Casa Systems, Inc. (NASDAQ:CASA) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 05:00 pm ET

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Casa Systems, Inc. (NASDAQ:CASA) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day ladies and gentlemen, and welcome to the Casa Systems Third Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

(Operator instructions)

As a reminder, today's conference is being recorded.

I would now like to turn the call over to Ms. Monica Gould, IR for Casa Systems. Mam, you may begin.

Executive
Monica Gould

Thank you, operator, and good afternoon, everyone. Casa released results for the third quarter of 2018 ended September 30, 2018 this afternoon after the market closed. If you did not receive a copy of our earnings press release, you may obtain it from the IR section of our website at investors.casa-systems.com. With me on today's call are Jerry Guo, CEO; and Shaun McCarthy, Interim CFO. This call is being webcast and will be archived on the IR section of our website.

(Forward-Looking Cautionary Statements)

In addition to US GAAP reporting, we reported 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.

Executive
Jerry Guo

Good afternoon everyone and thanks for joining us today. I am pleased to report that our third quarter revenue was directly in line with the revised fiscal year 2018 guidance we've provided in conjunction with the second quarter earnings. This guidance was based on anticipated delays in customer spend as they evaluate significant DAA architecture deployment decisions and continue to digest recent capacity purchases. Consistent with our revised guidance, in the third quarter of 2018, we generated total revenue of $71.5 million.

Gross margin for the quarter was 79.6%, a significant increase over the second quarter and relative to a year ago. This was driven by both a higher proportion of initial software purchases for our appliance sales and the shift in our revenue mix towards greater software license sales related to increased capacity demand. Software licensing in the third quarter comprised over 60% (ph) of product revenue. Shaun will discuss our financial results in more detail in his prepared remarks later during this call.

I would now like to provide some color on our third quarter performance and then update you on the progress we are making with our new products in cable, mobile and fixed telco. As we noted on our second quarter call, we believe that our core cable business is in a digestion period for the near term as our customers invest increasingly in software and linecard-based capacity expansion rather than large scale appliance purchases. This view is supported by our third quarter results, which were marked by significant software license sales versus the chassis modems from earlier in the year and late last year.

Hardware, as a percentage of total revenue, has in fact shifted from over