Harmonic Inc. (NASDAQ:HLIT) Q3 2020 Earnings Conference Call - Final Transcript

Oct 26, 2020 • 05:00 pm ET


Harmonic Inc. (NASDAQ:HLIT) Q3 2020 Earnings Conference Call - Final Transcript


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Patrick Harshman

operators worldwide, up nine from the second quarter and 100% from Q3 a year ago. As of at the end of the quarter, CableOS was actively serving over 2.1 million cable modems, up 122% from a year ago; of which over 1.4 million were served through our distributed access architecture, all indicative of a transforming market and a strong Harmonic momentum. This momentum was evident through the recent Cable-Tec Expo, the industry's premier technology conference, where industry consensus was clear. The future of Cable Access is software based, increasingly leveraging distributed access architectures, underscored by the fact the largest cable operator in the U.S. and the largest cable operator in Europe are both rolling out Harmonic's CableOS platform. Correspondingly, our new customer pipeline remains strong and we continue to anticipate being able to communicate an additional Top 5 North America deployment by the end of the year.

Associated with this Cable-Tec event, we made several significant announcements that further extend our market and technology leadership. We highlighted several new customer deployments, spanning the Americas, Europe and Asia. In coordination with Comcast, we announced a powerful and competitively differentiated symmetric gigabit solution that breaks through Cable's upstream bandwidth bottleneck, a crucial innovation in the context of increased work and school-from-home video conferencing. And we raised the bar for core software, announcing and demonstrating that operators can now leverage our cloud-native platform from multiple simultaneous containerized network applications, including PON, 5G OpenRAN and video caching, delivering on the vision of a cloud-native architecture in a way that is groundbreaking not only for cable but for broadband service providers, more generally. The first of these cloud-native applications we've attacked are XGS and 10G PON for fiber-to-the-home. We're pleased to report that our first fiber-to-the-home field trials are going well and we've received our first volume purchase order. This is an important strategic milestone, demonstrating the extensibility of our cloud-native CableOS platform beyond traditional cable applications and specifically, the opportunity for Harmonic to address the large and growing fiber-to-the-home market. We'll continue to update you on this important additive growth initiative.

So summarizing for Cable Access, we delivered another strong quarter. We provided further evidence that cable operators around the world are moving to CableOS. We announced powerful new technologies that are extending our value proposition and competitive advantages and we're expanding our addressable market to include fiber-to-the-home and additional access network applications. We're proud of our accomplishments and excited about where this business is headed.

Turning now to our Video segment. We saw solid rebound after several months of pandemic-related slowdown. Segment revenue was $54.6 million, up 15% sequentially, as previously delayed projects began to resume, in some cases sooner than we expected. Associated gross margin was 54.6%, indicating a healthy mix of appliance, software license and SaaS revenue. Looking ahead, we continue to anticipate an even stronger fourth quarter with combined second half revenue in line with our previous guidance. Specifically, as Sanjay will discuss momentarily, we anticipate a further step up