Q1 2024 Harmonic Inc Earnings Call
Okay.
Operator: Hello, and thank you for standing by. Welcome to the first quarter 2024 Harmonic Earnings Conference Call.
Hello, and thank you for standing by.
Welcome to the first quarter 'twenty 'twenty four harmonic earnings conference call.
Operator: My name is Tawanda, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please note that this conference is being recorded. I would now like to turn the call over to David Hanover, Investor Relations. David, you may begin.
Towanda: My name is to Wanda and I will be your operator for today's call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session. So ask a question. During this session you will need to press star one on your telephone you wouldn't hear an automated message advising your hand is raised to.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please note that this conference is being recorded.
Speaker Change: I would now like to turn the call over to David Hangover Investor Relations, David You may begin.
David Hanover: Thank you, Operator. Hello, everyone, and thank you for joining us today for Harmonic's first quarter of 2024 Financial Results Conference call. With me today are Patrick Harshman, President and Chief Executive Officer, Nimrod Ben-Mattan, Senior Vice President and General Manager of Harmonic's Broadband Business, and Walter Jankovic, Chief Financial Officer. 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, which you may view by going to our webcast on our Investor Relations website. Now turning to slide two.
Speaker Change: Thank you operator, Hello, everyone and thank you for joining us today for harmonics first quarter of 2024 financial result conference call with.
David Hanover: With me today are Patrick Harshman, President and Chief Executive Officer.
David Hanover: On the Pas senior Vice President and general manager of Harmonics broadband business I've also talked to the Chief Financial Officer.
David Hanover: Before we begin I would like to point out that in addition to the audio portion of the webcast. We've also provided slides for this webcast.
David Hanover: And by going through our webcast on our Investor Relations website.
Okay.
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. We refer you to documents, Harmonic files at the SEC, including our most recent 10Q and 10K reports in the forward-looking statements section of today's preliminary results press release. These documents identify important risk factors that can cause actual results to differ materially from those contained in our projections or forward-looking statements.
David Hanover: Now turning to slide two during this call we will provide projections and other forward looking statements regarding future events or future financial performance of the company.
David Hanover: Such statements are only current expectations and actual events or results may differ materially.
David Hanover: We refer you to documents 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 could cause actual results to differ materially from those contained in our projections or forward looking statements.
David Hanover: And please note that, unless otherwise indicated, the financial metrics we provide you on this call are determined on a non-gap basis. These metrics, together with corresponding gap numbers and a reconciliation gap, are contained in today's press release, which we have posted on our website and filed with the SEC on Form 8K. We will also discuss 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 the 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.
David Hanover: Please note that unless otherwise indicated the financial metrics. We provide you on this call are determined on a non-GAAP basis.
David Hanover: These networks together with corresponding GAAP numbers and a reconciliation of GAAP.
David Hanover: And in today's press release, which we have posted on our website and filed with the SEC on form 8-K.
David Hanover: We will 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: The remainder of the 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: So thanks, David, and welcome everyone to our first quarter call. Today, we reported our Q1 results and updated full-year outlook, both of which are in line with our prior guidance and demonstrate solid execution and continuing confidence in our growth opportunities. Key business highlights include strong broadband orders and new customer wins, supporting this business's sustained multi-year growth trajectory. Continued Video SaaS revenue growth driven by new sports opportunities and ad delivery technology.
Patrick J. Harshman: Thanks, David and welcome everyone to our first quarter call.
Patrick J. Harshman: Today, we reported our Q1 results and updated full year outlook, both of which are in line with our prior guidance and demonstrate solid execution and continuing confidence in our growth opportunities.
Patrick J. Harshman: Key business highlights include strong broadband orders and new customer wins supporting this businesses sustained multi year growth trajectory.
Patrick J. Harshman: <unk> video SaaS revenue growth driven by new sports opportunities in AD delivery technology.
Patrick J. Harshman: And the retirement of our outstanding convertible debt this month, capping shared dilution associated with convertible debt. We also announced on April 8th my planned retirement on June 11th, the date of our annual shareholder meeting, and our board selection of Nimrod Ben Natan as the next CEO. Nimrod, Walter, and the senior harmonic team have my full confidence in driving the next phase of growth for our company, and I look forward to having a continuing supportive relationship with Nimrod and the board for at least another year. And with that, I'll now turn the call over to you, Nimrod, to provide a more detailed update on our broadband business.
Patrick J. Harshman: And the retirement of our outstanding convertible debt this month, capturing share dilution associated with convertible notes.
Speaker Change: We also announced on April 8th My planned retirement on June 11th the date of our annual shareholder meeting.
Speaker Change: Board selection within broadband a ton as the next CEO of harmonic.
Speaker Change: Hey, Brian Walter and the senior harmonic team has my full confidence and driving the next phase of growth for our company.
Speaker Change: I look forward to having a continuing supporting relationship with Nimrod on the board for at least another year.
Brian Walter: With that I'll now turn the call over to Union Bryan to provide a more detailed update on our broadband business.
Union Bryan: Thank you Patrick.
Nimrod Ben: Moving now to our broadened business, on slide number four, we reported segment revenue of $78.9 million, a decrease of 31% sequentially and 21% year-over-year, which was in line with our expectations. We had another strong quarter of new bookings, driving record new bets. The number of global customers deploying our solution reached 113, up 20% year-over-year, corresponding with 28.6 million DOCSIS cable modems now served worldwide. This represents approximately 60% of cable modems deployed globally.
Union Bryan: Moving now to our broadband business on slide number four we reported segment revenue of $78 9 million, a decrease of 31% sequentially and 21% year over year, which was in line with our expectations. We had another strong quarter of new bookings driving record <unk>.
Speaker Change: Look the.
The number of global customers deploying our solution reached 113 up 20% year over year corresponding with $28 6 million DOCSIS cable modems now served.
Speaker Change: Worldwide. This represents approximately 60% of cable modems deployed globally.
Nimrod Ben: Again, highlighting the substantial DOCSIS growth opportunity still in front of us, in addition to further upgrades to DOCSIS 4.0 and Fiber to the Home. As a result of this growth, Deloro has recognized Harmonic with a fourth consecutive year of market share leadership in the DAA category, which is virtual CMTS and remote file devices, as well as becoming the global market share leader in total cable broadband equipment. As we communicated last quarter, the pace of DOCSIS 4.0 shipments is accelerating in accordance with our plan, and we expect this to expand further in the second half of the year.
Speaker Change: Again, highlighting the substantial DOCSIS growth opportunity still in front of US. In addition to further upgrades DOCSIS four <unk> and fiber to the home.
Speaker Change: As a result of this growth.
Speaker Change: Laurel has recognized harmonic with a fourth consecutive year of market share leadership in the DAA category, which is near <unk> and remote phy devices as well as becoming global market share leader in total cable broadband equipment.
Speaker Change: As we communicated last quarter the pace of DOCSIS four <unk> shipments is accelerating in accordance with our plan.
Speaker Change: And we expect this to expand further in the second half of the year. Additionally, we recently participated in the cable labs, DOCSIS, four <unk> and DAA technology.
Nimrod Ben: Additionally, we recently participated in the KBLABS DOCSIS 4.0 and DAA technology Interop event where we showcased our end-to-end DOCSIS 4.0 solution highlighting record speeds of 9.4 gigabits per second for DOCSIS and interoperability with multiple DOCSIS 4.0 cable models. We are also getting increased customer interest in our boosted DOCSIS 3.1 capability, which is unlocking the full potential of the existing This upgrade option is creating a unique opportunity for cable operators to achieve fiber speeds at a lower capital intensity and faster time to market.
Speaker Change: Interop event, where we showcase our end to end DOCSIS four O solution highlighting record speeds of nine four gigabit per second DOCSIS and interoperability with multiple DOCSIS four O cable modems.
Speaker Change: We are also getting increased customer interest in our booster DOCSIS three one capability, which is unlocking the full potential of the existing DOCSIS networks in combination with a new generation of DOCSIS four O modems.
Speaker Change: This upgrade auction is creating a unique opportunity for cable operators to achieve fiber speeds at lower capital intensity and faster time to market.
Nimrod Ben: Driven by the migration to higher speed networks, we announced earlier today a new and unique product capability, the Beacon, which is a new application running on our COS edge compute platform alongside the virtual CMTS, and it helps maximize broadband speed while lowering the operating cost of maintaining the network and dynamically addressing noise interference using our edge compute platform and AI implementation.
Speaker Change: Driven by the migration to higher speed networks, we announced earlier today, a new and unique product capability, the bitcoin, which is a new application running on our Pos edge compute platform alongside the virtual <unk>.
Speaker Change: And it helps maximizing the broadband speed, while lowering the operating cost of maintaining the network and dynamically addressing noise interference using our edge compute platform.
Speaker Change: <unk> implementation.
Nimrod Ben: In the first quarter, we built on the momentum of our Fiber to the Home initiative. Most notably, we secured a seven-digit purchase order for our recently launched new fiber products from an international tier one customer. This important milestone further validates our innovative approach with our fiber solution. We also see continued traction with our Fiber Island strategy. We are enabling operators who use our DOCSIS technology to fiber connect high-value customers and MDUs within their existing HFC footprint, fill-ins, and self-overbuilds to enhance services in a way that reduces churn within existing service areas and enables dramatically cost-effective edge outs with fiber.
Speaker Change: Yeah.
Speaker Change: In the first quarter, we built on the momentum of our fiber to the home initiatives. Most notably we have secured a seven digit purchase order for our recently launched new fiber products from an international tier one customer.
Speaker Change: This important milestone further validates our innovative approach with our fiber solutions we.
Speaker Change: We also see continued traction with our fiber island strategy, we are enabling operators, who use our DOCSIS technology to fiber connect high value customers and MD use within their existing HFC footprint aliens and self overbuild to enhanced services in a way that reduces.
Speaker Change: Churn within existing service areas, and enabling dramatically cost effective edge outs with fiber during.
Nimrod Ben: During the first quarter, we also announced that Millicom Tigo is accelerating deployments with our node-based solution to offer fiber-to-the-home service. These advancements are critical as we continue to scale our operations and add fiber as a key driver of our financial success. Both Comcast and Charter contributed greater than 10% of our first quarter revenue, and we are grateful to be working with both of them to scale and expand their respective deployment milestones.
Speaker Change: During the first quarter, we also announced that <unk> is accelerating deployment with our node based solution to offer fiber to the home service.
Speaker Change: These advancements are critical as we continue to scale, our operations and Ed fiber is a key driver of our financial success.
Speaker Change: Both Comcast and charter contributed greater than 10% of our first quarter revenue and we are grateful to be working with both of them to scale and expand their respective deployment milestones.
Nimrod Ben: We continue to focus on further diversifying our business, and this is showing positive results with a larger portion of our business coming from others in the marketplace. We are seeing an expanding pipeline of opportunities from these other operators driven by an urgency to modernize their architecture to enable greater reliability and higher upstream and downstream speed. As part of this effort, we recently hired Jeff Glenn as our new global SDP of sales to exclusively lead our broadband go-to-market strategy, and we have also expanded the team with dedicated fiber, sales, and specialization.
Speaker Change: We continue to focus on further diversifying our business. This is showing positive results with larger portion of our business is coming from other from others in the marketplace. We are seeing an expanding pipeline of opportunities from these other operators driven by urgency to modernize.
Speaker Change: Their architecture to enable greater reliability, and higher upstream and downstream speeds as well.
Speaker Change: Part of this effort, we recently hired Jeff Glenn as our new global SVP of sales to exclusively lead our broadband go to market strategy and have also expanded the team with dedicated fiber sales and specialties.
Nimrod Ben: In summary, our broadband business continues to be uniquely positioned with differentiated technology advantages, great customer relationships, expanding backlog, and a rich array of new products and business opportunities that give us confidence in our multi-year growth outlook. We executed the first quarter according to our 2024 plan and are confident in our ability to carry this execution forward through 2024 and beyond. I'm excited to be here today and honored to have been chosen by our board to serve as the next CEO of Harmonic. I look forward to connecting with many of you in the coming weeks. Now, let me turn it back to Patrick.
Speaker Change: In summary, our broadband business continues to be uniquely positioned with differentiated technology advantages, great customer relationships, expanding backlog and a reach era of new products and business opportunities that give us confidence in our multiyear growth outlook, we executed the first.
Speaker Change: Quarter. According to our 2024 plan and are confident in our ability to carry this execution forward through 2024 and beyond.
Speaker Change: I'm excited to be here today and honored to have been chosen by our board to serve as the next CEO of harmonic I look forward to connecting with many of you in the coming weeks.
Speaker Change: Now, let me turn it back to Patrick.
Patrick J. Harshman: Okay, thanks Nimrod. Turning now to our video segment, the big picture is that we continue to see streaming SaaS become a larger portion of the business. In addition, we've closed our strategic review and are now actively rebuilding business momentum with a focus on further SaaS growth and driving improved profitability. Says revenue in the quarter was $12.9 million, up 11% year over year but down modestly sequentially. Total subgrant revenue was $43.2 million, down from $57.3 million a year ago.
Okay, well thanks, everyone.
Patrick J. Harshman: Turning now to our video segment. The Big picture is that we continue to see streaming SaaS become a larger portion of the business.
Patrick J. Harshman: In addition, we closed our strategic review and are now actively rebuilding business momentum with a focus on further SaaS growth and driving improved profitability.
Patrick J. Harshman: SaaS revenue in the quarter was $12 $9 million up 11% year over year, but down modestly sequentially.
Patrick J. Harshman: Total segment revenue was $43 2 million down from $57 3 million a year ago.
Patrick J. Harshman: We've continued to see macroeconomic and sector headwinds impacting traditional pay TV customer spending. And our strategic review process was also causing a growing number of appliance and SAS customers to hold back on new commitments pending the outcome. Looking more closely at our SAS results, we're seeing growing usage by our largest and most successful customers, especially for live sports, partially offset by the loss of a couple of mid-tier streaming customers who lost content rights or ran into financial problems.
Patrick J. Harshman: We've continued to see macroeconomic and sector headwinds impacting our traditional pay TV customer spending on appliances.
Patrick J. Harshman: And our strategic review process was also causing a growing number of our clients and SaaS customers to hold back on new commitments pending the outcome.
Patrick J. Harshman: Looking more closely at our SaaS results, we're seeing growing usage by our largest and most successful customers, especially for live sports.
Patrick J. Harshman: Partially offset by the loss of a couple of mid tier streaming customers.
Patrick J. Harshman: Loss content rights <unk> ran into financial problems.
Patrick J. Harshman: Driven by the success we continue to have with our Tier 1 SAS customers, we've continued to invest in and innovate new streaming-related technology. Our new in-screen personalized ad technology was a huge hit at the recent NAB show. For those of you unfamiliar with in-stream advertising, it's the creative insertion of personalized ads while viewers are still watching live action programs, versus traditional ads that are simply inserted into programming.
Patrick J. Harshman: Driven by the success, we continue to have with our tier one SaaS customers, we've continued to invest and innovate new streaming related technology.
Patrick J. Harshman: New in strained personalized AD technology was a huge hit with the recent Nab show.
Patrick J. Harshman: For those of you aren't familiar with in stream advertising, it's the creative insertion of personalized ads, while viewers are still watching live action programs versus.
Patrick J. Harshman: Versus the traditional ads that are simply inserted into programming breaks.
Patrick J. Harshman: Based on this and other unique technical capabilities, our pipeline of opportunities with new and existing sports-focused streaming customers is stronger than it has been since we launched VersaZen. The Marriage of High-Quality Streamed Live Sports with Personalized Ads and Experience, in a real way. That said, we also recognize marketplace headwinds affecting appliance sales remain persistent industry-wide.
Patrick J. Harshman: Based on this and other unique technical capabilities.
Patrick J. Harshman: Our pipeline of opportunities with new and existing sports focused streaming customers is stronger than it has been since we launched our sales activity.
Patrick J. Harshman: The marriage of high quality stream live sports with personalized ads and experiences continues to look to us and our media customers like a real winner.
Patrick J. Harshman: That said, we also recognize marketplace headwinds affecting appliance sales remain persistent industry wide.
Patrick J. Harshman: And so we're taking action to restructure and streamline. As a result of these actions, and our continuing confidence in our streaming sales growth, we're increasing our full-year segment debit dial. And with that, now over to you, Walter, for a deeper discussion of our results.
And so we're taking action to restructure and streamline.
Patrick J. Harshman: As a result of these actions and our continuing confidence in our streaming SaaS growth plan.
Patrick J. Harshman: We're increasing our full year segment EBITDA outlook.
Patrick J. Harshman: And with that now over to Walter for a deeper discussion of our results actions and outlook.
Walter F. 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 Q1 press release and earnings presentation includes reconciliations of the non-GAAP financial measures to GAAP that are discussed on this call. Both of these are available on our website. Our first quarter results were consistent with our expectations. Additionally, we exceeded the midpoint of revenue guidance in broadband. I'll call out some of our first quarter highlights on slide seven.
Thanks, Patrick and thank you all for joining us today.
Walter: 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 Q1 press release and earnings presentation includes reconciliations of the non-GAAP financial measures to GAAP that are discussed on this call.
Walter: Both of these are available on our website or.
Walter: Our first quarter results were consistent with our expectations. Additionally, we exceeded the midpoint of revenue guidance and broadband.
Walter: I'll call out some of our first quarter highlights here on slide seven.
Walter F. Jankovic: For the quarter, we reported total revenue of $122.1 million. We also reported EPS of 0 cents, bookings of $146.1 million, a strong book-to-bill of $1.2, and a record backlog and deferred revenue of $677.8 million. Before reviewing our first quarter financials in more detail and providing detailed Q2 and full year 2024 guidance, I'd like to highlight a few key points regarding our guidance. Regarding broadband, we're reaffirming our FY 24 revenue guidance range of $460 to $500 million. As we do each quarter, we closely evaluate the latest customer information, forecasts, and commitments just prior to our earnings call.
Walter: For the quarter, we reported total revenue of $122 1 million. We also reported EPS of zero cents bookings of $146 1 million a strong book to Bill of one two and a record backlog and deferred revenue of $677 8 million.
Speaker Change: Before reviewing our first quarter financials in more detail and providing detailed Q2 and full year 2024 guidance I'd like to highlight a few key points regarding our guidance.
Speaker Change: Regarding broadband we're reaffirming our FY 'twenty for revenue guidance range of $460 million to $500 million.
Speaker Change: As we do each quarter, we closely evaluate the latest customer information forecasts and commitments just prior to our earnings call. Although the mix of customer business has changed from our prior guidance in total we expect to meet our FY 'twenty for revenue guidance range.
Walter F. Jankovic: Although the mix of customer business has changed from our prior guidance, in total, we expect to meet our FY24 revenue guidance range. For example, at the midpoint of our reaffirmed FY24 broadband guidance, we expect revenue to increase 24% year-over-year. Based on expected momentum in the second half of 2024, we continue to anticipate 2025 broadband revenue growth will accelerate on a year-over-year basis. As Nimrod mentioned earlier, we are well positioned with our leading technology, strong backlog, and our customer success to drive continued multi-year growth.
Speaker Change: At the midpoint of our reaffirmed FY 'twenty for broadband guidance, we expect revenue to increase 24% year over year based on expected momentum in the second half of 2024, we continue to anticipate 2025 broadband revenue growth will accelerate on a year over year basis.
Speaker Change: <unk> mentioned earlier, we are well positioned with our leading technology strong backlog and our customer success to drive continued multiyear growth.
Walter F. Jankovic: With regard to video, we are increasing our FY24 EBITDA guidance due to actions we are taking to improve profitability, which I will discuss in more detail in a few minutes. Turning to slide 8, total Q1 revenue was $122.1 million, down nearly 23% year-over-year and 27% on a sequential basis. This was in line with the updated guidance we provided in early April and above the midpoint of the original guidance we gave on our last earnings call. Looking more closely at broadband, Q1 revenue was $78.9 million, a decrease of 21% year-over-year and consistent with our guidance. As anticipated, during the first quarter, we saw reduced shipments from a large Tier 1 customer.
Speaker Change: With regards to video we are increasing our FY 'twenty for EBITDA guidance due to actions, we are taking to improve profitability, which I will discuss in more detail in a few minutes.
Speaker Change: Turning to slide eight total Q1 revenue was $122 1 million down nearly 23% year over year and 27% on a sequential basis. This was in line with the updated guidance. We provided in early April and above the midpoint of the original guidance. We gave on our last earnings call.
Speaker Change: Looking more closely at broadband Q1 revenue was $78 9 million a decrease of 21% year over year and consistent with our guidance as anticipated during the first quarter, we saw reduced shipments from a large tier one customer.
Speaker Change: In video Q1 revenue was $43 2 million with lower appliance sales compared to last year due to the factors Patrik mentioned earlier.
Walter F. Jankovic: In video, Q1 revenue was $43.2 million, with lower appliance sales compared to last year due to the factors Patrick mentioned earlier. At the same time, video revenue included SAS revenue of $12.9 million, an 11% year-over-year increase and representing 29.9% of segment revenue for the quarter. Video SaaS revenue growth continues to be driven by live sports streaming expansions and new customer wins.
Speaker Change: At the same time video revenue included SaaS revenue of $12 9 million and 11% year over year increase and representing 29, 9% of segment revenue for the quarter.
Video SaaS revenue growth continues to be driven by life sports streaming expansions and new customer wins.
Speaker Change: In the first quarter, we had two customers representing greater than 10% of total revenue with Comcast, representing 29% of total revenue and charter representing 17% of total revenue.
Walter F. Jankovic: In the first quarter, we had two customers representing greater than 10% of total revenue, with Comcast representing 29% of total revenue and Charter representing 17% of total revenue. Total company gross margin was 52.5% for Q124, above the high end of our original guidance range and reflecting sequential gross margin improvement in the broadband business segment. Broadband gross margin was 47.5% for Q1-24, up 510 basis points sequentially and down 260 basis points year over year due to product mix. Video gross margin was 61.6% in Q1-24, up 120 basis points year over year and down 300 basis points from an all-time segment record in Q4-23, mainly due to macroeconomic headwinds.
Speaker Change: Total company gross margin was 52, 5% for Q1 dollars 24 above the high end of our original guidance range and reflecting sequential gross margin improvement in the broadband business segment.
Speaker Change: Broadband gross margin was 47, 5% for Q1 dollars 24 up 510 basis points sequentially and down 260 basis points year over year due to product mix.
Speaker Change: Video gross margin was 61, 6% in Q1 dollars 24 up 120 basis points year over year and down 300 basis points from an all time segment record in Q4 2003, mainly due to macroeconomic headwinds.
Speaker Change: Moving down the income statement on slide nine Q1, 'twenty four operating expenses were $62 8 million down 5% year over year adjusted.
Speaker Change: Adjusted EBITDA for Q1, 24 was $4 1 million comprised of $10 4 million from broadband and negative $6 4 million from video.
Speaker Change: Adjusted EBITDA for broadband exceeded our expectations, while video came in at the low end of our expectations due to the lower revenue.
Walter F. Jankovic: Moving down the income statement on slide nine, Q124 operating expenses were $62.8 million, down 5% year over year. Adjusted EBITDA for Q124 was $4.1 million, comprised of $10.4 million from broadband and $6.4 million from video. Adjusted EBITDA for broadband exceeded our expectations, while video came in at the low end of our expectations due to lower revenue.
Speaker Change: This all translated into Q1 'twenty for EPS of zero cents per share in line with our previous guidance and compared with 13 and Q4 'twenty three and 12 per share for Q1 'twenty three.
Speaker Change: We ended the first quarter of 2024 with a calculated diluted weighted average share count of $118 1 million compared to $115 7 million in Q4, 23, and $117 8 million in Q1 'twenty three the sequential increase is primarily due to the increased convertible debt dialer.
Walter F. Jankovic: This all translated into Q124 EPS of 0 cents per share, in line with our previous guidance, and compared with 13 cents in Q4'23 and 12 cents per share for Q124. We ended the first quarter of 2024 with a calculated diluted weighted average share count of $118.1 million, compared to $115.7 million in Q4'23 and $117.8 million in Q1'23. The sequential increase is primarily due to increased convertible debt dilution, partially offset by share buyback.
<unk>, partially offset by share buybacks.
Speaker Change: Turning to the order book Q1 bookings were $146 1 million. The book to Bill ratio was strong at one two for the quarter for Q4 23 in Q1 'twenty three our book to Bill ratios were one two and two one respectively. As we stated previously over time, we expect the ratio to <unk>.
Speaker Change: <unk> and approach the historical benchmark of greater than one.
Speaker Change: Turning to the balance sheet on slide 10, we ended Q1 'twenty four with cash of $84 3 million, which was flat compared to Q4 'twenty three cash from operations provided $26 $8 million due predominantly to a decrease in accounts receivable from collections, partially offset by the net loss.
Walter F. Jankovic: Turning to the order book, Q1 bookings were $146.1 million, and the book-to-bill ratio was strong at 1.2 for the quarter. For Q4-23 and Q1-23, our book-to-bill ratios were 1.2 and 2.1, respectively. As we stated previously, over time, we expect the ratio to normalize and approach the historical benchmark of greater than one.
In the quarter.
Speaker Change: We also used $21 7 million during the first quarter for share repurchases, which I will discuss in more detail shortly.
Speaker Change: Turning to accounts receivable and days sales outstanding at the end of Q1 'twenty four DSO was 78 compared to <unk> 76 in Q4 dollars 23, and 50 in the prior year period. The prior year period was lower due to a large customer taking an early pay discount.
Walter F. Jankovic: Turning to the balance sheet on slide 10, we ended Q1-24 with cash of $84.3 million, which was flat compared to Q4-23. Cash from operations provided $26.8 million due predominantly to a decrease in accounts receivable from collections, partially offset by a net loss in the quarter. We also used $21.7 million during the first quarter for share repurchases, which I'll discuss in more detail shortly. Turning to accounts receivable and day sales outstanding, at the end of Q1-24, DSO was 78 compared to 76 in Q4-23 and 50 in the prior year period.
Speaker Change: Days inventory on hand was 134 days at the end of Q1 dollars 24 compared to 89 at the end of Q4, 'twenty three and $1 63 at the end of Q1 'twenty three.
Speaker Change: The inventory increased $2 6 million in the quarter sequentially as a result of higher in feed following strong sales in Q4.
Speaker Change: 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.
Speaker Change: In line with this strategy in December 23, 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.
Walter F. Jankovic: The prior year period was lower due to a large customer taking an early pay discount. Today's inventory on hand was 134 days at the end of Q124 compared to 89 at the end of Q423 and 163 at the end of Q123. The inventory increased $2.6 million in the quarter sequentially as a result of higher infeed following strong sales in Q4. Turning to capital allocation, our top priority remains driving our future growth.
Speaker Change: Subsequent to the end of the first quarter on April 18th we redeemed entirely the $115 5 million in convertible notes outstanding repaying the principal in cash by using our credit facility and the value over par was distributed with approximately $4 6 million in shares.
Speaker Change: As of today, we have drawn down $115 million on this credit facility.
Speaker Change: Additionally, with our enhanced liquidity.
Speaker Change: <unk> during Q1, 'twenty four we bought back $21 7 million or approximately $1 7 million in shares at an average price of $13 seven.
Walter F. Jankovic: 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, on December 23, we closed a five-year $160 million credit facility that included a $120 million revolving credit line and a $40 million delay draw term loan. Subsequent to the end of the first quarter, on April 18, we redeemed entirely the $115.5 million in convertible notes outstanding, repaying the principal in cash by using our credit facility, and the value over par was distributed in approximately $4.6 million in shares.
Speaker Change: To date, we have repurchased $26 $8 million of the $100 million approved under our repurchase program.
Speaker Change: 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.
Speaker Change: Also as mentioned during our last earnings call, 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. We believe we have sufficient available liquidity to continue funding our growth plans, while returning capital to.
Walter F. Jankovic: As of today, we have drawn down $115 million on this credit facility. Additionally, with our enhanced liquidity position during Q1'24, we bought back $21.7 million, or approximately $1.7 million, in shares at an average price of $13.07. To date, we have repurchased $26.8 million of the $100 million approved under our repurchase program. As we said previously, the timing and amount of any stock repurchases will depend on a variety of factors, including the price of Harmonic's common stock, market conditions, corporate needs, and regulatory requirements.
Speaker Change: Our shareholders through increased stock repurchases.
Speaker Change: At the end of Q1 total backlog and deferred revenue was a record 677 $8 million. Our strong backlog reflects continued demand from our large broadband customers and growing video SaaS commitments around 54% of our backlog and deferred revenue has customer request dates for shipments of.
Speaker Change: <unk> and for providing services within the next 12 months.
Lastly, we generated $24 9 million and free cash flow during the quarter.
Walter F. Jankovic: Also, as mentioned during our last earnings call, 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. We believe we have sufficient available liquidity to continue funding our growth plans while returning capital to our shareholders through increased stock repurchase. At the end of Q1, total backlog and deferred revenue was a record $677.8 million.
Speaker Change: Before reviewing our guidance just a few comments regarding our video business as previously announced on April 824, following a formal strategic review of our video business. Our board of Directors concluded its review and determined that harmonic would retain the business.
Speaker Change: As part of our go forward strategy harmonics video business will be centered on driving profitable growth by focusing on scalable market opportunities streamlining its operations and optimizing its cost structure to align to this go forward strategy. We are implementing a restructuring program to achieve cost savings.
Walter F. Jankovic: Our strong backlog reflects continued demand from our large broadband customers and growing video SaaS commitments. Around 54% of our backlog and deferred revenue has customer request dates for shipments of products and for providing services within the next 12 months. Lastly, we generated $24.9 million in free cash flow during the quarter.
Speaker Change: In this business. Many of these initiatives are already underway and we expect the vast majority of them to be completed no later than Q3 of this year.
Speaker Change: We currently expect to incur approximately $17 million of restructuring costs related to these actions in 2024, we expect to achieve approximately $18 million in savings in FY 'twenty four as a result of these actions and approximately $28 million in savings on an annualized basis in FY 'twenty five.
Walter F. Jankovic: Before reviewing our guidance, just a few comments regarding our video business. As previously announced on April 8, 24, following a formal strategic review of our video business, our board of directors concluded its review and determined that Harmonic would retain the business. As part of our Go Forward strategy, Harmonic's video business will be centered on driving profitable growth by focusing on scalable market opportunities, streamlining its operations, and optimizing its cost structure. To align with this Go Forward strategy, we are implementing a restructuring program to achieve cost savings in this business.
Speaker Change: We believe these actions are necessary to better align the video business with our go forward strategy.
Speaker Change: Due to these actions we are increasing our FY 'twenty for video EBITDA guidance at the same time, we're being conservative and reducing our FY 'twenty for video revenue guidance to reflect ongoing video market weakness, which we expect to persist throughout FY 'twenty four once this restructuring is complete.
Speaker Change: <unk>, we believe the video business will be able to achieve breakeven EBITDA at below $180 million of revenue per year.
Walter F. Jankovic: Many of these initiatives are already underway, and we expect the vast majority of them to be completed no later than Q3 of this year. We currently expect to incur approximately $17M of restructuring costs related to these actions in 2024.
Speaker Change: With that let's now review, our non-GAAP guidance for the second quarter, beginning on slide 11.
Speaker Change: We expect broadband to little over revenue between $85 million to $95 million gross margins between 47% to 48% due to product mix.
Walter F. Jankovic: We expect to achieve approximately $18M in savings in FY24 as a result of these actions, and approximately $28M in savings on an annualized basis in FY25. We believe these actions are necessary to better align the video business with our Go Forward strategy. Due to these actions, we are increasing our FY24 video EBITDA guidance. At the same time, we're being conservative and reducing our FY24 video revenue guidance to reflect ongoing video market weakness, which we expect to persist throughout FY24.
Speaker Change: <unk> profit between $40 million to $46 million and adjusted EBITDA between $11 million to $15 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.
Speaker Change: For broadband we continue to 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.
Walter F. Jankovic: Once this restructuring is completed, we believe the video business will be able to achieve break-even EBITDA at below $180 million of revenue per year. With that, let's now review our non-GAAP guidance for the second quarter, beginning on slide 11. We expect broadband to deliver revenue between 85 to 95 million, gross margins between 47 to 48% due to product mix, gross profit between $40 to $46 million, and adjusted EBITDA between $11 to $15 million.
Speaker Change: For our video segment in Q2, we expect revenue in the range of $40 million to $45 million gross margin in the range of <unk>, 62% to 63%.
Speaker Change: <unk> profit in the range of 25% to $28 million and adjusted EBITDA to range from negative 5 million to negative $2 million.
For the full year, we expect revenue between $185 to $195 million gross margins between 62% to 64%.
Speaker Change: Gross profit between $115 million to $125 million and adjusted EBITDA to range from zero to $5 million.
Walter F. Jankovic: For the full year, we expect revenue between $460 to $500 million, gross margins between 46.5% to 48.5%, gross profit between $214 to $243 million, and adjusted EBITDA between $95 to $119 million. For broadband, we continue to expect to see a return to top-line growth in the second half of the year and the potential to hit record quarterly revenue during that time.
Speaker Change: For video, we continue to be conservative, reflecting the factors I mentioned earlier.
Speaker Change: Turning to slide 12.
For the second quarter of 2024, we expect total company revenue in the range of $125 million to $140 million gross margin in the range of 51, 8% to 52, 9% gross profit to range from 65 to 74 million.
Adjusted EBITDA to range from 6 million to 13 million a weighted average diluted share count of $116 8 million.
Speaker Change: EPS to range from zero to five.
Walter F. Jankovic: For our video segment in Q2, we expect revenue in the range of $40 to $45 million, gross margin in the range of 62 to 63%, gross profit in the range of $25 to $28 million, and adjusted EBITDA to range from negative $5 million to negative $2 million. For the full year, we expect revenue between $185 million and $195 million, gross margins between 62 to 64 percent, gross profit between $115 million and $125 million, and adjusted EBITDA to range from $0 million to $5 million. For video, we continue to be conservative, reflecting the factors I mentioned earlier. Turning to slide 12.
And for the full year, we expect revenue between $645 million to $695 million gross margins between 51.0% to 52, 9%.
Gross profit between 329% to $368 million adjusted EBITDA between $95 million to $124 million.
Speaker Change: Our weighted average diluted share count of $118 5 million and EPS to range from 51 to 71 per share in.
Speaker Change: In summary, we reported first quarter results in line with guidance. We believe our broadband segment continues to be well positioned for future growth. In addition, with our restructuring actions. We believe our video segment will be better positioned for long term growth and profitability and.
Walter F. Jankovic: For the second quarter of 2024, we expect total company revenue in the range of $125 to $140 million, gross margin in the range of 51.8% to 52.9%, gross profit to range from $65 to $74 million, adjusted EBITDA to range from $6 million to $13 million, a weighted average diluted share count of $116.8 million, and EPS to range from $0 to $0.05. And for the full year, we expect revenue between $645 and $695 million, and gross margins between 51.0% to 52.9%. Gross profit was between $329 to $368 million, and adjusted EBITDA was between $95 to $124 million. A weighted average diluted share count of 118.5 million and EPS expected to range from 51 cents to 71 cents per share.
Speaker Change: And lastly, before turning it over to Patrick I'll ask everyone to Mark your calendars on June 13th we will be hosting a virtual analyst day event similar to the ones. We have held in the past. During this event, we will provide multi year updates for both our broadband and video business segments. Please stay tuned for additional details as we get.
Speaker Change: Or to the date.
Speaker Change: 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: Okay. Thanks, Walter in summary, <unk> delivered another solid quarter for order book competitive position and customer relationships are stronger than ever and.
Patrick J. Harshman: And we continue to be uniquely positioned for sustained growth.
Patrick J. Harshman: And finally on a personal note I've been privileged to work alongside the talented and committed harmonic colleagues some great customers.
Shareholders, who both challenged and supported me.
Speaker Change: To all of you and want to again say thank you.
Speaker Change: Convey my view that the best is still to come for harmonic.
Speaker Change: Okay.
Speaker Change: And with that let's as Walter said open up the call enough for your questions.
Walter F. Jankovic: In summary, we reported first quarter results in line with guidance. We believe our broadband segment continues to be well positioned for future growth. In addition, with our restructuring actions, we believe our video segment will be better positioned for long-term growth and profitability. And lastly, before turning it over to Patrick, I'll ask everyone to mark their calendars. On June 13th, we will be hosting a Virtual Analyst Day event similar to the ones we have held in the past.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and wait to hear your name announced.
To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A Roscoe.
Speaker Change: Our first question comes from the line of Simon Leopold with Raymond James Your line is open.
Simon Matthew Leopold: Thanks for taking the question Patrick if this is the last call you'll be doing just wanted to thank you for the time you work with us.
Walter F. Jankovic: During this event, we will provide multi-year updates for both our broadband and video business segments. Please stay tuned for additional details as we get closer to the date. 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.
Speaker Change: Great help and.
Speaker Change: <unk>, we're looking forward to resuming and spam.
Speaker Change: <unk> relationship with you.
Simon Matthew Leopold: But getting into the question one of the things I wanted to see if we could explore was harmonics dependence on the evolution of amplifiers, particularly for the rollout of DOCSIS four <unk> I understand you are not a manufacturer of the amplifiers.
Patrick J. Harshman: Okay, thanks, Walter. In summary, Harmonic delivered another solid quarter. Our order book, competitive position, and customer relationships are stronger than ever, and we continue to be uniquely positioned for sustainability. And, on a personal note, I've been privileged to work alongside my talented and committed Harmonic colleagues. Some great customers and shareholders who both challenged and supported us. To all of you, I want to again say thank you and convey my view that the best is still to come for us. And with that, let's, as Walter said, open up the call now for you. Thank you, ladies and gentlemen.
Simon Matthew Leopold: But wanted to understand how that effects your trajectory and what youre, assuming for the availability of both extended spectrum and full duplex amplifiers. Thank you.
Simon Matthew Leopold: Okay.
Speaker Change: So a couple of things Simon.
Speaker Change: First of all.
Speaker Change: Andy.
Remote.
Speaker Change: Kind of Fi device and network expansion.
That operators that are.
Speaker Change: Going for O.
Speaker Change: Are doing are always forward looking and even if they put it in an area, which is not farro. They would love to put something which is four O upgradable for whenever the rest of the network will become ready to four O same thing as others are putting.
Operator: Ladies and gentlemen, as a reminder to ask a question, please press star 1-1 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 1 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Simon Leopold with Raymond James. Your line is open.
Fires or past seats, and so forth. So that's number one.
Number two.
Simon Matthew Leopold: Thanks for taking the question. Patrick, if this is the last call you'll be doing, just wanted to thank you for the time you've worked with us. You've been a great help.
I think you should go back to what was.
Speaker Change: Kind of as reported by the industry in terms of progress on.
The full duplex amplifiers and I would go from the silicon to vendor and the operator all of them have reported progress and plan to go into field trials.
Nimrod Ben: And Nimrod, we're looking forward to resuming and expanding the relationship with you. But getting into the question, one of the things I wanted to see if we could explore was harmonics dependence on the evolution of amplifiers, particularly for the rollout of DOCSIS 4.0. I understand you're not a manufacturer of the amplifiers but want to understand how that affects your trajectory and what you're assuming for the availability of both extended spectrum and full duplex amplifiers. Thank you.
Speaker Change: Here with the plan to have that in deployment going into 2005, so that's our assumption.
Speaker Change: Based on everything that we've seen.
Speaker Change: And I guess many of you have visited the <unk> show in October this is progressing really well.
Speaker Change: Thanks, and just maybe a quick follow up on the video segment.
I think Walter made a reference to patricks comments as to.
Speaker Change: Some of the incremental weakness and I.
Speaker Change: I understand some of the explanation is related to customers maybe pausing.
Nimrod Ben: So a couple of things, Simon. First of all, any kind of PHY device and network expansion that operators that are going 4.0 are doing is always forward-looking, and even if they put it in an area which is not 4.0, they would love to put something which is 4.0 upgradable whenever the rest of the network will become ready for 4.0. Same thing as others are putting 4.0 amplifiers or passives and so forth. So that's number one.
Speaker Change: As the strategic strategic review was underway what Im looking for is maybe a little bit of help bridging how much of the shortfall might be attributed to a pause and then what the other aspects might be leading to the lower full year outlook for video. Thank you.
Speaker Change: Yes, Simon I'll kick it off here just in regards to the expectations on the full year as Patrick highlighted in the opening remarks, I mean, this was creating a pause with certain customers in terms of making making decisions obviously with the announcement that we made recently.
Nimrod Ben: Number two, and I think you should go back to what the industry has reported in terms of progress on the full duplex amplifiers, and I would go from the silicon to the vendor and the operator. All of them have reported progress and a plan to go into field trials this year with the plan to have that in deployment going into 25. So that's our assumption based on everything that we've seen, and I guess many of you have visited the SCTE show in October. This is progressing really well.
Speaker Change: That's opened up the conversations and there is an expectation that those conversations will move forward in terms of some of the business that was on hold so I'd say from a full year guide perspective that the impact is marginal from that event and it's more.
Speaker Change: Related to the headwinds that we're continuing to see with regards especially to the appliance business.
Patrick J. Harshman: Thanks, and just maybe a quick follow-up on the video segment. I think Walter made a reference to Patrick's comments as to some of the incremental weaknesses. And I understand some of the explanation is related to customers maybe pausing as the strategic strategic review was underway. What I'm looking for is maybe a little bit of help bridging how much of the shortfall might be attributed to a pause and then what the other aspects might be leading to the lower full year outlook for video. Thank you. Yeah, Simon, I'll kick it off here.
Speaker Change: Thank you very much.
Speaker Change: Okay. Thanks Simon.
Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of George Notter with Jefferies. Your line is open.
George Charles Notter: Hi, guys. Thanks, very much I guess I just wanted to ask about.
George Charles Notter: There is a pretty significant ramp you guys have now for the balance of the year I think on the broadband side I was looking at calculating about $310 million in sales in the second half.
Walter F. Jankovic: Yes, Simon, I'll kick it off here, just in regards to the expectations for the full year. As Patrick highlighted in the opening remarks, I mean, this was creating a pause with certain customers in terms of making decisions. Obviously, with the announcement that we made recently, that's opened up the conversations, and there is an expectation that those conversations will move forward in terms of some of the business that was on hold. So, I'd say from a full-year guidance perspective that the impact is marginal from that event and is more related to the headwinds that we're continuing to see, especially in the appliance business.
George Charles Notter: Versus about $169 million in the first half.
George Charles Notter: I am certain that your two largest customers are probably big components of that but could you give us any more sense for.
George Charles Notter: What youre seeing in terms of pipeline activity.
George Charles Notter: Traction towards that second half ramp and anything that could give us a bit more confidence than it would be it would be helpful. Thanks a lot.
Speaker Change: Okay, certainly maybe I'll start and then I'll ask <unk> to provide some more some more color on that George.
Speaker Change: First of all from a customer standpoint, as I mentioned in the opening remarks.
Speaker Change: We're obviously tracking very closely with our largest customers in terms of the expectations.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of George Notter with Jeffreys. The line is open.
Speaker Change: For the full year, and especially the back half of the year from a demand perspective from a supply chain and ensuring that we're ready for the higher expected revenue in broadband and in addition to those larger customers. We do have an expectation.
George Charles Notter: Hi guys. Thanks very much.
Unknown Executive: I guess I just wanted to ask about, you know, there is a pretty significant ramp you guys have now for the balance of the year. I think on the broadband side, I was looking at calculating about 310 million in sales in the second half versus about 169 million in the first half. And I'm certain that your two largest customers are probably big components of that. But could you give us any more sense of what you're seeing in terms of, you know, pipeline activity, traction towards, you know, that second half ramp, and anything that could give us a bit more confidence in it would be helpful. Thanks a lot.
Speaker Change: Of growing the rest of the customer base beyond the two largest customers and so we made some great traction in Q1 in terms of our revenue level from those other customers.
Speaker Change: And the team is highly focused in terms of continuing that momentum and building up the the rest of the market.
Speaker Change: <unk> and revenue in the back half and I'd like to turn it over to Nimrod to provide some color around what we're seeing in the market and some of the very encouraging conversations we're having with with those other customers.
Walter F. Jankovic: Okay, certainly. Maybe I'll start, and then I'll ask Nimrod to provide some more color on that, George. First of all, from a customer standpoint, as I mentioned in my opening remarks, we're obviously tracking very closely with our largest customers in terms of the expectations for the full year, and especially the back half of the year from a demand perspective, and from a supply chain, ensuring that we're ready for the higher expected revenue in broadband.
Nimrod: Yes, and I think we talked a lot about DOCSIS four <unk> and some of the major customers that are driving that but what we see through the rest of the market is an increased urgency to look into.
Nimrod: What we call modernizing the network and whether you look at it competitively or just to keep up with.
Bandwidth demand.
Walter F. Jankovic: And in addition to those larger customers, we do have an expectation of growing the rest of the customer base beyond the two largest customers. And so we made some great traction in Q1 in terms of our revenue level from those other customers, and the team is highly focused in terms of continuing that momentum and building up the rest of the market opportunities and revenue in the back half. And I'd like to turn it over to Nimrod to provide some color around what we're seeing in the market and some of the very encouraging conversations we're having with those other customers.
Nimrod: They have to go operators have to increase whether it's the upstream or the downstream of the network.
Nimrod: It did.
Nimrod: On this what we call boosted the.
Nimrod: Boosted the three one which really gives you fiber speeds and we see more and more customers looking into that this is now becoming available availability of DOCSIS four <unk> modem.
Nimrod: Nothing to do as amplifiers or notes or anything like that just a combination of a thorough modem with a boosted the capabilities of three one network also interesting and you may have heard other customers.
Nimrod Ben: Yeah, and I think we talk a lot about DOCSIS 4.0 and some of the major customers that are driving that, but what we see across the rest of the market is an increased urgency to look into what we call modernizing the network, and whether you look at it competitively or just to keep up with bandwidth demand, they have to go; operators have to increase, whether it's the upstream or the downstream of the network. And I did touch on this, what we call Boosted D and Boosted 3.1, which really gives you fiber speeds, and we see more and more customers looking into that.
Nimrod: Announcing retirement of legacy Qualm video and moving to an all IP. This is freeing up a lot of bandwidth in the network, which they can now put into this boosted architecture. So we have a lot of.
Nimrod: A lot of these discussions and in fact.
Nimrod: Advanced stages in lab and field trials and this is giving us the confidence.
Nimrod: For the rest of the market to follow.
Speaker Change: Got it great. Thank you I assume that charter is a big piece of the second half ramp I know those guys are talked about.
Speaker Change: For example in the Nextgen cable strategies comprehensive they were talking about kind of re accelerating there are accelerating their remote DAA build in July.
Nimrod Ben: This is now becoming available with the availability of DOCSIS 4.0 modems, which have nothing to do with amplifiers or nodes or anything like that, just a combination of a 4.0 modem with boosted capabilities of a 3.1 network. Also interesting, and you may have heard other customers announcing retirement of legacy QAM video and moving to an OLIP. This is freeing up a lot of bandwidth in the network, which they can now put into this boosted architecture. So we have a lot of these discussions and, in fact, advanced stages in lab and field trials, and this is giving us confidence for the rest of the market to follow.
Speaker Change: Is that still something that seems doable from your perspective.
Speaker Change: We cannot comment on any.
Speaker Change: Specific customer activity.
Speaker Change: Specifically, if you look at the two major customers both of them.
Speaker Change: Have.
Speaker Change: Announced their earnings.
Speaker Change: Earnings.
Speaker Change: Last week and they did provide an update so you can follow up on that.
Speaker Change: I believe charter talked about completing their upgrade by 'twenty six.
Speaker Change: I cannot comment specifically on July or any specific date.
Unknown Executive: Got it. Great. Thank you. I assume that Charter is a big piece of the second half ramp. I know those guys have talked about, you know, for example, the NextGen Cable Strategies Conference, they were talking about kind of reaccelerating their or accelerating their remote DAA build in July. Is that still something that seems doable from your perspective?
Speaker Change: Okay. Thank you very much I appreciate it.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Our next question comes from the line of Steven Frankel with Rosenblatt Securities. Your line is open.
Steven Bruce Frankel: Good afternoon, I was wondering if you might give us a little more color on the seven figure or fiber to the home deal.
Steven Bruce Frankel: You talked about during your commentary was this a.
New customer or is this within one of your existing cable OS customers today.
Nimrod Ben: We cannot comment on any specific customer activity. I think specifically, if you look at the two major customers, both of them announced their earnings last week, and they did provide an update. So you can follow up on that. I believe Charter talked about completing their upgrade by 26. July or any specific date.
Steven Bruce Frankel: So it's an existing tier one international customer.
Steven Bruce Frankel: Dan.
Dan: What's exciting for US about this is that this is the adoption of <unk>.
Dan: New fiber product generation that we announced.
Dan: In during last year.
Unknown Executive: Okay, thank you very much. I appreciate it.
Dan: Which is kind of the second phase of our fiber.
Operator: Please stand by for our next question. Our next question comes from the line of Steven Frankel with Rosenblatt Securities. Your line is open.
Dan: Product introduction.
Dan: And we are excited because this is being adopted by a major tier one customer for this for this new architecture.
Steven Bruce Frankel: Good afternoon. I wonder if you might give us a little more color on the seven-figure fiber-to-the-home deal that you talked about during your commentary. Was this a new customer, or is this one of your existing KLOS customers today?
And how quickly does this get deployed is this something that will be deployed in the back half of this year or do we have the kind of prolong ramp like we've seen with some of the DOCSIS customers.
Nimrod Ben: So it's an existing tier one international customer. And what's exciting for us about this is that this is the adoption of a new fiber product generation that we announced during SCTE last year, which is kind of the second phase of our fiber product introduction, and we're excited because this is being adopted by a major tier one customer for this new architecture.
Speaker Change: No. This is second half of the year shipments are starting early second half and this is definitely second half.
Speaker Change: Okay and then.
Speaker Change: Maybe just an update on the color of customer conversations and a b.
Speaker Change: Around streaming and the video business.
Steve: Well Steve.
Steve: I'll take this one and I'll answer it in two ways.
Steve: First it.
Steve: It felt to us to some extent that the market was bad coming to candidly speaking theres just been a little bit of a.
Nimrod Ben: And how quickly does this get deployed? Is this something that will be deployed in the back half of this year, or do we have the kind of prolonged ramp like we've seen with some of the DOCSIS customers? No, this isn't.
Steve: Slowness to the overall space.
Steve: As both Walter and I explained, we still see some of that.
Nimrod Ben: No, this is the second half of the year. Shipments are starting early in the second half, and this is definitely the second half.
Steve: Some of that drag on the traditional client space the streaming guys and the large media companies were out in force at NAV.
Unknown Executive: Okay, and then maybe just an update on the color of customer conversation to the NAB around streaming video.
Talking about looking about new content, new ways of packaging that content.
Steve: And our Doctor was Jampacked.
Patrick J. Harshman: Well, Steve, I'll take this one. I'll answer it in two ways. First, it felt to us, to some extent, that the market was back. I mean, candidly speaking, there's just been a little bit of a slowness overall, And as both Walter and I explained, we still see some of that. Some of that drags on the traditional client space; the streaming guys and the large media companies were out in force at NAB, talking about looking for new content and new ways of packaging that, and our doctor was jam-packed.
Steve: As I mentioned our pipeline.
Steve: Adding up to and particularly after <unk> be around significant new SaaS streaming opportunities is substantially larger than it's been.
In the last four quarters and stronger than it has been really since we launched.
Steve: The SaaS offering.
Steve: So while not exclusively a sports is the bigger piece of that.
Steve: Part of it is supporting new new programming rights, but another part of it is better monetizing the existing rates and more than ever before.
Patrick J. Harshman: As I mentioned, our pipeline leading up to and particularly after NAB around significant new SAS streaming opportunities is substantially larger than it has been in the last four quarters and stronger than it's been really since we launched the SAS offer. So while not exclusively, sports is the bigger piece of that, and part of it is supporting new programming, new rights, but another part of it is better monetizing the existing rights. And more than ever before, discussions around new and innovative advertising models, particularly personalized advertising models, and, as I mentioned, this in-stream advertising, which you may have seen in a broadcast scenario at home where there's a squeeze back, etc.
Steve: Our discussions around new and innovative advertising models, particularly personalized advertising models and.
Steve: As I mentioned this in stream advertising, which as you may have seen in our broadcast scenario at home, where you know there is a squeeze back et cetera, but thats all broadcasting everybody is seeing the same Ford truck advertisements there imagined the squeeze back happens and now something Thats being served up specifically for you or your neighborhood.
Steve: That becomes really powerful and its something thats generating a lot of excitement and an incremental opportunity.
Patrick J. Harshman: But that's all broadcasting. Everybody is seeing the same Ford truck advertisement. Imagine if, you know, the squeeze back happens, and now, you know, something is being served up specifically for you or your neighborhood. That becomes really powerful. And it's something that's generating a lot of excitement and an incremental opportunity that we're seeing, Steve.
We're seeing Steve.
Speaker Change: Great and then lastly, just maybe a few more nuggets on beacon and how material could that be as a revenue contributor to the broadband business.
Speaker Change: First of all it is a service.
Speaker Change: So it's recurring.
Speaker Change: <unk>.
Speaker Change: We are not disclosing pricing or anything like that but this is something that you can think of that scales with the number of.
Patrick J. Harshman: And then lastly, just maybe a few more nuggets on BEACON and how material could that be as a revenue contributor to the broadband business.
Nimrod Ben: First of all, it is a service, so it's a recurring service. We are not disclosing pricing or anything like that, but this is something that you can think of that scales with the number of nodes or subscribers in the network. We are in a customer field trial, and we expect this to start generating small revenue late this year. And over time, we see that the bigger the footprint of our COS, this is an add-on on top of that.
Speaker Change: Nodes or subscribers in the network.
We expect.
Speaker Change: We are in custom.
Speaker Change: Customer field trial, and we expect this to start Jenna.
Speaker Change: Generating smaller revenue but.
Speaker Change: Late this year and over time, we see that kind of the bigger the footprint of our Seo as this is an add on on top of that.
Unknown Executive: And just lastly, is that targeted at Tier Two specifically because Tier Ones can figure out how to do this themselves, or do you think even a Tier One customer could potentially get benefits from this project?
Speaker Change: And just lastly is that targeted at.
Speaker Change: Tier two specifically because tier ones can figure out how to do this themselves or do you think even a tier one customer could potentially get benefits from this product.
Nimrod Ben: I guess your question is on targeted ads or beacons. I was not talking about beacons, please. Okay, beacon can be relevant to any of our customers. It's not exclusive to only small ones.
Speaker Change: I guess your question is on the targeted ads or <unk> I was not on peak in place okay.
Speaker Change: Corn can be relevant to.
Speaker Change: To any of our any of our customers, it's not exclusive to only small ones.
Unknown Executive: Great! Thank you so much.
Operator: Please stand by for our next question. Our next question comes from the line of Ryan Koontz with Needleman Company. Your line is open.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Ryan <unk> with Needham and Needham <unk> Company. Your line is open.
Ryan Boyer Koontz: Hi, most of my questions have been answered, but maybe you can expand a little more on this in-stream advertising opportunity you were talking about in terms of revenue and the deployment model. Where is the whole market in terms of maturity, in terms of being ready for this in-stream dynamic ad model? I'd kind of thought that it was already there, but maybe I was, you know, misunderstood it. Thanks.
Ryan: Hi, most of my questions have been answered, but maybe you can expand a little more on this in stream advertising opportunity.
Ryan: You were talking about in terms of revenue and the deployment model.
Ryan: There is the whole market in terms of maturity in terms of being ready for this and stream dynamic ad model.
Ryan: Kind of thought that it was already there, but maybe it was.
Ryan: Michigan.
Speaker Change: I misunderstood it.
Speaker Change: It's not already therefore.
Patrick J. Harshman: It's not already there for this particular kind of advertising avail or availability. Certainly personalized advertising exists, but matching up personalized advertising with not a program break but ongoing live programming is new, Ryan. So, in fact, I mean, I spoke earlier about customer meetings, and almost the next volume, I would say, in terms of meetings, was with a broader ecosystem. Now, we're, you know, we're, of course, not an ad matching company, et cetera, but we had a number of those folks also through the booth.
Speaker Change: For this particular kind of advertising avail, or availability, certainly personalized advertisements exists, but Matt Matt matching up personalized advertising with <unk>.
Speaker Change: <unk>.
Speaker Change: Graham break.
But ongoing.
Speaker Change: Live programming is.
Speaker Change: Is his new Orion so in fact.
Speaker Change: Currently we're about in customer meetings.
Speaker Change: And almost next volume I would say in terms of meetings with a broader.
Speaker Change: Ecosystem now we're of course, not an AD matching company et cetera, but we had a number of those.
Patrick J. Harshman: So it felt very much like an NAB that not that we're miles or years away, but that the things were just now coalescing combination of the technology we're enabling on the pipeline together with those who do the ad inventory and matching and together with the people who will meld it all together into service. So it's, yeah, it's pretty exciting. And I think we're going to see a lot of progress in the coming couple of quarters and certainly the next year. Great.
Speaker Change: Also through the booth. So it felt very much that NAV would be that.
Speaker Change: Not that we're a miles are years away but.
Speaker Change: The things, we're just now coalescing combination of the.
Speaker Change: The technology, we are enabling the pipeline together with those who do the AD.
Speaker Change: Inventory and matching and together with the people who will.
Speaker Change: Melded altogether into into services. So it's yes, it's pretty exciting and I think we think we're going to see a lot of progress in the coming.
Speaker Change: In the coming couple of quarters and certainly the next year.
Patrick J. Harshman: Great. Great, Patrick. Thanks. And just a quick follow-up on the DOCSIS IV supply chain. Are you ready to meet your customer needs, which at this point in terms of the ramp, is it more supply chain limited, or are customers kind of phasing in the ducks for hardware?
Great Great Patrick Thanks, and just a quick follow up on on the DOCSIS for supply chain.
Speaker Change: Feel.
Patrick J. Harshman: Ready to meet your customer need which at this point in terms of the ramp is it more supply chain limited or customers are kind of phasing phasing and the doctors for hardware.
Nimrod Ben: I think the supply chain is not an issue, and it's ramping according to the phasing that we've been working with our customer. So it's on track based on what we predicted previously.
Speaker Change: I think the supply chain is not an issue and it's ramping according to the phasing that we have been working with our customer.
Unknown Executive: Got it. Thanks, Nimrod. That's all I've got. Thank you.
So it's.
Speaker Change: On truck based on what we predicted previously.
Speaker Change: Got it thanks, that's all I've got.
Operator: Please stand by for our next question. Our next question comes from the line of Tim Savageaux with Northland Capital Markets. Your line is open.
Thank you thanks, Rob.
Speaker Change: Standby for our next question.
Speaker Change: Our next question comes from the line of Tim <unk> with Northland Capital markets. Your line is open.
Timothy Paul Savageaux: Hey, good afternoon, and I'll offer my congratulations as well to both of you guys, actually. Synchrony got started with this thing. We're doing about $40 million in legacy revenue and now talking about 480. So that's a pretty, pretty amazing accomplishment over that period of time in terms of building the broadband business for both you guys, and I look forward to working with Nimrod. And it's really the diversification of that business that, I think, is critical.
Speaker Change: Yeah.
Tim: Hey, good afternoon.
Tim: I'll offer my congratulations as well to both of you guys actually seeing.
Tim: That started with this thing.
Tim: We're doing about $40 million in legacy revenue and now talking about 480, so thats a pretty.
Tim: Pretty amazing accomplishment over that period of time in terms of building the broadband business.
Tim: For both you guys and look forward to to working with Jim Brian.
Tim: And it's truly the diversification of that business.
Tim: I think.
Timothy Paul Savageaux: Now that you've put away both Comcast and Charter, which is again an amazing achievement, but Moving forward, I think Walter made a comment about being pleased with the kind of non-top two performance of the business, although and I'm doing this real time and making a lot of assumptions, but it, It seems like that part of your business has been about 35-40% of broadband revenue. And that percentage, I think, was probably up in Q1, but I'm not sure what the absolute number was.
Tim: Is critical.
Tim: No.
Tim: It away, both Comcast and charter, which again is an amazing achievement, but.
Tim: Moving forward I think Walter made a comment about being pleased with the kind of non top to performance of the business, although and I'm doing this real time, and making a lot of assumptions, but.
Tim: It seems like that part of your business has been about 35, 40% of broadband revenue.
Tim: And that percentage I think was probably up in Q1, but I'm not sure of the absolute number was Brian I'd be interested in that if that range is about right and how do you grow that business.
Timothy Paul Savageaux: But I'd be interested in that. If that range is about right, and how do you grow that business? Unknown Speaker. Whether it's fiber to the home with other tier ones, are there other major global MSOs that could meaningfully shift that balance? And to the extent I'm kind of right there, where would you like to have that number in a year? Well, it might be tough giving charter full ramp, but you know what I'm saying, where do you want to take it over time?
Whether it's fiber to the home with other tier ones are there other major global msos that could meaningfully meaningfully shift that balance.
Tim: And to the extent I am kind of right, there where would you like to have that number in a year.
Brian Walter: Well it might be tough given charter full ramp, but you know what I'm, saying, where do you want to take it over time. Thanks.
Unknown Executive: [inaudible]
Walter F. Jankovic: Hey, Tim, it's Walter. I'll kick it off and then Nimrod can add some more color to it. But just in terms of your observations, when I made the comment that we were pleased with the first quarter results, we did see some strong numbers for folks outside of the big two customers. And then also from a forecast perspective, in terms of the reviews that we've had with Nimrod and the team around the full year and the expectation, and I think you hit the high points, expectation around additional customers that are ramping on from a DOCSIS standpoint, but also getting more traction on the fiber to the home type of opportunities, both at the telco level, but more so in the strategy that Nimrod mentioned earlier around our cable customers and their strategies on focusing in on fiber islands, et cetera.
Brian Walter: Hey, Tim it's Walter I'll kick it off and then.
Walter: Brad can add some more color color to it but just in terms of your observations.
Walter: When I made the comment that we were pleased with the first first quarter results we did see.
Walter: Some strong numbers for folks outside of the big two customers.
Brad: And then also from a forecast perspective in terms of reviews that we've had with NIM rod and the team around the full year and the expectation I think you hit the high points.
Brad: The expectation around additional customers that are ramping are on from a DOCSIS standpoint, but also getting more traction on the fiber to the home type of opportunities both at the at the telco level, but more so in the strategy that NIM Rod mentioned earlier around our cable customers in there.
Brad: Strategies on focusing in on on fiber islands etcetera. So I think there is there is momentum there we were pleased with the mix of business. We saw in Q1, but your observations that as we ramp up the second half, we obviously have the big customers that impact the overall number but we're also.
Walter F. Jankovic: So, I think there's momentum there. We were pleased with the mix of business we saw in Q1, but your observations that as we ramp up the second half, we obviously have the big customers that impact the overall number, but we're also seeing good traction and have good expectations around the rest of the customers growing from an absolute dollar perspective. So, I'll turn it over to Nimrod to provide a little more color on that.
Brad: <unk> good traction and have good expectation around the rest of the customers growing from an absolute dollar perspective, so I will turn it over to NIM rod to provide a little more color on that.
Nimrod Ben: So, I would say a couple of things. First of all, there is a known list of operators that have yet to make a migration to next-generation architectures, and we target them as key opportunities. We also have customers that are not 100% our solution. They still have a legacy, so we're certainly looking to expand with them. And I would say, above and beyond the kind of core architecture; we look at fiber as another dimension of growth with existing cable customers.
Brad: Okay.
Nimrod: So I would say couple of things first of all there is a known list of operators that.
<unk> have yet to make a migration to a next generation architecture, and we target them as key opportunities.
Nimrod: We also have customers that are not 100%.
Nimrod: Our solution they still have a legacy so we're certainly looking to expand with them.
Nimrod: And I would say above and beyond kind of the core architecture.
Nimrod: We look at cyber is another dimension of growth with existing cable customers and also outside.
Nimrod Ben: And also outside, we see a lot of value that we bring to fiber first customers. And this is an area where we have expanded our go-to market. And we've now brought in kind of a fully dedicated sales leader on the broadband side, which I've seen over the last couple of weeks is kind of boosting everything we're doing. So I would say the combination of all of that, along with the fact that we made it a priority, we're continuing to focus on our major customers, kind of taking them through the transition that they are making, but we feel that this is a good time for us to focus on the rest of the market and make the right investment, as well as, as I said, we feel the urgency, whether it's fiber competition, whether it's fixed wireless, or So obviously, we're going to keep kind of focusing on the execution and growing that piece, as Walter described.
Nimrod: We see a lot of value that we bring into fiber first customers.
Nimrod: This is an area, where we have expanded our go to market.
Nimrod: We now brought.
Nimrod: On a fully dedicated.
Nimrod: Sales leader on the broadband side, which is what I've seen over the last couple of weeks. It couple of weeks is kind of boosting everything we're doing so I would say the combination of photo of that along with the fact that we made it a priority.
Nimrod: We're continuing to focus on our major customers kind of taking them through the transition that they make but we feel that.
Nimrod: This is a good timing for us to focus on the rest of the market.
Nimrod: And make the right investment.
Nimrod: As well as as I said, we feel the urgency.
Nimrod: Whether it's.
Nimrod: Fiber competition, whether its the fixed wireless or the urgency to kind of extend the life of their.
Nimrod: DOCSIS broadband network the combination of all of that bringing many of them into kind of a more urgent discussion about upgrading their network. So.
Nimrod: Obviously, we're going to keep kind of focusing on the execution and growing that piece as Walter described.
Unknown Executive: Great. And thanks for all that color.
Nimrod: Great.
Timothy Paul Savageaux: And Walter, just to follow up on another comment, which was, I guess, about maintaining the broadband revenue target for the year. I think you made a comment about, you know, kind of getting to the same place with a different mix. Is that sort of what we're talking about here, which is? Unknown Speaker More new customer revenue, more fiber, or did you mean more, maybe less, of a big customer? I'd like to. Can I amplify on that, Tom? Third, Tim, just from an overall perspective.
Speaker Change: Thanks for all that color.
Speaker Change: And Walter just to follow up I think on another comments, which was I guess in maintaining the broadband revenue target for.
Speaker Change: For the year I think you made a comment about kind of getting at the same place with a different mix is that sort of what we're talking about here which is.
Speaker Change: More new customer revenue more fiber or did you mean.
Speaker Change: Be lesser.
Speaker Change: <unk> customer.
I'd like to do.
Speaker Change: Alright.
Walter F. Jankovic: Sure, Tim. Just from an overall perspective, we had a lot of customer shifts, as you would expect as things move on through the year. I would characterize it as we had some shifts in big customers that had an impact as well. We've had some shifts in some of the smaller customers as well. And when I mean shift, it could be positive in terms of more, or it could be less. And so I think one of the key things, and you hit it on your first question, it's all about diversification.
Speaker Change: Sure Tim.
From an overall perspective, we have a lot of customer shift as you would expect as things things move on through through the year I would characterize it as we had some shifts and big customers that that had.
Tim: It had an impact as well we've had some shifts in some of the smaller customers as well and what it mean shift that could be positive in terms of more or it could be less and so I think one of the key things and you hit it.
Tim: On your first question, it's all around diversification and I think this is one of those situations as I looked at the number with the team for the full year, we're getting some benefits from diversification in terms of when when there's some changes going one way theres some potential offsets in the other way and so that's the way I would I would.
Walter F. Jankovic: And I think this is one of those situations where, as I looked at the number with the team for the full year, we're getting some benefits from diversification in terms of when there are some changes going one way, there are some potential offsets another way. And so that's the way I would characterize the workup of the full year number. It's different than it was 90 days ago, but it's still holding in at the number we have overall that we guided 90 days ago.
Tim: Or is the workup of the full year full year number it's different than it was 90 days ago, but it's still holding in at the number we have overall that we guided 90 days ago.
Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Patrick for closing remarks.
Speaker Change: Great. Thanks very much.
Okay. Thank you Tim.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, I'm showing no further questions in the queue I would now like to turn the call back over to Patrick for closing remarks.
Patrick J. Harshman: Okay, well, thank you again, everybody, for joining us this afternoon. We're excited about the quarter. We're excited about the momentum, and we're looking forward to our next opportunity with you all. Until then, have a good day. Bye.
Patrick J. Harshman: Okay, well. Thank you again, everybody for joining us. This afternoon, we're excited about the quarter. We're excited about the momentum and we're looking forward to our next opportunity with you all.
Patrick J. Harshman: Till then.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Have a good day.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.