Casa Systems, Inc.

Good afternoon and welcome to CASA Systems' third quarter 2023 earnings call. At this time, all participants are in a listen-only mode, and there will be a question and answer session opportunity at the end of this call. 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 and it's September 30th, 2023, 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 investor.casa-systems.com. With me on today's call are Michael Glickman, President and Chief Executive Officer, and Ed Durkin, 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 Michael, 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 earnings release are based upon information 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 US 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 Michael. Michael?

Thank you, Dennis, and thank you all for joining us today. Since joining Casa Systems in August, I've had the opportunity to spend time with many of our employees, customers, and partners. These discussions further reinforced my decision to take the role as CEO due to the great global customer base of top-tier communication service providers, our ability to quickly innovate, our strong engineering team, and market-leading cloud-native virtualized network functions, both for wireline and wireless customers. I see a company with industry-leading technology, talented employees, and significant potential to disrupt legacy incumbent solution providers and change how the world communicates. Service providers around the world are beginning to utilize more flexible, agile, and cost-efficient virtualized solutions across cable, telco, and wireless spaces, and the total addressable market is both large and growing across all major geographies. Driving these transformations are strong use cases that incrementally monetize providers' networks, as well as continued convergence of DOCSIS, fiber, and wireless for broadband services. CASA is uniquely positioned to take advantage of these transitions of both current and future spending with a combination of our virtual software offerings, including CCAP, Packet Core, BNG, and secure gateway solutions. Key to the adoption of these solutions will be strong partnerships to assist in the systems integration, operationalization, and support of these virtualized platforms. We are currently forming new partnerships with a combination of systems integrators, value-added resellers, OEMs, and cloud service providers whose capabilities complement CASAs and who can help us drive adoption of these solutions. We look forward to sharing more details on these new partnerships in the very near future. While many of these markets that CASA currently operates in are undergoing delayed transition for network updates, CASA continued to build momentum in 2023. During the third quarter, revenue came in at $62.1 million, which marks the second quarter in a row of quarter-over-quarter revenue growth. Our financial strategy is to focus on cash and capital-efficient operating results with a return to EBITDA profitability as well as consistent positive operating cash flow so that we can remain in control of our own destiny. As part of our ongoing transformation, we are continuing to evaluate non-core asset sales that will help further de-lever our business, such as the sale-leaseback agreement for our headquarters building in Andover that was completed in late October. Ed will provide further details on that and additional efforts we are taking to further de-lever our business shortly. Turning now to our product portfolio, I'm incredibly excited about the opportunities of our cloud software business, which is comprised of our industry-leading cloud-native virtualized packet core and small cell core portfolio, as well as our virtual BNG and virtual secure gateway. We are currently forecasting that we will end fiscal year 2023 with approximately $25 million of GAAP revenue and $35 million of billings for our cloud software business, growing at approximately 50% in fiscal year 2023. We currently have 10 customers, over $100,000 in fiscal year 2023 revenue that utilize components of our cloud portfolio. more than half of which are in production. Our partnership with YTL, a leader of mobility services in Malaysia, which we initially announced last year, has taken another step forward. In our recent announcement, we outlined how our software helped them win the Ookla Award for the fastest mobile network in Malaysia, as well as assisting their launch of the iPhone 15. Our strategic partnership with Verizon has also continued to grow with both the adoption of new software components, as well as software developments to enable Verizon to monetize their 4G and 5G investments. With our growing pipeline and continued growth from our current customers, we are on track for our cloud business to continue to grow approximately 50% in 2024. focusing on B2B business outcomes such as mobile private networks, fixed wireless access, and IoT telematics. Our access device business continues to see wins as well in areas such as fixed wireless access broadband, including our recent deployment we announced in September with U.S. Cellular. They selected CASA's new Aorus Link fixed wireless access outdoor device that provides high-speed broadband internet solution for homes and business to help expand U.S. Cellular's addressable market across diverse urban, suburban, and rural markets. As we look towards the future of our access device business, our focus will be on profitable deals which utilize our market-leading provisioning and management software and our outstanding customer support. This decision will have a positive impact on our gross profit with an eye towards achieving our goal of returning the company to EBITDA profitability. Within our access device business is also our 4G, 5G enterprise small cell business that has continued to scale as well. We are proud to be one of a handful of U.S.-based RAN companies in the world. Our focus is industry-leading solutions for scalable indoor enterprise small cell deployments for in-building coverage, either enhancing existing DAS or replacing it. Given our current customer deployments, we expect revenue this year to be north of $10 million, representing year-over-year growth above 50%. We expect this level of growth to continue in fiscal year 2024 as we continue to add new customers in Europe and North America. Turning now to Cable, where the transition to DOCSIS 3.1 and 4.0 for high-speed services, along with the transition to a virtual CCaaS core and DAA, will continue to provide CASA significant opportunities moving forward. Our installed base of customers, as well as new MSO customers, are migrating to CASA's portfolio and away from end-of-life equipment, replacing legacy solutions from vendors that have exited the business. We are also excited about participating in new markets with our MSO customers utilizing virtual BNG to support their fiber to the home and wireless installations. We have several customers in production as well as multiple proof of concepts with tier one MSOs. The convergence of fiber to the home DOCSIS and fixed wireless access broadband is the perfect application for our flexible virtual BNG solution. However, as with most vendors serving this market, there has been a slowdown in spend during these transitions, which have MSOs utilizing current capacity in their networks, as well as reducing inventory built through later stages of the pandemic timeframe. After revenue growth in Q2 2023 as compared to 22, these factors drove meaningful decline of 42% in our cable business in the third quarter compared to the prior year, and we expect to see similar dynamics in the fourth quarter of this year. With that said, it is important to note that this shortfall in revenue is not due to competitive market share losses, but rather the delays associated with these transitions. Before I turn the call over to Ed, I would like to note that we still have a lot of work ahead of us to achieve our transformational goals. We are making meaningful progress on achieving these goals by expanding our team with proven industry veterans. modifying our product strategy to leverage our technical differentiation to drive accelerated growth, and fine-tuning our partnership strategy. Our financial strategy continues to focus on a return to EBITDA profitability and generating consistent positive cash flow. As we look towards 2024, we believe we are very well positioned to be a dynamic leader with our market-leading product portfolio, growing sales pipeline, and expanded partner ecosystem. With that said, I would now like to turn the call over to Ed to review our financial results for the quarter. Ed?