CASA - Earnings call transcript Q1 2020

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Operator

Greetings and welcome to the Casa Systems First Quarter 2020 Earnings Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

At this time, I will now turn the conference over to Monica Gould, Investor Relations for Casa Systems. Ms. begin. may you Gould,

Monica Gould

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

of President. Bruckner, you Jerry Executive our Vice obtain If and Guo, from Relations investors.casa-systems.com. Chief website Investor Interim Officer; Officer of the receive Senior today's With not a me it earnings release, on Chief you did Financial press may our at Scott section and copy call are

This webcast of on website. being call Investor the archived is be will and Relations our section

I Jerry, will note Before risks turn on we like the statements as forward-looking it to call the discussion certain I'd such, today's see environment include as over currently that press cause our projections based business results from to contain refer our on described and, discussion. and and in information more materially our SEC actual could specific for uncertainties. risk that today's the the Please release to differ factors filings to does

make and Any today, earnings a new that future of forward-looking as statements statements that update obligation we believe these upon information on this are to of based release events. as or undertake information no the we result in call or we

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

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

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

Jerry Guo

for a time results. know is We afternoon joining difficult today QX discuss everybody. that everyone, us Good and as thanks we for this

on to you stay your our you to gratitude like sincere wishes Systems, healthy. I to begin want our would extend for So, Casa joining families and and the call, of expressing behalf safe for and I by

results to business expanding customer business, on wireless. expanding segments addressable In market in from XXXX, strategy and growing our see by new base our cable and to QX our by our revenue of executing footprint we start of our like

or now of me million turn came of to wireless cable tell compensation, business XX% the more million, our around $XX.X cable. first or our details approximately came million half fixed quarter. million has the can diversified which our you the or Total was $XX.X $XX.X from XX% revenue from telco Let from coming revenue $XX that business. with From become business. XX% and quarter only our of from revenue came

including Cores, We wireless good network areas access. in DAA all wireless XG newer fixed saw also XG radio of Packet progress and our product access solutions, and

is would customer to I reduced highlight point like concentration. too out Another

or quarter, the we of two service During provider. wireless was had Tier XX% first which greater a customers, one X

in wireless XX% of wireline XX% The was year-and and our the customers these same quarter the two in XXXX. of broadband period fourth a other last accounted revenue provider. Together, converged XX% versus for service

Turning in first Revenue now was both XX% our in quarter product same to from XXXX. the $XX areas. cable, products increase period and a the over services million,

QX, Excluding services, up product cable XXXX. over revenue XX% first quarter was

the footprint. As sales in customer due and is expanded cable noted QX I to growth base the in earlier,

core both that technical CCAP report a the the significant we with a and beating integrated also purchases advantages shipments nodes. competition virtual year-over-year, during trials virtual CCAP Customer in happy have quarter in and hardware chassis two included converted increase to CCAP orders, core. including to I'm DAA purchase sequentially our

fixed $XX.X wireless are revenue with access million quarter radio, wireless software. contributions was first Wireless the for and

sizable our a our quarter, we on shipment During with revenue recognizing network operator. North to a radios progress backlog Tier the X strand make of American to continue from mobile

trial our products, are machine and networks to of efforts verticals. our industry a edge XG XG indoor and cells consumer as as Cores, networks, mobile Packet enterprise XG XG for recognition wireless customer including solutions of gateways. computing, and progress expanding solutions we we wireless in XG machine in well XG and make revenue While both sales in combination on and products, These small rely and

had Barcelona year, to event have we will the launching for World a with in preview virtual virtual booth this We The solutions cancelled, available on to these we these and Congress but soon at made hoped networks. Mobile website. that wireless showcase be other will solutions be shifted to booth our

the outdoor million Finally, around XG and of XG largest at end quarter, and stood and wireless $XX and devices, native XG XG and access Packet included products. our radios, our the our backlog fixed first cloud indoor Cores

sales, products. fourth At of to driven quarter multiservice at largely and time, the was In router BNG to around of the products. the effort fixed in extend sales router fiber customer we our same our revenue by XX% our virtual telco, for point distribution continue

like we COVID-XX and I would to on the to business discuss impact operations as work having is Next, increasing our our comment that then demand for products. on our meet

of to at sudden across part began broadband quarter, globe experienced networks. and business, our subscribers and a the home, our from cable, on a work increasing First, industrial upstream telco and their customers, as the on the providers service latter study dramatic wireless to fixed traffic

in shift particular access alone. March reported bandwidth consumption during this for example, in for technologies. seeing a than all companies, greater cable XX% in noticed North We American increase March

wireless wireless range a and growth while the as by XX% by XX% median network the reported traffic of to traffic a XX%. of with much traffic as increase increased wireline of just While data in wireless operators under XX%, voice XX% increased

toward for to network of fixed customers and Because all customer telco. our to our equipment infrastructures technologies, a began with the the outer access broadband and we cable, supply end wireless in strong existing these trends across premise services quarter products equipment enable drive demand

million, year. quarter which the an order backlog joined throughout first will $XX.X we of readout, with So ended the be down

company, health our Second, employees employees working Since on are of our most safety operations, our mid-March, of as most from a responsible and are the important. the R&D home.

and services and that a as have our to essential communications to been supplier provides operations are the at we a deemed able As service industry, result running. up business keep

currently manufacturing are as companies the contract facilities of those fully manufacturers. operational all Globally, our

our very are disruption. some for short a of impact material our we the year. For now see as negative result of do operating from do we products devices access see we not normally, supply manufacturing overall this and period efforts to China, with contract expect currently in But

our we call, As on hand the increased generally last we able this demand. meet have products noted are earnings infrastructure and image our beyond to for

well However, particularly has high. ensure to we of with as inventory to augment continue our which open manufacturers and to manufacturer with contract chain, our supply not been the work is depleted that, demand the remains where products, as

from strong in we a standpoint. Finally, are position a liquidity

$XX cash or almost XX%. by million, our During the quarter, balance increased

and operating cash sufficient business balance more based the our in to Scott, In discuss this receivables balances, period his inventory this later our common call. sheet for addition extended have we detail in on will structure. time, to an on of on the operate remarks

strong to remarks our of in we that, to a position end my during I noting customers this time remain by like would help accelerated need.

high vital times uncertainty, communication are of priorities, we connected of the learned service. moves and crisis on up have people list becomes As previous the being a from spending and

guidance comfortable As our sit a we we remain call. today, on a for we earnings result, outlined where last with

the of how noted, cable demand the the the around abrupt environment. given MSO We've shift obviously half changed caution year. first in during This has previously spending

still to networks networks to year this a off wireless at composite our continue operators will time. of XG material We same that and We continue of the the expect component mobile XXXX believe to XG revenue. be increased roll

I financial will Scott our detail. that, more ask comment With to in results

Scott Bruckner

then like results our would Thank and our quarter by also and outlook start given of the find afternoon year. we discuss I that to reviewing good you, XXXX for first ourselves Jerry, remainder everyone. the financial will the unique environment I in,

million, $XX.X the first $XXX.X For million XXXX, million quarter the first Jerry quarter the XXXX. noted, which to compares of as XXXX in quarter revenue in was first of of total $XX.X and

the Revenue approximately acquired quarter the first million. during Netcomm from was business $XX

remains seeing to are high on track products, for expectation. Netcomm we that demand Netcomm year full our meet Given fully

the from year XX% quarter our increased Excluding year. Netcomm, contribution first over revenue

million or software. compares of million from million hardware was XX% Total million quarter and software. to quarter XX.X product or which XX% XX.X was XX.X of from This with first million from in of hardware the was $XX.X total first in year XX.X product XX% $XX.X million last XX% or the revenue from and or revenue

total similar by to is first in for year accounted quarter compared saw prior to terms revenue, XX% we hardware three hardware of the XX% the the which revenue, accounted in what factors. sales fourth for during quarter. In is in The increase quarter, primary

First, results of Netcomm is hardware from the our related. which inclusion all revenue in

from shipments and segment. wireless Jerry in And chassis shipments radio our noted. node Second, XX% sequentially XX% year-over-year third, our cable and shipments as up backlog, DAA increased increased

markets. we in an from be made As to the and progress fixed wireless telecom perspective, as further end Jerry more our market business mentioned, continued diversified

very revenue XX% XX% a a approximately $XX was cable, which QX During of came week to our million ago. year or up one from from

wireless Another year was and or was revenue the XXX% XX.X XX% in from fixed from prior nearly our or telecom by XX% cable. of from quarter comparison, $XX.X million came million

hardware XX% margin first mix year-over-year costs quarter. COVID-XX. beginning wireless latter gross during lower decrease in the The of increase The as stated by XXXX to the of was freight Our of and of compared quarter, Netcomm, we part gross our air which an consolidated margins, GAAP products the gross acquisition quarter the radio for including higher of margin to XXXX. revenue, our XX% the in driven has first the previously, in quarter related was in primarily

QX. expenses, Turning was inclusion first million Netcomm. to compared XXXX primarily in million total GAAP to operating were operating of total and in $XX.X XXXX million, expenses to of operating quarter from first expenses increase of in $XX.X the quarter in the $XX.X year-over-year The expenses due the

headcount expenses SG&A I by on year, costs decreased tradeshow quarter, lower were on the and call. in driven But COVID-XX. reduction expenses operating our in rebalancing due announced basis, last last personnel largely around we a as earnings by undertook And from travel to down X%, later the the sequential from late

XXX functions, resources of and beyond. XX further telecom additional QX the at to following our as wireless XXXX The March sales to reduction in employees to December markets total and and address overlapping acquisition related was of anticipate XXXX, XXXX. headcount our employees of during XX of growth compared higher and elimination fixed in Headcount XXX we rebalancing during R&D Netcomm,

quarter the $X.X adjusted compared was in the of of in quarter first million XXXX. negative XXXX Our $X.X EBITDA million, first to

stimulus an diluted Act of net GAAP This prior year operating that we million did share. basis, a basis, quarter. GAAP for at in positive booked or from loss of a GAAP the carrybacks negative on QX have $XX.X NOL fully GAAP a per approximately package. $X.XX a on of was related million, income in were or million. $X.X the income year the compares $X.X $X.XX loss to we quarter of per million The net positive While during this share permitted $X.X to by EPS primarily CARES diluted and diluted benefit the net tax quarter fully

this the because income non-GAAP that that EPS adjustment an for We and made I some fully quarter. of leasing valuation against we tax amount primarily Our net of this our full deferred the last the we been diluted to the tax tax that quarter, non-GAAP recorded made assets was from described. have recorded back positive and came the benefit added U.S. just income we except for adjustment would then benefit our allowance net balance

backs. the achieve that per This GAAP the diluted non-GAAP Think carry tax non-GAAP reconciliation you give order for and our allowance it will, amount of negative. subtracted to NOL be balance we amounted net fully to deferred income to income our million valuation from net expense share if a result, a benefit. a benefit of tax this income the as back, net tax to in caused non-GAAP As assets $X.X from quarter,

share for in loss diluted first $X.XX first first quarter XXXX. for the per was the of again, $X.XX non-GAAP diluted This net of million $X.X XXXX. the in loss first Non-GAAP the fully per loss of the share inclusive to adjustment. of million compares XXXX to non-GAAP of $X.X net $XX.X net per net quarter Non-GAAP including $X.XX share fully was diluted million the of adjustment. negative a of quarter XXXX, negative compares loss This quarter

$XX.X mentioned, liquidity, end total remain first the very from of negative as XXXX. was flow do and $XXX.X is Jerry in equivalent not mature the Free cash position. of million $XX.X million the quarter we million, December a We now with to quarter strong does $XXX.X million cash for first cash which to the Turning in XXst, $XXX.X million, ended and of on of which up debt quarter XXXX. until compared

have year $XX.X XXXX, inventory declined certain to current greater was end collections from million at remained we extended million XXXX, during XXst, due the March receivables million the quarter. good of declined terms As than strong very of In less approximately payment $XX.X $XX.X $XX to our than days. X% while aging with at and from to customers, at year for offered million while XX receivables the environment, end this

During repurchase just done share to our X.X to under the development million we of past, shares have will of use best the with program, quarter, in the we over business respect $X continue capital. our buyback plans determine approximately did to the for review we repurchase million for remainder as current program; our our

on now would comment our year. I like for to outlook the

as networks. was remarks, in COVID-XX customers need of our order created address to the increased has the to for on his in $XX increased has backlog in communications almost noted This infrastructure for pandemic demand million. quarter Jerry in in evident our strong traffic materially products, their As our invest

are our be summarize, million. we expect total and we the to reiterating that on issued $XXX earnings $XXX million guidance to revenue to With said, we call continue currently and last between

of to the revenue XXXX. year. we margin see full gross the range freight higher continue and We our of range XX%, full of mix that be a could hardware costs While this end to the gross expect may increased for believe year we at in air that of lower year remainder given XX% throughout margin and be the

certain We result like cost do as dollar on also SG&A FX negative this a on not we the marketing, gains. related income reductions Australian anticipate operating as will expenses items, benefit could some a lower in and trade have COVID-XX items see shows travel, impact down from of from lower that statement

So, of EPS of in negative $X.X to expect $X.X million be a GAAP a non-GAAP $XX be the $X.XX to million, loss EPS the in we to in EBITDA still adjusted $XX range on of $X.XX. to and and range negative diluted

our I Q&A our us manufacturers echo customers and world, demand deep Before the session. work the who unprecedented the around products. the to operator back of meet help conditions turning staff, to like to would gratitude call words the our to to Jerry's start for to express increased and appreciation continued has from suppliers under to

you. operator, you, Thank to back

Operator

Thank you.

We be conducting a Instructions] question-and-answer you. Thank [Operator now session. will

with is Morgan question line first Our from your the proceed Please Marshall question. of Stanley. with Meta

Erik Lapinski

that particularly wireless, better understand of for Meta on saw off of you the core here. in good. waiting where us with run for just quarter kind versus Can Eric Maybe you're wireless rate then for maybe in you knowing starting on And that help was any much the installed continuing in some the acceptance? revenue business to is strength how you that, XXXX? the of expect the

Scott Bruckner

Okay.

Scott here. it's So,

stuff things that was going answer all see booked obviously that's your you're The saw was me and past where POS. with revenue the acceptance. that awaiting during question. the to In Let from that that you acceptance are quarter backlog installed

our You'll products. all find of distributed is that across that evenly

be in quarter. cable So, spot we the if I demand saw you'll fix, during across and pretty third think in that assume in third the wireless board that the you third and on

Erik Lapinski

to similarly to That's QX just then kind that capacity during leads that maybe revenue, likely that look there's front you it. of seeing do And helpful. accommodate half the how potentially kind Would to traffic. cable, of add on loaded Got maybe you'll playing as year? see QX? ahead But in you like some expect -- more out QX maybe and

Jerry Guo

all the of whether a bandwidth look second do the like. this half to a that's going to we demand that going go is cannot there say is very that across of cable Well, level. be difficult continued is to service elevated yet. very do know a stops. see forecast sudden We don't forecast or demand We to is providers that wireless or accurately question the high going types to And what going telco. not We in

Scott Bruckner

capacity business throughout things. don't I could that year. may as continue from normal we the the those upgrades, there's possibility Like, add think way year, as of usual to couple about our about will where we you in and if this see think we revenue growth a exclude come the

customers, saw are year for QX footprint in cable Second, we from the additional that. of growth fact Jerry and as existing over noted, in in the new came year with which most there quarter customers

more the don't cable could then certain year of hoping the the we're on the There's two our with part agree on I is POs, exclude throughout the COVID-XX possibility, competitors that then and new less point throughout some And with that focus the we this Jerry efforts started space. there's quarter. a focus off that Jerry CCAP in paid uncertain. that that see of as whether technology, and But is we our see we to and continues virtual the about, question of again, which bump, year latter of to on the see talked the year. in that And demand highly

Operator

the question. Morgan. JP Our with with next question from line Chatterjee comes of Please Samik proceed your

Bharat Daryani

Hi This Thanks for my on Sumit. guys. is for actually Bharat taking question.

I orders half year give the shipping of first highlighted. we or into materializing? It those purchase range that you deployments And next question a back more this the more can CCAP had mean is on you orders? was can when from year? virtual start sense those loaded see to any revenue So I us

Jerry Guo

deploy. of We are some to ready deals the them and booked

We recognition next expect the revenue quarter in two. or

Bharat Daryani

cash. in the the And cash then quarter. mean a nice free second question you I on just had flow

working what positively cash there? are for that there? So do just levers contribute benefit more And and understand near guys capital term, wanted the to can see you you from going

Jerry Guo

Yes.

amount for of the see that last guidance on year, we our call, where the of revenue were and forecasting OpEx we our remainder year. we that's would largely in the cash free as for flow positive be So, noted we this given the

given dig you leverage decrease a came and as also forecasting. that see cash think the expect from the in In we're of quarter, cash the receivables I degree the through lot you'll we So, inventory. of revenue do the numbers, and of a operating into conversion the

in cash the side. some that chassis Those up big So began the two contributors were for wireless inventory to quarter. on both tied in and ship the

Operator

Our next Scott question is Please the question. of with proceed from line Stifel. with your Fessler

Scott Fessler

this with network move just looking just but go existing their you you to guys, customers products virtual? wanted In are cable, touched and like to seeing bit it. Hey ahead I still already, customers upgrade like or to next-gen on infrastructure back a to DDA

Jerry Guo

When have really legs. One cable we deployed and we that, to quite nice add including doing we two people Well, is solution same us. time, At to business core. that's a bandwidth a and stands virtual way, a we generate the base seen basically that. for continue are in actually that revenue hurry, bit on customer shifting of CCAP our continues customers see both, DDA quickest have really the footprint we

Scott Fessler

you. Got

So, I rephrase. guess to just

trying just you footprint, within are products? the looking So are evaluating new current to on come that do upgrades customers to suggesting or their customers next-gen but the

Jerry Guo

No, evaluating continue to the but cost that. a I that ways both, of lowest be point. wasn't the add them time the could easiest, they this given lot to The for and the see fastest And at have deployed. customers pressure, suggesting we existing what

Operator

& with is question. with of Instructions] the Thank next your Rich from proceed The you. Needham [Operator line coming question Company. Please Valera

Nate Hitchcock

Good afternoon. Nate on taking my for Rich. This is questions. Thanks for

how or quarter. ongoing circumstantial so COVID there's conversion last the believe I follow-up demand. was was trending? and wondering, that you So there based more if XX improvement I well potential it of I or the was then from result on purchase virtual virtual to had? currently trials wondering, CCAP front? to ongoing rollouts was of sequential the restrictions trials you. orders, And a are on-site the the if was I just the curious, CCAP to more return Thank that XX progress on trials in as would be And ongoing if

Jerry Guo

trials. Well, work the on on its Virtual own. conversion ongoing doesn't based was CCA

in add just expanding the to with work more the field. than bandwidth You CCAP. with a There's actually virtual lot CCAP onsite integrated -- fine the have remote node actually to a deploy existing a deploying

work. onsite more lot a there's So,

while convert they have to to that, it. for be actually doing to a achieve So trials

Nate Hitchcock

question. Great, the I think answered you've

So this you to some COVID? in time increased because majority also, about how that quarter. quarter, slipped the fourth And has of quarter, fourth call I have on been those prior Thank been orders then, consistent due trend deal but protracted the closed you the then talked for if large from And wondering with from or made has been demand this you. sequentially impacted was process this? third

Scott Bruckner

Sure. Yes.

has in trend and making revenue that recognized the that the call, been all necessarily of because when first mentioned last happened. is the we you we to so and as product. fourth our expected remainder quarter a yes, on progress see deploying that it us in recognized So, I wouldn't characterize new quarter, are

You're often an working on acceptance criteria.

customer do the to fine with working often are some tuning. You

not of So, deployed that into new to that there the that were novel are play technology. a The brand but timing. affect that lot products we only were of variables customer, come pieces affected the

quarter they integrated And in just the of nature first demand. time additional to seen did the require be not have into given But so the networks. that, we

Operator

Instructions] Thank proceed with Savageaux question Our Please is [Operator from your Tim with you. Northland. question. next

Tim Savageaux

business. have some you're and twofold afternoon so silly, in March and and really this wonder or cable cable Good I'll seen it's capacity year results. in pull of the we've upside if or advance. whether some congrats is growth and you on kind forgive you if over bumping late, and side I in like on is looking of in I'm the the results your terms apologize a at redundant question it late hopping given out, And update may Hi. more me. year looks seen. indicated sort this of please of solid on the forward

less should potentially came did, the redundant be grow through went hardware? hand. and be there, expected is be out on might but why the with was the this to cable year we And capacity think where probably margins I would gross my mix just about one that other, on higher, what and then You mix, have given able in dynamics you more question we to that margin

Jerry Guo

even have bit seen hardware wireless hardware especially that the we do hardware did one of we the of fixed ship a of both purchase as actually side. part this Yes, late that, QX radio and early quite on is We more cable a the in, in and bit wireless quarter trends see that It for licenses to operator little we on and that have access. the a the demand. shift, But means the merely order to more even in cable, add point to demand. cannot do got the see turning you meet more to hardware satisfy

So shipment we more margin. actually all that, the all, in have hardware that gross explains

Scott Bruckner

Yes, Casa the give numbers just In a first for quarter couple first first then quarter XX% XX%. year a basis, of revenue, and hardware of to of like in XXXX. and comprise XXXX, last was XXXX -- XX% sorry, the year Tim, QX, of like on you this it a of quarter, ago,

operators I number nodes, the we We networks. number their as saw of big out a saw noted As building on uptick call, the in of uptake are an in the chassis.

noted to of when added was think to Jerry that demand, part new is the as meet wasn't capacity software call, And I saying, addition the that, the customers Jerry we enough new footprint. chassis on and in just

you're that that, will the and CCAP, integrated to again software we for going sales forward off equipment, basic lead capacity. additional So, hope with then starting

Tim Savageaux

my the prospects pretty cable. question, part Well that is, of to which in for speaks growth about directly is other actually

but scenario. footprint the like got fill is that, this you've pull it likelihood more that forward a in so not hardware Given intensive maybe a a intensive, seems chassis mix,

changed, guess growth last you, at and you growth of leaving million so relative look versus year versus So cable assumptions on revenue, XXX I in terms guidance wireless in your your or rates? Have change. as cable fix

Jerry Guo

last wireless and in seen we're the near stabilizing what it, I our on is what the split. necessarily. continue did that kind quarters of I couple and you've term there, year. we and throughout to from then possibility at we evenly we the for see The would remarks, XX% about of assumed last of think cable that revenue the heard you that is Not what Look, noted call remainder a the there I know, of hardware, fixed and being don't the if know was more change one

guidance we're our end to other And than lower the of that that assumption, that we in between our sticking XX%, up margin gross But guidance the guidance to so, could in half that, XX% we range. gave. of

Tim Savageaux

And you talk guys customers did for XX% enough. quarter? Fair the

Scott Bruckner

and we noted concentration down We was that customer did significantly.

only XX% of X%, those or two not there only quarter half in this opposed It quarters. XX% greater was usual customers customers. almost of our the customers, one XX% were revenue as So and comprise to revenue previous

Operator

time, Thank closing Jerry for I'll the Guo, back floor you. to At this remarks. CEO turn

Jerry Guo

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

Operator

Thank you. This concludes today's conference.

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

Casa Systems (CASSQ) 2 May 202020 Q1 Earnings call transcript