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HI

HARMONIC INC (HLIT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered solid execution: revenue $133.1M (+9% YoY), GAAP gross margin 59.0% (+730bps YoY), and Non-GAAP EPS $0.11; both gross margin and Adjusted EBITDA exceeded internal expectations, with Video revenue above the high end of guidance .
  • Against Wall Street consensus, Harmonic posted a clear beat: EPS $0.11 vs $0.052 consensus and revenue $133.1M vs $127.5M consensus; strength was driven by higher cOS license mix in Broadband and larger appliance refresh deals in Video (margin uplift) . EPS and revenue estimates from S&P Global: $0.052 and $127.5M*.
  • Guidance pivot: the company introduced Q2 2025 guidance (total revenue $120–$135M, GAAP net loss per share $(0.04)–$(0.01)) and withdrew full‑year guidance given tariff uncertainty; Q2 outlook embeds ~$3M tariff impact (mostly Broadband) and a lower cOS license mix .
  • Strategic drivers intact: cOS scale at 129 customers managing 33.9M modems; record Fiber bookings; unified DOCSIS 4.0 traction (volume RPD shipments, RF front-end targeted for 2H); Video hybrid/SaaS pipeline strengthened, including Akamai partnership expected to contribute mid‑year .
  • Near-term stock reaction catalysts: tariff policy clarity, timing of large MSO deployments under Unified 4.0, and commencement of Akamai-related SaaS contribution; management emphasized no observed change in customer behavior to date .

What Went Well and What Went Wrong

  • What Went Well

    • “We exceeded expectations for Video revenue as well as gross margin and Adjusted EBITDA in both of our businesses” — Nimrod Ben‑Natan (CEO) ; Q1 Video revenue $48.3M (+11.8% YoY) and gross margin 66.4% (+480bps YoY) .
    • Broadband gross margin expanded to 55.5% (+800bps YoY) on favorable product mix (higher cOS license mix) and disciplined execution .
    • Strong cash generation lifted cash to $148.7M; backlog/deferred revenue of $485.1M underpins durability; share repurchases of $36.1M in Q1 reflect confidence in FCF .

  • What Went Wrong

    • Q2 segment margin guide implies compression in Broadband (Non-GAAP GM 44–45%) due to lower cOS license mix and ~$3M tariff impact; total company GAAP EPS guided to a loss of $(0.04)–$(0.01) .
    • Bookings of $113.7M yielded book‑to‑bill of 0.9; management acknowledged reliance less on “book & burn” in Q2 amid uncertainty, weighing near‑term revenue conversion .
    • Full-year 2025 guidance withdrawn due to tariff policy volatility; manufacturing concentration in Malaysia (Broadband nodes) and large U.S. customer mix heighten exposure until supply chain options are executed .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$122.1 $222.2 $133.1
GAAP Gross Margin (%)51.7% 56.1% 59.0%
Non-GAAP Gross Margin (%)52.5% 56.1% 59.4%
GAAP EPS ($)$(0.07) $0.32 $0.05
Non-GAAP EPS ($)$0.00 $0.45 $0.11
Adjusted EBITDA ($USD Millions)$4.1 $71.8 $21.1

Actual vs. Consensus (Q1 2025)

MetricConsensusActual
Primary EPS ($)$0.052*$0.11
Revenue ($USD Millions)$127.5*$133.1

Values with asterisk retrieved from S&P Global.

Segment Performance

MetricQ1 2024Q4 2024Q1 2025
Broadband Revenue ($USD Millions)$78.9 $171.0 $84.9
Video Revenue ($USD Millions)$43.2 $51.1 $48.3
Broadband Non-GAAP GM (%)47.5% 52.7% 55.5%
Video Non-GAAP GM (%)61.6% 67.4% 66.4%
Video SaaS Revenue ($USD Millions)——$14.8

KPIs

KPIQ1 2024Q4 2024Q1 2025
Bookings ($USD Millions)$146.1 $150.0 $113.7
Backlog & Deferred Revenue ($USD Millions)$677.8 $496.3 $485.1
Cash & Equivalents ($USD Millions)$84.3 $101.5 $148.7
cOS Customers (#)—127 129
Connected Modems (Millions)—33.3 33.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue (GAAP)Q2 2025—$120–$135M Initiated
GAAP Gross Margin (%)Q2 2025—50.8–51.9% Initiated
GAAP Net Loss ($)Q2 2025—$(5)–$(1) Initiated
GAAP EPS ($)Q2 2025—$(0.04)–$(0.01) Initiated
Diluted Shares (GAAP)Q2 2025—113.4 Initiated
Broadband RevenueQ2 2025—$75–$85M Initiated
Video RevenueQ2 2025—$45–$50M Initiated
Non-GAAP Gross Margin (%)Q2 2025—Total 51.1–52.0%; Broadband 44–45%; Video 63–64% Initiated
Non-GAAP Adjusted EBITDA ($M)Q2 2025—$4–$10 Initiated
Non-GAAP Tax RateQ2 2025—20% Initiated
Non-GAAP EPS ($)Q2 2025—$0.00–$0.04 Initiated
Diluted Shares (Non-GAAP)Q2 2025—113.7 Initiated
Tariff Impact (Gross Profit)Q2 2025—~$3M (mostly Broadband) New headwind
Total Revenue (GAAP)FY 2025$585–$645M Not providing updated annual guidance Withdrawn update
GAAP EPS ($)FY 2025$0.19–$0.45 Not providing updated annual guidance Withdrawn update
Non-GAAP Adjusted EBITDA ($M)FY 2025$85–$123 Not providing updated annual guidance Withdrawn update

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4)Current Period (Q1 2025)Trend
Unified DOCSIS 4.0 timing & ecosystemUnified 4.0 opened to market; Comcast demo; collaboration with Sercomm; expectation of ramps in 2025–2026 Volume RPD shipments started; RF front-end targeted 2H; at least 9 prior‑won customers to production in Q2 Progressing per plan
Amplifier availability (Unified)Collaboration to broaden choices; ecosystem validation in flight “No change vs original plan”; dependencies understood Stable
Tariffs & supply chainNot a Q3/Q4 factor; FY25 guide issued pre‑tariff volatility ~$3M Q2 tariff impact; manufacturing concentrated in Malaysia; exploring nearshoring (e.g., Mexico under USMCA); no customer behavior change to date New uncertainty; mitigation in progress
Broadband mix & marginsBroadband GM improved on scale and cOS; Q4 GM 52.7% Q1 GM 55.5%; Q2 GM guide lower on mix and tariffs (cOS lower mix in Q2) Near‑term compression
Fiber strategy & bookingsGrowing diversification; ROW growth; multiple new customers Record Fiber bookings; Tier‑1 LATAM nationwide upgrade; open ONU strategy aiding migrations post‑DZS bankruptcy Accelerating
Video hybrid/SaaS momentumVideo returned to profitability; Akamai qualification and selection announced Q1 Video SaaS $14.8M (+15% YoY); appliance refresh wins lift margins; Akamai contribution expected mid‑year Positive pipeline
Bookings & backlogQ3 backlog $584.7M; Q4 $496.3M Q1 bookings $113.7M (btb 0.9); backlog & deferred $485.1M Moderating; still durable

Management Commentary

  • CEO framing: “We exceeded expectations for Video revenue as well as gross margin and Adjusted EBITDA in both of our businesses… we remain confident in our strategy and long‑term growth prospects” — Nimrod Ben‑Natan .
  • Broadband execution: “We ended the quarter with 129 cOS deployments… managing 33.9M connected modems… we expect to bring at least 9 new customers… into production during the second quarter” — Nimrod Ben‑Natan .
  • Tariff stance: “To date, we have not seen any change in our customers' behavior… exploring options to offset tariff sensitivity, including optimizing our supply chain, cost management and taking price actions…” — Walter Jankovic .
  • Video strategy: “Our appliance business… delivered excellent margins… Meanwhile, our SaaS streaming business posted Q1 revenue of $14.8M… strong demand for AI‑based monetization tools…” — Nimrod Ben‑Natan .

Q&A Highlights

  • Unified amplifiers: Management reiterated no change versus original plan; dependencies and collaboration continue to broaden ecosystem options .
  • Tariff mitigation and inventory: Considering pulling forward inventory during the 90‑day pause; liquidity allows opportunistic buys if advantageous .
  • Fiber materiality: Fiber is becoming “sizable” in revenue; momentum building among telcos and cable customers adopting fiber alongside DOCSIS .
  • Q2 Broadband margin bridge: ~$3M tariff impact plus lower cOS license mix drives guide‑down; normalization seen when mix improves .
  • Customer behavior & booking approach: No behavior change observed; more reliance on backlog, less on “book & burn” in Q2 given uncertainty .

Estimates Context

  • Q1 2025 EPS beat: Actual Non‑GAAP EPS $0.11 vs consensus $0.052* (beat by ~$0.058) .
  • Q1 2025 revenue beat: Actual $133.1M vs consensus $127.5M* (beat by ~$5.6M) .
  • Estimate base: 5 EPS estimates and 3 revenue estimates informed Q1 consensus*.
    Values with asterisk retrieved from S&P Global.

Key Takeaways for Investors

  • Near‑term: Expect margin volatility in Q2 from mix and tariffs; monitor tariff policy outcomes and signs of cOS license mix re‑acceleration, which are key to EPS trajectory .
  • Broadband thesis intact: Unified 4.0 deployments remain on plan; 2H introduction of RF front‑end and Q2 production ramps for nine customers are milestones to watch .
  • Fiber optionality: Record bookings and open ONU migrations add a second leg of growth; follow telco wins and North America expansions as incremental drivers .
  • Video profitability: Appliance refresh cycles and hybrid solutions underpin double‑digit margins; SaaS growth, including Akamai contribution mid‑year, offers recurring uplift .
  • Cash and capital allocation: Strong FCF and $148.7M cash support opportunistic share repurchases and potential inventory pulls/nearshoring to mitigate tariffs .
  • Backlog durability: $485.1M backlog/deferred revenue provides cushion through macro uncertainty; watch book‑to‑bill normalization as Unified ramps .
  • Risk management: Supply chain diversification (e.g., Mexico) under evaluation; any customer timing shifts due to tariffs are the main watch item for 2H visibility .