Harmonic Inc.

Thank you for standing by. Welcome to the second quarter 2023 Harmonic Earnings Conference Call. My name is Jonathan, and I will be your operator for today's call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question at that time, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. Please note that this conference is being recorded. And now I'd like to 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 Harmonix's second quarter 2023 Financial Results Conference Call. With me today are Patrick Harshman, President and Chief Executive Officer, 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 where results may differ materially. We refer you to documents harmonified with the SEC, including our most recent 10Q and 10K reports and the forward-looking statements section of today's preliminary results press release. These documents identify important risk factors, which can cause actual results that 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 the 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 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 Harshman. Patrick?

Well, thanks, David, and welcome, everyone, to our second quarter call. In the second quarter, Armonic delivered solid broadband and video SaaS growth, we'll also encounter in short-term headwinds. Revenue was $156 million, EPS was 12 cents, and adjusted EBITDA margin was 13.5 percent. Our broadband segment revenue grew 20 percent year-over-year, our video SAS revenue was up 58 percent, and book-to-bill was over 1.2, leading to record backlog in deferred revenue of over $663 million. Hardware deliveries on both the broadband and video sides of the business were softer than anticipated. And we expect this softness to persist through the third quarter before rebounding in Q4. Our competitive position continues to be strong, evidenced by several important new customer wins during the quarter. The combination of record backlog and deferred revenue, active and healthy existing customers, and new customer relationships that have yet to scale, continues to position as well for sustained long-term growth. Taking a closer look first at our broadband segment, we delivered another quarter of solid growth with segment revenue $97.1 million of 20% year-over-year. Customers deploying our solution reached 98% of 24% year-over-year, with corresponding 21 million cable modems now served worldwide, still only approximately 12% of the addressable global market. highlighting our significant expansion opportunity, expanding existing and new accounts. Now, we did expect Q2 growth, excuse me, we did expect Q2 growth to be higher. And during the quarter, we ran into unexpected reductions in hardware deliveries, reductions we now expect to persist through the, we expect to persist through the third quarter. I want to emphasize, we see no lost business, nor do we see any change in our mid to long-term growth opportunity. Indeed, our customers remain on offense with regard to new gigabit services. Our new broadband bookings were strong, enabling record backlog and deferred revenue, and our competitive position has never been stronger. Contributing to these bookings were initial multimillion-dollar orders from two new Tier 1 accounts, one in North America and one international. Neither of these accounts have yet begun deployment or contributing revenue. Further highlighting our still strengthening market position, market intelligence firm Delor Group recently, and for the first time, recognized Harmonic as the cable broadband equipment market share leader. Another highlight of the quarter was the extension of our software license relationship with a key customer. Our cloud native core software continues to be unrivaled in the market, valued by our customers, and key to our unique and powerful market proposition. Illustrating the flexibility and competitive advantage of our software core, we're leading in enabling the new DOCSIS 4.0 standard, which opens the door to compelling new multi-gigabit services for our customers and new growth opportunities for our business. Complementing our extended software core is a new family of backward-compatible DOCSIS 4.0 RPDs and optical nodes. The technology development and trial progress in this area has been truly remarkable. and we're now gearing up to support initial deployments in the coming months. While technology transitions such as this can result in short-term headwinds, as some customers begin to look ahead to the coming standard, the new growth opportunities being created by the associated new wave of symmetrical multi-gigabit services that DOCSIS 4.0 unlocks are good news for our business. Also good news for our business is the progress we continue to make in the fiber-to-the-home area. We recently announced Clara Peru has selected our 10G PON solution for their new fiber service. And we also announced the availability of a powerful new hardened switch for XGS and 10G E-PON. Worldwide, cable customers are looking to fiber as they edge out their footprints and compete head-to-head with telcos. And our growing fiber sales pipeline reflects this expanding opportunity. In summary for our broadband business, we continue to be confident in our technology position, our market position, and our opportunities. With record backlog and deferred revenue, we're continuing to execute on high-impact cable and fiber initiatives that are being embraced by a growing number of customers worldwide, positioning us for sustainable long-term growth. Turning now to our video segment, the highlight of the quarter was SAS revenue, $13.6 million, up 58% year-over-year. Total revenue was $58.9 million, down from $76.2 million a year ago, reflecting our intentional SaaS transformation, some project delays, and a continuing transition of historical appliance revenue to software, evident in the second quarter from the 61.7 percent segment gross margin. The business delivered a positive EBITDA, demonstrating our commitment to profitability while investing in the transition to SaaS with its inherent revenue timing challenges. Our strong streaming SaaS growth was again driven primarily by live sports, with both existing and newer customers contributing. As a reminder, we're benefiting from several newer SaaS customers signed in prior periods that are now coming online and ramping usage. The exceptional video quality and low latency characteristics of our video SaaS continue to shine in the market. For example, we're currently supporting the Women's World Cup, and consumer feedback on the relative quality of the streaming services we're powering has been excellent. Based on this progress and growing impact of several new capabilities we announced last quarter, we continue to forecast SaaS growth greater than 50% for the full year. On the appliance side of the business, North America was quite solid, but we experienced some project delay headwinds internationally. We've undertaken a thorough review of our sales pipeline and are working closely with key customers worldwide. The net result is a reconfirmed solid sales pipeline for the second half of the year, with a seasonally strong fourth quarter, which is typical for our video business. Recapping our video segment strategy, we remain focused on taking a leading position in the growing streaming SaaS market, particularly for live sports, while also maximizing profit from the traditional video appliance market. Our results through the first half of the year demonstrate continuing excellent progress on SaaS and continued overall profitability, despite some macro international headwinds. We're confident in our second half outlook and in our ability to continue to create value through sustained streaming SaaS growth. With that, let me turn it over to you now, Walter, for deeper discussion of our financial results and outlook.