Casa Systems, Inc.

Hello, and welcome to the CASA Systems third quarter 2021 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jackie Marcus, Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Casa Systems released results for the third quarter of 2021, ended September 30th, 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.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?

Good afternoon, everyone. Thank you for joining us today as we discuss our third quarter results. As you know, we had a very solid start to our fiscal year. During the first half, we successfully managed to avoid any material impact from what are now very widespread supply chain issues. And we delivered record growth and profitability. Unfortunately, I cannot say the same about the third quarter. As we are seeing across our industry, our third quarter results were impacted by worsening supply chain issues. To add some color, we estimate that the revenue impact from delayed deliveries across our product lines in the quarter amounted to approximately $11 million. With the global shortage continuing towards the end of Q3, we are now facing orderly times for certain components of over a year. Finally, lower revenue from supply chain delays also meant lower year-over-year gross profit. Our gross profit margin in Q3 was lower also because of a higher percentage of hardware product revenue than we normally see each quarter. This resulted from a few customer software order delays that we expect to recognize as revenue in Q4. While we anticipate that supply and logistic challenges are only temporary, we do expect them to continue for at least the fourth quarter of this year and likely into 2022. As you saw in our press release, we are updating our guidance to reflect this current reality. We did mention on our previous earnings course that we would revise our assumptions if supply chain disruptions got worse. Unfortunately, and as I just laid out, they have. Scott will provide our revised guidance assumptions in his remarks later on this course. But please bear in mind that the supply chain situation is very fluid. So our revised guidance is based on the best information that we have today. Having said this, I want to reiterate that short-term or quarterly blips in our results in no way diminish our expected long-term growth trajectory. In fact, we continue to see growing demand for our products, particularly in wireless. We continue to have a very large backlog across our products, and we fully expect to benefit materially from RDoS, 5G, and the deployment of mobile private networks. We will provide more details about all of this and about our growth expectations during our November investor day. While industry-wide supply chain and logistics constraints made this a tough quarter, we did see several significant successes in Q3, to name a few. Mediacom chose Casa's innovative fixed wireless access devices and the 4G combo packet core as a package solution to bring reliable high-speed internet to underserved communities in rural areas. We announced an exclusive agreement with Bell Canada to provide a new 5G sub-6 fixed wireless access devices for Bell's wireless home internet service. This will deliver broadband to customers in small towns and rural communities. And Vodafone successfully tested our open architecture disaggregated virtual BNG router in a multi-vendor solution. We believe that our virtual BNG will disrupt the industry by being the first and only product that can work with the separate hardware and software provided by multiple vendors. As such, it helps our customers to seamlessly scale and deploy new features and enhance their time to market in launching new services. With that said, let me turn to our results, which again reflect significant supply chain headwinds. Total revenue for the quarter came in at $99.2 million, a 6% decline year over year. Adjust EBITDA was $5.5 million. On a year-to-date basis, however, revenue of $296 million was up 8.6% over the comparable period in 2020. And the year-to-date EBITDA of $37.4 million was up 24.5% over EBITDA in the first three quarters of 2020. Moving on to our product areas, starting with wireless. Despite supply chain headwinds, wireless revenue was $44.2 million. That's up 26% sequentially, up 51% year-over-year. and it represents 45% of our total revenue in the quarter. Wireless revenue growth in Q3 came from continuous success in our 4G, 5G packet core, and fixed wireless access devices. Our wireless backlog at the end of the quarter remained large and stood at $101.2 million. In addition to the product successes I mentioned earlier, we continue to make progress. with our cloud-native 5G solutions, both in terms of industry recognition by cloud leaders like Intel, Red Hat, Amazon and Google, as well as in terms of customer adoption. In fact, we have seen our 5G cloud-native core network functions chosen by a major North American mobile network operator and a mobile network operator in the APAC region, to name just a couple. And finally, As our cloud software products continue to gain traction, we'll have a wider mode to mitigate the impact of hardware supply chain disruptions. Moving on to fixed telco. Fixed telco revenue was $21 million in Q3 and accounted for 21% of our total revenue. This is down 39% year over year, but it's up 22% on a sequential basis. As I previously mentioned, the lumpiness we have seen our fixed telco revenue has been due to product and customer concentration, which we have been working towards resolving. We believe that the 22% sequential growth in this product area is evidence that fixed telco is beginning to gain traction, both with fiber extension products and our virtual BNG router products. Before moving on to cable, let me point out that revenue from our new product areas of fixed and wireless accounted for 65% of our Q3 revenue. Finally, let's turn to cable. Cable revenue in the quarter was $34 million, or 34% of revenue. While this was down 19% year over year, I would note that a majority of the negative impact from supply chain was in cable. Normalized for this impact, we believe our cable revenue would have been within the $45 to $50 million range that we have been seeing each quarter In spite of these supply chain issues, cable demand continues to be relatively stable with most of our customers opting for extended life in their existing integrated CCAP architecture, while they're also investing in high and mid-splits as they await deployable remote MaxFi. Before turning the call over to Scott to review our detailed financial results for the quarter and our outlook, for the remainder of 2021. I want to thank our best-in-class team members who worked extremely hard to try to minimize the impact of the supply chain environment on our customers and our company. Their efforts are responsible for the exceptional products we have developed and for our continued success in expanding our customer and revenue base. With that said, I'd like to turn the call over to Scott. Scott?