadership and deployment velocity.
To create even greater value for our customers and our shareholders.
For cable access business. This means that our objectives remain driving volume deployments with our tier one customers winning.
Winning in scaling with new global operators and expanding our dress market through our unique converged solution for DOCSIS and fiber to the home applications.
As our results demonstrate we have already made solid progress in all three of these fronts during the first quarter.
For our video segment, we continue to focus on accelerating the growth of our streaming SaaS customer base.
Extending the breadth of our streaming SaaS solution to enable even faster growth.
The leveraging the traditional broadcast appliance business to profitably enable these transformations.
Here again, we delivered good progress in all three of these areas during the first quarter.
We're looking forward to the rest of 2022 and we appreciate your continued support.
With that let's now open up the call to your questions.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one when you touch tone telephone again to ask a question. Please press Star then one.
Our first question comes from Simon Leopold of Raymond James Your line is open.
Thank you two if I may the first one is.
Could you help us understand your exposure either directly or indirectly to the lockdowns in China and what you've assumed in terms of your ability to operate are you identifying alternate sources or do you expect it to be short lived just trying to understand how you factored that into this guidance and.
Then I've got a follow up.
Okay, well first the headlines assignment is that it is factored into the guidance.
We sell some product.
Against primarily video in China. So there is a I'd say a modest revenue headwind there that has been factored into the guidance that we shared.
And as you.
As you your question anticipates or understands we do some limited amount of.
Component.
Sourcing we don't do any manufacturing, we don't do any R&D in China and.
Unfortunately, the areas from which we source.
The subset of components that we source to build some of the hardware products that we do elsewhere.
We're not so far impacted significantly by.
By the Lockdowns.
We have thought about.
The implications of the Lockdowns spread to the areas, where we're doing business and.
Especially we can we've factored in those risk factors into the guidance that we've provided.
Thanks, and then in terms of the follow up in the past we've talked about.
I guess the penetration rates of cable out west in terms of the number of subscribers turned onto the network relative to the number of total subscribers for the customer base.
Where does that metric stand and do you how do you see that evolving over the next year or two.
Yeah.
Well.
At quarter end.
R R.
About 6 million modems had been our systems have been deployed to serve 6 million modems.
Explicitly for cable or software predominantly also through our hardware.
And.
That represents 100% year over year growth in other words there was.
<unk> was about $3 million a year ago.
And that is if we if we add up the the modem served by the customers that are have now begun or in the process of deploying our solutions.
About 10% of the footprint or in other words, it's about a $60 million cable modem footprint that we are currently addressing.
So I guess, a couple of things clearly theres a ton of runway left with with those customers who have already selected and are deploying us not to mentioned.
The pipeline of course.
Newer customers that we're pursuing.
Or the add on fiber to the home applications, where we're going after.
If you look.
And our guidance for this year I think the <unk>.
Mid point of the guidance is about 45% or thereabouts, So Sanjay Andrei.
In very round numbers, and it's not correlated 100% Simon.
That implies roughly 50% more business than last year, it's roughly 50% more subscribers. So you might address our customers two to add in aggregate I don't know roughly $4 5 million more cable modem. So over the course of 2022.
Please.
Back of the envelope kind of number just to help.
I think give you the ZIP code of the way we see this.
This evolving I'll stop there does that help.
That's really very helpful. So thank you that's exactly what I was looking for.
I'd just say at the midpoint of the guidance the cable margins are approximately 32, 5%.
Thank you.
Yeah.
Thank you. Our next question comes from Ryan <unk> from Needham Your line is open.
Hi, nice quarter, there, especially on the cable front end.
Okay.
Just any color on kind of the mix in the quarter it sounds like hardware.
Obviously saw some headwinds on supply chain cost that kind of move through the flow and it impacted this quarter.
And how should we think about that mix as it sits posted in the quarter end.
In your backlog as well would be helpful. Thank you.
Yes, so the mix in the quarter for hardware is modestly up in.
In Q2 compared to Q1.
At the same time in Q1 as I mentioned the margins are.
The lower end, 38% and that came in primarily because we had non recurring premium costs, which are largely behind us.
That said if you look at the mix overall for the ear and comparing to the last year, there's just a modest increase in hardware versus software.
And that players all into the margins for the whole year, as well, which are pretty much flat at midpoint.
Right. So your outlook here for the rest of your on cable you sound pretty confident you're not going to see a ton of variability there and there should be a floor on the margin margin front.
That's right.
That's great.
And just a follow up if I could.
As you think about the.
Supply chain impacts there Sanjay or any other major concerns you have obviously, there's a lot of moving parts here, but no.
I assume no no major changes in your view of supply chain going forward here.
No major changes from where we are that said supply chain challenge still remains a big challenge, which we deal with every day and based on where we see in terms of capacity constraints do you see some improvement and hence we have expanded the high end of our revenue range that said in terms of the margin pressure.
I think we are pretty much flat.
Got it.
Well, thanks, very much I'll get back in queue.
Thank you. Our next question comes from Colin Mcmillan with Jefferies. Your line is open.
Hi, This is Kyle on for George Notter. Thanks for the question.
I wanted to get a sense, if you could tell us.
Some of your activity with tier one cable operators and how many of them are in progress with trials right. Now currently for cable OS I know you used to give a number that was similar to that and now you're moving to deploying customers, which is great but wanted to get a sense. If we can get update on what the pipeline looks like specifically for tier ones.
We're involved with a number of.
Let me take a step back Kyle forgive me first I think previously we've talked about nine tier one wins that should we are those.
I don't know four to five are actively deploying and the remaining.
Four to five are still in the process of really getting getting off the ground.
So thats the story from a currently deploying perspective, if we go even further up the pipeline.
Activity. Indeed, we are engaged with several additional.
Tier ones.
Both in the Americas and outside of the Americas, who are in various stages of.
Evaluating.
The solution, we remain quite optimistic that we will continue to see.
New customers, both large as well as medium and smaller continue to adopt our platform in 2022 and beyond.
Okay, great. Thanks, and one more for me. This one is regarding your progress with FTP deployments that activity certainly it sounds pretty positive can you give us a sense for what types of deployments. These are your first ones are.
Are they edge outs by cable operators or kind of more substantial brownfield upgrades.
Much of their footprint are they upgrading and are there any pure play or TTP customers in there at all.
So I'll start with the last one first there are a couple of smaller a pure fiber.
Fiber to the home players, but the focus so far and the success. So far has been with <unk>.
Cable operators are hybrid fiber cable operators and let's face. It every cable operator is over time, becoming a hybrid operator, we see fiber being used to two main applications. One is greenfield new housing developments businesses et cetera, and as your question alluded to we also see.
Growing strategic use of fiber in brownfields. So this is going after high end customers, where maybe a fiber offering is needed.
You're surgically to compete with the competitive fiber offerings.
Our products Watson really well in those kind of applications, where we see fiber.
Fiber being used let's say surgically or so called fiber islands. There's another term being used in the industry to kind of overlay existing cable infrastructure with with pockets of fiber.
So we see all of the above being used in.
I think our solution.
Works.
Really well for these hybrid kind of applications and business models.
Okay. Thanks, very much good job on the progress.
Thank you.
Thank you. Our next question comes from Tim Savage out of Northland Securities. Your line is open.
Hi, Pardon me Hi, good afternoon and congrats.
Congrats on that.
Very very strong results and increased outlook, yet again for cable access.
That's kind of part of my leaps to mind at least first question, which is on the.
Back on the PON side.
To what extent I guess.
<unk> PON revenue.
Material to either that guidance increase or to the overall cable access revenue number.
For calendar 'twenty two.
And competitively I Wonder if you might comment you had.
Commscope announcer.
Palm platform this morning.
Interested in your thoughts on the overall competitive landscape and maybe.
Try to relate the extent of your leadership and kind of the.
Virtualized distributed DOCSIS world.
Maybe relate that to where you think you were in the pawn world amongst the same customer base.
Yes.
Okay. Thanks.
Thanks for the question Tim.
Ill try to address that subject please.
The jump in so on the first part of the question look.
Yes.
The demand has been strong the backlog and deferred revenue has been strong.
Principally driven by.
The data over cable products and solutions fiber to the home is certainly part of that.
Our ability to raise guidance has more to do with our view of kind of expanding.
Supply chain capacity that increased demand put differently the outlook for our business continues to be capacity.
The constraint is not not demand constrained.
So from the beginning.
As part of that but.
The increase is not so much due to incremental fiber demand as it is our ability to.
Our increased confidence of squeezing more to the supply chain.
So that being said why I think the second part of your question as well.
How are we competitively positioned on the fiber front, but we think we're uniquely positions him.
And Thats from two perspectives number one.
We do think that just in cable, but more broadly in and telecom, we think our cloud native core platform is is really unique and really upfront.
So both of them in the context of DOCSIS, but also within the context of fiber platforms.
Doing the core.
Data handling provisioning interfacing the system all in a cloud native way, we think is.
<unk> is unique as powerful and as out ahead of us.
Just about everyone else, we're aware of in the broadband space in general.
And certainly our ability to do that in a converged way for DOCSIS and fiber to the solutions and kind of one common provisioning for example is.
It is pretty powerful and it is part of what's gaining residents.
Part of the power of our solution is the.
Out on the networks.
Platform conversion.
Our <unk>.
You don't mind me getting a little bit more technical on the fiber components are.
<unk> switch capability all of that drops right into the existing node platforms, we've already been deploying.
So, particularly if you're a cable operator who's been deploying DAA for cable initially.
Yes.
Whether you intended to or not you've already actually deployed a fiber to the home platform.
Through which the software exists centrally.
Through which you can very easily through through plug in upgrades extend to fiber. So this is we think this is a uniquely powerful this is not just us going to market with some kind of additional additional adjacent product.
This is a truly integrated solution.
Last week at cable labs, there was a.
A really interesting workshop for the for the industry.
Did very well.
By a number of cable operators, some really exciting demonstrations were done and.
Our converged DOCSIS and fiber capability was.
<unk> was prominently highlighted by ourselves and by customers and I think it really speaks to the.
The unique opportunity we have here.
Thanks, and if I could follow up there I mean, I think you mentioned.
Maybe you were running ahead of.
Some of the targets you outlined at the analyst day for our cable access.
You can feel free to.
The increase those targets if you like.
Sounds like maybe not yet, but as you look at maybe the two equations to factors that might be driving which is.
Your share of the market and overall growth of the market.
<unk> set out some.
Tam estimates back then would you say that.
The market has expanded faster than you thought.
Since the analyst day on either the.
Data over cable PON side, or both or has is harmonics and more successful kind of capturing customers and gaining share.
Interested in that dynamic.
It's more the latter than the former which is not to say that we're not excited about the growth of the.
The market, but what we do now believe relative to nine months ago or whenever it was when we held our analyst day, Tim is that we believe that we will capture an even larger share of the of the spend and thats, particularly true on the hardware side of the equation.
It means that we expect.
<unk> line growth ahead of what we projected.
Yes, it does mean.
Glenn did gross margin down, but it means EBIT dollars and EBIT.
Margin percentage are greater than what we projected.
At that time, which we think.
Net is.
As positive news and so it's more of a reflection of our growing confidence in our ability to command more sure Tim and lead this market.
Then it is.
And belief of even faster market growth.
Although.
Big part of why we're here is we believe that this is a pretty exciting.
Market to beta.
Thanks, very much and congrats again.
Alright, thank you.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one when you touch tone telephone again to ask a question. Please press Star then one.
One other player.
I'm showing no further questions at this time I'd like to turn the call back over to Patrick Harshman for any closing remarks.
Okay.
Okay, well, thank you very much shelf for joining us today.
We had a strong quarter I hope it also comes across clearly that we're excited about our opportunities.
We're focused on execution.
Both our cable business and our video business are well on track with not only the 2022 targets that we outlined but a longer range targets.
You can expect us to continue to execute.
In the context of an interesting market, let's say.
Clearly the opportunities outweigh the challenges and we're excited about what lies ahead.
We appreciate your time today and we appreciate your support and look forward to talking with you next time.
Thanks, Paul and have a good day. Thank you all.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.
Okay.
[music].
Yes.
Yes.
Okay.