Casa Systems saw a healthy lift in cable revenues in the first quarter thanks in part to existing cable operator customers augmenting capacity to get a grip on a surge in network traffic during the early stages of the COVID-19 pandemic.
But the bigger surprise in the quarter wasn't about existing customers adding capacity and expanding their footprints but by new business coming through the door, Scott Bruckner, Casa's interim CFO and SVP of strategy and corporate development, said in an interview Friday along with CEO Jerry Guo.
The backend of the first quarter was especially strong as cable operators evaluated their capacity needs as many MSOs dealt with a material increase in downstream and upstream traffic. That evaluation contributed to Casa entering the second quarter with a backlog of almost $91 million.
That backlog does include some longer-lead items, as well as uplift in demand for Casa's consumer premises equipment (CPE) for fixed wireless and fiber-to-the-distribution point. A portion of that backlog will be recognized in Q2, but will also be spread out into Q3 and Q4, Bruckner said.
On the cable side, operators were looking for quick ways to add capacity through software license upgrades on existing hardware alongside an influx of new hardware purchases, Guo said.
Following a recent period of sluggish cable network spending, the greater demand for network hardware, including a run on Converged Cable Access Platform (CCAP) chassis, is a relatively new phenomenon. Bruckner estimates Casa saw a 33% increase in CCAP chassis shipments in Q2 versus the year-ago period, and a 50% increase over Q4 2019.
"The pandemic increased demand so quickly and so fast that they [cable operators] just needed to by existing hardware and software tools to satisfy that demand," Guo said. "They can't just solve that problem with that bandwidth license alone."
While rapid capacity augmentations have sped up through software license upgrades and CCAP purchases, Casa has not seen a meaningful acceleration yet in longer-term plays that would beef up cable's upstream capacity, such as a "mid-split" that would raise the upstream ceiling from today's 5MHz-42MHz to 5MHz-85MHz.
Casa does have some production deployments of products for new distributed access architectures that push key network electronics and capacity toward the edge, but it still represents a relatively small piece of Casa's business, Guo said.
Casa posted Q1 sales of $83.6 million, handily beating Wall Street expectations of $72.1 million, according to Raymond James analyst Simon Leopold. Casa also maintained 2020 revenue guidance of $340 million to $360 million, noting it's not clear yet if the higher level of demand seen in Q1 will continue through the rest of the year.
Casa had two 10% or greater customers in the quarter, including an unidentified tier 1 wireless service operator along with a "diversified" service provider. Leopold reckons the latter is Australia's NBN and that Charter Communications fell below Casa's 10% threshold.
That mix among top customers also reflects Casa's positioning as a more diverse vendor that no longer relies as heavily on cable. Of note, Casa got deeper into the wireless game last year when it acquired NetComm, which happens to be a supplier to AT&T.
Casa said its supply chain has held up during the pandemic. Its central office and headend equipment is manufactured primarily in the US, with a smaller portion based in Ireland. Its CPE business acquired from NetComm uses manufacturing in China. After a four-week disruption in China due to the outbreak, operations there have been restored to normal levels.
- Casa Systems Q1 revenues rise to $83.6M
- Casa Systems seeing 'no impact' from COVID-19 on Q1
- Cable capacity spending perked up in Q4, Casa says
- Charter nets big broadband gains in Q1 as self-installs accelerate
- Australia's NBN under spotlight amid COVID-19 usage spikes
- COVID-19 data surge is wake-up call for cable's weak upstream
- Casa Systems buys AT&T's fixed wireless equipment supplier for $115M
— Jeff Baumgartner, Senior Editor, Light Reading