Harmonic rides broadband wave with 23% segment growth, record backlog

Harmonic is no stranger to the cable segment, but it’s hoping to ride the growing broadband wave to stellar sales in 2023. Its year already appears to be off to a great start, as Broadband segment revenue grew 23% year on year in Q1 to top the $100 million mark.

Video segment revenue fell 13% to $57.3 million but the strength in Broadband drove a 7% increase in consolidated revenue to $157.6 million. Net income of $5.1 million was up from a net loss of $1.5 million in the year-ago quarter. 

During an earnings call, executives said Comcast once again accounted for nearly half (47%) of total revenue. But CEO Patrick Harshman said the operator’s dominance of Harmonic’s balance sheet isn’t expected to last long-term.

“It's not surprising to see them out front. But in aggregate, the rest of the market is much larger. And our competitive position with the rest of the market is growing increasingly strong,” he said. “So over time, while we're excited about the work we still have ahead of us with Comcast, just the math of the rest of the markets is that the rest of the market will increasingly be a larger and larger portion of the business that we're seeing.”

Harmonic supplies Remote-PHY hardware and virtual cable modem termination system (vCMTS) CableOS software for Comcast. But Harmonic’s customer base for the latter continues to grow. It ended the quarter with 94 CableOS clients and deployments spanning 18.4 million modems. That was up from 79 customers and 8.5 million modems in Q2 2022.

Harshman added Harmonic believes “we're in the neighborhood of about 70% of the DAA [distributed access architecture] nodes that have been deployed to-date.” While that figure is expected to come down a bit over the coming years, “we're increasingly confident that we'll be able to maintain a very healthy market share.”

As of the end of Q1, the company had a record $623.5 million in backlog and deferred revenue. Interim CFO Jeremy Rosenberg said the vast majority of that backlog has “customer request dates for shipments of products and providing services within the next 12 months.”

The vendor has forecast between $705 million and $740 million in total revenue for 2023, with between $450 million and $470 million of this expected to come from its Broadband business. In Q2 alone the segment is expected to generate $101 million to $106 million. For context, that would represent a significant jump from the $624.9 million in consolidated revenue and $350.8 million in Broadband segment revenue the company posted for the full year 2022.

Though progress in the segment won’t necessarily be linear, Harshman said he expects “Q3 to be up [over Q2] and we expect Q4 to be up on top of that.”

All told, executives said things are on track for the company to hit its goal of achieving over $825 million in revenue by 2025.