Q1 2025 Harmonic Inc Earnings Call

Okay.

Operator: Welcome to the first quarter 2025 Harmonic Earnings Conference Call.

Lisa: Welcome to the first quarter 2025 harmonic earnings Conference call. My name is Lisa and I'll be your operator for today's conference call.

Operator: My name is Lisa, and I will be your operator for today's conference 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.

Yeah.

Lisa: At this time all participants are in a listen only mode.

Lisa: After the Speakers' presentation there'll be a question answer session to ask a question during the session you'll need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is also being recorded.

Operator: To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising, your hand is raised. To answer your question, please press star 11 again.

Operator: Please be advised that today's conference is also being recorded.

David Hanover: I would now like to turn the conference over to David Hanover, Investor Relations. David, you may begin.

David: Now, let's turn the conference over to David hand over Investor Relations.

Lisa: You may begin.

David Hanover: Thank you, Lisa. Hello, everyone, and thank you for joining us today for Harmonic's first quarter 2025 financial results conference call. With me today are Nimrod Ben Natan, President and CEO, and Walter Jankovic, Chief Financial Officer.

Speaker Change: Thank you Lisa Hello, everyone and thank you for joining us today for harmonics first quarter of 2025 financial results Conference call.

Today, our neighborhood, then upon president and CEO and Walter Jakob <unk>, 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, which you may view by going to our webcast on our Investor Relations website. Now turning to slide 2. During this call, we will provide projections and other forward-looking statements regarding future events or future financial performance of the company. Such statements are only current expectations, and actual events or results may differ materially. We refer you to documents Harmonic filed with the SEC, including our most recent 10-Q and 10-K reports and the forward-looking statements section of today's preliminary results press release.

Speaker Change: Before we begin I'd like to point out that in addition to the audio portion of the webcast.

Speaker Change: So provided slides for this webcast, which you may view by going to our webcast on our Investor Relations website.

Speaker Change: 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.

Speaker Change: Such statements are only current expectations and actual events or results may differ materially.

Speaker Change: 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. 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 the 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 operation, and some of this information is included in the 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: And please note that unless otherwise indicated the financial metrics. We provide you on this call are determined on a non-GAAP basis.

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

Speaker Change: We will also discuss historical financial and other statistical information regarding our business and operation 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.

Speaker Change: The remainder of the information will be available on a recorded version of this call or on our website.

Nimrod Ben: And now I'll turn the call over to our CEO, Nimrod Ben-Nassan. Nimrod? Thanks, David, and welcome, everyone, to our first quarter 2025 earnings. Before we get into the specifics in each of our businesses, I would like to provide a high-level update on how we're executing on our long-term growth plans and navigating tariffs and the current macroeconomics environment. Today, we delivered another strong quarter, advancing our long-term growth strategy. Revenue reached $133 million as we exceeded our video revenue expectations. We also generated adjusted EBITDA of $21 million, again, ahead of our previous outlook. Complementing this, strong operating cash flow lifted our cash balance to $149 million at quarter end.

Speaker Change: And now I'll turn the call over to our CEO Nimrod peloton and Rod.

Speaker Change: Thanks, David and welcome everyone to our first quarter of 2025 earnings call.

Speaker Change: Before we get into the specifics in each of our businesses I would like to provide a high level update on how we're executing on our long term growth plans and navigating periods and the current macroeconomic environment.

Speaker Change: Today, we delivered another strong quarter advancing our long term growth strategy revenue reached $133 million as we exceeded our video revenue expectations. We also generated adjusted EBITDA of $21 million again ahead of our previous outlook.

Speaker Change: Complementing this strong operating cash flow lifted our cash balance to $149 million at quarter end.

Nimrod Ben: That's even after the $36 million we returned to shareholders through share repurchase. We close the quarter with backlog and deferred revenue at 485 million dollars, underscoring the durability of our business model. In 2025, we're continuing to navigate the current industry shift to Unified DOCSIS 4.0. As we noted on our last earnings call, we expect 2025 will be a below-trend revenue year for broadband due to Unified 4.0 timing and its effect on customer deployment. Now, potential tariff exposure has contributed to this outlook. Having said that, with our technology and market share leadership position on Unified 4.0, our progress here to date has been in line with our expectations.

Speaker Change: Even after that $36 million, we returned to shareholders through share repurchases, we closed the quarter with backlog and deferred revenue at $485 million underscoring the durability of our business model.

Speaker Change: In 2025, we're continuing to navigate the current industry shift to unified docs as far out.

Speaker Change: As we noted on our last earnings call. We expect 2025 will be below trend revenue year for broadband due to unified four O timing and its effect on customer deployments.

Speaker Change: Now potential tariff exposure has contributed to this outlook, having said that with our technology and market share leadership position on unified four O. Our progress year to date has been in line with our expectations and therefore, we continue to expect resume revenue growth in 2026 with unified four O.

Nimrod Ben: Therefore, we continue to expect resumed revenue growth in 2026 with Unified 4.0 and existing customer ramps, as recently reflected on a Deloro Analyst Report, which supports this future long-term growth outlook.

Speaker Change: An existing customer ramps as recently reflected on at the lower of Analyst report, which supports these future long term growth outlook.

Nimrod Ben: Turning to slide number five, our broadband vision is becoming a reality. We are seeing rapid adoption of next generation virtualized platforms. across both DOCSIS and fiber networks. And I will highlight some of that focus today. Turning to slide number six, as we continue to execute on our broad and growth strategy, the revenue in this segment was $84.9 million for the quarter, representing 7.6% growth year over year and gross margin expended to 55.5%, reflecting a favorable product mix. We ended the quarter with 129 COS deployments in production, managing 33.9 million connected modems and approximately a quarter million remote PHY devices, a testament to the scalability and maturity of our virtualized access platform.

Speaker Change: Turning to slide number five our broadband vision is becoming a reality we are seeing rapid adoption of next generation Virtualized platforms.

Speaker Change: Across both DOCSIS and fiber networks, and I will highlight some of that August today.

Speaker Change: Turning to slide number six as we continued to execute on our broadband growth strategy. The revenue in this segment was $84 $9 million for the quarter, representing seven 6% growth year over year and gross margin expanded to 55, 5%, reflecting a favorable product mix.

Speaker Change: We ended the quarter with 129 Cof's deployments in production managing $33 9 million connected modems and approximately a quarter million remote phy devices, a testament to the scalability and maturity of our Virtualized access platform.

Nimrod Ben: Based on our progress to date, we expect to bring at least nine new customers, one in prior quarters, into production during the second quarter, further expanding the reach of our COS platform. Our customer diversification keeps accelerating. This quarter, we added seven new logos, a STOUND and a second top five North American MSO upgrading to Unified 4.0 and a Tier 1 Latin American operator launching a major fiber upgrade. Rest of World bookings were also strong and we expect that momentum to continue further expanding our global install base. Industry trends are amplifying this progress. As cable operators pursue broadened subscriber growth, they are shifting to virtualized access platforms that deliver higher speeds and reliability while lowering operating costs.

Speaker Change: Based on our August to date, we expect to bring at least nine new customers.

Speaker Change: One in prior quarters into production during the second quarter further expanding the reach of our Pos platform.

Speaker Change: Our customer diversification keeps accelerating this quarter, we added seven new logos astound.

Speaker Change: And a second top five north American MSL upgrading to unified four O and a tier one Latin American operator, launching a major fiber upgrade.

Speaker Change: Rest of World bookings were also strong and we expect that momentum to continue further expanding our global installed base.

Industry trends are amplifying this progress as cable operators pursue broadband subscriber growth. They are shifting to virtualized access platform that deliver higher speeds and reliability, while lowering operating cost harmonics proven deployment record field tested unified four O capabilities.

Nimrod Ben: Harmonic's proven deployment record, field-tested unified 4.0 capabilities, and converged access and fiber architecture help operators compete, deploy faster, and scale with confidence. Fiber is the major pillar of our broadband strategy, and the momentum we are seeing here is unmistakable. We booked a record quarter, lending three new pure fiber WINS, and completing eight expansion projects with existing customers. First, a tier one Latin American operator selected Harmonic for a nationwide upgrade based on the density and performance of our remote OLT solution and our industry-leading power fissions. Second, one of our largest North American customers have expanded its deployment with our virtual BNG and remote OLT solution on the very same distributed access network it already runs for virtual CMTS and DAA, another proof point of the power of convergence on COS.

Speaker Change: And converged DOCSIS and fiber architecture help operators compete deploy faster and scared with confidence.

Speaker Change: Fiber is a major pillar of our broadband strategy and the momentum we are seeing here is unmistakable.

Speaker Change: We booked a record quarter lending three new pure fiber wins, and completing eight expansion projects with existing customers.

Speaker Change: At tier one Latin American operator selected harmonic for a nationwide upgrade based on the density and performance of our remote LTE solution and our industry leading power efficiency.

Speaker Change: Second one of our largest north American customers have expanded its deployment with our virtual PNG and remote or LTE solution on the very same distributed access network. It already runs for near trustee M. P. S and DAA another proof point of the power of convergence on Crs and third our <unk>.

Nimrod Ben: And third, our open ONU strategy is proving its value in the field. Earlier this quarter, an operator seamlessly migrated from DZS to Harmonic with COS OLTs managing the legacy DZS ONUs already in subscriber homes. We expect this success story to resonate with other operators looking to replace their DZS network equipment following that company's Chapter 7 bankruptcy. These wins show the Harmonic's open and converged platform lets operators match the right access solution to every market use case, accelerating fiber rollouts with precision and confidence.

Speaker Change: Open a new strategy is proving its value in the field earlier this quarter and operator seamlessly migrated from Dcs to harmonic with Pos <unk> managing the legacy Dcs, owing us already in subscriber homes. We expect this success story to resonate with other operators looking to replace that.

Speaker Change: Our Dcs network equipment following that company's chapter seven bankruptcy.

Speaker Change: These wins show that harmonics open end converged platform, let's operators match, the right axis solution to every market use case accelerating fiber rollouts with precision and confidence.

Nimrod Ben: Turning to Unified 4.0, we continue to gain further traction here. In Q1, we started volume shipments of Unified RPDs and are on track to introduce the Unified Ale front end in the second half of the year. Since the architecture was open to the broader market, our team has been working closely with more than a dozen operators, and ecosystem partners to validate the technology and craft deployment roadmaps. That engagement is already translating into wins. As mentioned earlier, Estown chose Harmonic for a network upgrade that adds advanced DOCSIS and fiber capabilities, and we also secured a second top five North American MSO that will deploy Unified DOCSIS 4.0 in the second half of the year.

Speaker Change: Turning to a unified four O. We continue to gain further traction here in.

Speaker Change: In Q1, we started volume shipments of unified Rpgs and are on track to introduce a unified front end in the second half of the year.

Speaker Change: Since the architecture was open to the broader market. Our team has been working closely with more than a dozen operators ecosystem and ecosystem partners to validate the technology and craft deployment roadmaps.

Speaker Change: That engagement is already translating into wins as mentioned earlier astound chose harmonic for a network upgrade that adds advanced DOCSIS and fiber capabilities and we also secured a second top five north American Msos that will deploy unified DOCSIS four <unk> in the second half of the year.

Nimrod Ben: On the innovation front, we recently demonstrated 13 gigabit per second downstream throughput on a live unified system, which is faster than today's 10 gig fiber to the home speeds. This is an industry first that showcases the bandwidth performance built into the standard. We will keep highlighting this breakthrough at industry interoperability events and directly to customers throughout the second quarter and beyond. Achievements like these underscore the maturity of the unified ecosystem and reinforce why operators continue to choose Harmonic as their partner of choice for DOCSIS 4.0.

Speaker Change: On the innovation front, we recently demonstrated 13 gigabit per second downstream throughput on a live unified system, which is faster than todays 10 gig fiber to the home speeds. This is an industry first that showcases the bandwidth performance built into the standard we will keep highlighting this breakthrough.

Speaker Change: At the industry until probability events and directly to customers throughout the second quarter and beyond achievements like these underscore the maturity of the unified ecosystem and reinforce why operators continue to choose harmonic as their partner of choice for DOCSIS four <unk>.

Nimrod Ben: Innovation remains the foundation of our industry leading position, and this quarter I'm pleased to highlight three major advancements. First, we placed our patented PTP-less timing solution into live commercial service. This technology lowers overall DAA cost while enhancing reliability and represents another important proof point in our continued drive for smarter and simplified broadband infrastructure. Second. Our Beacon Speed Maximizer, a real-time automated network optimization service leveraging our COS Edge compute capabilities, is now live with eight customers. This service gives operators a powerful new way to ensure consistent subscribers' experience and proactively manage network performance. And third, we are excited to see one of our top customers launch the nation's first ultra-low-latency internet service, powered by our virtual CMTS technology.

Speaker Change: Innovation remains the foundation of our industry leading position.

Speaker Change: In this quarter I'm pleased to highlight three major advancements.

Speaker Change: First we placed our patented PTP less timing solution into light commercial service. This technology lowers overall DAA cost, while enhancing reliability and represents another important proof point in our continued drive for smelter and simplified broadband infrastructure.

Speaker Change: Second.

Speaker Change: Our beacon speed maximize our real time automated network optimization service leveraging our Pos edge compute capabilities is now alive with eight customers. This service gives operators a powerful new way to ensure consistent subscriber experience and proactively managed network performance.

Speaker Change: And third we are excited to see one of our top customers launched the nation's first ultra low latency Internet service powered by our <unk> technology. This milestone enables an entirely new class of latency sensitive applications from cloud gaming to immersive real time collaborations.

Nimrod Ben: This milestone enables an entirely new class of latency-sensitive applications, from cloud gaming to immersive real-time collaboration, helping broadband operators to deliver a differentiated experience with increased quality of service.

Speaker Change: Helping broadband operators to deliver a differentiated experience with increased quality of service.

Nimrod Ben: To summarize. Our broadband business continues to expand, adding new logos and delivering breakthrough innovation. With the world's largest base of live virtual CMTS networks, first-mover scale in Unified 4.0, and converged platform that spans both DOCSIS and Fiber, Harmonic is uniquely positioned to help operators deliver faster speeds with greater reliability while lowering operating costs. Record fiber bookings, rising rest-of-wall demand, and robust innovation pipeline give us confidence in this business' long-term top-line growth as unified and fiber deployments scale through 2026 and beyond, while we prudently navigate near-term tariff and macro uncertainty.

Speaker Change: To summarize.

Speaker Change: Our broadband business continues to expand.

Speaker Change: Adding new logos and delivering breakthrough innovation.

Speaker Change: With the worlds largest base of live virtual <unk> Networks' first mover scale and unified Forero and converged platform that spans both DOCSIS and fiber harmonic is uniquely positioned to help operators deliver faster speeds with greater reliability, while lowering operating cost.

Speaker Change: Record fiber bookings rising rest of world demand and robust innovation pipeline give us confidence in this business long term topline growth as unified in fiber deployments scattered through 2026 and beyond while we prudently navigate near term tariff and macro uncertainties.

Nimrod Ben: Now let's turn to slide number 7 to discuss current market trends in our video business and to provide an update. As the video market evolves, the bar for broadcast-grade quality and reliability keeps rising. Being a provider of leading video appliances, our customers still depend on Harmonic Appliances to keep their flagship channels flawless. And now they expect the same no-glitch experience for streaming, especially when premium sports rights can mean millions of dollars per minute. To meet these rising stakes, we are finding that customer demand spans across appliances, SaaS streaming, as well as an accelerating shift toward hybrid deployments that blends on-prem capacity with cloud elasticity.

Speaker Change: Now, let's turn to slide number seven to discuss current market trends in our video business and to provide an update.

Speaker Change: As the video market evolves the bar for broadcast grade quality and reliability keeps rising being a provider of leading video appliances, our customers still depend on harmonic appliances to keep their flagship China's flawless and now they expect the same no glitch experience for streaming.

Speaker Change: Specially when premium sports rights can mean millions of dollars per minute.

Speaker Change: To meet these rising stakes, we are finding that customer demand spans across appliances, SaaS screaming as well as an accelerating shift toward hybrid deployments that blends on prem capacity with cloud elasticity.

Nimrod Ben: That theme of multiple and often hybrid solutions was front and center at the NAB show in Las Vegas, where we unveiled AI power advances and industry's first end-to-end play-out-to-delivery workflow for the live at Weigel broadcast. Turning to slide 8. This momentum was visible in our first quarter results. Our appliance business sharpened by renewed focus and disciplined execution, delivered excellent margins on a higher volume of larger refresh deals and a series of competitive takeouts, including notable wins in the service provider segment. It remains solidly profitable engine for us with strong pipeline of opportunity. Meanwhile, our SaaS streaming business posted Q1 revenue of $14.8 million and continues to build a robust pipeline that supports growth in 2025 and beyond.

Speaker Change: That theme of multiple and often hybrid solutions was front and center at the Nab show in Las Vegas, where we unveiled AI power advances and industry's first end to end play out to delivery workflow or the live at Weigel broadcasting.

Speaker Change: Turning to slide eight.

Speaker Change: This momentum was visible in our first quarter results.

Speaker Change: Our appliance business sharpened by renewed focus and disciplined execution delivered excellent margins on a higher volume of larger refresh deals and a serious off competitive take outs, including notable wins in the service provider segment. It remains solidly profitable engine for us.

Speaker Change: Strong pipeline of opportunities means.

Speaker Change: Meanwhile, our SaaS streaming business posted Q1 revenue of $14 $8 million and continues to build a robust pipeline that supports growth in 2025 and beyond.

Nimrod Ben: The drivers are clear. First, expansion of live sports streaming with existing customers, where we deliver some of the world's most prestigious events with unmatched reliability. Second, a pipeline of tier one operators poised to scale on our platform. And third, strong demand for AI-based monetization tools that we previewed at the NAB show and will move from proof of concept into full production next year.

Speaker Change: The drivers are clear first expansion of live sports streaming with existing customers, where we deliver some of the world's most prestigious events with unmatched reliability second our pipeline of tier one operators poised to scale on our platform and third strong demand for AI.

Speaker Change: Based monetization tools that we previewed at the Nab show and we will move from proof of concept into full production next year.

Nimrod Ben: taking together the strengths of our appliance offering. the rapid expansion of SaaS streaming, our differentiated hybrid solution, and our strong operating leverage all position our video segment for sustained and profitable growth in 2025 and beyond.

Speaker Change: Taken together the strengths of our appliance offering.

Speaker Change: The rapid expansion of SaaS screaming, our differentiated hybrid solution and our strong operating leverage all position our video segment for sustained and profitable growth in 2025 and beyond.

Walter Jankovic: Now I will turn it to Walter for a deeper review of our financials and to elaborate on our expectations for and response to potential tariff impacts on our business. Thanks, Nimrod, and thank you all for joining us today. Before I discuss our quarterly results and outlook, I'd like to remind everyone the financials I'll be referring to on this call are provided on a non-GAAP basis. As David mentioned earlier, our Q1 press release and earnings presentation include reconciliations of the non-GAAP financial measures to GAAP. Both of these are available on our website. Looking at some of our first quarter highlights here on slide 10, our results reflect strong execution as we exceeded expectations for video revenue, as well as gross margin and adjusted EBITDA on both of our businesses.

Speaker Change: Now I will turn it to Walter for a deeper review of our financials and to elaborate on our expectations for and response to potential tariffs impacts on our business.

Walter: Thanks, Brad and thank you all for joining us today before I discuss our quarterly results and outlook I'd like to remind everyone. The financials I'll be referring to on this call are provided on a non-GAAP basis as David mentioned earlier, our Q1 press release and earnings presentation include reconciliations of the non-GAAP financial measure.

Speaker Change: Here's to GAAP both of these are available on our website.

Speaker Change: Looking at some of our first quarter highlights here on slide 10, our results reflect strong execution as we exceeded expectations for video revenue as well as gross margin and adjusted EBITDA in both of our businesses.

Walter Jankovic: Total company revenue increased 9% year-over-year to $133.1 million, and EPS rose from $0 to $0.11, driven by higher-than-anticipated profitability in both of our businesses. We also had strong positive free cash flow during the quarter, which helped raise our cash balance to $148.7 million at quarter end, a substantial increase of $47.3 million sequentially, even with repurchasing $36.1 million of shares during the quarter under our repurchase program. Looking more closely at our businesses, first quarter broadband revenue and adjusted EBITDA was $84.9 million and $15.9 million, respectively, with both metrics showing growth year over year. Video revenue was $48.3 million, up 11.8% year over year, while adjusted EBITDA in this business was $5.3 million, reflecting strong revenue momentum and ongoing efficiency improvement.

Speaker Change: Company revenue increased 9% year over year to $133 1 million and EPS rose from zero to 11, driven.

Speaker Change: Driven by higher than anticipated profitability in both of our businesses.

Speaker Change: We also had strong positive free cash flow during the quarter, which helped raise our cash balance to $148 7 million at quarter end, a substantial increase of $47 3 million sequentially, even with repurchasing $36 $1 million of shares during the quarter under our repurchase program.

Speaker Change: Looking more closely at our businesses first quarter broadband revenue and adjusted EBITDA was $84 9 million and $15 9 million, respectively, with both metrics showing growth year over year.

Speaker Change: Video revenue was $48 3 million up 11, 8% year over year, while adjusted EBITDA. In this business was $5 3 million, reflecting strong revenue momentum and ongoing efficiency improvements videos.

Walter Jankovic: Video SaaS revenue in the quarter was $14.8 million, up 15% year over year, as we continue to expand this portion of our business.

Speaker Change: Video SaaS revenue in the quarter was $14 8 million up 15% year over year as we continue to expand this portion of our business.

Walter Jankovic: Moving to slide 11, I will now briefly review our capital allocation priorities and mention some updates on our progress. One of our priorities is continuing to make targeted investments in order to drive our organic growth. This includes investments to support broadband rest of world growth, new service offerings, and funding anticipated working capital needs. As mentioned earlier, we had seven new broadband customer wins during the quarter, including three fiber wins. So these investments have been paying off.

Speaker Change: Moving to slide 11.

Speaker Change: I'll now briefly review our capital allocation priorities I mentioned some updates on our progress.

Speaker Change: One of our priorities is continuing to make targeted investments in order to drive our organic growth. This includes investments to support broadband rest of world growth New service offerings and funding anticipated working capital needs as mentioned earlier, we had seven new broadband customer wins during the quarter, including <unk>.

Speaker Change: <unk> fiber wins, so these investments have been paying off.

Walter Jankovic: Another priority is returning capital to our shareholders through stock repurchase. In our February earnings call, we announced a new three-year share repurchase program of up to $200 million, which doubled our previous program. In the first quarter, we repurchased $36.1 million of shares under this new program. As we mentioned on our last call, we expected to fund these purchases with strong free cash flow generation over the next three years, supported by our strong liquidity position. At quarter end, this liquidity position consisted of a hundred and forty eight point seven million in cash and eighty two million in undrawn credit facilities.

Speaker Change: Another priority is returning capital to our shareholders through stock repurchases in our February earnings call, We announced a new three year share repurchase program of up to $200 million, which doubled our previous program in the first quarter, we repurchased $36 1 million of shares under this new program.

As we mentioned on our last call we expected to fund these purchases with strong free cash flow generation over the next three years supported by our strong liquidity position at quarter end. This liquidity position consisted of $148 7 million in cash and $82 million and Undrawn credit.

Walter Jankovic: Therefore, we have ample liquidity to support our capital allocation priorities and to manage through the current economic uncertainties. We intend to continue to opportunistically repurchase shares. As we've 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, macroeconomic conditions, corporate needs and regulatory requirements.

Speaker Change: <unk>.

Speaker Change: Therefore, we have ample liquidity to support our capital allocation priorities and to manage through the current economic uncertainties.

Speaker Change: We intend to continue to Opportunistically repurchase shares as we've 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 macroeconomic conditions corporate needs and regulatory requirements.

Walter Jankovic: And finally, we intend to explore inorganic expansion opportunities. Our approach will be disciplined and targeted with a focus on opportunities that complement our current capabilities and leverage our growing footprint in broadband.

Speaker Change: And finally, we intend to explore inorganic expansion opportunities our approach will be disciplined and targeted with a focus on opportunities that complement our current capabilities and leverage our growing footprint in broadband.

Walter Jankovic: Turning back to a more detailed look at our first quarter 2025 financial results on slide 12. As I mentioned earlier, first quarter total company revenue was $133.1 million. In the quarter, we had two customers representing greater than 10% of total revenue, with Comcast representing 34% of total revenue and Charter representing 12%. Total company Q1 gross margin was 59.4% above the high end of our guidance range and significantly up both sequentially and year over year. Broadband Q1 gross margin was 55.5%, up 280 basis points sequentially, and 800 basis points year over year, due predominantly to a higher mix of COS.

Speaker Change: Turning back to a more detailed look at our first quarter 2025 financial results on slide 12 as.

Speaker Change: As I mentioned earlier first quarter total company revenue was $133 1 million in the quarter, we had two customers representing greater than 10% of total revenue with Comcast, representing 34% of total revenue and charter representing 12%.

Speaker Change: Total company Q1 gross margin was 59, 4% above the high end of our guidance range and significantly up both sequentially and year over year.

Speaker Change: Broadband Q1 gross margin was 55, 5% up 200 basis 280 basis points sequentially, and an 800 basis points year over year due predominantly to a higher mix of Pos licenses.

Walter Jankovic: Video gross margin in Q1 was 66.4%, up 480 basis points year-over-year, the increase mainly due to the revenue strength related to larger refresh appliance deals and our cost optimization efforts.

Video gross margin in Q1 was 66, 4% up 480 basis points year over year, the increase mainly due to the revenue strength related to larger refresh appliance deals and our cost optimization efforts.

Walter Jankovic: Moving down the income statement on slide 13, Q125 total company operating expenses were $60.5 million, down 3.6% year-over-year as a result of prior restructuring actions in video. And to briefly reiterate, first quarter 2025 broadband EBITDA was $15.9 million and video EBITDA was $5.3 million. Total company EPS was $0.11.

Speaker Change: Moving down the income statement on Slide 13, Q1, 25 total company operating expenses were $60 5 million down three 6% year over year as a result of prior restructuring actions in video.

Speaker Change: And to briefly reiterate first quarter 2025 broadband EBITDA was $15 9 million and video EBITDA was $5 3 million total company EPS was <unk> 11.

Walter Jankovic: Turning to the order book, Q1 bookings were $113.7 million. The book-to-bill ratio for the quarter was 0.9 compared to 0.7 in Q4-24 and 1.2 in Q1-24. As we stated previously, over time, we expect our book-to-bill ratio to normalize and approach the historical benchmark of greater than 1, especially as Unified Docs is 4.0 in broadband RAM.

Speaker Change: Turning to the order book Q1 bookings were $113 7 million the book to Bill ratio for the quarter was 0.9 compared to 0.7 in Q4 24 and $1. Two in Q1 'twenty four as we stated previously over time, we expect our book.

Speaker Change: To bill ratio to normalize and approach the historical benchmark of greater than one, especially as unified DOCSIS four <unk> and broadband ramps.

Walter Jankovic: Turning to the balance sheet on slide 14, we ended 2-1 with cash and cash equivalents of $148.7 million. The quarter-over-quarter change was mainly attributable to strong, positive free cash flow of $81.7 million, resulting from improved DSO and slightly lower inventory level. Day sales outstanding at the end of Q1'25 was 67 compared to 72 in Q4'24 and 78 in Q1'24. The sequential decrease was due to strong in-quarter collection. Inventory decreased $1.9 million in the quarter, and our day's inventory on hand was 103 days.

Speaker Change: Turning to the balance sheet on slide 14, we ended Q1 with cash and cash equivalents of $148 7 million quarter over quarter change was mainly attributable to strong positive free cash flow of $81 7 million, resulting from improved DSO and slightly lower inventory levels.

Speaker Change: Days sales outstanding at the end of Q1, 'twenty five was <unk> 67, compared to <unk> 72 in Q4, 24, and <unk> 78 in Q1 'twenty for the sequential decrease was due to strong end quarter collections inventory.

Speaker Change: Inventory decreased $1 9 million in the quarter and our days inventory on hand was 103 days.

Walter Jankovic: At the end of Q1, total backlog and deferred revenue was $485.1 million. Around 51% of our backlog and deferred revenue have customer request dates for shipments of products and for providing services within the next 12 months.

Speaker Change: At the end of Q1 total backlog and deferred revenue was $485 1 million around 51% of our backlog and deferred revenue have customer request dates for shipments of products and for providing services within the next 12 months.

Walter Jankovic: Turning to guidance, as we mentioned on our last earnings call, due to market developments around Unified DOCSIS 4.0, some customers have pushed out their deployment timing plans for 2025. We continue to believe this is mainly a timing change and expect these 2025 deployment shifts to create a positive tailwind for us in 2026, as schedules are refined and Unified 4.0 technology deployments accelerate.

Speaker Change: Turning to guidance as we mentioned on our last earnings call due to market developments around unified DOCSIS four <unk> some customers have pushed out their deployment timing plans for 2025. We continue to believe this is mainly a timing change and expect these 2025 deployment shifts.

Speaker Change: To create a positive tailwind for us in 2026 as schedules are refined and unified <unk> technology deployments accelerate.

Walter Jankovic: I'd like to take a couple of minutes to discuss the current tariff situation, its impact on our business, and how we are managing through it. In our video business, we anticipate the tariffs, both current and potential, will have an immaterial impact on our business. First of all, our video business revenue is geographically diversified, and our U.S. sales are well below half of the revenue. Secondly, we have a flexible supply chain with multiple location options, which we believe will allow us to minimize the tariff impact on the equipment element of our solutions, which is predominantly made up of off-the-shelf servers.

Speaker Change: I'd like to take a couple of minutes to discuss the current tariff situation its impact on our business and how we are managing through it.

Speaker Change: In our video business, we anticipate that terex, both current and potential will have an immaterial impact on our business.

Speaker Change: First of all our video business revenue is geographically diversified and our U S sales are well below half of the revenue.

Speaker Change: Secondly, we have a flexible supply chain with multiple location options, which we believe will allow us to minimize the tariff impact on the equipment element of our solutions, which is predominantly made up of off the shelf servers.

Walter Jankovic: In our broadband business, we do anticipate more significant impacts as a result of current and potential tariffs. As noted in our filings, one of our primary third-party manufacturing site is in Malaysia. This is where we have the vast majority of our broadband node products manufactured. Additionally, a large majority of our broadband sales are to U.S.-based customers.

Speaker Change: In our broadband business, we do anticipate more significant impacts as a result of current and potential tariffs as noted in our filings one of our primary third party manufacturing site is in Malaysia. This is where we have the vast majority of our broadband node products manufactured.

Speaker Change: <unk> a large majority of our broadband sales are to U S based customers.

Walter Jankovic: With the current 90-day pause in reciprocal tariffs, we have a certain level of clarity for at least Q2, and today's guidance reflects our current expectations. It's important to note that to date, we have not seen any change in our customers' behavior due to the tariff. This continues to be a fluid situation as we work through options on mitigating the short-term impact, as well as we look at longer-term supply chain options pending a final outcome on what the tariffs will be across different countries. We are actively exploring options to offset tariff sensitivity, including optimizing our supply chain, cost management, and taking price actions where appropriate.

Speaker Change: With the current 90 day pause and reciprocal tariffs, we have a certain level of clarity for at least Q2 and today's guidance reflects our current expectations. It is important to note that to date, we have not seen any change in our customers behavior due to the tariffs.

Speaker Change: This continues to be a fluid situation as we work through options on mitigating the short term impact as.

Speaker Change: As well as we look at longer term supply chain options pending a final outcome on what the tariffs will be across different countries. We are actively exploring options to offset tariff sensitivity, including optimizing our supply chain cost management, and taking price actions where appropriate.

Walter Jankovic: Our broadband solutions are critical for our customers as they upgrade their networks to address competitive pressures and to avoid subscriber churn.

Speaker Change: Broadband solutions are critical for our customers as they upgrade their networks to address competitive pressures and to avoid subscriber churn and we are confident that these current tariff uncertainties will not impact our business over the long term.

Walter Jankovic: And we are confident that these current tariff uncertainties will not impact our business over the long term.

Walter Jankovic: Now, let's review our non-GAAP guidance for 2025, beginning on slide 15. We are taking a prudent approach to Q2 guidance given the general macroeconomic factors I just mentioned.

Speaker Change: Now lets review our non-GAAP guidance for 2025, beginning on slide 15.

Speaker Change: We are taking a prudent approach to Q2 guidance given the general macroeconomic factors I just mentioned.

Walter Jankovic: For the full year 2025, we will not be providing updated annual guidance today due to lack of visibility on the future tariffs and the impact it may have on economic conditions and our customers' behavior for the second half of 2025. Continually shifting tariff policies have made it difficult to forecast and guide with confidence for the full year. For Q2, we expect broadband to deliver revenue between $75 to $85 million, gross margins between 44 to 45 percent due to product mix, and adjusted EBITDA between $2 to $6 million. In our guidance, we expect to see continued revenue growth in our rest-of-world customers based on the progress Nimrod mentioned earlier, offset by expected timing shifts by our larger customers.

Speaker Change: For the full year 2025, we will not be providing updated annual guidance today due to lack of visibility on the future tariffs and the impact it may have on economic conditions and our customers' behavior for the second half of 2025.

Speaker Change: Continually shifting tariff policies have made it difficult to forecast and guide with confidence for the full year.

Speaker Change: For Q2, we expect broadband to deliver revenue between $75 million to $85 million gross margins between 44% to 45% due to product mix and adjusted EBITDA between $2 million to $6 million.

Speaker Change: In our guidance, we expect to see continued revenue growth in our rest of world customers based on the progress Nimrod mentioned earlier offset by expected timing shifts by our larger customers.

Walter Jankovic: This guidance includes an estimated tariff impact of approximately $3 million in the Q2 margins, almost all of which is related to broadband. We continue to assess and seek to mitigate the tariff impacts both in the short term and over the long term. For our video segment in Q2, we expect revenue in the range of $45 to $50 million, gross margin in the range of 63 to 64 percent, and adjusted EBITDA to range from $2 to $4 million. On this slide, we've also provided total company guidance for Q2. In the interest of time, I will let you read through the details.

Speaker Change: This guidance includes an estimated tariff impact of approximately $3 million in the Q2 margins almost all of which is related to broadband we continue to assess and seek to mitigate the tariff impacts both in the short term and over the long term.

Speaker Change: For our video segment in Q2, we expect revenue.

Speaker Change: And the range of $45 million to $50 million gross margin in the range of 63% to 64% and adjusted EBITDA to range from $2 million to $4 million.

Speaker Change: On this slide we've also provided a total company guidance for Q2 in the interest of time I'll, let you read through the details. Please also note that our non-GAAP tax rate is 20%.

Walter Jankovic: Please also note that our non-GAAP tax rate is 20 percent.

Walter Jankovic: I would like to highlight that total company EPS for the second quarter of 2025 is expected to be in the range of $0 to $0.04.

Speaker Change: Would like to highlight the total company EPS for the second quarter of 2025 is expected to be in the range of zero to four.

Nimrod Ben: We thank everyone for their attention today, and now I'll turn it back to Nimrod for final remarks before we open up the call for questions. Thanks, Walter. In summary, we had a strong Q1 with gross margin and adjusted EBITDA exceeding our expectations in both of our businesses, and video revenue that was also higher than we had anticipated.

Speaker Change: We thank everyone for their attention today and now I'll turn it back to NIM Rod for final remarks, before we open up the call for questions.

Speaker Change: Thanks, Walter in summary, we had a strong Q1 with gross margin and adjusted EBITDA exceeding our expectations in both of our businesses and video revenue that was all.

Speaker Change: Also higher than we had anticipated.

Nimrod Ben: Although the transition to Unified 4.0 in broadband and the current tariff situation is creating some short-term headwinds, as you can tell from our August update today, we continue to be confident in the long-term growth for our business and in the expected growth rebound for broadband in 2026. With our innovation and technology leadership positions, our strong operating model and proven business execution, our growing roster of customer wins and sizable backlog, we are extremely well positioned for the future.

Speaker Change: Although the transition to unified four O in broadband and the current tariff situation is creating some short term headwinds as you can tell from our August update today, we continue to be confident in the long term growth for our business and in the expected growth rebound for broadband in 2026 with our innovation.

Speaker Change: And technology leadership positions.

Speaker Change: Our strong operating model and proven business execution, our growing roster of customer wins and sizeable backlog, we are extremely well positioned for the future.

Operator: Walter and I are now happy to take your questions. Thank you. As a reminder, if you would like to ask a question, please press Star 1-1 on your... You'll hear an automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment, please.

Speaker Change: Walter and I are now happy to take your questions.

Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone you hadn't automated message advising your hand is raised we also ask that you. Please wait for your name and company to be announced before proceeding with your question one moment. Please.

Steven Frankel: Our first question will be coming from the line of Steven Frankel. of, excuse me, Rosenblatt Securities, your line is open. Good afternoon. Thanks for the opportunity. You know, last quarter, there was some discussion of this unified DOCSIS delay having to do with the amplifier piece. Obviously, you don't supply those, but it's critical to the network.

Speaker Change: Our first question will be coming from the line of Steven Frankel.

Speaker Change: Of.

Speaker Change: Excuse me Rosenblatt Securities. Your line is open.

Speaker Change: Good afternoon, and thanks for the opportunity.

Speaker Change: <unk>.

Speaker Change: Last quarter, there was some discussion of this unified DOCSIS delay having to do wish.

Speaker Change: The amplifier piece, obviously, you don't supply those but it is critical to the network.

Nimrod Ben: Any update in terms of where we where you think the industry is in getting those unified amplifiers in and tested in tune? I would say according to our original plan. There is no change relative to what we expected at the beginning of the year.

Speaker Change: Any update in terms of where you think the industry is engaging those unified.

Speaker Change: Ample hires in and tested and tuned.

Speaker Change: I would say according to our.

Speaker Change: Our regional plan.

Speaker Change: There is.

Speaker Change: There is no change relative to what we expected at the beginning of the year.

Walter Jankovic: And then in terms of dealing with the tariffs, given the cash flow and the balance sheet in Q1, does it make any sense to... go out and try to buy product ahead of delivery to work around the tariffs or you're comfortable that whatever tariffs we end up with, your customers are likely to share the burden and so you don't need to be aggressive about bringing in WIPs. Hey, Steve, it's Walter. So with regards specifically to looking at options to bring inventory in forward, especially as we have or currently have a 90 day pause, we definitely are looking at those those options.

Speaker Change: And then in terms of dealing with the tariffs given the cash flow and the balance sheet in Q1.

Speaker Change: Does it make any sense to.

Speaker Change: Go out and try to buy product.

Speaker Change: Head of delivery to work around the terrorists or you're comfortable that whenever tariffs we ended up with.

Speaker Change: Customers are likely to really share the burden and so you don't need to be aggressive about bringing in width.

Speaker Change: Hey, Steve it's Walter so with regard specifically to looking at options to bring inventory in forward, especially as we have or currently have a 90 day pause. We definitely are looking at those those options as you've noted we have ample liquidity to <unk>.

Walter Jankovic: As you noted, we have ample liquidity to bring in product sooner if we think it's advantageous for us and our customers in terms of the potential for additional tariffs post the 90 day pause.

Speaker Change: Bring in product sooner, if we think it's advantageous for us and our customers in terms of the potential for additional tariffs post a 90 day pause.

Nimrod Ben: Okay, and then last quick one in terms of fiber, where you seem to make some real progress in terms of book When does that fiber business begin to become a material part of revenue in terms of deployment? So, we did not provide the breakdown, but this is becoming, I would say, sizable in terms of the revenue. I don't know, Walter, what level of details we can provide on that, but this is certainly sizable. In this quarter we expanded number of customers and some of them were pretty big in terms of the the booking and even initial revenue volume.

Speaker Change: Okay, and then last quick one in terms of fiber, where you seem to made some real progress in terms of bookings when does that fiber business begin to become a material part of revenue in terms of deployments.

Speaker Change: Yeah.

Speaker Change: So we did not provide the breakdown, but this is.

Speaker Change: This is becoming.

Speaker Change: I would say sizable in terms of the revenue.

Speaker Change: I don't know Walter what level of details we can provide on that but this is.

Walter: Certainly sizable.

Speaker Change: In this quarter.

Speaker Change: We expanded the number of customers and some of them were pretty big in terms of.

Speaker Change: The.

Speaker Change: The booking and even initial revenue.

Walter Jankovic: Yeah, one thing I would add, Steve, to Nimrod's comments here is that, you know, we have, you know, cable customers that are purchasing both DOCSIS and fiber and we've talked about that before in terms of penetrating our cable customers with our fiber products as well. So when we sell those products together, they're not necessarily segregated out. I think with regards to fiber sales to pure play telcos, that is an area that, you know, we continue to gain momentum on and will become more substantial as we move forward. Yeah, I think that the DZS, the DZS comment that we made is a pure telco.

Speaker Change: Volume, Yes, one thing I would add Steve to Nimrods comments here is that we have cable customers that are purchasing both DOCSIS and fiber and we've talked about that before in terms of penetrating our cable customers with our fiber products as well so when we sell those products together they are not necessary.

Speaker Change: Segregate it out I think with regards to fiber sales to pure play telcos that is an area that.

Speaker Change: We continue to gain momentum on and and will become more and more substantial as we move forward.

Speaker Change: Yes, I think that.

Speaker Change: The Dcs comment that we made is a pure telco.

Steven Frankel: The international opportunity we mentioned in Latin America is a cable, but a pure telco project from our point of view. And the other example that we provided is a sizable expansion with existing customer. Great, thank you. I'll jump back in the queue. Thank you.

The international opportunity, we mentioned in Latin America is a cable, but a pure telco project from our point of view and the other example that we provided is a sizable expansion with existing customer.

Speaker Change: Great. Thank you I'll jump back in the queue.

Speaker Change: Thanks, Steve.

Thank you.

Ryan Koontz: And our next question will be coming from the line of Ryan Koontz of the company, your line is open. Great, thanks. Just kind of double click here on the kind of your second half uncertainty. Trenderson, exactly. sources that how much of that uncertainties tariff situation and how much is coming from Technology Readiness. whether it's your customers adopting new technology at a different pace or just the DOCSIS 4 Unified. not really being ready yet. Can you can help us parse?

Speaker Change: And our next question will be coming from the line of Brian <unk>.

Anthony: Anthony Your line is open.

Speaker Change: Great. Thanks.

Speaker Change: Just kind of double click here on the kind of the your second half uncertainty in trying to understand exactly.

Speaker Change: Source of that how much of that uncertainty is coming from tariff situation and how much is coming from.

Speaker Change: Technology readiness.

It's your customers adopting new technology at a different pace or just the DOCSIS four unified ecosystem.

Speaker Change: Not really being ready yet can you kind of help us parse that current visibility of the current view of second half.

Walter Jankovic: Sure, Ryan, it's Walter. I'll kick it off. Specifically with regards to, you know, not providing a full year guide this time, this is strictly due to the macroeconomic uncertainty associated with the tariffs and the continuing changes in the tariff rates and potential tariff rates. That's impacted us in terms of, you know, having the right level of visibility as we look through the rest of the year. As of today, we don't have all of the revenue for the year committed in backlog, as you would imagine. And therefore, as we look at the tariff uncertainty and all of the tariff fluctuations, and remember, this is 26 days old that we've been involved in this situation, and things have continued to change over that period of time.

Speaker Change: Sure Ryan its Walter I'll kick it off specifically with regards to not providing a full year guide. This this time. This is strictly due to the macroeconomic uncertainty associated with the tariffs and the continuing changes in the tariff rates and potential tariff rates that's impacted us in <unk>.

Speaker Change: Terms of <unk>.

Speaker Change: Moving the right level of visibility as we look through the rest of the year as of today, we don't have all of our.

Speaker Change: The revenue for the year committed in backlog as you as you would imagine and therefore as we look at the tariff uncertainty in all of the tariff fluctuations and remember this is 2006 days old that we've been involved in this situation and things have continued to change over that period of time it puts.

Walter Jankovic: It puts us in a position where, depending on what happens next and the handling of these tariffs, you know, we could see customers potentially delay orders or have some timing shift in orders, especially if the tariffs are significant and we'll need to sit down with customers and discuss, you know, pricing going forward associated with products. So, this is the uncertainty that's been put in front of us. It's all related to that. And we just don't feel comfortable that we can provide a confident guide for the full year based on what we see ahead of us and where we are right now, 26 days into the situation with regards to tariffs.

Speaker Change: US in a position where depending on what happens next and the handling of these tariffs we could see customers potentially.

Speaker Change: Delay orders or have some timing shift in orders, especially if the tariffs are significant and will need to sit down with customers and discuss pricing going forward associated with with with products. So this is the uncertainty that's been put in front of us it's all related to.

Speaker Change: Due to that and we just don't feel comfortable that we can provide a confident guide for the full year based on.

Speaker Change: On what we see ahead of us and where we are right now 2006 days into into this situation with regards to tariffs in my prepared remarks today, we talked about.

Walter Jankovic: In my prepared remarks today, you know, we talked about, you know, our business and provided some color around, you know, a large majority of our broadband business does go to the U.S. It comes from Asia. So, those are the key facts in terms of, you know, what we're dealing with as we go through this. And, you know, it's everybody in the industry's going through it, obviously out of our control, but we're managing it effectively in terms of what we can do in the short term to address the tariffs that are in place right now, as well as looking longer term.

Our business and provided some color around.

Speaker Change: A large majority of our broadband business does go to the U S. It comes from from Asia. So those are the key facts in terms of what what we're dealing with as we go through this and.

Speaker Change: Everybody in the industry is going through it obviously out of our control, but we're managing it effectively in terms of what we can do in the short term to address the tariffs that are in place right now as well as looking longer term, but really we need to see what those final rules are before we start making any.

Walter Jankovic: But really, we need to see what those final rules are before we start making any decisions with regards to supply chains for the longer term. I think the other thing to really note here is that, and I mentioned it in the prepared remarks, that, you know, the fundamentals are strong. You heard it today from Nimrod in terms of our wins, our progress with regards to our long term strategy. None of that has changed. Our customers, in terms of their situation around competitive pressure and needing to upgrade the network or face subscriber loss, that hasn't changed.

Speaker Change: Patients with regards to supply chain for the.

Speaker Change: The longer term.

Speaker Change: The other thing too to really know here is that and I mentioned it in the prepared remarks that the.

Speaker Change: Fundamentals are strong you heard it today from NIM Rod in terms of our wins, our progress with regards to our our long term strategy. None of that has changed our customers in terms of their situation around competitive pressure and needing to upgrade the network or face substantial.

Walter Jankovic: So, we feel very good about, you know, our business and in the long term in the business. I think we all are facing some short term headwinds and uncertainty, all associated with regards to the macroeconomic uncertainty and the situation around tariff.

Speaker Change: Scriber loss that Hasnt changed so we feel very good about our business in the long term.

Speaker Change: In the business I think we all are facing some short term headwinds and uncertainty all associated with regards to the.

Speaker Change: The macroeconomic uncertainty and the situation around tariffs.

Ryan Koontz: Thank you so much. Really helpful, Walter. Thank you.

Speaker Change: That's really helpful. Walter Thank you and just a clarification on your comment about the nodes in sourcing that technology, obviously, the Rpgs are coming from our traditional PCB shops.

Ryan Koontz: And just a clarification on your comment about the nodes and sourcing, that technology, obviously the RPDs are coming from a traditional PCB shop, contract manufacturer, but how about the balance of the nodes in terms of... power and mechanicals that are, you know, so, so heavy. And, and, um, are those also sourced from Malaysia or are they coming from? Yeah.

Speaker Change: Okay.

Speaker Change: Contract manufacturer, but how about the <unk>.

Speaker Change: Balance of the nodes in terms of.

Speaker Change: The power and Mechanicals that are so so heavy in are those also source from Malaysia or are they coming from.

Walter Jankovic: As, as per the prepared remarks, the vast majority, the vast majority of our product is manufactured out of Malaysia for the broadband . Alright, thanks so much. Thanks, Ryan.

Speaker Change: As per the prepared remarks, the vast majority the vast majority of our product is manufactured out of Malaysia for the broadband business.

Speaker Change: Got it alright, thanks, so much.

Brian: Thanks, Brian.

Operator: Thank you. And one moment for the next question, please.

Brian: Thank you and one moment for the next question. Please.

Victor Chiu: Our next question is coming from the line of Victor Chiu. of Raymond James, and I guess open.

Speaker Change: Our next question is coming from the line of Victor Chu.

Speaker Change: Of Raymond James Hi, guys open.

Walter Jankovic: Hi guys, this is Victor for Simon Leopold. Just to follow up on the tariff commentary a bit, can you tell us, you know, kind of what potential options you're looking at in terms of possibly, you know, diversifying your manufacturing footprint, like you mentioned earlier for the broadband business? Hi, Victor, it's Walter. Yeah, so without getting into a lot of specific details, obviously, there are other options and I'm sure, you know, you've heard it from perhaps other other companies out there in terms of looking beyond Asia, looking to near shore our our supply chain potential for doing work in in in Mexico under the U.

Speaker Change: Hi, guys. This is victor in for Simon Leopold.

Speaker Change: Just to follow up on the tariff commentary a bit can you tell us kind of what potential options youre looking at in terms of possibly.

Speaker Change: First of all your manufacturing footprint and like you mentioned earlier for the broadband business.

Speaker Change: Hey, Victor it's Walter Yes, so without getting into a lot of specific details. Obviously, there are other options and I'm sure.

Speaker Change: <unk> heard it from perhaps other other companies out there in terms of looking beyond Asia looking to near shore.

Speaker Change: Our our supply chain potential for doing work.

Speaker Change: In Mexico under the U S. MCA rules, but this is all preliminary we really need to understand what is going to beat the permanent tariff.

Walter Jankovic: S. M. C. A. rules. But this is all preliminary.

Walter Jankovic: We really need to understand what is going to be the permanent tariff environment and then that will allow us to do the appropriate assessment to determine if there are other options that would be beneficial to us and our customers. Okay, that's helpful. And then, you know, kind of just excluding the potential impact from tariffs. Has there been any change around, you know, the visibility of the spending trajectory, you know, from your largest, you know, two largest MSO customers at this point in the year versus where, you know, when you cautioned us against the slower spending last year?

Environment, and then that will allow us to do the appropriate assessment to determine if there are other options that would be beneficial to us and our customers.

Speaker Change: Okay.

Speaker Change: Helpful and then.

Speaker Change: Just excluding the potential impact from tariffs so has there been any change around.

Speaker Change: The visibility of the spending trajectory from your largest two largest msos customers at this point in the year versus when you cautioned us against the slower spending last year.

Walter Jankovic: Yeah, I would say Victor, you know, without getting into any any specific customers, you know, we mentioned it on on the call. And I think we also mentioned that in our in our quote today, we haven't seen any change in our customers behavior to date.

Speaker Change: Yeah, I would say Victor.

Speaker Change: Without getting into any any specific customers.

Speaker Change: We mentioned it on the call and I think we also mentioned that in our in our quote today, we haven't seen any change in our customers' behavior to date.

Walter Jankovic: And then just one last one quickly. I'm sorry, what was the mixed dynamic in the broadband segment between 1Q and 2Q that's causing the big drop in the margins? Oh, certainly. So let me just bridge the margins for the Q2 guide. In the Q2 guide, we highlighted that we had put in $3 million approximately for the tariff impact. That's scenario. We're working through that right now. So if you bridge that, which is predominantly almost all of it is to the broadband business, the delta between Q1 and Q2 would be the mix of COS licenses. in the quarter.

Speaker Change: Okay, and then just one last one quickly.

Speaker Change: I'm sorry, what was the mixed dynamic in the broadband segment between <unk> and <unk>, that's causing the big drop in the margins certainly so let me just bridge the margins for the Q2 guide in the Q2 guide we highlighted that we had put in 3 million approximately for the tariff.

Speaker Change: Impact that's a worst case scenario, we're working through that right now. So if you bridge that which is predominantly almost all of it is to the <unk>.

Speaker Change: <unk> band business.

Speaker Change: The Delta between Q1, and Q2 would be the mix.

Speaker Change: Pos licenses.

Victor Chiu: Q2 is a below average type of quarter in terms of the mix of the COS compared to all the other products. That's the bridge between Q1 and Q2. And you would have seen in our Q4 results, the margin levels we were at in broadband. So in Q2, when you normalize for that, that's what's causing it to dip down. Okay, thank you. Thanks, Victor. Thank you, and as a reminder, if you would like to ask a question, please press star 1 on your telephone.

Speaker Change: The quarter Q2 is a below average type of quarter in terms of the mix of the Pos compared to all the other other products. That's the bridge between Q1 and Q2 and you would have seen in our Q4 results. The margin levels. We were at in in broadband so in Q2.

Speaker Change: Two when you normalize for that that's what's causing it to dip down.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks Victor.

Speaker Change: Okay.

Speaker Change: Thank you and as a reminder, if you would like to ask a question. Please press star one on your telephone.

Elisa Shreve: And our next question will be coming from the line of Elisa Shreve of Barclays. Your line is open. Hi, this is Alyssa Shreves.

Speaker Change: And our next question will be coming from the line of Alicia <unk> from Barclays. Your line is open.

Walter Jankovic: I'm for Tim Long from Barclays. I was just looking at the SAS piece in the video business. It looks like it was down a little bit quarter to quarter. Can you talk a little bit about the customer dynamics you're seeing within this piece of the business in terms of kind of overall customer fiscal health?

Speaker Change: This is illustrated on for Tim long from Barclays.

Speaker Change: Just looking at the that piece in the video business. It looks like it was down a little bit quarter to quarter can you talk a little about the customer dynamics youre seeing within that piece of the business.

Speaker Change: In terms of kind of overall customer physical health.

Walter Jankovic: Yeah, no, hi, Alyssa, it's Walter. So with regards to SAS, yeah, from Q4 to Q1, we were down slightly, there's always a level of seasonality with regards to especially live events and sports. And so there is not no major shift in terms of customers, or the portfolio of customers that we have. And when we look at year over year growth, as I mentioned, during the prepared remarks, it's 15% up year over year. One other thing to just comment or provide a little bit more color on, you know, we do expect the SAS business to grow in 2025.

Yes no.

Walter: Elisa, it's Walter so with regards to SaaS.

Walter: From Q4 to Q1, we were down slightly there is always a level of seasonality with regards to especially live events and sports and so there is no major shift in terms of customers or the portfolio of customers that we have and when we look at year end.

Walter: Over a year growth as I mentioned during the prepared remarks, it's 15% up year over year.

Walter: One other thing.

Walter: Just comment or provide a little bit more color on we do expect.

Walter: The SaaS business to grow in 2025, we mentioned that on our last earnings call and good part of that growth will come from our partnership with with Akamai that we had announced that during the last quarter.

Walter Jankovic: We mentioned that on our last earnings call. And you know, a good part of that growth will come from our partnership with with Akamai that we had announced during the last quarterly call. And we had not any contribution from that in the first quarter. That's right. We expect that to be starting to contribute kind of mid-year.

Quarterly call.

Walter: And we had not any contribution from that in the in the first quarter that's right.

Walter: We expect that to be starting to contribute kind of mid year.

Walter: And going forward.

Walter Jankovic: Okay, that's really helpful.

Walter Jankovic: And then you talked about some of the traditional kind of appliance refresh wins you're seeing. How should we kind of think about where we are in terms of ending with this kind of traditional appliance refresh cycle? Are we still, are we in the middle? How should we kind of think about? Thanks. Yeah, so we think it's going to continue. That was the level of confidence that we shared in the prepared remarks. It's not like a major industry trend like we see on SAS streaming, but at the same time, we see a good list of reasons for customers to upgrade and refresh for higher density, refreshing the compute infrastructure, new features and capabilities, improved video quality.

Walter: Okay. That's really helpful. And then you talked about some of the traditional kind of appliance refresh when youre seeing.

Walter: How should we kind of think about where we are in terms of any with this kind of traditional appliance refresh cycle.

Walter: In the middle or how should we kind of think about timing there. Thanks.

Walter: So we think it is going to continue that was the level of confidence that we shared in the prepared remarks.

Speaker Change: It's not.

Speaker Change: A major industry trend like we see on <unk>.

Speaker Change: <unk> streaming but at the same time, we see a.

Speaker Change: A good list of reasons for customers to upgrade and refresh.

Speaker Change: For higher density refreshing the compute infrastructure.

Speaker Change: New features and capabilities improved video quality there is.

Walter Jankovic: So there is a kind of good list of reasons for that. I think one of the other things that is helping us is the fairly big installed base that we have. So we don't need the entire installed base to go through a refresh at once. So in aggregate, we see that continuing.

There is a kind of good list of reasons for that I think one of the other things that is helping us is the fairly big.

Speaker Change: Installed base that we have so we don't need the entire installed base to go through a refresh at once.

Speaker Change: So in aggregate, we see that.

Speaker Change: <unk>.

Operator: Great, thank you so much. Thank you.

Speaker Change: Great. Thank you so much.

Speaker Change: Thanks Elisa.

Tim Savageaux: And our next question will be coming from the line of Tim Savageaux. of Northland Capital Markets. Your line is open. Hey, good afternoon. A couple of questions here, but I'll start on this one first. Last quarter... You talked about... Amplifier Availability, or Smart Amplifier Availability, I think, as maybe a gating factor or one factor that could be slowing down deployments. Talked about a technology collaboration, aim to address that. I wonder if we can get an update on the status of that situation from your perspective. Yeah, so I think when we presented that issue, we basically said that we count on availability of these not smart but brilliant amplifiers and we've got dependency on them.

Speaker Change: Thank you and our next question will be coming from the line of.

Tim SaaS: Tim SaaS now.

Tim SaaS: Of Northland capital markets. Your line is open.

Speaker Change: Hey, good afternoon.

Couple of questions here, but I'll start on this one first glass quarter you.

Speaker Change: You talked about.

Speaker Change: <unk>.

Speaker Change: Amplifier availability.

Speaker Change: Our smart amplifier availability.

Speaker Change: As maybe.

Speaker Change: Our gating factor or one factor that could be slowing down deployments talked about our <unk>.

Speaker Change: Technology collaboration aimed.

Speaker Change: <unk> addressed that I wonder if we can get an update on.

Speaker Change: The status of that situation from your perspective.

Speaker Change: Yes so.

Speaker Change: I think when we presented that issue, we basically said that.

Speaker Change: We count on availability of these not smart, but brilliant amplifiers.

Speaker Change: And we've got dependency on then we also mentioned that we collaborate with <unk> to bring.

Nimrod Ben: We also mentioned that we collaborate with CIRCOM to bring more choice for the market and help speed up the deployment. What I said earlier is that right now it's progressing according to what we anticipated when we provided the outlook for the entire year so it's going according to the plan. Okay, and just to, well, I mean, I guess the original plan from a guidance perspective was a pretty, you know, decent ramp and broadband or pretty sharp ramp and broadband. throughout the year, and sounds like you would still expect that to be the case, at least on, you know, barring any other issues.

Speaker Change: More.

Speaker Change: Choice for the market and help speed up the deployment what I said earlier is that right now it's progressing for existing according to what we anticipated when we provided the outlook for the entire year. So it's going according to the plan.

Speaker Change: Okay and just to.

Speaker Change: I mean, I guess the original plan from a guidance perspective was a pretty decent ramp in broadband are pretty sharp ramp in broadband.

Speaker Change: Throughout the year it sounds like.

Speaker Change: You would still expect that to be the case at least on barring any other issues.

Walter Jankovic: With regard to some of the rest of the business, it looks like, based on spending targets, that your other big US customers planning a pretty aggressive ramp in spending throughout the year. Is that something you see from your perspective? And, you know, again, leaving aside product availability as anything sort of... change there from From Your Standpoint.

Speaker Change: With regard to some of the rest of the business it looks like based on spending targets.

Speaker Change: Your other big U S customers, claiming a pretty aggressive ramp in spending throughout the year.

Speaker Change: Is that something you've seen from your perspective.

Speaker Change: Again, leaving aside product availability.

Speaker Change: Sort of.

Speaker Change: Change there.

Speaker Change: From your standpoint.

Walter Jankovic: Hey, Tim, it's Walter. Maybe I'll take that question. You know, obviously, we can't guide specifically to any one particular customer. Obviously, we've also read, you know, all of the public information associated with our largest customers. So, no specific comment with regards to, you know, that piece of it. Obviously, we had a certain expectation as we entered the year. We've provided our guide now for Q2, which, you know, is a prudent guide considering the macroeconomic environment that we're in right now. And we're just not guiding second half for all of the reasons that I mentioned earlier in the Q&A and the prepared remarks.

Speaker Change: Hey, Tim it's Walter maybe I'll take that.

Speaker Change: That question.

Speaker Change: Obviously, we can't guide specifically to any one particular customer obviously, we've also read.

Speaker Change: All of the public information associated with with our largest.

Speaker Change: Our largest customers so.

Speaker Change: No specific comment with regards to that piece of it obviously, we had a certain expectation as we entered entered the year. We provided our guide now for for Q2, which.

Speaker Change: As a prudent guide considering the the Mac.

Speaker Change: Macroeconomic environment that we're in right now and we're just not guiding second half for all of the reasons that I mentioned earlier in the in the Q&A in the prepared remarks.

Operator: Got it.

Walter Jankovic: Well, maybe let's wrap up then with just the Q2 guide and broadband. I mean, you'd mentioned having seen no changes. in customer behavior, and I guess you'd call that a potential tariff impact, but You know, is there anything in particular driving that? guidance to be flat to down, you know, given those comments about no changes in customer behavior. So, I would say, I would say two things relative to, if you compare that to Q1 or Q2 of last year. So, it's really a timing issue with some of our larger projects related to transitions. We did talk in the past on Unified 4.0 that we're dependent or limited to the pace of that.

Speaker Change: Got it well, maybe let's wrap up with just the Q2 guide in broadband.

Speaker Change: You had mentioned having seen no changes.

Speaker Change: And customer behavior, and I guess, you called out a potential tariff impact but.

Speaker Change: So is there anything in particular.

Speaker Change: Driving that.

Speaker Change: Guidance to be flat to down.

Speaker Change: Given those comments about no changes in customer behavior.

Speaker Change: So I would say I would say two things relative to.

Speaker Change: If you compare that to Q1 or Q2 of last year.

Speaker Change: So it's really a timing issue with some of our larger projects related to transitions. We did talk in the past on unified four O that were dependent or limited to.

Walter Jankovic: And also a couple of, I would call it a scale up of projects. The second thing, maybe, Walter, you can comment on how we got prudent around what's kind of a book and burn ahead of us. Yeah, so with the uncertainty, we definitely have a bias to rely a little bit less on what we call book and burn. So, these are opportunities that haven't yet booked that we expect will book and turn a revenue in the quarter. So, just because of the uncertainty potential that some of those orders could be delayed, we've biased ourselves a little bit more to relying more on the backlog and a little bit less on the book and burn element.

Speaker Change: The pace of that and also couple of.

Speaker Change: I would call it a scale up of projects.

Speaker Change: The second thing maybe Walter you can comment on.

Speaker Change: How we got prudent around whats kind of book and burn ahead of us. So so with with the uncertainty we definitely have a bias to rely a little bit less on what we call book and burn. So these are opportunities that haven't yet booked that we expect will book.

Speaker Change: And turn to revenue in the quarter. So just because of the uncertainty potential that some of those orders could could be delayed with biased ourselves a little bit more to relying more on the backlog at a little bit less on the book and burn element. So we think that's the prudent thing to do.

Walter Jankovic: So, we think that's the prudent thing to do considering the environment we're in right now that continues to shift by the day. I'll just add on my earlier comment. This was really expected. This is not something that was discovered for the second quarter. We knew what we're walking into. I think the book and burn conservatism is really something we decided on the kind of last couple of weeks. Got it. Thanks very much. Okay, great. Thanks, Tim.

Speaker Change: <unk> the environment. We're in right now that continues to shift by the day I'll just add on my earlier comment. This was really expect that this is not something that.

Speaker Change: <unk> was discovered.

Speaker Change: For the second quarter, we knew what we're walking into I think the bulk of the book and burn conservatism is really something we.

Speaker Change: Decided on the kind of last couple of weeks.

Speaker Change: Yes.

Tim: Got it thanks very much okay, okay, great. Thanks, Tim.

Operator: Thank you and that does conclude today's Q&A session.

Speaker Change: Thank you and that does conclude today's Q&A session I would like to go ahead and turn the call back over to NIM right.

Nimrod Ben: I would like to go ahead and turn the call back over to Nimrod Ben-Naten, CEO. Please go ahead for closing remarks. We appreciate your continued interest in Harmonic and look forward to updating you on our progress in the future. Thank you all for joining the call. Have a good day. This concludes today's conference call. You may all disconnect.

Speaker Change: <unk> CEO. Please go ahead for closing remarks.

Speaker Change: We appreciate your continued interest in harmonic and look forward to updating you on our progress in the future. Thank you all for joining the call have a good day.

Speaker Change: This concludes today's conference call you may all disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Operator: Thanks for watching!

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].