Harmonic Inc Q3 2024 Earnings Call Transcript

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

Question: Ryan Koontz - Needham & Company Inc. - Analyst : Hi. Thanks for the question, and congrats on the great quarter. The nice upside in broadband in the September quarter, can you explain -- was that primarily timing that you expected later in the year? And can you have any color you can provide on product mix as that might have been shifting and driving higher margins? Thanks.

Question: Ryan Koontz - Needham & Company Inc. - Analyst : That's great. Thank you. And if I could do a follow-up, please. In terms of the kind of characterization of your Tier 1 customer deployments, what kind of color can you provide on how those have changed, excluding Comcast, which is obviously in a strong growth mode? It looks like substantially all of your growth was coming out of the Americas segment. Any commentary you can make around some of the Americas Tier 1s moving into deployment mode?

Question: Ryan Koontz - Needham & Company Inc. - Analyst : Great. And any further color you can provide on your comments around '25? It sounds like there could be some stalling of growth in broadband as customers evaluate Unified. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 9:00PM, HLIT.OQ - Q3 2024 Harmonic Inc Earnings Call

Question: Ryan Koontz - Needham & Company Inc. - Analyst : Okay. So I assume, Walter, for some of these larger customers that go into a reevaluation mode, there could be multiple quarters of impact there in terms of their deployment plans versus previous?

Question: Ryan Koontz - Needham & Company Inc. - Analyst : Understood. Thank you both.

Question: Steven Frankel - Rosenblatt Securities, Inc. - Analyst : Good afternoon. I'll take another crack at the same question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 9:00PM, HLIT.OQ - Q3 2024 Harmonic Inc Earnings Call If we step back over the last year, one of the big questions has been, when will somebody other than your two largest customers really get going? So when you talk about this caution around the availability of Unified solutions potentially slowing down growth in 2025, are you implying that that affects everybody? Or is this caution around the notion that the other customers that have been anxious to get going may not be able to run as fast because of the lack of availability of Unified parts?

Question: Steven Frankel - Rosenblatt Securities, Inc. - Analyst : Okay. And then kind of on a related factor, are you also implying that maybe at the same time we're seeing a shift for people to kind of go full force on DOCSIS 4.0 rather than what it seemed to be before, which was you had a group of customers that seemed content with doing 3.1 first?

Question: Steven Frankel - Rosenblatt Securities, Inc. - Analyst : All right. Thank you so much.

Question: Tim Savageaux - Northland Securities - Analyst : Good afternoon. I want to kind of stay on that topic. I think last quarter, you had talked about the expectation for broadband revenues to accelerate from '24 growth rates into '25. I gather that's no longer the case. And I guess my question is, could broadband revenues decline in '25?

Question: Tim Savageaux - Northland Securities - Analyst : Okay. And maybe this is relevant to that last comment about EPS growth in a worst-case scenario, if I may summarize, and that is on gross margin guidance, especially for Q4 in broadband. I assume that envisions a pretty significant uptick on the head-end side with routers driving those margins into the 50s. Is that -- well, are there any other drivers, I guess? Would you view that as kind of anomalous and expect a return to the high 40s after this very strong kind of quarter exiting year? Or how would you describe that gross margin outlook for broadband in Q4?

Question: Tim Savageaux - Northland Securities - Analyst : Great. Appreciate that color. Last one for me in terms of kind of the diversification of the business. In the short term, it seems like you're going the opposite way. I'm just making sure I'm looking at this the right way. But as you look at kind of the broadband business, it seems like your two top guys are contributing something in excess of 80%, which is higher than it's been earlier this year. And I know perhaps you expected that ramp with these guys in the second half, but that would put your, quote, unquote, other customers sequentially down from an absolute dollar perspective. Is that something you expected? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 9:00PM, HLIT.OQ - Q3 2024 Harmonic Inc Earnings Call

Question: Tim Savageaux - Northland Securities - Analyst : Okay. Thanks very much.

Question: Simon Leopold - Raymond James - Analyst : Yeah. Just maybe to follow up on Tim's question in terms of the customer concentration, what are you assuming for scenarios for other customers? So I think you've disclosed Comcast and Charter for this quarter. How do you see the mix specifically in what's implied in the fourth quarter? And then, what are your expectations for concentration as you look out to the longer term, specifically other customers besides Comcast and Charter?

Question: Simon Leopold - Raymond James - Analyst : And I guess in terms of the delays due to Unified, one of the things I'm a little bit puzzled by is, I think, at the cable show, it sounded like the full duplex amplifiers are now shipping. So I assume, and I'm wondering if this is a safe assumption, that Comcast is basically moving ahead unencumbered because it had been waiting for full duplex. Full duplex is now available. So it sounds to me that they shouldn't be part of the delay, and I'm just trying to get a little bit of clarification around that idea.

Question: Simon Leopold - Raymond James - Analyst : Okay. And then just to try to come back to the video segment briefly, that segment seems to have been weighed down by some macro factors that caused some hesitancy by that group of customers. Just if you can give us some update on how you're seeing customer behavior in the pipeline in that line of business. And that's all I had. Thank you.

Question: Simon Leopold - Raymond James - Analyst : Thank you very much.

Question: George Notter - Jefferies - Analyst : Hi, guys. Thanks a lot. I appreciate it. You said, I think, ecosystem challenges was part of the issue here, as well as the Unified transition. When you say ecosystem challenges, what exactly was that about?

Question: George Notter - Jefferies - Analyst : Got it. Okay. And I assume integration of the cOS product with cable operator back-office networks, is that is that still an issue? Is that part of the ecosystem comment or not?

Question: George Notter - Jefferies - Analyst : Okay. Super. Thanks very much. I appreciate it.