Harmonic Inc.

Welcome to the Q2 2022 Harmonic Earnings Conference Call. My name is Kevin, and I'll be your operator for today. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. Please note that this conference is being recorded. I will now turn the call over to David Hanover, Investor Relations. David, you may begin.

Thank you, Operator. Hello, everyone, and thank you for joining us today for Harmonic's second quarter 2022 Financial Results Conference Call. With me today are Patrick Harshman, President and Chief Executive Officer, and Sanjay Kalra, 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 filed with the SEC, including our most recent 10Q and 10K reports and the forward-looking statement section of today's preliminary results 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 gap numbers and a reconciliation gap, are contained in today's press release, which we have posted on our website and filed with the SEC on Form 8K. 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, Patrick Harschman. Patrick?

Thanks, David, and welcome everyone to our second quarter call. In the second quarter of 2022, Harmonic again delivered exceptional business results. Revenue was up 39% year-over-year, reaching a record $157.4 million. EPS was $0.16, and adjusted EBITDA margin was 15.5%, with balanced contribution from our two business segments. The cable access segment continues to generate strong, sustainable growth, with revenue up 62% year-over-year. Video segment revenue grew 20%, with the underlying highlight again being SaaS revenue, which was up 69% year-over-year. These results demonstrate growing demand for multi-gigabit broadband and live streaming video, and that our associated products and services are highly differentiated and build value for our customers. They also demonstrate the resilience of our business model as Harmonic continues to execute despite current supply chain challenges and the macroeconomic environment. Turning first for our cable access segment, we produced strong top and bottom line growth during the second quarter. Segment revenue was $81.2 million, up 62% year-over-year. By quarter end, 79 broadband service providers were deploying our cable OS, and cable modems served grew to $8.5 million, up 159% year-over-year, still less than 15% of our existing customers' DOCSIS footprint. Adjusted segment EBITDA margin was 14.3%, demonstrating good earnings leverage despite product cost headwinds. These results reflect both a healthy market and our strong momentum in this market. Our current cable customers are global market leaders, and they're leaned into advancing their broadband networks through new multi-gigabit offerings, better analytics, and more flexible operations, all areas where harmonic solution continues to be way out in front. During the quarter, we announced and demonstrated groundbreaking new capabilities in support of the cable industry's 10G vision. We announced a new solution enabling customers to leverage legacy Cisco node platforms to deploy our DAA. And several of our engagements with prospective tier one customers move forward in ways that we find very encouraging. Complementing this excellent work in broadband over cable, we also drove significant progress in our more nascent fiber business area. During the quarter, we received over $10 million of fiber solution orders, advanced trials with additional Tier 1 customers, and grew our fiber sales pipeline domestically and internationally. We're increasingly convinced that our fiber and converged cable plus fiber solutions are winners, that fiber represents a significant address market expansion opportunity, and that fiber will be a key contributor to our longer-range market leadership and growth. Looking ahead to the remainder of 2022 and beyond, we remain confident that our broadband access business is uniquely positioned for sustained growth. We have a very strong backlog, great customer relationships, technology and service capabilities that are truly unique in the market, and we're investing and working hard to stay out in front. As mentioned last quarter, we now forecast that 2024 top line revenue, EBITDA dollars and EBITDA percentage will be ahead of the plan we communicated to you during our investor day in June last year. We've solidified plans for our next investor day in September, during which we'll provide additional color on our view of the market and growth trajectory, as well as updated long-term financial models for both of our business segments. In the meantime, we remain confident about the broadband access market and our ability to continue to deliver industry-leading solutions and compelling profitable growth. Turning now to our video segment, here also we delivered another quarter of strong financial and strategic execution. Second quarter segment revenue was $76.2 million, up 20% year-over-year, ahead of our forecast as some business we expected to realize in the second half of the year came in earlier than anticipated. Segment EBITDA was 16.7%, highlighting continued strong financial execution. Strategically, the biggest highlight of the quarter was achieving streaming SaaS revenue of $8.6 million, which was up 69% year-over-year. As a reminder, our video business strategy has two elements, taking a leading position in the growing streaming SaaS market, particularly for live sports, and maximizing profit from the flat to declining traditional video broadcast market. Our results through the first half of 2022 demonstrate continued execution of this plan with important strategic SaaS wins, top-line growth, gross margin expansion, and continued segment profitability. Despite ceasing sales in Russia, with estimated loss revenue of approximately $6 million. As I mentioned earlier, the highlight of the quarter and year-to-date is streaming SaaS growth, which was driven principally by our larger media customers for expanding their consumer footprints, content rights, and usage of our service, particularly for high-profile live sports events. We also secured several important new Tier 1 SaaS customer wins, spanning North America, Latin America, and EMEA. Live sports streaming is an increasingly active and opportunity-rich end market, and our experience and reputation for enabling best-in-class live streaming continues to grow. Considering our strong first half SaaS results and our robust sales pipeline, we continue to expect our streaming SaaS revenue will grow over 50% in 2022. Looking further ahead, we remain confident that our transformation in video to streaming SaaS is working. and that we remain on track to achieve the 2024 streaming SaaS targets that we laid out for you in our investor day last June. As with our cable access segment, we plan to provide you a more detailed update on video market dynamics and our forecasts in September. With that, I'll now turn it over to you, Sanjay, for further discussion of our financial results and outlook.