Casa Systems (CASSQ) 4 May 192019 Q1 Earnings call transcript

Greetings, and welcome to Casa Systems' First Quarter 2019 Earnings Call. [Operator Instructions]. Please note this conference is being recorded. I will now turn the conference over to Monica Gould, Investor Relations for Casa Systems. Ms. begin. may you Gould,

and quarter everyone. XX, of the afternoon Operator, for XXXX, released the after closed. first XXXX, market good you, Casa afternoon, results this Thank ended March

of webcast Nicolelli, you Jerry Executive our being obtain If call Guo, will from Relations investors.casa-systems.com. Chief website, Investor Chief Officer; archived This on of the receive is today's With not a me it earnings release, on Financial you be did Officer. press and Investor our may our at Maurizio section Relations section and website. copy call are the of

Before in the such, I new contain filings to factors actual to forward-looking our or call over results the cause believe include described uncertainties. and does see environment to Jerry, will note on on specific based risk I'd currently the business certain obligation press future are SEC risks turn on like the our the make refer that or statements and release could Any based a materially in this call as that today, undertake and earnings we statements to from as forward-looking as for information Please discussion as that our that these information of we and today's more we we to release no statements projections today's update upon result differ of events. discussion. information it,

financial we certain principles. reporting, U.S. measures do addition In accepted GAAP to report accounting not that to conform generally

help And over turn I'd understand performance call measures to to During it investors believe we it better the we the Jerry. is our if will to non-GAAP trends. or like with call, business may useful believe or that, use we investors

be did the very half slower would thanks first call for We that quarter for want us our first on by see the Good of light that likely acknowledging to a particular our first start likely afternoon, quarter and toughest that quarter. I was quarters. XXXX we off highlight of last a in for today one everyone, today. would XXXX and joining

even was remarks in first hardware, However, XXXX, for anticipated. the by XX these of by quarter our the internal a below particularly CCAP a than quarterly wireless greater decline integrated slower $XX.X first significantly our results in later our again revenue quarter run Revenue significant results million, will expectations, call. impacted this loss Maurizio lower period in on over in years. on spending and results his same were MSOs detail once our resulting industry-wide, with we in discuss

results, and We our are quarter. factors disappointed extremely impacted the detail provide with to these first I like that would on

of I notwithstanding of do number that to and form me opportunity. the our is our new quite point business of results are we development way performance, trials future while come in doing want future Before juncture our at are the confident opportunities makes business, recent indicative recent RFPs/RFIs the large. of out have an that the not important This so, that in our

the weaker-than-anticipated to that Now let quarter contributed several factors experienced. outlining me we by that start

Global First, we DAA. and hardware virtual for year the most for in during not industry-wide leading the the full combined fourth XXXX, overall Data but vendors respectively. data are first reporting quarter XXXX of not equipment The quarter spending only recent yet spend and in of toward CCAP a and the CCAP seeing slowdown declines from XX% MSO an three shift this available. implementing integrated in also S&P view, for CCAP are market support XX%

to slowed to gigabit and from With to by XX% of or our spending the DAA CCAP. has XXXX. trials, CCAP multiyear as full QX virtual that to we us service of from channel market we information year increased in during pattern into is the only to have understand the believe industry This slowing, I to enabled space share seen integrated the experienced to speeds, And a think lab we loss a of our continue it MSOs' would rollouts largest deliver this is I To is technologies shipments no spend the year. upgrade that network lead buildout made filling for footprint XX% gigabit of This point in and limited our share that MSO upgrades important to characteristic many X.X included headend out their several And date. spite XXXX received the the in in measured for been where pace buildout versus been downlink It why also through X.X these technology have key upgrades capacity markets know customers in this customers. evaluate moved has actively referring of of speeds few recently, years, has customers a cycles has past unique key significantly what provider substantial rollout of followed to digestion. DOCSIS the and, the in phase. upgrades the while MSOs. we general, of many the by the and not to of investments most trend of are CCAP network and CCAP MSOs have DOCSIS

our be of believe is curtailed a the at that quarter than is The their hardware our market the for purchases we core decline. With to pattern more significant term. aggressive that for near are in largest -- intention customers network XXXX, our indicated to share to but to a Because expansion hardware do other not network related largest who core during our their a hardware few spending businesses CapEx believe we overall market impacted customers they rather rate second the have purchase that holding limit of investments. reallocating MSO they infrastructure factor will have for awarding year, coming competitors throughout

revenue primarily our from fixed and diversifying cable on to telco. wireless working include been have we also Finally, the

anticipated. happened we as not However, fast this transition has as

result, revenue fixed and this As the invest the from that to for telco the yet several were impact for we been was which we continue factors not firmly wireless offset while is there a believe summarize, seeing impacted MSO from our earnings future transition, sufficient the slowdown customers. our of to right approach To we have company, quarter.

As I with. it's we're not at mentioned, a quarter all that happy

However, opportunity outlook year. the tangible and the pipeline, for it huge, our our comfort revenue on stands, us gives terms full ahead of me of is currently in as

me of Let for you. some this summarize

trial the products in PHY; mini significantly XG and we across QX. quarter, in WAG; wins Remote During gateways, macro business activities or all new first the We generated saw increased access areas: wireless three videos.

and the XX As in both engaged during unique quarter, were including wireless, in active CCAP fourth XX XX a we integrated our in and fixed for reminder, PHY telco trials X customers, Remote products. cable, XX with in

XX, BNG radio CCAP DAA, include we fixed During of EPON supporting customers. from with up in our the virtual up and our cable, first XX to in line the with and quarter, CCAP, and virtual products; in cores products; the XX and involving X These cards high-density trials are XX% software core. number for wireless, the telco from XX% QX, XX integrated QX, we increased both our

XX wireless, products. next-generation with RFPs fixed Tier cable for X and in involved are service We providers our

in of also We now to products, half certain to do revenue and to remainder experiencing delays the recognize been spite XXXX. continue have increase and and during the second million second we expect of we for anticipate now some of customers. backlog Our between wireless X amounts certification $XX this In year-end. the with just our Tier in to number quarter under wireline increased the the

the meetings that process to June you April of pleased and and like report Before to regulatory I now solid a NetComm. we still next this give I wave us. for of transaction opportunities a based ensure are of on not end increased including do our pending handing that spending close Australian on over The by of adding are ahead forward and end we on opportunities to the ahead includes that in to we foundation Maurizio, call scheme the our fine-tuning with shareholder quick at last of am expect vote. return update to would we to I our of this growth. MSO budget We our a that focused like provide would by miss remarks of on arrangement to ample execution my implementing resources received year. repeating moving us, the our approval court customers, outlined acquisition

it Now that, our ask incumbent execute. I With Maurizio is comment upon will to results. financial us on to

reviewing everyone. for outlook our afternoon, results good start XXXX and XXXX. then and Jerry, I will our first financial by you, quarter fiscal discuss Thank

XX% of revenue did first As going be for to annual I February, the with our quarter revenue, first was approximately in would the half first of in XXXX. lowest back a quarter period slow be half being We the project that discussed business. the our XXXX

MSO first significantly from fourth for or were or the with million However, XXXX, million in and $XX.X QX to quarter sequential accounted for product quarter software. XX% the below $XX.X lower-than-anticipated quarter million, of sales was down was of quarter the product XX% spending. to hardware quarter revenue, the year, in decrease XXXX. results quarter year first expectations, first total Total in during XX% was $XX.X of which $XX.X our or in revenue from and This of million down $XX.X the Total XX% prior of and hardware XX% from from internal the last quarter. million revenue software. was $XX.X the million a from Hardware of revenue or $XX.X $XX.X XXXX from of first from compares first owing of million XX% XX% revenue million

first margin in GAAP quarter was XX.X% of XXXX first Our compared XX%, XXXX. of gross quarter the the to for

on and sales with can software-enabled fluctuate capacity higher of a initial hardware products software-enabled quarter-to-quarter reminder, As from gross our capacity a based mix of expansions. our margin

in We our XX% XX%. be of continue the margin will to range fiscal believe that and XXXX

$XX operating in in to commissions of were to million deal to in X% decrease of expenses the lower to compensation, debt XXXX. expenses partner non-reoccurring million due by the down $X.X and in $XX.X and bad was Turning expenses operating related GAAP million, Total The costs. offset compared first quarter acquisition total quarter stock-based XXXX first reduced expenses.

new The the $XX.X hires of in by expenses a million positive Headcount million $X.X $X.X was at revenue pretax driven in the million, in year-over-year. the Adjusted negative March tax during X.X% XXXX, XXXX. the XXXX, $XX.X million period. XXX, mobile net majority research a since $XX.X in Income over compared prior XX primarily benefit to the negative EBITDA up to quarter December million the $X.X a operating the XX, non-reoccurring first Excluding were year reduction was development. expenses, million were and first to new quarter of XXXX loss. the quarter due to of related non-GAAP totaled employees XX, down

effective range compared our award net we XXXX, products compared cable that of expect ended will million was diluted net per the tax first equivalents $XXX.X income Free rate a to quarter million. quarter the QX. inventory next-generation for was free a from will benefit quarter Higher and continue and project period million, XX% $XX.X flow and million for million, cash in inventory of to net $X.XX X% net cash our quarter debt $X.XX and same XXXX. loss decline non-GAAP the first for begin quarter of XXXX as with for Lower for the to cash during free cash quarter Non-GAAP during fiscal the We flow positive that Non-GAAP cash shipping the first in year. wireless million We the $XX.X share and we loss this compared of $XXX.X was of per income XXXX $XX.X $XX.X in by between total XXXX. equity first quarter. the of the net in of in flow first XXXX. share inventory of to transactions drove negative higher quarter the of income totaled driven

repurchase During the repurchase did XXXX, shares ended any XX, March three under we program. months share not our

turn to for capital not capital and continue deploy between of results I fiscal opportunities, our look now fiscal repayments. from NetComm. as allocation we review policy does share to acquisition XXXX We our repurchase to would M&A for debt XXXX. our Guidance pending include guidance like to

revenue approximately to is For annual to the to XXXX, total. total full year to first be the in $XXX the be million. million and half of $XXX we between XX% XX% expected expect of Revenue continue

XX%. mentioned Adjusted our expect gross range expected in to million margin to and of be to As $XX we earlier, is to million. between $XX XX% continue the EBITDA range

income effective will as Our earlier, and rate, X% range tax XX%. discussed between

income to million of in between of range transaction, $X.XX. in We expected share $XX in XXXX $X.XX to compensation diluted to non-GAAP in and diluted from continue per income we the $X.XX to range diluted anticipate closing and the expect GAAP initial NetComm share XXXX to of per and the $X.XX synergies. $X.XX be deal accretion in continue is to non-GAAP Stock-based and net to be XXXX. $X.XX income Upon $X.XX share per approximately $X.XX be

will the operator the us Strategy. be the Thank call Joining Vice Corporate Bruckner, turn Development Q&A also President now questions. open for Senior and now you. to call I will to of for back Scott

[Operator Instructions].

first is with question Leopold Our Simon James. Raymond from

I've want First, got to things simple. One is two I about. ask pretty

the explicitly thought sort relative thought preannounce, choosing then a of to quarter, of I'm consensus. of earnings the your given want trending more not of ahead got after you this And that. Just of I've wanted to surprise not into question just a this to degree result. process to but did conscious understand guide understand to the

this is Simon, Maurizio. Sure,

that you consensus, half -- at for be the it first we're off range quarter, half, would lowest revenue the at quarter number gave revenue February, million the quarter When would million. we $XXX be say and the guidance of did first for it's the look a look by. quarter first did gave We weak significantly if which the we to a if $XXX our in that that the in be results would you So we year. we say a

We to what that don't we if And the by on give quarter Street math, quarter, the could we quarter difficult we guidance. tried do the best at. that's guidance explicitly the thought guidance a annual give Now gave come we the give for company. back again, you but And first direction. we would

industry CCAP trending, of get kind on are the adoption wanted a virtual in I thought your in CCAP. really platform -- of understanding to a the you and and So timing of the terms terms of better virtual of where

has Just one you've with that had stated your vendors don't have of answer, product to any recently competitors set they had I for your other impression And CCAP. a little see context trials. a that virtual you and the

develops. well I So your sure that want just of I CCAP make virtual market on your how positioning as view understand to as

most but likely is Simon, will their that trials fully Jerry CCAP are it's We believe XXXX. do here. we MSOs. know believe in where the in information virtual we came in don't featured and industry, with have happen from, we the deployments core it I some

trials you're in? Can you many tell us how

don't front the exact in but in trials. I of me, have are multiple numbers we

is Yes, Simon, in went went what Jerry's as to -- cable. from in number, XX in the I trials, -- we -- XX on it's just Scott. up What I you'll cable from comments would from pulling that, say the note cable,

and of DAA increase in All CCAP. of that trials so combination a are of it's the those advanced virtual and products, bulk

multiple saying information not product hearing with is from only whatever that in are Xs Tier party they're these this probably trials So you we virtual CCAP getting or aware is are embedded whoever that with the globally.

as be embrace or to and the and will grow? you rip virtual CCAP that the expect anticipate you How replace strategy transition for do that adoption occur? do And cap operators

core. the many core it's of believe distributed replace. We time, believe continue have and may the And an the buy time. a as using CCAP they and will the to don't We operators going do they We chassis addition. chassis. the virtual choice it's be with distributed rip same At at as a the architecture architecture, to same that believe

Our next & Rich from Valera Needham question is Company. with

I'm would correct if your as new quarter than and is wrong you're $XX and case, if year from obviously sounds me like and outlook the full imply contribution million CCAP guidance, your the last quarter it first year core based was your -- -- it you're a So last revenue said that performance products, which but bigger $XX I million. maybe it's and was that's worse your saying you'd think maybe there business commentary, of for this now quarter for maintaining on

million just do see from new revenue CCAP in those of a you than to for Is quarter core outlook you And wanted XXXX? worse So thought than the expect clarify more $XX products to ago? points.

a have contribution our good do numbers the the and POs the yet, outlook to and fixed We to contributions give the telco the continue fixed new see we current wireless. telco. and material cable the product contributions, generate believe million. very the in in backlog or we're wireless roughly going more I'm ready of than category, We $XX have not but revised for from to we

you to last And as the thought. able couldn't ran time as it but you you revenue you'll because a into timing issue mean, had recognize year be recognize frame revenue? you that expect where backlog you in I obviously

wondering lead going just you you're gives into to get significant trials I'm you to now, you're trial seem what XXXX have that to the from since revenue times revenue. with So confidence starting the

products longer takes have We as do POs against existing which the the POs to well certify products. as

that believe of rest -- half will portion half we the revenue will first and the recognized the a of in the to be be continue and then the So year. second

Yes. Rich, it's Scott.

that is The have in backlog, repeating, to formed we those of it's the certain as against previously on would just the which other us wave we I which products think worth say off indicated a and of I are customers did and currently and to market we indicate in first our of orders. that is thing this that certification

and order we much it us get ship to deploy. for and the for then through a faster once shipping, certification, process begin becomes So to them

order sure ordered thinking. I'm if to all orders. million first be those quarter just expected, because beat will from now more of they've not quickly customers you're you're I'm and this saying to $XX point, a expecting ago, that the presumably, following same more but Not they able line you once you said was

of the getting telco products. from of and fixed confident series more customers. outlook the customers, And about expect we are more POs bunch we do a the of wireless a Well,

with is Davidson. question next D.A. Kelleher Mark Our from

Mark. It's

I to I make -- numbers. sure want got Just understand the

-- saying suddenly products a into the sharp So XX% up XX% pretty you're that Is around that sets Is the the steep quarter? of MSOs recognized? first rebound driving still revenue second coming That in that that being What's half. wireless the comes QX. back?

Mark, it's Maurizio.

XX% we So range to the half in be we're $XXX guidance confident do and But to said QX, year. still we'll of XX%. we we the in be I Because between million the my XX% believe first do in lower-than-expected $XXX for between million our believe remarks had XX%. a will

that's said a I the to we So a our difference the bit guidance. would of what little and believe tweak do on half second in back February, up be made that based in

And range, quarter at back not believe you and in for steep so take you as second the range if look range. it what can of the when terms we you that into is it's that

into going Okay. Were quarter that that were just trying out there any in are I'm on get to QX? the into ramp orders a pushed handle QX. the

why think out I'm trying stuck. I that's just into a little pretty figure should I'm to why QX. aggressive rebound. That's getting it a ramp

So QX. a it's year, years little slowdown whereby then and years bit our see our for our the Based best in this factors, would in and previous unlike better potentially quarter and all those have we QX -- -- on are when QX in than seeing we -- at do also is quarters QX. we that in you much better revenue a look we a based are and our deferred on QX, pipeline, our what revenue backlog, QX

in quarter-after-quarter, so you've sequential seen different you'll than past. what And increase is this year is what see a the which

with Marchetti question is Stifel. Our from next John

around full of how versus there half road guess, backlog of and I'm I'm but where keep to line can similar year, into close? at pipeline ask running year we're confidence as level much, materialize, issue a sight another quarter of sorry death we that, reaffirm comfortable last And things, year you come kept sort mentioned or what ran those is I and now your the get that year. that of did to see expecting sitting seeing having and didn't having guide some beating through. into the to down half we this to this with second ramp here we And not this second where guess kind two I and I truly because to we we this the of curious, here, in full it really Maurizio, comfort kicked level situation last of when looking

today, quarter seeing a confident three our and we time good yes. revenue get cable the that together, still are our do telco. fixed at we of question. stand It's on our range for where those will There we million wireless of and just we within No, to it's in quarters at to still of and us we projection sit year. monitor of back and pipeline also quarter, when -- There from execute the on Yes, our second do give first number we have look of million terms for to a for new optimistic continue to very -- we with that the $XXX -- are our Look, $XXX it's the $XXX we achievable, add new we're is we to that's the is items. we finished still the When we revenue. And to year. a $XXX guidance million. we believe it that plenty of where on that, again clients. either reaffirm rest obvious But will more the year, of today. or product our in we opportunity, revenue again, backlog, end our and the are goes conservative for what discussions are two We both million

relative taking to being you participate the are customers, on to to your and about reallocated those within you of you the to how around shifted play made Jerry, perspective that some of of of or And rest how we're just where some trying infrastructure from made the they network that's areas can where the I'm of to comment shifting you understand through if all, being that year the Are some up around at comments think or I CMTS. shifted other participate? the dollars and about in Okay. follow to don't going longer that larger that don't close? you virtual

know to course, have CapEx than accurately of that we the are year, ambitious networks more indication customers lower the know cable We a we We, not our And different is got. those our that allocating offer year We of plans some last build their customers categories. the do that's to how CapEx. in indication got categories new this have products in out lot year. versus last do

So the think look -- year, I telco if 'XX that's back about the cable, that of wireless, things areas, and it is for cable does Casa? I do step guess, at with fixed fixed backdrop? that? excuse whether other full like I grow telco, in then How me, some Or

Yes. again. It's Maurizio

This So wireless a revenue year, of if by it and and for it's cable. at was cable revenue look between year, new driven our you the telco. really and mix it $XXX prior predominantly fixed product million, was

cable diversify So will suite. be inevitably. the as to start But this year, up we our make product we difference lower

Morgan is from Our next question Marshall Meta with Stanley.

the chassis Like come to like it a known just kind expectations of segment QX. ahead large that come that to expansions terms when as versus kind just wireless you take -- from you of into? has revenue slightly kind I of versus customers mean try of achieve confidence of we DAA? to what but way, $XXX versus we deployments million, rough Maybe $XXX can still buckets build are kind a down maybe up million any their capacity with And question. in you different about gives it think there plans how the to do CapEx you reported can what at second of were to then of

somewhat, an guess, you And -- conservatism, kind know what enough? standpoint, so least gives year? that not or conservative now you that the just to confidence just that come it's Or I going was at just was it and back, of throughout incremental from

you we when four at revenue revenue outlook, first, pipelines look have So in our categories. actually all

We have integrated them the in CCAP.

and Remote also DAA, in PHY wireless the nodes. also have systems, And we We have the architectural in and including telco. core distributed fixed

we wireless we categories. only And this at new say we can point. in the revenues the of and all with So be it's material to -- we have have going products fixed believe telco that

the the at In confidence future terms to imagine it longer. of the into is are bones, for cutting we that this we spend, hard them, It pattern, for MSOs this the some -- continue a forecast. can this much of of spend with to model the believe point spend their outlook, to we our have kind

going you at a QX And a in back really to anticipated to we that We lowered QX be lowered was our quarter. low when difficult we quarter the -- it history. level look

line will with is company. believe that will And spending additional point, we the at the is what of to so that MSO some benefit again. front we that And be have our in the going to start spending

from guess DAA? the does pick of like, to -- I point capacity Are chassis are you it deployments that? of Or up have or integrated come as to and is, CCAP kind expansions part expecting you to

getting orders just license the at or years every not orders, in are also as years. X We and level They're single the quarter. are getting X we chassis last

they So and around are the always There way for have of there will believe or orders we groups, chassis every going the that's ports chassis nature add service it. the they other DAA. And to they go quarter, no network. the to in is When single do add to have that's continue.

continue. have will both that we believe spend So to

question with from Tim Our Savageaux next Northland is Capital.

to decision that What would opportunity at in would in. the those that you regard you're a if of much deployment? and break should a do question of is color I'm expect RFPs, you the are value as wireless, -- sort all lines And better were look I think, really me, to trying like wireless? that pursuing. have that to as mentioned, engaged be? funnel get combined XG what on I can target segments, give RFPs down in Jerry, know, XX appreciated. How be sense with cable, to your to those you or moving Tier you amongst that color that along much timing that's X assume you of would Any what fixed, we I'd

here. Yes. wireless Jerry It's telco. Tim, actually of a combination and cable, fixed

we the cable And on both of our related. and BNG RFPs the well type DAA telco-based wireless RFPs, mostly and as the side SKUs. XG-related especially as we have side, also in RFPs. XG-related So are have RFIs fixed And

So Tier number... RFP diversified The from requests globally. we operators have very X

same, general those in either Any individual and commentary those timing toward on And you thoughts on -- or be sizing not in all kind the but opportunities, move decision the of aggregate? deployment. that as they'd

Yes.

the sizes make to that get it. them. are big Some just it small It's to of mention or piece of we a a like sense it so doesn't need of portion really

question next Group. from Sarah Our Macquarie Hindlian, is

correctly, if of I in terms emerging backlog want new of million, So to increase sure a saw correct. sequential make this I your believe your and about that's opportunities, just looking understand you because I'm $X at I

seems -- you rank about opportunities. consider in you you're a there's soon maybe the can calling four visibility like see and them that's terms it's what But QX. to thinking primarily timing-wise, terms conversion that of the at of back in RFPs. And out too or opportunity. where dollar there I coming would be opportunities if you're helpful year, it higher the how isn't in least of much in And your your of specific some really those know dollar half largest buckets values in it terms So in of would clearly give really available I could

on in And want QX so going a well. to bit I terms what's as little in understand of

Okay.

need half -- to and there's opportunity to the is in opportunity really foresee POs large big it's out, we half second lot And really we our to of is of in for execute. year that there us. wireless those that's a -- where second advantage And what are we wireless, of And year. right potential when a really be ready investing look of in for we very the now take the us, radio. the So it's in

projecting we're And business. the within will slowly back. cable that, come but will Given back, cable what come it spend that's

Okay. of to behind DAA? of it's in on CCAPs, I opportunity Is That's second want sort opportunity. it sure the very that want next I'm year virtual just but also terms that CCAPs? I wireless. Is follow helpful. virtual of largest make it to I up understand assuming

compared the lump telco, wireless -- significant the including is believe the are and well an as we CCAP opportunities We real, all smaller the radio. category, fixed packet one think they we nodes. they core as that's especially the and DAA BNG kind cores, virtual are but DAA is DAA of to as But And that opportunities. that opportunity

is -- makes quarters go. indication in long continue then timing? to Have idea That for the more you And process take terms them Do I'll to those sense there one terms and on follow-up you in they or commented to just how order going for of could me. let customers in Do this be acceptance? have could be from years? to be this have any you any

a to portion recognize of the recognizing remaining at continue we half the are of second the looking year. and that in in Sarah, QX

[Operator Instructions].

have to over would back we turn of the management like the question-and-answer to session. call remarks. end Okay, our I for reached closing

the quarter. everyone Thank on our forward you you today. we updating to joining next us look to progress for And

Thank concludes conference. you. This today's

You your may your time. you participation. And thank at for lines this disconnect