Supply chain constraints catch up to Casa Systems
Casa Systems successfully sidestepped supply chain constraints in the first half of 2021, but said they started to come to a head in Q3 2021, and expects that trend to continue through at least the end of 2021.
As a result, Casa said it took an $11 million hit in Q3 from supply chain constraints, which had a particularly heavy impact on the company's cable access network business.
Multiple cable components, including PHY and RF components, "are in short supply," Jerry Guo, Casa's president and CEO, told Light Reading. He said Casa was also surprised to learn that some suppliers reneged on orders that had been placed by Casa for certain components.
Guo said the reasons for it are not entirely clear, "but all the sudden there was a decommit" among certain suppliers that had run into delivery issues. "But it was a surprise."
It means that lead times are being pushed out to a year or more on certain components. "We did plan ahead for some of this, but you can't plan ahead for everything," Guo said.
Casa expects the issue to seep into Q4 2021, but is making moves that, it hopes, will ease the strain a bit in the first half of 2022. Yet the company is still bullish about its overall business as demand remains high.
"We were on track for a pretty phenomenal quarter" before issues with the supply chain and software order delays from certain customers started popping up around mid-October, Scott Bruckner, Casa's chief financial officer, told Light Reading. "We keep seeing, irrespective of the delays and the pushouts because of supply chain, the demand for everything across the board, but in particular for wireless, continues to surge for us. We feel really good about that."
Casa pulled in Q3 2021 revenues of $99.21 million, down from $105.74 million in the year-ago period, and off from the $106.5 million expected by analysts. Wireless, now Casa's largest business segment, generated revenues of $44.21 million, followed by cable ($34 million) and fixed telco ($21 million).
Casa now expects Q4 revenues to be in the range of $98 million to $108 million, below the $127 million originally expected by Wall Street. Casa shares were down 80 cents (11.92%) to $5.91 each in mid-day trading Wednesday.
Cable and wireless
Even as Casa deals with supply chain constraints impacting cable components, the vendor is seeing increased demand for next-gen network projects that include moves to a distributed access architecture (DAA) along with "mid-split" and "high-split" upstream bandwidth upgrades.
"We are having a lot of discussions about high-splits and mid-splits with customers," Guo said. "How fast it ramps, we don't know yet."
As for DAA, Casa is continuing to deploy remote PHY nodes, which push the physical layer of the cable modem termination system (CMTS) into the node. But it's seeing "stronger interest" for remote MACPHY, which also packs software and processing into the node.
Guo attributed that in part to a desire of customers to simplify their headends and hubs and the emergence of controllers for the new CableLabs-specified Flexible MAC Architecture (FMA) that are helping to obviate the debate over remote PHY and remote MACPHY.
"It's our belief that the original CCAP [converged cable access platform] core is going to be superseded by the FMA controller," he said, noting that Casa has a "functional FMA controller today."
On the wireless side, Casa ended the quarter with a backlog of $101.2 million in orders.
Casa is optimistic that more cable operators will get more active with fixed wireless access (FWA) in rural areas. Notably, the company's hopeful that more MSOs will follow the lead of Mediacom Communications, which has begun to roll out a service, called Mediacom Bolt, that takes advantage of CBRS spectrum.
"I think everyone is watching that to see how successful they are," Guo said. "We are very optimistic they're going to set an example for a lot of the MSOs, and also some of the smaller telcos as well."
Casa is attacking this piece of the market with multiple elements, including a packet core, CBRS radios and fixed wireless customer premises equipment (CPE). Casa believes that product lineup will also play a role in deployments aided by the federal Rural Digital Opportunity Fund (RDOF). Casa is also targeting RDOF with fiber extenders.
Casa is expected to provide more detail about how it's grappling with the supply chain, along with a revised view of its outlook, at an analyst day set for November 19.
- Casa Systems gets a piece of Mediacom's wireless action
- Casa Systems lands 5G fixed wireless deal with Bell Canada
- Casa Systems says cable network upgrade activity is heating up
- Wireless speeds into the lead at Casa Systems
- Charter tests high-splits, preps CBRS field trial for early 2022
— Jeff Baumgartner, Senior Editor, Light Reading
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