Harmonic Unveils Broadband Growth Plan and Tariff Mitigation Strategies for 2025

Insights from the Earnings Call: Harmonic Inc. (HLIT) First Quarter of 2025

Management View

CEO Nimrod Ben-Natan announced that the quarterly revenues climbed to $133 million, largely due to better-than-predicted outcomes from the Video division. The adjusted EBITDA stood at $21 million, and the firm concluded the period with $149 million in liquidity, despite spending $36 million on buying back shares. Total backlog along with deferred income amounted to $485 million.
The management emphasized the firm's continuous shift towards Unified DOCSIS 4.0, mentioning that 2025 may see lower-than-average broadband income because of the rollout schedule. Nonetheless, they expect broadband revenues to pick up again in 2026.
The broadband division generated revenues totaling $84.9 million, boasting a gross margin of 55.5%. Additionally, the firm welcomed seven new broadband subscribers, notably incorporating a prominent Latin American tier-one client for an extensive fiber enhancement project. In terms of video as-a-service (SaaS), earnings stood at $14.8 million, driven largely by robust interest in real-time sports broadcasting alongside advanced AI-driven income generation solutions.
Chief Financial Officer Walter Jankovic stated that the company’s first-quarter revenue climbed by 9% compared to the previous year, and earnings per share went up to $0.11. Despite buying back shares, the firm produced $81.7 million in free cash flow, which considerably enhanced its liquidity position.

Outlook

In the second quarter of 2025, the firm anticipates broadband earnings to fall within the $75 million to $85 million bracket, with video revenues expected to be between $45 million and $50 million. The gross margin forecast stands at 44-45% for broadband services and 63-64% for video offerings.
The projected Adjusted EBITDA for Q2 stands at $2 million to $6 million for the broadband segment and $2 million to $4 million for the video division. The overall company earnings per share (EPS) are anticipated to fall within the range of $0 to $0.04.
Management pointed to the ambiguity surrounding tariffs as a significant element affecting their careful stance toward the 2025 projections. They have been concentrating on reducing the effects of these tariffs via improvements in the supply chain and managing costs efficiently.

Financial Results

In the first quarter of 2025, broadband revenues amounted to $84.9 million, marking a 7.6% increase compared to the same period last year, primarily because of improved gross margins from a better assortment of products. Meanwhile, video earnings reached $48.3 million, showing an uptick of 11.8% when measured against the previous year’s figures during the same timeframe.
The firm announced robust results for Video SaaS, generating $14.8 million in income, bolstered by continuous client growth and the introduction of novel AI-powered features during the period.
The overall gross margin for the quarter stood at 59.4%, attributed to enhanced efficiency and better product distribution. Additionally, the book-to-bill ratio for the period came out to be 0.9, marking an advancement over Q4 of 2024.

Q&A

Steven Frankel from Rosenblatt Securities inquired regarding the availability of amplifiers for DOCISIS 4.0 implementations. The CEO, Ben-Natan, affirmed that everything is progressing as anticipated without any deviations from previous forecasts.
Ryan Koontz from Needham questioned the uncertainties in the latter half of the year and what’s causing them. The Chief Financial Officer, Jankovic, linked this ambiguity solely to tariff concerns and stated that customer conduct hasn’t changed considerably thus far.
Victor Chiu from Raymond James was asked about spreading out their production locations. The Chief Financial Officer, Jankovic, talked about looking into possibilities like moving closer to home markets by going into Mexico, all within the guidelines set by USMCA regulations.

Sentiment Analysis

Experts voiced worries about how tariffs and delayed rollouts might affect the company’s short-term financial outcomes.
The management kept a carefully upbeat stance, highlighting the potential for long-term expansion and key strategies like adopting Unified DOCSIS 4.0 and broadening their clientele.
In comparison to the prior quarter, the management’s tone indicated greater caution stemming from economic uncertainties, whereas analysts continued to concentrate on how well operations were being carried out and shifts in customer expenditure patterns.

Quarter-over-Quarter Comparison

In Q1 2025, the broadband revenue was lower than in Q4 2024, which can be attributed to typical seasonal fluctuations and expected delays in the rollout of Unified DOCSIS 4.0.
Improvements in gross margins were observed in both the Video and Broadband sectors, attributed to changes in product distribution.
In the first quarter of 2025, analysts' queries were predominantly centered around tariffs and operational changes rather than wider strategic issues as they had been in the prior quarter.

Risks and Concerns

The management pointed out possible tariff risks as a major concern, especially within the broadband sector, which sees much of its production happening in Malaysia.
Experts expressed reservations regarding the scheduling of Unified DOCSIS 4.0 implementations along with the preparedness of associated ecosystems.
Strategies for mitigation encompass optimizing the supply chain and investigating nearshoring possibilities to lessen the effect of tariffs.

Final Takeaway

Harmonic Inc. exhibited robust financials for Q1 2025, showcasing significant increases in both revenue and EBITDA. The firm continues to concentrate on long-term prospects within Unified DOCSIS 4.0 and Video SaaS sectors, even as it deals with immediate obstacles such as tariff issues and scheduling of deployments. Despite the hesitant forecast provided for Q2 due to these concerns, recent advancements in operations along with successful acquisitions of new customers bolster optimism regarding upcoming expansion.

Review the complete earnings call transcript.