Casa Systems (CASSQ) 7 Aug 222022 Q2 Earnings call transcript

Greetings and welcome to Casa Systems Second Quarter 2022 Earnings Conference 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, Mr. Michael Picariello, Director of Investor Relations. you. Thank

your begin presentation. may You

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

and Durkin, If is are release, may be of of Jerry CEO, press will our Guo, you our With being me IR Ed from you did our copy obtain receive the of our not on on call earnings IR the website. website. our it webcast CFO. section This a today's archived and call section

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

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

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

redo I’ll XXXX updates lines, access provide in XG to opportunities us thank in and XXXX, some made and all wins second progress our also product cloud fiscal major customer comments in CAD, second earnings joining devices, update new quarter provide as well covering offerings, new on our second today’s addition cable some dealing call, the on some software afternoon beyond. insights results, and our On for XG, and mature or on the quarter will half call. into of for as call Good our Michael. earnings Casa’s I ahead to you and Thanks, last on year May. Casa

As we able Casa’s you successfully, for solutions, our trajectory cloud during in saw the native our software press were release, to quarter. positive continue

However, quarter as constraints second chain financial expected, to supply weigh continue our on performance.

quarter year, we and improvement relative year second the for sequential second below have months in period ended results QX, the June XXXX, XX, results XXXX. revenue the in in and quarter, of quarter operating loss prior to incurred the again some the six this While first an same from with were

suffice are his control, that operating comments, Ed first While the detail and drivers it XXXX. QX financial the working and cover will in address in impacted to matters, results half to all financial say, hard we of more results within our for

have profitable the in objectives. us and to in steadfast our results, in the right actions And our beyond there positive the that many our near-term quarter. revamped path. is remain on growth accelerating long-term also for strategy We developments financial XXXX were Despite early our conviction course achieving

announcement very strategically, by for eventful a highlighted the XX. deal was QX quarter First, Casa, Verizon April on

Verizon For encompassed announcement things. have on calls, those may not the who earlier been two

in equity investment for First, X.X% it for shares. results in a Casa stake Verizon $XX a million minority

software major mobile to or native for deal XG of it includes for deployment. computing core consumer Casa’s $XXX contract addition, license a million for public value In total edge cloud up

position our solution. milestone Importantly, as go as transaction data solutions. very validation XG leadership This today is native great technology, computing in in this XG after well edge market comes important Verizon alternatives an core and and security core cloud mobile evaluated Verizon the all our of this for other and forward strategic strategy for

say months Verizon, and I Verizon and several strategic now to track. partnership our am in pleased impact is with into this excited are on business and going partnership everything I’m its beyond. well XXXX, that transformative very We about our and on

for geos, $XX.X in the QX, booking across encouraging quarter there end awards, XG many one Second, specifically, reflect million a metrics, an on customer progress several other device orders as active bookings our of quarter. quarter, was purchase nearly These including important from MEC some million U.S.-based for increasingly strong very during CSP for million the the all during business underlying of $XX as $XX Verizon’s well from bookings access public products. quarter, order

$XX billings we million, have paid, also and the $XX which in strong $XX already We Verizon for $XX the includes billed as have million. million for paid July, of expect late be QX of QX. later the million been remaining This to in to quarter

It XG for $XX.X was over supply did challenges. we while note GAAP XX% Finally, million QX core that recognized revenue QX, this to only is in XG cover in total detail, shortly. bill to greater from continuous important new of in for QX million, $X million chain the Ed revenue up $XX delivered despite core that, XXX XXXX, results will software sequentially, Verizon contract already Verizon, include QX. Again,

cell with with expected million in closed that we be on to our radios, networks technology lines, product and with color mature now providing a I Sub-X call, to we excellence. cloud $X.X report mentioned cell pleased and add and my radios during radio product both lines, small to delivery following. and the XG, some this is CSP a XXXX. cable for further highlights validation the access earnings news XG-X Now, our and orders of CSP. XG I’m to in May our product CAD. software can Tier business, radios small have We’ll when approximately we contract I’d comments good XG additional QX new would and RAN XG, the This X a large more our like on share signed Starting

CSPs able to be to and Tier more pursuing share other We RAN are with even quarters. coming in also the major hope opportunities success other X

their customer Telecommunications Vietnam I making cloud memorialize wanted to we a or May, Group, VNPT Turning In also a software addition highlight Casa is to The cloud Posts software demonstrate native our solutions. our Vietnam Verizon, MOU, MOU announced selecting services of network of progress in planned with to services with Casa Vietnam. and memorandum VNPT. growing understanding, in offerings, entered other to engagements for next-generation provider. telecommunication leading software our and that was provider order that success signed VNPT as in strategic a digital the with we’re

Casa’s core to power Axyom YTO digital its network in XG deployed its industry-leading cloud-native Communications, announced XG transformation, also across We June, service Malaysian provider, has accelerating Malaysia.

router for Our sales product native core MEC our cloud line pipeline as is and well promising. XG cloud as BNG opportunities,

We on XG applications core, provide BNG native as benefits our chassis-based router XG product. native to many BNG cloud wire wireless networks, to for land working Like replace as core other are deals, well as XG our core our the currently same include other cloud that traditional native BNG can networks. to cloud our cloud routers deals edge cloud

so is of X basis, are deployment, separation router a cloud faster with XXXX, partnership well. coordinated geographic cloud we And data and to redundancy cloud also Tier X partner, multidimensional agility able and QX, and large announce that to have with joint service BNG As scaling, of with service market with expect and high are some leading in native plans the Tier MEC initiatives a new and and XG assurance distribution integrators. reminder, partnership hyper-scalers latency, the the for edge providers wins new Including to announce in deals low to new designed partners, control solutions. go offers time-to-market. a network a software and cloud be some year act BNG both, CSPs and a These later this as throughput, public and these CSPs, system sales global for we with on our expect core later

X to turning core, we as line, with continuing mature product of more with our multiple Tier our are PHY deployment operators. Now, native our remote cloud in noted our CCAP nodes together cable May,

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

PHY months. We are our interest customers to the leading more remote last seeing remote and go to in few from cable MACPHY,

MACPHY, the of broadband cable We’re be return need with our to, hopeful growth to we providers position react support to that, cable and increased coupled that and will XXXX, dynamics both competitive remote PHY business remote to in with in a good beyond.

customer beyond wireless from extension week, States million that for Finally, our in receiving devices will regarding our product customer notification, fiber and the original and base products this United access our line, fiber earlier a extension PO We a $XX in extension received expanding fixed Europe, deployment Europe. are major be we in Australia. we fiber

XXXX, higher are making XXXX, management, provide will next and port with which and believe on and our us offerings generation opportunities wireless working we see and and growth also fixed with area also fixed this wireless products beyond. XGS-PON momentum beyond. we in in business, enhanced with renewed in new that new In we in prospects, both support, should counts progress We’re

to want continued I supply Lastly, address the issues. chain

suppliers. quarter the when some chain will will we our visibility today, the impacted through issues predict, products believe source supply and on hard It resolved. that QX. again, by for particularly, from components issues we supply Asia-based challenges, chain were, results Our of with be precisely, to Based COVID-related respect is chain to supply continue,

or we early that hopeful see some will to XXXX XXXX. are in late relief We begin

for period. connected I’m we Casa recognize thank in transform adjust with working software also stakeholders In work we cloud as we’re all economic these chain and cycles business commitment and are thrived, are to suppliers of confident while many with issues summary, throughout our would we working to now into to challenges. past, navigate through work, We I hard near-term economic we the uncertainties environment and a hard inflationary control Casa, business. will, an get the cloud supply COVID-related this through has and similarly, in focused today, costs. support us our and of like their

undoubtedly, We’re, foundation, transformation. a building our solid strategic through

are beyond. year, a growth next and We on trajectory,

large, BNG market and now I’m our will pipeline I profitable, growth. strategic, the pleased and native XG call we new to as believe CSPs, As I Ed. core with router for software turn stage pending are partnerships, delivering long-term native segments, growing setting such rapidly growth sustainable, major cloud Ed. and for we capitalize the over on cloud

on thanks this And and Jerry. afternoon. hot Thank everyone, us joining you, afternoon, very for August good

native for TCV overall quarter very software fast the minority Regarding start deal as million for his schedule. for cloud in value, details mentioned and off the the up is an comments, positive $XXX a the with to announced the with quarter, with perspective, April on $XX coupled licensed Jerry MEC Casa mentioned, with Jerry actually as the QX Verizon financial Verizon, was SA being And actually and Verizon with from XG eventful major as equity a million four-month-old quarter, highlight partnership on of X.X% everything very investment to XX. from good

for to bookings beyond, cable, up growth had strong in XXXX of million in cable the And do but also revenue $XX.X for XXXX, reflects, be approximately or digit to the reflect believe XXXX, essentially, over from contract. QX, ASC-XXX. drops XXXX, the And revenue the the $XX large the which be and Jerry as many in deliverables, we as million revenue business expect increasingly did quarterly fix as that’s under POs In as $XX but revenue and $XX.X its XX% and with QX, single Verizon for chain TOs, Jerry of forward, to be the QX some on $XX.X in million revenue dynamics. were across and XXXX. orders in Similarly, QX, obligations we recognized revenue up and recognition ship XXXX, million approximately ahead from $X a $XX million, including QX, in including CSP of $XX.X backlog. to our for non-cancelable, million U.S.-based QX, QX we Those only with non-cancelable, this million from unexpected had of down competitive And Jerry flat lumpy, Verizon paid we second down many results bookings, from customary down Verizon to revenue chain million. coupled of rules QX, due we due delays. supply XXXX. in we QX, XXXX. bookings received period orders, $XX.X include including $XX.X GAAP years, booking format, XXXX, mentioned, wireless during in we the in ship, all $XX.X into QX, which low to $XX these or we and XXXX, million which $XX.X fundamentals for finally, good at QX, each from in in in XXXX to which revenues for down end that occur the access Jerry for POs QX, as GAAP million, and quarter full were mentioned, noted, As GAAP Verizon the strong went from quarter, we one remainder quarter. million total go most good unable business complex in underlying had while And million Jerry of in mentioned, but device That million planned and product get will billed billings active of revenue, had from was QX, issues, quarter which the for the at recorded telco higher the in of for actually quarter of supply the are remaining than in reflect products, provisions additional is recognize continued contract call the Verizon had, Breaking million reflect XXXX, QX, code our an nonrefundable factors metrics, billings revenue will term came with, those revenues nonrefundable for mentioned, quarter And QX, during Cable XX%, backlog QX, order compared million, about up XX% over with being QX. QX, came in lines GAAP revenue XX% sequentially, fully quarter. over we familiar across down have to of And can $XX.X we $X Verizon. performance same XXXX. from software the as that paid also in

remaining deferred much improved picture unbilled million, $XXX when $XXX at with to which million the is and approximately from for TCV as Verizon’s value, consider June overall acceptance, XX% of deferred Verizon factors backlog in as revenue June million, increase future XX, approximately of macro backlog XX all revenue, Finally, we’re you from to as subject condition of XX/XX/XXXX $XXX an XXXX.

is at revenue to quarter GAAP percent a million from gross of profit, gross the down dollars Moving gross where $XX.X in profit revenue came at for a XX.X%. GAAP margin

QX, to well and issues cable than charges changes to margin mix the lower as due a see we future allow related margin to sales as estimates going And us historical $X.X been end million for profile. mix of a revenue if back a or non-cash some result we within revenues. margins gross inventory and get margins, cable inventory charge had, primarily software extent, life other a QX, million, gross of million, wireless inventory XX% With should approximately and of forma basis, improved revenues, $XX.X $X.X you in and with have that items, expected quarter. would revenue, in as the results on better our And pro that gross with to we some warranty announcements RAN gross non-cash exclude higher look of as expect approximately along lesser forward, factors, margin of to

QX, And now compared operating to capacity XXXX. go-to-market a expenses, $XX to our our well XXXX. product in to expenses functions. $XX.X continuing the as across million fact lines $XX.X QX GAAP are in business, in flat reflects Turning of in to as relatively million was and we distribution investing with QX offerings, as that million, all it increased invest operating It

was estimated QX, levels, income operating higher non-operating of expense rate including the higher in And complex was a just within among of will, indeed, end. a second quick and occur charges, in $XX.X similar by we resulted taxes our $XX.X $XX.X to significant a change, operating factors. for about XXXX, million offset yet with year the in tax And annual the million. inventory QX XXXX. loss P&L software tax the our Below been the in year, our of was spoke an amount update, beneficial actually with QX, a having has tax tax That the XXXX. due QX and tax expense change half the as provision, the like effect, XXXX, in not million finally, R&D we in versus was are line, to benefit us which other income effective our I R&D revenue income of to relative tax Regarding expected, quarter, quarter finally, XXXX retroactive advisers That before the for quarter, quarter loss but $X This during mentioned. reflected recorded repealed QX QX, related comments, QX provision the law law revenues, net for tax primarily loss hopeful quarter. impact this to the we for operating million

we million reflects balance. not sheet have Verizon, the in $XXX approximately balance our the $XXX get up investment that from payments, equity million end we though, And and, including with continue remaining does is $XX to from of year $XX working approximately million July million reflect of appreciably, Turning quarter of over million nonrefundable $X end the a September. the we’re to position mid-April. in liquidity cash. going got at in balance a It with capital QX strong quarter for license and restricted in That in at $XX received Verizon to minute, million cash $XX end the which XXXX, cash million cash,

and discussion from senior expenses of $XXX.X XX/XX/XX. up higher million, mentioned. accounts high was wrap $XXX.X the million to have from June and sheet, balance lower And quick in total debt down slightly as inventory earlier lower million, the of receivable including as deferred about $XX XX, of million accrued $XX Verizon, quality payables We balances, revenues,

and recall in partnerships in believe were call, native are for inherent our that actually of was you differentiated, on chain, formal other May in up now leveraging offerings. our and some progress team suspension we’re solutions, Casa. amazing as to we heading. reiterate guidance to native execution expect other and sense connected those market close the months As ecosystem. many comments short ago, CSPs. that cloud tech we common this I compared around these some to software strategy in we four observations, which the with X Verizon volume validated cycle. many as in we’re previewed invest he been the very November, complimentary team visibility major Verizon add the And reinstate. here, been software other in customers going believe cloud and YTL, other players of and able namely, pedigree of marketing to very in Jerry Xs during be hyper-scalers. later cloud to be able and differentiated of this impressed XXXX, years that Tier executing early And the we my competitively to announced until that interesting to Tier the of and we our uncertainties earnings the to the by been are And legacy own high-profile global then Tier also core now as guidance the and and Jerry further do we’re have well go-to-market the CSPs, inflation, pleased stage in have, at And we validation, I’ve many as some MEC new we like to with XG offerings of I’ve of My have where given like impressed deals I’ve major XXXX. been the very suspending with been has announce in urgency and opening is sales global That new given I also we platform, which taxes continues, X future, work of before and and tech anticipated key absolutely call final many I’d in as publicly with to of cloud Q&A, envisioned matters. points I’ve deciding pipeline prescient the made, forward-looking and sales supply multiyear and near announce investments And

to tangible conviction Casa indeed and So, these hardware-centered cloud all a profitability centric enable that give value data and of are increased us which on accelerated software transforming and confidence growth, collectively, the and in XXXX, we business, from the path, right should points, enhanced a business enterprise beyond.

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

this from with Leopold a the At comes be question Our Instructions] James. will question-and-answer conducting line [Operator Raymond session. time, we of first Simon

You question. may proceed with your

remind you’ve changes this are supply Simon whether guys, for you us that Leopold. Can Chiu Hi, impact any components you in lead the for and dynamics what mentioned you what products in to the in of kind from observed is most the half? that anticipate chain Victor seeing headwinds second material improvement the

answer chain see three and devices. impact actually, let Victor, cable, a hardware me We businesses, access including in of supply all that. our radio did

are changes, improvement that more going any seeing be you of are kind And leads forward? that to you improves, you observing optimistic Okay. it any

impact Yes, turn XXXX. we to in do hope early around see to will XXXX things QX. going and late see We in continue the

was mix, drove some well, commentary. the I margin that impact quarter? hear contraction, clarify as Okay. that the product Did some there to gross correctly from expense this I was one-time there wanted margin or

So, warranty biggest a margins across goods impact inventory the related the sold, reserves. on million non-cash charge, $X.X and was to

margins the range. the our the in margin was when quarter. driver more are of out, you take that a So, that during And primary customary compression,

Okay.

to wireless fixed the it. the help appears for I material Can been your in past. a more common and has me And an what theme just, access reports see, operators is it recent now, of A them understand this question. acknowledgment trend got are us you frame to implications concern then general Casa? just, and most Okay, on be more from cable I let a views that

cable see written And in why remarks, split, to as are like see trend, to year. the bio start competitive drive just going we And we next dynamics the mentioned. actually do are operators well more asking thing. on trend see the CapEx, architectural a the toward that that’s we we that you And like said MACPHY. spending we distributed Yes, as like high remote same

of too don’t next much of a you material But XXXX this a more expect, event. impact, anticipate but year

see Well, longer to impact an would not given competitive short hardware do operators what pressure. big the constraints, orders that licenses cable And we supply in the as do chain term, is to deliver. take buy combat the all any can

Got it. Great, thank you.

Thank you.

[Operator would Instructions] remarks. Ladies and to gentlemen, we today’s over this back Jerry I for have reached question-and-answer the call Mr. end session. Guo turn to of like closing

of Thank fixed transformation native and today. you on remain accomplish networks. track and we into for right multiyear us, We joining provider that cable our solutions physical technology infrastructure for software confident mobile, a leading are to the cloud

is pipeline Our strong.

are Our business healthy. fundamentals

product Our track. development on remains

into profitable we class global revenue provide we of of leverage growing believe growth the I sustain, on deliver is partners, you future. look backlog We’re indicative believe future. in which updating attracting go-to-market our to And progress. a will can well we our us the distribution the forward critical and

conference. concludes This today’s

rest this your lines, you Thank You participation. your day. may disconnect time. your for Enjoy at of the