Q3 2023 Casa Systems Inc Earnings Call

Speaker 1: Good afternoon and welcome to Casla Systems 3rd Corp. 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.

Good afternoon, and welcome to call.

Third quarter 2023 earnings call.

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.

Under this call is being recorded.

At this time I would like to turn the call over to Dennis Dailey, Vice President of corporate development and Investor Relations.

Speaker 2: Thank you operator and good afternoon everyone. Cost of systems release results for the third quarter of this year, 2023, and it's September 30, 2023, this afternoon after the market closed.

Thank you operator, and good afternoon, everyone. Casa systems released results for the third quarter of fiscal year 2023, and at September 30 of 2023. This afternoon after the market closed.

Speaker 2: If you did not receive a coffee of our earning 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, Michael Quickman, President and Chief Executive Officer, and Ed Durkin Chief Financial Officer. This call is being webcast. It will be archived on the Investor Relations section of our website.

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 <unk> Com that gas systems Dot Com with me on today's call Michael quick Mini President and Chief Executive Officer, and Ed <unk> Chief Financial Officer.

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

Speaker 2: 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 uncertain.

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 does include certain risks and uncertainties.

Speaker 2: Ladies and gentlemen, please refer to our press release and our SBC finalings 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.

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.

Speaker 2: Any poor 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.

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.

Speaker 2: In addition to US gap reporting, we report certain financial measures that do not conform to generally accepted accounting.

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

Speaker 2: 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. With that, I'd like to turn the call over to my

During the call we may use non-GAAP measures. If we believe it is useful to investors or believed it would be helpful to investors to better understand our performance or business trends.

With that I'd like to turn the call over to Michael Michael.

Speaker 3: Thank you, Dennis, and thank you all for joining us today.

Thank you Dennis and thank you all for joining us today.

Speaker 3: Since joining COSIS systems in August , I've had the opportunity to spend time with many of our employees, customers, and partners.

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 reinforce my decision to take the role as CEO due to the great global customer base of top tier communication service providers our ability to.

Speaker 3: These discussions further reinforce 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 a wireline and wireless customer.

Innovate, our strong engineering team and market, leading cloud native Virtualized network functions, both for wireline and wireless customers.

Speaker 3: I see a company with industry leading technology, talented employees, and significance potential to disrupt legacy and common solution providers, and change how the world communicates.

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.

Speaker 3: Service providers around the world are beginning to utilize more flexible, agile, and cost-efficient virtualized solutions across cable, telco, and wireless space.

Service providers around the world are beginning to utilize more flexible agile and cost efficient virtualized solutions across cable telco and wireless spaces.

Speaker 3: And the total addressable market is both large and growing across all major geographies.

And the total addressable market is both large and growing across all major geographies.

Speaker 3: Driving these transformations are strong use cases that incrementally monetize providers' networks, as well as continued convergence of doxas, fiber, and wireless for broadband service.

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.

Speaker 3: Kasa is uniquely positioned to take advantage of these transitions of both current and future spending with a combination of our virtual software offerings, including C-CAP, Packet Core, BNG, and Secure Gateway Solutions.

<unk> is uniquely positioned to take advantage of these transitions of both current and future spending with a combination of our virtual software offerings, including C cap packet core B N G and secured gateway solutions.

Speaker 3: key to the adoption of these solutions will be strong partnerships to assist in the systems integration, operationalization, and support of these virtualized platforms.

Key to the adoption of these solutions will be strong partnerships to assist in the systems integration Operationalization and supported these virtualized platforms.

Speaker 3: We are currently forming new partnerships with a combination of systems integrators, value added resellers, OEMs, and cloud service providers whose capabilities complement causes and who can help us drive adoption of these solutions.

We are currently forming new partnerships with a combination of systems integrators value added resellers Oems and cloud service providers, whose capabilities complement classes 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.

Speaker 3: We look forward to sharing more details on these new partnerships in the very near-

Speaker 3: While many of these markets that Casa currently operates in are undergoing delayed transition for network updates, Casa continue to build momentum in 2023. During the third quarter revenue came in at $62.1 million, which marks the second quarter of quarter of a quarter of revenue growth.

While many of these markets that concept currently operates in are undergoing delayed transition for network updates costs have 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.

Speaker 3: 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 desk.

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.

Speaker 3: As part of our ongoing transformation, we are continuing to evaluate non-core asset sales that will help further deliver our business, such as the sale lease back agreement for our headquarters building an andover that was completed in late October .

As part of our ongoing transformation, we are continuing to evaluate noncore 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.

Speaker 3: Ed will provide further details on that and additional efforts we are taking to further deliver our business.

Ed will provide further details on that and additional efforts we are taking to further de lever our business shortly.

Speaker 3: Turning out our product portfolio, I'm incredibly excited about the opportunities of our cloud software business.

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.

Speaker 3: which is comprised of our industry leading cloud-native virtualized packet core and small cell core portfolio.

Speaker 3: as well as our virtual BNG and virtual secure gateway.

As well as our virtual BMG and virtual secure gateway.

Speaker 3: We are currently forecasting that we will end fiscal year 2023 with approximately $25 million of gap revenue and 35 million of billions for our cloud software business growing at approximately 50% in fiscal year 23.

We are currently forecasting that we will end fiscal year 2023, with approximately $25 million of GAAP revenue and $35 million of billings for a cloud software business growing at approximately 50% in fiscal year 'twenty three.

Speaker 3: We currently have 10 customers, over 100,000 in fiscal year 23 revenue that utilize components of our cloud portfolio, more than half of which are in production.

We currently have 10 customers over 100000 in fiscal year 'twenty three revenue that utilize components of our cloud portfolio more than half of which are in production.

Speaker 3: 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 Uglow Award for the fastest mobile network in Malaysia, as well as assisting their launch of the iPhone PIP.

Our partnership with White T L. 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 help them win the Uccle award for the fastest mobile network in Malaysia, as well as assisting their launch.

The iPhone 15.

Speaker 3: 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.

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 horizon to monetize their forgey and five G investments.

Speaker 3: 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 telematic.

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 B to B business outcomes, such as mobile private networks fixed wireless access and Iot telematics.

Speaker 3: Our act of 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 US Cellular.

Our access device business continues to see wins as well in areas such as fixed wireless access broadband, including a recent deployment, we announced in September with U S. Cellular.

Speaker 3: They selected Casas new AuraSlink fixed wireless access outdoor device that provides high-speed broadband internet solution for homes and business to help expand U.S. cellulers addressable market across diverse bourbon suburban and rural markets.

They selected classes, new Rs 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.

Speaker 3: 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.

As we look towards the future of our access device business, our focus will be unprofitable deals, which utilize our market, leading provisioning and management software and our outstanding customer support.

Speaker 3: This decision will have a positive impact on our gross profit with an eye towards achieving our goal of returning the company to ebit of profitability.

This decision will have a positive impact on our gross profit with an eye towards achieving our goal of returning the company to EBIT profitability.

Speaker 3: Within our access device business is also our 4G, 5G enterprise small cell business that is continue to scale as well. We are proud to be one of a handful of US-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 DAZ or replacing

Within our access device business is also our <unk> five gene 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.

Speaker 3: Given our current customer deployments, we expect revenue this year to be north of $10 million, representing year of year growth above 50%.

Given our current customer deployments, we expect revenue this year to be north of $10 million representing year over year growth above 50%.

Speaker 3: We expect this level of growth to continue in fiscal year 2024 as we continue to add new customers in Europe and North America.

We expect this level of growth to continue in fiscal year 2024, as we continued to add new customers in Europe and North America.

Speaker 3: Turning out a cable where the transition to DOCSIS3.1 and 4.0 for high-speed services, along with the transition to a virtual C-CAS core and DAA, will continue to provide costs to significant opportunities moving forward.

Turning now to cable where the transition to DOCSIS three one in four that O for high speed services, along with the transition to a virtual <unk> core N. D. E will continue to provide cost us significant opportunities moving forward.

Speaker 3: 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 existed.

Our installed base of customers as well as new M. S. O customers are migrating to cause this portfolio and away from end of life equipment, replacing legacy solutions from vendors that have exited the business.

Speaker 3: 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 installation.

We are also excited about participating in new markets with our M. S O customers utilizing virtual B N G 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.

Speaker 3: We have several customers in production, as well as multiple proof of concepts with Tier 1 MSO.

Speaker 3: The convergence of fiber in the home, doxas and fixed wireless access broadband is the perfect application for our flexible virtual BNG solution.

The convergence of fiber to the home DOCSIS and fixed wireless access broadband is the perfect application for our flexible virtual <unk> solution.

Speaker 3: 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 time frame.

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 to later stages of the pandemic time frame.

Speaker 3: After revenue growth in Q2, 2023 is 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.

After revenue growth in Q2, 2023 as compared to 22. These.

These factors drove meaningful decline of 42% and 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.

Speaker 3: But 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 trends.

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.

Speaker 3: 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.

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.

Speaker 3: Our financial strategy continues to focus on a return to EBITDA profitability and generating consistent, positive cash flow.

Our financial strategy continues to focus on our return to EBITDA profitability and generating consistent positive cash flow.

Speaker 3: 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 and we are very well positioned to be a dynamic leader with our market leading product portfolio, growing sales pipeline, and expanded partner

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.

Speaker 3: With that said, I would now like to turn the call over to Ed to review our financial results for the quarter.

But that said I would now like to turn the call over to Ed to review, our financial results for the quarter Ed.

Speaker 1: Thank you, Michael and good afternoon to everyone on the call. As Michael mentioned, revenue for the quarter came in at 62.1 million, up 7% from the prior quarter.

Thank you Michael and good afternoon to everyone on the call as Michael mentioned revenue for the quarter came in at $62 1 million up 7% from the prior quarter.

Speaker 1: breaking down the revenue across our product lines for the third quarter. Cloud revenue is 11.5 million, an increase of 9.5 million from the prior year and up 9.2 million from the prior quarter of 2023.

Breaking down the revenue across our product lines for the third quarter cloud.

Cloud revenue was $11 5 million, an increase of $9 5 million from the prior year and up $9 2 million from the prior quarter of 2023.

Speaker 1: Cable revenue was 17.5 million, which was down 42% from 30.2 million from the prior year and down 37% from...

Cable revenue was $17 5 million, which was down 42% from $30 2 million from the prior year and down 37% from two.

Speaker 1: $27.5 million in the prior quarter. As Michael just mentioned, the decrease in cable revenue was driven...

$27 5 million in the prior quarter as Michael just mentioned the decrease in cable revenue was driven.

Speaker 1: by a slowdown in spending from cable MFOs, as these MFOs focused on utilizing existing capacity in the networks, and this decline was not market share losses. Competitively, we continue to do very well as evidence by our recent Clareo Columbia win earlier this year among other factors.

By a slowdown in spending from cable Msos as these msos.

Just on utilizing existing capacity in the networks and this decline was not market share losses competitively, we continue to do very well.

Evidenced by our recent clearer Columbia win earlier this year among other factors.

Speaker 1: Access revenue, which includes our access device products from our 2019 Netcom acquisitions.

Access revenue, which includes our access device products from our 2019 net com acquisition.

Speaker 1: Plus our 4G and 4G, 5G radio products totaled $33.1 million, which was down 4%.

Plus our 40 and 45 T radio products totaled $33 1 million, which was down 4%.

Speaker 1: from 34.6 million from the prior year, but was up 17% from the prior quarter.

From $34 6 million from the prior year, but was up 17% from the prior quarter.

Speaker 1: driven by sales of our RAND product, which increased by almost 100% from the prior quarter.

Driven by sales of our Ram product, which increased by almost 100% from the prior quarter.

Yeah.

Speaker 1: Moving out of Gross Profit, Gap Gross Profit for the third quarter was 25.9 million or 42% of revenue.

Moving now to gross profit GAAP gross profit for the third quarter was $25 9 million or 42% of revenue.

Speaker 1: Gross margin during the quarter was impacted by a non-cash charge to increase our inventory obsolescence reserve by $7.9 million.

Gross margin during the quarter was impacted by a noncash charge to increase our inventory obsolescence reserve by $7 9 million.

Speaker 1: Excluding the impact of this non-cash charge to increase our inventory reserve, gross profit would have been

Excluding the impact of this noncash charge to increase our inventory reserve gross profit would have been.

Speaker 1: 54% reflecting the higher mix of very high margin cloud software revenue we realized in Q3 2023.

54%, reflecting the higher mix of very high margin cloud software revenue, we realized in Q3 2023.

Speaker 1: Gap operating expenses for the quarter came in at $44.3 million. This is up $3.3 million or 8% from the prior quarter.

GAAP operating expenses for the quarter. It came in at $44 3 million. This is up $3 3 million or 8% from the prior quarter.

Speaker 1: This increase is largely driven by a $4.7 million non-cash.

This increase is largely driven by a $4.7 million noncash.

Speaker 1: and non-recurring impairment charge recorded during Q3 for the fail and leaseback of our and or headquarters.

And nonrecurring impairment charge recorded during Q3 for the sale and leaseback of our indoor headquarters.

Speaker 1: Our gap operating loss for the quarter is $18.4 million.

Our GAAP operating loss for the quarter was $18 4 million.

Speaker 1: $12.6 million of this loss was related to non-cash inventory reserves and the aforementioned $4.7 million non-cash impairment charge on the sale and lease back of the building and $2.3 million related to non-recurring workforce charges during the quarter.

$12 6 million of this loss was related to noncash inventory reserves and the aforementioned 4.7 million noncash impairment charge.

On the sale and leaseback of the building and $2 3 million related to nonrecurring workforce charges during the quarter.

Yeah.

Speaker 1: Finally, related to our third quarter P&L, our gap net loss for the quarter was $25.6 million, or $0.26 loss per diluted share, versus a net loss of $31.2 million in the third quarter of 2022. Our $25.6 million net loss in the quarter also includes $10.7 million in net loss.

Finally related to our third quarter P&L, our GAAP net loss for the quarter was $25 6 million or <unk> 26 cents loss per diluted share versus a net loss of $31 2 million in third quarter of 2022.

$25 6 million dollar net loss in the quarter also includes $10 7 million in.

Speaker 1: interest expense, which include $4 million of charges reflected in interest expense related to non-cash amortization of deferred debt issuance cost. We also had a $3.8 million

Interest expense, which includes $4 million of charges reflected in interest expense related to noncash amortization of deferred debt issuance cost.

We also had a $3 8 million noncash gain.

Speaker 1: related to the fair value and the warrant liability from Q during Q3.

Related to the fair valuing of the warrant liability from Q during Q3.

Speaker 1: On a non-gap basis, we had a net loss of 20.2 million or 20 cents loss per share and reported net adjusted ebid a loss of 6.1 million as reflected in the schedules shown in the back of the press release.

On a non-GAAP basis, we had a net loss of $20 2 million or 20 cents loss per share and reported net adjusted EBITDA loss of $6 1 million.

It reflected in the schedules shown in the back of the press release.

Speaker 1: Turning to our balance sheet, we're into the quarter of cash, cash equivalents and restricted cash are approximately 49.7 million.

Turning to our balance sheet, we ended the quarter with cash cash equivalents and restricted cash of approximately $49 7 million.

Speaker 1: Our cash balance at September 30th was down 16.3 million compared to June 30th. Duke primarily.

Our cash balance at September 30th was down $16 3 million compared to June 30th due primarily.

Speaker 1: to our net loss for the quarter, timing of payables, and a large quarterly debt service payment made in September 2023.

Two our net loss for the quarter timing of payables and a large quarterly debt service payment made in September 2023.

Speaker 1: We ended Q3 with $37.4 million of high-quality receivables.

We ended Q3 with $37 4 million of high quality receivables.

Speaker 1: These receivables are from the very financially capable MSOs and

These receivables are from the very financially capable msos and.

Speaker 1: CSPs and our receiver collection experience means

C S piece in our receivable collection experience remains excellent.

Speaker 1: As Michael mentioned earlier in the call, we recently completed a fail and leaseback for our Andover Massachusetts Headquarter October .

As Michael mentioned earlier in the call. We recently completed a sale and leaseback for Andover, Massachusetts headquarter October.

Speaker 1: As a result of the STALE leaseback agreement, we received approximately 6 million net proceeds, which will be used to help pay down our terminal and be debt and further deliver our business.

As a result of the sale leaseback agreement, we received approximately 6 million of net proceeds which will be used to help pay down our term loan b debt and further de lever our business.

Speaker 1: The interest savings from this debt paydown will more than cover in the operating expense increase we will see as part of this transaction.

The interest savings from this debt pay down well more than covering the operating expense increase we will see as part of this transaction.

Speaker 1: And the cell the building gives us the flexibility to right size our office space needs as we embrace the hybrid and more geographically diverse work for.

And the sale of the building gives us the flexibility to right size, our office space needs as we embrace a hybrid and more geographically diverse workforce.

Speaker 1: As part of our financial strategy, we're also evaluating the sale of other non-corassants that we can use to help further deliver our business.

As part of our financial strategy. We're also evaluating the sale of other noncore assets that we can use to help further delever our business.

Speaker 1: As noted in our earnings release today, we're adjusting our full year 2023 revenue guidance to a range of 205 million to 225 million.

As noted in our earnings release today, we are adjusting our full year 2023 revenue guidance to a range of 205 million to $225 million.

Speaker 1: The decrease in guidance is being primarily driven by the delay in cable MFO spend and Michael mentioned earlier.

The decrease in guidance is being primarily driven by the delay in cable msos spend that Michael mentioned earlier.

Speaker 1: as well as from telco customers pushing out deliveries of backlog access device orders into 2024 to manage their own inventory levels.

As well as some telco customers pushing out deliveries of backlogged access device orders into 'twenty 'twenty four it to manage their own inventory levels.

Speaker 1: Again, it is important to reiterate that this softness is not due to competitive market share losses, but rather due to delays in new purchases, delays in deployments of awarded virtual sea cap deals, and delays in timing of delivery of backlog orders from Q4 23 into the first half of 2024.

It is important to reiterate that this softness is not due to competitive market share losses.

Rather due to delays in new purchases delays in deployments of awarded virtual C cap deals and delays in timing of delivery of backlog order. Some Q4 'twenty three into the first half of 'twenty 'twenty four.

Speaker 1: Our guidance also being impacted to a lesser degree from the timing of shipments from some of our access device customers, which we have agreed to push from Q4 to the first half of 2020.

Our guidance also being impacted to a lesser degree from the timing of shipments from some of our access device customers, which we have agreed to push from Q4 to the first half of 2024.

Speaker 1: I'm very pleased that cloud and RAM revenues and business momentum continue to exceed our expectation.

I'm very pleased to cloud and Ram revenues in business momentum continued to exceed our expectations.

Speaker 1: and that our growth expectations for these strategic market segments for 2024 look strong.

And that our growth expectations for these strategic market segments for 2024 look strong.

Speaker 1: Given the shortfall in revenue for the second half of 2023, we no longer expect to be net-adjusted EBITDA positive for the year.

Given the shortfall in revenue for the second half of 2023 we no longer expect to be net adjusted EBITDA positive for the year.

Speaker 1: As part of our current 2024 planning process and consistent with our north star goal of returning to EBITDA and cashflow positive operating results, we are evaluating our cost structure to make sure that better lines would have future revenue and gross margin.

As part of our current 'twenty 'twenty, four planning process and consistent with our Northstar goal of returning to EBITDA and cash flow positive operating results. We are reevaluating our cost structure to make sure it better aligns with our future revenue and gross margin outlook.

Speaker 1: Finally, regarding our backlog in deferred revenue metrics, we currently have approximately 136 million in product and service backlog in deferred revenue.

Finally regarding our backlog and deferred revenue metrics. We currently have approximately $136 million in product and service backlog and deferred revenue.

Speaker 1: And we have 96 million remaining of future buildings under the Verizon contract.

And we have 96 million remaining of future billings under the Verizon contract.

Speaker 1: to be built in 2024 beyond, which brings our total backlog, deferred revenue, and future Verizon Billings to approximately 232 minutes.

To be built in 2024, and beyond which brings our total backlog deferred revenue and future horizon billings to approximately $232 million.

Speaker 1: As we noted last quarter, we also have approximately 40 million of remaining

As we noted last quarter, we also have approximately $40 million of remaining claw.

Speaker 1: We have a close contracted business for our 4G5G Enterprise Small Cell Radio, with a major North American Mobile Network operator that began chipping in Q3, where we get POs on an annual F.

Clothes contracted business for a fortune five enterprise small cell radios with a major north American mobile network operator.

That began shipping in Q3.

Where we get pose on an annual as ordered basis.

Speaker 1: We also have an award from a major European cable customer for Virtual SeaCap Core Project.

And we also have an award from a major European cable customer for virtual <unk> core project.

Speaker 1: With approximately $53 million of estimated TCV values that we will begin deployment in 2024 and continue over the next few years.

With approximately $53 million of estimated T. C V value that we will begin deployment in 'twenty 'twenty four and continue over the next few years.

Speaker 1: I would like to note that these last two award agreements are not included in the backlog in deferred revenue numbers, I cited, and will be reflected as we receive binding purchase and delivery orders for shipment deployment to these customers.

I would like to note that these last two award agreements are not included in the backlog and deferred revenue numbers I cited and will be reflected as we received binding purchase and delivery orders for shipment deployment to these customers.

Speaker 1: Before I turn the call over to the operator to open the line for questions, I would finally like to wrap up by discussing our ATM program, which we have received many questions on from investors since August .

Before I turn the call over to the operator to open the line for questions I would finally I'd like to wrap up by discussing our ATM program, which we have received many questions on from investors since August.

Speaker 1: Our ATM program was put in place in Q3 to have it on hand if we ever needed it. As we complete the transformation, Michael mentioned and returned to profitable operating results. But given our current share price, we currently have no plans to use our ATM program to issue an issue.

Our ATM program was put in place in Q3 to have it on hand, if we ever needed. It as we complete the transformation Michael mentioned and returned to profitable operating results, but given our current share price. We currently have no plans to use our ATM program to issue any shares.

Speaker 1: I'll now turn the call over to the operator, go up to line for any questions operator.

I'll now turn the call over to the operator to open up the line for any questions operator.

Speaker 4: Thank you. Well, now we can do a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tells them indicate your life is on the question key. You may press star two if you'd like to remove your question from the key. But for kids, you can speak your equipment and maybe not to start to pick up your hands that will focus on the star key. One moment please.

Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line and during the question queue.

You May press star two if you'd like to remove your question from the queue for participants using speaker equipment and they'd be necessary to pick up your handset before pressing the star.

One moment, please while we poll for questions.

Speaker 4: Thank you. Our first question is from Tim Savageau with Northland Capital Markets. Please consider your question.

Thank you. Our first question is from Tim Solvable with Northland Capital markets. Please proceed with your question.

Hmm.

Speaker 2: I get up in a couple questions here. You mentioned.

Hi, good afternoon.

Couple of questions here, we mentioned.

Speaker 2: in the goal for e-vita profitability a couple times and sounds like you're

In the Gulf for EBITDA profitability, a couple of times and it sounds like you are.

Speaker 2: Maybe in the middle of developing those plans, you've talked specifically about 24 for a couple of segments, but not a couple of others, but...

Maybe in the middle of developing those plans you've talked specifically about 24 for a couple of segments, but not a couple of others, but.

Speaker 2: Understanding that may still be underway in terms of the cost cutting as well. Do you have a sense of what you might

Understanding that may still be underway in terms of the cost cutting as well.

Do you have a sense of.

What you might hope for in terms of.

Speaker 2: targeting a return to EBITDAW profitability or EBITDAW profitability in general. And how much cash do you need to get there?

Targeting a return to EBITDA profitability or EBITDA profitability in general.

And how much cash do you need to get there.

And I have a follow up.

Speaker 1: Yeah Tim, I'll take that and Michael can weigh in also. We are going through the 2024 planning process now. As Michael mentioned, it is our North Star to return to operating cash flow positive and eaped of profitability in 2024 and beyond and we're working through that now. I think we don't have guidance for 2024. So levels of ebit of profitability, we would plan on

Yeah, Timm I'll take that in and Michael can weigh in also we are going through the 'twenty 'twenty four.

<unk> process now.

As Michael mentioned it is a R.

<unk> started to return to our operating cash flow positive in EBITDA profitability in 2024 and beyond and we're working through that now you know I think we don't have guidance for 2024, so the levels of EBIT profitability, we would plan on.

Speaker 1: providing that in our February March call when we provide guidance for the year. You know in terms of cash to get there, I think we should be fine on that front.

Providing that in our February March call, when we provide guidance for the year.

In terms of cash to get there I think we should be fine on that front.

Speaker 1: We did burn some cash in Q3 and expect to use some cash in Q4, but expect to be cash flow positive in Q1 and thereafter. And

We did burn some cash in Q3 and expect to use some cash in Q4, but expect to be cash flow positive in Q1 and thereafter and.

Speaker 1: you know, we are looking at the cost structure too and we'll do what is needed to right size that once we finish our 2022 revenue and gross margin.

You know, we we are looking at the cost structure too and we will do what is needed to to rightsize that once we finish our 2022.

<unk> gross margin planning.

Speaker 3: Yeah, and Tim, it's Michael, I'll just follow on that. I think it's just really important, and I wanted to make it very clear that if there was any expectation that, you know, the sole focus of the company was gonna be continued, focused just on top line growth.

Yeah, and Tim It's Michael I'll, just follow on on that Ah I think it's just really important and I wanted to make it very clear that if there was any expectation that you know the sole focus of the company was going to be continued focus just on top line growth.

Speaker 3: I think it's pretty clear coming out of this that we pivoted towards obviously continuing to try to grow the company and we've got great growth in some of the business lines as I mentioned.

I think it's pretty clear coming out of this that we pivoted.

Towards obviously continuing to try to grow the company and we've got great growth in some of the business lines as I mentioned, but we have to get consistently back to profitability and cash flow positivity right. So the way that I think we're approaching it is you know look above the line first and look at the mix.

Speaker 3: But we have to get consistently back to profitability and casual positivity, right? So...

Speaker 3: The way that I think we're approaching it is, you know, look above the line first and look at the mix of the

The the products that you're selling as.

Speaker 3: the products that you're selling, as well as the types of deals that you're taking down. And as Ed talked about on a, you know, a pro form of basis, our gross margin actually expanded to the positive in the quarter. And we're going to continue to focus on that.

As well as the types of deals that you are taking down and as Ed talked about on a pro forma basis, our gross margin actually expanded a to the positive in the quarter and we're going to continue to focus on that and then you've also obviously you got to look below the line as well and we'll be making the right calls as any solid.

Speaker 3: And then you've also obviously got to look below the line as well. And we'll be making the right calls as any.

Speaker 3: Solid business wood on how we write size our cost basis as well.

Business would on how we rightsize our cost basis as well.

Okay.

Speaker 2: Right, so let's like actually inventory charge in the quarter. You are probably somewhere close to break even. That fair.

Alright, so it looks like ex the inventory charge in the quarter, you were probably somewhere close to breakeven.

Okay fair enough or positive EBITDA.

Speaker 2: So does that give a sense to, you know, what the business could look like in the future in terms of maybe a lower top line but higher margin?

So does that give a sense of what the business could look like in the future in terms of maybe a lower top line, but higher margins.

Speaker 1: Yeah, I think that's right Tim. There are a lot of activity flowing through the P&L and it is an operating loss of 18.4 million. But when you back out the non-CAST charge for the Indoor Reserve of 7.9 million.

Yeah, I think that that's right Tim there are a lot of a lot of activity flowing through the P&L and it is an operating loss of $18 4 million, but when you back out the noncash charge for the inventory reserve of $7 9 million.

Speaker 1: which is in Costa Goodsola, you back out the impairment charge for the building of 4.7 million in op-x.

Which is in cost of goods sold you back out the impairment charge for the building of $4 7 million in Opex.

Speaker 1: You know, back out the, you know, non-recurring workforce charge of 2.3 million in COGS and OPEX and you back out the stock-based comp, amortization depreciation of 5.3 also in COGS and OPEX.

You hook back out the.

Nonrecurring workforce charge of $2 3 million in Cogs, and Opex and you back out the stock based comp amortization depreciation of 5.3 also in Cogs and Opex you know the operating loss picture gets a considerably better so they're very active quarter with lots of kind of one time charges.

Speaker 1: you know, the operating loss picture gets considerably better. So, very active quarter, lots of kind of one-time charges, but you write if you look through and piece it together, you know, the picture looks better.

But you're right. If you if you look through and piece it together the picture.

Looks better in an operating loss basis, and will continue to improve that and again make the necessary adjustments, we need to make to ensure were positive in 2024.

Speaker 1: and we'll continue to improve that and again, make the necessary adjustments we need to make to ensure we're positive in 2020.

Speaker 2: Hey, great. And as you look at Q4, I mean, any, you made some comments, but I don't know if we ever recast last year on cable, but generally where you expect the segments to kind of move in Q4 is really just a...

Okay, Great and then as you look at it.

Q4.

Any you made some comments, but I don't know if we ever recast last year on cable, but <unk>.

Generally where do you expect the segments to kind of move in Q4 is is it really just.

Speaker 2: Verizon revenue coming out or are there any other big moves quarter to quarter from a segment basis you can call out.

Verizon revenue coming out or are there any other big moves quarter to quarter from a segment basis, you can call out.

Speaker 3: I would just say upfront I'll let the head comment as well. Traditionally as I look back on the trend of the business, we usually have a very strong Q4 in, especially in the cable space where we were able to traditionally bring in...

I would just say upfront and I'll, let Ed comment as well you know traditionally as I look back on the trend of the business. Yeah. We we usually have a very strong Q4, and especially in the cable space, where we were able to traditionally bring in.

Speaker 3: Some additional business, both the hardware and software licenses with your end spend, etc. But as you've heard from pretty much everybody Felling into this industry, right? There's just been a fairly significant pullback

Additional business, both the hardware and software licenses with yearend spend et cetera, but as you use you've heard from pretty much everybody selling into this industry right. There's just been a fairly significant pullback.

Speaker 3: uh... in spend and and and and you know uh... certainly the ms wanting to take advantage of utilizing any inventory that they had purchased and pre-purchased during the uh... the pandemic so uh... you know that that's uh... obviously have an effect on uh... on us as well as the rest of our peers and uh... as we said that we expect that to go into q4 as well

In spend in and and and you know certainly the Msos are wanting to take advantage of utilizing any inventory that they had purchased and pre purchase during the pandemic. So you.

You know that that's obviously, having an effect on us as well as the rest of our peers and as we said that we expect that to go into Q4 as well.

Okay. Thanks.

Speaker 4: Thank you. There are no further questions at this time. I'd like to hand a floor back over to Michael Glitzman for an closing call.

Thank you no further questions at this time I'd like to hand, the floor back over to Michael Glickman for any closing comments.

Speaker 3: Okay, well thank you again for joining us today and we are continuing to make tremendous progress towards bringing our industry leading products to market during this period of transition and transformation.

Okay, well. Thank you again for joining us today and we are.

<unk> to make tremendous progress towards bringing our industry leading products to market. During this period of transition and transformation with our growing pipeline continued expansion growth from current customers and our focus to further delevering our business I'm confident that Casa is on the right path towards.

Speaker 3: With our growing pipeline, continue to expansion growth from current customers and our focus to further delivering our business. I'm confident that CASA is on the right path towards returning to EBITDA profitability. I'd like to thank all the talented team members for their tireless work and dedication to the business.

Returning to EBIT profitability I would like to thank all the talented team members for their tireless work and dedication to the business and also thank our customers and our stakeholders for their continued steadfast support we look forward to keeping you all updated on our progress during the fourth quarter call.

Speaker 3: and also thank our customers and our stakeholders for their continued steadfast support.

Speaker 3: We look forward to keeping you all updated on our progress during the fourth quarter call and our plans for 2024.

And our plans for 2024, thank you.

Speaker 4: This concludes today's conference. You may disconnect your wives at this time. Thank you for your participation.

Okay.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Okay.

Okay.

Yeah.