0001193125-26-221899
SEC filingHarmonic's Q1 2026 revenue surged 43% YoY to $121.7M on Broadband strength, but gross margin contracted 250bps due to unfavorable product mix.
For the three months ended April 3, 2026, Harmonic delivered strong revenue growth from continuing operations (Broadband segment). Total net revenue increased 43% year-over-year to $121.7 million from $84.9 million. The growth was driven by a $32.2 million (45%) increase in Appliance and integration revenue, attributed to new deployments in North America, an increase in outside plant services, and project activity in APAC and LATAM. SaaS and service revenue grew 34% to $17.9 million, primarily due to higher support services.
Gross profit rose 37% to $63.6 million, but gross margin contracted 250 basis points to 52.3%, versus 54.8% in the prior year, due to an unfavorable product mix that included a higher proportion of lower-margin outside plant services. Operating income jumped 191% to $20.4 million, driven by revenue growth partially offset by higher R&D and SG&A expenses. Net income from continuing operations was $9.6 million ($0.09 per diluted share) compared to $2.4 million ($0.02 per share) a year ago. Total net income including discontinued operations was $7.3 million ($0.07 per share) versus $5.9 million ($0.05 per share).
As of April 3, 2026, cash and cash equivalents stood at $109.0 million, down from $124.1 million at December 31, 2025. Total assets decreased to $705.3 million from $718.5 million, mainly due to the cash used for share repurchases and debt repayments. Inventories increased to $51.2 million from $47.8 million. Total debt (current and long-term) was $111.3 million, roughly flat compared to $112.1 million at year-end. Stockholders' equity declined to $355.2 million from $383.2 million, driven by substantial share repurchases ($43.0 million) and an accumulated deficit increase.
The company maintains a $160 million revolving credit facility with $82.0 million available as of April 3, 2026. There is also a $40 million delayed draw term loan (fully drawn). Management believes existing cash and available credit are sufficient for the next 12 months.
Operating cash flow from continuing and discontinued operations was $31.7 million, a significant decrease from $83.6 million a year ago. The decline was driven by elevated collections in the prior period associated with strong end-of-year 2024 revenue. Net income of $7.3 million was adjusted by non-cash items including $9.8 million of stock-based compensation, $2.5 million depreciation, and $0.6 million inventory provisions. Changes in working capital generated $11.8 million, led by accounts receivable decrease ($3.2 million) and accounts payable increase ($9.2 million).
Capital expenditures were $1.4 million (1.1% of sales), down from $1.9 million. Free cash flow (operating minus capex) was approximately $30.3 million. Financing activities consumed $44.5 million, primarily for share repurchases ($42.9 million) and net debt repayments ($0.8 million).
The company does not pay dividends.
Management's discussion highlights that the company is focused on its software-based cOS broadband solutions, which are expected to drive long-term growth. The pending sale of the Video business to Leone Media Inc. for $145 million in cash is expected to close in Q2 2026. The Video business contributed $50.1 million in revenue in Q1 2026 (down from $48.3 million in the prior year), but generated a net loss of $2.3 million due to $4.0 million in advisory fees.
Specific quantitative guidance was not provided. However, management expressed confidence in continued strong long-term growth driven by increasing adoption of virtualized DOCSIS and fiber solutions. Risks identified include potential disruptions from the Video business sale, customer concentration (top two customers represent 36% and 22% of revenue), and technology transition risks.