Casa Systems CEO Michael Glickman doesn’t shy away from the fact that he has a monumental task ahead of him. Burdened by an overly broad portfolio and a mountain of debt, the company has posted seven consecutive quarters of net losses, most recently closing Q3 with a loss of $25.6 million.
Judging from its bargain basement stock price and dearth of analysts on its most recent earnings calls, the market seems to have all but given up on the company. But Glickman, the former Cisco exec who stepped into Casa's CEO role in August, told Silverlinings he has a plan to change all that.
“I wouldn’t be here if I didn’t think we could” right the ship, he said in an interview.
Glickman said there were a couple of reasons he decided to leave his most recent role at PacketFabric to lead Casa Systems. One was its impressive portfolio of network function virtualization (NFV) software. But the real thing that encouraged him to make the leap was the company’s engineering prowess.
“From my experience, if you’re going to turn a company around you can modify fairly quickly your sales and marketing approach and partner approach with customers. It’s a lot of work but you can do it,” he said. “But the thing that’s really difficult to start from scratch on is engineering. And so we have a really strong base there, which is why I agreed to take this on.”
“This,” of course, is a reference to turning around Casa Systems’ failing operation. Glickman said he has a three-part plan to do so.
Righting the ship
The first course of action is to streamline its portfolio, he said. While its NFV software is the star of the show, Casa Systems also offers products in areas ranging from cable and fixed wireless to IoT and small cells. Since he took over, Glickman said the company has been spending a lot of time deciding what areas it wants to stick with and where it might divest.
“It’s very difficult to lead in any space when you’re trying to do 27 things at the same time,” he explained. “We’re a sizable enough company in comparison to maybe a startup but we’re not big enough to have that big a portfolio.”
For all Glickman's talk about homing in on the right technologies, it seems Casa will be doing so without the input of a CTO – at least for now.
In an SEC filing submitted right before the U.S. Thanksgiving holiday, Casa disclosed that Weidong Chen – who has served as its chief technology officer since 2004 – would retire effective November 30, 2023. That document was spotted by Dell'Oro Group VP Jeff Heynen.
More on the prospects for a replacement in a moment.
Another area where Glickman has been spending a lot of time has been on reworking Casa’s capital structure. He noted his predecessor took out a sizable amount of debt to fund acquisitions. While Casa has already been able to trim its debt load from $285 million to under $180 million, Glickman said it’s “still not a good situation to be in because the interest rates associated with that are not favorable to us.”
While some of the money from any divestitures it makes could be used to help pay down its debt further, Glickman said Casa will have to work carefully to balance debt repayment with forward looking investments. That all said, the CEO noted that while its lenders do eventually want their money, they seem to believe in Casa’s turnaround plan, which is a mark in its favor.
The third pillar of Glickman’s plan involves bringing in more sales and marketing firepower in the form of new hires. At the end of November, the company appointed another former Cisco exec Sanjay Kaul as its new chief revenue officer. Glickman said it has two more “impressive” hires in the pipeline.
Presumably one of those will be a new CTO to replace Chen, though the company did not immediately respond to a follow-up request for comment.
At the same time, Glickman said he’s encouraged that people who could “go to any technology vendor they wanted to” have seen the opportunity that lies before Casa.
Cloud ambitions
Part of what they see could be Casa’s rapidly growing cloud business. While Verizon has been touted as Casa’s headline get, Glickman said it will exit the year with more than 10 customers who are collectively generating about $35 million in billings. More than half of those are already in production, he added, noting its customers include at least one in Asia, “a couple” of Tier-1 European carriers, two companies in Latin America and, of course, Verizon in North America.
Through a combination of both vertical and horizontal customer growth, “we intend on continuing to grow that reoccurring software base at fifty-plus percent year over year,” he said.
He continued: “The cloud business I think is a tremendous asset for us because growing so fast and it’s now becoming a larger portion of business. We have an indoor small cell business that’s also growing at fifty-plus percent, in some cases over 100% per year – off of a small base but we’re starting to see very good traction across Tier-1s across North America as well as Europe. The space that we’ve really taken a fairly significant hit lately is cable MSO space” due to inventory digestion that’s impacting all vendors across that market.
Glickman said, though, that Casa’s exposure to a downturn in the cable market is minimal because it derives most of its income from CMTS and virtual CMTS rather than cable access systems. That’s the opposite of most of its competitors, he said.
But what makes Casa Systems qualified to provide cloud software? Does it, or is it even possible to, have expertise in this realm given how many products it’s juggling? The answer from Glickman – of course – is yes.
He pointed out that several years back Casa Systems hired engineering talent who previously worked at mobile infrastructure solutions company Starent Networks. Those engineers have “spend eight years developing from the ground up” a cloud-native platform that runs on a small footprint. The minimal size of this footprint means operators can run functions farther out in the network using either the public or private cloud.
For mobile operators, that offers the ability to, for instance, process fixed wireless access traffic closer to the edge rather than paying to backhaul it all to the core network. They can also purchase software components like a packet core from Casa and run them on the public cloud to trial new 5G services with a minimal investment, Glickman said. He added Casa Systems has “very positive” relationships with both Amazon and Google Cloud, which have run its code in the past.
“With all due respect to my larger incumbents, they don’t have cloud native offers. They can’t do some of the use cases I just took you through,” Glickman argued. “They’ll all say they have cloud offers, which means basically you take your code and you put it into a virtualized container, a Kubernetes container and you say ‘I’m cloud native.’ No, that’s not what I’m talking about.”
“It’s not a crowded space of vendors who can actually do that today, and we’re in a very good position to take that. And that’s why I feel bullish that business will continue to grow at hyper growth rates,” he concluded. “If we can do that and it’s recurring revenue and software, that’s a very good model.”
Analyst take
Heynen, who tracks Casa's cable business as VP of Broadband Access and Home Networking at Dell'Oro, offered some thoughts on how big a hill Casa has to climb.
"When I look back at what made Casa successful back in the 2014-2015 time frame it was really the innovation and problem-solving the company brought to the market," he told Silverlinings. "The C100G and C40G, at the time, were the first fully-certified CCAP platforms on the market."
He continued: "I feel like the Casa team needs to have another moment like that. The residue of all that occurred in March (Jerry Guo leaving and Charter [Communications] saying it would not be using Casa equipment in its next upgrade cycle) is unfortunately still there. Combine that with a soft market right now and it is definitely going to be an uphill battle for Glickman and his team."
Silverlinings reached out to several other analysts for comments about the company's moves. Raymond James, which previously tracked the company, declined to comment given they dropped coverage of Casa in May. Northland Capital Markets Managing Director Tim Savageaux was the only analyst asking questions during Casa Systems' Q2 and Q3 2023 earnings calls.
According to Heynen, Glickman certainly has his work cut out for him and Silverlinings will be watching to see where he takes the company from here.
Updated 12/5/2023 3:24 pm ET: This story has been updated to reflect the fact that Casa Systems' cloud business will generate $35 million in billings, not revenue.