Welcome to the First Quarter 2020 Harmonic Earnings Conference Call. My name is Olivia and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Michael Smiley, Investor Relations. Michael you may begin.

Thank you, Olivia. Hello, everyone, thank you for joining us today for Harmonic's first quarter 2020 financial results conference call. With me today are Patrick Harshman, President and Chief Executive Officer; and Sanjay Kalra, our Chief Financial Officer. Before we begin, I'd like to point out that in addition to the audio portion of this webcast, we've also provided slides which you can see by going to our webcast or our Investor Relations website. Now, turning to slide 2. During this call, we will provide projections and other forward-looking statements regarding future events or future financial performance of the Company. Such statements are only current expectations and actual event or results may differ materially. We refer you to documents Harmonic files with the SEC including our most recent 10-Q and 10-K reports in 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’ve posted on our website and filed with the SEC on Form 8-K. We will also discuss historical, financial, and other statistical information regarding our business and operations, 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. Now I’ll turn the call over to our CEO, Patrick Harshman. Patrick?

Well, thanks Michael and welcome everyone to our first quarter call. Before delving into our recent business results and outlook, I'd like to briefly address the extraordinary situation we all find ourselves in. Harmonic is a people first business and we're deeply grateful for the support of our employees and their families have received from essential service providers and local governments around the globe and our sympathies are with those who have been most impacted by the crisis. We're proud of the role we play in enabling vital broadband and video streaming services worldwide and appreciative of the continuing strong partnerships with our many customers and suppliers. I'm particularly thankful for the extraordinary efforts being made by our employees to continue to support our customers and drive our business forward. As most of you know, several years ago Harmonic embarked on a journey to reinvent our company through new cloud native technology and services. It can be as transformative for our customers as for our own business. While the COVID-19 crisis has presented unexpected challenges. It's also shining a light on power of our virtualized CableOS and cloud-based video streaming solutions, which have held up extremely well under increased operational pressures, providing our customers unprecedented real-time agility and scalability, as they respond to heavy network utilization and expansion opportunities. Although we have real near-term challenges to overcome, our key customers are fundamentally healthy and our technology position is both powerful and unique particularly our Cable Access and Video SaaS Solutions. Our objective is to emerge from this crisis stronger and even better positioned. Turning now to the first quarter results. COVID-19 impacted our global business during the final three weeks of March and our business in Asia-Pacific throughout the entire quarter. Resulting revenue was $78.4 million, down 2.1% year-over-year and…

Thanks Patrick and thank you all for joining our call this afternoon. Before I share with you our quarterly results and outlook, I would like to remind you that the financial results as referring to are provided on a non-GAAP basis. For the first quarter of 2020, we had mixed financial results impacted by the effects of COVID-19, reporting revenue of $78.4 million and $0.10 EPS loss. While we are disappointed by the overall impact of this health pandemic on our financial results, there were some clear bright spots. We improved our recurring SaaS and services revenue by 10.5% year-over-year, maintained reasonable gross margins at 48.9% and have strong backlog in deferred revenueof $207.9 million. Further we maintained a solid balance sheet with a cash at $71.7 million and unused available line of credit of 25 million reflecting a total available cash of $96.7 million, positioning us well for the challenging pandemic environment we are in. Turning to slide 8, let's take a closer look at our Q1 revenue and gross margin. Revenue was $78.4 million compared to $122.2 million in Q4, ‘19 and $80.1 million in Q1 ‘19. The revenue decline reflects both typical seasonality and the impact of COVID-19 which I will cover momentarily. Cable Access segment revenue was $24 million compared to $43 million in Q4, ‘19 and $12.9 million in the year ago period reflecting significant progress ramping CableOS over the past year and expected sequential decline after a very strong fourth quarter. In our Video segment, we reported revenues of $54.4 million compared to $79.2 million in Q4 and $67.2 million in the year ago period. Together with the typical seasonality, our video business was more strongly impacted by COVID-19 as we experience reduced applied demand in March. Additionally, as anticipated the ongoing transition from…

Okay. Thanks Sanjay. We want to finish by emphasizing the fact that despite the near term challenges as Sanjay just said our core growth drivers remain intact and therefore our strategic priorities for the year are unchanged. For Cable Access business we remain very focused on scaling our tier one customer deployments across the footprints, securing new design wins with additional global operators and launching new solutions that expand our addressed market. For our Video segments, our objectives continue to be accelerating the growth of our live streaming business especially cloud-based SaaS, expanding our addressed market to include new non-traditional streaming customers also through our SaaS platform and return to consistent profitability. And finally, I want to again recognize the extraordinary efforts of our employees to support our customers and our company during these trying times. But together we're confident that we will get through this and come out the other side even stronger and better positioned. Let's now open the call up for your questions. Thank you.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from John Marchetti with Stifel.

Thanks very much. Patrick, I was wondering if you could just spend a minute and go through some of that weakness in the video, just so we can better understand what's kind of going on there, particularly on the appliance side. I mean, do you worry about as we look through this that maybe with the focus more on the SaaS business that maybe this lasts a little bit longer as you're working through this transition? Just curious to get your takeaways or your thoughts kind of how we should think about where that video business really stands right now?

So Video business, John, was purely impacted by COVID-19. We saw the impact primarily in appliances demand as you referred to it. COVID-19 impacts arose primarily due to the reasons Patrick just mentioned, there was -- several high confidence deals were delayed. We encountered situations where these were signed, but customers' warehouses had -- were closed, so shipments are not possible. That said, we do not believe these deals are lost for competitive reasons, nor do we believe these deals will permanently disappear. So far in April, we have seen a couple of these deals coming back and subsequently getting booked. So relative to our guidance, it was purely COVID-19 impact. At the same time, we have seen significant growth in our pipeline for SaaS business. And a lot of traction is there for SaaS business, and we expect those to be converted into orders in months to come, and we expect ramp in SaaS business.

And then maybe, Sanjay, just as a follow-up to that, with that growth expected still to come for SaaS and things like that, how do we think about the margins in that SaaS and software business as we progress through the year, assuming a more normalized sort of contribution to revenue? Just curious, given the big drop this quarter in those gross margins, how we should think about that piece of it as we look out through the remainder of '20?

So John, SaaS itself, SaaS video margins, we don't disclose separately. SaaS is still a growing part of our SaaS and Services business. I would say we, as of now, look at SaaS and Services together as our recurring stream of revenue. And SaaS definitely is a good piece of that. But SaaS and Services, the margin which we track is a part of our recurrent revenue. But as we expand and as we scale, particularly SaaS, to which you asked, our gross margins should improve, and we have seen that improvement happening over a period of time. This quarter, we saw good bookings of SaaS. Actually, our bookings for SaaS in Q1 were higher than the plan, although they are still less than 10%. And hence, we don't disclose that separately. But we have seen significant ramp in bookings ahead of the plan. And in total, SaaS and Services, which basically is a composition of SaaS together with services from video and services from cable, we have seen a ramp in cable services as well. And that -- those margins are increasing. Year-over-year, our margins are higher in terms of dollars, we ended at $30 million, it was less than $30 million in the year-ago period.

Next question is from Simon Leopold from Raymond James.

Thanks for taking the question. So I missed the beginning prepared remarks, so apologies if I'm asking something you clarified. But two things I want to try to get a better understanding on. One is around the disruption to evaluation. So when we think about the CableOS being a new product, being in evaluations in a pipeline, I saw you've got 27 awards now, so that's nicely up. Just trying to understand what gets disrupted or the mechanics of disruption of evaluations, certifications, trials, etc.?

Sanjay -- excuse me, Simon, this is Patrick. It was a mixed picture. We did see a couple of evaluations, particularly with smaller customers really slow down really as they operationally scrambled to deal up with kind of the urgent tactics of the moment. If I generalize, we actually saw after a momentary pause, we've seen our evaluation qualification processes with larger customers continue well. Our observation is that larger MSOs are capable. We're actually impressed with their ability to both attend to tactical operational focus issues as well as keep pushing forward on strategic initiatives. I guess two additional comments, I think that are important color here, Simon, is number one, all of that is significantly aided by the fact that the core software. I think one of the strong attributes of CableOS is our remote tack that can be always connected like any other software-based service. And so our ability to support testing, configurations, all of that stuff on the software core, we have complete ability to do that in a remote capacity. And so that's been quite significant. I think the other thing to mention is that this architecture, one of the attractive things about it is the agility, as we've talked about repeatedly. And particularly in the context of now a surge of anticipated work around upstream. I think the importance of that agility, the value of that agility is really coming to even sharper focus, particularly for larger MSOs who have, let me say, sophisticated engineering teams. And so we think that the competitive differentiation, the rationale for wanting to move to this architecture is even more highlighted in this current situation. And we think that has helped keep, if you will, the pressure on keeping evaluation process, qualification process ongoing.

So that was actually set me up nicely for the follow-up was trying to understand maybe the mechanics of what happens when an operator wants to add upstream capacity. What do they buy from Harmonic? What happens to your business?

Typically, there's two pieces. There's additional bandwidth that needs to be provisioned through the core. In our case, it's a software license running on the same server infrastructure. And then typically, it's something that happens at the PHY level, either in a centralized architecture right there, in our case, licensing another piece of the shelf, or in fact, adding more upstream capacity -- known segmentation deep in the network. And so for us, it's a combination of additional hardware appliance sales as well as additional licensing. And the key is that relative to historic or, let's say, traditional solutions, there's a lot of rewiring, particularly on the head-end as you kind of break out that new upstream. I think the beauty of our solution is there's no such rewiring. It is all completely software-driven process on the upstream. And that's where, I guess, at the risk of getting into too much detail, we think that's really key to the differentiation of the flexibility, the agility of being able to manage these upstream transitions when you have a truly virtualized core running on off-the-shelf server farm.

That's helpful, and that's sort of what I thought. So I appreciate the clarification. One just last one. On the Video business, you've got such a mixture of customer types in there. And I presume that one aspect are customers that sell video content and those customers may be dependent on advertising for the business. To what extent is their business health being challenged and therefore, that affects your business in the Video segment? Thank you.

Yes, I think that's a great question. The answer is, short term, we've not seen any such impact. Indeed, particularly with loss of sports, I think the data is clear that the advertising revenue is down. That being said, we don't have any relationships with a broadcaster sync that they're kind of down for the count. There is a belief that it's just a question of when, not if, sports comes back, etc. And in the meantime, streaming content, including linear streaming content has been through the roof. More generally live video viewing. So all of the customers we're talking to believe that they may have some bumps themselves in the near-term business. But we don't see anyone talking about a fundamental change in the way their -- the consumer-facing part of the business or the advertising model is. We do think that more and more customers are starting to think, wait a minute, perhaps a more software and cloud-based scale-up, scale-down solution may make sense. I think that's going to drive greater mid and long-term demand around cloud-based solutions for, let me call them, more traditional broadcast and media companies, although as we mentioned in the prepared remarks, we're already seeing some pretty substantial growth of the pipeline there. In no case, though, are we seeing a direct line between ad revenue softness and demand softness. Frankly, the stuff that was in our pipeline needs to get done, and that's why we're quite confident, particularly after follow-up conversations with customers around the globe that they're going to get back and catch up on pent-up demand. It's really just a question of how quickly they can -- and here, we're talking about a lot of smaller and medium-sized broadcast and media companies all across the globe, how quickly they can kind of get their operations spun back up to be able to do the work. So again, it seems to be a timing question, not a fundamental shift question in terms of viability of these businesses.

So then just to maybe finish up on that point and to clarify, and then I'll yield the floor. So if it's not the health of their business, what was the major factor that softened the Video segment sales this quarter and the guidance for video in the next quarter?

Operational disruption. Remember, well over half of our Video business is outside of the U.S. And Asia is almost exclusively so far a video market for us, for example. Sooner than the U.S., we saw a lot of countries starting to take more severe action of shutting down, and that included sending people to work from home, shutting down labs. So particularly for appliances where you're shipping into an operational center, you're doing some on-site integration where the customer's engineer is doing some on-site integration. We saw all of that slow more pronounced outside of the U.S. than inside of the U.S. in the last weeks of March. So really just operational adjustment to the new model, and not any fundamental strategic or business retrenching.

Next question, Rich Valera from Needham & Company. Now online with a question.

Thank you. Taking your -- the midpoint of your cable guidance for 2Q and then the second half, it looks like you're now at -- midpoint is around a low $120 million level versus about $140 million midpoint with your previous guidance. Wondering if you could kind of give a little color on what's baked into that? Is this mainly around just not having the time to physically deploy hardware, you're assuming that's just going to kind of push into next year? Any lost business there, just any color you can add to why that's sort of been taken down on an annual basis.

Richard, there's a lot of moving parts, but the simplest answer is it's a slower roll-out than originally anticipated among new customers we were bringing on this year. The customers that are already rolling out with us, although they're delayed in the first half, we think they're largely going to catch up, or they're going to work hard to catch up. So kind of only minimal impact there is our current view. In contrast, we think that -- I think there's just no way around it. We think we have lost a little bit of time in the first half of the year with brand new customers. We don't think, in any way, we're losing those deals. We just think that the qualification process is going to proceed a little bit more slowly. And the initial ramp is going to proceed a little bit more slowly. We're quite -- we remain quite confident in our ability to pick up those customers we planned on doing so this year. It's simply a question of the pace of the new customers.

Rich, I will just add that -- Rich, I would like to add that the additional guidance we gave or a bigger guidance we gave for second half, it does bring the midpoint for the whole year close to $123 million. But that's still 29% up year-over-year if we exclude the one-time Comcast pickup.

Got it. And then do you need to win many new customers to make that? You said you have 27 customers today. It sounds like everything you've been talking about is really just deployments with those customers. So is it safe to say that your -- kind of the midpoint of your guidance doesn't really need to involve a lot of new customer wins?

I would say it's modest -- modest and more modest contribution from new customers than the original guidance average. And please don't mistake that by saying we're stopped trying or we're not seeing the same opportunity. It's simply we think we've lost a little bit of time. But yes, on a relative basis, the mix now looks much more heavily tilted toward roll-out or expansion of existing wins and relatively less contribution because of time delay -- some time delay with newer accounts.

Got it. And just one more, if I could, on the Video business. It's actually on the SaaS and Service revenue, which I guess is a combination of both now. So that was down $5 million roughly quarter-over-quarter. And I think, Sanjay, you attributed that to volatility in service renewals. Just hoping you could provide a little more color there. Is that business that's lost? Or is it just a timing issue? And was any of that COVID-related? Thank you.

Well, we believe it's primarily due to the COVID-related delays we experienced. If we think it's purely timing. We have seen the April stuff coming in, a part of it, but it's purely timing related, we think.

I am sorry. Is that professional service? Or are those kind of maintenance renewals?

It's a little bit of both.

Next question coming from Samik Chatterjee from JP Morgan.

Hey guys, thanks for taking the question. I just wanted to kind of run through as kind of on the cable's taxes segment. My working assumption here was that cable customers would have to add capacity as they're looking to manage kind of the higher bandwidth needs or capacity needs from a lot of work from home. And as the kind of view side that you're seeing some kind of fits and starts on CableOS deployment. Does that generally indicate that some of the spending is now going back to the incumbents because of the disruption? And as you return to more normalcy, that's when you expect to kind of resume gaining share again? Is that a fair way to characterize it?

No, we don't believe in this process we're losing any share, and nor do we believe that we're going to kind of seed expected share going forward. What we do see is a slightly slower pace, simply because of the social distancing, etc. Our customers were heading in a safe way. As we discussed a moment ago, probably the biggest piece, probably the biggest piece of our CableOS business and ramp this year was associated with more volume roll-outs of existing customers and already won accounts. And all of those cases, frankly, they were leaning into it really as hard as they could. So a simple -- I'll make it up for sake of example, 20% loss of throughput efficiency doesn't mean that they're doing other things with that time. It means they're simply accommodating the operational realities of the current situation. And we think that's particularly going to continue to be prevalent in the second quarter. And our expectation is that loosens or improves in the back half of the year. It's simply a slower pace of what already was a pretty healthy pace with the existing customers. And second is also mentioned, but perhaps not clearly enough, layered on top of that is wins with new accounts we're seeing, in general, those qualifications continue to go well, although, again, we see a little bit of a slowdown in terms of the pace of how quickly that's happening in the labs. And therefore, we've taken, I would say, a somewhat conservative view on how quickly those design wins once qualification is confirmed, how quickly that will translate into field launch and deployment through the rest of the year. So it's a little bit -- a slightly lower pace, but we -- relative to what was planned, which, frankly, was already fairly aggressive. Now we do see a long-term more upstream bandwidth being needed, etc. We think for us that that really underpins the mid to long-term opportunity. And indeed, even with some of our established accounts, we think that can positively impact demand and installation in the -- later in the year. But I consider that a little bit more upside at this point and not favoring too prominently into the full-year revenue guidance we've given for cable.

Got it. And if I can just follow up, and maybe I missed this, are you still expecting any incremental or higher operating costs because of the supply chain issues that you're navigating going into calendar 2Q?

Well, we do expect additional freight charges which we experienced in Q1 as well, and we have captured that into our Q2 guidance as well when we came for gross margins. But other than the additional freight charges, we are not expecting any other incremental cost at this point.

Next on line with a question from Steven Frankel from Dougherty. Your line is now open.

Good afternoon. Thank you. Patrick, I wonder if you might spend a couple of minutes talking about the shelf opportunity. Maybe help size that for us of how big is that relative to the overall opportunity for CableOS, and is that included in the 48 million modems that you're addressing today? Or does that create a new incremental opportunity?

I'll start with the end. We said 45 million, and it's included in that. Essentially, the point is, look, even without an additional design win, the people who've already selected and started to deploy CableOS in part of their network, collectively, they serve over 45 million modems. We're only at 1.3 million modems. So there's a lot of headroom there. I think one of the questions or concerns has been, well, if I paraphrase back to us has been, hey, that's great but isn't CableOS only about DAA, and isn't DAA only going to be used for a subset of that footprint. And it really remains to be seen exactly how much of our customers' footprint ultimately will be deep fiber or distributed access and how much will be centralized. But the point with the shelf is, is that together with our deep fiber solution and now with our shelf, we've got the whole thing covered. And so it's not a question of CableOS being relevant for just a subset of the solution, we think that we're extremely well positioned for the entirety of the footprint. And so I think that's the key takeaway is that with this addition to our offering, we don't see ourselves occupying a nature a subset, but rather a solution, an integrated solution for the entirety of our customers' footprints.

Okay, great. And maybe an update on the notion that you might have incremental software products to sell back into the installed base, kind of when would those modules might be ready to start generating revenue? And what's the timing on the fiber to the home product?

Well, thank you for those questions. You're definitely paying close attention. I didn't mention either of those in the script, not because they're not important but just in the context of everything else going on. So indeed, we -- our growth strategy is multi-pronged here. And additional software capability is definitely coming on board from a revenue bearing point of view the second half of this year. And our -- we expect by the end of this quarter to be well into field trials with our fiber-to-home product. All that being said, the guidance that we've given, I'd say, is taken a fairly conservative view on the incremental contribution from both of those new areas. Frankly, the idea is not to be overly conservative, but we do have a lot of moving parts here. And we thought it was prudent just to -- not get ahead of ourselves in those areas from a modeling or projection point of view. That being said, we continue to be quite bullish about the specific features, software features we have coming in specifically, and in general, the opportunity to continue to come back with additional software-based functionality for additional license capability onto our CableOS platform. And on top of that to complement what we're doing on the DOCSIS Cable Access with fiber to the home, particularly -- excuse me, targeted at cable operators. So both of those continue to be quite active, very active, not only discussions but now testing and trialing with customers under way, expecting to see some things in the second half, but not yet modeling that in a significant way until we make a couple of more steps.

Great. And I understand the COVID-19 impact on the Video business, but this has been a frustrating business for the last couple of years for bunch of different reasons. Is there anything you can do to try to accelerate the move away from appliances and to SaaS? Any financial incentives or end-of-lifting products, anything to try to kind of force this business to the new world and get out of the hardware business?

Yes. I think it's a good question. I mentioned in the prepared remarks that we have a revamp to go to market. And indeed, we are challenging ourselves as much as we're challenging our customers. There's aspects, frankly, of the broadcast and media landscape that are a little bit -- if it isn't broke, don't fix it. And I think as much as us kind of coming with new viewpoints and perspectives, I think that this crisis is definitely changing some of that mindset. So this is forcing on us and our customers I think the opportunity to really rethink how aggressively a transition can happen to cloud infrastructure, both for streaming as well as some core broadcast functions. So without revealing our entire playbook here, indeed, we're thinking hard and aggressively along the lines that you've suggested. I'd like to see us have a little bit more progress and results to report. But as both I and Sanjay mentioned earlier, the pipeline that has been developed recently is quite impressive. It's ahead of our internal plan. And we do think that there is a -- it's not just hyperbole, a real acceleration of activity that's going to be quite promising for this business over the mid to long term.

And any insight into what's happening with deal sizes on the SaaS side of that business? Are they still relatively small today? Or are you getting more significant deals as you've gotten more presence in the marketplace?

We're seeing both. I mentioned in the prepared remarks that we had two, what I call Tier 1 wins, one a large international telecom operator, one a large-name broadcast and media player, and both of those are definitely large by historic standards. That being said, among the nine new ones that we brought on board in the quarter, also a number of new, more insurgent TAM expansion kind of accounts. So we're seeing both. And both are important, expanding the TAM, even with small accounts that will build up a very sizable long tail, we think, is very important. But at the same time, getting large Tier 1 domestically and internationally, the tip to this world is also vitally important. And I'm very encouraged that we're seeing success on both sides.

Next question is from Tim Savageaux with Northland Capital Markets.

Good afternoon. Thanks for squeezing me in here. I want to follow back up on kind of your major customers' response to increased network traffic on the cable side. I guess first question either in the March quarter as you look into Q2 here, did you, in fact, see any kind of increases or expedited interest in incremental capacity from your current footprint of CableOS business? That's one question. And then secondly, I guess trying to discern to what degree the operators and I think you referenced sort of tactical needs in the network in terms of capacity, whether it's downstream or upstream, whether the nature of your footprint to date can really help them address those issues, given that it's still relatively small? Or does it indeed kind of pull-in, especially as you referenced the upstream plans to increase bandwidth? Can that be done in a timely enough fashion to meet these relatively short-term demands for increased traffic? I guess it's along the lines of whether they turn to more established technologies in a pinch if you will in triage mode or accelerated deployment of new paradigms. So that's a bigger question. The first one on whether you did see any increased capacity demand in here in the first half today.

The short answer is yes, Tim. Look, in general, the -- I think just to set the context, the cable network sort of absorbed -- in general, they've absorbed kind of the hit. But what happened is they lost a lot of the headroom and capacity. So it's not -- at least our understanding, it's not the new capacity needs to be added within the next 48 hours. It's just they lost their headroom, and now, particularly if you contemplate that work from home and video conferencing behavior may actually become part of the landscape indefinitely going forward, there is a long-term readjustment of what the ceiling needs to be. And so, we think -- from that perspective, we think we're extremely well positioned. It doesn't require a kind of an urgent band-aid, or maybe there are some situations that need to band-aid. And given our small market share today, that's probably not us, but we think that the real interesting opportunities, the fundamental rescaling of the network and particularly, the upstream. And there we think we're extremely well positioned. And absolutely, there was heavy conversations about that during the quarter. One of the things that we're excited about is our first sale, first order of this new shelf product from one of our large Tier 1 customers. And that's really all about accelerating use of CableOS across the entire footprint and in large part accelerating being able to use CableOS for expanding the upstream.

Okay. Just a follow-up. So, then I guess it sounds like you say outside of the slower pace of new customer evaluations and wins in CableOS that what you're seeing out of your kind of larger established customers is relatively unchanged outside of whatever kind of short-term logistical delays you might have seen as through the first half here?

That's correct.

Next question is from George Notter from Jeffrey. Your line is open.

Hey, thanks a lot for the question. This is Kyle on for George. So, this one is about the Video business, regarding the business with broadcasters that you mentioned, the higher margin appliance sales to broadcasters. Can you give us a sense for how much of the Video business revenue is tied to that type of activity? Is it like 90% that's not SaaS, or is it something much smaller than that, I guess I would expect? And then regarding that activity, can you give us a sense for whether customers are pushing out versus the orders may be lost for you? Is there anything that you can get in terms of your conversations with customers or anything that they've said to you, maybe updated timelines that they've given to you that would help us understand that?

So Kyle, the first part of the question, broadcast and media represents approximately 40% of our business. And the balance is for service providers. And the mix we saw this quarter, which Patrick mentioned in terms of the broadcast and media views getting delayed, we saw that although we have seen a marginal pick up now after, since Q2 has just kicked off. But that's the piece which has been shifting a little bit.

And also then Kyle, on the second part of the question, we don't feel as though -- not feel. We don't believe that we've lost any of these deals for competitive reasons, nor have we've been told in a single case, have we been told by our customer that the deal is being taken off the table. In every case and we have done an exhaustive scrub as you might imagine, worldwide. It really is a question of timing. Now, we're really talking about hundreds of customers in this area around the globe and across a lot of different countries. As I mentioned earlier, over half of this business is outside of the U.S. So, really the question for us and for our customers and channel partners is about timing and about really getting labs and operation centers reopened to reintegrate new product. And we believe it's simply a question of when, not if, and that is really across the board, the message that we've received and it makes sense to us, because in general, these projects are not -- in general they're driven out of necessity. And we don't think that the need -- the fundamental need has gone away.

Okay. Great. That's helpful. And is that 90% of the Video business? Is it less than half? Is there anything you can give to us as a general sense for how large that is as a component of video?

So as Sanjay said, we publish for the full company, a broadcast and media business, which is exclusively video, it's about 40% for the whole company. So just if you kind of do the math backwards, it says broadcast and media is about 60%, 65%, about two-thirds of our video business. And so as an overall category, it's pretty significant. So you can see that what happened was to a subset of that, it wasn't across the board. It was to a subset of broadcast and media players, particularly smaller and medium size ones. And where we saw this kind of push out. And indeed, particularly small and medium-sized companies, we have seen struggle to readapt to work from home and perhaps don't have the same kind of sophisticated IT systems or whatever. In some cases, we had a couple of small customers who struggle to execute purchase orders from -- with clerical people or what have you working from home. So there's kind of myriad logistical challenges. And in general, what we see is logistical challenges that have to be overcome. From the point of view of these companies' internal operations as well as their own countries, regulations on being able to work, etc. So our belief is that as these logistical challenges become overcome, as the situations become [indiscernible], if you will, one way or another, we believe that these deals will begin to flow again. Our current expectation is that happens in earnest in the second half of the year despite a continuing slowdown in the second quarter.

I'm not showing any further questions at this time. I would like to turn the call back over to Mr. Patrick Harshman for closing remarks.

Okay. Well, thank you very much. We went after time. We appreciate very much all the questions and feedback. The fundamental drivers of the business are healthy. We continue to push forward. We continue to believe in everything we're doing, and we very much appreciate your support. And we look forward to talking with you all again soon. Thank you. Have a good day.

Thank you. Ladies and gentlemen this concludes today's conference. Thank you for participation. You may all disconnect. Good day.