Harmonic Inc.

Welcome to the Q1 2023 Harmonic Earnings Conference Call. My name is Lateef, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. Please note that this conference call is being recorded. I will now turn the call over to Scott Eckstein, Investor Relations. Scott? You may begin.

Thank you, Operator. Hello, everyone, and thank you for joining us today for Harmonic's first quarter 2023 financial results conference call. With me today are Patrick Harshman, President and Chief Executive Officer, and Jeremy Rosenberg, Interim 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 the documents harmonic 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 active results that differ materially from those contained in our projections or forward-looking statement. 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 the reconciliation of GAAP, 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 logistical information regarding our business and operations. 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 Harshman.

Patrick? Thanks, Scott, and welcome, everyone, to our first quarter call. In the first quarter, Harmonic delivered another period of excellent results. Revenue was $157.6 million, EPS was 12 cents, and adjusted EBITDA margin was 14%. Our broadband segment revenue grew 23% year-over-year, and our video SaaS revenue was up 72% for the same period. And both segments had booked a bill greater than one. Strong demand for our products and services was further evidenced by strategic multi-year contracts signed for both cable OS and video SaaS during the quarter. These new contracts Overall demand trends and the competitive success we're seeing gives us continued confidence in our ability to deliver on our full year of 2023 and previously stated multi-year growth objectives. Taking a closer look first at our broadband segment, it was another excellent quarter characterized by strong financial growth, promising market development, and expanding technology leadership. Segment revenue was $100.4 million, up 23% year-over-year. Adjusted segment EBITDA margin was 21.5%, demonstrating consistently improving operating leverage. New customer wins brought the total number of broadband operators deploying our solution to 94, up 22% year-over-year. At quarter end, our cable OS deployments expanded to serve 18.4 million cable modems worldwide, still only approximately 10% of the global cable model footprint. Looking ahead, we see expanding opportunity associated with both the remaining 90% of this global cable footprint for distributed DOCSIS 3.1 and follow-on investment waves associated with DOCSIS 4.0, fiber to the home, and network expansions. Breaking this down a little further, our 2023 growth expectations remain centered around our existing customers who continue to reaffirm and execute their advanced DOCSIS 3.1 and distributed access deployment plans across their networks. Looking a little further ahead, engagements with prospective new accounts are increasingly encouraging, aided by the visible success of our current customers and accelerating industry recognition of the unique market-leading benefits of our solution. Notably, during the quarter, we announced our partnership with Charter, and we're very excited to contribute to their new network evolution, footprint expansion, and operational efficiency initiatives. We're also excited about the progress we continue to make with our new DOCSIS 4.0 and fiber solutions, important contributors to our multi-year growth plan. In the DOCSIS 4.0 area, our technology is out in front, and we're actively supporting our customers with advanced demonstrations and trials. In the fiber area, our unique cloud-native VBNG and remote POM solution continues to gain traction with both new and existing customers. fiber growth target. I'll conclude this broadband update by reminding you of our overall 2025 financial targets. Over $825 million in revenue and over 28% EBITDA margin. The combination of our existing customers who have already begun multi-year deployment programs, new customers we expect to begin scaling in 2024, and our increasingly strong competitive position across both cable and fiber all give us high confidence in delivering on these 2025 targets and building an even stronger broadband business that will drive profitable growth for years to come. Turning now to our video segments, here also we delivered a solid quarter. First quarter segment revenue was $57.3 million. Although the top line was down, gross margin was 60.4%, up 160 basis points year over year, reflecting a continued shift to software reduced low margin server sales, and especially continued SaaS transformation and growth. SaaS revenue was up over 72% year over year, exceeding 20% of total segment revenue for the first time. The strong streaming SaaS growth was primarily driven by existing media accounts expanding their live sports content rights and consumer reach, resulting in growing consumption of our services. A second significant highlight of the quarter of several new SAS contracts with major media players that will begin to contribute recurring SAS revenue in the coming periods. Among these were a greater than $10 million expansion with an existing sports streaming customer, and a greater than $20 million contract with a historically appliance-based broadcaster who's flipping the majority of their traditional operations to our SAS. Associated with the April industry NAB event in Las Vegas, We recently made several announcements that highlight our growing leadership and success in live sports, streaming, and dynamic service monetization. On the customer front, we announced very exciting relationships with Madison Square Garden, Valleys Interactive, and VertiCast. On the technology and services front, we announced significant new SaaS technology advancements and ecosystem partnerships for dynamic ad insertion and fast channel creation. Recapping our video business strategy, we're focused on taking a leading position in the growing streaming SaaS market, particularly for live sports, and maximizing profit from the traditional video appliance market with a financial focus on recurring revenue, gross profit, and EBITDA. The first quarter results, both financial and strategic, demonstrate that we continue to make excellent progress towards these objectives. In fact, we're increasing our internal streaming SaaS forecast for 2023, and we remain highly confident in the 2025 business transformation SAS revenue growth, and composite EBITDA targets we previously shared with you. With that, I'll now turn it over to you, Jeremy, for further discussion of our financial results and our outlook.