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10-Q

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, 2022


☐	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(s)	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 22, 2022, the registrant had 94,412,431 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, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6.	Exhibits	41
Signatures		42

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 communications 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 operating 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 ongoing COVID-19 pandemic, which is highly uncertain and will depend on future developments on our business, our suppliers, our logistics 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 United States, or 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;

•

increases or decreases in our expenses caused by fluctuations in interest rates;

•

the costs and possible outcomes of any contingent liabilities, as well as 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,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	195,832		$	154,703
Accounts receivable, net of provision for doubtful accounts of $269 and $117 as of June 30, 2022 and December 31, 2021, respectively(1)		67,767			85,774
Inventory		78,300			84,828
Prepaid expenses and other current assets		4,681			5,746
Prepaid income taxes		2,510			23,963
Total current assets		349,090			355,014
Property and equipment, net		21,235			23,508
Accounts receivable, net of current portion		57			115
Deferred tax assets		9			101
Goodwill		50,177			50,177
Intangible assets, net		28,556			31,144
Other assets		8,459			8,648
Total assets	$	457,583		$	468,707
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,946		$	28,087
Accrued expenses and other current liabilities		29,651			41,382
Accrued income taxes		8,443			4,991
Deferred revenue(2)		38,334			14,473
Current portion of long-term debt, net of unamortized debt issuance costs		1,959			1,924
Total current liabilities		92,333			90,857
Accrued income taxes, net of current portion		8,117			7,732
Deferred tax liabilities		2,979			5,293
Deferred revenue, net of current portion		6,084			7,012
Long-term debt, net of current portion and unamortized debt issuance costs		273,194			274,193
Other liabilities, net of current portion		1,714			1,701
Total liabilities		384,421			386,788
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized as of June 30, 2022 and December 31, 2021; no shares issued and outstanding as of June 30, 2022 and December 31, 2021		—			—
Common stock, $0.001 par value; 500,000 shares authorized; 98,009 and 87,815 shares issued as of June 30, 2022 and December 31, 2021, respectively; 94,413 and 84,422 shares outstanding as of June 30, 2022 and December 31, 2021, respectively		98			88
Treasury stock, at cost; 3,597 and 3,393 shares as of June 30, 2022 and December 31, 2021, respectively		(14,837	)		(13,645	)
Additional paid-in capital		237,306			193,654
Accumulated other comprehensive (loss) income		(1,068	)		878
Accumulated deficit		(148,337	)		(99,056	)
Total stockholders’ equity		73,162			81,919
Total liabilities and stockholders’ equity	$	457,583		$	468,707

(1) Includes accounts receivable due from a related party of $26,213 at June 30, 2022 (see Note 15)

(2) Includes deferred revenue associated with a related party of $18,289 at June 30, 2022 (see Note 15)

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,
	2022			2021			2022			2021
Revenue:
Product	$	59,141		$	80,469		$	111,686		$	174,267
Service		11,695			12,261			23,549			22,740
Total revenue(1)		70,836			92,730			135,235			197,007
Cost of revenue:
Product		42,882			46,117			79,110			93,143
Service		1,319			1,098			2,811			2,309
Total cost of revenue		44,201			47,215			81,921			95,452
Gross profit		26,635			45,515			53,314			101,555
Operating expenses:
Research and development		22,813			20,295			45,486			41,901
Selling, general and administrative		21,970			21,583			44,299			43,463
Total operating expenses		44,783			41,878			89,785			85,364
(Loss) income from operations		(18,148	)		3,637			(36,471	)		16,191
Other income (expense):
Interest income		274			103			308			217
Interest expense		(3,820	)		(3,999	)		(7,508	)		(7,917	)
Gain (loss) on foreign currency, net		816			(231	)		543			(978	)
Other income, net		161			479			179			551
Total other expense, net		(2,569	)		(3,648	)		(6,478	)		(8,127	)
(Loss) income before (benefit from) provision for income taxes		(20,717	)		(11	)		(42,949	)		8,064
(Benefit from) provision for income taxes		(4,020	)		3,182			6,332			5,508
Net (loss) income		(16,697	)		(3,193	)		(49,281	)		2,556
Other comprehensive (loss) income —foreign currency translation adjustment, net of tax		(2,065	)		593			(1,946	)		257
Comprehensive (loss) income	$	(18,762	)	$	(2,600	)	$	(51,227	)	$	2,813
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.18	)	$	(0.04	)	$	(0.56	)	$	0.03
Diluted	$	(0.18	)	$	(0.04	)	$	(0.56	)	$	0.03
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders:
Basic		92,504			85,036			88,565			84,641
Diluted		92,504			85,036			88,565			89,013

(1) Includes revenue during which a related party relationship existed of $10,550 during the three months ended June 30, 2022 (see Note 15)

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 (Loss)			Deficit			Equity
Balances at March 31, 2022		88,452	$	88		3,597	$	(14,837	)	$	194,973	$	997		$	(131,640	)	$	49,581
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		234		1		—		—			37		—			—			38
Foreign currency translation adjustment		—		—		—		—			—		(2,065	)		—			(2,065	)
Sale of common stock, net of issuance costs		9,323		9		—		—			39,361		—			—			39,370
Stock-based compensation		—		—		—		—			2,935		—			—			2,935
Net loss		—		—		—		—			—		—			(16,697	)		(16,697	)
Balances at June 30, 2022		98,009	$	98		3,597	$	(14,837	)	$	237,306	$	(1,068	)	$	(148,337	)	$	73,162


	Common Stock				Treasury Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount			Capital			Income (Loss)			Deficit			Equity
Balances at January 1, 2022		87,815	$	88		3,393	$	(13,645	)	$	193,654		$	878		$	(99,056	)	$	81,919
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		871		1		—		—			(1,375	)		—			—			(1,374	)
Foreign currency translation adjustment		—		—		—		—			—			(1,946	)		—			(1,946	)
Repurchases of treasury shares		—		—		204		(1,192	)		—			—			—			(1,192	)
Sale of common stock, net of issuance costs		9,323		9		—		—			39,361			—			—			39,370
Stock-based compensation		—		—		—		—			5,666						—			5,666
Net loss		—		—		—		—			—			—			(49,281	)		(49,281	)
Balances at June 30, 2022		98,009	$	98		3,597	$	(14,837	)	$	237,306		$	(1,068	)	$	(148,337	)	$	73,162

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

Income