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HI

HARMONIC INC (HLIT)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue and profitability exceeded the high end of guidance in both Broadband and Video; total revenue was $138.0M, GAAP gross margin 53.5%, and non-GAAP EPS $0.09, with record Video SaaS revenue of $15.4M .
  • Results beat Wall Street consensus for Q2: revenue $138.0M vs $126.2M estimate*, and non-GAAP EPS $0.09 vs $0.02 estimate*; bookings strengthened to $158.4M, driving book-to-bill to 1.1* .
  • Management guided Q3 total revenue to $120–$135M with GAAP gross margin 52.5–53.8%, non-GAAP EPS $0.02–$0.07; non-GAAP tax rate increased to 21% and GAAP tax rate to 43% .
  • Tariff impact was far smaller than feared (less than $1M in Q2), with supply chain offsets; improving rest-of-world diversity and unified DOCSIS 4.0 progress (e.g., Mediacom win) underpin the 2026 rebound narrative .

What Went Well and What Went Wrong

What Went Well

  • Exceeded top-end guidance across segments: “revenue and profitability in both our Video and Broadband businesses exceeding the high end of our guidance” — CEO Nimrod Ben‑Natan .
  • Record Video SaaS revenue ($15.4M) and Video non-GAAP gross margin expansion to 67.0%, reflecting appliance strength and SaaS momentum .
  • Strong bookings ($158.4M) and backlog ($504.5M) with book-to-bill of 1.1; rest-of-world revenue reached record levels, improving diversification and supporting future growth .

What Went Wrong

  • Broadband segment revenue declined year-over-year ($86.9M vs $92.9M), with non-GAAP gross margin down year-over-year to 46.5% amid mix/tariffs, though tariffs were <$1M .
  • Sequential GAAP EPS softened to $0.03 vs $0.05 in Q1; adjusted EBITDA decreased q/q to $17.0M vs $21.1M .
  • Q3 guidance remains cautious due to industry upgrades pacing and tariff uncertainty; GAAP guidance implies EPS between $(0.04) and $0.00 .

Financial Results

Consolidated Metrics vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$222.2 $133.1 $138.0
GAAP Gross Margin %56.1% 59.0% 53.5%
Non-GAAP Gross Margin %56.1% 59.4% 54.1%
GAAP EPS ($)$0.32 $0.05 $0.03
Non-GAAP EPS ($)$0.45 $0.11 $0.09
Adjusted EBITDA ($USD Millions)$71.8 $21.1 $17.0

Segment Breakdown

MetricQ2 2024Q1 2025Q2 2025
Broadband Revenue ($USD Millions)$92.9 $84.9 $86.9
Video Revenue ($USD Millions)$45.8 $48.3 $51.1
Broadband Non-GAAP GM %47.6% 55.5% 46.5%
Video Non-GAAP GM %64.4% 66.4% 67.0%
Video SaaS Revenue ($USD Millions)——$15.4

KPIs

KPIQ2 2024Q1 2025Q2 2025
Bookings ($USD Millions)$72.4 $113.7 $158.4
Backlog + Deferred Revenue ($USD Millions)$613.1 $485.1 $504.5
Cash & Cash Equivalents ($USD Millions)$45.9 $148.7 $123.9
cOS Deployments (# customers)—129 136
Modems Managed (Millions)—33.9 35.3
Share Repurchases ($USD Millions in quarter)—$36.1 $14.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total GAAP Revenue ($M)Q2 2025 vs Q3 2025$120–$135 (Q2 guide) $120–$135 (Q3 guide) Maintained
GAAP Gross Margin %Q2 2025 vs Q3 202550.8–51.9% 52.5–53.8% Raised
Non-GAAP Gross Margin % (Total)Q2 2025 vs Q3 202551.1–52.0% 52.5–53.8% Raised
GAAP EPS ($)Q2 2025 vs Q3 2025$(0.04) to $(0.01) $(0.04) to $0.00 Maintained (upper end improved)
Non-GAAP EPS ($)Q2 2025 vs Q3 2025$0.00–$0.04 $0.02–$0.07 Raised
GAAP Tax RateQ2 2025 vs Q3 202527% 43% Raised
Non-GAAP Tax RateQ2 2025 vs Q3 202520% 21% Raised
Broadband Revenue ($M)Q2 2025 vs Q3 2025$75–$85 $75–$85 Maintained
Video Revenue ($M)Q2 2025 vs Q3 2025$45–$50 $45–$50 Maintained
Adjusted EBITDA (Total, $M)Q2 2025 vs Q3 2025$4–$10 $7–$14 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Unified DOCSIS 4.0 readinessTransition headwinds, ecosystem (amplifiers) and inventory provisions; leadership positioned for 2026 rebound RPDs shipping; RF front-end entering labs; CableLabs 14Gbps demo; Mediacom confirmed unified 4.0 customer Improving deployment readiness
Tariffs/supply chainInventory provision in Q4; warned of tariff proposals Actual Q2 tariff impact < $1M; offsets via supply chain/operations; Q3 impact expected < $1M Mitigating impact
Video SaaS and hybridAkamai partnership; SaaS momentum highlighted, $15.1M in Q4 Record SaaS revenue $15.4M; hybrid demand in live sports; pipeline scaling Strengthening
Rest-of-world diversificationROW growth >50% q/q in Q4; strategy to expand beyond top-2 Record ROW revenue; bookings across multiple customers Strengthening
Regulatory/cash taxes (OBBBA)Not discussed in Q4Expect meaningful cash tax benefit over several years, enhancing capital allocation Positive tailwind

Management Commentary

  • “Our team delivered strong second quarter results with revenue and profitability in both our Video and Broadband businesses exceeding the high end of our guidance.” — Nimrod Ben‑Natan .
  • “Rest of world revenue was at a record level…demonstrating our improving diversification trend.” — Walter Jankovic .
  • “For Q2, the tariff impact was less than $1 million…due to trade reprieves as well as operational and supply chain adjustments.” — Walter Jankovic .
  • “We continue to expect revenue growth to resume in 2026, supported by unified DOCSIS 4.0 adoption, recent wins, and accelerated customer ramps.” — Nimrod Ben‑Natan .

Q&A Highlights

  • Rest-of-world strength and customer concentration: Comcast was 39% of revenue; ex‑top customers, ROW stronger than 50%; diversification trend improving .
  • Unified DOCSIS 4.0 progress: RPDs shipping, RF front-end entering labs; field trials planned with early shipments in Q4; ecosystem interop advancing (14Gbps demo) .
  • Tariff impact and mitigation: Q3 guidance incorporates Malaysia 25% from Aug 1; total broadband impact expected < $1M; optionality across manufacturing and exemptions .
  • Seasonality and baseline: Expect sequential growth Q3 to Q4 but withheld Q4 guide given tariff/customer spend uncertainty; positioning for 2026 rebound .
  • Charter timing: Push-out into next year noted, but network evolution remains a priority; amplifiers alone won’t deliver target service levels .

Estimates Context

MetricQ2 2025 Estimate*Q2 2025 Actual
Revenue ($USD Millions)$126.2*$138.0
Primary EPS ($)$0.02*$0.09

*Values retrieved from S&P Global.

Key implications: Results were a clear beat on revenue and non-GAAP EPS vs consensus; book-to-bill >1.0 and guidance for Q3 is prudent, with gross margin guided up and EPS range widened, suggesting stability amid industry pacing .

Key Takeaways for Investors

  • Broad-based beat: Revenue and non-GAAP EPS beat consensus, with Video margin/SAAS momentum and ROW strength offsetting Broadband year-over-year softness .
  • Quality of backlog/bookings: Bookings rose to $158.4M and backlog+deferred at $504.5M underpin visibility; book-to-bill 1.1 supports 2H and 2026 ramp narratives .
  • Margin resilience: Q3 gross margin guidance raised vs prior quarter; Video margins at 67% and SaaS at record levels point to durable mix/investor-friendly cash conversion as tariffs are mitigated .
  • Broadband setup: Near-term upgrades moderate, but unified DOCSIS 4.0 wins (e.g., Mediacom) and ecosystem progress position for 2026 inflection .
  • Capital allocation: $50.1M YTD repurchases; cash $123.9M and $82M revolver capacity; OBBBA likely enhances cash taxes/FCF trajectory over several years .
  • Watch catalysts: Further unified 4.0 field trials/shipments, Akamai-driven SaaS onboarding in 2H, tariff rule stability, ROW customer ramps, and Comcast/Charter deployment pacing .
  • Trading stance: Short-term, expect range-bound sentiment into Q3 on cautious guide; medium-term, positioning is attractive on margin upgrades and 2026 growth path with credible execution signals .