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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, 2022

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 3, 2022, the registrant had 94,621,236 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, 2022 and December 31, 2021

 

3

 

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2022 and 2021

 

4

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended
September 30, 2022 and 2021

 

5

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

 

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

Item 2.

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

 

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

38

Item 4.

Controls and Procedures

 

39

PART II.

OTHER INFORMATION

 

40

Item 1.

Legal Proceedings

 

40

Item 1A.

Risk Factors

 

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

41

Item 6.

Exhibits

 

42

 

Signatures

 

43

 

 

 

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:

our inability 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;
our ability to anticipate technological shifts;
our ability to generate positive returns on our research and development;
changes in the rate of communications service providers’ or CSPs, deployment of, and investment 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 maintain and expand operating profit and net income or to return to operating profitability in the future;
the sufficiency of our cash resources and needs for additional financing;
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 potential impact of the ongoing COVID-19 pandemic, which is highly uncertain and will depend on future developments on our business, our suppliers, our logistics suppliers and our customers;
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 confronting our key suppliers, which could disrupt our supply chain;
future accounting pronouncements or changes in our accounting policies;
stock-based compensation expense;

1


our overall effective tax rate, including impacts caused by the relative proportion of foreign to United States, or 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 foreign currency exchange rates;
increases or decreases in our expenses caused by fluctuations in interest rates;
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;
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.

2


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,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

193,494

 

 

$

154,703

 

Accounts receivable, net of provision for doubtful accounts of $295 and $117 as of
   September 30, 2022 and December 31, 2021, respectively
(1)

 

 

49,040

 

 

 

85,774

 

Inventory

 

 

82,189

 

 

 

84,828

 

Prepaid expenses and other current assets

 

 

4,013

 

 

 

5,746

 

Prepaid income taxes

 

 

2,929

 

 

 

23,963

 

Total current assets

 

 

331,665

 

 

 

355,014

 

Property and equipment, net

 

 

20,266

 

 

 

23,508

 

Accounts receivable, net of current portion

 

 

57

 

 

 

115

 

Deferred tax assets

 

 

63

 

 

 

101

 

Goodwill

 

 

50,177

 

 

 

50,177

 

Intangible assets, net

 

 

27,265

 

 

 

31,144

 

Other assets

 

 

8,475

 

 

 

8,648

 

Total assets

 

$

437,968

 

 

$

468,707

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

13,784

 

 

$

28,087

 

Accrued expenses and other current liabilities

 

 

41,753

 

 

 

41,382

 

Accrued income taxes

 

 

6,598

 

 

 

4,991

 

Deferred revenue(2)

 

 

33,597

 

 

 

14,473

 

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

 

 

1,933

 

 

 

1,924

 

Total current liabilities

 

 

97,665

 

 

 

90,857

 

Accrued income taxes, net of current portion

 

 

8,175

 

 

 

7,732

 

Deferred tax liabilities

 

 

2,812

 

 

 

5,293

 

Deferred revenue, net of current portion

 

 

5,799

 

 

 

7,012

 

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

 

 

272,739

 

 

 

274,193

 

Other liabilities, net of current portion

 

 

8,214

 

 

 

1,701

 

Total liabilities

 

 

395,404

 

 

 

386,788

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized as of September 30, 2022
   and December 31, 2021;
no shares issued and outstanding as of
   September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value; 500,000 shares authorized; 98,212 and 87,815 shares
  issued as of September 30, 2022 and December 31, 2021, respectively;
94,615 and
  
84,422 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

98

 

 

 

88

 

Treasury stock, at cost; 3,597 and 3,393 shares as of September 30, 2022 and December 31,
   2021, respectively

 

 

(14,837

)

 

 

(13,645

)

Additional paid-in capital

 

 

240,579

 

 

 

193,654

 

Accumulated other comprehensive (loss) income

 

 

(3,805

)

 

 

878

 

Accumulated deficit

 

 

(179,471

)

 

 

(99,056

)

Total stockholders’ equity

 

 

42,564

 

 

 

81,919

 

Total liabilities and stockholders’ equity

 

$

437,968

 

 

$

468,707

 

 

(1) Includes accounts receivable due from a related party of $1,817 at September 30, 2022 (see Note 15)

(2) Includes deferred revenue associated with a related party of $16,775 at September 30, 2022 (see Note 15)

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

3


CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

55,435

 

 

$

87,752

 

 

$

167,121

 

 

$

262,019

 

Service

 

 

11,464

 

 

 

11,467

 

 

 

35,013

 

 

 

34,207

 

Total revenue(1)

 

 

66,899

 

 

 

99,219

 

 

 

202,134

 

 

 

296,226

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

38,421

 

 

 

57,372

 

 

 

117,531

 

 

 

150,515

 

Service

 

 

1,195

 

 

 

1,223

 

 

 

4,006

 

 

 

3,532

 

Warranty Settlement Provision

 

 

12,907

 

 

 

 

 

 

12,907

 

 

 

 

Total cost of revenue

 

 

52,523

 

 

 

58,595

 

 

 

134,444

 

 

 

154,047

 

Gross profit

 

 

14,376

 

 

 

40,624

 

 

 

67,690

 

 

 

142,179

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

22,059

 

 

 

21,578

 

 

 

67,545

 

 

 

63,479

 

Selling, general and administrative

 

 

22,442

 

 

 

21,029

 

 

 

66,741

 

 

 

64,492

 

Total operating expenses

 

 

44,501

 

 

 

42,607

 

 

 

134,286

 

 

 

127,971

 

(Loss) income from operations

 

 

(30,125

)

 

 

(1,983

)

 

 

(66,596

)

 

 

14,208

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

810

 

 

 

80

 

 

 

1,118

 

 

 

297

 

Interest expense

 

 

(4,762

)

 

 

(3,969

)

 

 

(12,270

)

 

 

(11,886

)

Gain (loss) on foreign currency, net

 

 

1,546

 

 

 

(375

)

 

 

2,089

 

 

 

(1,353

)

Other income, net

 

 

106

 

 

 

83

 

 

 

285

 

 

 

634

 

Total other expense, net

 

 

(2,300

)

 

 

(4,181

)

 

 

(8,778

)

 

 

(12,308

)

(Loss) income before (benefit from) provision for income taxes

 

 

(32,425

)

 

 

(6,164

)

 

 

(75,374

)

 

 

1,900

 

(Benefit from) provision for income taxes

 

 

(1,261

)

 

 

(5,288

)

 

 

5,071

 

 

 

220

 

Net (loss) income

 

 

(31,164

)

 

 

(876

)

 

 

(80,445

)

 

 

1,680

 

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

 

 

(2,737

)

 

 

(127

)

 

 

(4,683

)

 

 

130

 

Comprehensive (loss) income

 

$

(33,901

)

 

$

(1,003

)

 

$

(85,128

)

 

$

1,810

 

Net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.33

)

 

$

(0.01

)

 

$

(0.89

)

 

$

0.02

 

Diluted

 

$

(0.33

)

 

$

(0.01

)

 

$

(0.89

)

 

$

0.02

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

94,512

 

 

 

85,660

 

 

 

90,569

 

 

 

84,985

 

Diluted

 

 

94,512

 

 

 

85,660

 

 

 

90,569

 

 

 

88,948

 

 

(1) Includes revenue during which a related party relationship existed of $3,041 and $13,591 during the three and nine months ended September 30, 2022 (see Note 15)

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

4


 

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(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

 

 

98,212

 

 

$

98

 

 

 

3,597

 

 

$

(14,837

)

 

$

240,579

 

 

$

(3,805

)

 

$

(179,471

)

 

$

42,564

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2022

 

 

87,815

 

 

$

88

 

 

 

3,393

 

 

$

(13,645

)

 

$

193,654

 

 

$

878

 

 

$

(99,056

)

 

$

81,919

 

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

 

 

1,074

 

 

 

1

 

 

 

 

 

 

 

 

 

(1,773

)

 

 

 

 

 

 

 

 

(1,772

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,683

)

 

 

30

 

 

 

(4,653

)

Repurchases of treasury shares

 

 

 

 

 

 

 

 

204

 

 

 

(1,192

)

 

 

 

 

 

 

 

 

 

 

 

(1,192

)

Sale of common stock, net of issuance costs

 

 

9,323

 

 

 

9

 

 

 

 

 

 

 

 

 

39,361

 

 

 

 

 

 

 

 

 

39,370

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,337

 

 

 

 

 

 

 

 

 

9,337

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(80,445

)

 

 

(80,445

)

Balances at September 30, 2022

 

 

98,212

 

 

$

98

 

 

 

3,597

 

 

$

(14,837

)

 

$

240,579

 

 

$

(3,805

)

 

$

(179,471

)

 

$

42,564

 

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

 

5


 

 

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(in thousands)