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casa-10q_20210630.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 June 30, 2021

☐	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 23, 2021, the registrant had 85,528,136 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 June 30, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Six months ended June 30, 2021 and 2020	4
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six months ended June 30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the Six months ended June 30, 2021 and 2020	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	37
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

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 communication 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 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 potential impact of the COVID-19 pandemic, which is highly uncertain and will depend on future developments on our business, our 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;

•

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;

•

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.

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,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	168,654		$	157,455
Accounts receivable, net of provision for doubtful accounts of $147 and $58 as of June 30, 2021 and December 31, 2020, respectively		65,570			94,124
Inventory		95,782			101,204
Prepaid expenses and other current assets		7,531			3,864
Prepaid income taxes		14,526			14,087
Total current assets		352,063			370,734
Property and equipment, net		25,471			28,880
Accounts receivable, net of current portion		65			143
Deferred tax assets		1,060			1,150
Goodwill		50,177			50,177
Intangible assets, net		34,171			35,844
Other assets		6,196			6,038
Total assets	$	469,203		$	492,966
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	26,299		$	41,203
Accrued expenses and other current liabilities		29,417			39,793
Accrued income taxes		3,821			7,463
Deferred revenue		20,224			15,531
Current portion of long-term debt, net of unamortized debt issuance costs		8,418			15,171
Total current liabilities		88,179			119,161
Accrued income taxes, net of current portion		9,921			9,520
Deferred tax liabilities		7,359			7,282
Deferred revenue, net of current portion		5,328			3,520
Long-term debt, net of current portion and unamortized debt issuance costs		275,153			276,085
Other liabilities, net of current portion		1,306			1,024
Total liabilities		387,246			416,592
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized as of June 30, 2021 and December 31, 2020; no shares issued and outstanding as of June 30, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value; 500,000 shares authorized; 87,116 and 85,329 shares issued as of June 30, 2021 and December 31, 2020, respectively; 85,394 and 83,607 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		87			85
Treasury stock, at cost; 1,722 shares		(4,826	)		(4,826	)
Additional paid-in capital		185,809			183,041
Accumulated other comprehensive income		594			337
Accumulated deficit		(99,707	)		(102,263	)
Total stockholders’ equity		81,957			76,374
Total liabilities and stockholders’ equity	$	469,203		$	492,966

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

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,
	2021			2020			2021			2020
Revenue:
Product	$	80,469		$	72,128		$	174,267		$	145,886
Service		12,261			11,222			22,740			21,087
Total revenue		92,730			83,350			197,007			166,973
Cost of revenue:
Product		46,117			39,011			93,143			78,655
Service		1,098			1,209			2,309			2,535
Total cost of revenue		47,215			40,220			95,452			81,190
Gross profit		45,515			43,130			101,555			85,783
Operating expenses:
Research and development		20,295			20,688			41,901			41,899
Selling, general and administrative		21,583			21,110			43,463			46,101
Total operating expenses		41,878			41,798			85,364			88,000
Income (loss) from operations		3,637			1,332			16,191			(2,217	)
Other income (expense):
Interest income		103			271			217			677
Interest expense		(3,999	)		(4,307	)		(7,917	)		(8,935	)
(Loss) gain on foreign currency, net		(231	)		528			(978	)		680
Other income, net		479			35			551			97
Total other income (expense), net		(3,648	)		(3,473	)		(8,127	)		(7,481	)
(Loss) income before provision for (benefit from) income taxes		(11	)		(2,141	)		8,064			(9,698	)
Provision for (benefit from) income taxes		3,182			887			5,508			(7,832	)
Net (loss) income		(3,193	)		(3,028	)		2,556			(1,866	)
Other comprehensive (loss) income—foreign currency translation adjustment, net of tax		593			99			257			(418	)
Other comprehensive (loss) income—gain on foreign currency hedge, net of tax		—			171			—			527
Comprehensive (loss) income	$	(2,600	)	$	(2,758	)	$	2,813		$	(1,757	)
Net (loss) income attributable to common stockholders:
Basic and diluted	$	(3,193	)	$	(3,028	)	$	2,556		$	(1,866	)
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.04	)	$	(0.04	)	$	0.03		$	(0.02	)
Diluted	$	(0.04	)	$	(0.04	)	$	0.03		$	(0.02	)
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders:
Basic		85,036			83,068			84,641			83,505
Diluted		85,036			83,068			89,013			83,505

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

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			Income		Deficit			Equity
Balances at March 31, 2021		86,502	$	86		1,722	$	(4,826	)	$	182,088		$	1	$	(96,514	)	$	80,835
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		614		1		—		—			(432	)		—		—			(431	)
Foreign currency translation adjustment		—		—		—		—			—			593		—			593
Stock-based compensation		—		—		—		—			4,153			—		—			4,153
Net loss		—		—		—		—			—			—		(3,193	)		(3,193	)
Balances at June 30, 2021		87,116	$	87		1,722	$	(4,826	)	$	185,809		$	594	$	(99,707	)	$	81,957

	Common Stock				Treasury Stock					Additional Paid-in			Accumulated Other Comprehensive		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount			Capital			Income		Deficit			Equity
Balances at January 1, 2021		85,329	$	85		1,722	$	(4,826	)	$	183,041		$	337	$	(102,263	)	$	76,374
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		1,787		2		—		—			(4,490	)		—		—			(4,488	)
Foreign currency translation adjustment		—		—		—		—			—			257		—			257
Stock-based compensation		—		—		—		—			7,258			—		—			7,258
Net income		—		—		—		—			—			—		2,556			2,556
Balances at June 30, 2021		87,116	$	87		1,722	$	(4,826	)	$	185,809		$	594	$	(99,707	)	$	81,957

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

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(in thousands)

(Unaudited)

Common Stock

Treasury Stock

Additional

Paid-in

Accumulated

Other

Comprehensive

Accumulated

Total

Stockholders’

Amount

Capital

Loss

Deficit

Equity

Balances at March 31, 2020

84,726

1,711

(4,793

)

171,914