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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 September 30, 2023


☐	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 November 2, 2023, the registrant had 99,108,998 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, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Stockholders' (Deficit) Equity for the Three and Nine Months Ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 6.	Exhibits	51
	Signatures	52

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:

•

the sufficiency of our cash resources and needs for additional financing;

•

our ability 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;

•

we have been notified by The Nasdaq Stock Market LLC, or Nasdaq, of our failure to comply with certain continued listing requirements and, if we are unable to regain compliance with all applicable continued listing requirements and standards of Nasdaq, our common stock could be delisted from Nasdaq, which would have an adverse impact on the trading, liquidity, and market price of our common stock;

•

our ability to anticipate technological shifts;

•

our ability to generate positive returns on our research and development;

•

changes in the rate at which communications service providers or CSPs, deploy and invest 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 return to operating profitability in the future;

•

our ability to comply with all covenants, agreements and conditions under our credit facility, including, without limitation, our monthly minimum liquidity covenant;

•

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 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 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 interest rates and foreign currency exchange rates;

•

impact of inflation and actions taken by central banks to counter inflation;

•

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, including new macro-economic recession concerns, a potential economic downturn, banking industry liquidity concerns, or inflationary conditions;

•

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,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	47,925		$	126,312
Accounts receivable, net of provision for doubtful accounts of $152 and $636 as of September 30, 2023 and December 31, 2022, respectively(1)		37,360			74,484
Inventory		77,206			81,795
Prepaid expenses and other current assets		4,171			2,836
Prepaid income taxes		3,022			6,352
Total current assets		169,684			291,779
Property and equipment, net		6,427			19,518
Right-of-use assets		3,674			5,199
Goodwill		50,177			50,177
Intangible assets, net		21,316			25,759
Noncurrent assets held for sale		6,146			—
Other assets		5,092			5,862
Total assets	$	262,516		$	398,294
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	21,891		$	29,283
Accrued expenses and other current liabilities		30,629			31,825
Warrant liability		11,218			—
Accrued income taxes		1,011			4,298
Deferred revenue(2)		41,859			31,305
Lease liability		1,446			2,040
Current portion of long-term debt, net of unamortized debt issuance costs		6,378			225,161
Total current liabilities		114,432			323,912
Accrued income taxes, net of current portion		6,509			6,640
Deferred tax liabilities		1,488			1,490
Deferred revenue, net of current portion		4,361			5,529
Long-term debt, net of current portion and unamortized debt issuance costs		175,104			—
Warrant liability, net of current portion		4,118			—
Lease liability, net of current portion		2,416			3,416
Other liabilities, net of current portion		7,513			7,906
Total liabilities		315,941			348,893
Commitments and contingencies (Note 18)
Stockholders’ (deficit) equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding as of September 30, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value; 500,000 shares authorized; 102,321 and 98,262 shares issued as of September 30, 2023 and December 31, 2022, respectively; 98,724 and 94,665 shares outstanding as of September 30, 2023 and December 31, 2022, respectively		102			98
Treasury stock, at cost; 3,597 shares as of September 30, 2023 and December 31, 2022		(14,837	)		(14,837	)
Additional paid-in capital		251,140			244,675
Accumulated other comprehensive loss		(3,188	)		(2,305	)
Accumulated deficit		(286,642	)		(178,230	)
Total stockholders’ (deficit) equity		(53,425	)		49,401
Total liabilities and stockholders’ (deficit) equity	$	262,516		$	398,294

(1) Includes accounts receivable due from a related party of $1,289 and $6,044 at September 30, 2023 and December 31, 2022, respectively (see Note 16)

(2) Includes deferred revenue associated with a related party of $27,200 and $18,094 at September 30, 2023 and December 31, 2022, respectively (see Note 16)

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

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue:
Product	$	49,736		$	55,435		$	130,972		$	167,121
Service		12,353			11,464			34,417			35,013
Total revenue(1)		62,089			66,899			165,389			202,134
Cost of revenue:
Product		35,131			38,421			94,155			117,531
Service		1,067			1,195			3,372			4,006
Warranty settlement provision		—			12,907			—			12,907
Total cost of revenue		36,198			52,523			97,527			134,444
Gross profit		25,891			14,376			67,862			67,690
Operating expenses:
Research and development		17,121			22,059			57,947			67,545
Selling, general and administrative		27,174			22,442			72,616			66,741
Total operating expenses		44,295			44,501			130,563			134,286
Loss from operations		(18,404	)		(30,125	)		(62,701	)		(66,596	)
Other income (expense):
Interest income		612			810			2,431			1,118
Interest expense		(10,712	)		(4,762	)		(21,896	)		(12,270	)
Loss on extinguishment of debt(2)		—			—			(28,822	)		—
Revaluation of warrant liability		3,795			—			3,795			—
(Loss) gain on foreign currency, net		(160	)		1,546			228			2,089
Other income, net		47			106			657			285
Total other expense, net		(6,418	)		(2,300	)		(43,607	)		(8,778	)
Loss before provision for (benefit from) income taxes		(24,822	)		(32,425	)		(106,308	)		(75,374	)
Provision for (benefit from) income taxes		796			(1,261	)		2,104			5,071
Net loss		(25,618	)		(31,164	)		(108,412	)		(80,445	)
Other comprehensive loss —foreign currency translation adjustment, net of tax		(251	)		(2,737	)		(883	)		(4,683	)
Comprehensive loss	$	(25,869	)	$	(33,901	)	$	(109,295	)	$	(85,128	)
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.26	)	$	(0.33	)	$	(1.12	)	$	(0.89	)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic and diluted		97,488			94,512			96,705			90,569

(1) Includes revenue of $16,037 and $23,321 during the three and nine months ended September 30, 2023 and $3,041 and $13,591 during the three and nine months ended September 30, 2022, during which a related party relationship existed (see Note 16)

(2) Loss related to Term Loan B refinancing and issuance of warrants during the nine months ended September 30, 2023 (see Note 10)

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

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(in thousands)

(Unaudited)


	Common Stock				Treasury Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Deficit
Balances at June 30, 2023		100,610	$	101		3,597	$	(14,837	)	$	247,609		$	(2,937	)	$	(261,024	)	$	(31,088	)
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		419		—		—		—			(215	)		—			—			(215	)
Common stock issued for exercise of warrants		1,292		1		—		—			1,173			—			—			1,174
Foreign currency translation adjustment		—		—		—		—			—			(251	)		—			(251	)
Stock-based compensation		—		—		—		—			2,573			—			—			2,573
Net loss		—		—		—		—			—			—			(25,618	)		(25,618	)
Balances at September 30, 2023		102,321	$	102		3,597	$	(14,837	)	$	251,140		$	(3,188	)	$	(286,642	)	$	(53,425	)


	Common Stock				Treasury Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity (Deficit)
Balances at January 1, 2023		98,262	$	98		3,597	$	(14,837	)	$	244,675		$	(2,305	)	$	(178,230	)	$	49,401
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		2,767		3		—		—			(3,210	)		—			—			(3,207	)
Common stock issued for exercise of warrants		1,292		1		—		—			1,173			—			—			1,174
Foreign currency translation adjustment		—		—		—		—			—			(883	)		—			(883	)
Stock-based compensation		—		—		—		—			8,502			—			—			8,502
Net loss		—		—		—		—			—			—			(108,412	)		(108,412	)
Balances at September 30, 2023		102,321	$	102		3,597	$	(14,837	)	$	251,140		$	(3,188	)	$	(286,642	)	$	(53,425	)

CASA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) 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, 2022		98,009	$	98		3,597	$	(14,837	)	$	237,306		$	(1,068	)	$	(148,337	)	$	73,162
Exercise of stock options and common stock issued upon vesting of equity awards, net of shares withheld for employee taxes		203		—		—		—			(398	)		—			—			(398	)
Foreign currency translation adjustment		—		—		—		—			—			(2,737	)		30			(2,707	)
Stock-based compensation		—		—		—		—			3,671