Harmonic (NasdaqGS:HLIT) Q4 2025 Earnings call February 19, 2026 05:00 PM ET Company ParticipantsDavid Hanover - Investor Relations OfficerNimrod Ben-Natan - President and CEOTaran Katta - Equity Research AssociateWalter Jankovic - CFOConference Call ParticipantsRyan Koontz - Managing Director and Equity Research AnalystSimon Leopold - Managing Director and Senior Equity AnalystSteven Frankel - Director of Research and Senior Research AnalystOperatorWelcome to the fourth quarter and full year 2025 Harmonic ...

Financial Data and Key Metrics Changes - The total company revenue for Q4 2025 was $157.3 million, with EPS at $0.14 and adjusted EBITDA at $23.8 million, all exceeding Q4 guidance [20] - For continuing operations, Q4 Broadband revenue was $98.2 million, above the guidance range of $85 million to $95 million, with adjusted EBITDA of $12.1 million and EPS of $0.06 [21] - The total company net revenue for the fiscal year 2025 was $570.8 million, with a gross margin of 55.8%, adjusted EBITDA of $83.8 million, and EPS of $0.47 [22] Business Line Data and Key Metrics Changes - Broadband revenue for Q4 was $98.2 million, reflecting a 9% sequential growth and record quarterly bookings of $346.9 million, resulting in a 3.5 book-to-bill ratio [5][20] - The Video business, now classified as discontinued operations, exceeded expectations in Q4 in terms of revenue and profitability, with a planned sale to MediaKind for approximately $145 million [7] - Rest of World revenue grew 33% year-over-year in Q4, now representing 41% of total Broadband revenue, indicating a significant shift in revenue mix [8][21] Market Data and Key Metrics Changes - The cable serviceable addressable market is projected to grow from approximately $510 million in 2025 to over $1.1 billion by 2030, driven by increased data consumption and network modernization [15] - The addressable market for fiber exceeds $2.6 billion, with Harmonic's share growing, indicating substantial opportunities in this segment [16] Company Strategy and Development Direction - The company is transitioning to a pure-play broadband leader, focusing on expanding market leadership in DOCSIS and fiber, increasing customer diversification, and driving software and cloud differentiation [17][18] - The sale of the Video business is expected to simplify operations and enhance the balance sheet, allowing for investments in organic growth and strategic M&A [18][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth trajectory, citing strong bookings and backlog growth as indicators of future revenue resilience [34] - The transition to DOCSIS 4.0 is seen as a significant opportunity, with expectations for accelerated growth as deployments ramp up [34] Other Important Information - The company ended the year with $124.1 million in cash and cash equivalents, demonstrating strong liquidity to support capital allocation priorities [23][26] - Free cash flow for the fourth quarter was $9.6 million, with a total of $97 million for the full year, reflecting strong profitability [24] Q&A Session Summary Question: Customer mix for full year 2026 - Management indicated that while Rest of World customers showed significant growth, the percentage of revenue from these customers may fluctuate based on larger customer spending [39] Question: Impact of memory pricing on gross margins - Management confirmed a net impact of approximately $6 million from memory pricing, with committed orders in place for 2026 [41][42] Question: Bookings composition in Q4 - Bookings were strong across both larger customers and Rest of World, with multi-year contracts contributing to the backlog [61] Question: SaaS and service revenue breakdown - The majority of the $58 million in 2025 SaaS and service revenue came from SLA contracts, with a focus on growing intelligence tools for customers [77][80]

Financial Data and Key Metrics Changes - The total company revenue for Q4 2025 was $157.3 million, with EPS of $0.14 and adjusted EBITDA of $23.8 million, all exceeding Q4 guidance [20] - For continuing operations, Q4 broadband revenue was $98.2 million, above the guidance range of $85 million to $95 million, with adjusted EBITDA of $12.1 million and EPS of $0.06 [21] - The total company net revenue for the full year 2025 was $570.8 million, with a gross margin of 55.8%, adjusted EBITDA of $83.8 million, and EPS of $0.47 [22] Business Line Data and Key Metrics Changes - Broadband revenue for Q4 was $98.2 million, reflecting a 9% sequential growth and record quarterly bookings of $346.9 million, resulting in a 3.5 book-to-bill ratio [5][20] - The video business, now classified as discontinued operations, exceeded expectations in Q4 in terms of revenue and profitability, with a planned sale to MediaKind for approximately $145 million [6] - Rest-of-world revenue grew 33% year-over-year in Q4, now representing 41% of total broadband revenue, indicating a shift in revenue mix and diversification efforts [7][21] Market Data and Key Metrics Changes - The cable serviceable addressable market is expected to grow from approximately $510 million in 2025 to over $1.1 billion by 2030, driven by increased data consumption and network modernization [14] - The addressable market for fiber exceeds $2.6 billion, with Harmonic's share growing, indicating significant opportunities in this segment [15] Company Strategy and Development Direction - The company is transitioning to a pure-play broadband leader following the sale of its video business, focusing on broadband infrastructure and simplifying its operating model [4][17] - The long-term strategy includes expanding market leadership in DOCSIS, increasing customer diversification, driving software and cloud differentiation, and maintaining operational discipline [16] - The company aims for sustained rest-of-world growth of 30% or more annually, expanding beyond its largest North American customers [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth trajectory as DOCSIS 4.0 and fiber deployment scale through 2026 and beyond, supported by strong demand and cash generation [34] - The company anticipates significant full-year broadband revenue growth in 2026, driven by strong bookings and backlog [20][24] Other Important Information - The company ended the year with a strong balance sheet, including $124.1 million in cash and cash equivalents, and a significant capital infusion expected from the video business sale [23][26] - The company has a $200 million share repurchase program, with $101 million already repurchased, indicating a commitment to returning capital to shareholders [28] Q&A Session Summary Question: Customer mix for full year 2026 - Management indicated that while rest-of-world customers showed strong growth, the percentage of revenue from these customers may fluctuate based on larger customer spending [39][40] Question: Gross margin expectations and memory costs - Management confirmed an estimated $6 million impact from memory pricing, with a focus on maintaining margin guidance despite potential headwinds [41][42][43] Question: Bookings composition in Q4 - Management noted that bookings were strong across both larger customers and rest-of-world, with multi-year contracts contributing to the backlog [61][76] Question: SaaS and service revenue breakdown - The majority of the $58 million in SaaS revenue was from SLA contracts, with a focus on growing intelligence and tools for customers [78][80]

Swedish telecoms group Telia and Norway's Lyse [RIC:RIC:LYSEK.UL], owner of mobile operator Ice, have agreed to combine their Norwegian mobile radio access networks into a jointly held firm, the compa... ...

Core Viewpoint - Kirkby's leadership at BT has been characterized by a strategic confirmation of existing plans rather than introducing a new ambitious approach, coinciding with a peak in investment in full-fibre broadband that allows for cost reductions and increased shareholder returns [1][2]. Company Strategy and Performance - Under Kirkby's leadership, BT has reduced its broadband network investment by £3 billion, which has been positively received by investors, leading to a significant rise in share price [2]. - Despite the positive market response, BT is losing market share in key segments, with a noted decline in broadband customers and a need for a clear growth strategy [4][5]. - BT's revenue fell by 3% to £9.8 billion in the first half of the financial year, attributed to lower demand for handsets and competitive pricing pressures, while pre-tax profit decreased by 11% [9]. Competitive Landscape - BT faces intense competition from new mobile operators like VodafoneThree and aggressive "alt-net" broadband rivals, which have contributed to customer losses [6][10]. - The merger of Vodafone and Three has resulted in BT's EE losing its status as the largest mobile network in the UK, further complicating its competitive position [10]. Shareholder Dynamics - Sunil Bharti Mittal, BT's largest shareholder with a stake of nearly 25%, has increased pressure on Kirkby to adopt a more aggressive strategy, particularly regarding IT system updates and addressing broadband line losses [22][23]. - Major shareholders, including Deutsche Telekom and Carlos Slim, are reportedly aligning with Mittal, intensifying the scrutiny on Kirkby's performance [24]. Organizational Changes - Kirkby has implemented significant personnel changes, including a complete overhaul of the top management team, which has raised concerns about the lack of senior UK experience within the company [19][20]. - Employee morale appears low, with a survey indicating that 95% of respondents felt last year's pay settlement was unfair, highlighting potential internal challenges [18]. Brand and Market Positioning - BT is planning a major brand refresh to coincide with its 180th anniversary, aiming to emphasize its heritage and role in building Britain's networks, although timing issues have allowed competitors to gain an advantage [13][14]. - There is ongoing confusion regarding BT's market approach, particularly in the discount segment, as executives consider launching a new low-cost mobile brand despite recent changes in strategy [17].

Summary of J.P. Morgan's 2026 Investment Grade TMT Outlook Industry Overview - **Industry Focus**: Technology, Media, and Telecommunications (TMT) in Europe - **Key Themes**: The report outlines expectations for European TMT spreads in 2026, emphasizing trade ideas and sector evaluations [1] Core Insights Sector and Issuer Views - **Telecommunications**: - **Rating**: Overweight - **Performance**: Strong earnings and improving free cash flow as fiber capital expenditures peak - **M&A Activity**: Ongoing mergers and acquisitions, particularly in France, Germany, Spain, and Italy, are expected to enhance market conditions - **Valuation**: Tower companies maintain high asset valuations due to robust contracts and proactive management [4][10][13] - **Technology**: - **Rating**: Neutral - **Challenges**: Facing headwinds from increased AI and data center capital expenditures, with major players like Alphabet and Microsoft impacting euro supply - **Market Conditions**: Equipment manufacturers and semiconductor firms are dealing with mature markets and macroeconomic pressures [4][15] - **Media**: - **Rating**: Neutral - **Adaptation**: Advertising agencies and publishers are adjusting to AI disruptions and shifting client demands - **Long-term Demand**: The satellite segment is supported by ongoing demand for secure connectivity and C-band monetization potential despite near-term credit challenges [4][14] Rating Changes - **Upgrades**: ASML, Nokia, Proximus, Telia, T-Mobile US, and WPP to Overweight - **Downgrades**: Inwit, KPN, Pearson, Publicis Groupe, Swisscom, and Verizon to Neutral - **New Coverage**: Initiated Euro coverage on Alphabet (Neutral) and Microsoft (Underweight) [4] Important Data Points - **Investment Grade Spreads**: - Current Euro Investment Grade spread forecast is flat at 90bps, indicating a tight spread environment [10] - TMT sector spreads as of January 7, 2026: Telecommunications at 90bps, Technology at 87bps, Media at 85bps [17] - **Supply Outlook**: - **Telecom**: Expected issuance of ~€38.4 billion in 2026, down from ~€46.4 billion in 2025 - **Media**: Anticipated increase to ~€12.9 billion in 2026 from ~€6.5 billion in 2025 - **Technology**: Expected issuance to rise to ~€31.8 billion in 2026 from ~€26.7 billion in 2025, driven by major players [18][27] Additional Insights - **Macroeconomic Environment**: - European macro backdrop remains supportive, with fiscal stimulus in Germany and improving sovereign ratings in Southern Europe - Corporate fundamentals are strong, with limited fallen angel risk forecasted for 2026 [10][12] - **Regulatory Trends**: - A shift towards supporting infrastructure investment rather than consumer protection is noted, which may benefit telecom operators [13][35] - **Consolidation Prospects**: - Ongoing discussions about consolidation in four-player markets, with potential for significant cost synergies and improved market structures [35][41] - **Investor Sentiment**: - Investors are showing "recession fatigue," indicating a reluctance to price in economic risks until a downturn is confirmed [10] This comprehensive overview captures the key themes, sector evaluations, and important data points from J.P. Morgan's 2026 Investment Grade TMT Outlook, providing insights into the current and future landscape of the TMT industry in Europe.

Core Insights - Harmonic's cOS platform is set to enhance subscriber experience and reduce churn for Telia, Norway's second-largest telecom operator, by modernizing its broadband network [1][2]. Group 1: Company Collaboration - Telia is transitioning to Harmonic's cOS virtualized broadband platform, which will replace outdated routers and improve network reliability and speed [2]. - The collaboration aims to provide superior broadband connectivity, leveraging the efficiencies of Harmonic's cOS vCMTS software [2][5]. Group 2: Technological Advancements - Harmonic's cOS Central services will offer automation, advanced analytics, and real-time network visibility, ensuring high-quality service [3]. - The integration of Harmonic's Beacon ISM application will enhance spectrum efficiency and maximize bandwidth while minimizing operational costs [3]. Group 3: Market Position - Harmonic is recognized as the market leader in cable broadband equipment and virtual CMTS, powering nearly 38 million CPE devices globally [5]. - The company's innovative solutions are designed to facilitate the delivery of gigabit internet services, positioning it favorably in a competitive market [6].

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Core Insights - Telia has entered into an agreement with Nokia to enhance its 5G networks across multiple Nordic and Baltic countries, deploying Nokia's cloud-native, 5G Standalone (SA) Core and Radio Access Network (RAN) portfolio [1][2][3] Company Developments - The deployment of Nokia's 5G SA architecture will enable Telia to provide more flexible and robust connectivity, enhancing offerings for businesses and public sector customers while increasing network scalability and automation [2][4] - Telia aims to significantly boost network performance and reduce energy consumption through the implementation of Nokia's RAN portfolio, which will support consistent coverage, higher capacity, and lower latency [3][4] Strategic Importance - The partnership with Nokia is crucial for Telia's 5G ambitions, as it seeks to advance its infrastructure capabilities and create new possibilities for customers, including essential public services [4][5] - Nokia's cloud-native core is part of a multicloud strategy that allows for the rapid, secure rollout of innovative services in an agile and scalable environment [5] Market Position - As of Q3 2025, Nokia leads the industry with the highest number of 5G SA core operator customers (127) and live deployments (54), according to industry data [6] - Nokia is recognized as a leader in core network portfolio capabilities and has been acknowledged in the 2025 Gartner Magic Quadrant for Communication Service Provider 5G Core Network Infrastructure Solutions [6]

Group 1 - A €17bn ($20bn) proposal by Bouygues Telecom, Free-iliad Group, and Orange to acquire a significant portion of Altice's activities in France has been rejected, driven by the need for Altice's owner Patrick Drahi to reduce substantial debts [1] - The B2B assets were intended to be primarily taken over by Bouygues Telecom, while B2C activities would be shared among all bidders [2] - The proposal reflects two trends in the European telecoms market: the necessity for consolidation and the strain on investment and margins [3] Group 2 - Historical discussions on telecom mergers in Europe have not led to significant outcomes, with past proposals between major players like France Telecom and Deutsche Telekom failing to materialize [4] - While there is an intellectual argument for cross-border consolidation, cultural, political, and regulatory barriers persist, although some providers like Orange and Vodafone have successfully operated across multiple markets [5] - The 'rule of three' suggests that three competitors can effectively scale and invest in individual markets, ensuring sufficient competition to benefit customers [6] Group 3 - The combination of debt and market forces indicates that Altice/SFR will likely be broken up in the future, with questions remaining about the timing, valuation, and asset distribution [7] - Despite the concept of a single market in Europe, significant barriers to cross-border consolidation remain, with potential technological, cultural, and political implications [8]