Welcome to the 19th Annual Needham Technology and Growth Conference, or Technology Media Conference. I'm Ryan Koontz. I cover the cloud communications sector here at Needham. That includes broadband networking and cloud communications, and really pleased to have Harmonic with us today, a provider of video streaming solutions and the leader in next-generation cable access, joined by CFO Walter Jankovic. So welcome, Walter. Thank you, Ryan. Thanks for having us here. Great. Super. Let's quickly start just kinda unpacking Q1. I know you guys have been through a lot of changes, a bit of a roller coaster in the last year. I want you to kinda unpack kind of, you know, how Q1 developed, and did it kinda arrive where you thought it would in the end? Yeah, certainly. Q1 came in line with our expectations. I mean, if you look at our revenue for the quarter was just above the midpoint of guidance. What we saw on the broadband side of the business, we were at the higher end of our range. We had a good diversification of customers, as I mentioned during the earnings call, and we saw some orders pop in from some of our smaller customers as well, so we're pleased with what we saw in broadband. On the video side of the business, we were just below the midpoint of that business, and two factors there that are impacting our business. We're seeing the macroeconomic headwinds continue to persist in the appliance side of the video business. Plus, at that point in time, we were still under our video review, which we've now concluded, and there were definitely some customer decisions and customer conversations put on pause, which had a secondary effect on on our revenue in that business. Our margins, margin percents came in on the high end on both sides of the business, and overall, at the bottom line, we were EBITDA $4 million, which was above our midpoint. So it played out the way we expected it to play out. Q1 was lower than our sequential Q4 prior quarter, but that was as expected. We've got one major customer in broadband that's going through a technology transition and as a result, we're seeing a little less revenue right now from that customer. Right, let's start with the video piece and your decision to hang on to that business and not divest it. Can you kinda unpack for us the logic there and kinda how we ended up in this spot? Sure. Certainly, we had, you know, publicly disclosed that we were running a video review looking at that business in terms of the strategic options. That went on for a period of time, and the board came to the conclusion, based on what was out there, that it wasn't meeting our value objectives, and also from the perspective of being able to execute a deal. So we've decided to conclude that back in April and disclose that. So now we're, you know, deep into a review of the business in terms of optimizing the cost structure, and that's already underway, so we already had the plan in place. We're executing in terms of that plan, and so there's some key things as we look at that business moving forward. First of all, you know, from a SaaS perspective that is the growth engine of the video business. We continue to see growth opportunities in that, in that arena, and what we've learned over the last three years, based on a very wide customer base, you know, where are the biggest opportunities for us? Where do we have the biggest, lead and differentiation? And it's really in live sports and in ad insertion. You know, we've just announced recently another feature in terms of our targeted ads, specifically for live stream in addition to the in-stitching type of advertising that we've already, you know, had on the market. So that's without a commercial break at all? No commercial. It was- Banners come up, just like when you're watching a live action in sports and they go to the referees, or there's something going on, and they've got a banner of advertising. Sure. Today, that's done. We've all seen that, but that's a one-feed broadcast. Whereas now with our technology, you can actually customize it and target the ads- By household ... to a specific person by household. So I think that's another area of opportunity for us. On the video appliance side of the business, I mean, that market has been slower. There's macroeconomic headwinds. You're seeing folks hold back CapEx budgets, interest rates are high, foreign currency issues internationally. So for that business, we've, you know, optimized the cost structure. We're going through restructuring, and we're focused on where are the opportunities, medium to long term and doing the right things to invest in those areas while we curb back the support and some of the costs associated with that business to get it profitable, and that's really our focus in taking out about $28 million of annualized cost. Wow, so there's not a ton of sales synergy with the appliance piece and the live streaming SaaS, really? Yeah, they're different. We got different folks focused on each one of those areas. Yep. So, you know, our decisions in that business were really predicated on where we see growth, where do we see, you know, a more stagnant market and therefore, we've adjusted accordingly in terms of the go-forward plan in the business. Got it, and I think I also heard, geography is another area. You're looking to kinda narrow the focus. Yeah, yeah. There's, you know, as we, you know, did a more comprehensive review of that business we looked at, you know, what's the contribution by sub-region, by country? Really looking at, you know, where does it make sense for us to consider different models, pull back on some of the investment in terms of people, or leverage partners in certain areas where it just doesn't make sense for us to have a full encompassing support, support model? So that's one area. And then, you know, another area in the client side of the business is with regards to, you know, the product line. So we do a lot of work in production and playout as well as distribution on the appliance side. And so there's some key products there that we're investing in and continue to place bigger bets on, and then there's certain parts of that, the hardware business, where it's not as critical, and therefore- Got it. That's where we can curb back some of the investment. Got it. And on the SaaS side, I saw some slowing growth. Can you... I think you walked through some of the puts and takes there. You saw some delays, maybe because of the potential divestiture in that SaaS business. What were some of the puts and takes there on the SaaS revenues? Yeah, certainly. In Q1, we indicated we grew that business at 11% year-over-year, and that's slower than some of the growth rates we've shown over the last several quarters. And so there are a couple of factors that came into play in those numbers. First of all, we saw a churn from a couple of customers. You know, I'd call them mid-tier customers one with regards to sports rights that were lost, so then therefore they get impacted, we get impacted. Wasn't a competitive loss necessarily? Not necessarily. And then another customer ran into financial troubles, and they've ceased operations. So we had a couple of you know churn items that gave us a headwind to otherwise the growth in that business. The other factor, and you called it out, is because of the video review that was ongoing at that point in time, and now we've concluded it, there were customers that were pausing conversations. Some of them more strategic customers, and therefore, once we concluded the review, we've started having, you know, conversations again and moving things forward. We're seeing, you know, quite a bit of opportunity and interest, not just from existing customers but new customers, Tier 1 customers, in some of the functionality and features I talked about earlier in terms of the live sports but specifically around some of the ad features that we're now providing. Right. I think that's kind of opened up the discussion so we can move, move, move those forward. And we still see, you know, a significant growth potential in that business with, you know, more and more folks acquiring our sports rights. We've got quite a diversified base of business across the Tier 1s that do, you know, live sports. We also have, you know, Tier 1 and Tier 2 customers that do a lot of TV everywhere as well. And so definitely from the perspective of SaaS, we're very focused on the areas where we believe the most scalable growth is for us as we move forward, and I think the opportunities are out there for us in that particular area. So it sounds like you do think you could see a re-acceleration in video down the road a bit, you know? That's our expectation as we, as we get into quite encouraging dialogue, including some of the dialogue we've had recently with the big video show NAB and some of the customer engagement there. Yep. Now, on the broadband side, you're able to maintain your guidance, which was pretty impressive. A lot of folks thought that was gonna come down, 'cause it was a pretty big lift to stick to that second-half number. Sure. Walk us through some of your thoughts there on, you know, balance of the year for broadband. You've got your one customer in transition. It sounds like, you're starting to ship some DOCSIS 4 there for a large customer. Certainly. You know, I look at the year, it's a transitional year because we've got some big transitions occurring. We've got one large customer who's moving off of 3.1 and going to 4.0. FDX, we're already shipping at scale that product, and the beauty of our nodes that go into that solution is they're backward compatible to 3.1. So for an operator, you know, they can make that investment in the node, and they can turn it up to 4.0 when they're ready to turn it up to 4, 4.0. So that's already happening in terms of deployment at scale. We've got, you know, second-largest customer that's continuing the early ramp stage if you will, of building out, their, on, on their plans. And so as we look at the second half, we see, you know, the big customers contributing based on their commitments, based on their plans, and we also see other customers contributing as well. And so the, the guidance, albeit second half being, you know, significantly higher than first half, this is based on our deep discussions with customers. I mean, there's orders, commitments around contracts, but then the most important thing is having that dialogue with the customer on the ground, taking that into consideration in terms of what's the expectation for the second half of the year as we see more and more customers and ramp rates increasing. Yeah, and so these, these other customers you mentioned are increasing element of the mix in the broadband side in the second half. These are customers you've signed up in years past that are really getting their momentum going? What's the catalyst at this point that their operations are really getting off the ground here for the next? Certainly. As you point out, we've signed up 113 customers across the platform. And you know, last year at SCTE, at the Cable Show in October, we promoted our unified cOS solution. So basically, doesn't matter if you wanna move on DOCSIS 3.1, if you wanna do BoostD 3.1 any of the 4.0 DOCSIS formats, let it be FDX or ESD or fiber for the home... Our platform handles it. And now we've put the portfolio of products that do all that, the nodes that go out in the field in terms of 3.1 or 4.0 in any of those formats, as well even the fiber to the home products in terms of, you know, we just announced Pearl here in the last few days which is an OLT that goes into one of our enclosures out there. So we have the Pier and the Pearl. So we've got all of the, you know, the structure of the portfolio in terms of supporting the solutions. And I think from a wider span of customers who are deciding, you know, "Do I go to 3.1? Do I wait? Do I do this?" By setting themselves up on the platform, they can make that migrational decision. It's all there on the unified base, and so we're—you know, that was a big push. It's our biggest focus of our, our sales team is around the rest of these customers, so we're definitely, and you heard Nimrod talk about it during the last earnings call in terms of bringing a sales leader in on broadband to help accelerate that. Right. Also, I think the market has to, you know, push the customers to move along, and so you got the competitive forces associated with, "Well, I can't stand still because I've got, you know, competition from fiber folks out there or from fixed wireless. Wireless, yeah. Or in other cases, they're looking at the situation. They might be on a legacy platform. "Who's gonna continue supporting my legacy platform if some of the current vendors aren't gonna do that? Yeah. It's maybe time to make a migration decision and move things forward. Yeah. The in terms of number of options you give operators to evolve, I mean, you've pretty much covered the whole gamut there. How would you group them? And obviously, you have, you obviously have one big name that's all going all in, DOCSIS 4. But the balance of the cable market either seems to be, you know, still kind of hedging their bets on which way they wanna go. Yeah, certainly. I mean, you know, everyone's gonna have a different viewpoint and be in a different circumstance to decide how they wanna migrate the network. And so we've got a lot of customers who are deploying 3.1. Now there's the BoostD capability by having the upgraded, modems CPE equipment That gives, you know, the download speeds of almost fiber-like download speeds. So, there's options, and everybody's economics and migration plans will look different based on the options, based on how fast, they have to move. It's not trivial to go to 4.0 I think that, you know, we've said that in the past. Yeah. You have to look at your time horizon and say, "Okay, what do I need to do now? What do I need to do later? Right. So you're gonna get a mix of all of those solutions out there being relevant for different operators. Yeah. I think you were saying on the call, I think you were asked by Simon about the amplifier compatibility, availability, these sort of things for DOCSIS 4, and from your perspective, I think you said you support the future amps that are coming. They'll be tested when they're available. And you know, what are you hearing from your customers about their thoughts about DOCSIS 4? Is it more just investment protection upfront, or are they really serious about moving to DOCSIS 4 when those amps come? Well, I think some of the large customers speak for themselves very clearly about their migration their investment behind 4.0. And, you know, the benefit of, of 4.0 is symmetrical speeds up and down and fiber-like speeds, and so that's the big advantage of 4.0. Just to, you know, one of the things that often gets confused is around the amplifiers. We don't do amplifiers o thers do. Those 4.0 amplifiers, you know, they're set to come out, you know, down the road a few quarters away. Quarters away, yeah. But our solution today in providing the 4.0 nodes, it's backward-compatible to 3.1, so you can deploy those nodes today and turn them up when you're ready. You know, the other factor is that there's parts of the network that are fiber deep where the node sits so close to the subscriber, you don't need an amplifier. So you have these permutations, and so I just wanna make sure, you know, always when we're speaking to folks, that, you know, we're not dependent on those things happening with regards to, you know, what we're, you know, guiding for the next little while here. Got it. So your second half is not dependent on these amplifiers being delivered, you're basically saying? Yeah, basically. Okay. Basically. That's, that's great. Is there a difference in the kind of where these operators land in the U.S. compared to the rest of the world much in terms of their idea about going to fiber or DOCSIS 4? Well, I think it's a mixed bag out there. When you look at the other operators around the world, their decision points on going, "Okay, do I start with 3.1 and go virtual CMTS and take all the advantages of that immediately, or do I, do I wait out?" Now, some people were in the camp of, "I'll just wait and then go fiber. You know, two factors need to be considered: It's gonna take a lot longer to go fiber- Fiber in the ground, yeah. ... and it's a huge investment. And so really being able to, you know, leverage the investment you've got in the coax out there, and to deliver the higher speeds, the better quality of experience to customers, that's key in terms of, you know, driving the business forward. So it all comes down to, you know, each specific operator making decisions based on what's my competitive landscape? What's happening with my subscribers? You know, what's my quality of experience to those customers? And then deciding, how do I move forward from there. So, you know, fiber all the way to the home is a pretty new market for you guys. I mean, you've had a product now for probably a couple years of, you know, early, early access there. Can you kind of explain to the investor base, like, what your play is there? You've got a platform out there that can migrate fiber on demand. What's the selling point? Sure. You know, what's from your perspective, with your CFO hat on, how does that business look different from what you're selling today? Okay, so I think the best way to describe our value prop in the fiber-to-the-home market. There's two, two vectors. There's the, the cable companies that are out there that are deploying DOCSIS solutions but will also leverage fiber. They may do what we refer to as a fiber island, or we've called it precision fiber, but it's basically, "Hey, I'm gonna deploy DOCSIS here, and there's an area down the street or specific subscribers that I'm gonna drop a fiber to. For competitive reasons or- Yeah. Take congestion off the network. Well, whatever the reason is. And so that is, you know, a solution that we've already had out there in the market. Got it. It's quite compelling in terms of what it'll allow the operator to do, and you do it all within the same enclosure. Right? And you just drop one of these, you know, fiber products in there, and it gives the operator who's leveraging the cOS virtual CMTS platform to, to leverage the same platform. It's plug-and-play. It's transparent to them. Very plug-and-play. That's more brownfield, right? Then, you know, there's also, you know, on that vector, cable co's that are expanding out into a new area and will drop fiber. Edge outs or whatever, yeah. Edge out, they can leverage those same tools. They've got it all in, lined up from an orchestration standpoint. That's vector one. Vector two is around, you know, selling to the telco market. It's, you know, and that's why, when we talk about the Pier and the Pearl products, the OLT product that fits into that space. Where you're just gonna do pure, you know... High density, usually ... fiber play. We've got higher density f its in our enclosure when you're going off from a shelf environment over to an outdoor enclosure environment. Sure. You know, it's a different set of competitors we compete with in that area, and that's just the business that right now is still in the early stages. We've got the product portfolio. We indicated we've invested and are continuing to invest in expanding our go-to-market team in that, in that area. And from a customer diversification standpoint, it's another kind of check mark for us because it's a different set of customers. And so we're focused. We'll talk more about it during our Analyst Day in June in terms of the strategy in that area. Sure. But that's another area of growth and customer diversification for us, and so we're encouraged by the conversations we're having with customers and the traction we're getting there. Nice. So different set of... Totally different set of customers than you have traditionally talked with. Absolutely. Is that both domestic and international markets you think are opportunistic domestic for fiber? Absolutely. Great. Yeah, speaking of the competitive landscape, like, how do you think that has evolved here over the past few quarters? I mean, yourself and Vecima have kind of emerged as the top two emerging players in the space. I mean, what would you say is happening? Yeah. Well, I don't think it's unexpected from those that have been following the market in terms of, you know, the solutions we've brought to the market, the virtualized CMTS. If you look at the Dell'Oro market share information, I mean, in virtualized CMTS we're greater than 97% share. Wow. At the node level, we've consistently been above 60% share, even though these are, you know, CableLabs standardized product. There is a level of differentiation in our nodes and there's additional functionality available when you run it with our software. So, you know, you can go back to, I think, just Q4, Dell'Oro's report even seen a spike up in our node share. Wow. So definitely it's, you know, playing out as we expected. I think one of the other factors that is playing into decisions of cable co's and some of the folks out there is, you know, "Who's gonna support my legacy stuff? ' Cause some, you know, folks are, you know, there's issues there. There's some financial constraints, etc., by some of the companies and competitors. So that's another reason to get on with the plan of migration. So that plays to our advantage in that particular area. So that's kind of a quick synopsis of the broadband market dynamics and competitive situation. Video's a lot different. Video is a very fragmented market of competitors. You've got a number of different companies, especially in the appliance space. Oh, yeah. SaaS is different because we're highly differentiated in that area. But in the appliance space, a lot of competitors, they're all facing similar headwinds in terms of the CapEx-constrained environment and so on and so forth. You know, our focus is to, you know, get our, you know, cost structure optimized, make sure we're focused on the right areas for growth. As we highlighted in our guidance, we expect this headwinds in video appliance business to persist through the year... but we're tooling ourselves up, that when the next refresh cycle happens out there, we'll be there to take advantage of it with the proper construct. So you do think there's value in staying in that business for now? I mean, you guys have made some level of commitment to it. We've made a level of commitment. We're optimizing it w e definitely feel good about where we can take that business in terms of b ottom line profitability, as well as growing the business in the places that make sense for us to grow. Yeah, great. Let me take any questions from the audience. If anyone has any, anyone want to lob it in? Questions. Well, let's, let's talk about the nodes a little bit. I think there's probably an investor perception that a node is a node is a node. And I know that you guys are probably on, I don't know, what generation you on since you've been at the TIA work? Many, many? Definitely many. Many on both the nodes, and then, as you know, on the software- Software, yeah ... we often say we're on fifth or sixth generation of the software. Yeah, I bet. And on the nodes, maybe explain to the audience, like, what are some of those changes you're making? I assume you're just pulling in more density, less power demand, more capacity, more plugs. What's- Yeah, I think the key things for our node business is it... You know, a lot of times it comes down to footprint and power and having that advantage in terms of those key elements right up front as the operator is considering their choices. But I think the factor that is gonna be more and more important is some of the feature set that rides on top of those nodes that orchestrates back with our cOS platform. All right. And I think that being able to leverage value-add services you saw, like, recently, just as another example, we announced Beacon just recently. Yeah, just recently. Yep. You know, there's another feature set that allows for better performance and so, of your network. So really focused around how do we add more software features subscription-based kind of value to, to the overarching solution is really gonna be a key. But I kind of dropped that in that conversation of what's differentiated about the node beyond the usual, you know, speeds, feeds, power size, kind of, kind of, dynamic. So Beacon, which you're looking to sell on a subscription basis, I think, right, to probably at least some of the mid-tier and below operators. To make that perform best, you need kinda latest generation hardware, is kinda what you're saying? Well, I don't wanna indicate that it's all hardware-based, 'cause a lot of it is software-based b ut I use that as an example to say, hey, it's creating features that ou can drive off hardware as well, that will allow us to, you know, differentiate the node side of the business as well. Great. Great, great. And, you know, just in wrapping up here, anything you wanted to say in closing up today? I think just, you know, convey to, you know, the broad base of our investors and the participants in the ecosystem about our confidence in both of our businesses, in both our broadband business, where, you know, we've got a significant amount of customer wins, you know, record backlog across both the total company and the position we're in with our, with our products. It's an exciting time for us. And definitely, you know, we're looking forward to providing more insight on our business longer term at Analyst Day. And in the video business, you know, highly confident that the actions we're taking, the deep dive we've done on the business, and where we're focused for growth, are the right areas to take advantage of the market and to do it in a, you know, in a profitable manner and a sustainable manner for us. So that's what I wanted to wrap up with to the team here. Great. Well, thanks so much for joining, Walter. All right. Thank you.