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casa-10q_20210930.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, 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 October 26, 2021, the registrant had 86,006,357 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, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine months ended September 30, 2021 and 2020	4
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine months ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the Nine months ended September 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	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	40
PART II.	OTHER INFORMATION	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	44
Signatures		45

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 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;

•

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)

	September 30,			December 31,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	156,460		$	157,455
Accounts receivable, net of provision for doubtful accounts of $121 and $58 as of September 30, 2021 and December 31, 2020, respectively		80,863			94,124
Inventory		91,853			101,204
Prepaid expenses and other current assets		4,485			3,864
Prepaid income taxes		19,956			14,087
Total current assets		353,617			370,734
Property and equipment, net		24,647			28,880
Accounts receivable, net of current portion		—			143
Deferred tax assets		1,704			1,150
Goodwill		50,177			50,177
Intangible assets, net		32,661			35,844
Other assets		7,435			6,038
Total assets	$	470,241		$	492,966
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	22,841		$	41,203
Accrued expenses and other current liabilities		33,368			39,793
Accrued income taxes		4,020			7,463
Deferred revenue		15,857			15,531
Current portion of long-term debt, net of unamortized debt issuance costs		8,421			15,171
Total current liabilities		84,507			119,161
Accrued income taxes, net of current portion		11,359			9,520
Deferred tax liabilities		6,504			7,282
Deferred revenue, net of current portion		5,072			3,520
Long-term debt, net of current portion and unamortized debt issuance costs		274,672			276,085
Other liabilities, net of current portion		1,582			1,024
Total liabilities		383,696			416,592
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized as of September 30, 2021 and December 31, 2020; no shares issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value; 500,000 shares authorized; 87,678 and 85,329 shares issued as of September 30, 2021 and December 31, 2020, respectively; 85,956 and 83,607 shares outstanding as of September 30, 2021 and December 31, 2020, respectively		88			85
Treasury stock, at cost; 1,722 shares		(4,826	)		(4,826	)
Additional paid-in capital		191,399			183,041
Accumulated other comprehensive income		467			337
Accumulated deficit		(100,583	)		(102,263	)
Total stockholders’ equity		86,545			76,374
Total liabilities and stockholders’ equity	$	470,241		$	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 September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue:
Product	$	87,752		$	93,741		$	262,019		$	239,627
Service		11,467			12,006			34,207			33,093
Total revenue		99,219			105,747			296,226			272,720
Cost of revenue:
Product		57,372			51,947			150,515			130,602
Service		1,223			1,206			3,532			3,741
Total cost of revenue		58,595			53,153			154,047			134,343
Gross profit		40,624			52,594			142,179			138,377
Operating expenses:
Research and development		21,578			21,823			63,479			63,722
Selling, general and administrative		21,029			21,630			64,492			67,731
Total operating expenses		42,607			43,453			127,971			131,453
(Loss) income from operations		(1,983	)		9,141			14,208			6,924
Other income (expense):
Interest income		80			170			297			847
Interest expense		(3,969	)		(3,771	)		(11,886	)		(12,706	)
(Loss) gain on foreign currency, net		(375	)		(6	)		(1,353	)		674
Other income, net		83			338			634			435
Total other income (expense), net		(4,181	)		(3,269	)		(12,308	)		(10,750	)
(Loss) income before (benefit from) provision for income taxes		(6,164	)		5,872			1,900			(3,826	)
(Benefit from) provision for income taxes		(5,288	)		2,399			220			(5,433	)
Net (loss) income		(876	)		3,473			1,680			1,607
Other comprehensive (loss) income—foreign currency translation adjustment, net of tax		(127	)		1,334			130			916
Other comprehensive loss—gain on foreign currency hedge net of tax		—			(527	)		—			—
Comprehensive (loss) income	$	(1,003	)	$	4,280		$	1,810		$	2,523
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.01	)	$	0.04		$	0.02		$	0.02
Diluted	$	(0.01	)	$	0.04		$	0.02		$	0.02
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders:
Basic		85,660			83,302			84,985			83,437
Diluted		85,660			85,466			88,948			85,370

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 June 30, 2021		87,116	$	87		1,722	$	(4,826	)	$	185,809	$	594		$	(99,707	)	$	81,957
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		562		1		—		—			1,704		—			—			1,705
Foreign currency translation adjustment		—		—		—		—			—		(127	)		—			(127	)
Stock-based compensation		—		—		—		—			3,886		—			—			3,886
Net loss		—		—		—		—			—		—			(876	)		(876	)
Balances at September 30, 2021		87,678	$	88		1,722	$	(4,826	)	$	191,399	$	467		$	(100,583	)	$	86,545

	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		2,349		3		—		—			(2,787	)		—		—			(2,784	)
Foreign currency translation adjustment		—		—		—		—			—			130		—			130
Stock-based compensation		—		—		—		—			11,145			—		—			11,145
Net income		—		—		—		—			—			—		1,680			1,680
Balances at September 30, 2021		87,678	$	88		1,722	$	(4,826	)	$	191,399		$	467	$	(100,583	)	$	86,545

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’
	Shares		Amount		Shares		Amount			Capital		Loss			Deficit			Equity
Balances at June 30, 2020		84,856	$	85		1,722	$	(4,826	)	$	175,496	$	(2,113	)	$	(128,930	)	$	39,712
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		389		—		<