Earnings call transcript: Harmonic Q2 2025 beats expectations, stock rises

Harmonic Inc. (HLIT) reported strong second-quarter results for 2025, surpassing earnings and revenue forecasts. The company posted an earnings per share (EPS) of $0.09, significantly above the expected $0.02, marking a 350% surprise. Revenue reached $138 million, exceeding the forecast of $127.73 million by 8.04%. Following the announcement, Harmonic’s stock rose 1.67% in aftermarket trading, reflecting investor optimism. According to InvestingPro analysis, the company maintains a GREAT financial health score and appears slightly undervalued based on Fair Value calculations.

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Key Takeaways

• Harmonic’s Q2 EPS of $0.09 beat forecasts by a wide margin.
• Revenue of $138 million surpassed expectations by 8.04%.
• Stock price increased by 1.67% in aftermarket trading.
• Comcast contributed 39% of total revenue.
• The company anticipates broadband revenue growth resuming in 2026.

Company Performance

Harmonic’s performance in Q2 2025 showcased resilience and growth, with both revenue and EPS beating market expectations. The company’s continued innovation in broadband and video technologies has positioned it well in a competitive market. This performance is a testament to its strategic focus on expanding its product offerings and partnerships, such as those with Vodafone and Cujo AI, which are driving growth.

Financial Highlights

• Revenue: $138 million, up from forecasted $127.73 million.
• Earnings per share: $0.09, surpassing the forecast of $0.02.
• Gross margin: 54.1%, an increase of 100 basis points year-over-year.
• Free cash flow: -$15.5 million.
• Cash balance: $123.9 million, up $78 million year-over-year.

Earnings vs. Forecast

Harmonic’s Q2 EPS of $0.09 represented a significant 350% surprise over the forecast of $0.02, highlighting the company’s ability to outperform expectations. Similarly, revenue exceeded expectations by 8.04%, demonstrating strong operational execution and market demand.

Market Reaction

Following the earnings announcement, Harmonic’s stock rose by 1.67% to $9.16 in aftermarket trading. This positive movement reflects investor confidence in the company’s growth trajectory and its ability to deliver strong financial results. The stock remains within its 52-week range, with a high of $15.46 and a low of $7.91, indicating room for potential growth. Year-to-date, the stock has declined approximately 31%, though analyst targets suggest up to 22% potential upside from current levels, according to InvestingPro data.

Outlook & Guidance

Looking ahead, Harmonic remains cautiously optimistic about its growth prospects in 2026, particularly in broadband revenue. The company provided Q3 guidance with broadband revenue expected to range between $75 million and $85 million, and video revenue between $45 million and $50 million. The positive outlook is supported by anticipated tailwinds from DOCSIS 4.0 and international market expansion. However, InvestingPro analysis indicates that analysts anticipate a 13% revenue decline for the current fiscal year, suggesting near-term challenges despite long-term potential.

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Executive Commentary

CEO Nimrod Ben Natan emphasized the strong performance, stating, "We delivered strong second-quarter results as revenue and profitability in both our video and broadband businesses were above the high end of expectations." CFO Walter Jankovic highlighted the importance of their broadband solutions, saying, "Our broadband solutions are critical for our customers as they upgrade their networks to address current competitive pressures and minimize subscriber churn."

Risks and Challenges

• Supply chain disruptions could impact production and delivery timelines.
• Market saturation in key regions may limit growth opportunities.
• Macroeconomic pressures, including inflation, could affect consumer spending.
• Regulatory changes in telecommunications may pose compliance challenges.
• Competition from larger players in the broadband and video sectors.

Q&A

During the earnings call, analysts inquired about the impact of tariffs and the company’s mitigation strategies, with executives confirming ongoing development in the DOCSIS 4.0 ecosystem. Strong bookings across multiple customers were highlighted, suggesting robust demand for Harmonic’s offerings. The potential for 2026 growth driven by network evolution was also emphasized, signaling confidence in future performance.

Full transcript - Harmonic Inc (HLIT) Q2 2025:

Conference Operator: note that this conference is being recorded.

I will now turn the call over to David Hanover, Investor Relations. David, you may begin.

David Hanover, Investor Relations, Harmonic: Thank you, operator. Hello, everyone, and thank you for joining us today for Harmonic’s second quarter twenty twenty five financial results conference call. With me today are Nimrod Ben Natan, President and CEO and Walter Jankovic, Chief Financial Officer. Before we begin, I’d like to point out that in addition to the audio portion of the webcast, we’ve also provided slides for this webcast, which you may view by going to our webcast on our Investor Relations website. Now turning to slide two.

During this call, we will provide projections and other forward looking statements regarding future events or future financial performance of the company. Such statements are only current expectations, and actual events or results may differ materially. We refer you to documents Harmonic filed with the SEC, including our most recent 10 Q and 10 ks reports and the forward looking statements section of today’s preliminary press release. These documents identify important risk factors which can cause actual results to differ materially from those contained in our projections or forward looking statements. And please note that unless otherwise indicated, the financial metrics we provide you on this call are determined on a non GAAP basis.

These metrics together with corresponding GAAP numbers and a reconciliation of GAAP are contained in today’s press release, which we have posted on our website and filed with the SEC on Form eight ks. We will also discuss historical, financial and other statistical information regarding our business and operation, and some of this information is included in the press release. The remainder of the information will be available on a recorded version of this call or on our website. And now I’ll turn the call over to our CEO, Nimrod Bennathan. Nimrod?

Nimrod Ben Natan, President and CEO, Harmonic: Thanks, David, and welcome, everyone, to our second quarter twenty twenty five earnings call. Today, we’re sharing strong results that exceeded our guidance in both broadband and video, reflecting our continued focus on execution and long term value creation. Revenue was $138,000,000 driven by a record quarter in fiber, significant sequential and year over year growth in broadband rest of world and robust performance across both appliances and SaaS streaming. We also continue to drive innovation, customer expansion in broadband, further enhancing our competitive position. In addition to our results, during the quarter, we returned capital to our shareholders by repurchasing an additional $14,000,000 of our outstanding common shares, bringing total repurchases under the current program to $50,100,000 We closed the quarter with backlog and deferred revenue of $504,500,000 underscoring consistent customer demand for our products and services, even as the industry transitions to unified DOCSIS four point zero, as we have discussed previously.

While tariffs had minimal impact this quarter, the global trade environment remains uncertain. Looking ahead, we continue to expect revenue growth to resume in 2026, supported by Unified DOCSIS four point zero adoption, recent wins, and accelerated customer ramps. Turning to slide five, our broadband vision continues to gain momentum. We are accelerating the adoption of next generation virtualized broadband networks designed for speed, reliability, and simplicity. Spending DOCSIS and fiber, this transformation is well underway and we are helping customers modernize their networks and prepare for the future.

We expect that the recently passed OBBBA, which provides bonus depreciation cash tax benefits to those building and modernizing broadband networks in The US, will help to incentivize those investments over the next several years. Turning to slide six, building on our broadband growth strategy, the revenue in this segment was $86,900,000 for the quarter and gross margin was 46.5%, reflecting a lower mix of COS software in the quarter. We ended the quarter with 136 COS deployments in production, managing 35,300,000 connected modems, demonstrating the scalability and maturity of our virtualized access platform, capabilities not yet evident elsewhere in the market. Our customer base continues to expand. This quarter, we added four new logos, including a large regional Tier two North American broadband operator undertaking a major DOCSIS and fiber network transformation.

Rest of world revenue grew significantly year over year, and we expect this momentum to continue, driving further expansion of our global installed base. Additionally, projects announced last quarter such as a sound and a tier one Latin American fiber project are progressing well with deployments ramping and customers coming online. Industry momentum is building as operators modernize networks for higher speeds, greater reliability and lower cost. We believe our unified four point architecture and converged DOCSIS and fiber design backed by proven deployments and ongoing innovation will continue to enable faster rollouts and confident scaling for our customers. Let’s now turn to fiber, which is at the heart of our broadband strategy and a top priority as our customers increasingly leverage the fiber optionality built into our solution to deploy fiber to the home for MDUs, Edge Outs and Greenfield builds.

In the second quarter, we delivered record fiber revenue while building a strong pipeline for the future, driven by both existing customers and new customer wins. This quarter, we introduced Sistar, our new optical node purpose built for multi dwelling units, MBUs. SISTAAR enables cable and telco operators to quickly and very cost effectively deliver fiberglass broadband to low density buildings using existing infrastructure. It simplifies deployments, lower costs, and accelerates time to market, giving operators a powerful and cost effective way to compete in this MDU segment. We also partnered with Vodafone on their Fiber Island Showcase at the Angacom show in Germany.

The demonstration highlighted how our solution enabled operators to extend fiber to the home connectivity more efficiently, leveraging existing HFC and fiber investments to accelerate fiber broadband availability. Overall, we made great progress this quarter in fiber with record revenue, the launch of the new C Star product and the high profile Vodafone showcase, which underscore the powerful momentum and leadership we are building in fiber. Looking at unified DOCSIS four point our solution is rapidly moving to real world deployment. We are shipping unified RPDs in volume and advancing the new unified out of front end tray, which is entering customer labs this quarter for testing and early field trials. We also formally announced Mediacom as a unified DOCSIS four point zero customer, and they have since shared their deployment strategy and the magnitude of their plans, reinforcing the reality and opportunity of DOCSIS four point zero rollouts powered by our unified platform.

We recently demonstrated a 14 gigabit per second throughput milestone on a live unified DOCSIS four point zero system at Cable Ops Interop, exceeding today’s 10 gig fiber to the home speeds and setting a new industry record. These advancements show how our technology is redefining broadband performance and why operators are turning to Harmonic to lead their DOCSIS four point evolution. On the topic of innovation, this continues to be the cornerstone of our leading industry position. And this quarter, we’re excited to share two notable updates. First, Vectra, a leading operator in Poland, selected Harmonic for its broadband transformation, citing our patented PTP less timing solution as a key differentiator.

That solution is now live in full commercial production, simplifying network timing, lowering cost, and enhancing reliability, another step forward in delivering smarter, more efficient broadband infrastructure. Second, we collaborated with Cujo AI on a live demonstration of ultra low latency broadband powered by our virtual CMTS and advanced traffic management. This joint showcase highlighted how operators can dramatically reduce latency for applications such as cloud gaming and advanced real time collaboration, delivering a step change in broadband quality of experience. To summarize, broadband business continues to progress, adding new logos, expanding in fiber and delivering advanced innovations With the world’s largest base of live virtual CMPS networks, leadership in unified DOCSIS four point zero and a converged DOCSIS and fiber platform, we enable operators to deliver faster speeds, greater reliability, and lower operating costs. Record fiber business and rest of world revenue, along with the accelerated product innovation pipeline, give us confidence in the long term growth of this business as unified and fiber deployment scale through 2026 and beyond.

Turning to slide number seven, the video market continues to evolve rapidly as broadcast grade reliability is no longer optional in premium streaming, but rather a necessity. Customers depend on Harmonic to deliver flawless performance for their most valuable content, specifically high stakes live sports events, where even a brief interruption can translate into the potential loss of millions of dollars. To meet these rising demands, we are seeing a strong momentum across appliances, SaaS streaming, and increasingly hybrid deployments that combine on premise capacity with agnostic cloud flexibility. Our SaaS streaming platform is delivering at scale with high reliability across all major cloud providers. A clear example is our partner ViewLift, a live sports focused platform that illustrates how our customers’ growth fuels our SaaS streaming momentum.

ViewLift is expanding its customer base and leveraging our cloud agnostic, SSAI advertising solution to achieve top tier reliability and greater business flexibility. In the second quarter, our Video segment delivered $51,100,000 in revenue, reflecting strong overall performance. Our appliance business contributed solid profitability to our results, driven by primary distribution and competitive takeout deals, while our SaaS streaming business posted a record $15,400,000 in quarterly revenue, again fueled by the expansion of live sports streaming and a growing pipeline of Tier one operators preparing to scale deployments. Additionally, our Akamai partnership positions us for expanded opportunities in premium streaming delivery in the second half of twenty twenty five. Together, we believe our appliance strengths, accelerating SaaS streaming growth and differentiated hybrid approach with agnostic cloud support provide our video business with a solid foundation for sustained and profitable growth in 2025 and beyond.

Now, I will turn to Walter for a deeper review of our financials.

Walter Jankovic, Chief Financial Officer, Harmonic: Thanks, Nimrod, and thank you all for joining us today. Before I discuss our quarterly results and outlook, I’d like to remind everyone the financial results I’ll be referring to on this call are provided on a non GAAP basis. As David mentioned earlier, our Q2 press release and earnings presentation include reconciliations of the non GAAP financial measures to GAAP. Both of these are available on our website. Our second quarter highlights are here on slide 10.

As you can see, revenue and profitability in both our video and broadband businesses exceeded the high end of our guidance as we continue to successfully execute our plans and navigate the previously discussed industry wide headwinds in broadband. On a total company basis, revenue was $138,000,000 while EPS rose from $08 to $09 per share year over year. Free cash flow during the quarter was minus $15,500,000 and our cash balance at quarter end was $123,900,000 a notable increase of $78,000,000 versus the same quarter a year ago. The large increase in cash from a year ago is net of $50,000,000 of stock repurchases and is primarily a correlation to the strong revenue we delivered in the 2024 and demonstrates the operating leverage in our business. As we expect our broadband revenue growth to resume in 2026, this gives us confidence in our ability to drive significant future cash flow.

Looking more closely at our businesses, second quarter broadband revenue and adjusted EBITDA were $86,900,000 and $10,800,000 respectively. These year over year results were expected owing to the industry headwinds we have previously discussed. It’s important to note that in Q2, our rest of world revenue was at a record level and helped to mitigate the lower revenue from our largest customers on a year over year basis, demonstrating our improving diversification trend. In our video business, we’re continuing to see greater momentum as video revenue was $51,100,000 up 11.6% year over year, while adjusted EBITDA in this business was $6,200,000 This reflects consistently strong appliance and SaaS revenue, as well as the ongoing efficiency improvements we’ve implemented. We’ve also continued to expand the video SaaS part of our business, as this revenue line grew 10.1% year over year to reach a record 15,400,000.0.

Moving to slide 11. As we stated previously, we currently have three main capital allocation priorities. These include: one, making targeted investments in our business to drive our organic growth two, returning capital to our shareholders and three, identifying and evaluating inorganic growth opportunities, or M and A, that complement and leverage our growing broadband installed base. Aligned with our first key priority, we will continue to invest further in our inventory over the next several quarters to support our expected growth in broadband, which includes our rest of world customers where we’re making substantial progress. In terms of returning capital to our shareholders, we will continue to engage in opportunistic stock repurchases under our share repurchase program, which authorizes up to $200,000,000 of repurchases and doubled our previous program.

Year to date, we have repurchased $50,100,000 of our common shares under this program, including repurchasing shares totaling $14,000,000 in the second quarter. As we’ve said in the past, we expect to fund these purchases with expected strong free cash flow generation over the next three years. Our balance sheet remains strong with ample sources of liquidity. As of June 27, we had $123,900,000 in cash and $82,000,000 available under our credit facility. We believe this is more than sufficient to support our capital allocation priorities.

In addition, given the considerable research and development we do in The US and with the passage of the OBBBA, we expect this to result in a meaningful cash tax benefit to the company over the next several years, which will enhance our capital allocation plan. Now let’s take a more detailed look at our second quarter twenty twenty five financial results on slide 12. As I mentioned earlier, second quarter total company revenue was $138,000,000 In the quarter, we had one customer representing greater than 10% of total revenue, with Comcast representing 39% of total revenue. Total company Q2 gross margin was 54.1%, surpassing the high end of our guidance range and up 100 basis points year over year. Broadband Q2 gross margin was 46.5%, down 110 basis points year over year, mainly due to tariff costs, which ended up being substantially less than what we had anticipated when we guided last quarter.

I’ll discuss tariffs in greater detail shortly. Video gross margin in Q2 was 67%, up two sixty basis points year over year, reflecting both revenue strength from larger appliance deals and SaaS expansion and our cost optimization efforts. Moving down the income statement on slide 13, Q2 total company operating expenses were 60,700,000.0 down 1.3% year over year as a result of our previously discussed restructuring initiatives in video and other cost management initiatives. Our profitability metrics remained steady. The second quarter twenty twenty five broadband EBITDA was $10,800,000 and video EBITDA was $6,200,000 Total company EPS was $09 Our order book was strong with Q2 bookings at 158,400,000.0 The book to bill ratio for this quarter was 1.1 compared to 0.9 in Q1 twenty twenty five and zero 0.5 in Q2 twenty twenty four.

Digging a little deeper, broadband book to bill was significantly higher than the company average of 1.1 as we saw a strong level of bookings across multiple customers. This is a positive indicator for future revenue growth. As we’ve stated previously, over time, we expect our book to bill ratio to normalize and approach the historical benchmark of greater than one, especially as we see growth in broadband due to unified DOCSIS four point zero and other customer ramps accelerate. Turning to the balance sheet on slide 14, as I’ve noted earlier, we ended Q2 with cash and cash equivalents of $123,900,000 The quarter over quarter change in cash was mainly attributed to the aforementioned share repurchases and increases in inventory to support our growth and to provide a cushion for any potential near term tariff impacts. Day sales outstanding at the end of Q2 was 79 compared to 67 in Q1 twenty twenty five and seventy eight in Q2 twenty twenty four.

The sequential increase was due to timing of sales in the quarter and reflects our typical DSO level. Inventory increased $9,100,000 in the quarter and our days inventory on hand fell to one hundred and one days from one hundred and three days last quarter. At the end of Q2, total backlog and deferred revenue was $504,500,000 around 51% of our backlog and deferred revenue have customer request dates for shipments of products and for providing services within the next twelve months. Turning to guidance, we anticipate a moderate pace of broadband upgrade activity in the near term. However, we continue to believe this is mostly a timing change and we are already beginning to see positive tailwinds for 2026 as customer ramp readiness improves, unified Ford Auto technology progresses, and our new rest of world customers ramp up, as Nimrod highlighted earlier.

These positive developments we expect will support the return of growth in 2026. Now I’d like to provide an update on the tariff situation. On our last call in late April, we stated that we believe the increased tariff proposals at the time would have an immaterial impact on our video business and an estimated $3,000,000 impact on our broadband business for Q2. However, the actual impact in Q2 was much less than our initial forecast. For Q2, the tariff impact was less than $1,000,000 and it was all related to broadband.

This better than expected performance was due to trade reprieves as well as operational and supply chain adjustments that we had implemented to address these potential effects, which proved quite successful. While we are pleased with the success of these efforts to date, the tariff situation remains fluid and unpredictable. As such, we continue to explore options to offset tariff sensitivity, including further optimizing our supply chain, additional cost management measures, and taking price actions where appropriate. Now let’s review our non GAAP guidance for Q3 twenty twenty five, beginning on slide 15. Similar to last quarter, we’re taking a prudent approach to our current quarter guidance given the industry and macroeconomic factors I discussed.

Additionally, like last quarter, we’ll not provide updated full year 2025 guidance at this time due to the current situation with tariffs and the potential impact on economic conditions and our customers’ behavior. To date, we have not seen any changes in our customers’ behavior. For Q3, we expect broadband to deliver revenue between 75,000,000 to $85,000,000 gross margins between 45% to 46% due to product mix and adjusted EBITDA between $5,000,000 to $9,000,000 The broadband guidance includes an estimated tariff impact of less than $1,000,000 in the Q3 margins based on the current announced tariff rates and exemptions. For our Video segment in Q3, we expect revenue in the range of $45,000,000 to $50,000,000 as normal seasonal weaknesses in appliances is offset by our strong backlog and pipeline gross margin in the range of 65% to 67% and adjusted EBITDA to range from $2,000,000 to $5,000,000 On this slide, we have also provided total company guidance for Q3. In the interest of time, I’ll let you read through the details.

Please also note that our non GAAP tax rate has changed slightly to 21%. I would like to highlight that total company EPS for the third quarter is expected to be in the range of $02 to $07 In closing, we want to reiterate that our broadband solutions are critical for our customers as they upgrade their networks to address current competitive pressures and minimize subscriber churn. Harmonic has had a history of successfully navigating industry transitions like the one we are in now, and our operating leverage and market leadership puts us in an enviable position when growth resumes in 2026. We thank everyone for their attention today, and now I’ll turn it back to Nimrod for final remarks before we open up the call for questions.

Nimrod Ben Natan, President and CEO, Harmonic: Thanks, Walter. In summary, we delivered strong second quarter results as revenue and profitability in both our video and broadband businesses were above the high end of expectations. In addition to our financial results, we continue to make progress across all aspects of our business, including COS deployments, unified DOCSIS four point zero, fiber, and video appliances and SaaS streaming. While we expect broadband upgrades to progress at the moderate pace in 2025, we continue to see developments that will ultimately benefit our business in 2026 and beyond. Walter and I are now happy to take your questions.

Conference Operator: Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for name to be announced. To withdraw your question, Our first question will come from the line of Simon Leopold from Raymond James. Your line is open.

Simon Leopold, Analyst, Raymond James: Thank you very much for taking the question. I did I’m interested in your description of the strength from what we refer to as others, and rest of world customers. So I guess in your first quarter of the year, if we exclude the business with Comcast and Charter, that was about 54% of your revenue. And I’m just wondering if you could characterize or quantify actually what the ex Comcast Charter percent and dollar value was this quarter to help us quantify strength in rest of world.

Walter Jankovic, Chief Financial Officer, Harmonic: Well, specifically, Simon, it’s Walter here. We basically provided our concentration with regards to Comcast during the prepared remarks. And obviously, in terms of rest of world and the makeup of rest of world for the company, it is definitely much stronger than 50%. And that’s on a total company basis, so that includes both broadband video. And you probably noticed that one of the customers that we had been calling out as a greater than 10% customer, I think five of the last seven quarters, was not listed today.

Simon Leopold, Analyst, Raymond James: Okay. And then the other fact I wanted to follow-up is you certainly found, I think, a little bit more optimistic about 2026 than you did on the prior conference call. And when I’m looking at the forecast from the third party researchers that you typically cite, it looks like for your served market, they’re expecting good growth in 2026 as well, roughly 40% growth in the year. Could you give us your thoughts, even if you’re not prepared yet for formal forecast of how you’re thinking about that trajectory for 2026? Thank you.

Nimrod Ben Natan, President and CEO, Harmonic: Yeah, so it’s still too early for us to give the exact ’26, but we certainly see some of the headwinds that we talked about turning into tailwinds. Clearly, the Unified four point zero will be ready for the entire ’26. We did talk about a couple of wins that are scheduled to deploy the Unified. We did talk about MediaComm and few others that are in the pipeline. So we certainly see that.

We also see kind of rest of the market, as we call it, strengths, you asked in your first question. So overall, we certainly see that. We cannot, at this point, comment on the exact 40% that you highlighted. We’re Yeah, seeing

Walter Jankovic, Chief Financial Officer, Harmonic: and definitely, Simon, we’re seeing the momentum in terms of our rest of world customers, momentum around customer ramp readiness. And so to your point about feeling more bullish in terms of 2026, Definitely, we’re seeing those positive indicators, those tailwinds as we had expected, when we had talked earlier in the year with regards to what the expectations are around 2026. And I think that third party market research corroborates that turnaround in 2016.

Nimrod Ben Natan, President and CEO, Harmonic: And maybe one more thing, I think the competitive environment for our customers is getting very challenging. And clearly, they all recognize the importance and the value of what they call the network evolution or upgrading the network to kind of deliver the best of what you can get out of these networks, which is more in the symmetric speeds, at least one gigabit on the upstream. So they all definitely see the importance of that, and we believe that they will do anything they can to push that forward. I think the other thing, Walter, and you touched on that, the OBBVA, which again, it’s kind of new. We heard from other telco operators that this will help them to accelerate CapEx investment.

We have not yet seen the kind of impact of that, as this is fairly new, but this is kind of yet another factor to add.

Walter Jankovic, Chief Financial Officer, Harmonic: Thank you. Thanks, Simon.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Ryan Koontz from Needham. Your line is open.

Ryan Koontz, Analyst, Needham: Great, thanks. Wondering you can talk a little bit more detail about, DOCSIS four Unified in light of your soft broadband guide commentary that you’re making early, RPD shipments there. We’ve seen some recovery here in your 2Q sales to Comcast. Where is the industry now today, July, on DOCSIS four Unified Readiness? And then what kind of progress have you specifically made on your product platform?

Thank you.

Nimrod Ben Natan, President and CEO, Harmonic: Yeah, so, you know, specifically, I think Comcast, the case of full duplex, we talked about that and we talked about the dependency early in the year on amplifiers. That’s a non issue. That’s overseeing well. That’s one component of what we generically define as the Unified four point zero. For the rest of the market, above and beyond Comcast, the progress that we’re making is fairly good.

As I mentioned, we do have dependency on this so called RF front end, which is required. This technology must be deployed both in RPD in conjunction with an RF front end, which is unified compatible. And I did mention that we’re entering into customer labs in the third quarter, and starting field trials with the plan to early shipments in the fourth quarter. On top of that, you could follow the progress that we’re making from an interop point of view at CableLabs, including this 14 gigabit milestone, which is, I agree, is more of a marketing milestone, but nevertheless important. There is an ongoing interop activity with the CPEs.

So overall, the ecosystem is moving forward and we are encouraged by that.

Ryan Koontz, Analyst, Needham: That’s really helpful, Nimrod. Thank you. And with respect to Charter, who you mentioned fell off the 10%, we saw them cut CapEx a few days ago on the year. How should investors think about that opportunity for you? You see this really is just a push out general in their program or is there other competitive changes?

Well,

Nimrod Ben Natan, President and CEO, Harmonic: yes, so they did say that they will be short about 500,000,000 that will be moved to next year. They also said a couple of times how important the network evolution is for the services that they deliver, the two by one, the five by one as a converged network. And they specifically called out what they call step two of the program, which is underway. So think they signal that this is moving forward.

Ryan Koontz, Analyst, Needham: Yeah, think we’ve heard about them deploying amplifiers, I think, as part of their phase two, but perhaps doing that in phases with other products.

Nimrod Ben Natan, President and CEO, Harmonic: Well, so I cannot break it down beyond what they said, but I think the point for them is to deliver services just by deploying amplifiers. You cannot deliver the kind of enhanced service, whether it’s the two by one or eventually the five by one.

Ryan Koontz, Analyst, Needham: Great. And just a quick question for Walter on the strong bookings in the quarter. Walter, any change in the mix there of bookings? Is this more longer term for ’26? How should we think about that step up?

Walter Jankovic, Chief Financial Officer, Harmonic: Yes, it’s a mix of bookings across the time period. And as I pointed out in the prepared remarks, it came across in broadband across a number of customers, including our rest of world customers.

Ryan Koontz, Analyst, Needham: All right. Thanks very much.

Walter Jankovic, Chief Financial Officer, Harmonic: Okay. Thanks, Ryan.

Conference Operator: Thank you. One moment for our next question. Our next question will come from the line of Steven Frankel from Rosenblatt Securities. Your line is open.

Steven Frankel, Analyst, Rosenblatt Securities: Good afternoon. I just want to try to square the strong order book, the cautious guidance, and the third element, which is a nice pickup in modem served in the quarter. So deployment seems to be getting back to a better pace. Do we read from this that one of the dynamics that we’re seeing in Q3 is deployments from inventories of nodes and RPDs that your customers have had and now are ready to start to draw down?

Nimrod Ben Natan, President and CEO, Harmonic: You know, we always talked about the lag between shipments and when do we see modems specifically. We also talked about impact of deployments in what’s called fiber deep environment, where you deploy a lot of nodes, but you don’t pick up a lot of subscribers. So, it did, and I think I did highlight last quarter because the number was lower, that we have in the pipeline, a good number of customers that will turn up the service in the second quarter and we can see the results in the modem pickup and we expect to see that increasing going forward.

Steven Frankel, Analyst, Rosenblatt Securities: Okay, and then on the video side, we haven’t talked about new customer wins in a while. Kind of what’s the pipeline like? Are there large potential customers that are in the process of deploying that will flow into revenue in the next few quarters?

Nimrod Ben Natan, President and CEO, Harmonic: So maybe two things. And I did highlight on the prepared remarks, a partner we work with that provide a platform for more of regional sports. And they actually bring on the platform a lot of customers. We don’t count them as customers. It’s effective being existing customers that get expended as they bring on more customers.

We also did talk about Akamai, which we kind of count as one customer, but under the hood, they actually transition and expand into more customers. So, are two examples where we expand and grow with existing customers, but we don’t necessarily provide the details of these customers.

Steven Frankel, Analyst, Rosenblatt Securities: Okay. And you did talk about Akamai contributing to growth in the back half, but that doesn’t appear to be in the guide for Q3. So is that more of a Q4 phenomenon?

Walter Jankovic, Chief Financial Officer, Harmonic: Yes. We’re just in Q2, we started successfully onboarding a number of customers and starting to see the revenue. But by the time the ramp up occurs of the customers, it takes a little while before you’re going to see that into the growth. But we are highlighting that in the second half, a good part of our growth coming out of the SaaS business will be a result of that partnership.

Steven Frankel, Analyst, Rosenblatt Securities: Alright, thank you.

Walter Jankovic, Chief Financial Officer, Harmonic: Thanks, Steve.

Conference Operator: Thank you. One moment for our next question. Our next question will come from the line of George Nader from Wolfe Research. Your line is open.

George Nader, Analyst, Wolfe Research: Hi, guys. Thanks very much. I was just curious about anything more you can tell us on the plan around tariffs. I think you guys make quite a bit of your nodes in Malaysia. It feels like the tariff is going to be reasonably substantial in Malaysia as that gets negotiated.

And I guess I’m just curious about what kind of offsets would you have? Could you move manufacturing? Is there some kind of flexibility you can kind of walk us through that would help your situation on nodes and margins there? And if you do have, say, a 20% or 25% tariff in Malaysia, what kind of impact might you expect through the P and L? Thanks.

Walter Jankovic, Chief Financial Officer, Harmonic: Sure. Hey, George, it’s Walter. So first of all, our assumptions that we built into our guidance for Q3 take into consideration the current rates that have been disclosed in terms of, for example, Malaysia, August 1, going up to 25%. And so the impact is already baked into our quarterly guidance. And as you heard earlier, the whole impact for Q3 for the broadband business, we expect it to be less than $1,000,000 based on the rates and the exemptions.

So we have products that are exempt, we have products that are not exempt, and we also have some various options in terms of optionality around our product base there. So in total, right now, based on the rules that exist today, the impact is less than $1,000,000 in the broadband business. Now, if the rules change, let it be the rates, the exemptions, we continue to look at other options from a long term standpoint in terms of looking at near shoring and potentially taking advantage of other options of that nature. But until both the rates and this whole thing is cleared up, it’s not like there’s something that we’re going to execute on. I think we’re proactively looking at the different options available to us.

And right now, it’s not having that much of a significant impact on our overall business, if you consider $1,000,000 about 1% on the overall margin line.

George Nader, Analyst, Wolfe Research: Got it. I assume that’s a high percentage of your nodes are exempt. That’s what’s going on here, I presume. Is that correct?

Walter Jankovic, Chief Financial Officer, Harmonic: There’s elements. There’s parts of our portfolio.

George Nader, Analyst, Wolfe Research: Okay. Thank you.

Nimrod Ben Natan, President and CEO, Harmonic: Okay. You’re welcome.

Conference Operator: Thank you. And one moment for our next question. Our next question will come from the line of Tim Savageaux from Northland Capital Markets. Your line is open.

Tim Savageaux, Analyst, Northland Capital Markets: Hey, good afternoon. Couple of questions. First, think you mentioned some positive indications for ’26 and I think above trend growth. So that would beg a question about off what baseline. I know you’re not guiding for the year.

Your commentary sounds flattish throughout the second half. But you usually do see some degree of upward seasonality in Q4s and I know they’ve been all over the place of late. But I wonder if you have any commentary there. Should we take should we assume Q4 looks like a lot like Q3 or could we have some seasonality in thinking about the baseline for that above trend growth in 2026?

Walter Jankovic, Chief Financial Officer, Harmonic: Hi, Tim. So what I would say about Q4 is that we do expect some sequential growth Q3 to Q4. Right now, we’re not going to guide Q4 because of the commentary I provided earlier in regards to the uncertainty around customers’ behavior on spend because of tariffs. I would also indicate that we’ve got a lot of puts and takes as we look at Q4. And so therefore, that’s a key reason why we are not guiding for Q4.

But if you think about Q3 to Q4, we do still expect some sequential growth in the quarter. And our commentary all really focused around the positive tailwinds that we’re now seeing, some of the progress that’s been made across the board in terms of customer ramp readiness, in terms of the unified four point zero that Nimrod spoke about earlier, as well as onboarding of rest of world customers. And that really we see as the key elements for our 2026 growth.

Tim Savageaux, Analyst, Northland Capital Markets: Okay, and to take it right from there in terms of 2026, and obviously we’ve been, I think we’re looking the beginning of this year and we’re going to get declines of a similar magnitude. But for ’26, I assume you’d like to hit as an initial goal a new high watermark for revenue in the business, kind of the nearly 500,000,000 you achieved in ’twenty four. Is that safe to say?

Walter Jankovic, Chief Financial Officer, Harmonic: Too early to guide at this point, Tim. I think we’ve got to make assessment across the board, look at all of the various customers, all of the things we talked about today in terms of the progress that’s been made. And it’s just too early to comment around any specific number or watermark for next year, other than to say, we’re very well positioned in terms of our portfolio, our market share. We’ve talked about the positive tailwinds that we’re now seeing and the progress that we are seeing right now with the customer base. So I think those all point in the right direction, but we’re not going to give any type of directional statement at this point.

Tim Savageaux, Analyst, Northland Capital Markets: Yep, fair enough. Last question for me, I guess, you mentioned Charter not on the 10% customer list. There any way to assess inventory over there? Yes, they pushed some CapEx, but it’s still more this year than last year and more in the second half than the first. And so I know that’s not a quarter to quarter relationship.

So second half of last year, you shipped to maybe $80,000,000 worth of gear. First half of this year, I don’t know, twenty five million, maybe 10,000,000 in the quarter. So is there a way for you to assess what’s going on there in terms of what they’ve deployed, what inventory they might have and how that might relate to their kind of run rate deployment schedule.

Walter Jankovic, Chief Financial Officer, Harmonic: Tim, we can’t comment around any specific customers’ ramp, ramp schedule, etcetera. What we can say in general is that many of our customers acquire product from us, they acquire licenses from us, they acquire nodes from us. And obviously, as they ramp and the speed of their ramp will dictate exactly when they’re going to need more equipment and therefore the onset of orders and product to a customer. And that goes across the board for all customers.

Tim Savageaux, Analyst, Northland Capital Markets: Okay, thanks.

Walter Jankovic, Chief Financial Officer, Harmonic: Thanks, Tim.

Conference Operator: Thank you. I’m not showing any further questions in the queue. I would now like to turn it back over to management for any closing remarks.

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