Casa Systems (CASSQ) 7 May 222022 Q1 Earnings call transcript

Greetings! And welcome to Casa Systems, First Quarter 2022 Earnings Call. At this time all participants are in a listen only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jackie Marcus with Alpha IR Group. Thank you.

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

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

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

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an leadership infrastructure champion our for important Systems agreement as and in in Verizon deal, the operating into of supply computing, mobile deeper growth Diving security situation expected States. address by the will cloud-native the core core has our been Casa our this well some as position edge Asia and ecosystem. of United by and key a technology, in starting current COVID the this environment, recent which as We chain with is milestone potential XG XG believe a cloud-native exacerbated points, capacity we validates reduction remains challenged related business. gateway production XG these little Lastly, for and the as based our software-based announcement ongoing further

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news, since access deliver native nodes the announced subscriber a with core the of experience. virtual Communications multi-gigabit to and addition the year scalable and Axyom In will beginning architecture is Verizon CCAP broadband that superior Casa deploying distributed we capacity that services fast, Systems' cloud Rogers

to announced attend to We capital we our core technology where hiatus with Congress are cloud-native R&D XG the more deploying but to needs are business, showcasing To importantly, Mobile and a current also from due processes. excited of industry we our and in demand, XG our to Barcelona solutions. COVID, leaders, after into business World customers, investing two the our our of year future partnerships meet meet we people end-to-end growing the our are our in expanded

footprint our the all see investments on prospects growth our are and significant prudent segments, What expanding the given for and look growing sharing forward and these across these interim software we clear we wireless in updates. strength very are We our during progress in is horizon. is pipeline, backlog of our to that the

the In customer addition wins, including tractions lines. also product significant in are existing to getting product lines, customer newer and our we all announced these

attractions. with significant open enterprise investment have very but RAM businesses, see our pay some our market Within additional we with cells products our quarter. of only technology not this addition We on in new soon. We'll small advancing mature these new two are are in products, the off customers and also from the point a beginning view, of making progress updates to XG more XG customer wins technical and and for

deployment worldwide. the with our core, cable continuing our together CCAP Remote virtual multiple with are We nodes, operators PHY X of Tier

customer in end-to-end In addition, we our also Remote solution. trials for MACPHY are

we the XXXX in grow cable broadband MACPHY, our that Remote our Remote both support are and business with a of are and in to position PHY We beyond. confident

States customer Europe base We in we are deployment NetComm. in also acquired original extension our expanding fiber the United Australia our beyond when and

we customer will will business, paying we future. the XXXX We management, in wave enhanced is investment wireless higher with the beyond. fixed fixed near support, into the that believe continue to in in XGS-PON XG-millimeter year. are the which announce counts wireless and our continue In growth momentum and in this high-power With network port see our we next segment products targeting off wins,

All of the the early of result are long-term of development now years in deployment. stages product connected early our of many with along cloud successes, is these that strategy

are products. which are well to with running the excited cloud transformation. path be are recognized We on network on time as leader that industry an off-the-shelf cloud-native an important wins hardware, such we connected software cloud-centric appliance-based as right recent our strategy, includes our in customer as at The validations

designed software mobile network by revolutionize function potential and strategy strategy This customers fixed for strategic are path long-term and strategy to strategy the with as the on telecommunications cloud-native Investor by outlined we the company of reposition our architectures as the for development to our cable, and in even aligns this wins with our the product Verizon, virtual early such at to future-proof, Importantly, networks. and has industry recent significant network chassis-based the legacy are making a partnerships. disrupt solutions transformation customer encouraged validation Day. efforts older-generation the partnerships, the with combined new speed significant reflected November progress or to our we future and our We we as

a Now, year XXXX let's to reiterate Casa. turn remains I that for to the building quarter. want first

strong challenges. are the by to backlog, logistical be we in clearly for also significant our impacted chain While are we products, demand experiencing and continuing ongoing supply as our seen

of have those down at For reduced to our shut example, capacity been or of some and operate factories our a forced recently. suppliers

completed press to reflection caused in are or ship seeing. as our we This which in our chose demand significant chain, existing headwinds to have year navigate today, We disruptions negative our business of release decision working the these That customers. to in products saw we our ability are a fiscal not said, remove and supply the to guidance. is you

However, revenue uncertainty; and reflect supply the we namely the have new currently persistent the that financials. some level tax of and overseas, suppliers; implications cash it partnerships demand; reduced our does the in could on those may on our the as have address our COVID-XX impact facilities changes constraints Ed they law regarding of and current will and ongoing pending Asia our impact revenue and recognition shortly, chain matters visibility large of

the While to many remove previously at likely I to are too uncertainties have stated was guidance guidance. there range, we simply achieving of just prudent end the the as low time do see it our this a revenue at felt outlined. path formal we Thus,

year. backlog I We In to will with the such our customers to can, we a as are the providing note fiscal commit until have interim we guidance our and products. would you across to also however working qualitative over to basis as updates meantime, all of many have time orders we the that we like large for our reinstate the that visibility fulfill

revenue deferred and the backlog our Ed quarter, give significantly first you details. will the During increased that

sales of focused such, on business, are strong future and in book As we are our seeing pipeline. we our building interest

chain looking to recent beyond in stage on constraints performance the and these expected and detailed setting the remarks Ed focused are a discussion for regarding growth and impact effort his will beyond. XXXX in We provide and strong future supply of our current mitigate are more situation them.

we to expect accounted of for quarter revenue first momentum million with quarter. the that of by booked our a and Compared number had XX customers, and This Let's our review total only Starting $XX.X XX% our across wireless the product XX wireless continue now wireless, lines. during we customers our first revenue. grow. the total increased of to we have will this XXXX, of wireless

and revenue cable to revenue was in our first total quarter, of the for the million cable, quarter represented XXXX. quarter first first the $XX.X compared company of XX% in to Moving XX%

to led shortages continued chip segment shipments. to impacted global cable issue, Our delayed manufacturing be by which and

previous be we continue our a expect and result. we cable see to that shortages, growth during flat supply during stated will As call, as chain relatively XXXX earnings

we percentage of the to Finally, time as is have down that today year a certain telco the Casa, million, In feel and has this elements, markets new large posted the beginning multiyear and is uncontrollable quarter significant compared which I first wins leader of into early by summary, engagements dollar last $XX.X financial the is of cloud our the macro proven carriers cloud multiple in impacted X performance are the transformation believe addressable total now that just connected a with And a of period, the technologies. We with strategy we have up negatively that percentage number being leadership Casa on the accelerated most points in industry. growth basis, been large revenue and will fixed by our partners. while short-term optimistic but a enter of we validated telecommunications revenue. this

industry. executive you our new experiences introduce brings on call Officer, on and over software the has to join the case able Durkin. strong years in to Ed. first us us, and would With weeks April to Ed. Chief over said, that few weren't in call been our like a welcome in his He to with company. I Ed Verizon of we I'd Finally, Financial to XX XX, already him contributor financial turn the Ed like

before Casa And And good I my Yeah, I'm Thank joining everyone at first afternoon! for I my excited I to like forward and transformation, coming today. weeks. Jerry! here call launch good to say into call you, over very many earnings to us afternoon meeting Systems company's actually be would pivotal presentation, this you to our first on look this of time the in

discuss the quarter. said, the that of let's with So details

we're to benefits a our Jerry think recent growing our a that ultimately products solution. continued the of we'll by our prospects evidenced comp quarter first control, win distribution challenges on new team demand as timing on strategy XXXX of the been were during by few And a XXXX in you our comparative the and due headwinds experienced chain Verizon at number cloud-native major solution, product for So we of I we in since said, to some to Verizon sales first, of go-to-market broader know With large many difficult to the XXXX. and Jerry and and conveying large and in further large orders partners we supply are software QX, and beyond due QX, similar on principally XXXX And go-to-market also interest including the future growing from that quarters result basis, strong was execution seeing are mentioned XXXX in a see a our macro QX, last very related. seeing Verizon. as that pipeline, impacted November. have from as backlog significant of QX, significantly

of in repeat contributing we important may and not year-over-year and these recognized a comparison Specifically factor last as first it's items knew for software order we you a the to we have while an And year. year, in last in a the large QX just QX you quarter would NetComm revenue decline. of recall, order year sake large this know cable also reminder of

QX, impacted lesser Our to anticipated extent, also revenues due the QX in and this modest the with are a shortages software mid-March deal delays XXXX. the XXXX we – revenue originally close of component to as timing our revenues by to QX Verizon shipment in XXXX deal,

the result, were which and year-over-year $XX.X in during continues our some provide decrease. ship million, or of operate competitively we were you contribute a revenue to time, down quarter suppliers during capacity products the quarter. a our component important. unable shortages revenue, complete strategy forced software hardware or came this cloud to at connected as growth. reduced total we're build And quarter, Casa's portion So to finally, XX% the to making significant from and this shut great In business appliance progress APAC and will know At of is regard the some the a backlog in the of that revenues to orders is hardware our long-term record thus first needed at

close with We and announcement quality of outside deals and soon April very competitive slips a that strength and do differentiation, validates QX either XX expected of or deal to also our offering. continue Verizon closing our of certainly well the the few to

XX% and margin is solutions revenue. the wireless product Verizon XG as first our of expect breaking wireless and I'll discuss from time revenue improve little details higher multiyear contract software, make segment for Related our we over lines, continue XXXX, to revenue the in purchase help XX% total the transition our will QX for into hardware Going to do with down $XX.X bit. detail across wireless this in we from greater million, accounting a to QX, wireless, was which down quarter

XXXX. to revenues at cable, million, cable in QX, next a XX.X% Turning came $XX.X decline from

finally, had QX, it's revenue lack with again, not to more these our in some during distributed While Rogers we bear announced our but QX, point, the there that recently investments quarter, telco, in we few orders decline software XXXX million a of QX, shipments of large a backlog finally a telco us we came vCCAP $XX during increase our moving offerings in the decrease And XXXX Communication supply $XX.X XX.X% from great contrast ship confidence in was gives XXXX. solution this about Casa's will is to orders revenue that did shortages. QX, fixed XXXX. more architecture, our this cable to due within and delays were in to were access as future. that dividends million, XXXX. mature some to deploying chain backlog And we businesses unable There demand, at where And software to had in and with due

million, QX, down XXXX. of at $XX.X quarter gross the in off compared gross Moving XX% for down revenues margins margins, to came GAAP to

in margin first in gross of revenue XXXX revenues at primarily percent decline revenue, compared came as a sales lower the with in quarter with issue software GAAP percentage due 'XX. as of the to – to this QX, mix XX.X% Our

as make had is long tax a tax the a to shipments expenses. discussed, is adversely to now U.S. January QX, software operating and unusual million. the we the QX line. story at relatively and the expenses place top provision operating revenue as story this expected operating statement impacted really of R&D a this chain largely and is, our To current expenses, in affected some gross expected rooted And delay which to you tax law in seen loss XXXX. back short, all million. QX $XX.X had due to which related XXXX income revenues supply the anomalous impact, flat of Turning as margins, know operating a down Again, line we flowing loss that revenues, in took We in change year-over-year matter on X, of GAAP deductibility were and finally $XX

the strongly R&D repealed tax As this near of U.S. deferred, are major XXXX. and Casa and most tech impacted who change tax a over to impact anywhere is or on magnitude tech indeed company for all companies, other are deferred law, companies Certainly only change result tax the repealed purposes. have nor law several matter the not capitalize amortize experts this of now this by be advocating expect subject in in the tech will expenses to we and this we be years tax later or

change $XX.X during provision recorded pretax $X.X $XX.X X/XX, loss tax tied covers with deferred However, was tax were assets income this and to That million provision statement. expense valuation and on by this, of quarter million, required the how this anomalous and we first specifics to million the of of tax deferred account tax repealed tax we as including our law allowances. such of for income a of an kind it not

strong year-over-year platform sequentially invest sheet, a QX, receivables cash up quarter have million in net a the cash primarily refunds over and us driven balance received Verizon balances Verizon million. and cash inventory with receipts on our $XX.X our cash million, It for working balance also we provides At we needed excludes tax cash just payments ability balance and us three we million received cash $XX is to gives excludes up which $XX liquidity debt million, we I programs. in year. QX go-to-market $XXX our license equivalents, $XXX.X million $XX with equity to X.X% on ability highlight the balance in from by also capital XX% of stake and continue we from million. like it increase, further excellent over for sheet, strong and strong the XXXX. $XXX.X select. to debt had which unrestricted in or excludes, million to receivables just and slightly And shares down XX/XX/XX of Turning from tech the up pay And in to would repurchase of months. receive end down gross April current as was to wrap $XXX.X we'll as the six another the next the last that of also this XX to covered

an as customers, innovative in ago, per the to but to really Casa's marks call an Verizon, share stock incredible in for Verizon $XX milestone industry from important at terms Investor potential $X.XX. transformation company Casa's common agreement, million we unique weeks validates, Verizon our as to that that compared create terms with of partnership, includes million legacy small security week, leader we'll will announcement, have exchange during of in which Turning critical TCV our invested validation opportunity XG comes additional not this cell to on continued a tech. Verizon's revenue Further, Systems under be a of With tech outlined strategy a $XXX of financial cash we industry price with only $XX shift existing Verizon strategy and transformation in we'll the multi-year that also with XXXX our announcement gateway Casa the enterprise competitors we and last cloud-based the we and mentioned our shift commercial and demonstrates, like a pioneer November. endorsement QX, a expect and of XXXX, X.X deal purchase accelerate shares of which through in new of implication, to the building And cloud-based shift strategy. million last potential, and the Day streams for received a orders payments few multi-year a in agreement, committed million approximately

for discussed, to about contract Jerry guidance we excited year. this other remove win and extremely have but wins decided temporarily as are Verizon the We financial

these phenomenon While we've that opportunity tax And we year impacting chain have story regard deals provisions, finally, believe and said, and uncertainties outlined likely to supply a uncertainties the with our simply other circumstances, future we Verizon wins time to deal impacts, as about an there am over guidance, these recognition reiterate just do end software to we finally, this as earlier other cloud-native want we we do future on before Casa all and for updated believe did questions, be previously place then this tailwinds risks deals. many moderate. and considering at our to bigger all range, is that supply I once guided other there's XG increased projections. anomalous future pipeline complexity of our prospects turn for too to growth contracts financial transformation achieve assess the of call low begin large taking this And many while that Casa. our And the chain mix there the further, in this jointly category cloud time, will Tier them. in are global are This announcement us worked we believe are software capabilities. This out legacy large are these And class we and beyond the a opportunities our in with of sizes leading the set a market past. will reaching and actually on working deal succeed XG ecosystem uniquely look, partner expansion my transformation them, reaching we new in Casa huge not them for now cloud- ecosystem we is are high software working clearly is And opportunities within revenue fact partners and there today; belief to new guidance is X, annual like forward-looking year leading elevated how And the Verizon Verizon, the expect These major and interest will annual at our unlock today. by issues the helps recent we very and our a with – experience was given sales together us to provide you much This heartening. XXXX driven our software with and tech this as out revenue things and is a this will rooted opportunity hyperscalers; from or new for and in timing about endeavor look, expanding these will actually Jerry software at them globally the is I important, of market cloud-native prospects the cap is for actually succeed a partners native on excited Casa. focused cloud aided that I I and in pipe seeing transformation new – I sales significant firms. take successful opportunity by here later are of

just So know all. leading a I to has these are closing, hope a and the some, couple provides team. context seeing indicators am real of this good assembled tremendous you In Jerry

tech We suite. platform product and a have great

for profitable been partner with future We stage our TAM our expanding, XX. in and are validated sales the by the the setting ecosystems backlog and of software best growing announcement cloud-native pipeline the our strong, Verizon growth April have our capabilities with sustainable, industry

in and and strategy we to on We the accelerated have growth XXXX enterprise right path value differentiated drive working, is beyond. are and this resolute

with I'd over back that, open line operator the to questions. call So for to the the like to turn

[Operator conducting you. Tim gentlemen, first Thank Please Our your we comes will now with be Barclays. from proceed question. of Long question-and-answer the question and Ladies a line session. with Instructions]

if two could I Thank you. Yes, questions here.

could complexion MAC opportunities a the know on customers Ed you there of little little a that to position miss this go those on area. since they related First, in any the most the then lot gone a side would is you more, cloud-native orders the other us that, like win in little – in grew, the little that Can guys relative seems way? and product those you business color talk bit think about component know grew bit much has kind just you are talked a more question to give the you want at others a on than have how And industry. backlog, which the Casa Where it the severe to to you is, the they any reason color thread geographically? if might second competition you where the a different common they customers? And know or give on of way Verizon just you seems

potential line So could some potentially of to going that you that getting components the front when in fulfill these customers in talk backlog, about to larger risk to it might of be orders? defensibility comes of to Casa the that

especially can supply the on answer side, Ed first the answer and XG me the backlogs question customers, chain to let the the of core part challenges. the and Tim, about

You know engagements we XG and space, have several large really in Verizon. of are different there like types just core ones the

We we have our cloud-native are our deploying test multiple basically cloud-native of validate core. to type engaged with of medium-sized solutions. customers those or to and testing And also a which the companies are already

this private engage. We to only end-to-end tend to actually And private final enterprise category very that we category solutions. end-to-end to category our and also effort provide in have partners and more but our we cores. mobile multiple not have have small we selective We given to the of with we and network cells core, networks, are want solution, smaller that for know – ones that mobile and cloud-native carriers are working than you in the can. be kind deploy do we O-RAN it takes And help them

give we have well. Ed, very can who in handle time. the engaged partners We are comments. Ed to been And you and need partner mentioned, do so but selective large many, us maybe with in single can have with limit we as a are many many we at interested space some as working that how also we

to just still with Yes, need sorry I'm mean do Jerry, Verizon. you lot things, of the development yes. that I timing these on you obviously of have a

be could are of that these So uncertain possibly? some year this is timing more or in hitting this

deals do closing XXXX. in We expect cloud software more

And thanks. chain and Okay, the Ed, on please? supply backlog then

Verizon of deal our is payments picture and Firm we've million. deferred excluding reverse now about full forward that in total up. million $XX revenue about contract at value forma look kind that and $XXX at And million; at sure In cash new got if revenue components order, and deferred backlog, that of if Verizon, allow obviously balance meeting. Yes, and the at XX/XX/XX, it $XXX sheet, million, committed revenue Tim million thing was us closed, was X/XX/XX this announced to excluding so it's is, again, the to million. we is is it deferred backlog, $XX.X from year looking XX/XX any of pro X/XX/XX future $XX.X QX for you Verizon coming you $XXX given QX, at

dollars deferred or revenue versus in at around of it's backlog Verizon XX/XX/XX. of firm of $XXX and So million X/XX/XX of revenue, kind so deferred backlog and total comparison a $XXX at million

So Obviously, Verizon to on a contract. increase. us pretty execute requires sizable it that

Tim we impact saw we As doing on mitigate business. to impact the look, manage. to dynamic do weekend delivery, are that's question that where to know have on your and this and supply year, that process and shipments chain, so nights, a continue. working the best the revenue and biggest it's in drive working suppliers to challenges subcontractors nights We're hard, we on we're component Casa's hard again, the optimize can ongoing revenues. But and do We very APAC, you weekends the probably second

you. Okay, thank

Yeah.

with Leopold question James. the of Please your question. Raymond with comes Simon next proceed Our from line

much. very you Thank Great!

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down with firms, but the nailed working haven't of the rec are for accounting we software. rev delivery really our that We

problem is to cash revenue, to customer we what and get the we at point. willing rev have, really we basically committed no delivering rec the have but will the We the this accept question software the is but

to we No, which is related revenue, in margin impact the that the other how me. makes of do you're Sure. sense activity? gross though think what about XXXX, that with then doing I Verizon is, guess this question

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are it depends going going we revenue what you So That's ship, determine recognize on really the and to year. be the able software the to ship. is we of margin able to this be going know are to how mix after much to

for the then Casa And want understanding an I've private the sure networks, enterprise award. impression sure. XXX% for my is not Verizon XG but application Okay. of case use I core just wireless got that I'm to It's related the core to make

I So on more see case can want a little for the color you to if bit Verizon. use provide just

Yes.

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just some But you Thank you for opted know a not you you you should last that. preannouncement to is, just I Great! type you're for expectations, why talk quarter? year. the not more philosophy for preannounce. to but didn't and I know debate this the guess explicitly, opted this to you is And guide of question, if but on preannounce, a quarter your Could one about miss consensus make that going argument I of there's philosophical

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for taking Thank much my you very questions.

Please Our line Garrett your Hinds from next Macquarie. proceed question. with comes of question with [Operator the Instructions]

so Thank much my questions. taking you Hi! for

to held like disconnected in just sort also you service It guys count, diluted Just that the a should grew. It from share seems color good revenue. the for dynamic, fully well of actually of share housekeeping couple understand just ones. be do count? And and how product would then the have any think we about

you to want take do Ed, question? the

services it’s not services, and huge small, but mean in a maintenance support Sure. The component. it I it's other service up relatively revenue,

count, seeing to You the XX. on does is the share Verizon have $XX of provided shares you're any to know million. That what not April as the there

included given in X.X going I and million shares to you be forward. there the know were in outstanding diluted and effect obviously XX for on they think basic sold EPS, shares the those QX, of common will share. April And Verizon equivalents per diluted have the we loss loss in EPS, the because of we're diluting effect in position include would a the don't stock

So will $X.X another $XX as so forward. and March. infusion million kind form will XX, equity end of that of a April Verizon million was result the what was going shares outstanding or There of on outstanding the of at basis be the

about Thanks you that what most curious, enabling just you. then for are much. cases very use with Thank Thank portfolio? broad And excited XG your you one.

no metaverse. XG software, is applications, which no data dispatch before the we and with and centers things going no real-time and to things edge second our related. they their thing gaming their process latency require the about latency, the and are know also that back the which all video, really control-related you low computing again. For excited And out security process edge are and real requires high to And time all the edge. operators’ the Everything mobile at right very traffic we mobile traditionally enable traffic backhaul to are that

us. another that's opportunity exciting very for So

Thank you much. so

the further There I'd queue. call in for to to over closing the remarks. no hand like back Guo are Jerry questions

us thank today. joining Well, for everyone you

are physical leading solutions the and supplier networks. right software confident We accomplish and track mobile, provider infrastructure – for to that cable of cloud- fixed on we technology are a our native multiyear transformation into

backlog on strong; strong I we is growing our the and Verizon deliver these well remains indicative can into growth pipeline our our on phase initiatives sustain forward of revenue our of Our developments and track next progress look the and believe the is future. to you. you we updating with product partnership. Thank

Thank conclude teleconference. your and Ladies does gentlemen, this you today's for participation.

lines wonderful this You disconnect your time and have day! may at a