Harmonic Inc. (HLIT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance, with significant revenue and EPS growth, exceeding guidance. The broadband and rest-of-market segments show robust expansion, and a substantial backlog supports future visibility. Despite some supply chain concerns, the overall sentiment is positive, reinforced by a large share repurchase program. However, guidance implies no sequential growth due to macro uncertainties, slightly tempering enthusiasm. Considering the market cap, the stock price is likely to experience a positive movement, within the 2% to 8% range, over the next two weeks.
Key Financial Performance
Broadband Revenue $121.7 million, a 43% increase year-over-year. This growth was driven by strong rest of market demand and accelerated service deployments.
Rest of Market Revenue 78% year-over-year growth, representing 42% of total revenue. This reflects progress in customer diversification and expanding global adoption of the Harmonic platform.
Backlog and Deferred Revenue $582.1 million, an 87% increase year-over-year. This growth bolsters visibility and confidence in the company's trajectory.
Free Cash Flow $30.3 million generated in the quarter. This was partially offset by $43 million in stock repurchases.
Operating Profit $26 million, exceeding the guidance of $18 million to $20 million. This was attributed to revenue upside across multiple customers and accelerated service deployments.
Earnings Per Share (EPS) $0.17, above the guidance range of $0.11 to $0.12. This reflects strong financial performance in the quarter.
Customer NPS (Net Promoter Score) 85, up from 82 at year-end 2025. This increase reflects improved customer satisfaction and trust.
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Operating Highlights
Fiber on-demand solution: KBRO selected Harmonic's fiber on-demand solution to enhance its network in Taiwan.
Platform modernization: Vyve Broadband adopted Harmonic's platform to modernize its U.S. network, enabling broadband and DOCSIS-fiber convergence.
New fiber products: Harmonic introduced Pearl-1XL and Jetty-3 to improve deployment efficiency, port density, network reach, resilience, and simplify operations.
Amply software: Launched Amply, a multi-vendor amplifier management software, to reduce repair time, operational costs, and improve network reliability.
Rest of market revenue growth: Revenue from the rest of the market grew 78% year-over-year, representing 42% of total revenue.
Global market share: Harmonic expanded its global market share with 150 customers and 45.7 million CPE devices deployed.
Fiber adoption: Fiber products contributed over 14% of appliance and integration revenue, with multiple new international wins.
Revenue growth: Broadband revenue increased 43% year-over-year to $121.7 million.
Backlog and deferred revenue: Backlog and deferred revenue grew 87% year-over-year, reaching $582.1 million.
Customer satisfaction: Customer NPS improved to 85 in Q1 2026, up from 82 at year-end 2025.
Sale of video business: Harmonic is on track to sell its video business in Q2 2026, focusing on broadband operations.
Unified DOCSIS 4.0 strategy: Expanded DOCSIS 4.0 customer base and deployments, offering flexible paths for network upgrades.
Intelligent services: Introduced AI-driven solutions like Beacon, Pathfinder, and Amply to enhance network performance and reduce operational costs.
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Risk or Challenges
Supply Chain Disruptions: The company is advancing memory purchases to secure supply for the remainder of the year, indicating potential risks related to memory chip and component supply dynamics.
Customer Concentration Risk: Two customers accounted for 58% of total revenue, highlighting a dependency on a small number of large customers, which could pose risks if these customers reduce their business with the company.
Tariff Impact: The company expects an estimated tariff impact of approximately $2.3 million for the full year, which could affect gross margins.
Stranded Costs: The pending sale of the video business includes approximately $10 million in stranded costs, with 30% expected to be temporary. This could impact operating profit in the short term.
Economic and Geopolitical Risks: The company is taking a prudent approach to guidance due to the situation in the Middle East, which could pose economic or geopolitical risks.
Product Mix and Margin Pressure: Gross margins are expected to decline due to elevated memory costs and new product ramps, which could pressure profitability.
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Guidance & Outlook
Full Year 2026 Broadband Revenue Guidance: Raised to $475 million to $495 million, up from the prior range of $440 million to $480 million.
Q2 2026 Broadband Revenue Guidance: Expected revenue between $115 million and $125 million.
Gross Margins for Q2 2026: Expected to be between 52% and 53% due to product mix.
Full Year 2026 Gross Margins: Expected to be between 50% and 51.5%, declining from Q1 levels due to elevated memory costs and new product ramps.
Operating Profit for Q2 2026: Expected to be between $23 million and $28 million.
Full Year 2026 Operating Profit: Expected to be between $87 million and $101 million.
EPS for Q2 2026: Expected to be between $0.15 and $0.19.
Full Year 2026 EPS: Expected to be between $0.57 and $0.67, up roughly $0.07 or 13.8% from the midpoint of prior guidance.
Broadband Backlog and Deferred Revenue: Reached a record $582.1 million, with 60% expected to convert to revenue within the next 12 months.
DOCSIS 4.0 Strategy: Continued commercial traction with new customer wins and expanded deployments, focusing on upstream capacity and network densification.
Fiber Growth: Fiber products represented over 14% of appliance and integration revenue in the past year, with expectations for continued growth.
New Product Launches: Introduction of Pearl-1XL and Jetty-3 at the Fiber Connect conference to improve deployment efficiency and enhance network resilience.
Pending Sale of Video Business: Expected to close in Q2 2026, positioning Harmonic as a focused broadband company.
Capital Allocation Priorities: Focus on organic growth, share repurchases, and potential strategic M&A to enhance broadband business diversification.
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Shareholder Return Plan
Share Repurchase Program: Harmonic repurchased approximately 4.2 million shares for $43 million during the first quarter of 2026. This is part of their ongoing $200 million share repurchase program. To date, they have repurchased $122 million worth of shares under this program. The company aims to fund ongoing repurchases through strong free cash flow generation over the next several years, with a minimum goal of offsetting any dilution from equity compensation awards.
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Key Q&A
Q:What are the triggers that have started to unlock the rest of the market for Harmonic this year?
A:The triggers include DOCSIS 4, fiber, and any DOCSIS migration to a virtualized platform. Harmonic has started to win more in the last 18 months, and these wins are now showing up in revenue.
Q:Can you quantify the memory impact on margins and discuss other supply chain concerns?
A:The net impact of memory on the second half is about $6 million. Other supply chain concerns include CPUs, PCBs, aluminum, switches, and servers, which are in constrained supply. However, key silicon is not a concern as it has been aggressively pipelined.
Q:What is the detailed contribution of the top 2 customers to revenue?
A:The top 2 customers contributed 58% of revenue in the quarter, with both making meaningful contributions.
Q:Does the guidance imply no sequential growth for the remaining quarters?
A:Yes, the guidance implies roughly no sequential growth for the remaining quarters, with approximately $122 million per quarter. This is due to prudence and conservatism given macroeconomic uncertainties and supply chain constraints, despite strong customer demand.
Q:Is the unlocking of customers leading to a faster ramp than previously discussed?
A:No, the ramp varies by customer and is proceeding according to the plan without any acceleration relative to previous expectations.
Q:What is the expected percentage of fiber in the business by year-end?
A:Harmonic did not provide specific guidance on fiber as a percentage of the business. Fiber accounted for 14% of the business over the trailing 4 quarters, and it is expected to grow, but the mix will vary by quarter.
Q:What percentage of the business is tied to customers buying servers through Harmonic?
A:Approximately half of the rest of market customers buy servers through Harmonic, but this contributes less than 5% of total revenue.
Q:What are Harmonic's priorities for M&A and thoughts on industry consolidation?
A:Harmonic's M&A priorities include diversification, growth in fiber, and intelligence. They aim for opportunities with high synergy and value addition for customers. They see potential for industry consolidation but focus on creating value rather than just bundling products or companies.
Q:What growth is implied for the rest of the market in the revised guidance?
A:Harmonic did not specify growth for the rest of the market but indicated a strong start in Q1 and reiterated a multiyear target of 30% growth, with some of the guidance increase related to this segment.
Q:What opportunities exist for Harmonic to grow internationally?
A:Harmonic has opportunities in Asia, Europe, and Latin America, with recent wins in Taiwan and Europe. However, North America remains the largest market and focus area due to the size of the cable industry there.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on the expected percentage of fiber in the business by year-end, citing variability in the mix and complexities in categorizing fiber-related elements. Additionally, they did not specify growth rates for the rest of the market in the revised guidance, only reiterating a multiyear target of 30% growth.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Amply
DOCSIS fiber
Harmonic strength
NPS
Slide
backlog visibility
broadband DOCSIS
broadband backlog
broadband margin
broadband market
cOS architecture
capacity
cash flow
customer
demand
density
deployment
diversification
flexibility
highlight
intelligence layer
memory
momentum
operator
outcome
outlook
press release
priority
remainder
sale video
subscriber experience
traction
transaction
upgrade
win
HLIT Transcript
Harmonic Inc. (HLIT) Q1 2026 Earnings Call Transcript
Positive5-12
The earnings call highlights strong financial performance, with significant revenue and EPS growth, exceeding guidance. The broadband and rest-of-market segments show robust expansion, and a substantial backlog supports future visibility. Despite some supply chain concerns, the overall sentiment is positive, reinforced by a large share repurchase program. However, guidance implies no sequential growth due to macro uncertainties, slightly tempering enthusiasm. Considering the market cap, the stock price is likely to experience a positive movement, within the 2% to 8% range, over the next two weeks.
Harmonic Inc. (HLIT) Q4 2025 Earnings Call Transcript
Positive2-20
The earnings call summary and Q&A highlight strong financial performance, optimistic guidance, and strategic growth initiatives. Record high revenue, strong EBITDA, and free cash flow, coupled with positive broadband and video segment growth, are positive indicators. While memory pricing poses a risk, strategic pricing actions and multiyear agreements provide stability. The Q&A reveals confidence in Rest-of-World customer growth and a solid bookings outlook. Given the company's market cap, a positive stock price movement of 2% to 8% is anticipated.
Harmonic Inc. (HLIT) Presents at Barclays 23rd Annual Global Technology Conference Transcript
Neutral12-11
Harmonic Inc. (HLIT) Q3 2025 Earnings Call Transcript
Positive11-3
The earnings call presented strong financial performance, with record high revenue and robust gross margins. The company's strategic partnerships, such as with Akamai and Comcast, and market confidence in DOCSIS 4.0, bolster growth prospects. Although guidance reflects short-term headwinds, the optimistic outlook for 2026 and shareholder returns via buybacks support a positive sentiment. Despite some analyst concerns about unclear timelines, the overall sentiment is positive, suggesting a stock price increase of 2% to 8%.
HLIT Slides
HLIT Report
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