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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to _________.

Commission File Number: 001-38324

 

Casa Systems, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

75-3108867

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

100 Old River Road

Andover, Massachusetts

 

01810

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (978) 688-6706

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

CASA

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of November 2, 2023, the registrant had 99,108,998 shares of common stock, $0.001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

Page

PART I.

FINANCIAL INFORMATION

 

3

Item 1.

Financial Statements

 

3

 

Condensed Consolidated Financial Statements (Unaudited)

 

3

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

 

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022

 

4

 

Condensed Consolidated Statements of Stockholders' (Deficit) Equity for the Three and Nine Months Ended September 30, 2023 and 2022

 

5

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022

 

7

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

31

Item 4.

Controls and Procedures

 

44

PART II.

OTHER INFORMATION

 

46

Item 1.

Legal Proceedings

 

46

Item 1A.

Risk Factors

 

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

49

Item 6.

Exhibits

 

51

 

Signatures

 

52

 

 

 

i


 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “should,” “expects,” “plans,” “anticipates,” “would,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

the sufficiency of our cash resources and needs for additional financing;
our ability to fulfill our customers’ orders due to supply chain delays, access to key commodities or technologies or events that impact our manufacturers or their suppliers;
we have been notified by The Nasdaq Stock Market LLC, or Nasdaq, of our failure to comply with certain continued listing requirements and, if we are unable to regain compliance with all applicable continued listing requirements and standards of Nasdaq, our common stock could be delisted from Nasdaq, which would have an adverse impact on the trading, liquidity, and market price of our common stock;
our ability to anticipate technological shifts;
our ability to generate positive returns on our research and development;
changes in the rate at which communications service providers or CSPs, deploy and invest in ultra-broadband network capabilities;
the lack of predictability of revenue due to lengthy sales cycles and the volatility in capital expenditure budgets of CSPs;
our ability to return to operating profitability in the future;
our ability to comply with all covenants, agreements and conditions under our credit facility, including, without limitation, our monthly minimum liquidity covenant;
our ability to further penetrate our existing customer base and obtain new customers;
changes in our pricing policies, whether initiated by us or as a result of competition;
the amount and timing of operating costs and capital expenditures related to the operation and expansion of our business;
the actual or rumored timing and success of new product and service introductions by us or our competitors or any other change in the competitive landscape of our industry, including consolidation among our competitors or customers;
our ability to successfully expand our business domestically and internationally, including our ability to maintain the synergies we have realized from our acquisition of NetComm Wireless Limited, or NetComm;
insolvency or credit difficulties confronting our customers, which could adversely affect their ability to purchase or pay for our products and services, or our key suppliers, which could disrupt our supply chain;
future accounting pronouncements or changes in our accounting policies;

1


 

stock-based compensation expense;
our overall effective tax rate, including impacts caused by the relative proportion of foreign to U.S. income, the amount and timing of certain employee stock-based compensation transactions, changes in the valuation of our deferred tax assets and any new legislation or regulatory developments;
increases or decreases in our expenses caused by fluctuations in interest rates and foreign currency exchange rates;
impact of inflation and actions taken by central banks to counter inflation;
the costs and possible outcomes of any contingent liabilities, as well as legal actions or proceedings against us, including those described under “Part II, Item 1—Legal Proceedings”;
general economic conditions, both domestically and in foreign markets, including new macro-economic recession concerns, a potential economic downturn, banking industry liquidity concerns, or inflationary conditions;
our ability to obtain and maintain intellectual property protection for our products; and
our use of proceeds from our initial public offering.

Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

47,925

 

 

$

126,312

 

Accounts receivable, net of provision for doubtful accounts of $152 and $636 as of
   September 30, 2023 and December 31, 2022, respectively
(1)

 

 

37,360

 

 

 

74,484

 

Inventory

 

 

77,206

 

 

 

81,795

 

Prepaid expenses and other current assets

 

 

4,171

 

 

 

2,836

 

Prepaid income taxes

 

 

3,022

 

 

 

6,352

 

Total current assets

 

 

169,684

 

 

 

291,779

 

Property and equipment, net

 

 

6,427

 

 

 

19,518

 

Right-of-use assets

 

 

3,674

 

 

 

5,199

 

Goodwill

 

 

50,177

 

 

 

50,177

 

Intangible assets, net

 

 

21,316

 

 

 

25,759

 

Noncurrent assets held for sale

 

 

6,146

 

 

 

 

Other assets

 

 

5,092

 

 

 

5,862

 

Total assets

 

$

262,516

 

 

$

398,294

 

Liabilities and Stockholders’ (Deficit) Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

21,891

 

 

$

29,283

 

Accrued expenses and other current liabilities

 

 

30,629

 

 

 

31,825

 

Warrant liability

 

 

11,218

 

 

 

 

Accrued income taxes

 

 

1,011

 

 

 

4,298

 

Deferred revenue(2)

 

 

41,859

 

 

 

31,305

 

Lease liability

 

 

1,446

 

 

 

2,040

 

Current portion of long-term debt, net of unamortized debt issuance costs

 

 

6,378

 

 

 

225,161

 

Total current liabilities

 

 

114,432

 

 

 

323,912

 

Accrued income taxes, net of current portion

 

 

6,509

 

 

 

6,640

 

Deferred tax liabilities

 

 

1,488

 

 

 

1,490

 

Deferred revenue, net of current portion

 

 

4,361

 

 

 

5,529

 

Long-term debt, net of current portion and unamortized debt issuance costs

 

 

175,104

 

 

 

 

Warrant liability, net of current portion

 

 

4,118

 

 

 

 

Lease liability, net of current portion

 

 

2,416

 

 

 

3,416

 

Other liabilities, net of current portion

 

 

7,513

 

 

 

7,906

 

Total liabilities

 

 

315,941

 

 

 

348,893

 

Commitments and contingencies (Note 18)

 

 

 

 

 

 

Stockholders’ (deficit) equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and
   outstanding as of September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value; 500,000 shares authorized; 102,321 and 98,262 shares
  issued as of September 30, 2023 and December 31, 2022, respectively;
98,724 and
  
94,665 shares outstanding as of September 30, 2023 and December 31, 2022, respectively

 

 

102

 

 

 

98

 

Treasury stock, at cost; 3,597 shares as of September 30, 2023 and December 31, 2022

 

 

(14,837

)

 

 

(14,837

)

Additional paid-in capital

 

 

251,140

 

 

 

244,675

 

Accumulated other comprehensive loss

 

 

(3,188

)

 

 

(2,305

)

Accumulated deficit

 

 

(286,642

)

 

 

(178,230

)

Total stockholders’ (deficit) equity

 

 

(53,425

)

 

 

49,401

 

Total liabilities and stockholders’ (deficit) equity

 

$

262,516

 

 

$

398,294

 

 

(1) Includes accounts receivable due from a related party of $1,289 and $6,044 at September 30, 2023 and December 31, 2022, respectively (see Note 16)

(2) Includes deferred revenue associated with a related party of $27,200 and $18,094 at September 30, 2023 and December 31, 2022, respectively (see Note 16)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

49,736

 

 

$

55,435

 

 

$

130,972

 

 

$

167,121

 

Service

 

 

12,353

 

 

 

11,464

 

 

 

34,417

 

 

 

35,013

 

Total revenue(1)

 

 

62,089

 

 

 

66,899

 

 

 

165,389

 

 

 

202,134

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

35,131

 

 

 

38,421

 

 

 

94,155

 

 

 

117,531

 

Service

 

 

1,067

 

 

 

1,195

 

 

 

3,372

 

 

 

4,006

 

Warranty settlement provision

 

 

 

 

 

12,907

 

 

 

 

 

 

12,907

 

Total cost of revenue

 

 

36,198

 

 

 

52,523

 

 

 

97,527

 

 

 

134,444

 

Gross profit

 

 

25,891

 

 

 

14,376

 

 

 

67,862

 

 

 

67,690

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

17,121

 

 

 

22,059

 

 

 

57,947

 

 

 

67,545

 

Selling, general and administrative

 

 

27,174

 

 

 

22,442

 

 

 

72,616

 

 

 

66,741

 

Total operating expenses

 

 

44,295

 

 

 

44,501

 

 

 

130,563

 

 

 

134,286

 

Loss from operations

 

 

(18,404

)

 

 

(30,125

)

 

 

(62,701

)

 

 

(66,596

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

612

 

 

 

810

 

 

 

2,431

 

 

 

1,118

 

Interest expense

 

 

(10,712

)

 

 

(4,762

)

 

 

(21,896

)

 

 

(12,270

)

Loss on extinguishment of debt(2)

 

 

 

 

 

 

 

 

(28,822

)

 

 

 

Revaluation of warrant liability

 

 

3,795

 

 

 

 

 

 

3,795

 

 

 

 

(Loss) gain on foreign currency, net

 

 

(160

)

 

 

1,546

 

 

 

228

 

 

 

2,089

 

Other income, net

 

 

47

 

 

 

106

 

 

 

657

 

 

 

285

 

Total other expense, net

 

 

(6,418

)

 

 

(2,300

)

 

 

(43,607

)

 

 

(8,778

)

Loss before provision for (benefit from) income taxes

 

 

(24,822

)

 

 

(32,425

)

 

 

(106,308

)

 

 

(75,374

)

Provision for (benefit from) income taxes

 

 

796

 

 

 

(1,261

)

 

 

2,104

 

 

 

5,071

 

Net loss

 

 

(25,618

)

 

 

(31,164

)

 

 

(108,412

)

 

 

(80,445

)

Other comprehensive loss —foreign currency
   translation adjustment, net of tax

 

 

(251

)

 

 

(2,737

)

 

 

(883

)

 

 

(4,683

)

Comprehensive loss

 

$

(25,869

)

 

$

(33,901

)

 

$

(109,295

)

 

$

(85,128

)

Net loss per share attributable to common
   stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.26

)

 

$

(0.33

)

 

$

(1.12

)

 

$

(0.89

)

Weighted-average shares used to compute net loss per
   share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

97,488

 

 

 

94,512

 

 

 

96,705

 

 

 

90,569

 

 

(1) Includes revenue of $16,037 and $23,321 during the three and nine months ended September 30, 2023 and $3,041 and $13,591 during the three and nine months ended September 30, 2022, during which a related party relationship existed (see Note 16)

(2) Loss related to Term Loan B refinancing and issuance of warrants during the nine months ended September 30, 2023 (see Note 10)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(in thousands)

(Unaudited)

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balances at June 30, 2023

 

 

100,610

 

 

$

101

 

 

 

3,597

 

 

$

(14,837

)

 

$

247,609

 

 

$

(2,937

)

 

$

(261,024

)

 

$

(31,088

)

Exercise of stock options and common stock
   issued upon vesting of equity awards, net
   of shares withheld for employee taxes

 

 

419

 

 

 

 

 

 

 

 

 

 

 

 

(215

)

 

 

 

 

 

 

 

 

(215

)

Common stock issued for exercise of warrants

 

 

1,292

 

 

 

1

 

 

 

 

 

 

 

 

 

1,173

 

 

 

 

 

 

 

 

 

1,174

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(251

)

 

 

 

 

 

(251

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,573

 

 

 

 

 

 

 

 

 

2,573

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,618

)

 

 

(25,618

)

Balances at September 30, 2023

 

 

102,321

 

 

$

102

 

 

 

3,597

 

 

$

(14,837

)

 

$

251,140

 

 

$

(3,188

)

 

$

(286,642

)

 

$

(53,425

)

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

Balances at January 1, 2023

 

 

98,262

 

 

$

98

 

 

 

3,597

 

 

$

(14,837

)

 

$

244,675

 

 

$

(2,305

)

 

$

(178,230

)

 

$

49,401

 

Exercise of stock options and common stock
   issued upon vesting of equity awards, net
   of shares withheld for employee taxes

 

 

2,767

 

 

 

3

 

 

 

 

 

 

 

 

 

(3,210

)

 

 

 

 

 

 

 

 

(3,207

)

Common stock issued for exercise of warrants

 

 

1,292

 

 

 

1

 

 

 

 

 

 

 

 

 

1,173

 

 

 

 

 

 

 

 

 

1,174

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(883

)

 

 

 

 

 

(883

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,502

 

 

 

 

 

 

 

 

 

8,502

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108,412

)

 

 

(108,412

)

Balances at September 30, 2023

 

 

102,321

 

 

$

102

 

 

 

3,597

 

 

$

(14,837

)

 

$

251,140

 

 

$

(3,188

)

 

$

(286,642

)

 

$

(53,425

)

 

5


 

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY (continued)

(in thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2022

 

 

98,009

 

 

$

98

 

 

 

3,597

 

 

$

(14,837

)

 

$

237,306

 

 

$

(1,068

)

 

$

(148,337

)

 

$

73,162

 

Exercise of stock options and common stock
   issued upon vesting of equity awards, net
   of shares withheld for employee taxes

 

 

203

 

 

 

 

 

 

 

 

 

 

 

 

(398

)

 

 

 

 

 

 

 

 

(398

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,737

)

 

 

30

 

 

 

(2,707

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,671

 

 

 

 

 

 

 

 

 

3,671

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,164

)

 

 

(31,164

)

Balances at September 30, 2022