Casa : Q4’21 Earnings Call Transcript

Operator

Greetings. Welcome to the Casa Systems Q4 2021 Earnings Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Jackie

Marcus. You may begin.

Jackie Marcus, Investor Relations

Thank you, operator, and good afternoon, everyone. Casa Systems released results for the fourth quarter and full year ended December 31, 2021, this afternoon after the market closed. 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.casa-systems.com. With me on today's call are Jerry Guo, our Chief Executive Officer; and

Scott Bruckner, our Chief Financial Officer. This call is being webcast 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, it 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 earningsrelease are based upon information we believe as of today and 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 believe it will be helpful to investors to better understand our performance or business trends.

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

Jerry Guo, Chief Executive Officer of Casa Systems

Good afternoon, everyone. Thank you for joining us today to discuss our fourth quarter and fiscal year 2021 results.

As I noted on our last earnings call, our full year results will likely be impacted by global supply chain issues. Despite this, I'm happy to report that 2021 was another growth year for our company. Our full year revenue came in above the midpoint of our updated guidance range. I'm also extremely pleased with the material advances we made in our wireless business during the fourth quarter and the full year. Wireless is now the largest source of our revenue on an absolute and relative basis.

Before diving into our results, I want to update you on ongoing supply chain situation.

As I noted on our last earnings call, we saw approximately $11 million of impact fromsupply chain issues in the third quarter of last year. And we noted that we'll likely see continued impact in Q4. Including the fourth quarter, the net impact of supply chain delays for the full year was approximately $29 million. What's important to note is that absent this impact, our full year revenue would have been in line with our initial guidance. We do expect to see the $29 million impact recognized as revenue in the current fiscal year.

However, I want to caution that there very likely will be additional supply chain delays affecting our hardware products in 2022. While this is reflected in the full year guidance that Scott will give you, I will continue to update you on where we stand on supply chain as the year progresses.

Okay. Now turning to our product lines and starting with the wireless. As I mentioned, we saw extremely strong performance in our wireless business this year. We made a commitment to grow our wireless business, and we delivered with $56.3 million of wireless revenue in Q4 and $175.8 million in fiscal year 2021. With these results, wireless became not only the largest source of revenue for the company, contributing 53.5% in the fourth quarter and 43.8% in fiscal 2021, but also our most critical growth driver, increasing on a year-over-year basis by 11.7% in Q4 and by 48.2% for fiscal

2021. Additionally, we grew our wireless customers in the fourth quarter to 47. That's up from 28 at the end of 2020. We achieved these results despite the supply chain issues that we faced in the second half of the year that caused us to push out shipments of certain of our wireless hardware products into 2022.

Turning to cable. We continue to make progress with our next-gen products. As an example, we announced last week that Rogers has selected Casa to power its next generation of broadband services with our virtual CCAP core and distributed access architecture node solutions. We are extremely excited to be partnering with Rogers on this important network upgrade.

However, even with these advances, our fourth quarter and full year cable revenue were impacted by chip shortages, which led to delayed shipments of some new cable products, including Remote PHY and BDM 2 products. Currently, we are seeing supply chain shortages related to our cable products of up to 12 months. So, we do not expect to see growth in our cable revenue during 2022.

Our fixed telco products were similarly impacted by supply chain, which led to a decline in year-over-year revenue for the fourth quarter and full year. However, we did see continued advances with our virtual BNG router software product with 5 new purchase orders. As a result, I feel much better about what we can achieve this year with our fixed telco software products.

Before turning the call over to Scott, I want to say a few words about our outlook for the current fiscal year. As we noted during our Investor Day meeting, 2022 will be a significant transition year for Casa. What this means is that our focus going forward is on 2 things: growing our cloud software revenue and scaling back our lower-margin hardware products. Coupled with continuing supply chain issues, this may mean lowerhardware revenue during our transition year, but it will mean significantly higher margins and greatly improved profitability for our company beginning this fiscal year.

The benefits of this strategic pivot are already evident in the success we are seeing with our wireless and fixed telco software products. Scott will provide details on 2022 guidance in just a moment.

As many of you know, Scott will be leaving Casa before our next earnings call. I regret to see him leave, but I'm very grateful to him for the contributions he has made to our business during his more than 4 years at Casa Systems. I want to thank Scott for his hard work and for his commitment to assist us during the transition to his successor. I speak for the entire Casa team in wishing him the best in his future endeavors. We have already initiated a search for his replacement. We'll keep you posted as the search progresses.

With that said, I'd like to turn the call over to Scott. Scott?

Scott Bruckner, Chief Financial Officer

Thank you, Jerry, and good afternoon, everyone. As Jerry mentioned, even though we faced supply chain headwinds and component shortages in the fourth quarter and full year, we were still able to deliver another year of profitable growth and with strong free