News Release Details
Casa Systems Announces Fourth Quarter and Full Year 2017 Financial Results
- Revenue of
$351.6 million for 2017 - Won Three Tier-1 Mobile Customers for New Wireless Solutions
Fourth Quarter 2017 Financial Highlights
- Revenues were
$118.0 million , an increase of 18.9% compared to the fourth quarter of 2016 - Gross margin of 77.1%, compared to gross margin of 76.8% in the fourth quarter of 2016
- GAAP net income of
$28.9 million , a decrease of 27.6% compared to the fourth quarter of 2016 - Non-GAAP net income of
$53.7 million , an increase of 28.7% compared to the fourth quarter of 2016 - Adjusted EBITDA of
$59.8 million , an increase of 9.6% compared to the fourth quarter of 2016
2017 Financial Highlights
- Revenues were
$351.6 million , an increase of 11.2% compared to 2016 - Gross margin of 73.4%, compared to gross margin of 69.1% in 2016
- GAAP net income of
$88.5 million , a decrease of 0.2% compared to 2016 - Non-GAAP net income of
$118.0 million , an increase of 24.2% compared to 2016 - Adjusted EBITDA of
$153.1 million , an increase of 18.6% compared to 2016 - Net cash provided by operating activities of
$95.0 million
GAAP net income for the fourth quarter and for 2017 includes the impact of the Tax Cuts and Jobs Act of 2017 and an estimated one-time tax charge of approximately
“We are pleased to report continued strong growth in revenue and profitability for our first quarter as a public company,” said
Commenting on the Company’s financial results,
To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), we are presenting non-GAAP financial measures in this press release. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures”.
Financial Outlook
For the fiscal year 2018, we expect:
- Revenues between
$380.0 million and $395.0 million - Non-GAAP net income between
$100.0 million and $111.0 million - Non-GAAP diluted net income per share between
$1.08 and $1.19
Guidance for non-GAAP financial measures excludes stock-based compensation, which is a non-cash charge, and the resulting tax effect of such stock-based compensation. We have not reconciled the non-GAAP metrics as to which we provide guidance to their most directly comparable GAAP metrics because certain items that impact these measures are uncertain, out of our control and/or cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.
Conference Call Information
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this press release, including statements regarding future results of the operations and financial position of
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), we are presenting the following non-GAAP financial measures in this press release and the related earnings conference call: non-GAAP net income, non-GAAP diluted net income per share, adjusted EBITDA and free cash flow. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.
Non-GAAP net income and non-GAAP diluted net income per share. We define non-GAAP net income as net income as reported in our consolidated statements of operations, excluding the impact of stock-based compensation expense, which is a non-cash charge, and the tax effect on this excluded item applied using our effective income tax rate for the period, and excluding the impact of the U.S. Tax Cuts and Jobs Act of 2017, which is a one-time non-recurring charge, and the actual tax charge for this excluded item. We define non-GAAP diluted net income per share as diluted net income per share attributable to common stockholders reported in our consolidated statements of operations, excluding the impact of cumulative dividends on convertible preferred stock, which are no longer applicable following the conversion to common stock of all of our outstanding preferred stock in
Adjusted EBITDA. We define adjusted EBITDA as our net income, excluding the impact of stock-based compensation expense; other income (expense), net; depreciation and amortization expense; and our provision for income taxes. We have presented adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. In particular, we believe that excluding the impact of these expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.
Free cash flow. We define free cash flow as net cash provided by operating activities minus capital expenditures. We believe free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that, after purchases of property and equipment, can be used for strategic opportunities, including investing in our business, making strategic acquisitions and strengthening our balance sheet.
We use these non-GAAP financial measures to evaluate our operating performance and trends and make planning decisions. We believe that each of these non-GAAP financial measures helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of each non-GAAP financial measure. Accordingly, we believe that these financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.
Our non-GAAP financial measures are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures rather than the most directly comparable financial measures calculated and presented in accordance with GAAP. Some of these limitations are:
- we exclude stock-based compensation expense from each of non-GAAP net income, non-GAAP diluted net income per share and adjusted EBITDA as it has recently been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business and an important part of our compensation strategy;
- we exclude the impact of the U.S. Tax Cuts and Jobs Act of 2017 from non-GAAP net income and non-GAAP diluted net income per share, although it represents a significant cash expense, because it is a one-time non-recurring charge;
- adjusted EBITDA excludes depreciation and amortization expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future;
- adjusted EBITDA does not reflect the cash requirements necessary to service interest on our debt or the cash received from our interest-bearing financial assets, both of which impact the cash available to us, and does not reflect foreign currency transaction gains and losses, all of which are reflected in other income (expense), net;
- adjusted EBITDA does not reflect income tax payments that reduce cash available to us;
- free cash flow may not represent our residual cash flow available for discretionary expenditures, since we may have other non-discretionary expenditures that are not deducted from this measure;
- free cash flow may not represent the total increase or decrease in the cash and cash equivalents for any given period because it excludes cash provided by or used for other investing and financing activities; and
- other companies, including companies in our industry, may not use non-GAAP net income, non-GAAP diluted net income per share, adjusted EBITDA or free cash flow, or may calculate such non-GAAP financial measures in a different manner than we do, or may use other non-GAAP financial measures to evaluate their performance, all of which could reduce the usefulness of these non-GAAP financial measures as comparative measures.
For the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, “Reconciliation of Selected GAAP and Non-GAAP Financial Measures”.
About
IR Contact
212-871-3927
investorrelations@casa-systems.com
212-331-8417
investorrelations@casa-systems.com
CASA SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share amounts) |
||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue | $ | 117,962 | $ | 99,226 | $ | 351,575 | $ | 316,128 | ||||||||
Cost of revenue | 27,009 | 23,041 | 93,511 | 97,817 | ||||||||||||
Gross profit | 90,953 | 76,185 | 258,064 | 218,311 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 16,765 | 11,997 | 60,677 | 49,210 | ||||||||||||
Sales and marketing | 12,619 | 8,825 | 39,602 | 36,114 | ||||||||||||
General and administrative | 7,176 | 4,683 | 21,563 | 18,215 | ||||||||||||
Total operating expenses | 36,560 | 25,505 | 121,842 | 103,539 | ||||||||||||
Income from operations | 54,393 | 50,680 | 136,222 | 114,772 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 765 | 397 | 2,439 | 1,208 | ||||||||||||
Interest expense | (4,529 | ) | (645 | ) | (17,466 | ) | (902 | ) | ||||||||
Gain (loss) on foreign currency, net | 113 | (284 | ) | 886 | (328 | ) | ||||||||||
Other income, net | 105 | 500 | 737 | 943 | ||||||||||||
Total other income (expense), net | (3,546 | ) | (32 | ) | (13,404 | ) | 921 | |||||||||
Income before provision for income taxes | 50,847 | 50,648 | 122,818 | 115,693 | ||||||||||||
Provision for income taxes | 21,984 | 10,797 | 34,318 | 27,025 | ||||||||||||
Net income | 28,863 | 39,851 | 88,500 | 88,668 | ||||||||||||
Cumulative dividends on convertible preferred stock | (1,273 | ) | (1,483 | ) | (5,674 | ) | (5,884 | ) | ||||||||
Dividends declared on convertible preferred stock | (23,430 | ) | (94,114 | ) | (70,977 | ) | (117,903 | ) | ||||||||
Net income (loss) attributable to common stockholders, basic and diluted |
$ | 4,160 | $ | (55,746 | ) | $ | 11,849 | $ | (35,119 | ) | ||||||
Net income (loss) per share: | ||||||||||||||||
Basic | $ | 0.10 | $ | (1.69 | ) | $ | 0.34 | $ | (1.07 | ) | ||||||
Diluted | $ | 0.08 | $ | (1.69 | ) | $ | 0.26 | $ | (1.07 | ) | ||||||
Weighted average shares used in computing net income (loss) per share: |
||||||||||||||||
Basic | 40,407 | 32,990 | 35,359 | 32,864 | ||||||||||||
Diluted | 50,236 | 32,990 | 44,972 | 32,864 | ||||||||||||
CASA SYSTEMS, INC. RECONCILIATION OF SELECTED GAAP AND NON-GAAP FINANCIAL MEASURES (unaudited) (in thousands, except percentages and per share amounts) |
||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Reconciliation of Net Income to Non-GAAP Net Income: | ||||||||||||||||
Net income | $ | 28,863 | $ | 39,851 | $ | 88,500 | $ | 88,668 | ||||||||
Stock-based compensation | 3,243 | 2,329 | 9,136 | 8,304 | ||||||||||||
Impact of the U.S. Tax Cuts and Jobs Act(1) | 37,052 | — | 37,052 | — | ||||||||||||
Tax effect of excluded items | (15,499 | ) | $ | (496 | ) | (16,650 | ) | (1,940 | ) | |||||||
Non-GAAP net income | $ | 53,659 | $ | 41,684 | $ | 118,038 | $ | 95,032 | ||||||||
Non-GAAP net income margin | 45.5 | % | 42.0 | % | 33.6 | % | 30.1 | % | ||||||||
Reconciliation of Diluted Net Income (Loss) Per Share Attributable to Common Stockholders to Non-GAAP Diluted Net Income Per Share |
||||||||||||||||
Diluted net income (loss) per share attributable to common stockholders |
$ | 0.08 | $ | (1.69 | ) | $ | 0.26 | $ | (1.07 | ) | ||||||
Cumulative dividends on convertible preferred stock | 0.03 | 0.04 | 0.13 | 0.18 | ||||||||||||
Dividends declared on convertible preferred stock | 0.47 | 2.85 | 1.58 | 3.59 | ||||||||||||
Non-GAAP adjustments to net income | 0.49 | 0.06 | 0.65 | 0.19 | ||||||||||||
Non-GAAP diluted net income per share | $ | 1.07 | $ | 1.26 | $ | 2.62 | $ | 2.89 | ||||||||
Weighted -average shares used in computing diluted non-GAAP net income per share |
50,236 | 32,990 | 44,972 | 32,864 | ||||||||||||
Reconciliation of Net Income to Adjusted EBITDA: | ||||||||||||||||
Net income | $ | 28,863 | $ | 39,851 | $ | 88,500 | $ | 88,668 | ||||||||
Stock-based compensation | 3,243 | 2,329 | 9,136 | 8,304 | ||||||||||||
Depreciation and amortization | 2,162 | 1,557 | 7,738 | 6,008 | ||||||||||||
Other income (expense), net | 3,546 | 32 | 13,404 | (921 | ) | |||||||||||
Provision for income taxes | 21,984 | 10,797 | 34,318 | 27,025 | ||||||||||||
Adjusted EBITDA | $ | 59,798 | $ | 54,566 | $ | 153,096 | $ | 129,084 | ||||||||
Adjusted EBITDA margin | 50.7 | % | 55.0 | % | 43.5 | % | 40.8 | % | ||||||||
Reconciliation of Net Cash Provided by (Used in) Operating Activities to Free Cash Flow: |
||||||||||||||||
Net cash provided by (used in) operating activities | $ | 45,954 | $ | (13,289 | ) | $ | 95,008 | $ | 110,780 | |||||||
Purchases of property and equipment | (2,311 | ) | (1,260 | ) | (7,014 | ) | (7,419 | ) | ||||||||
Free cash flow | $ | 43,643 | $ | (14,549 | ) | $ | 87,994 | $ | 103,361 | |||||||
Summary of Stock-Based Compensation Expense: | ||||||||||||||||
Cost of revenue | $ | 104 | $ | 59 | $ | 306 | $ | 237 | ||||||||
Research and development | 1,329 | 668 | 2,864 | 2,306 | ||||||||||||
Sales and marketing | 310 | 301 | 1,112 | 1,147 | ||||||||||||
General and administrative | 1,500 | 1,301 | 4,854 | 4,614 | ||||||||||||
Total | $ | 3,243 | $ | 2,329 | $ | 9,136 | $ | 8,304 | ||||||||
Summary of Revenue: | ||||||||||||||||
Sales of broadband products | $ | 56,347 | $ | 49,040 | $ | 198,147 | $ | 209,751 | ||||||||
Capacity expansions | 50,394 | 38,420 | 113,749 | 69,472 | ||||||||||||
Product | 106,741 | 87,460 | 311,896 | 279,223 | ||||||||||||
Service | 11,221 | 11,766 | 39,679 | 36,905 | ||||||||||||
Total revenue | $ | 117,962 | $ | 99,226 | $ | 351,575 | $ | 316,128 | ||||||||
|
(1) During the fiscal quarter ended
CASA SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) |
||||||||
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 260,820 | $ | 329,554 | ||||
Marketable securities | — | 14,392 | ||||||
Accounts receivable, net | 122,634 | 110,234 | ||||||
Inventory | 36,148 | 65,975 | ||||||
Prepaid expenses and other current assets | 5,151 | 7,178 | ||||||
Prepaid income taxes | 538 | 39 | ||||||
Total current assets | 425,291 | 527,372 | ||||||
Property and equipment, net | 29,363 | 25,682 | ||||||
Accounts receivable, net of current portion | 4,710 | 6,629 | ||||||
Deferred tax assets | 9,718 | 21,140 | ||||||
Deferred offering costs | — | 1,464 | ||||||
Other assets | 615 | 748 | ||||||
Total assets | $ | 469,697 | $ | 583,035 | ||||
Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 15,833 | $ | 21,704 | ||||
Accrued expenses and other current liabilities | 48,250 | 149,184 | ||||||
Accrued income taxes | 118 | 11,823 | ||||||
Deferred revenue | 34,224 | 55,876 | ||||||
Current portion of long-term debt, net of unamortized debt issuance costs | 2,156 | 2,133 | ||||||
Total current liabilities | 100,581 | 240,720 | ||||||
Accrued income taxes, net of current portion | 8,810 | 463 | ||||||
Deferred revenue, net of current portion | 14,691 | 18,458 | ||||||
Long-term debt, net of current portion and unamortized debt issuance costs | 295,459 | 297,618 | ||||||
Total liabilities | 419,541 | 557,259 | ||||||
Convertible preferred stock | — | 97,479 | ||||||
Stockholders’ equity (deficit): | ||||||||
Common stock | 81 | 33 | ||||||
Additional paid-in capital | 128,798 | — | ||||||
Accumulated other comprehensive income (loss) | 194 | (1,739 | ) | |||||
Accumulated deficit | (78,917 | ) | (69,997 | ) | ||||
Total stockholders’ equity (deficit) | 50,156 | (71,703 | ) | |||||
Total liabilities, convertible preferred stock and stockholders’ equity (deficit) | $ | 469,697 | $ | 583,035 | ||||
CASA SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited) (in thousands) |
||||||||
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 88,500 | $ | 88,668 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization | 7,738 | 6,008 | ||||||
Stock-based compensation | 9,136 | 8,304 | ||||||
Deferred income taxes | 11,422 | (6,860 | ) | |||||
Excess and obsolete inventory valuation adjustment | 4,115 | 1,674 | ||||||
Increase in provision for doubtful accounts | 6 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (25,726 | ) | (20,479 | ) | ||||
Inventory | 21,859 | (22,798 | ) | |||||
Prepaid expenses and other assets | 3,519 | (3,235 | ) | |||||
Prepaid income taxes | (486 | ) | 900 | |||||
Accounts payable | (6,475 | ) | 14,453 | |||||
Accrued expenses and other current liabilities | 10,243 | 19,965 | ||||||
Accrued income taxes | (3,212 | ) | 6,894 | |||||
Deferred revenue | (25,631 | ) | 17,286 | |||||
Net cash provided by operating activities | 95,008 | 110,780 | ||||||
Cash flows provided by (used in) investing activities: | ||||||||
Purchases of property and equipment | (7,014 | ) | (7,419 | ) | ||||
Purchases of marketable securities | — | (14,392 | ) | |||||
Proceeds from maturities of marketable securities | 14,589 | — | ||||||
Net cash provided by (used in) investing activities | 7,575 | (21,811 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from initial public offering, net of underwriting discounts and commissions | 83,421 | — | ||||||
Proceeds from issuance of debt, net of issuance costs | — | 292,189 | ||||||
Principal repayments of debt | (3,292 | ) | (282 | ) | ||||
Proceeds from exercise of stock options | 274 | 594 | ||||||
Payments of dividends and equitable adjustments | (246,634 | ) | (142,301 | ) | ||||
Payments of initial public offering costs | (2,384 | ) | (517 | ) | ||||
Employee taxes paid related to net share settlement of equity awards | (4,046 | ) | (315 | ) | ||||
Net cash (used in) provided by financing activities | (172,661 | ) | 149,368 | |||||
Effect of exchange rate changes on cash and cash equivalents | 1,344 | (1,279 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (68,734 | ) | 237,058 | |||||
Cash and cash equivalents at beginning of period | 329,554 | 92,496 | ||||||
Cash and cash equivalents at end of period | $ | 260,820 | $ | 329,554 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 16,275 | $ | 274 | ||||
Cash paid for income taxes | $ | 26,297 | $ | 25,179 | ||||
Supplemental disclosures of non-cash operating, investing and financing activities: |
||||||||
Purchases of property and equipment included in accounts payable | $ | 1,018 | $ | 869 | ||||
Prepaid expenses and other current assets included in accounts payable | $ | 1,394 | $ | 256 | ||||
Deferred offering costs included in accounts payable and accrued expenses and other current liabilities |
$ | 1,193 | $ | 947 | ||||
Unpaid dividends and equitable adjustments included in accrued expenses and other current liabilities |
$ | 10,661 | $ | 107,509 | ||||
Release of customer incentives included in accounts receivable and accrued expenses and other current liabilities |
$ | 15,444 | $ | 4,206 | ||||
Source: Casa Systems, Inc.