Casa Systems (CASSQ) 6 Nov 222022 Q3 Earnings call transcript

Greetings, and welcome to Casa Systems Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Dennis Dailey, Director of Corporate Development and Investor Relations. ahead. go Please

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

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

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joining you, Good you call. earnings and Dennis. for third all afternoon, fiscal Casa’s quarter XXXX thank Thank

networks and for customer critical wireline our in Casa broadband in provider leading foundation for months core first cloud-native software been nine have the XXXX wireless validation growth of The in of physical of solutions. and a as technology laying

many continue I highlight progress. to partner We discuss engagements I XG on April. partnership group, working which the investment licensing a the TCV projects the in and core is projects, for Within customer with detail multiple examples from we our of consumer our announced Google strategic Cloud cloud-native announcement recent August in actively in will our as contract some progress million our the of And million since with have tremendous of offer. cloud-native worked, Our differentiated and equity our make validation being to and great multi-year been our cloud-native truly Verizon other customer customer $XXX public core Cloud There are and software greater and software. Google and shortly. news continue jointly product Cloud networks would $XX XG Verizon

We Cable additional in improvement in sequential challenges, and shipment we orders backlog for in partner from of is the despite progress expect to be deals. our Group, coming by revenue customer our cable revenues chain Product evidenced Within cable successes in here cable and software native supply expect XXXX our months. QX continued able offerings and increased QX to announce cloud continued the new

to internationally. for node deployments cable spend most our leading in But continue be MSO and and our We to low CCAP virtual of core both XXXX year North a overall, expand base. remote America MSOs, customer with continued the has

categories, remote all laying for by core year. virtual expect significant spend the technologies distributed However, including we next-generation PHY. the in our leading CCAP MSOs XXXX are in broadband And working we with and growth cable foundation worldwide in in changes product coming with

earnings good mobile and RAN have new major sight on in discussed customers This as product we these closed provides customer group, these in partners. to backlog the and call, call, which RAN and will XXXX. well major America XXXX detail customers, the announced we product as slated contracts new later. large North telco our As have results new also new in Within our the now for worked in distributors now customers with in August with August to us GAAP with orders line relationships Within have and delivery Europe a I of new QX August. given in we we the improve small pipelines discussed our a operators orders from North MACPHY, major in QX American earnings cell GAAP discuss as network hard our manager and operator our more on cultivate remote a as group, are

radio potential beyond. the Despite overcome sub-chip issues revenue with partners their Casa and close and our continued revenue going particular, we deals we nicely operator our during and for our investing our experienced have continue major chain and financial yet, customers. our reflect network R&D strategy ability demand from radio expect significantly our impacting financial to supply quarter forward, In results We in reflected products, of progress growth expect issues, in of does we for which in and performance and us products the to market-leading based help our groups Asia we customers grow is all a challenges work to limited soon, our maximize performance. GAAP for summary, while ship line not contribute XXXX in to availability expand network mobile expectations the In more order made our hard to their to XXXX to and innovative on well positions networks delivering progress or this in for the progress XXXX. our capabilities heavily across in product not our customers in products renewed our top increasing and access

quarter. from result factors, was revenue down a prior $XX.X other the is of chain the for supply issues As a which and these few quarter million, X%

continue the our cable QX from in expect improvement positive to a experienced compared uptick this in due decline momentum cover did take an we’ll margins, our existing more in to we financials QX pleased in gross detail this on expenses we customers, revenue we metrics from including fixed to for and to into in and see are XXXX. in and and financial a and segment, XXXX And While the XX% our operating balance this demand QX section, we wireless revenue questions cable telco sheet retrospective results.

is software our group core believe product strategy routing cloud-native virtual Software and Cloud all my in the forward, look on top across belief and lines bottom software transformation ahead I routing our groups do and software. as with product XG lines we As following. includes our execute growth our I complete cloud our Product Group, both BNG

XG our software mentioned, for the I we networks. TCV consumer have As Verizon licensing deal $XXX million great core for

for on on. have XXXX. $XX deliverables under million track great another our $XXX Verizon that And are licensing million in year, with this a increments paid in agreement. QX million of we We per foundation out to development $XX build fees bill in is and

providers and clouds options communication networks cloud-native wireline are service continue functions to providing over or them and functions XG their to wireless core private public with their transform BMG clouds. As using build we technologies,

and or a we few expect months. partnership announced engagements, coming to in with a Google working and hybrid be in announce Cloud we the Cloud well, late Google to able are is cloud progressing and wins new cloud public actively is joint option the that Our August customer

that platforms. with great determined and our our flexible cloud services, to both of XG, software, of reconfiguration inbound public and deployment us to their We of new providers private This After truly platforms fast automated it and enable integrators and and our Casa’s networks cloud-native able system other cloud work networks. and slicing seamlessly integrating have from on seamless realize integrate XG have core communication partners functions resilient mobile integration indeed will networks, cloud-native operations interest cloud and networks. consumer to with fast service secure, value of and providers evaluating reliable the is with

we have and CCAP and to line trials or are and to as and continued and as lab CCAP with product largest upcoming press should on every directions major engagement, is – articles, moving like cable spend. made close earlier, believe with. RFPs pause remote upgrade forward regard, decisions MSOs well, spend the the a beyond. we product I technology the well on as seen MSOs technique on nodes. us very as the both in several key private built in results. coming the broadband XXXX that that future. of pipeline closely leading future we have are Based ready The of BNG few there spending cable with large strong to is of believe MSOs, complete capital one remote for recent valuation to CCAP cloud virtual large directions virtual our Virtual strong position next-generation would in them. we may technical was cable in including virtual mentioned proceed live Casa XXXX cable core CCAP extensive renewed MSOs evaluation MACPHY On and plans believe the direction you now. in leading has product remote demand XXXX of spend of networks PHY cable Cable well-positioned we portfolio several working there and the virtual Comcast, cable public for live and core of nodes, to the and and what with this our customer cable In technology MSO we recent Finally, two only PHY cores sales on and deployed PHY near upgrade with compete with CCAP seeing we the Based cloud Group, we as have Product expect very of to router in exception network core have CapEx to contribute remote core which capitalize MSO cable well engagement evaluated a the today virtual decisions whatever PHY in meet Casa remote has product deals increase a as to go We and are for are other a MSOs are in today, our wave

XXXX. progress also made to good as compared large the final today groups QX cable contract GAAP today. months in Access Access CSP, results node Just of in FMA This in extension radio I great a new were in XXXX, remote did one XXXX XXXX cell results relationships CSP been calls, by last have gives for like partner XG in that We’ve a This also repeat product finally adds America the XXXX cable that in believe be as decision ready and deployed MSOs in in over expected a our mentioned cell access matter few of backfilling meet go. component ended XXXX in lines and masked want XXXX. This fiber impacted XXXX. R&D We matter, have Europe delivery PHY, impact the Group, cultivating and Tier product Product September wireless portfolio any with products XXXX. customer not our Radio we virtual CCAP evident X small in core manager. product and months GAAP was direction our remote Devices earlier end-of-life technology XXXX we made years Casa three and in on invested CSP to significant MACPHY with and this Product as XXXX. Group CSP did this for supply radio. did have to is renewed proven complete nine for fixed have to end-of-life GAAP the us some our well revenues first GAAP end-of-life that where small XXXX progress products. North that product the and the This sizable will Network as growth XX, leading now product

We soon. with additional rent X close network expect Tier to operators other contracts mobile

top our significant the Given line cell have growth on XG XXXX revenue visibility in In have interest based in across few we’ll the in expect groups all radio to cells have in product summary, growth I today. we months, small small strong expect see XXXX. seen we I the last

annual While we and XXXX guidance complete XXXX provide our XXXX the the operating at are will this plan. to after time guidance financial not we prepared we provide

buy our million as us of back part Finally, as authorized to release, press $XX to our delever. plan existing our our in mentioned debt of Board

of growth million refinance transaction are matures as XXXX. and Implicit and details plans in to on this We XXXX. results our that debt, coming in is debt in which to well will Ed confidence $XX remaining report purchased Term pleased his financial approximately as we in our provide B December progress debt commentary retirement more Loan week. and renewed improved this retired top in this line

that to Ed, hinder customers the I to addressing turn supply want moments our the to few call to products spend Before to ship over I headwinds completed continue briefly. chain a ability

key to and these from continue closely supply we in suppliers, We work are improvement chip with our partners. an seeing

We working and Southeast are to we disruptions can on COVID-related closures hopeful plans aggressively there within will months, ensure in meet be the Asia fewer partners are and contingency demand. we coming our our

the lead will seen components, better past are continue next quarters. have couple couple the trend We for quarters, optimistic the and slowly over over times of of certain get that we this

in correct issues still As I I noted XXXX. begin today, which QX believe is call, in to our these abate will

control critical In and with working are a partners vendors, inflection closely transformation. our is pressures we point and Finally, to inflationary Casa conclusion, at customers in our costs. manage

with the strongly stage to and strategically our R&D long-term to across accessing partnering the performance review for in turn are now like right improved forward. Ed all markets the we the are growth to world capabilities. Ed? the I moving partners financials. over I’d product call groups and We investing around setting new believe sustainable

I in across first, XXXX made our think we it’s we’ve is validated August Verizon multi-year which lie announced as and about really I do as then further prefacing fees thanks, cable, excited the also it’s that by RAN April XG improved QX cloud for really first CEO things with going Great and late said, I’ll is do like our progress the covered further well the remarks. today. good in and as joining my very And say for reiterate his thanks Jerry cloud-native continuing in Okay. and we’re strategic transformation announcement with Jerry software our opportunities to everyone, us us safe $XX they opening think the and of towards cloud look by by million progress whole Cloud, strategic XXXX. I’d Jerry, product is and paid safe in partnership the and evidenced, deal short Verizon that’s and about stand-alone forward well. excited our team results Mac Google very of to XXXX. all the to as afternoon, license to software keep licensing to Casa the for planned, overview Casa say, evidenced And considerable that’s in really groups, CAD, ahead comment deal

million, well prefacing those supply get I’d with issues to the details by quarter at cable comments we breaking the revenues ending revenue impacted So for product the early QX deals, not ongoing or into quarter done, in came the like lines. close QX chain for expect to down XXXX, in $XX.X X:XX, XXXX. across Revenues with as which as delays, losses some results in

Third XXXX. hardware chain products. $XX.X continued is quarter QX device for was wireless our down supply wireless XX% due to revenue million, matters from backlog remains strong This as access decline

majority some which by and pipeline for should deals, of are installed opportunities. in cable from We came technical inherently to including revenues by $XX.X driven major the customer serve with increase continue risk cable our cable the than reasons over increase QX cited, in The XXXX recent vast cable well logo side, revenue which and are positive growth at new the demand XX% renewed direction, was this really pipeline cable into MSOs customers. us global prior quarter. in is our Jerry further decisions on lower cable believe large cable momentum going for cable the sales into deals On million, actually our some base, their a which

access quarter, decline next we billings the future of again, of million be to this, fixed $XXX router and increments had billings, we Verizon in scheduled billed future commitments a contract includes a of orders year $XXX backlog deferred at recognition we And revenue then device no believe if five BNG chain revenues, and Again, for matters. million. Verizon XXXX, on And products. backlog as supply are about balance $XXX million to future. which sheet in of came regarding were in of fixed the to hardware backlog, XXXX, will And remaining put delays. on exclude to years our finer an the total point wireless here supply million exit QX in chain obviously, over million approximate under ship unanticipated and QX during the per in $XX as our assuming occurs, and unable deliver that the chain $X supply you virtual million, revenue approximately deterioration $XX.X revenue remaining due to we from Revenues the significant XXXX. we majority our XX% backlog which Moving occur telco for in acceptance result a ship finally, as

gross improved RAN which we a or And of and finally, of have alongside I on charges approximately And exclude forma better gross cable $X.X in that revenue. basis, came off million. and of good. margins $XX.X warranty those revenue XX% of QX, that of margins a revenue. includes two when that It’s matter, profit related note So cost a settlement for in customer modestly a inventory GAAP also moving disclosed XX-Q. recorded now million we increased quarter $XX.X gross accrual profit, that and of related is software that’s we’ll go cost And revenue quarter to pro you do given second the on important going been margins, mix see to that, forward, matter gross of expect within would its at million our warranty gross charges into had $XX.X reserve would revenue, million to the to higher-margin say in

line Turning GAAP million prior with $XX.X expenses to quarters. expenses, were operating in QX and operating

product point, factors in to important comments. to globally to finally, cost and that’s all demand this improves. adjust there of for are the have bearing, we us really deliveries and on our growing in differentiated, fast, evidenced RAN million, new we and product prime product is this other new million to Jerry make select has which two close Jerry also many increase have offering for time related products, major our as and RAN cable to that this allowed the these our providers continue XXXX. as product as of across and And over provision, in us telcos mentioned, revenues I was And rare positions RAN what $XX.X for those fruit think MSO group, actually groups loss note differentiated. in new growth inventory to warranty well finally, we reserves, than one on $X.X we by with important cloud, offers providers, XXXX And cable recognize Jerry increase quarter quarterly mentioned, made to we offerings. offerings it’s products, the I as it cloud only investments influenced invest GAAP P&L suite. in bookings I’ll group, opportunities truly cloud-native million Jerry as very ecosystem know we virtual by mentioned, group, The as And for renewed contribute mentioned, within we’re Casa by context ready in to CCAP QX. but core supply Comcast when the our the for and have companies solution a did our with think accrued call, for every to a engaged customers, This have globally, R&D excellence you for within device discussions revenue and large-cap access our Within contracts we in cloud and many the that our occur. are should including Verizon validated technical operating on which other telco And working GCP. cable technically ongoing $XX.X tech partners, other with recording SIs, are continue contracts interested

related one comments, moving to in $XX.X have as the $XX.X and items net this in quarter the loss lot matter the still million. to And back be one ongoing. on million of one was $XX.X formally dispute primarily warranty formally what is QX XXXX that of component a doesn’t $XX.X before I accrual off Our many issue warranty line. judicious just product limited loss to product the approval and the related comply to product substituted questions this a component And the in one net result and to third-party resolve specifically of anyone’s appears knowledge full time versus are specs. we million this. the increase manufacturer The other is say XXXX. or to this, be in be will But covered. provision we root That finally of resistor for frame of given a faulty extend the customer technical a there our that’s limited million loss can this I’m was to to P&L in cause further subcontract without with and the the well of not product as discussions delivered net in guessing related customer to

And truly provide a great we the really this finalized, that business working totality with charge. many we’re had relationship and so and we’ve QX this details that’s on of an but over more long-standing and unfortunate to complex who once will million settlement nature matter, $XX.X years customer amicable now

continue you million cash, the of QX further, a including P&L in in X/XX positive a $X is XX one, spend. and approximately and sheet, with the million was a capital year-to-date XXXX. to CapEx-light $XX.X liquidity accrual And balance very $XXX.X great cash for end things, notwithstanding to business. a cash And limited $X to at million we And up including, also in $XX compared It’s number at balance currently off million flow balance months cash. down is that the from that note strong cash X/XX/XX, function and June only at and many cash at was increase cash operating approximately and year-to-date XX/XX/XX and take to restricted CapEx positive operating September losses, flow slightly, cash million. $XXX our nine of and have position over I should with million working Moving the quarter think XX, the up

reserve have April, also QX Verizon of like a million non-cash the we It in $XX cash our increases million And into base. investment strong non-cash cash positions charges amortization great from helpful $XX warranty excellent announced. in customer license cash XXXX but a payments tax increase also context XXXX. XXXX. further AR GAAP this function a our high It’s $XX then equity forward million reflects as overall. in million of and Verizon hopefully, And deferred reflects foundation in only We and level $XX specifically, and accrual refunds to provides QX comp, of strong for X/XX. pedigree QX. million It provision a as of we’ve high cash reflects in of about in the $X loss million Also, net in from between revenue is payments for us in that go the $XX the QX, $X through Verizon, of approximates Inventory stock-based recognized depreciation, function we settlement revenue an million. we received into for of about

sheet, to net up to by value $XX.X balance covered risk in $XX obvious, So of million. implicit report to was end, $XX delevering have debt profitability Jerry additional of cash face part quarter the inventory At we consider as debt approximately repurchase did this modest we wrap and approximately And our XXXX and and at this quarter million gross we’re we and about to million at stating plan. return is balance on receivables the cash. the to debt the the all million and renewed using cash in top of of debt growth debt will closed and it, debt retire confidence $XX $XXX for in our the million his balance release, line since a moving face repurchases for retire use in of had the the our of in an we remarks. discount our And of value the off reduce sheet matter strong about reasons highlighted pleased as earnings about

are and repurchase debt evaluating also an end good remainder we us. specializes refinance of this matters regard, the to investment options this Term bank that that XXXX. these say at Loan In the the Beyond we’ve work to actively matures retirement, in for formally of with of pleased the B we’re December engaged

where in good optimistic we they we’ll over really past groups, two progress and the on market we but results. as the as QX in curve, two of we’ve And considerably just we and the to internally this CAD press result refinancing as in exit we new resolved all are QX is this making are improve rooted which years on confident additional confidence line accrual vision few the product context suites, the and months. XXXX in this, to XXXX XXXX mature a are front, We’re and the have cable we’ll with the five invest product we ahead anticipating and have fact coming QX GAAP funded headed. rebound turn of to in Jerry’s results, optimism, XXXX, was top that contribute in the future disappointed page product as And the it and and our groups

great So And with got to that’s there QX. the a another occurs. to partnership, on million We’ve about who mentioned, which our for able across as be we is great the here wins BNG cloud build customer year reflected activities. as to We inbound We’ve new want we’re product in acceptance And XXXX a now and software have months. we deliverables licensing on truly forward, coming demand GCP and TCV $XX well. $XXX this that as and stand be $XXX Verizon, other million in indeed foundation for is to virtual development and payments track with determine Cloud Google our go-to-market in our too. specifically with build cloud have lot is a further cloud-native per groups, on progressing these to SIs engage the our will product announce expect look got well, finally, to and providers increments who of deal, evaluated in which Verizon And all million we’re Verizon and software as cloud-native to on that delivery optimistic as from Jerry strong few help interest routing seeing strong also software group. us

largest our the And exception to core, Comcast, orders, made and customer extension it’s that results in to prime is the working past our sizable the getting and our them. two we virtual new North with which MSO that only high access we’re few contract of interest time small with international other we Turning And for as every direction, much public. and we’re as evaluated of ready as revenue CCAP margins mentioned product access today. cores line MSOs that product is Jerry up have now. MSOs cable as and a will and market and and And technical when these renewed progress for engagements, a as several should customer in XXXX. XXXX telco. major we’ve technology America deliver ramps. decision Europe of again, and R&D our technologies, RAN and our losses of were in based for in CAD And contribute in good with radio into bookings revenue globally with RAN we remains not orders is in spending And life decision they’re XXXX have the partner soon new the pause to future spending made cable impacted contracts Jerry we what such benefit a cable And will in have ship we’re heavily over We that yet mentioned, device fiber proven XXXX typically and and products have forward North X in those orders of cable wave well. supply one we moving XXXX. now to providers subscriber by our Tier flow bit occurred was cable regard, coming which moving enure mentioned, cultivating of an invested well-positioned also new there are again, to of spend, to alternative finally, close believe CapEx extensive product is and CCAP early and spend really believe And MSO relationships is, devices, years, this which CapEx today. access America for wireless have these our a new Jerry and backlog with cable in as over to news this fixed gross cable and generally on and the XXXX. have dealing another plans in to virtual RFPs build a for to in we while as GAAP cell we XXXX XXXX again RAN ready But RAN on now showing operator to with revenues expect great of And products, compete group,

And do return believe we of for reflected of a announced financial and patience year. paydown host confidence believe that an we for year primary QX everyone’s really it’s our as be profitability reasons, So as of complete months. coming And what plan I debt few transformation XXXX these we the provide a today. in the transition in of is well upon guidance mentioned, Casa. we Jerry appreciate annual will of XXXX Casa was This should other over and finally, to renewed growth we as amazing for as reasons completion

look Casa interest call in thank questions. and transformation. the sharing the for do back line Operator? we that, open over turn our like to we to for to I’d you the with this to operator complete So as continued forward support And progress your and

joining for today. you us Thank

progress to our in partnerships continuing new to technology our strategic make innovative are bring markets. to We

with way you our infrastructure achieving forward have to become on you. well achievements I’m to are software quarter. and cable next cloud native of We we to look physical leading mobile, our transformation encouraged assembled Thank by the fixed the networks. solutions multi-year provider for technology and sharing a our team and

you Thank your you. This participation. concludes today’s Thank conference. for

now may disconnect. You