Harmonic Virtual Analyst Day Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ryan Koontz - Needham and Company, LLC - Analyst : All right, thanks for the question. Appreciate the presentation today. With regards to the fiber opportunity, how do you compare that on a revenue per subscriber basis compared to DOCSIS for Harmonic?

Question: Ryan Koontz - Needham and Company, LLC - Analyst : All right, that's super helpful. Thanks. And on your open ONU strategy, I certainly understand that. What kind of costs are you incurring to kind of qualify all these partners? And certainly the Tier 1s are going to kind of dictate to you, I'm sure who they want to use for the right size opportunity. But apart from that, where it's not a volume-driven business, how are you kind of carrying those costs to qualify the ONU suppliers?

Question: Ryan Koontz - Needham and Company, LLC - Analyst : Got it. And so I assume those partners are primarily driven by your customer feedback on who to work with there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 13, 2024 / 2:00PM, HLIT.OQ - Harmonic Virtual Analyst Day

Question: Ryan Koontz - Needham and Company, LLC - Analyst : Got it. And maybe one last question on the broadband side. Great to hear about your kind of strategic direction towards edge cloud as well as kind of cloud-hosted subscription services. Do you have any of your other models out there? And I know you guys have this kind of intelligent bandwidth product that just came out. But any other sorts of examples of that that you guys have in mind for kind of layer on applications for cOS?

Question: Ryan Koontz - Needham and Company, LLC - Analyst : Got it. Yeah, it sounds like a real interesting opportunity as it evolves. I assume that in addition that cOS has sort of APIs that your largest customers could even develop their own apps for that, is that accurate?

Question: Ryan Koontz - Needham and Company, LLC - Analyst : Okay, great. And just one last one with regards to the ad insertion. I know you guys have had some announcements in the last few months about this is kind of in-stream advertising. Is that something that you're uniquely able to do because you're the streaming platform or do other ad insertion to -- or are you competing there with other ad insertion technologies that can essentially you do the same thing, but there's APIs that other ad platforms could plug in to the sports streaming?

Question: Ryan Koontz - Needham and Company, LLC - Analyst : Got it. So it sounds like we should think of this as a another product or a module for the streaming business. And the next kind of follow-up on that, can this also be applicable to the appliance business, to the linear business? Is there ability to do so to speak in-stream for appliances or appliance is always broadcast only.

Question: Ryan Koontz - Needham and Company, LLC - Analyst : Got it. Great. And maybe Walter, one last one for you on the gross margins on cable. Sounds like you're expecting a stronger mix of hardware there in terms of the gross margin targets. What are the kind of puts and takes there that we should think about gross margins going forward? Is that -- you feel like that's a baseline or a conservative estimate or you're expecting stronger share in hardware generally? That would be helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 13, 2024 / 2:00PM, HLIT.OQ - Harmonic Virtual Analyst Day

Question: Ryan Koontz - Needham and Company, LLC - Analyst : Super helpful. Thanks, Walter. That's all I've got. I'll get back in queue.

Question: Simon Leopold - Raymond James and Associates, Inc. - Analyst : Great. Thank you for taking the questions. A couple of things I wanted to explore here, one of which is what are you thinking about the possibility that the industry consolidates or integrates FDX and ESD technology into a unified device. I'm hearing that that's being discussed. And wondering if first of all, what do you think of that possibility? Two, if it happens, is that lead to a push of your opportunities out of this year and pushes them down the line into '25 and '26? Anything you can offer on sort of this scenario or possibility? Then I've got a couple of quick follow-ups. Thanks.

Question: Simon Leopold - Raymond James and Associates, Inc. - Analyst : Great. That's very helpful. The other thing is that I wonder if you can offer some thoughts on the fact that one of your competitors is buying the assets of another now bankrupt competitor. I can't imagine that changes things much for you, but just if you've got any thoughts on how that might affect the industry as a whole?

Question: Simon Leopold - Raymond James and Associates, Inc. - Analyst : Great. And then the follow-up is hopefully pretty easy. In the past, you've broken out the expectations for your fiber to the X revenue within broadband. Just wondering how you're thinking that it contributes to that $800 million 2026 target. Thank you.

Question: Simon Leopold - Raymond James and Associates, Inc. - Analyst : Thank you.

Question: Steven Frankel - Rosenblatt Securities Inc. - Analyst : Good morning, and thank you for doing this today. I'd like to take another cut at that 2026 broadband forecast and maybe give us some insight into how much revenue would you attribute to customers since you already have today versus what's in the pipeline?

Question: Steven Frankel - Rosenblatt Securities Inc. - Analyst : Okay. (inaudible) Can you detail on kind of how much of this is a lot of those customers that have kind of been in the waiting room the last couple of years, you're going to be ramping up versus discounting what's in the pipeline to get to that number? If -- I'm trying to understand your visibility on that number.

Question: Steven Frankel - Rosenblatt Securities Inc. - Analyst : Okay. And then maybe take one more cut at it. So when we get to 2026 and you look across your customer base and where do we think we are in deployment? Are we a third of the way there, are we three-quarters of the way deployed by '26? And what inning will we be in 2026?

Question: Steven Frankel - Rosenblatt Securities Inc. - Analyst : Great. Thank you so much.

Question: Tim Savageaux - Northland Securities, Inc. - Analyst : Hi, good morning. One to follow up on that discussion about diversification of the business, maybe along a couple of lines. First, Walter you mentioned that percentage from the top two going down (technical difficulty) pin you down a little bit on that. Would you see that below 50% of the broadband business in the '26 timeframe, or can you give us any other metrics?

Question: Tim Savageaux - Northland Securities, Inc. - Analyst : Okay, thanks. And you mentioned share. And that was kind of where I was going to head next and I think we've got 26 targets in 27 TAMs. But even working with that a little bit, it looks like your current DOCSIS share is something on the order of 70%. It seems like you're making an assumption that that declines a bit over the next few years and kind of correct me if I'm wrong there in terms of what's implied market share wise in your '26 target, maybe let's just focus on that and DOCSIS, and I'll follow up on fiber.

Question: Tim Savageaux - Northland Securities, Inc. - Analyst : Great. Okay. And another element of that could be just continued growth in the TAM. I think you were talking about -- I realize it was a while ago, but a $900 million TAM for '25 (inaudible) now looking at $1.25 billion or so for '27. So there's some pretty nice group, nice growth there. Similarly, on the fiber side, I think similar dynamic, which I think previous share assumptions were around 20% of the TAM for cable PON, but you're adding kind of the rural telco market into that equation. And so I assume that share assumption kind of ought to be less than that original target as well, given the expanded TAM in rural. Is that a fair way to look at it?

Question: Tim Savageaux - Northland Securities, Inc. - Analyst : Great, thanks. And last question for me here. And here I'm looking for customer [count] metrics and that is around -- can you give us any color on the number of current Tier 2, Tier 3 (technical difficulty) telco, fiber wins and or can you give us a sense of the size of the active pipeline from a customer perspective?

Question: Tim Savageaux - Northland Securities, Inc. - Analyst : Okay. And real last question here. Can you describe obviously you're looking a little farther out, but can you describe the current state of your Tier 1 engagement on the fiber side? And when would you like to see some sort of field or lab trial or activity? What are your expectations there?

Question: Tim Savageaux - Northland Securities, Inc. - Analyst : Yeah, outside of cable.

Question: Tim Savageaux - Northland Securities, Inc. - Analyst : Okay. Thanks.

Question: George Notter - Jefferies LLC - Analyst : Hi guys (technical difficulty) I guess I'm kind of sitting back here and listening to the whole dialogue. And I have to admit it feels like your business historically hasn't been super predictable and listening to how you guys are kind of parsing the different aspects of the business and where the growth is coming from, it sort of implies a level of precision that I'm not sure is really here. And as evidence I would point to some of these sessions you guys have done in the past and some of the numbers that you guys have outlined and they didn't really pan out. And so I guess I just want to kind of level set here and think a little bit about why are you guys setting these expectations? Why is that important for investors? Like why does it make sense to really kind of feel like there is a lot of precision in this whole process, when (inaudible) hasn't been in the past? Sorry for the tough question, but I think it's worth asking. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 13, 2024 / 2:00PM, HLIT.OQ - Harmonic Virtual Analyst Day

Question: George Notter - Jefferies LLC - Analyst : Okay. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 13, 2024 / 2:00PM, HLIT.OQ - Harmonic Virtual Analyst Day