HARMONIC INC. Q1 FY2025 earnings call

• Broadband Progress: Rapid adoption of next-generation virtualized platforms, 129 cOS deployments in production, added seven new logos, record fiber bookings, and innovation like PTP-less timing solution and Beacon Speed Maximizer.
• Video Business: Customer demand for broadcast-grade quality and reliability, appliance business with strong margins, SaaS streaming expansion, and differentiated hybrid solutions.
• Financials: Total company revenue was $133.1 million, up 9% year-over-year. Adjusted EBITDA was strong, cash balance was $148.7 million at quarter end, and backlog and deferred revenue were $485.1 million.

Broadband Segment

• Revenue for the quarter was $84.9 million, representing 7.6% year-over-year growth. Gross margin expanded to 55.5% due to a favorable product mix. There were 129 cOS deployments in production, managing 33.9 million connected modems and approximately 0.25 million remote PHY devices. The segment booked a record quarter for fiber, with three new pure fiber wins and eight expansion projects with existing customers.

Video Segment

• Appliance business had excellent margins on higher volume of larger refresh deals. SaaS streaming revenue was $14.8 million for the quarter, up 15% year-over-year. Video revenue was $48.3 million, up 11.8% year-over-year, with adjusted EBITDA of $5.3 million.

• For Q2 2025, broadband is expected to deliver revenue between $75 million to $85 million, gross margins between 44% to 45%, and adjusted EBITDA between $2 million to $6 million. Video is expected to have revenue in 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. Total company EPS for Q2 2025 is expected to be in the range of $0 to $0.04. Full-year 2025 guidance is not provided due to tariff uncertainty.

• Tariff impacts on the broadband business, particularly from Malaysia manufacturing and U.S. sales. The tariff situation is fluid with a 90-day pause, and the company is exploring supply chain optimization, cost management, and price actions to mitigate impacts.

Q: Last quarter, there were some discussion of this Unified DOCSIS delay having to do with the amplifier piece. Any update in terms of where you think the industry is in getting those unified amplifiers in and tested and tuned?

A: According to our original plan, there is no change relative to what we expected at the beginning of the year.

Q: 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 really share the burden and so you don't need to be aggressive about bringing in WEP?

A: With regards specifically to looking at options to bring inventory and forward, especially as we have or currently have a 90 day pause. We definitely are looking at those options. 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.

Q: When does that fiber business begin to become a material part of revenue in terms of deployments?

A: This is becoming sizable in terms of revenue. We expanded number of customers, and some of them were pretty big in terms of the booking and even initial revenue volume. With cable customers purchasing both DOCSIS and Fiber, and momentum in pure-play telco projects, it will become more substantial moving forward.

Q: Great. Thanks. Just trying to double click here on the kind of your second half uncertainty, and trying to understand exactly the source of that. How much of that uncertainty is coming from 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 4.0 Unified ecosystem not really being ready yet?

A: The uncertainty is strictly due to the macroeconomic uncertainty associated with the tariffs and the continuing changes in the tariff rates and potential tariff rates. It puts us in a position where, depending on what happens next and the handling of these tariffs, we could see customers potentially delay orders or have some timing shift in orders, especially if the tariffs are significant. The fundamentals are strong, but short-term headwinds are associated with tariff uncertainty.

Q: I was just looking at the SaaS 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 the kind of overall customer physical health?

A: With regards to SaaS, yes, from Q4 to Q1, we were down slightly. There's always a level of seasonality with regards to especially live events and sports. There is no major shift in terms of customers or the portfolio of customers that we have. When we look at year-over-year growth, it's 15% up year-over-year. We expect the SaaS business to grow in 2025, with our partnership with Akamai starting to contribute mid-year.

Q: Hi, 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?

A: 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. We also mentioned that, we collaborate with Sircomm to bring more choice for the market and help to 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.

Q: 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?

A: 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. We also mentioned that, we collaborate with Sircomm to bring more choice for the market and help to 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.

Q: Maybe let's wrap up then with just the Q2 guide in broadband. I mean, you'd mentioned having seen no changes in customer behavior and I guess you've called out a potential tariff impact, but is there anything in particular, driving that guidance to be flat to down, given those comments about no changes in customer behavior?

A: Two things relative to if you compare that to Q1 or Q2 of last year. 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, and also couple of, I would call it, scale-up of projects. 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 to 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 elements. 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.