Casa : Q2’21 Earnings Call Transcript

Casa Systems Q2'21 Earnings Call Transcript

July 29, 2021 5pm EDT

[Operator Instructions]

Jackie Marcus, Investor Relations

Thank you, operator, and good afternoon, everyone. Casa Systems released results for the second quarter of 2021 ended June 30th, 2021, this afternoon after the market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at investors.casasystems.com.

With me on today's call are Jerry Guo, Chief Executive Officer, and Scott Bruckner, Chief Financial Officer. This call is being webcasted and will be archived on the Investor Relations section of our website. Before I turn the call over to Jerry, I'd like to note that today's discussion will contain forward-looking statements based on the business environment as we currently see it and as such, does include certain risks and uncertainties. Please refer to our press release and our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's discussion.

Any forward-looking statements that we make on this call or in the earnings release are based upon information that we believe as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. During the call, we may use non-GAAP measures if we believe it is useful to investors or we believe it will help investors better understand our performance or business trends.

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

Casa Systems Q2'21 Earnings Call Transcript

July 29, 2021 5pm EDT

Jerry Guo, Chief Executive Officer of Casa Systems

Good afternoon, everyone. Thank you for joining us today as we discuss our second- quarter results.

I'm pleased to report that Q2 was another growth quarter for Casa Systems.

Here are some of the highlights:

• 11% topline growth year-over-year;
• 111% year-over-year wireless revenue growth with continued strong momentum in all our wireless products;
• A 63% year-over-year increase in our wireless backlog, which now stands at over $139 million;
• 56% of total revenue in the quarter from our wireless and fixed telco products…this makes four consecutive quarters of our new product offerings comprising over half of our revenue; and,
• Numerous customer advances with our strategic growth products that show growing demand for our products.
• Here are the numbers for quarter:

• 11 new purchase orders for DAA and virtual CCAP;
• 15 purchase orders for our wireless cores, radios, and FWA products… and an increase in our wireless customer count to 41 from 32 in the previous quarter; and,
• 9 new purchase orders for our virtual router and fiber extension products.

Before I review our second quarter performance, I would like to comment on the ongoing supply chain situation. As you know, our business relies on sales of both software and hardware products. While our software products remain unaffected, we are seeing component shortages for our hardware products. During the first half of the year, we were

Casa Systems Q2'21 Earnings Call Transcript

July 29, 2021 5pm EDT

able to take measures that minimized the impact of these shortages on our business. You can see this in our strong results for the two quarters. However, since the end of Q2 the situation has continued to worsen. As a result, we are seeing component lead times extending further, and order delivery schedules increasingly being pushed out into the first half of 2022. As of today, given the contribution of software to our business, I believe that we remain on track to meet our full-year guidance. And, as our large backlog demonstrates, we are continuing to benefit from strong demand that is driving our growth. However, while we view the supply chain issues as transitory, I would like to note that if the supply chain situation continues to deteriorate, our fiscal 2021 results could be adversely impacted.

With that said, let's turn to our Q2 performance.

Total revenue for the quarter came in at $92.7 million…that's up 11% year-over-year. And if we look at our first half performance, revenue was up 18% year-over-year. To put these numbers in perspective, as of June 30th, we have delivered 45% of our fiscal 2021 revenue guidance…this is ahead of our initial expectations of 40%. And…we delivered this performance profitably… Q2 adjusted EBITDA was $11.7 million…up 25% year-over- year…and the first half adjusted EBITDA was $31.9 million…that's up 145% over the first half of 2020.

Turning now to our product areas and starting with wireless. We saw significant progress in our wireless business in the second quarter. Not only was wireless revenue up by 111% year-over-year, but we continued to receive meaningful industry and customer recognition for our differentiated cloud native 5G standalone core, and our industry leading 5G millimeter wave fixed wireless access products.

To name a few:

Casa Systems Q2'21 Earnings Call Transcript

July 29, 2021 5pm EDT

• On 5G millimeter wave, using our AurusAI device, Optus in Australia set a world record with a single user reaching peak speeds of over 5 gigabits per second using a 5G fixed wireless connection. This is now the 4th world record for fixed wireless that demonstrates the power of fixed wireless as a broadband access technology…and I'm proud to say that each of these world records relied on Casa's 5G fixed wireless access devices.
• On our 5G core, we now have several deployments and multiple strong performances including:
  o Red Hat naming Casa as partner of the year after deploying our 5G converged core on its industry-leading Kubernetes platform, OpenShift
  o Orange announcing Europe's first 5G Standalone end-to-end cloud network, that featured Casa's cloud native 5G SA Core
  o And, working with Intel and Red Hat, we unveiled our private 5G multi-access network solution that will allow service providers and enterprises to deploy personalized and private networks with higher levels of security, application customization, and differentiated performance
  o These are in addition to the deployments of our 5G SA core by Google and

Amazon Web Services that I noted last quarter.

Truly a great quarter for our wireless products!

Ok…moving on to Fixed Telco. Fixed telco revenue was $17.2 million. This is down 29% year-over-year…but is up around 4% sequentially. As I mentioned last quarter, the lumpiness we are seeing in our fixed telco revenue has been due to product and customer concentration. I also noted that we are making progress in reducing this concentration. This segment is again gaining traction and is ramping well. For reference, we are seeing increased demand for fixed telco…and this is evident in the 9 purchase orders we received in the quarter for our virtual BNG router and fiber extension products.

Casa Systems Q2'21 Earnings Call Transcript

July 29, 2021 5pm EDT

Finally, let's turn to cable. As expected, cable was steady in the quarter, with revenue of $40.5 million. While this is within the $40 to $50 million range we have seen for the last nine quarters, in Q2 we had several qualitative advancements with our cable products.

First, we expanded our footprint by taking share for some of our competitors. Second, we saw an acceleration in virtual CCAP license and node spend by some of our MSO customers. While we still believe that virtual CCAP and DAA spend will ramp up gradually, this is clearly a very positive sign that cable operators are more ready to make network infrastructure upgrade decisions.

Before I turn the call over to Scott to walk through our financials in detail, I would like to reiterate that I am very pleased with our progress year-to-date. We delivered growth. We did so profitably. And we made meaningful progress with our next-gen infrastructure products. For the remainder of the year, as we continue to grapple with supply shortages impacting our hardware products, I do see an important opportunity for us to continue to grow our software revenue. With that said, I'd like to turn the call over to Scott. Scott?

Scott Bruckner, Chief Financial Officer

Thank you, Jerry. Good afternoon, everyone.

Just to build on Jerry's remarks…I'm really very pleased with our second quarter results. In addition to the business achievements that Jerry noted in all our product areas, we delivered year-over-year growth in revenue, EBITDA and operating profit. And we ended the quarter with a strong balance sheet, enhanced liquidity, and lower leverage. These are great results.

Ok…let's look at these results in detail.

Revenue for the second quarter came in at $92.7 million. Breaking this down across our product lines: