Key Highlights

  • Shares rose 17.08% pre-market to $11.93 from a $10.19 close.
  • Q3 Revenue grew 64% to $148.8 million, above the $125 million to $135 million guide.
  • Full-year revenue guidance was raised to $545 million to $555 million.

Harmonic (NASDAQ:HLIT) shares rose 17.08% in pre-market trading on Tuesday to $11.93, from a Monday close of $10.19. The move followed third quarter results above guidance and a third guidance raise this year.

Harmonic is a San Jose, California broadband provider focused on virtualized access, with a cOS platform sold to cable and telecom operators. It has about 552 employees.

Guidance Raised for the Third Time This Year

Revenue rose 64% to $148.8 million, above company guidance of $125 million to $135 million and a consensus near $129 million. Non-GAAP EPS was $0.23, against $0.17 expected. Gross Margin was 52.1% and operating profit was $33 million.

Full-year revenue guidance was raised to $545 million to $555 million from $505 million to $525 million. EPS guidance moved to $0.80 to $0.84 from $0.67 to $0.75. Fourth quarter revenue is guided to $141 million to $151 million.

Backlog Growth Meets Memory Costs and Cash Flow Pressure

Rest-of-Market revenue grew 101% to a record 46% of revenue, while the top two customers made up 54%. Backlog and deferred revenue was $534 million, up 58%, with 72% expected to convert within 12 months.

Offsetting points include negative free cash flow of $5.1 million as inventory rose to 120 days. Rising memory and component costs are expected to continue, and the fourth quarter guide includes about $3 million of uncovered memory costs.

Valuation After the Pre-Market Gap

At $11.93, the shares sit about 33% below the 52-week high of $17.68 and about 41% above the 52-week low of $8.47. Market Capitalization is about $1.11 billion, with a forward price-to-earnings ratio of 14.27. The company has repurchased $142 million of its $200 million buyback program.

Q4 Execution and Memory Costs to Follow

Nine new customers were added, including three regional Tier 1 operators. Investors will watch fourth quarter delivery against the guide and how price increases offset memory costs.