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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 June 30, 2020

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 July 24, 2020, the registrant had 83,134,818 shares of common stock, $0.001 par value per share, issued and 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 June 30, 2020 and December 31, 2019

 

3

 

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Six months ended June 30, 2020 and 2019

 

4

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Six months ended June 30, 2020 and 2019

 

5

 

Condensed Consolidated Statements of Cash Flows for the Six months ended June 30, 2020 and 2019

 

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

Item 2.

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

 

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

42

Item 4.

Controls and Procedures

 

43

PART II.

OTHER INFORMATION

 

44

Item 1.

Legal Proceedings

 

44

Item 1A.

Risk Factors

 

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

46

Item 6.

Exhibits

 

47

Signatures

 

48

 

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 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 extent of the effects of the COVID-19 pandemic on the Company, which is highly uncertain and will depend on future developments;

 

the potential impact of the COVID-19 pandemic on our suppliers, our business operations 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 integrate and generate potential synergies from our acquisition of NetComm Wireless Limited;

 

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;

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. Financial Statements

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

149,148

 

 

$

113,638

 

Accounts receivable, net of provision for doubtful accounts of $44 and $20 as of

   June 30, 2020 and December 31, 2019, respectively

 

 

52,867

 

 

 

93,100

 

Inventory

 

 

85,965

 

 

 

93,604

 

Prepaid expenses and other current assets

 

 

5,772

 

 

 

4,884

 

Prepaid income taxes

 

 

10,843

 

 

 

3,217

 

Total current assets

 

 

304,595

 

 

 

308,443

 

Property and equipment, net

 

 

32,303

 

 

 

35,910

 

Accounts receivable, net of current portion

 

 

324

 

 

 

575

 

Deferred tax assets

 

 

665

 

 

 

69

 

Goodwill

 

 

50,347

 

 

 

50,347

 

Intangible assets, net

 

 

38,295

 

 

 

41,148

 

Other assets

 

 

6,007

 

 

 

7,820

 

Total assets

 

$

432,536

 

 

$

444,312

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

26,488

 

 

$

25,890

 

Accrued expenses and other current liabilities

 

 

31,324

 

 

 

34,567

 

Accrued income taxes

 

 

486

 

 

 

 

Deferred revenue

 

 

18,061

 

 

 

25,485

 

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

 

 

8,374

 

 

 

8,524

 

Total current liabilities

 

 

84,733

 

 

 

94,466

 

Accrued income taxes, net of current portion

 

 

10,887

 

 

 

12,381

 

Deferred tax liabilities

 

 

9,166

 

 

 

8,993

 

Deferred revenue, net of current portion

 

 

3,546

 

 

 

4,583

 

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

 

 

283,805

 

 

 

284,756

 

Other liabilities, net of current portion

 

 

687

 

 

 

569

 

Total liabilities

 

 

392,824

 

 

 

405,748

 

Commitments and contingencies (Note 18)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized as of June 30, 2020

   and December 31, 2019; no shares issued and outstanding as of

   June 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.001 par value; 500,000 shares authorized as of June 30, 2020

   and December 31, 2019; 84,856 and 84,333 shares issued and outstanding

   as of June 30, 2020 and December 31, 2019, respectively

 

 

85

 

 

 

84

 

Treasury stock, at cost; 1,722 and 495 shares at June 30, 2020 and December 31, 2019,

   respectively

 

 

(4,826

)

 

 

(1,795

)

Additional paid-in capital

 

 

175,496

 

 

 

169,561

 

Accumulated other comprehensive loss

 

 

(2,113

)

 

 

(2,222

)

Accumulated deficit

 

 

(128,930

)

 

 

(127,064

)

Total stockholders’ equity

 

 

39,712

 

 

 

38,564

 

Total liabilities and stockholders’ equity

 

$

432,536

 

 

$

444,312

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

72,128

 

 

$

42,223

 

 

$

145,886

 

 

$

68,876

 

Service

 

 

11,222

 

 

 

9,878

 

 

 

21,087

 

 

 

18,711

 

Total revenue

 

 

83,350

 

 

 

52,101

 

 

 

166,973

 

 

 

87,587

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

39,011

 

 

 

10,976

 

 

 

78,655

 

 

 

20,405

 

Service

 

 

1,209

 

 

 

1,820

 

 

 

2,535

 

 

 

3,380

 

Total cost of revenue

 

 

40,220

 

 

 

12,796

 

 

 

81,190

 

 

 

23,785

 

Gross profit

 

 

43,130

 

 

 

39,305

 

 

 

85,783

 

 

 

63,802

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

20,688

 

 

 

18,260

 

 

 

41,899

 

 

 

36,665

 

Selling, general and administrative

 

 

21,110

 

 

 

17,302

 

 

 

46,101

 

 

 

37,495

 

Total operating expenses

 

 

41,798

 

 

 

35,562

 

 

 

88,000

 

 

 

74,160

 

Income (loss) from operations

 

 

1,332

 

 

 

3,743

 

 

 

(2,217

)

 

 

(10,358

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

271

 

 

 

1,570

 

 

 

677

 

 

 

3,222

 

Interest expense

 

 

(4,307

)

 

 

(5,225

)

 

 

(8,935

)

 

 

(10,422

)

Gain (loss) on foreign currency, net

 

 

528

 

 

 

503

 

 

 

680

 

 

 

411

 

Other income, net

 

 

35

 

 

 

142

 

 

 

97

 

 

 

371

 

Total other income (expense), net

 

 

(3,473

)

 

 

(3,010

)

 

 

(7,481

)

 

 

(6,418

)

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

 

 

(2,141

)

 

 

733

 

 

 

(9,698

)

 

 

(16,776

)

Provision for (benefit from) income taxes

 

 

887

 

 

 

(558

)

 

 

(7,832

)

 

 

(2,728

)

Net (loss) income

 

 

(3,028

)

 

 

1,291

 

 

 

(1,866

)

 

 

(14,048

)

Other comprehensive (loss) income—foreign currency translation

   adjustment, net of tax

 

 

99

 

 

 

(646

)

 

 

(418

)

 

 

67

 

Other comprehensive (loss) income—gain on foreign currency hedge, net of tax

 

 

171

 

 

 

 

 

 

527

 

 

 

 

Comprehensive (loss) income

 

$

(2,758

)

 

$

645

 

 

$

(1,757

)

 

$

(13,981

)

Net (loss) income attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(3,028

)

 

$

1,291

 

 

$

(1,866

)

 

$

(14,048

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

0.02

 

 

$

(0.02

)

 

$

(0.17

)

Diluted

 

$

(0.04

)

 

$

0.01

 

 

$

(0.02

)

 

$

(0.17

)

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

   share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

83,068

 

 

 

83,884

 

 

 

83,505

 

 

 

83,605

 

Diluted

 

 

83,068

 

 

 

86,369

 

 

 

83,505

 

 

 

83,605

 

 

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 March 31, 2020

 

 

84,726

 

 

$

85

 

 

 

1,711

 

 

$

(4,793

)

 

$

171,914

 

 

$

(2,383

)

 

$

(125,902

)

 

$

38,921

 

Exercise of stock options and common stock issued upon

   vesting of equity awards, net of shares withheld for

   employee taxes

 

 

130

 

 

 

 

 

 

 

 

 

 

 

 

75

 

 

 

 

 

 

 

 

 

75

 

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

171

 

 

 

 

 

 

171

 

Foreign currency translation adjustment, net of tax of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99

 

 

 

 

 

 

99

 

Repurchases of treasury shares

 

 

 

 

 

 

 

 

11

 

 

 

(33

)

 

 

 

 

 

 

 

 

 

 

 

(33

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,507

 

 

 

 

 

 

 

 

 

3,507

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,028

)

 

 

(3,028

)

Balances at June 30, 2020

 

 

84,856

 

 

$

85

 

 

 

1,722

 

 

$

(4,826

)

 

$

175,496

 

 

$

(2,113

)

 

$

(128,930

)

 

$

39,712

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2020

 

 

84,333

 

 

$

84

 

 

 

495

 

 

$

(1,795

)

 

$

169,561

 

 

$

(2,222

)

 

$

(127,064

)

 

$

38,564

 

Exercise of stock options and common stock issued upon vesting of

   equity awards, net of shares withheld for employee taxes

 

 

523

 

 

 

1

 

 

 

 

 

 

 

 

 

(73

)

 

 

 

 

 

 

 

 

(72

)

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

527

 

 

 

 

 

 

 

527

 

Foreign currency translation adjustment, net of tax of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(418

)

 

 

 

 

 

(418

)

Repurchases of treasury shares

 

 

 

 

 

 

 

 

1,227

 

 

 

(3,031

)

 

 

 

 

 

 

 

 

 

 

 

(3,031

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,008