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Edited Transcript of HLIT.OQ earnings conference call or presentation 26-Oct-20 9:00pm GMT

·49 min read

Q3 2020 Harmonic Inc Earnings Call SAN JOSE Nov 25, 2020 (Thomson StreetEvents) -- Edited Transcript of Harmonic Inc earnings conference call or presentation Monday, October 26, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * David Hanover;Investor Relations * Patrick J. Harshman Harmonic Inc. - President, CEO & Director * Sanjay Kalra Harmonic Inc. - Senior VP & CFO ================================================================================ Conference Call Participants ================================================================================ * George Charles Notter Jefferies LLC, Research Division - MD & Equity Research Analyst * John Warren Marchetti Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst * Richard Frank Valera Needham & Company, LLC, Research Division - Senior Analyst * Samik Chatterjee JPMorgan Chase & Co, Research Division - Analyst * Simon Matthew Leopold Raymond James & Associates, Inc., Research Division - Research Analyst * Steven Bruce Frankel Colliers Securities LLC, Research Division - Senior VP & Director of Research * Timothy Paul Savageaux Northland Capital Markets, Research Division - MD & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to the Q3 2020 Harmonic Earnings Conference Call. My name is Jimmy, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded. I will now turn the call over to David Hanover, Investor Relations. David, you may begin. -------------------------------------------------------------------------------- David Hanover;Investor Relations, [2] -------------------------------------------------------------------------------- Thank you, Jimmy. Hello, everyone, and thank you for joining us for today's Harmonic Third Quarter 2020 Financial Results Conference Call. With me today are Patrick Harshman, President and Chief Executive Officer; and Sanjay Kalra, Chief Financial Officer. Before we begin, I'd like to point out that in addition to our audio portion of the webcast, we've also provided slides to this webcast, which you may see 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, 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 or furnished to 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. 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 to GAAP, are contained in today's press release, which we posted on our website and furnished to 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. And now I'll turn the call over to our CEO, Patrick Harshman. Patrick? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Well, thanks, David, and welcome, everyone, to our third quarter call. Harmonic delivered a solid third quarter as our Cable Access business continued to gain momentum and our Video business rebounded strongly from the Q2 pandemic slowdown. Corporate revenue was $94.9 million, up 28% sequentially. EPS was $0.03, and book-to-bill was greater than 1, highlighting strong execution and market momentum as we head into the fourth quarter. Our company has really responded to the challenges and opportunities that this year has brought. We're executing well. Our competitive differentiation and customer relationships are stronger than ever. And we see healthy demand for both our Cable Access and Video products and services. Taking a closer look now at our Cable Access segment. We had another strong quarter. Revenue was $40.3 million, up 52% sequentially, and segment operating income was over 14%, our strongest financial quarter-to-date, with the exception of Q3 a year ago when we recognized onetime revenue from our foundational software license deal with Comcast. As of the mid-October Cable-Tec Expo, we were commercially deployed with 38 cable operators worldwide, up 9 from the second quarter and 100% from Q3 a year ago. As of the end of the quarter, CableOS was actively serving over 2.1 million cable modems, up 122% from a year ago, of which over 1.4 million are served through a distributed access architecture, all indicative of a transforming market and a strong Harmonic momentum. This momentum was evident at the recent Cable Tech Expo, the industry's premier technology conference. Our industry consensus was clear. The future of Cable Access is software-based, increasingly leveraging distributed access architectures. Underscored by the fact the largest cable operator in the U.S. and the largest cable operator in Europe are both rolling out Harmonic's CableOS platform. Correspondingly, our new customer pipeline remains strong, and we continue to anticipate being able to communicate an additional top 5 North America deployment by the end of the year. Associated with this Cable Tech event, we made several significant announcements that further extend our market and technology leadership. We highlighted several new customer deployments, spanning the Americas, Europe and Asia. In coordination with Comcast, we announced a powerful and competitively differentiated symmetric gigabit solution that breaks through cable's upstream bandwidth bottleneck, a crucial innovation in the context of increased work- and school-from-home video conference. And we raised the bar for core software, announcing and demonstrating that operators can now leverage our cloud-native platform for multiple simultaneous containerized network applications, including PON, 5G OpenRAN and video caching, delivering on the vision of a cloud-native architecture in a way that is groundbreaking, not only for cable, but for broadband service providers more generally, the first of these cloud-native applications we've attached to our XGS and 10G-EPON for fiber-to-the-home. We're pleased to report that our first fiber-to-the-home field trials are going well and that we've received our first volume purchase order. This is an important strategic milestone and demonstrating the extensibility of our cloud-native CableOS platform beyond traditional cable applications, and specifically, the opportunity for Harmonic to address the large and growing fiber-to-the-home market. We'll continue to update you on this important additive growth initiative. So summarizing for Cable Access, we delivered another strong quarter. We provided further evidence that cable operators around the world are moving to CableOs. We announced powerful new technologies that are extending our value proposition and competitive advantages, and we're expanding our addressable market to include fiber-to-the-home and additional access network applications. We're proud of our accomplishments and excited about where this business is headed. Turning now to our Video segment. We saw a solid rebound after several months of pandemic-related slowdown. Segment revenue was $54.6 million, up 15% sequentially as previously delayed projects began to resume, in some cases, sooner than we expected. Associated gross margin was 54.6%, indicating a healthy mix of appliance, software license and SaaS revenue. Looking ahead, we continue to anticipate an even stronger fourth quarter, with combined second half revenue in line with our previous guidance. Specifically, as Sanjay will discuss momentarily, we anticipate a further step up to $80 million to $85 million revenue and associated solid operating profit in the fourth quarter. We're particularly pleased to see continued growth of streaming solution sales through both public cloud SaaS and on-premise appliance and software solutions. We signed 9 new cloud-based streaming customers during the quarter, a mix of both traditional and new media companies. Line streaming of premium content is where our competitive differentiation and brand is strongest and where we see sustainable growth opportunity, highlighting our expanding position in this live streaming space. Through the end of the quarter, we exceeded 48,000 live streaming channels deployed worldwide, up 15% year-over-year. Last quarter, we communicated an incremental business opportunity associated with the FCC-mandated reclamation of C-band satellite spectrum for 5G. As you may recall, we estimated this to be a several hundred million dollar global opportunity that will play out over the next couple of years, a substantial additional solution category that will complement our live streaming and traditional broadcast sales. We also announced a partnership with Satellite leader, SES, and said that we expect associated revenue to commence in the fourth quarter of this year. I'm pleased to tell you that all of this is still on track. We've received our first multimillion-dollar order associated with the C-band 5G opportunity during the third quarter, and we continue to expect to recognize revenue beginning in the fourth quarter. In summary of our Video business. We saw solid rebound in customer activity and demand in the third quarter, and we're carrying strong momentum into the fourth quarter with traditional broadcast, expanding live streaming and new 5G bandwidth reclamation projects all contributing to what we project will be a strong, profitable quarter. Looking further ahead, the resilience we're seeing in the second half of the year underscored by growing success with our streaming platforms point to the strength of our video brands, technology and customer relationships, and to our compelling opportunity to drive profitable growth. With that, I'll turn the call over now to you, Sanjay, for a more detailed discussion of our financial results and outlook. -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [4] -------------------------------------------------------------------------------- Thanks, Patrick, and thank you all for joining us today. Before I discuss our quarterly results and outlook, I'd like to remind everyone that the financial results I'll be referring to are provided on a non-GAAP basis. As David mentioned earlier, our Q3 press release and earnings presentation includes reconciliations of non-GAAP financial measures to GAAP that are discussed on this call. For the third quarter of 2020, we delivered solid results above our guidance range driven by both our Cable Access and Video segments. We are pleased with these results as they demonstrate diminishing COVID-19 headwinds and the resilient business. Before I run through our quarterly financials in more detail, I'll briefly review some of the highlights. We reported Q3 revenue of $94.9 million, reflecting 28.2% sequential growth. Gross margin for the quarter was 52.2%, up 60 basis points sequentially. Also, notably, Cable Access operating margin was 14.6% in the quarter. Further, we reported adjusted EBITDA of $7.2 million and $0.03 EPS. During the quarter, we saw growing business momentum resulting in a book-to-bill ratio of 1.06. As a result, we ended Q3 with sequentially higher backlog and deferred revenue of $216.2 million, positioning us well as we head into our seasonally strongest quarter for this year. Now I'll review our financials for the quarter in more detail. Turning to Slide 7. Q3 revenue was $94.9 million compared to $74 million in Q2 '20, up 28.2% sequentially and $78.2 million in Q3 '19, up 21.3% year-over-year after excluding onetime upfront revenue of $37.5 million from the $175 million CableOS software license agreement that we closed with Comcast last year. In our Cable Access business, we continue to see increased traction with 38 commercial deployments through October 14, the date of Cable Tech Expo 2020, which is a leading industry conference, reflecting growth of 100% from Q3 '19. Cable Access segment revenue was $40.3 million compared to $26.5 million in Q2, up 51.7% sequentially and $18.2 million in Q3 '19, up 121.5% year-over-year, after excluding the onetime initial software license revenue I mentioned earlier. Cable Access revenue performance was driven by addition of new customer deployments and increased penetration of existing customers. In our Video segment, we reported revenue of $54.6 million compared to $47.5 million in Q2, up 15.1% sequentially and $60 million in the year ago period. During the quarter, this segment continued to see steadily increasing activity worldwide, primarily attributable to relaxed COVID-19 restrictions. Additionally, some sales we expected to occur in Q4 actually came to fruition earlier than anticipated. As we enter the fourth quarter, we expect this rebound to continue across all of our markets as well as additional demand for satellite C-band 5G-related activity. We had 2 greater than 10% revenue customers during the quarter. Comcast contributed 20%, and Vodafone contributed 12% of total revenue. As I mentioned earlier, gross margin improved quarter-over-quarter to 52.2% in Q3 '20 compared to 51.6% in Q2 '20 and 51.2% in Q3 '19, excluding the onetime software license revenue. Cable Access gross margin was 48.9% in Q3 compared to 45.7% in Q2 '20 and 29.9% in prior year, excluding the onetime software license revenue, reflecting improved product mix. Also, as previously mentioned, Cable Access operating margin was very healthy at 14.6%, owing to both growing top line and improved gross margin. Video segment gross margin was 54.6% in Q3 compared to 54.8% in Q2 and 57.7% in the year ago period. Video margins were relatively flat sequentially, and the year-over-year decrease is primarily due to product mix. SaaS and service revenue was $31.6 million in Q3 compared to $31.8 million in Q2 '20 and $32.6 million in Q3 '19. SaaS and service gross margins were 57.7% in Q3, 58.3% in Q2 '20 and 60.6% in Q3 '19. The slight year-over-year decline is due to a marginally higher portion of SaaS revenue in the mix of SaaS and services as early stage SaaS margins are lower than service margins. Moving down our income statement on Slide 8. We continue to maintain good expense control during the quarter. Q3 '20 operating expenses were $45.3 million compared to $43.3 million in Q2 '20 and $47.7 million in Q3 '19. The sequential increase primarily reflects increased sales expenses as a result of increased revenue in the quarter. The year-over-year decrease is due to reduced travel, entertainment and trade show expenses as well as overall careful expense management. We recorded an operating profit for the third quarter of $4.2 million, going to strong Cable Access operating profit of $5.9 million and a modest Video operating loss of $1.7 million. The company's Q3 operating profit of $4.2 million compares to an operating loss of $5.1 million in Q2 '20 and an operating loss of $7.6 million in Q3 '19 after including software license revenue and profit of $37.5 million, as noted earlier. Adjusted EBITDA for the third quarter was $7.2 million, reflecting a strong contribution from Cable Access of $6.9 million and $0.3 million from Video. This compares to an adjusted EBITDA loss of $2.8 million in Q2 '20 and adjusted EBITDA loss of $5.5 million in Q3 '19 after excluding the software license profit noted earlier. The current quarter's operating profit translates to a better-than-expected Q3 EPS of $0.03 per share compared to Q2 '20 EPS loss of $0.06 and Q3 EPS loss of $0.09 after excluding the onetime impact of software license revenue and profit previously mentioned. We ended the quarter with a diluted weighted average share count of 98.4 million compared to 96.7 million in Q2 and 97.6 million in Q3 '19. The sequential increase reflects the weighted effect of stock issued to employees under the ESPP plan and the shares that came into the money during the third quarter. The year-over-year increase is due to the issuance of 4.4 million shares issued to employees for restricted stock units and performance-based stock compensation during the year and 0.9 million shares to Comcast for exercise of options, offset by reduced dilutive effect of 4.5 million shares not in the money during the current quarter. Q3 bookings were $100.7 million, a 30.7% increase compared to $77 million in Q2 '20 and up 13.1% compared to $89 million in Q3 '19, excluding onetime bookings of $37.5 million in the year ago period, resulting in a book-to-bill ratio of 1.06. It was encouraging to see the sequential bookings growth driven mainly in North America and APAC, building confidence in our ability to rebound from the pandemic slowdown in the media and broadcast markets. Bookings grew year-over-year in both of our segments during the third quarter. Turning to Slide 9. We'll now discuss our liquidity position and balance sheet. We ended Q3 with a cash of $70.8 million. This compares to $77.7 million at the end of Q2 and $66.7 million at the end of Q3 '19. The $6.9 million sequential decrease in cash is comprised of $3.3 million cash used in operations primarily attributable to higher working capital needs in both our Cable Access and Video business, $5.4 million used for capital purchases, primarily the purchase of fixed assets, approximately $2.9 million of which was related to our new Silicon Valley headquarters for which the construction was completed during the third quarter and research and development capital equipment for our Cable Access division as we scale the business, and net of $1.3 million cash generated from financing activities, which were primarily the proceeds from purchases under our ESPP. During the fourth quarter, we are committed to pay off the remaining $8.1 million of our 4% convertible debt due in December 2020. This will immediately reduce the potential dilution by 1.4 million shares from our total diluted share count using an if-converted basis. Also note that this debt is in the money now, and its conversion price is $5.75. And hence, this will start benefiting our reported diluted shares in Q4 '20 by approximately 0.1 million shares calculated using the treasury method. This debt environment will also reduce our annual interest expense by approximately 0.3 million going forward. As mentioned on our last call, in April, we extended our old San Jose headquarters leased with a month-to-month arrangement due to COVID-19-related delays in completing our new headquarters facility. During Q3, we vacated our previous facility, terminated the old lease and moved into our new headquarters. The new lease will reduce our annual cash outflow by approximately $5 million and annual pre-depreciation OpEx by approximately $2 million. Clearly, strongly accretive for us beginning in the current quarter. Our day sales outstanding at the end of Q3 was 77 days compared to 91 days in Q2 and 78 days at the end of Q3 '19. The sequential decrease in DSO reflects continued collection improvements. Our days inventory on hand was 73 days at the end of Q3 compared to 81 days at the end of Q2 and 68 days at the end of Q3 '19. At the end of Q3, of our total backlog and deferred revenue was $216.2 million compared to $210.2 million at the end of Q2 '20 and $192.5 million at the end of Q3 '19, an increase of 12.3% year-over-year. Historically, about 90% of our backlog and deferred revenue gets converted to revenue within a rolling 1-year period. Please note, deferred revenue represented 23% of our total backlog and deferred revenue at the end of Q3 compared to 21% at the end of Q4 and 28% at the end of Q3 '19, reflecting revenue conversion consistent with our expectations. As I mentioned on previous calls, approximately $187 million of CableOS business associated with 3 Tier 1 CableOS customers under contract is not included in this backlog filler, pending purchase orders, taking these CableOS contracts into account. In total, we have future contracted revenues of $403.2 million. This provides a strong foundation for us moving forward. Now I'll turn to our non-GAAP guidance for the full year on Slide 10. While a degree of COVID-19-related uncertainty still exists, our customer activity and pipeline have certainly rebounded since the onset of the pandemic. Based on our analysis and the current environment, we expect this rebound to continue through the remainder of 2020. Specifically for the full year, we now expect revenue in the range of $367.5 million to $377.5 million, with Video revenue in the range of $236.5 million to $241.5 million and Cable Access revenue in the range of $131 million to $136 million. This top line guidance is higher than our previous full year expectations. For our Video segment, we have tightened our revenue guidance, raising the low end of the guidance by approximately $7.5 million and reducing the high end by only $4.5 million, thereby increasing our midpoint by $1.5 million. For our Cable Access segment, we have raised the low end of the revenue guidance by $10.5 million and increased the high end by $0.5 million, thereby increasing our midpoint by $5.5 million. Gross margin in the range of 51% to 52%, an improvement from our prior guidance of 50% to 51.5%. Operating expenses in the range from $184.5 million to $186.5 million, reflecting an increase of $1 million at the midpoint from the prior guidance as we expect higher second half revenues. Operating income to range from $3 million to $10 million, significantly improved from our prior guidance of operating loss of $7.5 million to an operating income of $11.5 million. EPS to range from a loss of $0.03 to a profit of $0.04, materially improved from our prior guidance of a loss of $0.12 to a profit of $0.05. An effective tax rate of 10%, a weighted average diluted share count of approximately 97 million shares to 98.2 million shares. Year-end cash to range from $80 million to $90 million, consistent with prior guidance. Moving to Slide 11. We provide the corresponding updated Q4 2020 guidance. Specifically for Q4, we expect revenue in the range of $120 million to $130 million, with Video revenue in the range of $80 million to $85 million and Cable Access revenue in the range of $40 million to $45 million; gross margin in the range of 50.5% to 54.5%; operating expenses to range from $48 million to $50 million; operating income to range from $12.5 million to $21 million; adjusted EBITDA to range from $15.5 million to $24 million; EPS to range from $0.10 to $0.18 per share; an effective tax rate of 10%; a weighted average diluted share count of 98.8 million. And finally, cash at the end of Q4 is expected to range from $80 million to $90 million. In summary, while we entered Q3 with some uncertainty around the ongoing impact of COVID-19, we are incredibly proud of how our teams executed and focused on positioning our Cable Access and Video streaming businesses for long-term success during such a challenging period. Our Cable Access business continues to grow rapidly as we expand our customer base and further penetrate our existing customers. Based on the midpoint of full year guidance I just gave, Cable Access segment revenue is expected to grow by approximately 53% in 2020 compared to 2019 after excluding the onetime Q3 '19 software license revenue. At the same time, our Video segment showed solid improvement in Q3. We continue to see increased customer activity and expect the rebound will continue for the balance of this year, driving profitability and cash generation in both of our business segments. Regarding 2021 expectations, we are in the middle of our planning process, and we will be able to share more detailed guidance on our next earnings call. At this time, we expect to be profitable in both segments in 2021 while strengthening our market leadership position for both Cable Access and live video streaming. In summary, the company is continuing to execute on its strategic priorities in both segments, delivering results that have been quite positive. With that, thank you. And back to you, Patrick. -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- Okay. Thanks, Sanjay. We want to conclude by emphasizing that our core growth drivers and execution priorities for 2020 are very much intact. For our Cable Access business, we remain incredibly focused on scaling our Tier 1 customer deployments across their extensive footprints with a growing range of products and services, securing new design wins with additional global operators, particularly additional Tier 1s and launching new solutions that expand our addressable market, especially fiber-to-the-home. For our Video segment, our objectives continue to be accelerating the growth of our live streaming deployments, expanding our addressable market to include both nontraditional streaming customers, especially through cloud-based services and 5G bandwidth reclamation projects, and to remain profitable as we drive these growth initiatives. Finally, echoing Sanjay's comments, I want to again recognize our employees who continue to push forward with passion and conviction despite this year's challenges. And I also want to thank our customers and our shareholders who continue to place their confidence in our market. With that, let's now open up the call for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from John Marchetti with Stifel. -------------------------------------------------------------------------------- John Warren Marchetti, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [2] -------------------------------------------------------------------------------- Patrick, I know you're not necessarily giving '21 guidance yet or not giving that outlook, but Sanjay and you both mentioned on the call, once we adjust for the Comcast impact in this quarter last year, the full year is obviously north of 50% growth in that CableOS business. And I'm curious, as we do start to look out into '21, and we think about the growth rate given what you've gotten in backlog, given there's even a chunk of that that's not even fully in there yet, is it wrong to assume that we should be looking at that type of similar growth rate as we're looking out into next year? Or what are some of the puts and takes as you think about '21 just for that CableOS business? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Well, thanks for the question, John. We -- in terms of puts, we feel very strongly about our competitive position. And we feel that from a technological perspective, it's even more apparent that the market is headed our way, if you will. Really, the open question is what will the pace of spending and investment be and how quickly can we onboard new customers and scale with those. I think, as you know, what we've seen, we've seen a variety of results. We've seen some customers come on board and start scaling quickly. Others, it's taken a little bit longer amount of time. So to be clear, John, our question is -- the question in our mind is not one of if we can gain more market share, but it's simply how quickly and against what kind of market fundamentals we're working against. And that's what we're working through right now from a planning perspective on. -------------------------------------------------------------------------------- John Warren Marchetti, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [4] -------------------------------------------------------------------------------- Okay. And then maybe just as a follow up to that. You mentioned Cable Tech a couple of times, and we certainly were remotely participating in a lot of the panels and the discussions there. Just curious to get your take on the competitive landscape. Obviously, a lot more being shared about others coming into this market, what they're seeing from a trial and deployment activity perspective. But just curious -- as you're talking to customers, you had some very nice wins here over the last several quarters, curious how you think the competitive landscape is shaping up right now. -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- We came out of the event feeling pretty good. We didn't know what to expect competitively, as I've emphasized several times. We don't know what we don't know here. But other than the marketing messages of our competitors kind of pivoting strongly to what we've been talking about for a while, we weren't knocked back by any specific announcements. And the feedback that we continue to get from customers as well as other, let's say, close industry observers continues to tell us that we're -- we have a comfortable technological lead. And so we're certainly not overconfident by any means, but we didn't learn anything new competitively at the trade show. And we continue to feel as though we're well out in front on the virtualization, cloud-native and distributed access -- architecture ideas that we really brought to the market in the first place. -------------------------------------------------------------------------------- John Warren Marchetti, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [6] -------------------------------------------------------------------------------- Great. And then, Sanjay, if I can maybe just ask one last question. We've seen some nice improvement here on the Cable Access gross margin line. Just curious if we should be reading into that in terms of mix of fewer node deployments or how to think about the improvement there over the last several quarters? -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [7] -------------------------------------------------------------------------------- Well, this quarter, we did experience a decent mix of hardware and software, and which actually generated good gross margin overall. And yes, the mix is improving as the business is scaling and as we are getting in Tier 1s, Tier 2s and Tier 3s all in the mix, and a good mix of hardware and software is coming to fruition as we expected. And I think overall we are seeing improvements. And going forward, as we have said, our long-term goal is to get 60% plus. I think we are marching on the right path. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Our next question comes from Simon Leopold with Raymond James. -------------------------------------------------------------------------------- Simon Matthew Leopold, Raymond James & Associates, Inc., Research Division - Research Analyst [9] -------------------------------------------------------------------------------- First, I just wanted to see if you could give a little bit more detail on the revenue that you recognized this quarter that you had originally expected in the fourth quarter. Was this part of the satellite opportunity that you had talked about or something different? Can you help us understand what that was that occurred sooner than you expected? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [10] -------------------------------------------------------------------------------- Yes, Simon, it was not any of the 5G satellite revenue. We have yet to -- although we received an order -- our first order -- multimillion-dollar order in the third quarter. We have not recorded any revenue. As you may recall, from Q2, we mentioned we saw several projects -- anticipated high confidence projects slip out. At our call 3 months ago, we anticipated -- well, frankly, we weren't sure what to anticipate in the third quarter. We saw that as a transition and -- but we're fairly confident we'd get it by the end of the year. So we kind of put it into the fourth quarter in our guidance, and several of those deals, we actually were able to close out in the third quarter. So it's really other, I don't know, let me call them more garden-variety video things that simply had been delayed in the earlier pandemic lockdowns. -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [11] -------------------------------------------------------------------------------- I'd just add... -------------------------------------------------------------------------------- Simon Matthew Leopold, Raymond James & Associates, Inc., Research Division - Research Analyst [12] -------------------------------------------------------------------------------- Sure. Go ahead. -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [13] -------------------------------------------------------------------------------- I'd just add, Simon, we experienced that in all the regions across the board, revenues increasing in this quarter compared to last quarter. -------------------------------------------------------------------------------- Simon Matthew Leopold, Raymond James & Associates, Inc., Research Division - Research Analyst [14] -------------------------------------------------------------------------------- Okay. And when you think about the opportunity you're seeing tied to the satellite folks and 5G spectrum, you're expecting some contribution, I presume, then in the fourth quarter. How are you thinking about the opportunity in 2021? I guess there's some struggle as to how we should think about the timing of the whole opportunity. -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [15] -------------------------------------------------------------------------------- Well, the opportunity starts generating revenue in Q4, and then it's going to take its pace through in 2021 as well. So I would say Q4 is a portion of it and then followed by revenue in 2021. -------------------------------------------------------------------------------- Simon Matthew Leopold, Raymond James & Associates, Inc., Research Division - Research Analyst [16] -------------------------------------------------------------------------------- I guess what I'm really trying to get at with my question is, is it something that burns brightly in 2021 and then goes to 0 in 2022? Or does it have a long tail? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [17] -------------------------------------------------------------------------------- Let me jump in on that one, Sanjay. I think it's still early days for us, Simon. We're -- we have in our sights a couple of very specific opportunities, which I would call the front end of the tail that we believe are going to drive revenue in the fourth quarter and, let's say, in the first half of 2021. And that being said, we are pursuing other opportunities that will play out. There will be opportunities later in 2020 and '21 and even in 2022. In fact, there's a couple of different deadlines in this country that play into that, and the international opportunity is also part of what we're looking at. So it's premature, unfortunately, still. It's still a relatively nascent thing outside of a couple of more mature opportunities in North America that are very much in our sights. So there's kind of the high-confidence stuff, which, yes, will play out, let's say, over the next quarters. But there's broader business, which is included in the several hundred million dollar total opportunity that I mentioned that we expect to carry forward for approximately 2 years. So we do see more runway, although the picture is still hazy, not unexpectedly, on some of that slightly further out stuff. -------------------------------------------------------------------------------- Simon Matthew Leopold, Raymond James & Associates, Inc., Research Division - Research Analyst [18] -------------------------------------------------------------------------------- Great. And then just one last one. If we could maybe talk a little bit about the I'll call them evolutionary opportunities around things like fiber-to-the-home, OpenRAN. Could you help us, maybe if you're not ready to size them, at least rank order where we are in terms of seeing those turn into revenue opportunities? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [19] -------------------------------------------------------------------------------- Yes. Thanks for the question. Definitely, fiber-to-the-home PON is first. In fact, we -- although we didn't take revenue, we have our first material purchase order in the third quarter. So that's where we said we were going to go first. I think it was a year ago that we announced that we were beginning to work on this, and so here we are a year later with our first revenue order and some very successful field trials ongoing and a growing pipeline. But as your question suggests, we really -- we're really leveraging the cloud-native architecture here. So from another perspective, there's nothing kind of that special about the PON application, and we did successfully. And to a lot of very interested customer feedback at the recent cable event, we showcased a couple of other cloud native applications. So it is too early for us to kind of give you a -- and we don't get ourselves having a good revenue forecast for that. But we do think what we've built here with CableOS is a very extensive, very flexible, cloud-native core access platform that -- DOCSIS application first, PON is coming second, and -- but I'd tell you, it's opportunity-rich after that. And so we're going to -- we have business development work to do, but we're working with a number technology partners around that. And I'd just say watch the space. We think that there's good opportunity to leverage, to monetize this cloud-native platform we've developed -- monetize it over time. -------------------------------------------------------------------------------- Simon Matthew Leopold, Raymond James & Associates, Inc., Research Division - Research Analyst [20] -------------------------------------------------------------------------------- And who do you see as your competitors in that particular opportunity? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [21] -------------------------------------------------------------------------------- Well, that's a really interesting question. I mean, I don't know yet. It's very much an evolving space. I don't think there's nobody within cable that we see is talking really the same language. It's -- as far as we understand, even in a more broad wireline access space, we're -- we think we've done something very, say, ahead of the pack. And we're working on getting a feel for that, and we're working and building alliances with a number of other players in the broader ecosystem and really trying to get our arms around the opportunity. But we're clear, there is an opportunity. It's just a little bit early for us to quantify. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- Our next question comes from Rich Valera with Needham & Company. -------------------------------------------------------------------------------- Richard Frank Valera, Needham & Company, LLC, Research Division - Senior Analyst [23] -------------------------------------------------------------------------------- Question on the number of CableOS customers, which jumped pretty significantly, I think, from 29 to 38 this quarter. Was trying to understand where those customers are from a revenue generation perspective. I'm presuming maybe you've actually received some revenue from them, but how would we think about these relatively new customers in terms of their revenue potential over, say, the next 12 months? Any way for us to gauge how much this could mean incrementally as we look out over the next year, 1.5 years? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [24] -------------------------------------------------------------------------------- I think there's 2 parts of the question, and maybe I'll take the first, and then you can step in more on the model. But just in terms of the business, I do want to emphasize that -- you talked about the pickup. I think the main message we had is -- and when we talked about that at the trade show. And by the way, the number was kind of past -- because of the trade show, the number was past the end of the quarter. We gave the number as of the date of the show, Rich. So it did also include some October -- a couple of October deployments as well. So we're relatively early days. And what we're really doing is just building up a bigger portfolio of customers, and we really wanted to convey to the market, including our customers is that we see growing momentum in being selected and having their customers begin -- with rollout. So I wanted to give that context, and maybe I'll pass it to Sanjay to talk a little bit about how that waterfalls into revenue. -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [25] -------------------------------------------------------------------------------- Yes. Definitely. Rich, the significant portion of our revenues come from Tier 1s, but at the same time, there is a good contribution -- decent contribution every quarter from other non-Tier 1 customers, too. I mean, Tier 2, 3 we are contributing. And that's increasing quarter-over-quarter. I think as we head into '21 and as we scale, it's going to start becoming significant as well. And I think the deployments count. They do contribute, not in the initial periods. But as they expand and as they increase their deployments, we believe the benefits of revenue and margins in the longer run. So we expect going forward, this is going to be getting significant every quarter as we move ahead. -------------------------------------------------------------------------------- Richard Frank Valera, Needham & Company, LLC, Research Division - Senior Analyst [26] -------------------------------------------------------------------------------- Got it. So probably more of a -- sort of '21 meaningful contribution from those customers, but it sounds like they will be ramping. And just as a percentage of the mix, I mean, you continue to add Tier 1s. You're adding more, let's call it, Tier 2s and Tier 3s, but obviously, they're small. I'm just wondering how you're thinking about the mix longer term, Tier 1 versus, say, Tier 2, Tier 3. Does that shift one way or the other? Or do you think it kind of maintains its current levels? -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [27] -------------------------------------------------------------------------------- I think over the longer term, there is a slight change where the Tier 2, Tier 3s do become significant as time passes. But overall, the material contribution would remain from Tier 1s in the market. -------------------------------------------------------------------------------- Richard Frank Valera, Needham & Company, LLC, Research Division - Senior Analyst [28] -------------------------------------------------------------------------------- Got it. And just one more. I think you reiterated that you expected to name a top 5 U.S. carrier as a new customer within this year. I'm just trying to understand, is that currently a customer or still a customer you hope to win that customer by the end of the year? And just wanted to clarify that. -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [29] -------------------------------------------------------------------------------- Well, Rich, I'll take that one. Let's say, we're in process. It's premature for us to communicate, but we're fairly confident we will be able to communicate by the next time we speak with you. So we don't want to say more for a variety of reasons, including competitive reasons. But we -- I think the real point here is that we're making good traction and good progress. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- Your next question comes from Samik Chatterjee with JPMorgan. -------------------------------------------------------------------------------- Samik Chatterjee, JPMorgan Chase & Co, Research Division - Analyst [31] -------------------------------------------------------------------------------- Patrick, I'm just sorry, I jumped on quite late, so this might be that you have to repeat yourself somewhat. But just want to get your kind of what you're expecting in relation to Video growth sequentially, excluding the 5G reclamation opportunity. And do you -- now there seems to be kind of a decent uptick over the last couple of quarters. Are you expecting that to continue into 2021? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [32] -------------------------------------------------------------------------------- We see a strong fourth quarter regardless or without the 5G reclamation. Part of this is organic growth of the streaming initiative, and part of it admittedly is catch up on projects that got slowed down or delayed earlier in the year. So this has been a -- well, there's no surprise. It's somewhat tumultuous year, and we're really pleased to see customers getting active again and starting projects again with us in the third quarter and continuing into the fourth quarter. So I'd say overall, the trend is encouraging on Video, a growing component of that work is around streaming. And we think that, that piece of our business continues to scale. We think we have significant competitive momentum and differentiating technology as well as I think we all see around us that increasing streaming of live content, which is where we particularly specialize, is doing nothing but growing at higher and higher resolutions, HD 4K. And then layered on top of that with a -- not a dominating but incremental impact is the 5G in the fourth quarter. As Sanjay said earlier and you may have missed, where -- it's premature for us to talk about specific 2021 guidance, but we're really happy to see the Video business doing so well in the second half. And we're strong believers in the underlying growth opportunity around streaming and the fact that it's bolstered by this incremental 5G reclamation opportunity. Those things together, we think, put the Video business in a strong position as we head into 2021. -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [33] -------------------------------------------------------------------------------- I'll just add a few things, Samik, as you may have missed. For Video business, our book-to-bill ratio is high. We are exiting the quarter with a very strong backlog. Our Q4 seasonally is strong. So we're getting more orders. Our pipeline is up quarter-over-quarter, and all the signs are pointing is we're expecting a strong quarter Q4. -------------------------------------------------------------------------------- Samik Chatterjee, JPMorgan Chase & Co, Research Division - Analyst [34] -------------------------------------------------------------------------------- Got it. Sanjay, if I can just follow up on the Video business, and particularly this 5G reclamation opportunity, actually. What is the gross margin that you're converting this business at? Is it more similar to what you have for the Video segment? Because does that mean that as you kind of execute on this revenue, we should see kind of more of a mix benefit on the corporate gross margin line? -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [35] -------------------------------------------------------------------------------- It should be very similar to our Video segment margins, high 50. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- Our next question comes from Steven Frankel with Colliers. -------------------------------------------------------------------------------- Steven Bruce Frankel, Colliers Securities LLC, Research Division - Senior VP & Director of Research [37] -------------------------------------------------------------------------------- Patrick, on this reclamation opportunity, is there also an opportunity for you to sell not just hardware to these customers, but also sell software? And what's the plan to execute on that, if there is one? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [38] -------------------------------------------------------------------------------- Software is a big part of the solution that we're bringing to market, Steve. Frankly, that's the case for everything we do in Video these days. And so that's part of where the margin profile that Sanjay just mentioned comes from. So it's both. There's a server component. Frankly, it's off-the-shelf servers. The rest of it is software. And we're working intently on the, I'd say, the bird in hand and looking ahead to expanding the win rate. -------------------------------------------------------------------------------- Steven Bruce Frankel, Colliers Securities LLC, Research Division - Senior VP & Director of Research [39] -------------------------------------------------------------------------------- And is there an opportunity to make those customers SaaS customers as opposed to a perpetual package that might go on that server? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [40] -------------------------------------------------------------------------------- The blatant answer is yes. The initial opportunities that we have in front of us are perpetual license software. But we see a midterm to longer-term SaaS opportunities with those companies that complements, let's call it, kind of the vanilla satellite replacement solution. And with other customers, it's more generally how we go to market these days. We offer both solutions. We have a perpetual license option, but we try to bring a SaaS solution wherever possible. And so this opportunity will not be any different. -------------------------------------------------------------------------------- Steven Bruce Frankel, Colliers Securities LLC, Research Division - Senior VP & Director of Research [41] -------------------------------------------------------------------------------- Great. And then on CableOs, there's been a visibility issue in the past. With the momentum you have now in the market and the product maturing a little bit, do you have more visibility into the rollout ramps of these new customers than you might have had a year ago? -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [42] -------------------------------------------------------------------------------- Yes. As -- Steve, as we are adding more Tier 1, Tier 2 and Tier 3 customers, and we are getting more visibility. In fact, the whole supply chains involved in getting the visibility of the timing of shipments and the deployment timings. So our visibility is good. And as we gain more customers, we definitely are improving in that process as well. We believe that's helping our guidance methodology, at the same time, our expectations for revenue as we scale the business. -------------------------------------------------------------------------------- Steven Bruce Frankel, Colliers Securities LLC, Research Division - Senior VP & Director of Research [43] -------------------------------------------------------------------------------- Okay. Great. And then, Patrick, you've had some great wins. You're talking about another Tier 1 or top 5 U.S. company between now and year-end. What's the pipeline behind that look like in terms of field trial? Or is the number of field trial still growing sequentially? Or is the story in '21 more about serving the 40-odd customers you'll have by the end of this year and penetrating their customer bases? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [44] -------------------------------------------------------------------------------- We're seeing growing interest in the solution and the platform, Steve. So the number of trials and the number of customer engagements, I would say, is growing worldwide. And the recent Cable Tech event created a really good marketing and sales platform for us to further extend that. What we've learned, though, is that there is a -- there's a lag time between the trial and the initial deployment and then the volume revenue, as we've touched on a couple of times here. So as I look forward to, let's say, the first half of 2021 will be -- revenue will be dominated by customers that are already kind of scaling as we exit '20. And we'll see revenue from even newer customers coming in line thereafter. So it's a virtuous circle, and we're kind of focused on both sides of that. It's that's one of the things I really tried to highlight in my summary of our execution priorities. We've got to do both. We've got to really work on scaling the existing customers and keep the pipeline strong. And those things do work hand-in-hand. More word of mouth as successive deployments gets around, the more the pipeline grows and et cetera, et cetera. So we think we have good momentum. I think there's inherent uncertainty in timing. But as the number gets bigger, the statistics get better. I think to your previous question, I think we're on a better path as we continue to scale in terms of better path from a reliability of numbers. Strategically, competitively, the position continues to be as strong as it's ever been. -------------------------------------------------------------------------------- Steven Bruce Frankel, Colliers Securities LLC, Research Division - Senior VP & Director of Research [45] -------------------------------------------------------------------------------- Great. And then one last one. You talked about introducing the shelf product a quarter or so ago. What was the feedback on the shelf product from Cable Tech? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [46] -------------------------------------------------------------------------------- Positive. We did well with the product in the market in the third quarter. And the feedback at the show was also positive on it. We're aware there's other shelves out there. We think ours has some significant advantages, and that the show gave us a really good opportunity to showcase the advantages. We think it was well received. -------------------------------------------------------------------------------- Operator [47] -------------------------------------------------------------------------------- Our next question comes from George Notter with Jefferies. -------------------------------------------------------------------------------- George Charles Notter, Jefferies LLC, Research Division - MD & Equity Research Analyst [48] -------------------------------------------------------------------------------- I guess I wanted to ask another question about the C-band transition. And obviously, you've talked about the U.S. opportunity. We know there are other C-band reclamation projects going on internationally as well. Canada is an example right now. And could you talk about what you see outside of the U.S. in terms of C-band opportunities? Is this something that could be revenue next year for you? Like how do you think about it? -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [49] -------------------------------------------------------------------------------- Yes. It's definitely a phenomena. We don't know that it will play out in every market. But right now, George, we see opportunity in, let's say, a handful of international markets. And we're kind of relatively early in the qualification and in process of trying to secure those opportunities. The head start we have in North America certainly helps us in that regard, but we're -- I'd characterize the international opportunity still in a business development to early pipeline phase. And how successful we are internationally and how many other countries, excuse me, get into the act, I think it still remains to be seen, but it's an opportunity we're very focused on. And we feel very well positioned competitively from a technology perspective as things do come to fruition overseas. -------------------------------------------------------------------------------- Operator [50] -------------------------------------------------------------------------------- And our next question comes from Tim Savageaux with Northland Capital Markets. -------------------------------------------------------------------------------- Timothy Paul Savageaux, Northland Capital Markets, Research Division - MD & Senior Research Analyst [51] -------------------------------------------------------------------------------- And congrats on the results. I have a couple I'll try to do quickly. You had a pretty decent uptick with Comcast in the quarter. And you also had a -- kind of what looks to be kind of a head end, heavy Cable Access mix driving your gross margins higher as well as some revenue upside. I wonder if we can relate those 2 events. And if not, maybe what should we relate that favorable mix to? And I say this in the context of something I took out of the Cable Tech show, which were Comcast executive talking about populating the vast majority of their head end and hub locations with virtualized technology by the end of '21. I wonder if you'd offer any comments on where they are relative to the vast majority currently and what sort of activity you might be seeing there and whether that activity portends additional activity out in the outside plant and distributed access network. I have one quick follow-up from there. -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [52] -------------------------------------------------------------------------------- Okay. Thanks, Tim, for the question. I think I can't speak about Comcast in particular. But I -- if you just zoom out, on one hand, while we're proud of the fact that we're now serving 2.1 million modems. Obviously, it's a very small percentage of the total footprint of Comcast plus Vodafone, plus the other customers we've announced, never mind the ones we haven't announced. So we still think we're in very early days, very early innings in terms of this transition. And Dave, as you point out, we see the opportunity. I think at one point, there was a perception that what we're doing is exclusively for, let's say, the distributed access. So we see growing understanding that this virtualized cognitive architecture is equally powerful and impactful operationally in the context of a more centralized setup. And so our pipeline of opportunity that we're working is a rich mix of the 2. And it's still relatively early days on both fronts. So going forward, I think we've got a lot to do on both sides. You may see certain quarters that have a slightly stronger distributed outside plant mix, some that are more centralized. But the runway is long in on both sides. And we expect both opportunity and both the architectures you've alluded to. -------------------------------------------------------------------------------- Timothy Paul Savageaux, Northland Capital Markets, Research Division - MD & Senior Research Analyst [53] -------------------------------------------------------------------------------- Okay. And maybe just a follow-up on that particular point. I mean, you do report Comcast as a 20% customer, so it seems like fair game to think about what drove that increase sequentially. Can you say -- was that primarily on the Cable Access side? Or obviously, there's a -- it's a big company and probably some video activity going on there, too. Can you characterize the nature of that increase sequentially between your 2 segments? -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [54] -------------------------------------------------------------------------------- Tim, we haven't broken that out historically to give a total consolidated revenue percentage, so it spans across both segments. -------------------------------------------------------------------------------- Timothy Paul Savageaux, Northland Capital Markets, Research Division - MD & Senior Research Analyst [55] -------------------------------------------------------------------------------- Great. And my actual follow-up was going to be on the Remote PHY shelf side where CommScope for this year did announce a product and an engagement with Comcast at the show, maybe among the more significant competitive developments. Would you view that as distinct from what you're doing on the virtualized side, both customer-specific and in general? And you referenced it a bit before and saying you're aware you have competitors out there that's specifically want you're referencing and maybe you can give us a couple of points of differentiation between the solutions. -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [56] -------------------------------------------------------------------------------- Yes, I appreciate the question, Tim. I mean, let me zoom out, just paint a mental picture for you. And there's 2 parts to the architecture in this case. There's the virtualized core, which we've done a big deal with Comcast that, and then there's these Remote PHY devices, could be central and a shelf or could be remote out in a node. And I think we've been very clear from the beginning that our software talks to not only our Remote PHY devices, our shelves, our nodes, but also to our competitors. And I think as it should. So we're -- those are 2 different dimensions of competition, if you will. So first, the fact that our competitors are coming out with products that talk to our Harmonic virtualized core, I think, is good news on that front. It shouldn't be lost here. And so what that means is then we're competing head-to-head on the Remote PHY stuff. And we saw nothing at the show. We saw nothing that was announced that we think is strongly competitive with us. So yes, there are competitive Remote PHY nodes and shelves out there. Yes, well, it's not a surprise. And we came out of the show feeling wow. We kind of saw what the other guys are cooking, and we still feel pretty strong about our competitive position. That's not to say 100% what the end customer is going to choose to purchase, but we feel that we're very well positioned from a competitive technology point of view on the PHY stuff. And I think we'll see -- we'll continue to see the reflection of effectively of both centralized and Remote PHY sales in our CableOS numbers. -------------------------------------------------------------------------------- Operator [57] -------------------------------------------------------------------------------- Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Patrick Harshman for any closing remarks. -------------------------------------------------------------------------------- Patrick J. Harshman, Harmonic Inc. - President, CEO & Director [58] -------------------------------------------------------------------------------- Okay. Well, I think we're out of time. We simply wanted to thank you all for joining us today. We're very pleased with the work we've been able to do here in the third quarter. We're excited about the opportunity. The challenge is ahead of us in the fourth quarter as we head into 2021, and we look forward to updating you all on our progress soon. In the meantime, take care, and good day. Thanks, everyone. -------------------------------------------------------------------------------- Sanjay Kalra, Harmonic Inc. - Senior VP & CFO [59] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program, and you may now disconnect.