Heading into the report, the stock had been on quite a run, up 35% since mid-February. So, traders were anticipating a strong print. With expectations elevated, CASA had a high bar to hurdle as it would take a stand-out report to keep the stock moving higher. And CASA appears to have met those lofty expectations as the stock is currently up 3% in pre-market trade, threatening to break to new post-IPO highs.
Before diving into its Q4 results in more detail, here is a closer look at CASA's business:
CASA provides a suite of software-centric infrastructure products that allow cable service providers to deliver voice, video and data services over a single platform at multi-gigabit speeds. Additionally, it offers products for next-generation distributed and virtualized architectures in cable operator, fixed telecom and wireless networks. More specifically, its technology enables customers to cost-effectively and dynamically increase network speed, add bandwidth capacity and new services for consumers and enterprises, reduce network complexity and reduce operating and capital expenditures.
The company says it pioneered the use of a software-centric approach to leverage the programmability of FPGAs and general purpose processors for use in the cable industry. In addition, it says it was the first to provide each of the following to its customers: a solution enabling cable service providers to deliver IP voice, digital video and data over a single port; a solution enabling cable service providers to deliver multi-gigabit speeds to their subscribers; and a remote node solution to enable distributed broadband cable access at gigabit speeds.
Its Axyom software architecture allows network functions to be provided and controlled by a distinct segment of software, which can be integrated or combined together in a building block-style fashion with the segments of software responsible for each other network function. This allows CASA to offer network architectures that can be efficiently tailored to meet each customer’s specific requirements, both as they exist at the time of initial implementation and as they evolve over time.
The company's products are commercially deployed in over 70 countries by more than 400 customers, including regional service providers as well as some of the largest Tier 1 broadband service providers, serving millions of subscribers. Its principal customers include Charter/Time Warner Cable, Rogers and Mediacom in North America; Televisa/IZZI Mexico, Megacable Mexico and Claro Telmex Colombia in Latin America; Liberty Global, Vodafone and DNA Oyj in Europe; and Jupiter Communications and Beijing Gehua CATV Networks in Asia-Pacific.
Closer Look at Q4 Results
As noted above, CASA handily beat analysts' top and bottom line expectations. The blow-out EPS performance was driven by a few different factors. Namely, gross margin improved to 77.1% from 76.8% in the year ago quarter, and, the company benefited from the lower tax rate. Furthermore, in a research note this morning, Stifel noted that CASA had far fewer shares outstanding than it had anticipated which resulted in a $0.46/share benefit vs. its estimate.
There were also a number of catalysts behind CASA's revenue outperformance. For instance, management commented that customers added bandwidth to their networks, resulting in solid DOCSIS 3.0 and DOCSIS 3.1 capacity expansions. Additionally, CASA continues to expand into new markets and is bolstering its customer base with new wins at Telefonica and China Mobile.
While CASA clearly delivered an impressive quarter, it is important to note that its quarterly results might be volatile due to the lumpy nature of orders. From a quarter-to-quarter basis, its business may seem "boom or bust." For that reason, management did not provide quarterly guidance for 1Q18.
However, it did issue guidance for FY18, projecting revenue of $380-$395 (+50% at mid-point) million and EPS of $1.08-$1.19. That EPS guidance would actually equate to a 56% decline due to a higher expected share count for this year.