Harmonic Inc 2026 Q2 Earnings Call

Hello, everyone, and thank you for joining us today for Harmonic's second quarter 2026 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 have also provided slides for this webcast, which you may view by going to our webcast on our Investor Relations website. Now turning to Slide 2. 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-K 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. 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 to 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 the information will be available on a recorded version of this call or on our website. Now I'll turn the call over to our CEO, Nimrod Ben-Natan.

Nimrod? Thanks, David, and welcome everyone to our second quarter 2026 earnings call.

Q2 was another strong quarter, both financially and in terms of the progress we've made on our strategic imperatives. We saw continued strength in rest of market demand, an accelerating pace of fiber deployments, and encouraging results from our new intelligence layer. In June, we completed the sale of our video business, marking the completion of our transformation to a pure-play broadband company. With the momentum and improved visibility we achieved in the first half of the year, we are once again raising our full year 2026 broadband revenue outlook. Driving this momentum is an important theme we have been building toward for several years. Operators no longer have to settle the network architecture's question before they can move forward, because our cOS Platform supports all access architectures, DOCSIS 3.1+, DOCSIS 4.0, distributed, centralized, and fiber.

Operators are deploying cOS knowing it will evolve as their priorities do. From more upstream capacity now to an accelerated fiber overlay over time. This is more important than ever for operators as network traffic is not just growing, it is changing shape. OpenVault's latest data show upstream traffic now growing more than three times faster than downstream, the third consecutive year that gap has widened. AI pushes the same way. Agents and connected devices tilt traffic upstream and run around the clock, not just at the evening peak, which is what legacy broadband networks were engineered around. The critical constraint is upstream capacity, and there is more than one way to relieve it. DOCSIS 4.0, a high split upgrade, or fiber. The unique strength of our platform is that it enables all of these options with the same software at the same time.

Cable One CEO captured this well at The Independent Show in July, describing network topology as the biggest question broadband operators face, and saying his plan is to try DOCSIS 3.1 splits, DOCSIS 3.1+, DOCSIS 4.0, and fiber side by side. All of these options are commercially available and deployed with cOS today, making this entire evaluation possible with a single platform. This flexibility matters more than ever, as legacy platforms are both constrained on upstream capacity and approaching the end of their useful life. For a growing number of global operators, those legacy systems are an increasing security and maintenance liability, and as they weigh their options, cOS and Harmonic are uniquely positioned as the platform and company enabling them to modernize across current and future architectures. This is the dynamic that is now driving our market momentum worldwide. Turning to our financials results highlights on Slide 5.

Q2 revenue grew 54% year-over-year to $133.5 million, above the high end of our guidance and our strongest second quarter ever. Rest of market revenue grew 44% year-over-year to nearly $50 million. Looking at the six months ended July 3rd, this revenue surpassed $100 million, approximately 60% higher than in the first half of last year. Bookings were again strong in the quarter, reaching $144 million, led by rest of market, which represented approximately 60% of total bookings in the quarter. Also, we exited the quarter with backlog and deferred revenue of $588 million. This continues to improve our visibility, and it is a key reason we are raising our full year outlook. Rest of market continued in the quarter. Our momentum continued in the quarter, and behind the revenue is an expanding base of customers.

Our deployed cOS footprint now includes 161 customers, serving 48.2 million CPE devices. Bluepeak is a good illustration of why operators are choosing us, and it goes directly to the theme I opened with. Two years ago, they selected our distributed access platform to expand their DOCSIS network. Partway through, their strategy evolved, and they begun overbuilding parts of their footprint with fiber. In the words of their Vice President of Technology and Engineering, Eric Fligel, because of the platform they had already deployed, they were able to quickly make a technology shift, utilize the same housings, the same infrastructure, the same backhaul, and start deploying XGS-PON very quickly. Today, they decide service area by service area, where to run DOCSIS and where to run fiber. That is the pattern we are seeing repeatedly.

Operators start with one use case and expand over time across DOCSIS and/or fiber, and increasingly add network intelligence, which I will come back to shortly. They do it by leveraging the cOS Platform underneath. Fiber momentum continued to build, with Q2 setting a record rest of market fiber bookings. Deployments are ramping alongside the bookings. SeaStar, our MDU optical node, went live at DNA Finland, the European operator behind the sizable booking we highlighted last quarter. They are now bringing multi-gigabit service into apartment buildings that were previously uneconomic to upgrade by reusing the existing in-building network. We are also seeing fiber used in ways that extend our market beyond residential broadband. Inter Venezuela, the largest private ISP in the country, is building a nationwide XGS-PON service on our platform for mobile backhaul, using fiber as carrier infrastructure for mobile operators preparing for 5G.

The new product portfolio we previewed at Fiber Connect last quarter is already converting to orders. We secured our first multimillion-dollar order for the PAL One XL and Oyster, which together deliver high port density and keep service running through extended power outages, the leading cause of downtime in outdoor deployments. Their outdoor design lets operators skip the street cabinet altogether, consolidating that capacity into one compact power-protected device that deploys faster, costs less to install, and takes up far less space in the communities they serve. Together, our record fiber bookings, expanding portfolio, and converged architecture position us to keep gaining share as operators look for more flexible, reliable, and cost-effective ways to expand fiber. The DOCSIS 4.0 ecosystem took an important step forward. In June, cable modems from six suppliers across two chipset vendors cleared the first CableLabs interoperability milestone on the path to DOCSIS 4.0 certification.

With multi-vendor modem supply now coming into place, operators can move ahead on DOCSIS 4.0 with greater confidence. We are shipping unified DOCSIS 4.0 nodes in volume across a broad range of customers as they ramp their upgrades. We also won a new DOCSIS 4.0 customer in Europe during the quarter. With DOCSIS 4.0, operators can deliver fiber-like upstream speeds over the plan they already have, which is what an AI era applications increasingly demand. Turning to our new intelligence area, we continue to see adoption building. Beacon is now live with approximately 20 customers, and our broader intelligence platform is expanding, with newer offerings now running with about 10 operators. Early deployments continue to show significant value, including a reduction in subscribers' calls to service providers by more than 30%, as we discussed last quarter.

Amply, which extends real-time visibility into the amplifier plant, is now in beta with several operators, running with amplifiers from two different vendors. That matters as many operators run multi-vendor amplifier strategy for supply chain flexibility and assurance. A recent Dell'Oro Group report projects that nearly 10 million of the amplifiers deployed in the industry's current upgrade cycle will be smart amplifiers. In other words, the outside plant is being instrumented by the upgrade cycle itself, generating the kind of granular real-time data our intelligence layer is built to use. That is a significant expansion of the opportunity ahead of us. These outcomes and our customer-first approach show up in how our customers rate us. Our customer NPS reached 87 in the second quarter.

Turning to slide 6, stepping back, there are four things driving the growth of Harmonic, and during the second quarter, we made significant progress on each of them. First, DOCSIS and fiber on a single converged architecture, which is increasingly why operators select us in the first place. Second, a global customer base that keeps widening beyond our largest accounts. Third, new intelligence products and services where adoption is building across our customer base. Fourth, operating leverage, which is increasingly visible in our financial performance. We are looking forward to sharing more with you at our upcoming Investor Day on September 15, including our updated view of the market opportunity, our longer-term strategy and growth plans, and much more on the intelligence opportunity. I hope many of you will be able to join us. That concludes my opening remarks.