Harmonic Inc.

Welcome to the fourth quarter and full year 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. Please note that this conference is being recorded. 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. To remove yourself from the queue, you may press star 1 1 again. 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 Harmonix's fourth quarter and full year 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 or results may differ materially. We refer you to document harmonic files 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 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 GAAP, are contained in today's press release, which we have posted on our website and filed with the SEC on Form 8-K. 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 this 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 fourth quarter call. Today, we reported our fourth quarter and full-year results, wrapping up 2023 with another quarter of solid performance, including record total company revenue, driven by continuing strong demand for our market-leading broadband, and video streaming solutions. Key highlights for the quarter included record broadband revenue, demonstrating our broadband business remains firmly on track for sustained multi-year growth, record video SAS revenue exceeding $50 million for the year, powered by growing sports streaming success, and execution of a new $160 million credit facility, enhancing our financial flexibility. We also delivered strong new bookings during the quarter, with a book to bill of 1.2, ending 2023 with over $653 million of backlog and deferred revenue and positioning as well for 2024 in the coming years. So moving now to our broadband segment, we delivered segment revenue of $115.2 million, up 52% sequentially and 20% year over year. The number of global customers deploying our solution reached 108, up 19% year over year, with corresponding 26.3 million DOCSIS cable modems now served worldwide. Approximately 15% of cable modems deployed globally, again highlighting the substantial DOCSIS growth opportunity still in front of us. We had several new customer wins during the fourth quarter, including a new top 10 North American operator for whom we made initial shipments. Our pipeline of new customers remained strong, bolstered by the expanding breadth and depth of our competitive advantages. An important area of expanding competitive differentiation for harmonic is DOCSIS 4.0. Our software core has seamlessly accommodated the new standard, as have our remote PHY edge device designs. We're successfully powering several early DOCSIS 4.0 deployments launched late in the year, and we are uniquely positioned as the go-to partner for any operator planning a DOCSIS 4.0 launch or skill deployment in 2024 or 2025. As a reminder, our DOCSIS 4.0 nodes are fully backward compatible with DOCSIS 3.1. so that availability of DOCSIS 4 RF amplifiers is not a requirement for any operator who chooses to go forward and deploy Harmonix 4.0 capable nodes in 2024. Now, we expect at least one key customer to make a big move to DOCSIS 4.0-enabled edge devices during 2024, leading to a slower pace of deployment early in the year as 4.0 node deployment expertise scales up, followed by a heavier deployment pace in the second half. Another important aspect of our broadband business is that we had greater revenue diversification during the fourth quarter, with both Comcast and Charter contributing greater than 10% of our revenue. While at different places in their respective DAA architecture deployment journeys, we're grateful to be working with both of these industry leaders that are incredibly focused on supporting their respective strategic initiatives. Augmenting our growing multiyear pipeline of DOCSIS opportunities We also continue to make solid progress during the fourth quarter on building a synergistic fiber to the home business. In the fourth quarter, we secured several new fiber customer wins, spanning existing cable and non-cable fiber first operators. We also announced a couple of compelling new fiber products that significantly expand our address market and our ability to compete with incumbent fiber to the home competitors. Early customer response to these new products has been very encouraging. We're ramping up our fiber specialist sales team and we remain very much on track to make fiber a strong strategic and financial contributor to our business. So in summary on broadband, our broadband business continues to be well positioned with unique and powerful technology advantages, solid customer relationships, strong backlog, and a rich array of new business opportunities that give us confidence in our multi-year growth outlook. We finished 2023 with solid execution and Considering our customers' positive feedback, we're confident in our ability to carry this strong execution forward through 2024 and beyond. So turning now to our video segment, the highlight of the quarter was again SAS revenue, $13.2 million, up 26% year-over-year. Total segment revenue was $51.9 million, down from $68.3 million a year ago, while gross margin was a record 64.6%. These results reflect our continued intentional SaaS transformation and some macroeconomic headwinds overseas impacting our appliance business. As mentioned previously, SaaS revenue for the year topped $50 million, up about 47% year-over-year, mainly driven by streaming sports, live sports. During the fourth quarter, we continued to see existing customers expand usage and new customers adopt and begin to launch services with our SaaS solution. This positive momentum has carried into 2024, Earlier this month, our SaaS powered the largest live streaming event ever in the U.S., a testament to our exceptional technology and service capabilities. The market visibility of this extremely successful event has already translated into an additional boost to our SaaS sales pipeline. A targeted ad monetization is key to the rationale for moving live content, especially live sports, to streaming, and it's an important adjacent growth opportunity for us. As you may recall, we rolled out a new ad insertion SAS earlier in 2023, and it was great to see several initial wins with this new service during the fourth quarter. On the appliance side of the business, which as a reminder is more capital intensive for our customers, we saw revenue stabilize despite several continuing instances of project delays associated with financing and other macroeconomic headwinds, particularly internationally. Our domestic video appliance business remained solid, as does our overall pipeline, and competitive position. Finally, regarding video, our strategic review process is ongoing and continues to be a very high priority for us. Walter will speak more about this shortly. So in conclusion, we ended 2023 on a solid note and with a robust backlog. This highlights the continued demand we're seeing from our customers and the strong footing we have for further growth in 2024 and beyond. With that, let me turn it over to you, Walter, for a deeper discussion of our results and outlook.