casa-10q_20190930.htm

 

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, 2019

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

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 October 31, 2019, the registrant had 84,204,089 shares of common stock, $0.001 par value per share, issued and outstanding.

 

 

 

 


Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

3

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

 

3

 

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

 

3

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine months ended September 30, 2019 and 2018

 

4

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine months ended September 30, 2019 and 2018

 

5

 

Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2019 and 2018

 

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

Item 2.

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

 

36

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

48

Item 4.

Controls and Procedures

 

49

PART II.

OTHER INFORMATION

 

50

Item 1.

Legal Proceedings

 

50

Item 1A.

Risk Factors

 

51

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

75

Item 6.

Exhibits

 

76

Signatures

 

77

 

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 ability to integrate and generate potential synergies from our acquisition of NetComm Wireless Limited;

 

our ability to anticipate technological shifts;

 

our ability to generate positive returns on our research and development;

 

changes in the rate of broadband service providers’ 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 broadband service providers;

 

our ability to maintain and expand gross profit and net income;

 

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 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;

 

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;

 

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;

 

future accounting pronouncements or changes in our accounting policies;

 

stock-based compensation expense;

 

the cost and possible outcomes of any potential litigation matters;

1


 

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 foreign currency exchange rates;

 

the costs and possible outcomes of any 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;

 

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. Condensed Consolidated Financial Statements (Unaudited)

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

123,570

 

 

$

280,587

 

Accounts receivable, net of provision for doubtful accounts of $911 and $410 as of

   September 30, 2019 and December 31, 2018, respectively

 

 

62,736

 

 

 

81,782

 

Inventory

 

 

98,203

 

 

 

50,997

 

Prepaid expenses and other current assets

 

 

6,747

 

 

 

3,755

 

Prepaid income taxes

 

 

390

 

 

 

390

 

Total current assets

 

 

291,646

 

 

 

417,511

 

Property and equipment, net

 

 

37,006

 

 

 

29,879

 

Accounts receivable, net of current portion

 

 

937

 

 

 

2,388

 

Deferred tax assets

 

 

32,497

 

 

 

21,578

 

Goodwill

 

 

49,794

 

 

 

 

Intangible assets, net

 

 

42,574

 

 

 

 

Other assets

 

 

4,045

 

 

 

3,293

 

Total assets

 

$

458,499

 

 

$

474,649

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

19,128

 

 

$

17,776

 

Accrued expenses and other current liabilities

 

 

32,835

 

 

 

36,992

 

Accrued income taxes

 

 

1,407

 

 

 

958

 

Deferred revenue

 

 

27,556

 

 

 

31,206

 

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

 

 

8,599

 

 

 

2,179

 

Total current liabilities

 

 

89,525

 

 

 

89,111

 

Accrued income taxes, net of current portion

 

 

7,126

 

 

 

4,923

 

Deferred tax liabilities

 

 

7,064

 

 

 

 

Deferred revenue, net of current portion

 

 

6,075

 

 

 

12,479

 

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

 

 

285,224

 

 

 

293,280

 

Other liabilities, net of current portion

 

 

511

 

 

 

 

Total liabilities

 

 

395,525

 

 

 

399,793

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized as of September 30, 2019

   and December 31, 2018; no shares issued and outstanding as of

   September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Common stock, $0.001 par value; 500,000 shares authorized as of September 30, 2019

   and December 31, 2018; 84,204 and 82,961 shares issued and outstanding

   as of September 30, 2019 and December 31, 2018, respectively

 

 

84

 

 

 

83

 

Additional paid-in capital

 

 

166,565

 

 

 

156,939

 

Accumulated other comprehensive loss

 

 

(2,271

)

 

 

(1,158

)

Accumulated deficit

 

 

(101,404

)

 

 

(81,008

)

Total stockholders’ equity

 

 

62,974

 

 

 

74,856

 

Total liabilities and stockholders’ equity

 

$

458,499

 

 

$

474,649

 

 

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 INCOME (LOSS)

(in thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

71,319

 

 

$

60,817

 

 

$

140,196

 

 

$

199,544

 

Service

 

 

10,497

 

 

 

10,689

 

 

 

29,208

 

 

 

29,758

 

Total revenue

 

 

81,816

 

 

 

71,506

 

 

 

169,404

 

 

 

229,302

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

40,578

 

 

 

13,272

 

 

 

60,983

 

 

 

57,612

 

Service

 

 

2,024

 

 

 

1,303

 

 

 

5,404

 

 

 

3,403

 

Total cost of revenue

 

 

42,602

 

 

 

14,575

 

 

 

66,387

 

 

 

61,015

 

Gross profit

 

 

39,214

 

 

 

56,931

 

 

 

103,017

 

 

 

168,287

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

24,158

 

 

 

16,403

 

 

 

60,823

 

 

 

53,629

 

Selling, general and administrative

 

 

23,823

 

 

 

17,905

 

 

 

61,318

 

 

 

52,524

 

Total operating expenses

 

 

47,981

 

 

 

34,308

 

 

 

122,141

 

 

 

106,153

 

(Loss) income from operations

 

 

(8,767

)

 

 

22,623

 

 

 

(19,124

)

 

 

62,134

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

660

 

 

 

1,821

 

 

 

3,882

 

 

 

4,596

 

Interest expense

 

 

(5,240

)

 

 

(5,032

)

 

 

(15,662

)

 

 

(14,579

)

(Loss) gain on foreign currency, net

 

 

(869

)

 

 

69

 

 

 

(458

)

 

 

(445

)

Other income, net

 

 

106

 

 

 

411

 

 

 

477

 

 

 

978

 

Total other income (expense), net

 

 

(5,343

)

 

 

(2,731

)

 

 

(11,761

)

 

 

(9,450

)

(Loss) income before benefit from income taxes

 

 

(14,110

)

 

 

19,892

 

 

 

(30,885

)

 

 

52,684

 

(Benefit from) provision for income taxes

 

 

(5,612

)

 

 

995

 

 

 

(8,339

)

 

 

(5,406

)

Net (loss) income

 

 

(8,498

)

 

 

18,897

 

 

 

(22,546

)

 

 

58,090

 

Other comprehensive income (loss)—foreign currency translation

   adjustment

 

 

(1,180

)

 

 

(1,117

)

 

 

(1,113

)

 

 

(1,620

)

Comprehensive (loss) income

 

$

(9,678

)

 

$

17,780

 

 

$

(23,659

)

 

$

56,470

 

Net (loss) income attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(8,498

)

 

$

18,897

 

 

$

(22,546

)

 

$

58,090

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.10

)

 

$

0.22

 

 

$

(0.27

)

 

$

0.69

 

Diluted

 

$

(0.10

)

 

$

0.21

 

 

$

(0.27

)

 

$

0.62

 

Weighted-average shares used to compute net (loss) income per

   share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

84,068

 

 

 

86,167

 

 

 

83,761

 

 

 

83,701

 

Diluted

 

 

84,068

 

 

 

92,032

 

 

 

83,761

 

 

 

93,180

 

 

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

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2019

 

 

84,028

 

 

$

84

 

 

$

163,526

 

 

$

(1,091

)

 

$

(92,906

)

 

$

69,613

 

Exercise of stock options and common stock issued upon vesting of

   equity awards, net of shares withheld for employee taxes

 

 

176

 

 

 

 

 

 

304

 

 

 

 

 

 

 

 

 

304

 

Foreign currency translation adjustment, net of tax of $0

 

 

 

 

 

 

 

 

 

 

 

(1,180

)

 

 

 

 

 

(1,180

)

Stock-based compensation

 

 

 

 

 

 

 

 

2,735

 

 

 

 

 

 

 

 

 

2,735

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,498

)

 

 

(8,498

)

Balances at September 30, 2019

 

 

84,204

 

 

$

84

 

 

$

166,565

 

 

$

(2,271

)

 

$

(101,404

)

 

$

62,974

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2019

 

 

82,961

 

 

$

83

 

 

$

156,939

 

 

$

(1,158

)

 

$

(81,008

)

 

$

74,856

 

Exercise of stock options and common stock issued upon vesting of

   equity awards, net of shares withheld for employee taxes

 

 

1,243

 

 

 

1

 

 

 

1,467

 

 

 

 

 

 

 

 

 

1,468

 

Foreign currency translation adjustment, net of tax of $0

 

 

 

 

 

 

 

 

 

 

 

(1,113

)

 

 

 

 

 

(1,113

)

Effect of adopted accounting standards (Note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,150

 

 

 

2,150

 

Stock-based compensation

 

 

 

 

 

 

 

 

8,159

 

 

 

 

 

 

 

 

 

8,159

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,546

)

 

 

(22,546

)

Balances at September 30, 2019

 

 

84,204

 

 

$

84

 

 

$

166,565

 

 

$

(2,271

)

 

$

(101,404

)

 

$

62,974

 

 

 


5


 

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(in thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2018

 

 

86,223

 

 

$

86

 

 

$

147,211

 

 

$

(309

)

 

$

(39,724

)

 

$

107,264

 

Exercise of stock options and common stock issued upon vesting of

   equity awards, net of shares withheld for employee taxes

 

 

1,714

 

 

 

2

 

 

 

3,873

 

 

 

 

 

 

 

 

 

3,875

 

Foreign currency translation adjustment, net of tax of $0

 

 

 

 

 

 

 

 

 

 

 

(1,117

)

 

 

 

 

 

(1,117

)

Follow-on offering selling shareholders profit disgorgement, net of offering

   costs of $41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock repurchase program

 

 

(3,090

)

 

 

(3

)

 

 

 

 

 

 

 

 

(45,696

)

 

 

(45,699

)

Stock-based compensation

 

 

 

 

 

 

 

 

2,496

 

 

 

 

 

 

 

 

 

2,496

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,897

 

 

 

18,897

 

Balances at September 30, 2018

 

 

84,847

 

 

$

85

 

 

$

153,580

 

 

$

(1,426

)

 

$

(66,523

)

 

$

85,716

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2018

 

 

81,043

 

 

$

81

 

 

$

128,798

 

 

$

194

 

 

$

(78,917

)

 

$

50,156

 

Exercise of stock options and common stock issued upon vesting of

   equity awards, net of shares withheld for employee taxes

 

 

6,894

 

 

 

7

 

 

 

14,015

 

 

 

 

 

 

 

 

 

14,022

 

Foreign currency translation adjustment, net of tax of $0

 

 

 

 

 

 

 

 

 

 

 

(1,620

)

 

 

 

 

 

(1,620

)

Follow-on offering selling shareholders profit disgorgement, net of offering

   costs of $41

 

 

 

 

 

 

 

 

3,770

 

 

 

 

 

 

 

 

 

3,770

 

Stock repurchase program

 

 

(3,090

)

 

 

(3

)

 

 

 

 

 

 

 

 

(45,696

)

 

 

(45,699

)

Stock-based compensation

 

 

 

 

 

 

 

 

6,997

 

 

 

 

 

 

 

 

 

6,997

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58,090

 

 

 

58,090

 

Balances at September 30, 2018

 

 

84,847

 

 

$

85

 

 

$

153,580

 

 

$

(1,426

)

 

$

(66,523

)

 

$

85,716

 

 

 

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

 

 

6

 


CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Cash flows (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(22,546

)

 

$

58,090

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,903

 

 

 

7,037

 

Stock-based compensation

 

 

7,450

 

 

 

6,542

 

Deferred income taxes

 

 

(14,894

)

 

 

(9,130

)

Increase (decrease) in provision for doubtful accounts

 

 

510

 

 

 

(6

)

Excess and obsolete inventory valuation adjustment

 

 

(826

)

 

 

(3,185

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

33,533

 

 

 

38,062

 

Inventory

 

 

(25,427

)

 

 

(3,344

)

Prepaid expenses and other assets

 

 

(1,505

)

 

 

(849

)

Prepaid income taxes

 

 

 

 

 

238

 

Accounts payable

 

 

(5,557

)

 

 

4,309

 

Accrued expenses and other current liabilities

 

 

(10,346

)

 

 

549

 

Accrued income taxes

 

 

2,518

 

 

 

383

 

Deferred revenue

 

 

(5,883

)

 

 

(4,594

)

Net cash (used in) provided by operating activities

 

 

(33,070

)

 

 

94,102

 

Cash flows used in investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(6,725

)

 

 

(6,224

)

Acquisition of a business, net of cash acquired

 

 

(109,431

)

 

 

 

Net cash used in investing activities

 

 

(116,156

)

 

 

(6,224

)

Cash flows (used in) provided by financing activities:

 

 

 

 

 

 

 

 

Principal repayments of debt

 

 

(5,992

)

 

 

(2,476

)

Proceeds from exercise of stock options

 

 

2,478

 

 

 

14,035

 

Employee taxes paid related to net share settlement of equity awards

 

 

(1,009

)

 

 

(13

)

Payments of dividends and equitable adjustments

 

 

(2,375

)

 

 

(6,472

)

Follow-on offering selling shareholders profit disgorgement

 

 

 

 

 

3,811

 

Repurchases of common stock

 

 

 

 

 

(45,699

)

Payments of initial public offering costs

 

 

 

 

 

(1,148

)

Net cash (used in) provided by financing activities

 

 

(6,898

)

 

 

(37,962

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(900

)

 

 

(1,374

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(157,024

)

 

 

48,542

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

281,606

 

 

 

260,820

 

Cash, cash equivalents and restricted cash at end of period (1)

 

$

124,582

 

 

$

309,362

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

14,467

 

 

$

13,441

 

Cash paid for income taxes

 

$

3,044

 

 

$

4,252

 

Supplemental disclosures of non-cash operating, investing

   and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable

 

$

511

 

 

$

963

 

Prepaid expenses and other current assets included in accounts payable

 

$

290

 

 

$

515

 

Unpaid equitable adjustments included in accrued expenses and other current liabilities

 

$

961

 

 

$

4,189

 

Release of customer incentives included in accounts receivable and accrued expenses

   and other current liabilities

 

$

5,604

 

 

$

6,314

 

 

(1)

See Note 2 of the accompanying notes for a reconciliation of the ending balance of cash, cash equivalents and restricted cash shown in these condensed consolidated statements of cash flows.

 

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

7


 

CASA SYSTEMS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(Unaudited)

1. Nature of Business and Basis of Presentation

Casa Systems, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on February 28, 2003. The Company is a global communications technology company headquartered in Andover, Massachusetts and has wholly owned subsidiaries in China, France, Canada, Ireland, Spain, Colombia, the Netherlands, Hong Kong, Australia, Germany, the United Kingdom and New Zealand.

The Company offers converged solutions for next-generation centralized, distributed and virtualized architectures for cable broadband, fixed-line broadband and wireless networks. The Company’s solutions enable 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 is subject to a number of risks similar to other companies of comparable size and other companies selling and providing services to the communications industry. These risks include, but are not limited to, the level of capital spending by the communications industry, a lengthy sales cycle, dependence on the development of new products and services, unfavorable economic and market conditions, competition from larger and more established companies, limited management resources, dependence on a limited number of contract manufacturers and suppliers, the rapidly changing nature of the technology used by the communications industry and reliance on resellers and sales agents. Failure by the Company to anticipate or to respond adequately to technological developments in its industry, changes in customer or supplier requirements, changes in regulatory requirements or industry standards, or any significant delays in the development or introduction of products could have a material adverse effect on the Company’s operating results, financial condition and cash flows.

In December 2017, the Company closed its initial public offering (“IPO”) of 6,900 shares of its common stock at an offering price of $13.00 per share, including 900 shares pursuant to the underwriters’ option to purchase additional shares of the Company’s common stock. The Company received net proceeds of $79,327, after deducting underwriting discounts and commissions of $6,279 and offering costs of $4,094. Upon the closing of the IPO, all 4,038 shares of the Company’s then-outstanding preferred stock automatically converted on a ten-for-one basis into an aggregate of 40,382 shares of the Company’s common stock. Upon conversion of the preferred stock, the Company reclassified $97,439 from temporary equity to additional paid-in capital and $40 from temporary equity to common stock.

On April 30, 2018, the Company closed its follow-on public offering in which certain stockholders sold 7,350 shares of the Company’s common stock at a price of $25.00 per share, before deducting underwriting discounts and commissions (the “follow-on offering”). The Company did not sell any common stock in the follow-on offering and did not receive any of the proceeds from the sale of the Company’s common stock by the selling stockholders. In connection with the sale of the Company’s common stock in the follow-on offering, certain of the selling stockholders disgorged $3,770 of profits recognized from the sale, after deducting $41 of offering costs, to the Company in accordance with Section 16(b) of the Securities Exchange Act of 1934, as amended, which was recorded as an increase in additional paid-in capital. The Company incurred $856 of transaction costs in connection with the follow-on offering, of which $815 was recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

On July 1, 2019, the Company acquired 100% of the equity interests in NetComm Wireless Limited (“NetComm”) for cash consideration of $161,963 Australian dollars (“AUD”) ($112,674 United States dollars (“USD”)), based on an exchange rate of USD $0.700 per AUD $1.00 on July 1, 2019) and NetComm became a wholly-owned subsidiary of the Company (the “Acquisition”). NetComm is a global leader in the development of fixed wireless and distribution point broadband solutions, and with the Acquisition, the Company now offers a broad, highly competitive product portfolio for new 4G architectures and 5G wireless for service providers across all access technologies.

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the initial public offering, subject to specified conditions.  The JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company will adopt the new or revised standard at the time private companies adopt the new or revised standard, provided that the Company continues to be an emerging growth company. The JOBS Act provides that the decision to take advantage of the extended transition period for complying with new or revised accounting standards is irrevocable.

8


 

The accompanying condensed consolidated balance sheet as of September 30, 2019, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2019 and 2018, the condensed consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018 and the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2019 and 2018 are unaudited. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2019 and 2018 are also unaudited. The accompanying condensed consolidated balance sheet as of December 31, 2018 was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019 (the “Annual Report on Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K. There have been no material changes to the Company’s accounting policies from those disclosed in the Annual Report on Form 10-K that would have a material impact on the Company’s condensed consolidated financial statements.

The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and, in the opinion of management, include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations and cash flows to be anticipated for the full year ending December 31, 2019 or any future period.

The accompanying condensed consolidated financial statements include the accounts and results of operations of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and judgments relied upon by management in preparing these condensed consolidated financial statements include revenue recognition, provision for doubtful accounts, reserves for excess and obsolete inventory, valuation of inventory and deferred inventory costs, the expensing and capitalization of software-related research and development costs, amortization and depreciation periods, recoverability of net deferred tax assets, valuations of uncertain tax positions, (benefit from) provision for income taxes, warranty allowances, the valuation of equity instruments and stock-based compensation expense.

Although the Company regularly reassesses the assumptions underlying these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances existing at the time such estimates are made.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all highly liquid investments maturing within three months from the date of purchase. As of September 30, 2019 and December 31, 2018, the Company’s cash and cash equivalents consisted of investments in certificates of deposit and money market mutual funds.

Restricted cash as of September 30, 2019 and December 31, 2018 consisted of a certificate of deposit of $1,012 and $1,019, respectively, pledged as collateral for a stand-by letter of credit required to support a contractual obligation.

9


 

The following table is a reconciliation of cash, cash equivalents and restricted cash included in the accompanying condensed consolidated balance sheets that sum to the total cash, cash equivalents and restricted cash included in the accompanying condensed consolidated statements of cash flows:

 

 

 

September 30, 2019

 

 

September 30, 2018

 

Cash and cash equivalents

 

$

123,570

 

 

$

308,350

 

Restricted cash included in other assets

 

 

1,012

 

 

 

1,012

 

 

 

$

124,582

 

 

$

309,362

 

 

Accounts Receivable

Accounts receivable are presented net of a provision for doubtful accounts, which is an estimate of amounts that may not be collectible. Accounts receivable for customer contracts with customary payment terms, which are one year or less, are recorded at invoiced amounts and do not bear interest. The Company generally does not require collateral, but the Company may, in certain instances based on its credit assessment, require full or partial prepayment prior to shipment.

In limited instances, for certain customers and/or for certain transactions, the Company provides extended payment terms that are considered significant financing components. These extended payment terms allow the customer to pay for the purchased equipment in monthly, other periodic or lump-sum payments over a period of one to five years. In certain circumstances, the receivables may be collateralized by the underlying assets over the payment period. Payments due beyond 12 months from the balance sheet date are recorded as non-current assets.

Accounts receivable as of September 30, 2019 and December 31, 2018 consisted of the following:

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Current portion of accounts receivable, net:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

60,526

 

 

$

79,526

 

Accounts receivable, extended payment terms

 

 

2,210

 

 

 

2,256

 

 

 

 

62,736