Does anyone have a time machine handy? Casa Systems could use one to spring the company ahead to when cable operators have made their big decisions on next-gen access network architectures and are ready to splash more cash on upgrades.
Shares in Casa Systems Inc. were down almost 25% in after-hours trading Tuesday after the company slashed guidance in large part because some cable operators have delayed large-scale capacity purchases on centralized, chassis-based Converged Cable Access Platform (CCAP) products as they mull over plans focused on new distributed access architecture and the virtualization of some services.
That scenario has caused Casa to cut revenue guidance for the rest of the year by about $50 million. Instead of 2018 revenues in the range of $380 million to $395 million, Casa lowered it to a range of $330 million to $350 million.
The push-out in Q2 revenues accounted for $15 million to $20 million of the $50 million shortfall now expected in 2018.
Casa's revised guidance comes as MSOs continue to take a close look at distributed architectures that will push some key electronics closer to the edge of the network and set them up for the virtualization of some services and new technologies such as Full Duplex DOCSIS, an addition to DOCSIS 3.1 that will support multi-gigabit symmetrical speeds. (See Intraway, Casa Systems Team on Virtual CCAP Demo and CableLabs Pushes Full Duplex Forward.)
But this transition is not happening overnight, and some MSOs are tightening capacity spending and being more deliberate as they shore up their product strategies.
"This shift is complex," Jerry Guo, Casa’s president and CEO, said on Tuesday's earnings call. "It represents a complex change in network architecture and a redirection of network capex."
He said cable's DAA evolution is still in the "digestion phase." At the same time, Casa views DAA as the company's "next growth inflection point in the cable space" as it will drive more spending on software and new nodes that are optimized for DAA, Guo added.
But today's reality is this: The spending spigot is not off, but it's been turned down. Rather than going with big capacity buys on CCAP chassis/appliances, some of Casa's biggest MSO customers are instead buying it for incremental, short-term-focused fill-ins for network hot spots that are feeling the most pressure.
"It has become clear to us we are witnessing a pattern shift in procurement in the cable market," Guo said.
He was hopeful that some larger-scale DAA deployments would get underway by the first half of 2019.
The good news is that Casa didn't lose any market share in Q2, as it saw channel shipments rise by about 30% and gained some new customers in new geographies, according to Guo.
Casa also expects to see some "material" contribution from the company's wireless and small cell product line in Q4, Guo said.
Casa pulled down Q2 2018 revenues of $68.7 million, up 3.1% from the year-ago quarter, but down 23% from Q1 2018. Its board has also authorized the repurchase of up to $75 million of Casa's common stock. (See Casa Systems Revenues Rise 3.1% in Q2.)
Casa shares were down $3.89 (24.94%) in after-hours trading Tuesday.
— Jeff Baumgartner, Senior Editor, Light Reading