HLIT — Harmonic Inc.

Harmonic (HLIT) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Q1 Broadband Revenue: $121.7 million, up 43% year-over-year, exceeding guidance of $100 million to $105 million.
• Earnings Per Share (EPS): $0.17, above the expected range of $0.11 to $0.12.
• Operating Profit: $26 million, surpassing guidance of $18 million to $20 million.
• Rest of Market Revenue: Grew 78% year-over-year, contributing 42% of total revenue.
• Backlog and Deferred Revenue: Reached a record $582.1 million, up 87% year-over-year, with 60% expected to convert to revenue within the next 12 months.
• Free Cash Flow: Generated $30.3 million during the quarter.
• Cash Position: $109 million in cash and cash equivalents, with an additional $82 million available from an undrawn credit facility.

2. Strategic Updates and Business Highlights:

• Harmonic is transitioning to a focused broadband company with the pending sale of its video business to MediaKind, expected to close in Q2 2026.
• The company is expanding its customer base, with significant wins in the "rest of market" segment, including new customers like KBRO in Taiwan and Vyve Broadband in the U.S.
• Harmonic's DOCSIS 4.0 strategy is gaining traction, with increasing customer adoption and deployments.
• The company is enhancing its fiber offerings, with fiber products representing over 14% of appliance and integration revenue.
• New products and solutions, including Amply and innovations showcased at upcoming conferences, are aimed at improving network efficiency and reliability.

3. Forward Guidance and Outlook:

• Q2 2026 Revenue Guidance: Expected to be between $115 million and $125 million, with gross margins of 52% to 53%.
• Full Year 2026 Revenue Guidance: Raised to $475 million to $495 million, up from a prior range of $440 million to $480 million.
• Operating Profit Guidance: For the full year, projected between $87 million and $101 million, with EPS expected between $0.57 and $0.67.

4. Bad News, Challenges, or Points of Concern:

• Margin Pressures: Anticipated decline in gross margins due to elevated memory costs and new product ramps, with a net impact of approximately $6 million related to memory in the second half of 2026.
• Supply Chain Concerns: Ongoing caution regarding availability of high-end silicon and other components, which could impact deployment timelines.
• Geopolitical Risks: The situation in the Middle East and broader macroeconomic factors are creating uncertainty in the supply chain and overall market conditions.

5. Notable Q&A Insights:

• CEO Nimrod Ben-Natan emphasized that the growth in the "rest of market" is driven by a combination of DOCSIS 4.0 and fiber adoption, with previous customer wins starting to show revenue impact.
• CFO Walter Jankovic clarified that the guidance reflects a conservative approach due to macroeconomic uncertainties, not a lack of customer demand.
• The discussion highlighted that while the company is focused on the U.S. market, there are opportunities for growth internationally, particularly in Asia and Europe.
• Questions around the contribution of top customers indicated that two customers accounted for 58% of revenue, with ongoing efforts to diversify the customer base.

Overall, Harmonic's Q1 2026 results demonstrate strong growth and strategic positioning in the broadband market, although challenges related to supply chain and margin pressures remain.