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Casa Systems (NASDAQ:CASA)
Q1 2019 Earnings Call
May. 01, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to Casa Systems' first-quarter 2019 earnings call. [Operator instructions] Please note this conference is being recorded. I will now turn the conference over to Monica Gould, investor relations for Casa Systems. Ms.

Gould, you may begin.

Monica Gould -- Investor Relations

Thank you, operator, and good afternoon, everyone. Casa released results for the first quarter of 2019 ended March 31, 2019, this afternoon after the market closed. If you did not receive a copy of our earnings press release, you may obtain it from the investor relations section of our website at investors.casa-systems.com. With me on today's call are Jerry Guo, chief executive officer; and Maurizio Nicolelli, chief financial officer.

This call is being webcast and will be archived on the investor relations section of our website. Before I turn the call over to Jerry, I'd like to note that today's discussion will contain forward-looking statements based on the business environment as we currently see it, and as such, does include certain risks and uncertainties. Please refer to our press release and our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's discussion. Any forward-looking statements that we make on this call or in the earnings release are based upon information that we believe as of today, and we undertake no obligation to update these statements as a result of new information or future events.

In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. During the call, we may use non-GAAP measures if we believe it is useful to investors or we believe it will help investors better understand our performance or business trends. And with that, I'd like to turn the call over to Jerry.

Jerry Guo -- Chief Executive Officer

Good afternoon, everyone, and thanks for joining us today. I want to start off for today by acknowledging that the first quarter of 2019 was one of our toughest quarters. We did highlight on our last call that we would likely see a slower first half for 2019 and that the first quarter, in particular, will likely be a very light quarter. However, our first-quarter results were even below our internal expectations, with our results once again impacted by significantly lower spending by MSOs industrywide, particularly our integrated CCAP hardware, and the slower run of wireless revenue than we anticipated.

Revenue for the quarter was $35.5 million, a significant decline over the same period in 2018, resulting in our first quarterly loss in 10 years. Maurizio will discuss these results in greater detail in his remarks later on this call. We are extremely disappointed with these results, and I would like to provide detail on the factors that impacted our first quarter. Before doing so, I do want to point out that notwithstanding the recent business performance, the number of new opportunities that have come our way in the form of trials and RFPs, RFIs is quite large.

This makes me confident that while we are at an important juncture in the future development of our business, our recent results are not indicative of our future opportunity. Now let me start by outlining several factors that contributed to the weaker-than-anticipated quarter that we experienced. First, we are seeing an industrywide slowdown not only in MSO spending or integrated CCAP hardware equipment but also in implementing a shift toward virtual CCAP and DAA. The most recent data from S&P Global support this view, reporting declines in overall CCAP market spend for the three leading vendors combined of 26% and 11% during the fourth quarter and the full-year 2018, respectively.

Data for the first quarter of 2019 are not yet available. I think it is important to know that in spite of this trend, our CCAP market share measured by channel shipments increased to 27% in 2018 from 22% for the full-year 2017. And the information we received from our key customers lead us to believe that we experienced no footprint share loss in Q1 of this year. To understand why CCAP spend has been slowing, I would point out that during the past several years, the MSOs have made substantial investments in network upgrades to deliver a gigabit speed to their customers.

This has included upgrades to DOCSIS 3.0 and the most recently DOCSIS 3.1 and also the rollout in the head end of integrated CCAP. With many of the MSOs' key markets enabled for gigabit downlink speeds, the pace of network upgrades has slowed significantly and the industry has moved into a capacity filling versus buildout phase. And while many of our largest MSO customers continue to actively evaluate DAA and the virtual CCAP through lab and a few trials, we have only seen limited rollouts of these technologies to date. This pattern of spending is not unique to the MSOs.

It is a characteristic of the service provider space in general where multiyear cycles of technology upgrade or buildout are followed by what we have been referring to as digestion. The second factor that impacted our quarter is -- throughout is related to a few of our largest MSO customers who have curtailed their core network infrastructure, hardware spending and a more aggressive rate than the overall market decline. Because they have indicated their intention to limit purchases for core network hardware for the coming year, we believe that they will be in a holding pattern of significant hardware purchase for the near term. With our market share expansion during 2018, we do not believe that our largest customers are awarding businesses to competitors but rather relocating capex to other investments.

Finally, we have been working on diversifying our revenue from primarily cable to also include wireless and the fixed telco. However, this transition has not happened as fast as we anticipated. As a result, while we continue to invest for this future transition, which we firmly believe is the right approach for the company, revenue from wireless and the fixed telco was not yet sufficient to offset the earnings impact of the slowdown we have been seeing from our MSO customers. To summarize, there were several factors that impacted our quarter.

As I mentioned, it's a quarter that we're not at all happy with. However, the tangible opportunity ahead of us is huge, and our pipeline as it currently stands gives me comfort on our outlook in terms of revenue for the full year. Let me summarize some of this for you. During the first quarter, we generated a new business wins in three areas: wireless access gateways, or WAG; Remote PHY; and the 5G mini macro videos.

We saw significantly increased trial activities across all products in Q1. As a reminder, during the fourth quarter, we were engaged in 67 active trials with 49 unique customers, including 26 in wireless, eight in fixed telco and 33 in cable for both our integrated CCAP and Remote PHY products. During the first quarter, we increased the number of trials we are supporting to 90 with the 67 customers. These include 37 in wireless, up 42% from Q4, involving both our software cores and our radio products; eight in fixed telco with our virtual BNG and EPON products; and 45 in cable, up 40% from Q4, for DAA, the integrated CCAP, high-density line cards and the virtual CCAP core.

We are involved in RFPs with the 15 Tier 1 service providers for our wireless, fixed and next-generation cable products. Our wireless backlog also increased and now among to just under $24 million with the Tier 1 customers. We do anticipate this number to increase between now and year-end. In spite of the delays we have been experiencing in certification for certain of our wire LAN products, we continue to expect to recognize some revenue in the second quarter and the remainder during the second half of 2019.

Before handing over to Maurizio, I would like to give you a quick update on our pending acquisition of NetComm. We still expect this transaction to close at the end of June of this year. I am pleased to report that we received Australian regulatory approval in April and are now moving forward with the implementing the scheme of arrangement process that includes court meetings and shareholder vote. I would like to end my remarks by repeating that we are focused on adding resources based on the budget we outlined on our last call and fine-tuning our execution to ensure that we do not miss the opportunities ahead of us.

The ample opportunities ahead of us, including a return to increased spending by our MSO customers, provide a solid foundation for our next wave of growth. Now it is incumbent upon us to execute. With that, I will ask Maurizio to comment on our financial results.

Maurizio Nicolelli -- Chief Financial Officer

Thank you, Jerry, and good afternoon, everyone. I will start by reviewing our first-quarter 2019 financial results and then discuss our outlook for fiscal 2019. As I discussed back in February, the first half of 2019 was going to be a slow period for our business. We did project that the first half would be approximately 40% of our annual revenue, with the first quarter being the lowest revenue quarter in 2019.

However, Q1 results were below our internal expectations owing to significantly lower-than-anticipated MSO spending. Total revenue for the first quarter of 2019 was 35.5 million, a 48% sequential decrease from the fourth quarter and down from 89.1 million in the first quarter of 2018. Total product revenue was 26.7 million in the first quarter of 2019, of which 13.4 million or 50% was from hardware and $13.3 million or 50% was from software. This compares to 80.2 million of total product revenue in the first quarter of last year with 50.8 million or 57% from hardware and 29.4 million or 33% from software.

Hardware sales during the first quarter accounted for 38% of revenue, down from 57% of revenue in the prior-year quarter. Our GAAP gross margin for the first quarter of 2019 was 69% compared to 69.6% in the first quarter of 2018. As a reminder, our gross margin can fluctuate from quarter to quarter based on a mix of sales of our hardware products with higher initial software-enabled capacity and software-enabled capacity expansions. We continue to believe that our fiscal 2019 margin will be in the range of 65% and 70%.

Turning to expenses. Total GAAP operating expenses in the first quarter of 2019 were 38.6 million, down 1% compared to 39 million in the first quarter of 2018. The decrease in total operating expenses was due to lower partner commissions and reduced stock-based compensation, offset by 2.1 million in non-reoccurring expenses related to bad debt and acquisition deal costs. Excluding the 2.1 million in non-reoccurring expenses, non-GAAP operating expenses were down 6.4% to 36.5 million over the prior-year period.

Headcount at March 31, 2019, totaled 777, up 34 net new employees since December 31, 2018. The majority of the new hires were related to mobile research and development. Adjusted EBITDA in the first quarter of 2019 was a negative 7.7 million compared to a positive 29.5 million in the first quarter of 2018 primarily due to the reduction in revenue year over year. Income tax benefit during the quarter was a negative 2.2 million driven by the $17.5 million pre-tax loss.

We continue to expect that our effective tax rate for 2019 will range between zero and 10% as we project the benefit from equity award transactions during the fiscal year. Non-GAAP net loss for the first quarter of 2019 was 11.6 million compared to non-GAAP net income of 21.6 million in the first quarter of 2018. Non-GAAP diluted net loss per share was $0.14 for the first quarter of 2019 compared to net income per share of $0.23 for the first quarter of 2018. Free cash flow for the quarter totaled a negative 15.7 million compared to positive free cash flow of 48.6 million in the same period in 2018.

Lower net income and higher inventory drove the decline in free cash flow during the quarter. Higher inventory was driven by our next-generation cable products and wireless inventory that we will begin shipping this quarter in Q2. We ended the first quarter with cash and cash equivalents of 265.4 million and total debt of 294.9 million. During the three months ended March 31, 2019, we did not repurchase any shares under our share repurchase program.

We continue to review our capital allocation policy as we look to deploy capital between M&A opportunities, share repurchase and debt repayments. I would now like to turn to our guidance for fiscal 2019. Guidance for fiscal 2019 does not include results from our pending acquisition of NetComm. For the full year of 2019, we continue to expect total revenue to be between $250 million and $300 million.

Revenue in the first half is expected to be approximately 30 to 40% of the annual total. As mentioned earlier, we continue to expect our gross margin to be in the range of 65 to 70%. Adjusted EBITDA is expected to range between 50 million and 60 million. Our effective income tax rate, as discussed earlier, will range between zero and 10%.

We continue to anticipate GAAP diluted net income per share to be in the range of $0.20 to $0.30 and non-GAAP diluted income per share to be in the range of $0.30 and $0.40. Stock-based compensation is expected to be approximately 11 million in 2019. Upon closing of the NetComm transaction, we continue to expect non-GAAP diluted income per share accretion between $0.02 and $0.03 in 2019 and $0.07 to $0.08 in 2020 from initial deal synergies. Joining us now for Q&A will also be Scott Bruckner, senior vice president of corporate development and strategy.

I will now turn the call back to the operator to open the call for questions. Thank you.

Questions & Answers:

Operator

[Operator instructions] Our first question is from Simon Leopold with Raymond James. Please proceed.

Simon Leopold -- Raymond James -- Analyst

Thank you very much for taking the question. First, I've got two things I want to ask about. One is pretty simple. Just wanted to understand sort of your thought into this earnings of choosing not to preannounce given the degree of surprise relative to consensus.

I'm conscious you did not guide explicitly to the quarter, but just want to understand the thought process ahead of this result. And then I've got a more of a trending question after that.

Maurizio Nicolelli -- Chief Financial Officer

Sure, Simon, this is Maurizio. So if you look at the results for the quarter, if you look at consensus, it's a revenue number that we -- that we're significantly off by. When we gave our guidance in February, we gave a range of 250 to 300 million. We did say that the first half would be a weak first half, and we did say the first quarter would be a quarter in which it would be the lowest revenue quarter for the year.

Now if you do the math, that's a difficult quarter for the company. And we explicitly gave that direction. And again, we give annual guidance. We don't give guidance by quarter, but we try the best we could to give the Street guidance on what we thought the first quarter would come back at.

Simon Leopold -- Raymond James -- Analyst

So in terms of kind of the trending, I wanted to get a better understanding of where you are in terms of the virtual CCAP platform and your thought on really the industry timing and adoption of virtual CCAP. Just to set a little context for your answer, one of your competitors recently have stated that they don't see any other vendors with virtual CCAP. And I had the impression that you've had a product and you have trials. So I just want to make sure I understand your positioning of virtual CCAP, as well as your view on how that market develops.

Jerry Guo -- Chief Executive Officer

Simon, it's Jerry here. We believe we have the most fully featured virtual CCAP core in the industry, and we are in trials with MSOs. I don't know where their information came from, but we do believe that it is likely some deployments will happen in 2019.

Simon Leopold -- Raymond James -- Analyst

Can you tell us how many trials you're in?

Jerry Guo -- Chief Executive Officer

I don't have the exact numbers in front of me, but we are in multiple trials.

Scott Bruckner -- Senior Vice President of Corporate Development and Strategy

Yes, Simon, what I -- it's Scott. What I would say is that as you'll note from the -- Jerry's comments on trials, we went from -- in cable, just pulling up the number, went from 33 in cable to 45 in cable. All of that increase and the bulk of those trials are in advanced products, so it's a combination of DAA and virtual CCAP. So whatever information you are getting or hearing from whoever this party is saying they're the only virtual CCAP is probably not aware that we are embedded in these trials with that product with multiple Tier 1s globally.

Simon Leopold -- Raymond James -- Analyst

And do you expect that as operators embrace virtual CCAP, that the strategy for adoption will be rip and replace or cap and grow? How do you anticipate the transition to occur?

Jerry Guo -- Chief Executive Officer

We don't believe it's going to be a rip and replace. We believe that many operators will continue to buy chassis. At the same time, they may do distributed architecture at the same time. And with the distributed architecture, they have a choice of using chassis as the core and the virtual CCAP as the core.

We believe it's an addition.

Simon Leopold -- Raymond James -- Analyst

Great. Thank you for taking my questions.

Jerry Guo -- Chief Executive Officer

Thank you, Simon.

Operator

Our next question is from Rich Valera with Needham & Company. Please proceed.

Rich Valera -- Needham and Company -- Analyst

Thank you. So you're obviously maintaining your full-year revenue guidance, but based on the first-quarter performance and your commentary, it sounds like your outlook for your core CCAP business is worse than it was last quarter, and maybe correct me if I'm wrong there. And if that's the case, that would imply a bigger contribution from new products, which I think as of last quarter you'd said was 20 million for this year and maybe now you're saying it's 24. So just wanted to clarify those points.

Is the outlook for core CCAP worse than you thought a quarter ago? And do you expect to see more than 20 million of revenue from new products in 2019?

Jerry Guo -- Chief Executive Officer

We do see -- we have revised our outlook for the cable contributions, and we do see a very good contribution or material contributions from wireless and fixed telco. I'm not ready to give the numbers yet, but we continue to generate the POs in the new product category, in the fixed telco and the wireless. We believe we're going to have more than the current backlog of roughly $24 million.

Rich Valera -- Needham and Company -- Analyst

And you expect you'll be able to recognize that as revenue? I mean because obviously last year, you ran into a timing issue where you had backlog but you couldn't recognize it was revenue in the time frame you thought. So I'm just wondering what gives you the confidence that you're going to get the revenue into 2019 with trials you're starting now since you seem to have significant lead times from trial to revenue.

Jerry Guo -- Chief Executive Officer

We do have POs against the existing products, as well as POs which take longer to certify the products. So we believe that a portion of the revenue will continue to be recognized in the first half and then -- and the rest will be the second half of the year.

Scott Bruckner -- Senior Vice President of Corporate Development and Strategy

Yes. Rich, it's Scott. The other thing that I would say is that on certain of the products in which we are currently in certification against and off of which we formed our backlog, and as we did indicate to the market previously and I think it's worth repeating, those customers have indicated to us that this is just a first wave of orders. So once we get through the certification, begin shipping, it becomes a much faster process than for them to order and for us to ship and deploy.

Rich Valera -- Needham and Company -- Analyst

Not to beat this point, but a quarter ago, you said 20 million was all you expected, and presumably, you're now expecting more from those same customers because you're saying they will be able to order more quickly once they've ordered the first orders. I'm just not sure if I'm following that line of thinking.

Jerry Guo -- Chief Executive Officer

Well, we are getting more confident about the outlook of the fixed telco and the wireless products. And we do expect more POs from a series of customers, a bunch of customers.

Rich Valera -- Needham and Company -- Analyst

OK. Fair enough. Thanks for taking my question, gentlemen.

Operator

Our next question is from Matt Kelleher with D.A. Davidson. Please proceed.

Mark Kelleher -- D.A. Davidson -- Analyst

Hi, guys. It's Mark. Just want to make sure I got -- I understand the numbers. So you're still saying that 40% -- around 40% of revenue comes in the first half.

That sets up a pretty steep Q2. Is that the MSOs suddenly coming back? Is that the wireless products being recognized? What's driving that sharp rebound into the second quarter?

Maurizio Nicolelli -- Chief Financial Officer

Mark, it's Maurizio. So in my remarks I said we're still confident in our guidance of 250 to 300 million for the year. But we do believe the first half will be between 30 and 40%. Because we had a lower-than-expected Q1, we do believe we'll be in the range between 30 to 40%.

So that's a little bit of a tweak to what I said back in February, and we do believe that the difference would be made up in the second half based on our guidance. And so if you take that range, you can back into what we believe is the range for the second quarter and is not as steep when you look at it in terms of that range.

Mark Kelleher -- D.A. Davidson -- Analyst

OK. Were there any orders in the quarter that were pushed out that are going into Q2? I'm just trying to get a hand on the ramp into Q2. I think that's why I'm getting a little stuck. That's a pretty aggressive ramp into Q2.

I'm just trying to figure out why it should rebound.

Maurizio Nicolelli -- Chief Financial Officer

So when we look at revenue this year, it's a little bit unlike previous years whereby our Q1 and our Q4 are our best quarters for the years and then you would see a slowdown in Q2 and Q3. Based on our -- what we had in backlog, in deferred revenue and also in our pipeline, we do -- we are seeing that Q2, based on all those factors, potentially is a better -- much better quarter than Q1. And so what you'll see this year is a sequential increase quarter after quarter, which is different than what you've seen in the past.

Mark Kelleher -- D.A. Davidson -- Analyst

OK. Thanks.

Operator

Our next question is from John Marchetti with Stifel. Please proceed.

John Marchetti -- Stifel Financial Corp. -- Analyst

Thanks very much. Maurizio, sorry to keep sort of beating this to death here, but when I'm looking at that full-year guide and I guess the confidence level around that, you mentioned backlog and some of those things, how much, I guess, of what we're seeing there is truly line of sight versus pipeline having to close? And I ask because we ran into this issue last year where we kept kind of expecting this second half ramp to materialize, and we really didn't see it come through. And I'm curious sitting here now with your comfort level to reaffirm that full year, where we can get comfortable not having this kicked down the road another quarter or two and running into a similar situation as we did in the second half of last year.

Maurizio Nicolelli -- Chief Financial Officer

Yes, yes. No, it's a very good question. Look, it's -- we are in our -- we just finished our first quarter of the year. There are still three more quarters to the rest of the year.

There is still plenty of time for us to execute on a number of items. And again, it goes back to what we are seeing in terms of our backlog, our pipeline and also our discussions with clients. Now we do have a conservative cable projection for revenue for the year, and we are optimistic on our new product revenue for both wireless and fixed telco. When we look at the opportunity, when we add those two together, we get confident that we're within the range of 250 to 300 million.

It's obvious that we will continue to monitor that, and we -- at the end of the second quarter, we will again either reaffirm that or give our new guidance on revenue. But from where we sit today, we do believe 250 to 300 million is still achievable, and that's where we stand today.

John Marchetti -- Stifel Financial Corp. -- Analyst

OK. And Jerry, if I can follow up on the comment you made about some of the dollars being reallocated or shifted around within some of your larger customers, are those being shifted to other infrastructure that you participate in and that's taking longer to close? Are they shifting to areas of the network where you don't play at all, where you don't participate? I'm just trying to understand from that perspective how to think about that relative to how we're going through the rest of the year and some of the comments that you made around virtual CMTS.

Jerry Guo -- Chief Executive Officer

We, of course, do not know accurately how our customers are allocating their capex. We got the indication that the cable capex is lower than last year, that's the indication we got. We do know that some of our customers have ambitious plans to build out networks in different categories. And we have a lot more new products to offer in those categories this year versus last year.

John Marchetti -- Stifel Financial Corp. -- Analyst

So if I step back and look at the full year, does cable grow in '19 for Casa? Or is it some of the other areas, whether that's fixed telco -- excuse me, fixed wireless, telco, things like that? How do I think about cable and I guess then with that backdrop?

Maurizio Nicolelli -- Chief Financial Officer

Yes. It's Maurizio again. So if you look at our revenue for the prior year, it was 297 million, and that was really driven predominantly by cable. This year, it's a mix between cable and new product revenue of wireless and fixed telco.

So cable will be lower this year inevitably. But we make up the difference as we start to diversify our product suite.

John Marchetti -- Stifel Financial Corp. -- Analyst

Thank you.

Operator

Our next question is from Meta Marshall with Morgan Stanley. Please proceed.

Meta Marshall -- Morgan Stanley -- Analyst

Great, thanks. Maybe you try to come at it from a slightly different way, but just as you build up to kind of what still gives you confidence that you can achieve the 250 to 300 million, like how do we think about it in terms of wireless versus capacity expansions versus chassis deployments versus what has to come with DAA? Like are there any rough buckets of -- that we can kind of segment the revenue expectations into? And then just maybe a second question. I mean large customers were kind of known to take down their capex plans kind of ahead of when you reported Q4. And so I guess just from an incremental standpoint, like was that conservatism, was it just not conservative enough? Or -- and just what kind of gives you confidence that you now know that it's going to come back or at least somewhat throughout the year? Thanks.

Jerry Guo -- Chief Executive Officer

So first, when you look at our revenue, although we actually have revenue pipelines in all four categories. We have them in the integrated CCAP. We also have in DAA, in distributed architectural Remote PHY systems including the core and the nodes. And we also have wireless and the fixed telco.

So we have revenues in all categories. And we currently say that we have -- we believe it's going to be material with the new products of wireless and the fixed telco at this point. In terms of the confidence we have for the future spend, for the outlook, we believe that the MSOs are cutting their spend to the bones, some of them, to -- at this point with this kind of a spend pattern, and we model it into our forecast. It is hard to imagine this can continue much longer.

Maurizio Nicolelli -- Chief Financial Officer

We anticipated back in Q4 that Q1 was going to be a difficult quarter. And we lowered it -- we lowered the quarter to really a low level when you look at our history. And so what we believe is that at some point, the MSO is going to have to start spending again. And we will be in the front of the line with that additional spending that will benefit our company.

Meta Marshall -- Morgan Stanley -- Analyst

Are you -- I guess kind of to the point is like are you expecting chassis deployments to pick up as part of that? Or does it have to come from capacity expansions and integrated CCAP or DAA?

Jerry Guo -- Chief Executive Officer

We are getting chassis orders, and we are also getting license orders every single quarter. They're not just at the level as in the last two years or three years. So there is always chassis order for every single quarter, and we do believe that's going to continue. And that's the nature of the network.

When they -- the service groups, they will have to add ports in the chassis or they have to go DAA. There is no other way around it. So we believe that both spend will have to continue.

Operator

Our next question is from Tim Savageaux with Northland Capital. Please proceed.

Tim Savageaux -- Northland Capital -- Analyst

Pardon me. Hi, good afternoon. Having a big day on screen name pronunciation today. I I have a question on -- Jerry, you mentioned, I think, 15 Tier 1 RFPs that you are engaged in.

I'm trying to get a better sense of the opportunity that you're pursuing. What I really like to know as much color as you can give me is that if you were to look at the combined value of those RFPs, what would that be? How would that break down among your target segments, cable, wireless, fixed or should we assume that's all 5G wireless? And what sort of timing do you expect in that funnel with regard to moving to decision and deployment? Any color along those lines would be much appreciated.

Jerry Guo -- Chief Executive Officer

Yes. Tim, Jerry here. It's actually a combination of cable, wireless and the fixed telco. So the cable side are mostly DAA related.

And on the wireless side, we have both 4G-related and as well as the 5G-related RFIs and RFPs in our SKUs. And we also have the fixed telco-based RFPs, especially BNG type of RFPs. So we have very diversified RFP requests from Tier 1 operators globally. The number --

Tim Savageaux -- Northland Capital -- Analyst

Any commentary on sizing those -- either those individual opportunities, not that they'd all be the same, but in general or in the aggregate? And thoughts on kind of timing as you move toward decision and deployments.

Jerry Guo -- Chief Executive Officer

Yes. Some of the sizes are so big in value, that it doesn't really makes sense to measure, and then is like annual, we just need to get a piece of it or a small portion of it.

Tim Savageaux -- Northland Capital -- Analyst

OK. Thanks.

Operator

Our next question is from Sarah Hindlian, Macquarie Group. Please proceed.

Sarah Hindlian -- Macquarie Group -- Analyst

Great, thank you so much. Thanks for taking my questions. So I just want to make sure I understand this correctly because if I'm looking at your backlog in terms of your new and emerging opportunity, you saw sequential increase of about 4 million, I believe that's correct. So in the back half of the year, there's clearly some much higher conversion that you're calling out in terms of your available opportunities in your RFPs.

And I know it's too soon or there isn't a visibility to give specific dollar values in terms of how you're thinking about those, really, what I consider four buckets of opportunity. But can -- maybe it would be really helpful if you could at least rank some in terms of where you see the largest dollar opportunities. And timing-wise, it seems like that's coming in primarily in Q4. And so I want to understand a little bit in terms of what's going on in Q3 as well.

Maurizio Nicolelli -- Chief Financial Officer

OK. So our big opportunity in the second half of the year is in wireless, and it's really wireless radio. And that's where -- when we look out, there's a very large opportunity there for us. And for us, it's really -- we need to execute.

And a lot of what we are investing in right now is to really be ready to take advantage of those potential POs that we foresee in the second half of the year. Given that, cable spend will come back, but it will slowly come back. And that's where we're projecting within the cable business.

Sarah Hindlian -- Macquarie Group -- Analyst

OK. That's very helpful. I just want to follow up on that also in terms of the second largest opportunity behind wireless. Is that DAA? Is it virtual CCAPs? I'm assuming it's virtual CCAPs, but I want to make sure I understand that sort of next year of opportunity.

Jerry Guo -- Chief Executive Officer

We kind of lump for the DAA as to one category, including the virtual CCAP core and the DAA nodes. And that is an opportunity we think it's real, but that's -- we believe that DAA and the fixed telco, especially BNG opportunities, as well as packet cores, they are all significant opportunities. But they are smaller compared to wireless radio.

Sarah Hindlian -- Macquarie Group -- Analyst

That makes sense to me. And then just one more follow-up and I'll let you go. Do you have any indications on those customers in terms of how long the process is going to continue to take for them in order for there to be acceptance? Have they commented in terms of this could in quarters or this could be years? Do you have any idea on timing?

Jerry Guo -- Chief Executive Officer

Sarah, we are looking at recognizing a portion of that in Q2 and continue to recognize the remaining in the second half of the year.

Operator

[Operator instructions] We have reached the end of our question-and-answer session. I would like to turn the call back over to management for closing remarks.

Jerry Guo -- Chief Executive Officer

Thank you to everyone for joining us today. And we look forward to updating you on our progress the next quarter.

Operator

[Operator signoff]

Duration: 43 minutes

Call participants:

Monica Gould -- Investor Relations

Jerry Guo -- Chief Executive Officer

Maurizio Nicolelli -- Chief Financial Officer

Simon Leopold -- Raymond James -- Analyst

Scott Bruckner -- Senior Vice President of Corporate Development and Strategy

Rich Valera -- Needham and Company -- Analyst

Mark Kelleher -- D.A. Davidson -- Analyst

John Marchetti -- Stifel Financial Corp. -- Analyst

Meta Marshall -- Morgan Stanley -- Analyst

Tim Savageaux -- Northland Capital -- Analyst

Sarah Hindlian -- Macquarie Group -- Analyst

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