Q4 2023 Harmonic Inc Earnings Call

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Welcome to the fourth quarter and full year 2023 harmonic earnings conference call.

Speaker Change: My name is let's see and I will be your operator for today's call.

At this time all participants are in a listen only mode. Please note that this conference is being recorded.

Speaker Change: After the speaker presentation, there will be a question and answer session.

Speaker Change: Ask a question during the session you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one one again.

Speaker Change: I'll now turn the call over to David Hangover Investor Relations, David you may begin.

Thank you operator, Hello, everyone and thank you for joining us today for harmonics fourth quarter and full year 2023 financial results Conference call.

David Hangover: With me today are Patrick Harshman, President and Chief Executive Officer, and Walter Jankovic, Chief Financial Officer.

Speaker Change: Before we begin I'd like to point out that in addition to the audio portion of the webcast. We've also provided slides for this webcast.

Speaker Change: You may view by going to our webcast on our Investor Relations website.

Speaker Change: Now turning to slide two.

Speaker Change: 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.

Speaker Change: We refer you to documents harmonic files 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.

Speaker Change: These documents identify important risk factors, which can cause actual results to differ materially from those contained in our projections or forward looking statements.

Speaker Change: Please note that unless otherwise indicated the financial metrics. We provide you on this call are determined on a non-GAAP basis.

Speaker Change: These metrics together with corresponding GAAP numbers and a reconciliation to GAAP are contained in today's press release, which we have posted on our website and filed with the SEC on form 8-K.

Speaker Change: We will also discuss <unk>.

Speaker Change: Historical financial and other statistical information regarding our business and operations and some of this information is included in the press release. The remainder of this information will be available on a recorded version of this call or on our website.

And now I'll turn the call over to our CEO Patrick Harshman Patrick.

Patrick J. Harshman: Well, thanks, David and welcome everyone to our fourth quarter call.

Today, we reported our fourth quarter and full year results wrapping up 2023 with another quarter of solid performance, including record total company revenue.

Patrick J. Harshman: Driven by continuing strong demand for our market, leading broadband and video streaming solutions.

Patrick J. Harshman: Key highlights for the quarter included record broadband revenue demonstrating our broadband business remains firmly on track for a sustained multi year growth.

With video SaaS revenue exceeding $50 million for the year powered.

Patrick J. Harshman: Powered by growing sports streaming success and execution of a new $160 million credit facility enhancing our financial flexibility.

Patrick J. Harshman: We also delivered strong new bookings during the quarter with a book to Bill of one two pending.

Pending 2023 with over $653 million of backlog and deferred revenue.

Positioning us well for 2024 and the coming years.

So moving now to our broadband segment, we delivered segment revenue of $115 2 million.

Patrick J. Harshman: Up 52% sequentially and 20% year over year.

Patrick J. Harshman: The number of global customers deploying our solution reached 108 up 19% year over year.

Patrick J. Harshman: With a corresponding $26 3 million DOCSIS cable modems now served worldwide approximately 15% of cable modems deploy globally.

Patrick J. Harshman: Again, highlighting the substantial DOCSIS growth opportunity still in front of us.

Patrick J. Harshman: We had several new customer wins during the fourth quarter, including a new top 10, North American operator for whom we made initial shipments.

Patrick J. Harshman: Our pipeline of new customers remained strong mostly by the expanding breadth and depth of our competitive advantages.

Patrick J. Harshman: An important area of expanding competitive differentiation for harmonic is DOCSIS four <unk>.

Our software court has seamlessly accommodated the new standard as have our remote phy edge device designs for.

Patrick J. Harshman: We're successfully powering several early DOCSIS four <unk> deployments launched late in the year and we are uniquely positioned as the go to partner for any operator planning a DOCSIS four that'll launch where scale deployment in 2024 or 2025.

Patrick J. Harshman: As a reminder, our DOCSIS four nodes are fully backward compatible with DOCSIS three one so that availability of DOCSIS for RF amplifiers is not a requirement.

Patrick J. Harshman: For any operator, who chooses to go forward and deploy harmonics support Idaho capable nodes in 2024.

Patrick J. Harshman: And we expect at least one key customer to make a big move to DOCSIS four <unk> enabled edge devices during 2024.

Patrick J. Harshman: Leading to a slower pace of deployment early in the year as Ford I don't know deployment expertise scales up followed by a heavier deployment pace in the second half.

Patrick J. Harshman: Another important aspect of our broadband business just that we had greater revenue diversification during the fourth quarter with both Comcast and charter contributing greater than 10% of our revenue.

Patrick J. Harshman: Well at different places in their respective DAA architecture deployment journeys, we're grateful to be working with both of these industry leaders.

Patrick J. Harshman: Incredibly focused on supporting their respective strategic initiatives.

Patrick J. Harshman: Welcome entering a growing multi year pipeline of DOCSIS opportunities. We also continue to make solid progress during the fourth quarter on building a synergistic fiber to the home business.

Patrick J. Harshman: In the fourth quarter, we secured several new fiber customer wins spanning existing cable and non cable fiber first operators.

We also announced a couple of compelling new fiber products that significantly expand our addressed market and our ability to compete with incumbent to fiber to the home competitors.

Early customer response to these new products has been very encouraging.

Patrick J. Harshman: We're ramping up our fiber specialist sales team and we remain very much on track to make fiber a strong strategic and financial contributor to our business.

Patrick J. Harshman: So in summary on broadband our broadband business continues to be well positioned with unique and powerful technology advantages.

Patrick J. Harshman: Solid customer relationships strong backlog and a rich array of new business opportunities that give us confidence that our multi year growth outlook.

Patrick J. Harshman: We finished 2023 with solid execution and considering our customers positive feedback we're confident in our ability to carry this strong execution forward through 2024 and beyond.

Patrick J. Harshman: So turning now to our video segment.

Patrick J. Harshman: Highlight of the quarter was again SaaS revenue 30.

Patrick J. Harshman: $14 2 million up 26% year over year.

Patrick J. Harshman: Total segment revenue was $51 $9 million down from $68 3 million a year ago.

Patrick J. Harshman: Margin was a record 64, 6%.

These results reflect our continued intentional SaaS transformation and some macroeconomic headwinds overseas impacting our appliance business.

As mentioned previously SaaS revenue for the year to $50 million up about 47% year over year, mainly driven by streaming sports.

Patrick J. Harshman: Live sports.

During the fourth quarter, we continued to see existing customers expand usage and new customers adopt and begin to launch services with our SaaS solution.

Patrick J. Harshman: This positive momentum has carried into 2024 earlier this month, our SaaS powered the largest live streaming event ever in the U S.

A testament to our exceptional technology and service capabilities.

Patrick J. Harshman: The market visibility of this extremely successful event has already translated into additional boost an additional boost to our sales SaaS sales pipeline.

Patrick J. Harshman: A targeted AD monetization is key to the rationale for moving live content, especially live sports to streaming.

It's an important adjacent growth opportunity for us.

Patrick J. Harshman: As you May recall, we rolled out a new AD insertion SaaS earlier in 2023, and it was great to see several initial wins with this new service during the fourth quarter.

Patrick J. Harshman: On the appliance side of the business, which as a reminder is more capital intensive for our customers. We saw revenue stabilized. Despite several continuing instances of project delays associated with financing and other macroeconomic headwinds, particularly internationally.

Patrick J. Harshman: Our domestic video appliance business remains solid as does our overall pipeline and competitive position.

Patrick J. Harshman: Finally regarding video our strategic review process is ongoing and continues to be a very high priority for us.

Patrick J. Harshman: Walter will speak more about this shortly.

Walter Jankovic: So in conclusion, we ended 2023 on a solid note and with a robust backlog.

Walter Jankovic: This highlights the continued demand we're seeing from our customers and a strong footing we have for further growth in 2024 and beyond.

Walter Jankovic: With that let me turn it over to you Walter for a deeper discussion of our results and outlook.

Walter Jankovic: Thanks, Patrick and thank you all for joining us today before I discuss our quarterly results as well as our 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 Q4 press release and earnings presentation includes reconciliations of the non-GAAP.

Walter Jankovic: <unk> measures to GAAP that are discussed on this call. Both of these are available on our website.

Our fourth quarter results were consistent with our expectations and above the midpoint of our guidance range on the top as well as the bottom line. Additionally, we exceeded the midpoint of revenue guidance in both broadband and video.

Walter Jankovic: Before reviewing our Q4 2023 financials in detail I will call out the highlights here on slide seven.

For the quarter, we reported revenue of $167 1 million, which was an all time company record and included record broadband revenue of $115 2 million. We also reported EPS of <unk> 13 book.

Walter Jankovic: Bookings of $196 5 million, a strong book to Bill of one two and near record backlog and deferred revenue of $653 2 million.

Walter Jankovic: In a few moments I will provide detailed Q1 and full year 2020 for guidance.

Walter Jankovic: To that I'd like to highlight a few key points regarding our guidance for our broadband business. We expect full year 2024 revenue increased 24% year over year at the midpoint of our guidance based on the momentum we expect to see in the second half of 2024, we anticipate.

Walter Jankovic: 25 broadband revenue growth to accelerate on a year over year basis as Patrick mentioned earlier, we are well positioned with our leading technologies strong backlog and our customer success to drive continued multi year growth.

Walter Jankovic: With regards to video we are guiding conservatively for FY 'twenty four due to the ongoing strategic review.

Walter Jankovic: Turning to slide eight.

Walter Jankovic: Total Q4 revenue was up nearly 2% year over year and 31, 4% on a sequential basis.

Walter Jankovic: This quarter over quarter increase was due to growth in our broadband segment.

Walter Jankovic: Looking more closely at broadband Q4 revenue was a record $115 2 million, an increase of 20% year over year.

Walter Jankovic: As anticipated during the fourth quarter, we benefited from the initial shipments of another large tier one customer.

Walter Jankovic: And video Q4 revenue was $51 $9 million, while video appliance sales were lower due to the factors I noted on our last earnings call.

Walter Jankovic: <unk> revenue included SaaS revenue of $13 2 million or 25, 4% of segment revenue for the quarter up 26% from the prior year.

Walter Jankovic: Video SaaS revenue growth continues to be driven by live sports streaming expansions and new customer wins, we continue to focus on growing our SaaS business and video, while maximizing our profitability and imply in appliances. Despite current macroeconomic headwinds.

In our last earnings call, we announced the initiation of a formal strategic review process for our video business due in part to indications of interest. We have received from a number of parties. We are continuing the strategic review process and it remains a top priority for us having said that as previously.

We know that no specific timetable has been established for the completion of the review we.

We are not providing any further details on this process unless and until a definitive agreement has been reached and our board approves the transaction or decides to conclude the review.

Walter Jankovic: Turning back to our fourth quarter results, we had two customers representing greater than 10% of total revenue during the quarter with Comcast representing 41% of total revenue and charter representing 15% of total revenue.

Walter Jankovic: The total company gross margin was 49, 3% for Q4 23, reflecting decreased gross margin in the broadband business segments sequentially.

Walter Jankovic: Broadband gross margin was 42, 4% for Q4, 'twenty three down 520 basis points year over year due to product mix to offer additional clarity. During Q4, we shipped out an extremely high mix of edge products that possesses relatively lower margins compared to other products in our portfolio.

Walter Jankovic: <unk>.

Walter Jankovic: Video gross margin was 64, 6% in Q4 2003, and all time record for the business segment, even taking into consideration today's macroeconomic headwinds and project delays that we've discussed previously this margin improvement occurred across both SaaS and appliances.

Yeah.

Walter Jankovic: Moving down the income statement on slide nine Q.

Walter Jankovic: Q4, 23 operating expenses were $63 4 million up slightly both on a sequential and year over year basis adjusted.

Walter Jankovic: Adjusted EBITDA for Q4, 23 was $21 7 million comprised of $21 9 million from broadband and negative zero point $2 million from video.

Walter Jankovic: Adjusted EBITDA for broadband was in line with our expectations, while video beat our expectations due in part to the gross margin strength previously discussed.

Walter Jankovic: This all translated into Q4 'twenty three EPS of <unk> 13 per share in line with our prior guidance and compared with zero in Q3 dollars 23, and <unk> 17 per share for Q4 'twenty two.

Walter Jankovic: We ended the fourth quarter of 2023 with a calculated diluted weighted average share count of $115 7 million compared to $116 7 million in Q3 dollars 23, and $117 3 million in Q4 'twenty to the sequential decrease is primarily.

Walter Jankovic: I'm merely due to the decreased convertible debt dilution of one 1 million shares.

Walter Jankovic: Turning to the order book Q4 bookings were $196 5 million. The book to Bill ratio was strong at one two for the quarter for both Q3 dollars 23 in Q4 2002, our book to Bill ratios were 0.8.

Walter Jankovic: As we stated previously over time, we expect this ratio to normalize and approach the historical benchmark of greater than one for Q4, we were above one after being below one last quarter.

Turning to the balance sheet on slide 10, we ended Q4 'twenty three with cash of $84 3 million. The net $2 3 million sequential increase in cash and short term investments was due to a few factors cash from operations provided $6 $3 million due predominantly to a decrease.

Walter Jankovic: Inventory and inventory related deposits offset by an increase in accounts receivable. We also used $2 7 million in the purchase of fixed assets.

Walter Jankovic: Turning to accounts receivables and days sales outstanding at the end of Q4 'twenty three DSO was 76 compared to <unk> 78 in Q3, 23% and 59 in the prior year period. The prior year period was lower due to a large customer taking an early payment discount.

Walter Jankovic: Days inventory on hand was 89 days at the end of Q4 dollars 23 compared to 145 at the end of Q3 dollars 23, a 140 at the end of Q4 'twenty to.

Walter Jankovic: The inventory decline in the quarter was a result of strong sales in Q4 and lower <unk> as we continued to tighten our supply chain.

Walter Jankovic: Turning to capital allocation, our top priority remains driving our future growth when appropriate we will strategically invest in building inventory as we've done in the past to meet strong demand.

Walter Jankovic: In line with this strategy in December we closed a five year $160 million credit facility that included a $120 million revolving credit line and a $40 million delayed draw term loan. This new credit facility allows us to repay our 2010.

For convertible notes outstanding, while providing us with ample liquidity and flexibility to support our multiyear growth plans as of today, we have not borrowed on this facility.

Walter Jankovic: Tomorrow Tuesday January 30th we will issue a notice to holders to redeem the entire $115 5 million aggregate principal amount of our outstanding 2024 convertible notes as a result holders of the convertible notes, we will have the right to convert their notes to shares of <unk>.

Walter Jankovic: <unk> common stock under the terms of the indenture.

Walter Jankovic: We elected to settle any such conversions by paying cash equal to the principal amount and delivering common stock for any conversion value over par we expect to use our credit facility and cash on hand to fund the cash portion of the redemption and complete the redemption in Q2 of this year.

Walter Jankovic: Additionally, with our enhanced liquidity position, we intend to step up our stock buybacks available under our current authorization of $100 million of which $5 million has been used to date with that in mind, we plan to prudently manage our balance sheet by maintaining overall net leverage of around two times.

Walter Jankovic: Or less and available liquidity of no less than $100 million going forward in summary, due to the actions we've taken to strengthen our balance sheet. We believe we have sufficient available liquidity to continue funding our growth plans, while returning capital to our shareholders through increased stock repurchases.

As we said previously the timing and amount of any stock repurchases will depend on a variety of factors, including the price of harmonics common stock market conditions corporate needs and regulatory requirements.

Walter Jankovic: At the end of Q4 total backlog and deferred revenue was $653 $2 million. Our strong backlog reflects continued demand from our large broadband customers and growing video SaaS commitments, just over 50% of our backlog and deferred revenue have customer request dates for shipments of.

Walter Jankovic: <unk> and for providing services within the next 12 months.

Walter Jankovic: Lastly, we generated $3 5 million in free cash flow during the quarter.

Speaker Change: Before reviewing the guidance I would like to mention that given the ongoing strategic review process, we've decided to hold off on setting a date for the next analyst day, we expect to revisit this in the future.

Speaker Change: Let's now review, our non-GAAP guidance for the first quarter beginning on slide 11.

Speaker Change: We expect broadband to deliver revenue between $70 million to $80 million, reflecting a technology transition that one or one of our largest customers.

Gross margins between 46% to 47% due to product mix.

Speaker Change: Gross profit between $32 million to $38 million and adjusted EBITDA between $4 million to $8 million.

Speaker Change: For the full year, we expect revenue between $460 to $500 million gross margins between 46, 5% to 48, 5% gross profit between $214 million to $243 million and adjusted EBITDA between $95 million to $119 million for <unk>.

Speaker Change: Broadband, we expect to see a return to topline growth in the second half of the year and the potential to hit record quarterly revenue during that time frame.

Today's guidance and wider range also reflects anticipated shifts in the timing of certain project deployments related to customers that are transitioning to new technologies.

Speaker Change: In 2025, we expect our growth rate to accelerate from 2024 levels as our larger customers ramp up their spend levels in the second half of 2024, which should build greater momentum as we enter 2025.

Speaker Change: For our video segment in Q1 on Slide 12, we expect revenue in the range of $40 million to $50 million.

Gross margin in the range of 60% to 61% gross profit in the range of 24% to $31 million and adjusted EBITDA to range from negative $8 million to negative $2 million.

Speaker Change: For the full year, we expect revenue between $195 million to $210 million gross margins between 60% to 62%.

Speaker Change: Gross profit between $117 million to $130 million and adjusted EBITDA to range from negative $7 million to positive $2 million.

Speaker Change: For video, we continue to be conservative, reflecting the ongoing strategic review and other macroeconomic factors I mentioned earlier.

Turning to slide 13 for the first quarter of 2024, we expect total company revenue in the range of $110 million to $130 million gross margin in the range of 51, 1% to 52, 4% gross profit to range from $56 million to $69 million adjust.

Speaker Change: At EBITDA to range from negative $4 million, the positive 6 million weighted average diluted share count of 111, 7% to $115 2 million and EPS to range from a loss of <unk> <unk> to a profit of <unk> <unk> and.

Speaker Change: And for the full year, we expect revenue between $655 million to $710 million gross margins between 55% to 52, 5% gross profit between 331% to $373 million adjusted EBITDA between 88 to one.

Speaker Change: Wondered $21 million.

Speaker Change: Weighted average diluted share count of $114 6 million and EPS to range from 49 to 72.

Speaker Change: In summary, we reported solid fourth quarter results, including record total company and broadband segment revenue. We believe our broadband segment continues to be well positioned for future growth. In addition, our video segment continued its strategic transformation and shift to SaaS during the fourth quarter.

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.

Patrick J. Harshman: Thanks Walter.

Patrick J. Harshman: As Walter just said harmonic delivered another strong quarter.

Patrick J. Harshman: A year of solid financial and operational execution, despite industry wide challenges.

Patrick J. Harshman: The company continues to be exceptionally well positioned for sustained growth.

Patrick J. Harshman: And create greater value for our shareholders.

Patrick J. Harshman: Remain focused and confident in our ability to execute and we appreciate your confidence in us.

Speaker Change: With that let's now open up the call for some questions.

Speaker Change: Okay.

Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone to remove yourself from the question queue. Please press star one again, please standby, while we compile the Q&A roster.

Okay.

Speaker Change: Our first question.

Speaker Change: It comes from the line of Simon Leopold of Raymond James. Please go ahead Simon.

Great. Thank you very much for taking the question.

I'm, just sort of trying to figure out a little bit more of what's going on within this broadband segment in that when I sort of couple of your first quarter revenue guidance with the full year. It would appear that the second quarter or back half of the year.

Speaker Change: Really expand dramatically from this first quarter and I'm trying to get an understanding of what.

Speaker Change: What youre, assuming for that to happen and I'll be explicit.

Speaker Change: You may not be in your answer, but we recall last earnings period charter talked about delaying some of its upgrades by perhaps six months and we know Comcast had started deploying DOCSIS four <unk>, but some of your language in the prepared remarks. It sounded like you were making references to.

Speaker Change: Some slower aspects of a four night out so I'm just trying to discern what.

Speaker Change: The real driver is and what the pattern might be through the year. Thank you.

Speaker Change: Hi, Simon and I'll start that and then ask Patrick to jump in as well, let me first start by identifying how our guidance is set up and address those two points that you brought up definitely from a Q1 standpoint, you see where our guidance is the expectation is we returned to <unk>.

Growth year on year growth in the second half of Q3 Q4, what is giving us confidence in terms of providing that full year guidance is predicated on two things. One is based on our backlog and contracts that we have with with our customers, but more importantly, with regards to the recent.

<unk> that we've been having with key customers in terms of their deployment plans in 2024, and so the guidance reflects the information the latest information that we have by working with our customers to identify the technology transitions when they expect to to ramp and.

Speaker Change: That's reflected in the guidance in regards to.

Speaker Change: The two technology specifically.

Speaker Change: Definitely there is a customer who is ramping up and moving over to Ford auto and Thats going to take some deployment time as Patrick mentioned earlier and with regards to our other customer that's ramping up I mentioned the alignment with regards to the plans and the deployment plans with that.

Patrick J. Harshman: Customer Hess, Patrick would you like to add.

Patrick: I think you've covered it.

Patrick: Thank you Simon if that's clear so you have any more specific follow up.

Speaker Change: Actually I've got a I've got a different follow up and this is just much more of the sort of broader topic in that you highlighted sort of the 15% coverage to date, we know Comcast has been working at its own initiative for about four years. That's backwards looking if you were to sort of take a look at the what's in front of.

Speaker Change: You and your pipeline can you give us sort of your thinking of how many years. This cycle should last for you.

Speaker Change: Well.

Speaker Change: I think it is a tough question Simon, but I mean, a top level answer is certainly another four to five years.

Speaker Change: You've kind of got some cross currents on one hand, we are customers the market have learned a lot.

Speaker Change: So the deployment pace today can and should be much faster than it was when this whole initiative started four years ago.

Speaker Change: On the other hand as we all have seen some customers are just inclined for a variety of reasons to move more slowly, particularly.

In regards to getting the programs up and running.

So you've got both of those things kind of ongoing somewhat offsetting themselves. So in summary, I expect the pace going forward to be slightly faster than the pace that we've seen to date, but not dramatically so and I think that that sets us up for 456, plus strong years of.

Speaker Change: Investment and opportunity in this area.

Speaker Change: Great. Thank you for taking the questions.

Thanks Simon.

Thank you.

Speaker Change: Our next question.

It comes from the line of Ryan Koontz of Needham <unk> Company. Please go ahead Ryan.

Thanks for the question.

Ryan Koontz: If we could just step back also in talk about your North America tier ones, obviously, we're familiar with Comcast and your win at charter.

Ryan Koontz: But without naming names can you refresh us on where we are with <unk>.

Ryan Koontz: North American tier ones that you have wins with maybe without naming names but.

Ryan Koontz: Talk about them in generality.

Speaker Change: Sure Ryan.

Speaker Change: I think we previously stated that actually out of the top five we've received some kind of order or some level of business with a top three.

Speaker Change: And as I mentioned in the prepared remarks, we went another top 10, just this past quarter.

Speaker Change: So our our coverage does not 100% but.

Speaker Change: It is now over 50%.

Speaker Change:

Speaker Change: And each of those customers is moving forward with.

Speaker Change: <unk>.

Speaker Change: Different set of priorities different paces.

To date frankly out of the two biggest names I think the <unk>.

Speaker Change: <unk> has been a little bit slower than we would have expected.

Speaker Change: If you will.

Back a year or two ago, but we see growing signs of.

Speaker Change: <unk>.

Speaker Change: That improve at one of the things Thats kept some folks on the sidelines as you know has been a.

Speaker Change: <unk> about DOCSIS, four and different variants of that technology and.

Speaker Change: And the success that we're seeing rolling that out I think is being very well received by by the market both existing customers. We're trying to figure out exactly how to move forward as well as prospective customers, who are kind of waiting for the right stepping off point.

Speaker Change: So the momentum is strong the position is strong there are a couple of additional accounts to win.

Speaker Change: And Theres a lot of really good work ahead of us and plans actively being worked with customers have yet to really start scaling in earnest.

Speaker Change: Okay. That's super helpful. Patrick Thank you and maybe double clicking on your comment there around and DOCSIS four <unk> I know in your prepared remarks, you mentioned.

Speaker Change: The.

Speaker Change: Amplifier supply in these sort of things can you unpack that a little bit for us there in terms of your assumptions that go into your your DOCSIS for migration in terms of.

Speaker Change: Pendants on other things.

Speaker Change: You can't control.

Speaker Change: Calm chips whatever.

Speaker Change: Yeah. So so.

Speaker Change: Right so.

Speaker Change: The question and we were trying to two two to illuminate that a little bit more.

Speaker Change: Need for a customer to turn on in Endo and DOCSIS four system other things seem to be in place. So DOCSIS four modem.

And most of architectures.

Speaker Change: Some kind of DOCSIS four amplifier.

Speaker Change: Et cetera. However, the important thing to understand is that our new DOCSIS four <unk> technology can be run in a DOCSIS three one mode.

Speaker Change: So if you're a customer and you got to deploy.

Speaker Change: I'll make it up Akron, Ohio.

Speaker Change: You may not be ready with the modem and the RF amplifiers, but you may nonetheless choose to buy DOCSIS four capable nodes now rather than quote unquote regrettable spend DOCSIS three one limited notes if that makes sense.

Speaker Change: So we're seeing some rethinking by by customers and we are definitely not seeing in all cases purchasing or in planning and deployment of our DOCSIS four <unk>.

Speaker Change: Capable technology being in any way limited by the broader ecosystem.

Speaker Change: And so that kind of brings us full circle to one large customer has decided to really pivot almost fully.

What they are deploying with us to the DOCSIS four <unk> I think that's great. It takes advantage of our new <unk> technology really further strengthens our position in.

Speaker Change: In the short term as you can see from our guidance and as we just discussed with Simon. This does mean, we've kind of got a little bit funny shaped to the curve of slower first half followed by.

Speaker Change: What we think is going to be a very aggressive second half.

Speaker Change: And and.

Speaker Change: But net net.

It doesn't diminish the total opportunity and it certainly does not put us on the sidelines waiting for any other third party products or element of the solution.

Speaker Change: That's clear.

That's perfect Patrick Thank you and with regards to your DOCSIS four <unk>.

Speaker Change: Any of the second half load.

Is it more dependent on your customers.

Speaker Change: Or is it your own supply chain.

Speaker Change: Holding things up there in terms of the second half weight on broadband specifically regarding DOCSIS four it's more about our customers I mean that being said it's a good question I mean, the fact is we could not ship DOCSIS four <unk> infinite quantities today, even if we wanted to so frankly.

All in a kind of a ramp up of the supply chain of the deployment experienced some maturation et cetera. So everything is converging, but I think if you'll have to point to something that that could be a <unk>.

Speaker Change: Limiting factor, it's more on the on the demand side, we feel quite good about where we are with the technology and that we're going to be in good shape to two.

Speaker Change: To supply quite heavy demand in the second half in fact as you've heard from Walter that is our plan.

Speaker Change: Yes.

Speaker Change: Great. Thank you so much.

Thanks.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question.

It comes from the line of Steven Frankel of Rosenblatt. Please go ahead Steven.

Good afternoon, Patrick let's talk about the other set of customers. There were a large number of customers and are entering Cte that hadn't really figured out their deployment plans and where are we with those and how big a percentage of that group is likely in the four okay.

And so they're going to be back half weighted as well.

Patrick: Yes, that's right Steve.

Patrick: It's an excellent question and an excellent point look there is not certainly domestically there is not a significant cable operator, who is not contemplating DOCSIS forero for at least part of their strategy.

Patrick: And so it's part of the dialogue with everyone.

Patrick: And as part of the dynamic for better or worse than again, what we're talking about here is not the scale of the opportunity in fact, DOCSIS four <unk> expands the opportunity from our perspective, but it does have certain implications on the on the timing for all the reasons, we've just discussed and indeed.

Patrick: <unk>.

Patrick: I'd say the typical let's say mid size. The operator is still probably has three one more central to their near term plans.

Understanding and figuring out their <unk> strategy, particularly for their most competitive areas is is mission critical for them and it's very much core to <unk>.

Patrick: So the planning.

Patrick: Discussions with us and to the anticipated scaling.

Speaker Change: Indeed, as you said.

Speaker Change: Pushing things a little bit more back half.

Speaker Change: This year.

Okay, and then on the fiber business, maybe a little more color on the progress you are making.

Speaker Change: Yes.

Speaker Change: New opportunities in the pure fiber area.

Speaker Change: Well I mean for us, it's all new opportunity.

Speaker Change: We've I mean, as I mentioned, where we've won quite a bit of business with some significant existing cable accounts, but actually very often within those accounts. It's a different team this could be a team dealing with business services.

Speaker Change: Yeah.

Speaker Change: Services to them to use as well as this.

Speaker Change: The groups, who are expanding the footprint the so called edge out activity acquiring new homes passed.

Speaker Change: So we're making good progress there we've had a couple of very significant design wins last year was actually quite a good year from a particularly a new order input point of view.

Speaker Change: One of the things, we discovered particularly internationally, though is that there was a couple of holes in the product line for instance, we focused on <unk> initially and Theres a number of accounts that are really also looking for complementary one gig solutions still legacy solution. So we've added some capabilities around that really I.

Speaker Change: I think bullet proofing, our offering and giving us a more complete end to end solution.

Speaker Change: Four for domestic and international operators and this is looking at both cable as well as new let's say traditional telecom or fiber first operators.

Speaker Change: We're we're we're also excited about the progress we're making there with those new non cable accounts against several good wins late last year, and a pretty strong pipeline and actually its going after those accounts. That's one of the key areas of focus for us in terms of scaling up our go to market capability.

And would you remind us how many fiber first customers you have today.

Speaker Change: I don't think we've quoted that and I think thats not a metric we want to get into but it's.

Speaker Change: It's more than just several how about that Steve.

Steve: Okay, great. Thank you.

Speaker Change: Okay. Thanks, Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of George Notter of Jefferies. Your question. Please George.

George Charles Notter: Hi, guys, thanks very much.

George Charles Notter: If I go back to the last quarter I think there was a conversation about customers carrying excess inventory.

George Charles Notter: I guess I was thinking about it more in the context of Comcast, but could you give us a sense for what that looks like did that inventory gets burned off here in Q4 or is that still something that's kind of lingering going forwards.

No in terms of.

George Charles Notter: What we talked about last year George in terms of orders that got pushed out those orders were fulfilled in Q4 that was part of the.

George Charles Notter: Impact you would see there on an inventory for examples the reduction in inventory. So we were holding inventory that was ready to go a couple of quarters ago, and we've now flushed that out in in Q4.

Got it Okay, and then also what about inventory that is in the possession of your customers.

Speaker Change: Is there is there a comment on that as well.

Speaker Change: No specific comment George in terms of having direct access to see exactly whats in their pipeline in terms of lead at the 331 nodes or or 4.0 is just getting started so there's very little inventory in the pipeline because thats just getting getting started.

Speaker Change: Now.

Speaker Change: Got it okay. So is that is that part of the narrative here that.

Speaker Change: As you see customers transition from three one to four row.

Speaker Change: Your business trends are softer now because.

Speaker Change: Yes.

Inventories or is it in fact that is.

Speaker Change: There's a different SKU than that they are buying as they deploy forero or how do I think about how the customer is approaching their own inventories of your products.

Speaker Change: They go through this transition.

Speaker Change: Yes, certainly George well as Patrick mentioned earlier with regards to deployment around for Dot O notes and Theyre backward compatibility in terms of ability to put those notes in place.

Speaker Change: In in the network and not regret putting a three one and having to go back in short order and upgrade to a 4.0 notes. So I think we're seeing a level of planning around that as customers look at how they're going to leverage our four dato notes that have that backward compatibility. So I think that's it.

Speaker Change: Big driver in terms of the technology transition specifically to <unk>.

Speaker Change: Got it up for.

Speaker Change: For you is that a different SKU that youre selling into a customer like like a Comcast.

Speaker Change: Certainly for Dot O is a different SKU than three dot one George its a different hardware design, it's a different core trip, it's a different RF design too to support the.

Speaker Change: The DOCSIS four capabilities so for the edge devices. It is a different hardware design and it's also additional.

Speaker Change: Incremental <unk>.

Speaker Change: Capability functionality on the software the core software piece.

Got it right and I guess the question I'm asking is.

Speaker Change: Is that a source of the softness that you see here in the first part of the year.

Customers depleting any remaining inventory of <unk> nodes in advance of cutting over to forum.

Speaker Change: So it's part of the story I don't think it's the whole story, but for one customer in particular, George its a big part of the story. If you if youre gearing up for four Oh, you're not only just right sizing your inventory youre actually believing your legacy inventory down heart right.

Speaker Change: We have another.

A significant customer that for their own reasons is is just the natural curve of their ramp up.

Speaker Change: <unk> is still I'd say ramping up moderately through the first half and kind of hitting the need of the curve sometime in Q2, and really getting to a much heavier pace of deployment in Q3 and Q4, that's a customer who is relatively newer to deployment and thats consistent with what we've seen in the past with other customers who are in their let's say first year of major rollout.

Speaker Change: So we've got they've got two separate things working at the same time and coincidentally.

Speaker Change: Both following the same kind of lighter first half stronger second half curve kind of.

Speaker Change: Multiplying the effect that makes sense.

Speaker Change: That helps thank you guys very much.

Speaker Change: Thank you George.

Speaker Change: Thank you again to ask a question. Please press star one one on your Touchtone telephone again Thats Star one one on your Touchtone telephone to ask a question.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Tim <unk> of Northland.

Speaker Change: Northland. Please go ahead Tim.

Speaker Change: Thanks.

Good afternoon.

Tim: The question is on.

Tim: Kind of the nature of your initial.

Tim: For Amp with charter I guess, and what you might expect going forward.

Tim: And I guess I want to come at that from a couple of directions first you saw.

Tim: Weaker gross margins in Q4.

Do we infer that thats.

Tim: Hardware heavy initial mixed or some kind of stocking.

Or there is a relationship there at all.

Tim: Remembering that you had a big upfront software license with Comcast, but that initial deployment.

Tim: And then.

Tim: Relatives and assuming that most of the charter revenue is vast majority is broadband.

Tim: Really wasn't much.

Tim: Anything last quarter.

How would you relate that ramp to what you saw historically with Comcast.

Tim: And I can remember times when you were at similar levels.

Tim: On up to doing.

Tim: $50 million to $60 million a quarter, we're probably on the broadband side. So when you talk about that second half ramp should we think about.

Tim: Those types of metrics to try in.

Define what you mean.

Tim: But with charter in particular.

Tim: Hey, Tim it's Walter So we're not going to specifically talk about any particular customers ramp, but I think theres a couple of things there that that you passed that will address.

Walter Jankovic: First of all in regards to the margins for for Q4.

Walter Jankovic: In broadband specifically, so as we highlighted in our opening remarks, we had a significant high mix of nodes go out in the Q4 time period more than we had anticipated going into the quarter part of that was other customers who came in with <unk>.

Walter Jankovic: Orders that they wanted fulfilled in the quarter.

And so we prioritize that and so when we look at our mix of business.

Walter Jankovic: Heavy mix of nodes in Q4 and that drove down the broadband margin compared to what we've seen historically.

Walter Jankovic: Second point that I will I will highlight here in terms of how to think about the margin profile as we move forward across the customer base as we look at customers.

Walter Jankovic: In.

Walter Jankovic: In terms of moving forward.

Walter Jankovic: Customers acquire the nodes they acquire licenses software licenses to enable those nodes once those get put put into the network and so as we've highlighted before.

Walter Jankovic: Quarter to quarter, the margins will fluctuate depending on the mix over a longer period of time, such as the year you average those puts and takes and youll see more of a normalized mix of the Pos coupled with with the nodes that are going out in.

Walter Jankovic: In broadband.

Walter Jankovic:

Speaker Change: So I addressed a couple of your questions. Tim is there maybe there is something I missed from from the ones that you listed out here.

Speaker Change: Dresser.

Dresser: Yes, I think so.

Dresser:

As a follow up question you mentioned the prospects for an accelerating growth rate in 'twenty five.

Tim: As new.

Dresser: New customers kind of get ramped up.

Speaker Change: Can you offer any kind of commentary.

Speaker Change: Because you mentioned over a year for gross margin sort of normalized youre guiding into the.

Speaker Change: Slide <unk> lets say 47, something like that.

Speaker Change: As the business scales, if we're looking at 25.

Is 50% on the table from a gross margin perspective, or do you expect the hardware mix to be heavy enough.

Speaker Change: This range is a reasonable range to expect where we are currently thanks.

That's a good question Tim.

The way I would look at FY 'twenty four it's a transitional year with regards to a lot of notes that are going out into into the networks as we look forward beyond.

Speaker Change: 2020 for I would say that the mix will likely be slightly improved in terms of the mix of our Pos as compared to two our hardware, but there as you can imagine there are many factors and some of the ones that Patrick highlighted earlier with regards to our our focus around fiber as well.

Speaker Change: <unk> that has an impact in terms of the overall margins for the business.

Speaker Change: Okay. Thanks very much.

Speaker Change: Okay. Thanks, Tim.

Speaker Change: Thank you I would now like to turn the conference back over to Patrick Harshman for closing remarks, Sir.

Patrick J. Harshman: Okay, well, thank you again for joining us today.

Patrick J. Harshman: We're pleased with our strong quarter and we're excited about the opportunities ahead of us and we are determined to execute in 2020 for 2025 and beyond.

Speaker Change: We appreciate your support we're confident in our ability to execute and we look forward to continuing to be in close dialogue with you as we go forward.

Speaker Change: Thanks again, everyone have a good day.

Speaker Change: Okay.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

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Speaker Change: Welcome to the fourth quarter and full year 2023 harmonic earnings conference call My.

Lindsey: My name is Lindsey and I will be your operator for today's call.

Lindsey: At this time all participants are in a listen only mode. Please note that this conference is being recorded.

Lindsey: After the speaker presentation, there will be a question and answer session.

Lindsey: Ask a question during the session you will need to press star one one on your telephone to remove yourself from the queue. You May press star one again.

Lindsey: I will now turn the call over to David Hanover Investor Relations, David You may begin.

David Hanover: Thank you operator, Hello, everyone and thank you for joining us today for harmonics fourth quarter and full year 2023 financial results Conference call.

David Hanover: With me today are Patrick Harshman, President and Chief Executive Officer, and Walter Jankovic, Chief Financial Officer.

David Hanover: Before we begin I'd like to point out that in addition to the audio portion of the webcast. We've also provided slides for this webcast.

David Hanover: Which you may view by going to our webcast on our Investor Relations website.

David Hanover: Now turning to slide two during.

David Hanover: 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.

David Hanover: 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.

David Hanover: These documents identify important risk factors, which can cause actual results to differ materially from those contained in our projections or forward looking statements.

David Hanover: 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 have posted on our website and filed with the SEC on form 8-K.

David Hanover: We'll also discuss historical financial and other statistical information regarding our business and operations and some of this information is included in the press release.

David Hanover: This information will be available on a recorded version of this call or on our website.

David Hanover: And now I'll turn the call over to our CEO Patrick Harshman Patrick.

Patrick J. Harshman: Well, thanks, David and welcome everyone to our fourth quarter call, but today, we reported our fourth quarter and full year results wrapping up 2023 with another quarter of solid performance, including record total company revenue.

Patrick J. Harshman: Driven by continuing strong demand for our market, leading broadband and video streaming solutions.

Patrick J. Harshman: Key highlights for the quarter included record broadband revenue demonstrating our broadband business remains firmly on track for sustained multi year growth.

Patrick J. Harshman: <unk> video SaaS revenue exceeding $50 million for the year powered.

Patrick J. Harshman: Powered by growing sports streaming success and execution of a new $160 million credit facility enhancing our financial flexibility.

Patrick J. Harshman: We also delivered strong new bookings during the quarter with a book to Bill of one two pending.

Patrick J. Harshman: Ending 2023 with over $653 million of backlog and deferred revenue and.

Patrick J. Harshman: And positioning us well for 2024 and the coming years.

Patrick J. Harshman: So moving now to our broadband segment, we delivered segment revenue of $115 2 million.

Patrick J. Harshman: Up 52% sequentially and 20% year over year.

Patrick J. Harshman: The number of global customers deploying our solution reached 108 up 19% year over year.

Patrick J. Harshman: With a corresponding $26 3 million DOCSIS cable modems now served worldwide approximately 15% of cable modems deploy globally.

Patrick J. Harshman: Again, highlighting the substantial DOCSIS growth opportunity still in front of us.

Patrick J. Harshman: We had several new customer wins during the fourth quarter, including a new top 10, North American operator for whom we made initial shipments.

Patrick J. Harshman: Our pipeline of new customers remained strong mostly by the expanding breadth and depth of our competitive advantages.

An important area of expanding competitive differentiation for harmonic is DOCSIS four <unk>.

Patrick J. Harshman: Our software court has seamlessly accommodated the new standard does have a remote phy edge device designs for.

We're successfully powering several early DOCSIS four <unk> deployments launched late in the year and we are uniquely positioned as the go to partner for any operator planning a DOCSIS four that'll launch where scale deployment in 2024 for 2025.

As a reminder, our DOCSIS four nodes are fully backward compatible with DOCSIS three one so that availability of DOCSIS for RF amplifiers is not a requirement.

Patrick J. Harshman: For any operator, who chooses to go forward and deploy harmonics support Idaho capable nodes in 2024.

Patrick J. Harshman: And we expect at least one key customer to make a big move to DOCSIS four <unk> enabled edge devices during 2024.

Patrick J. Harshman: Leading to a slower pace of deployment early in the year. The sport I don't know deployment expertise scales up followed by a heavier deployment pace in the second half.

Another important aspect of our broadband business is that we had greater revenue diversification during the fourth quarter with both Comcast and charter contributing greater than 10% of our revenue.

Patrick J. Harshman: Well at different places in their respective DAA architecture deployment journeys, we're grateful to be working with both of these industry leaders.

Patrick J. Harshman: Incredibly focused on supporting their respective strategic initiatives.

Welcome entering a growing multi year pipeline of DOCSIS opportunities. We also continue to make solid progress during the fourth quarter on building a synergistic fiber to the home business.

Patrick J. Harshman: In the fourth quarter, we secured several new fiber customer wins spanning existing cable and non cable fiber first operators.

Patrick J. Harshman: We also announced a couple of compelling new fiber products that significantly expand our addressed market and our ability to compete with incumbent to fiber to the home competitors.

Patrick J. Harshman: Early customer response to these new products has been very encouraging.

Ramping up our fiber specialist sales team and we remain very much on track to make fiber a strong strategic and financial contributor to our business.

So in summary on broadband our broadband business continues to be well positioned with unique and powerful technology advantages solid customer relationships strong backlog and a rich array of new business opportunities that give us confidence that our multi year growth outlook.

Patrick J. Harshman: We finished 2023 with solid execution and considering our customers positive feedback we're confident in our ability to carry this strong execution forward through 2024 and beyond.

Patrick J. Harshman: So turning now to our video segment. The highlight of the quarter was again says revenue $13 2 million up 26% year over year.

Patrick J. Harshman: Total segment revenue was $51 $9 million down from $68 3 million a year ago, while gross margin was a record 64, 6%.

Patrick J. Harshman: These results reflect our continued intentional SaaS transformation and some macroeconomic headwinds overseas impacting our appliance business.

Patrick J. Harshman: As mentioned previously SaaS revenue for the year to $50 million up about 47% year over year, mainly driven by streaming sports live sports.

During the fourth quarter, we continued to see existing customers expand usage and new customers adopt and begin to launch services with our SaaS solution.

Patrick J. Harshman: This positive momentum has carried into 2024 earlier this month, our SaaS powered the largest live streaming event ever in the U S.

Patrick J. Harshman: Testament to our exceptional technology and service capabilities.

The market visibility of this extremely successful event has already translated into additional boost an additional boost to our sales.

Patrick J. Harshman: <unk> sales pipeline.

Patrick J. Harshman: Our targeted AD monetization is key to the rationale for moving live content, especially live sports to streaming.

Patrick J. Harshman: And it's an important adjacent growth opportunity for us.

Patrick J. Harshman: As you May recall, we rolled out a new AD insertion SaaS earlier in 2023, and it was great to see several initial wins with this new service during the fourth quarter.

Patrick J. Harshman: On the appliance side of the business, which as a reminder is more capital intensive for our customers. We saw revenue stabilized. Despite several continuing instances of project delays associated with financing and other macroeconomic headwinds, particularly internationally.

Patrick J. Harshman: Our domestic video appliance business remains solid as does our overall pipeline and competitive position.

Patrick J. Harshman: Finally regarding video our strategic review process is ongoing and continues to be a very high priority for us.

Patrick J. Harshman: Walter will speak more about this shortly.

So in conclusion, we ended 2023 on a solid note and with a robust backlog.

Patrick J. Harshman: This highlights the continued demand we are seeing from our customers and a strong footing we have for further growth in 2024 and beyond.

Patrick J. Harshman: With that let me turn it over to you Walter for a deeper discussion of our results and outlook.

Walter Jankovic: Thanks, Patrick and thank you all for joining us today before I discuss our quarterly results as well as our 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 Q4 press release and earnings presentation includes reconciliations of the non-GAAP.

Walter Jankovic: <unk> measures to GAAP that are discussed on this call. Both of these are available on our website.

Walter Jankovic: Our fourth quarter results were consistent with our expectations and above the midpoint of our guidance range on the top as well as the bottom line. Additionally, we exceeded the midpoint of revenue guidance in both broadband and video.

Walter Jankovic: Before reviewing our Q4 2023 financials in detail I will call out the highlights here on slide seven.

Walter Jankovic: For the quarter, we reported revenue of $167 1 million, which was an all time company record and included record broadband revenue of $115 $2 million we.

Walter Jankovic: We also reported EPS of <unk> 13.

Bookings of $196 5 million, a strong book to Bill of one two and near record backlog and deferred revenue of $653 2 million.

Walter Jankovic: In a few moments I will provide detailed Q1 and full year 2020 for guidance.

Prior to that I would like to highlight a few key points regarding our guidance for our broadband business. We expect full year 2024 revenue increased 24% year over year at the midpoint of our guidance.

Walter Jankovic: Just on the momentum we expect to see in the second half of 2024, we anticipate 2025 broadband revenue growth to accelerate on a year over year basis as Patrick mentioned earlier, we are well positioned with our leading technologies strong backlog and our customer success to drive continued <unk>.

Walter Jankovic: All three year growth.

Walter Jankovic: With regards to video we are guiding conservatively for FY 'twenty four due to the ongoing strategic review.

Walter Jankovic: Turning to slide eight.

Walter Jankovic: Total Q4 revenue was up nearly 2% year over year and 31, 4% on a sequential basis.

Walter Jankovic: This quarter over quarter increase was due to growth in our broadband segment.

Walter Jankovic: Looking more closely at broadband Q4 revenue was a record $115 2 million, an increase of 20% year over year.

Walter Jankovic: As anticipated during the fourth quarter, we benefited from the initial shipments of another large tier one customer.

Walter Jankovic: And video Q4 revenue was $51 9 million, while video appliance sales were lower due to the factors I noted on our last earnings call.

Walter Jankovic: <unk> revenue included SaaS revenue of $13 2 million or 25, 4% of segment revenue for the quarter up 26% from the prior year.

Walter Jankovic: Video SaaS revenue growth continues to be driven by live sports streaming expansions and new customer wins, we continue to focus on growing our SaaS business and video, while maximizing our profitability and implied in appliances. Despite current macroeconomic headwinds.

Walter Jankovic: In our last earnings call, we announced the initiation of a formal strategic review process for our video business due in part to indications of interest. We have received from a number of parties. We are continuing the strategic review process and it remains a top priority for us having said that as previously.

Walter Jankovic: He noted no specific timetable has been established for the completion of the review we.

We are not providing any further details on this process unless and until a definitive agreement has been reached and our board approves the transaction or decides to conclude the review.

Walter Jankovic: Turning back to our fourth quarter results, we had two customers representing greater than 10% of total revenue during the quarter with Comcast representing 41% of total revenue and charter representing 15% of total revenue.

Walter Jankovic: The total company gross margin was 49, 3% for Q4 23, reflecting decreased gross margin in the broadband business segments sequentially.

Walter Jankovic: Broadband gross margin was 42, 4% for Q4, 'twenty three down 520 basis points year over year due to product mix to offer additional clarity. During Q4, we shipped out an extremely high mix of edge products that possesses relatively lower margins compared to other products in our portfolio.

Walter Jankovic: No.

Walter Jankovic: Video gross margin was 64, 6% in Q4, 'twenty three and all time record for the business segment, even taking into consideration today's macroeconomic headwinds and project delays that we've discussed previously this margin improvement occurred across both SaaS and appliances.

Walter Jankovic: Moving down the income statement on slide nine.

Walter Jankovic: Q4, 'twenty three operating expenses were $63 4 million up slightly both on a sequential and year over year basis adjusted.

Walter Jankovic: Adjusted EBITDA for Q4, 23 was $21 $7 million comprised of $21 9 million from broadband and negative <unk> 2 million from video.

Walter Jankovic: Adjusted EBITDA for broadband was in line with our expectations, while video beat our expectations due in part to the gross margin strength previously discussed.

Walter Jankovic: This all translated into Q4 'twenty three EPS of <unk> 13 per share in line with our prior guidance and compared with zero in Q3 dollars 23, and <unk> 17 per share for Q4 'twenty two.

Walter Jankovic: We ended the fourth quarter of 2023 with the calculated diluted weighted average share count of $115 7 million compared to $116 7 million in Q3 dollars 23, and $117 3 million in Q4 2002, the sequential decrease is primarily.

Walter Jankovic: Merrily due to the decreased convertible debt dilution of one 1 million shares.

Turning to the order book Q4 bookings were $196 $5 million. The book to Bill ratio was strong at one two for the quarter for both Q3 dollars 23 in Q4 'twenty two our book to Bill ratios were 0.8.

Walter Jankovic: As we stated previously over time, we expect this ratio to normalize and approach the historical benchmark of greater than one for Q4, we were above one after being below one last quarter.

Walter Jankovic: Turning to the balance sheet on slide 10.

Walter Jankovic: We ended Q4, 'twenty three with cash of $84 3 million. The net $2 3 million sequential increase in cash and short term investments was due to a few factors cash from operations provided $6 $3 million due predominantly to a decrease in inventory and inventory related deposits.

Walter Jankovic: Offset by an increase in accounts receivable, we also used $2 7 million and the purchase of fixed assets.

Walter Jankovic: Turning to accounts receivables and days sales outstanding at the end of Q4 'twenty three DSO was 76 compared to <unk> 78 in Q3, 23% and 59 in the prior year period. The prior year period was lower due to a large customer taking an early payment discount.

Walter Jankovic: Days inventory on hand was 89 days at the end of Q4 dollars 23 compared to 145 at the end of Q3 dollars 23, a 140 at the end of Q4 'twenty to.

The inventory decline in the quarter was a result of strong sales in Q4 and lower indices as we continued to tighten our supply chain.

Walter Jankovic: Turning to capital allocation, our top priority remains driving our future growth when appropriate we will strategically invest in building inventory as we've done in the past to meet strong demand.

In line with this strategy in December we closed a five year $160 million credit facility that included a $120 million revolving credit line and a $40 million delayed draw term loan. This new credit facility allows us to repay our 2010.

Walter Jankovic: For convertible notes outstanding, while providing us with ample liquidity and flexibility to support our multiyear growth plans as of today, we have not borrowed on this facility.

Walter Jankovic: Tomorrow Tuesday January 30th we will issue a notice to holders to redeem the entire $115 5 million aggregate principal amount of our outstanding 2024 convertible notes as a result holders of the convertible notes, we will have the right to convert their notes to shares of her.

Walter Jankovic: Monarch common stock under the terms of the indenture.

Walter Jankovic: We elected to settle any such conversions by paying cash equal to the principal amount and delivering common stock for any conversion value over par we expect to use our credit facility and cash on hand to fund the cash portion of the redemption and complete the redemption in Q2 of this year.

Walter Jankovic: Additionally, with our enhanced liquidity position, we intend to step up our stock buybacks available under our current authorization of $100 million of which $5 million has been used to date with that in mind, we plan to prudently manage our balance sheet by maintaining overall net leverage of around two times.

Or less and available liquidity of no less than $100 million going forward in summary, due to the actions we've taken to strengthen our balance sheet. We believe we have sufficient available liquidity to continue funding our growth plans, while returning capital to our shareholders through increased stock repurchases.

Walter Jankovic: As we said previously the timing and amount of any stock repurchases will depend on a variety of factors, including the price of harmonics common stock market conditions corporate needs and regulatory requirements.

At the end of Q4 total backlog and deferred revenue was $653 2 million are strong backlog reflects continued demand from our large broadband customers and growing video SaaS commitments, just over 50% of our backlog and deferred revenue have customer request dates for shipments of.

Walter Jankovic: <unk> and for providing services within the next 12 months.

Walter Jankovic: Lastly, we generated $3 5 million in free cash flow during the quarter.

Before reviewing our guidance I would like to mention that given the ongoing strategic review process, we've decided to hold off on setting a date for the next analyst day, we expect to revisit this in the future.

Walter Jankovic: Let's now review, our non-GAAP guidance for the first quarter beginning on slide 11.

Walter Jankovic: We expect broadband to deliver revenue between $70 million to $80 million, reflecting a technology transition at one or one of our largest customers.

Walter Jankovic: Gross margins between 46% to 47% due to product mix.

Walter Jankovic: Gross profit between $32 million to $38 million and adjusted EBITDA between $4 million to $8 million.

For the full year, we expect revenue between $460 to $500 million gross margins between 46, 5% to 48, 5% gross profit between $214 million to $243 million and adjusted EBITDA between $95 million to $119 million for.

Walter Jankovic: Broadband, we expect to see a return to topline growth in the second half of the year and the potential to hit record quarterly revenue during that timeframe.

Today's guidance and wider range also reflects anticipated shifts in the timing of certain project deployments related to customers that are transitioning to new technologies.

Walter Jankovic: In 2025, we expect our growth rate to accelerate from 2024 levels as our larger customers ramp up their spend levels in the second half of 2024, which should build greater momentum as we enter 2025.

Walter Jankovic: For our video segment in Q1 on Slide 12, we expect revenue in the range of $40 million to $50 million.

Walter Jankovic: Gross margin in the range of 60% to 61% gross profit in the range of 24% to $31 million and adjusted EBITDA to range from negative $8 million to negative $2 million.

For the full year, we expect revenue between $195 million to $210 million gross margins between 60% to 62%.

Walter Jankovic: Gross profit between $117 million to $130 million and adjusted EBITDA to range from negative $7 million to positive $2 million.

Walter Jankovic: For video, we continue to be conservative, reflecting the ongoing strategic review and other macroeconomic factors I mentioned earlier.

Walter Jankovic: Turning to slide 13 for the first quarter of 2024, we expect total company revenue in the range of $110 million to $130 million gross margin in the range of 51, 1% to 52, 4% gross profit to range from $56 million to $69 million adjust.

Walter Jankovic: That EBITDA to range from negative $4 million, the positive 6 million weighted average diluted share count of 111, 7% to $115 2 million and EPS to range from a loss of <unk> <unk> to a profit of <unk>.

Walter Jankovic: And for the full year, we expect revenue between $655 million to $710 million gross margins between 55% to 52, 5% gross profit between 331% to $373 million adjusted EBITDA between 88.

Walter Jankovic: $121 million.

Walter Jankovic: Weighted average diluted share count of $114 6 million and EPS to range from 49 to 72.

In summary, we reported solid fourth quarter results, including record total company and broadband segment revenue. We believe our broadband segment continues to be well positioned for future growth. In addition, our video segment continued its strategic transformation and shift to SaaS during the fourth quarter.

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.

Patrick: Thanks, Walter and summary, as Walter just said harmonic delivered another strong quarter.

Patrick: Capping a year of solid financial and operational execution, despite industry wide challenges.

Patrick: The company continues to be exceptionally well positioned for sustained growth.

And to create greater value for our shareholders.

Patrick: Remain focused and confident in our ability to execute and we appreciate your confidence in us.

Speaker Change: With that let's now open up the call for some questions.

Okay.

Thank you as a reminder to ask a question you will need to press star one on your telephone to remove yourself from the question queue. Please press star one again, please standby, while we compile the Q&A roster.

Speaker Change: Okay.

Speaker Change: Our first question.

Come from the line of Simon Leopold of Raymond James. Please go ahead Simon.

Simon Leopold: Great. Thank you very much for taking the question.

I'm, just sort of trying to figure out a little bit more of what's going on within this broadband segment in that when I sort of couple of your first quarter revenue guidance with the full year. It would appear that the second quarter or back half of the year.

Simon Leopold: Im really expand dramatically from this first quarter and I'm trying to get an understanding of what.

Simon Leopold: What youre, assuming for that to happen and I'll be explicit.

Simon Leopold: You may not be in your answer, but we recall last earnings period charter talked about delaying some of its upgrades by perhaps six months and we know Comcast had started deploying DOCSIS four <unk>, but some of your language in the prepared remarks. It sounded like you were making references to.

Simon Leopold: Some slower aspects of the Ford auto so I'm just trying to discern.

Simon Leopold: What the real driver is and what the pattern might be through the year. Thank you.

Speaker Change: Hi, Simon I'll start that and then ask Patrick to jump in as well.

Speaker Change: First start by identifying how our guidance is set up and address those two points that you brought up <unk>.

Speaker Change: Definitely from a Q1 standpoint, you see where our guidance is the expectation is we returned to growth year on year growth in the second half of Q3 Q4, what is giving us confidence in terms of providing that full year guidance is predicated on two things one is based on our backlog and contract.

Speaker Change: That we have with with our customers, but more importantly, with regards to the recent conversations that we've been having with key customers in terms of their deployment plans in 2024, and so the guidance reflects the information the latest information that we have by working with our customers.

Speaker Change: To identify the technology transitions when they expect to to ramp and Thats reflected in the guidance in regards to.

Speaker Change: The two technology specifically.

Speaker Change: Lee, there's a customer who is ramping up and moving over to <unk> and thats going to take some deployment time as Patrick mentioned earlier and with regards to our other customer that's ramping up I mentioned the alignment with regards to the plans and the deployment plans at that.

Speaker Change: Perhaps Patrick would you like to add.

Patrick: I think you've covered it.

Patrick: Thank you Simon if that's clear so you have any more specific follow up.

Speaker Change: Actually I've got a I've got a different follow up and this is just much more of the sort of broader topic in that <unk>.

Patrick: You highlighted sort of the 15% coverage to date, we know Comcast has been working at its own initiative for about four years. That's backwards looking if you were to sort of take a look at the what's in front of you and your pipeline can you give us sort of your thinking of how many years this cycle.

Patrick: Should last for you.

Patrick: Well.

Speaker Change: I think it is a tough question Simon but top.

Speaker Change: Top level answer is certainly another four to five years.

Speaker Change: You've kind of got some cross currents on one hand, we are customers the market have learned a lot.

Speaker Change: So the deployment pace today can and should be much faster than it was when this whole initiative started four years ago.

The other hand as we all have seen some customers are just inclined for a variety of reasons to move more slowly, particularly.

Speaker Change: In regards to getting the programs up and running.

Speaker Change: So you've got both of those things kind of ongoing somewhat offsetting themselves. So in summary, I expect the pace going forward to be slightly faster than the pace that we've seen to date, but not dramatically so and I think that that sets us up for 456, plus strong years of.

Investment and opportunity in this area.

Speaker Change: Great. Thank you for taking the questions.

Speaker Change: Okay. Thanks Simon.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: It comes from the line of Ryan Koontz of Needham <unk> Company. Please go ahead Ryan.

Ryan Koontz: Thanks for the question.

If we could just step back also in talk about your North America tier ones, obviously, we're familiar with Comcast and your win at charter.

Ryan Koontz: But without naming names can you refresh us on where we are with.

North American tier ones that you have wins with maybe without naming names, but talking about them in generality.

Sure Ryan.

Ryan Koontz: I think we've previously stated that actually out of the top five we've received some kind of order.

Ryan Koontz: Or some level of business with the top three.

As I mentioned in the prepared remarks, we went another top 10, just this past quarter.

Ryan Koontz: So our our coverage does not 100%, but is now over 50%.

And each of those customers is moving forward with.

<unk>.

Ryan Koontz: Different set of priorities different paces.

To date frankly out of the two biggest names I think the <unk>.

Ryan Koontz: <unk> has been a little bit slower than we would have expected.

If you roll the clock.

I look back a year or two ago, but we see growing signs of.

Ryan Koontz: <unk>.

Ryan Koontz: That improve it.

Ryan Koontz: The things that has kept some folks on the sidelines as you know has been a.

Ryan Koontz: <unk> about DOCSIS, four and different variants of that technology and.

Ryan Koontz: And the success that we're seeing rolling that out I think he is being very well received by by the market both existing customers. We're trying to figure out exactly how to move forward as well as prospective customers, who are kind of waiting for the right stepping off point.

Ryan Koontz: So the momentum is strong the position is strong there are a couple of additional accounts to win.

Ryan Koontz: And Theres a lot of really good work ahead of us and plans actively being worked with customers have yet to really start scaling in earnest.

Okay. That's super helpful. Patrick Thank you.

Maybe double clicking on your comment there around and DOCSIS four <unk> I know in your prepared remarks, you mentioned.

Ryan Koontz: The.

Ryan Koontz: Amplifier supply in these sort of things can you unpack that a little bit for us there in terms of your assumptions that go into your your DOCSIS for migration in terms of dependence on other things that.

Ryan Koontz: You can't control.

Broadcom chips whatever.

Speaker Change: Yes, so so.

Speaker Change: Right so.

Speaker Change: I appreciate the question and we were trying to two two to illuminate that a little bit more indeed for a customer to turn on in <unk> DOCSIS four system other things need to be in place. So DOCSIS four modem.

Speaker Change: And most of architectures.

Speaker Change: Some kind of DOCSIS four amplifier.

Et cetera. However, the important thing to understand is that our new DOCSIS four <unk> technology can be run in a DOCSIS three one mode.

Speaker Change: So if you're a customer and you got to deploy.

Speaker Change: I'll make it up Akron, Ohio.

Speaker Change: You may not be ready with the modem and the RF amplifiers, but you may nonetheless choose to buy DOCSIS four capable nodes now rather than quote unquote regrettable spend DOCSIS three one limited notes if that makes sense.

Speaker Change: So we're seeing some rethinking by by customers and and we're definitely not seeing in all cases purchasing or in planning and deployment of our DOCSIS four <unk> capable technology being in any way limited by the broader ecosystem and so that kind of brings us full circle to one large customer has decided to really pivot almost fully.

Speaker Change: What theyre deploying with us to the DOCSIS Fort out overseas.

Speaker Change: I think that's great. It takes advantage of our new technology really further strengthens our position in the short term as you can see from our guidance and as we just discussed with Simon. This does mean, we've kind of got a little bit funny shaped to the curve of slower first half followed by.

What we think is going to be a very aggressive second half.

Speaker Change: Hum.

Speaker Change: But net net it.

Speaker Change: It doesn't diminish the total opportunity and it certainly does not put us on the sidelines waiting for any other third party products or element of the solution.

Okay.

Speaker Change: Yes.

Speaker Change: Perfect Patrick Thank you and Rick regards your DOCSIS four is any of this second half load is.

Is it more dependent on your customers' demand or is it your own supply chain.

Rick: Holding things up there in terms of the second half weight on broadband specifically regarding DOCSIS four it's more about our customers I mean that being said it's a good question I mean, the fact is we could not ship DOCSIS four <unk> infinite quantities today, even if we wanted to so frankly, we're all in a kind of a ramp up of the supply chain of the deployment.

Rick: <unk> experienced some maturation et cetera, so everything is converging, but I think if you have to point to something that could be a.

Rick: Our limiting factor it's more on the on the demand side, we feel quite good about where we are with the technology and that we're going to be in good shape to two to.

Rick: To supply quite heavy demand in the second half in fact as you've heard from Walter that is our plan.

Speaker Change: Great. Thank you so much.

Speaker Change: Thanks.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: It comes from the line of Steven Frankel of Rosenblatt. Please go ahead Steven.

Steven Frankel: Good afternoon, Patrick let's talk about the other set of customers there were a large number of customers entering Cte.

Steven Frankel: It hadn't really figured out their deployment plans.

Where are we with those and how big a percentage of that group is likely in the <unk> camp and so they're going to be back half weighted as well.

Yes, that's right Steve.

Patrick: An excellent question and an excellent point look there is not certainly domestically there is not a significant cable operator, who is not contemplating DOCSIS forero for at least part of their strategy.

Patrick: And so it's part of the dialogue with everyone and it's and it's part of the dynamic channel for better or worse than again, what we're talking about here is not the scale of the opportunity in fact, DOCSIS four <unk> expands the opportunity from our perspective, but it does have certain implications on the on the timing for all the reasons, we've just discussed.

Patrick: And indeed well.

Patrick: I'd say the typical let's say mid sized operator is still probably has three one more central to their near term plans.

Understanding and figuring out their <unk> strategy, particularly for their most competitive areas is is mission critical for them and it's very much core to <unk>.

Planning.

Discussions with us and to the anticipated scaling.

Patrick: As you said.

Patrick: Pushing things a little bit more back half.

Patrick: Yes.

Patrick: This year.

Okay, and then on the fiber business, maybe a little more color on the progress you're making with.

Patrick: New opportunities in the pure fiber area.

Speaker Change: Well I mean for us, it's all new opportunity, Steve I mean, as I mentioned, we've won quite a bit of business with some significant existing cable accounts, but actually very often within those accounts. It's a different team this could be a team dealing with business services.

Speaker Change: Services and to use as well as the.

The groups, who are expanding the footprint the so called edge out activity acquiring new homes passed.

Speaker Change: So we're making good progress there we've had a couple of very significant design wins last year was actually quite a good year from a particularly a new order input point of view.

Speaker Change: One of the things, we discovered particularly internationally, though is that there was a couple of holes in the product line for instance, we focused on <unk> initially and Theres a number of accounts that are really also looking for complementary one gig solution still legacy solution. So we've added some capabilities around that really I think bullet proofing, our offering and giving us a more complete end to end solution.

Speaker Change: Four for domestic and international operators and this is looking at both cable as well as new let's say traditional telecom or fiber first operators.

Speaker Change: Where we are.

Speaker Change: We're also excited about the progress we're making there with those new non cable accounts against several good wins late last year.

Speaker Change: A pretty strong pipeline and actually its going after those accounts thats one of the key areas of focus for us in terms of scaling up our go to market capability.

Speaker Change: And would you remind us how many fiber first customers you have today.

Speaker Change: Aye.

Speaker Change: I don't think we've quoted that and I think thats not a metric we want to get into but it's.

Speaker Change: It's more than just several.

Speaker Change: How about that Steve.

Steve: Okay, great. Thank you.

Speaker Change: Okay. Thanks.

Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of George Notter of Jefferies. Your question. Please George.

Hi, guys, thanks very much.

George Charles Notter: If I go back to the last quarter I think there was a conversation about customers carrying excess inventory.

George Charles Notter: I guess I was thinking about it more in the context of Comcast, but it could.

George Charles Notter: Could you give us a sense for what that looks like did that inventory gets burned off here in Q4 or is that still something that's kind of lingering going forwards.

So in terms of.

What we talked about last year George in terms of orders that got pushed out those orders were fulfilled in Q4 that was part of the.

Impact you would see there on an inventory for examples the reduction in inventory. So we were holding inventory that was ready to go a couple of quarters ago, and we've now flush that out in in Q4.

Got it Okay, and then also what about inventory that is in the possession of your customers.

Is there is there a comment on that as well.

Speaker Change: No specific comment George in terms of having direct access to see exactly what's in.

In their pipeline in terms of let it be 331 nodes or or.

Speaker Change: 4.0 is just getting started so there's very little inventory in the pipeline because thats just getting getting started now.

Speaker Change: Got it okay. So is that is that part of the narrative here that.

Speaker Change: As you see customers transition from three one to four row.

Speaker Change: Your business trends are softer now because.

Speaker Change: They are adjusting inventories or is it in fact that.

Speaker Change: It is a different SKU than that they are buying as they deploy forero or how do I think about how the customers approaching their own inventories of your products as they go through this transition.

Speaker Change: Yes, certainly George well.

Speaker Change: Patrick mentioned earlier with regards to deployment around four Dato notes and Theyre backward compatibility in terms of ability to put those notes in place.

Speaker Change: In the network and not regret putting a three one then having to go back in short order and upgraded to a 4.0 notes. So I think we're seeing a level of planning around that as customers look at how they are going to leverage our <unk> notes that have that backward compatibility. So I think that is.

Speaker Change: A big driver in terms of the technology transition specifically to <unk>.

Got it up for you is that a different SKU that youre selling into a customer like like a Comcast <unk>.

Speaker Change: Certainly for Dod always a different SKU than $3, one yeah, yeah, George its a different hardware design, it's a different core trip, it's a different RF design too to support the.

Speaker Change: The DOCSIS four capabilities so for the edge devices. It is a different hardware design and it's also additional.

Speaker Change: Incremental <unk>.

Capability functionality on the software the core software piece.

Speaker Change: Got it right and I guess the question I'm asking is.

Is that a source of the softness that you see here in the first part of the year.

Speaker Change: Customers depleting any remaining inventory of three one nodes in advance of cutting over to forum.

Speaker Change: So it's part of the story I don't think it's the whole story, but for one customer in particular, George its a big part of the story. If you if youre gearing up for four Oh, you're not only just right sizing your inventory youre actually believing your legacy inventory down heart right.

Speaker Change: We have another.

Speaker Change: Significant customer that for their own reasons is is just the natural curve of their ramp up.

<unk> is still I would say ramping up moderately through the first half and kind of hitting the need of the curve sometime in Q2, and really getting to a much heavier pace of deployment in Q3 and Q4, that's a customer who is relatively newer to deployment and that's consistent with what we've seen in the past with other customers who are in their let's say first year of major rollout.

Speaker Change: So we've got two separate things working at the same time and coincidentally.

Speaker Change: Both following the same kind of lighter first half stronger second half curve kind of.

Speaker Change: Multiplying the effect that makes sense.

Speaker Change: That helps thank you guys very much.

Thank you George.

Speaker Change: Thank you again to ask a question. Please press star one one on your Touchtone telephone again Thats Star one one on your Touchtone telephone to ask a question.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Tim <unk> of Northland. Please go ahead Tim.

Tim: Thanks and good.

Tim: Good afternoon.

Tim: Our question is on.

Tim: Kind of the nature of your initial.

Tim: We're amp with charter I guess and what you might expect going forward.

Tim: And I guess I want to come at that from a couple of directions first you saw.

Tim: Weaker gross margins in Q4.

Tim: Do we infer that thats.

Hardware heavy initial mix or some kind of stocking.

Tim: Or there is a relationship there at all.

Tim: Remembering that you had a big upfront software license with Comcast about initial deployment.

Tim: And then.

Tim: Relative to and assuming that most of the charter revenue is vast majority is broadband and really it wasn't much.

Tim: Anything last quarter.

Tim: How would you relate that ramp to what you saw historically with Comcast.

And I can remember times when you were at similar levels.

Tim: On up to doing.

$50 million to $60 million a quarter, probably on the broadband side. So when you talk about that second half ramp should we think about.

Tim: Those types of metrics to try in.

Speaker Change: Define what you mean.

Speaker Change: But with charter in particular.

Speaker Change: Hey, Tim it's Walter So we're not going to specifically talk about any particular customers ramp, but I think theres a couple of things there that that you passed that will address.

Walter Jankovic: First of all in regards to the margins for for Q4.

Walter Jankovic: In broadband specifically, so as we highlighted in our opening remarks, we had a significant high our mix of nodes go out in the Q4 time period more than we had anticipated going into the quarter part of that was other customers who came in with <unk>.

Walter Jankovic: Orders that they wanted fulfilled in the quarter.

Walter Jankovic: And so we prioritize that and so when we look at our mix of business.

Walter Jankovic: Heavy mix of nodes in Q4 and that drove down the broadband margin compared to what we've seen historically.

Walter Jankovic: Second point that I will I will highlight here in terms of how to think about the margin profile as we move forward across the customer base as we look at customers.

Walter Jankovic: In.

Walter Jankovic: In terms of moving forward.

Walter Jankovic: Customers acquire the nodes they acquire licenses software licenses to enable those nodes once those get put put into the network and so as we've highlighted before.

Walter Jankovic: Quarter to quarter, the margins will fluctuate depending on the mix over a longer period of time, such as the year you average those puts and takes and youll see more of a normalized mix of the Pos coupled with with the nodes that are going out in.

Walter Jankovic: In broadband.

Speaker Change: So I addressed a couple of your questions. Tim is there maybe there is something I missed from from the ones that you listed out here.

Speaker Change: Okay.

Tim: I'll address them.

Tim: Yes, I think so.

Tim: Okay.

As a follow up question you mentioned the prospects for an accelerating growth rate in 'twenty five.

Tim: New customers kind of get ramped up.

Tim: Can you offer any kind of commentary.

Tim: Because you had mentioned over a year. So gross margins are normalized youre guiding into the.

Tim: Slide <unk> lets say 47, something like that.

As the business scales, if we're looking at 25.

Tim: Is 50% on the table from a gross margin perspective, or do you expect the hardware mix to be heavy announcement.

Speaker Change: This range is a reasonable range to expect where we are currently thanks.

Speaker Change: That's a good question Tim.

I would look at FY 'twenty four it's a transitional year with regards to a lot of nodes that are going out into into the networks as we look forward beyond <unk>.

Speaker Change: <unk> 2020 for I would say that the mix will likely be slightly improved in terms of the mix of our Pos as compared to two our hardware, but there as you can imagine there are many factors and some of the ones that Patrick highlighted earlier with regards to our our focus around fiber as well.

Speaker Change: <unk> that has an impact in terms of the overall margins for the business.

Speaker Change: Okay. Thanks very much.

Hey, Thanks, Tim.

Speaker Change: Thank you I would now like to turn the conference back over to Patrick Harshman for closing remarks, Sir.

Patrick J. Harshman: Okay, well, thank you again for joining us today.

Patrick J. Harshman: Pleased with our strong quarter and we're excited about the opportunities ahead of us and we are determined to execute in 2020 for 2025 and beyond.

Speaker Change: We appreciate your support we're confident in our ability to execute and we look forward to continuing to be in close dialogue with you as we go forward.

Speaker Change: Thanks again, everyone have a good day.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.