Casa Systems (CASSQ) 7 Nov 232023 Q3 Earnings call transcript

Good afternoon, and welcome to Casa Systems' Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder this call is being recorded. At this time, I would like to turn the call over to Dennis Daly, Vice President of Corporate Development and Investor Relations.

Thank you, operator, and good afternoon, everyone. Casa Systems released results for the third quarter fiscal year 2023 ended September 30, 2023, this afternoon after the market closed.

receive obtain of Relations it our at not release, earnings section did website may you from investor.casa-systems.com. you a our copy press of If the Investor

Chief are Officer. Financial call our the is will Glickman, call Investor Durkin, and This today's webcast archived on and Ed me President With website. and be Executive being Relations Officer; Chief of Michael on section

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

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

if be business it is believe or or will non-GAAP useful we our it investors helpful to During measures the to use we call, investors believe better trends. may performance to understand

to call Michael? to the over turn And I'd like with that, Michael.

the solution a spend my take I've company These global customers communication joining customer thank communicates. wireless strong had for technology discussions of functions, with our partners. to network team see top-tier Casa the wireline August, customers. employees, great base potential and in CEO the market-leading providers today. both incumbent time significant and further and for us many all Since and you ability Dennis, our to reinforce due innovate, as to to you, talented with engineering change Thank employees the providers, quickly cloud-native I role service decision opportunity our how to legacy and of and virtualized industry-leading Systems disrupt world joining

is convergence positioned Service and providers of flexible, more as that growing major and with cable, solutions agile DOCSIS, these to uniquely and world cost-efficient as large transitions fiber all of and providers' and addressable transformations CCAP, and secure are use including both broadband networks of gateway beginning wireless advantage continued solutions. to both the BNG take Packet offerings, virtual services. cases Driving around utilize market software a geographies. monetize well are strong across of and wireless current our Core, spaces, these combination Casa for spending the total future telco is across incrementally virtualized

Due these virtualized to integration, systems will operationalization strong adoption and these the assist be the of of solutions platforms. in partnerships support to

these of on of Casa's adoption service We forming We partnerships resellers, can a capabilities sharing are complement with cloud in forward these value-added new more and future. OEMs look near to who us solutions. help combination systems providers new the details and currently integrators, very partnerships whose drive

continued in markets these to delayed operates for of many currently updates, network momentum or undergoing Casa transition While that XXXX. Casa in build

row which quarter, at quarter marks third the million, $XX.X a came growth. of quarter-over-quarter in revenue the During second revenue in

can so that results return focus operating of we profitability to strategy capital is on consistent control destiny. positive to operating in and cash well as our cash with flow financial EBITDA remain own efficient as Our a

that Ed that the business will will completed that our and our help late on for As noncore shortly. efforts in Andover business, delever and part continuing we was of further evaluate our as delever such are building details taking our ongoing to additional transformation, to are agreement October. sales sale-leaseback we headquarters provide further further asset

now our Small software incredibly Cell business, virtual virtual as our well and excited Core I'm portfolio our which opportunities and cloud about is virtualized of as the product industry-leading portfolio. cloud-native our Core to secure Packet BNG Turning comprised gateway. of

forecasting that of currently $XX year We approximately are of customers business. approximately over in that than fiscal will end 'XX portfolio, our We for XXXX billings in more we are GAAP of year half Growing our revenue at of XX $XXX,XXX cloud fiscal have currently utilize XX% million 'XX. components $XX year software production. revenue and with in million fiscal which cloud

Malaysia, we a of has forward. services year last taken leader announced mobility another which step Our YTL, initially partnership in with

as In helped of our software launch Ookla fastest win network the for recent announcement, well our the Malaysia mobile as in their XX. we them iPhone outlined assisting award the how

our our grow Our from XXXX. developments Verizon software XG has to enable we with to are cloud strategic with new as XX% also as track continue software to our on the continued growing partnership continued in and to well pipeline current With of to both approximately grow growth for components monetize their and adoption investments. customers, XG business Verizon

BXB IoT telematics. fixed as access on wireless business outcomes and Focusing such mobile networks, private

Cellular's suburban homes device solution and for we Our Auris fixed see expand continues to that U.S. across access rural Cellular. Casa's wireless market announced high-speed selected to in such business and Link U.S. fixed wins provides Device help access broadband, outdoor our markets. diverse as areas including broadband addressable Access recent They September in new well Internet as deployment business wireless with urban,

our an management EBITDA This eye decision our gross achieving towards on towards provisioning look with profit of our software deals, a device the our will profitable returning As goal and we our our market-leading future have positive the impact to support. will access utilize customer on be business, of outstanding company focus and which profitability.

small also business has Device cell Access XG, enterprise to business our Within well. as that continued XG is scale our

proud in to a the handful of world. RAN We one of U.S.-based are be companies

replacing in-building for small deployments or coverage, Our scalable cell either focus existing indoor for enhancing DAS solutions is industry-leading enterprise it.

of this north year-over-year above be we Given representing growth customer year $XX to expect XX%. million, revenue our current deployments,

in expect this and Europe fiscal level growth year continue America. new We we add North in of as customers continue XXXX to to

cable, and X.X forward. to to DAA moving to and with core Turning the high-speed for where now will CCaaS Casa's services, along to continue a significant the DOCSIS opportunities virtual transition transition provide X.X

customers Our as installed base to the customers vendors equipment as new replacing from that solutions MSO away of end-of-life well and business. from are portfolio have exited migrating legacy Casa's

BNG new their participating also are markets support MSO utilizing to in and We customers wireless fiber-to-the-home virtual installations. about our with excited

perfect We flexible virtual convergence and is DOCSIS of have for BNG in multiple MSOs. as The customers Tier fixed well application X our as solution. several fiber-to-the-home access production broadband the with of concepts proof wireless

XX% said, is competitive vendors quarter networks market, the note compared in most been year, but to fourth share through transitions, to third as expect which transitions. growth decline in cable the with with XXXX in it compared built we as in well business not After reducing stages our inventory current there drove to factors utilizing that rather year. 'XX the the However, dynamics see to in is quarter in losses, market due QX delays their associated revenue these these the these similar spend revenue a shortfall and during to With that serving important this capacity this of pandemic prior of frame. as as MSOs this meaningful later has slowdown time in have of

to that over still of transformational to to call the turn of a work Ed, have we achieve goals. I us lot I would our note like ahead Before

differentiation our on We are technical product modifying veterans, meaningful expanding to our by leverage with progress making strategy goals team growth our fine-tuning accelerated achieving to our these and industry strategy. proven partnership drive

focus on cash to and return flow. financial consistent generating a continues profitability EBITDA Our strategy to positive

As growing leader sales ecosystem. our we positioned to pipeline, well product portfolio, we XXXX, very look are and believe expanded towards a market-leading be dynamic with we partner

said, financial Ed? to to that the now to like With turn quarter. call would results our for I review Ed over the

on you, and good the everyone Thank afternoon call. to Michael,

revenue the third from mentioned, was from came lines the Cloud quarter prior across in our from for at million up the Michael XXXX. an quarter product prior Breaking the the for up X% million, increase quarter. of and $XX.X quarter. million of $XX.X $X.X million, the revenue year down prior revenue $X.X As

which XX% year the million, prior $XX.X was XX% down the $XX.X down from was $XX.X quarter. prior in million revenue million and from Cable from

in in as we win the capacity Michael As Cable was by slowdown this year, revenue a existing MSOs driven this our earlier and in continue Cable from well as Colombia utilizing recent was the spending decrease losses. mentioned, networks do among not factors. just Competitively, very by Claro evidenced on focused share decline other MSOs these market to

XX% from which includes million sales down prior acquisition, XXXX almost our quarter. from prior XG XG of driven X% totaled the quarter, prior $XX.X access our Access by RAN the which $XX.X XXX% products revenue product, was and device plus increased but year, up products our from XG, million, which was our radio from by the NetComm from

gross for obsolescence to to or GAAP reserve profit. $X.X now noncash profit million our quarter quarter was by charge XX% inventory revenue. by increase was the margin Gross Moving impacted during of million. $XX.X the gross a third

sale realized noncash charge, cloud and Excluding charge during for revenue our increase the $X.X million This at recorded quarter very quarter. in a in inventory impairment leaseback impact of have and $XX.X Gross operating would profit a high-margin the to of we increase QX been by expenses XXXX. the reflecting up $X.X is the of million. This or this software prior came our from mix driven X% headquarters. noncash and/or higher for is reserves. largely million QX GAAP XX%, nonrecurring

the quarter the charge aforementioned this leaseback sale $XX.X million GAAP reserves building loss inventory the Our to related and was for during of workforce of noncash million was noncash nonrecurring $X.X to and charges related $X.X million, and on operating the million $XX.X the loss quarter. impairment

loss million to the for loss was third versus share the of quarter XXXX. $XX.X related or quarter third net GAAP million our Finally, a P&L, loss of $XX.X per net $X.XX our diluted quarter in

related expense, loss quarter net includes reflected which million in includes deferred amortization of interest million the debt -- noncash issuance also cost. charges expense $XX.X $XX.X of $X Our interest million in to in

press warrant in basis, value the of during million million loss of from a adjusted of reflected had we had million release. a $X.XX a shown $XX.X a also EBITDA the and related in $X.X to back net or and liability as net On We schedules QX. non-GAAP per $X.X reported noncash the the loss share gain fair loss the

our to with balance $XX.X approximately cash We million. the of quarter Turning cash equivalents and cash, ended restricted sheet.

We ended the excellent. remains QX compared June September XX CSPs very Our primarily and the These million payment our at $XX.X XX September down and debt balance from MSOs to high-quality for payables capable collection large with $XX.X financially cash in experience to quarterly net was are million and service of made loss quarter timing receivables. receivables due receivable XXXX. of our a

recently completed for our sale October. we call, As Michael the a and mentioned headquarter in earlier in Andover, Massachusetts leaseback

delever of transaction loan down paydown $X a debt received leaseback sale more workforce. net this will will be building we the business. interest of this than our rightsize cover see As as proceeds flexibility help B increase, result and from a and office expense us used term and of operating further as agreement, the our which diverse part the debt approximately embrace to million sale the we pay geographically our to space The will savings we of in needs hybrid gives more the

As strategy, other can business. our we of further part that the to financial use evaluating sale assets help also our of delever we're noncore

in XXXX $XXX to but backlog we're customers to levels. of to to is XXXX. As it today, orders own in backlog not in Michael XXXX MSO release of virtual noted manage primarily due access their is timing telco year new delay half by deals The $XXX into adjusting orders well CCAP is delays market Again, the delivery and of competitive decrease rather share mentioned awarded million. first full deployments range as a 'XX delays in into delays in the purchases, guidance guidance important driven being in earlier of QX the out cable that softness as pushing of inventory revenue due device reiterate losses, from of that some our spend earnings to deliveries to million our

push to being the to from to guidance of lesser agreed impacted a QX some customers half from also we of our XXXX. of first access Our timing shipments degree the device from which have

these pleased expectations for segments exceed and strong. very revenues that continue growth Cloud look and and to expectations momentum for I'm RAM business our market XXXX our strategic that

of half net shortfall to in longer the the positive no adjusted Given revenue second EBITDA expect for for year. XXXX, the we be

our flow As positive aligns to revenue process sure cost part current margin of are structure our and cash it planning and goal outlook. with operating our our gross North we XXXX to consistent evaluating better and results, of EBITDA Star with future returning make

regarding we revenue. have Verizon and and in million future in contract approximately backlog, remaining $XX be to backlog beyond, billings service and revenue which currently we under Finally, deferred million of total approximately $XXX and deferred $XXX million. Verizon revenue our the to have built metrics, deferred profit And our backlog billings future XXXX and brings

years. XXXX core estimated also And and of as on closed a enterprise our radios from an major have TCV As we we virtual remaining also basis. we where XG we the $XX that will contracted approximately in next customer noted a continue a began few with XG, last major $XX million quarter, small award operator. value we that network annual shipping POs ordered for get business mobile in cable for begin of with CCAP an European American North million over have cell deploying project QX approximately

to in and and are deferred customers. cited will numbers I these orders last to revenue for agreements received delivery deployment be not backlog award and shipment we I the that would X note binding like purchase these reflected the as included

ATM over would from finally turn questions, received many line our open to like wrap since Before program, have operator the August. on questions call by to to the I up we I which the investors for discussing

put it was ATM in needed to QX Our have ever if program we on in place hand it.

to have any transformation the shares. But plans our given current use profitable issue and complete share we operating price, ATM we to program mentioned currently As our results. to return Michael no

I'll the Operator? to up over questions. for the operator call now any the open turn to line

you. [Operator moment please questions. Thank Instructions] we for One while poll

Our first Capital question is Markets. Northland from Tim Savageaux with

Good of afternoon. here. questions A couple

of you're like plans. You times, of mentioned couple the it the and goal in sounds middle developing for maybe a EBITDA profitability those

in of a that segments, sense of couple cutting 'XX the You've you in for talked others. of a what terms a to may but how return do have general? of But might you a still as specifically to there? in EBITDA well. understanding get have couple need not EBITDA underway about follow-up. And you targeting hope cost for or be profitability terms I a cash of profitability And Do much

can and take I'll Tim, weigh Michael Yes, also. that in

process planning are We going through XXXX the now.

now. and Michael our it is working and Star profitability through we're operating cash EBITDA As flow and mentioned, to return North positive to XXXX that beyond, in

I guidance for XXXX. think we don't have

February-March year. plan of providing EBITDA So levels on would we when profitability. provide We the guidance our that for in call

use cash flow rightsize structure, XXXX of cash but our think terms I the needed be margin QX, at and and we'll is to that expect are front. cash get some we once planning. be what cost should in In on looking QX there, QX expect in cash fine that to to and we thereafter. positive We did to burn some do finish we revenue And gross in too, and

Yes. it's just on I'll that. follow And Tim, Michael.

the any really top and clear to expectation just it's was going growth. very on wanted that the there company focus was if line to think continued I focus important, just sole be make that I it of

you're positive approaching we're our clear actually is the mix and pivoted of selling it great that forma I that the to grow quarter, mentioned. lines, types focus look to pro coming at and Ed expanded going So to above continue products think the we flow way deals down that. towards off consistently the in of to as line to continuing to positivity, you're a But some talked of back get of have profitability pretty we've gross in and first I the right? to think company, as on as we the try we're business that taking and growth the the margin on this about, got obviously the I look basis, cash as and that well it's

well. cost the also then basis And would our we'll below right line well, rightsize you've as obviously and as look solid calls got the on we be as making how any to business

Right.

it inventory business enough like but the you what maybe that or So of in somewhere to close in breakeven. lower margins? Is sense look probably So that a top of the could ex charge looks a the terms like future us line, quarter, in give fair positive EBITDA? were the does higher

There think P&L the out is an noncash operating a goods and Tim. million back in are through of you inventory is which $XX.X of I activity the that's Yes, lot when sold. right, million. the flowing charge of for loss $X.X or But cost

the the stock-based OpEx, building $X.X in in nonrecurring OpEx. out charge and You you the charge back of out depreciation the back $X.X loss impairment workforce considerably better. of gets back of COGS OpEx comp The COGS for out operating million million and amortization, in picture and $X.X

So quarter with active But kind onetime lots of charges. very of you're right.

the improve through looks piece ensure to and adjustments continue we're better and necessary make loss look the XXXX. you If to on need operating we'll and again, basis to that picture in positive together, an we make

expect segments in segment you as from But quarter-to-quarter a really there if you And but Is QX, Verizon cable. look year just made recast -- moves coming don't can you any out? generally, I I Great. QX? move Or have you revenue basis comments, call last any to Okay. some the we out? of other know a do big kind mean at it are where on

certainly, as just space, and would QX very where and bring let hardware significant fairly back cetera. that year-end any as [indiscernible], heard I everybody able and there's the traditionally say usually prepurchased to this look cable with I'll into I And the much pretty just licenses selling were some of MSOs to purchased pandemic. the business, had wanting we we during utilizing Ed of et take both in right, pullback spend, in strong inventory advantage they and additional a in you've a from trend the software have as But especially spend. been traditionally, on comment well. industry, the business, the

us rest well QX the we well. of our said, peers. an And that as to expect we having that's So that obviously into as go effect as on as

over floor no this I'd questions at to the for closing time. back to are any hand further There Glickman like comments. Michael

industry-leading to you of transformation to market joining bringing returning this continued towards is growing pipeline, are towards from EBITDA and progress delevering confident Okay. right Well, Casa our and today. I'm our continuing our us customers, And to focus that tremendous our the during with period on path we transition again to current make further thank for growth expansion profitability. products business.

would their the for you. for team to I like during progress XXXX. quarter for We on thank also our you thank and look our all Thank updated members to dedication fourth business talented the support. continued their work tireless and our customers keeping the and forward to plans and call, steadfast our all stakeholders

This concludes today's conference.

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