Casa Systems Reports Second Quarter 2022 Financial Results


Verizon Multi-Year Agreement Progressing on Schedule

5G Cloud-Native Solutions Gain Additional Traction with Tier 1 CSPs

Strong Bookings and Billings During Quarter

Revenue up 10% Sequentially Over Q1

Backlog and Deferred Revenue Continues to Grow

ANDOVER, Mass., Aug. 04, 2022 (GLOBE NEWSWIRE) — Casa Systems, Inc. (Nasdaq: CASA), a leading provider of cloud-native software and physical broadband technology solutions for wireless, cable and fixed networks, today announced its financial results for its second quarter ended June 30, 2022.

Second Quarter 2022 Financial & Operational Highlights

  • Revenue of $70.8 million
  • Gross margin of 37.6%
  • GAAP net loss of $(16.7) million
  • Non-GAAP net loss of $(13.5) million
  • GAAP net loss per fully diluted share of $(0.18)
  • Non-GAAP net loss per fully diluted share of $(0.15)
  • Adjusted EBITDA of $(11.7) million
  • Positive Operating Cash Flows of $9.6 million for the first half of 2022
  • Cash and Cash Equivalents of $195.8 million at quarter end

“We were able to successfully continue our positive trajectory for Casa’s cloud-native solutions during the quarter, although supply chain constraints continued to weigh on our second quarter financial performance,” said Jerry Guo, Casa Systems’ President and Chief Executive Officer. “Our position as an industry leader in cloud-native technology continued to grow during the second quarter following the announcement of our multi-year partnership with Verizon to provide our 5G Core Network Functions to power their Mobile Edge Computing service offering. We provided further proof of our progress with the signed MoU with Vietnam Posts and Telecommunications Group to pave the way for next generation 5G services in Vietnam, and our partnership with YTL Communications to deploy our Ayxom 5G Core solution to power the company’s 5G network and accelerate digital transformation across Malaysia. Casa Systems continues to remain focused on achieving our transformation goals as we transition to cloud-native solutions.”

Edward Durkin, Casa Systems’ Chief Financial Officer, said, “During the second quarter, Casa continued to face a difficult supply chain environment that limited our ability to fulfill orders, which impacted our top- and bottom-line results. We remain very optimistic moving forward, as our bookings and billings during the second quarter of 2022 were very strong, and our backlog and deferred revenue continue to grow. We are also seeing increased demand for key product offerings, most notably for our high margin cloud-native software solutions, for which we have several new Tier 1 CSP prospects. We regard this as a good leading indicator. Our balance sheet also remains strong, including a healthy cash balance to help us navigate any headwinds while we execute on our multi-year transformation.”

Financial Outlook

Due to various uncertainties, including most significantly supply chain challenges and its potential impact on 2022 revenue, Casa Systems suspended its prior full year 2022 guidance indefinitely in May 2022.  Any prior guidance should no longer be relied upon.

Conference Call Information

Casa Systems is hosting a conference call for analysts and investors to discuss its financial results for the second quarter ended June 30, 2022, and its business outlook at 5:00 p.m. Eastern Time today, August 4, 2022. The conference call can be heard via webcast in the investor relations section its website at http://investors.casa-systems.com, or by dialing 877-407-4019 in the United States or 201-689-8337 from international locations with Conference ID 13731317. Shortly after the conclusion of the conference call, a replay of the audio webcast will be available in the investor relations section of Casa Systems’ website for 90 days after the event.

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 the projected results of operations and financial position of Casa Systems, Inc. (“Casa Systems” or “Casa” or the “Company” or “we”), including financial targets, business strategy, and plans and objectives for future operations, are forward-looking statements. The words “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “target”, “should”, “would”, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements on our estimates and assumptions of our financial results and our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs as of the date of this press release. A number of important risk factors could cause actual results to differ materially from the results described, implied or projected in these forward-looking statements. These factors include, without limitation: (1) 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, including the impacts of the ongoing COVID-19 pandemic; (2) any failure by us to successfully anticipate technological shifts, market needs and opportunities, and develop new products and product enhancements that meet those technological shifts, needs and opportunities; (3) the concentration of a substantial portion of our revenue in certain customers; (4) fluctuations in our revenue due to timing of large orders and seasonality; (5) the length and lack of predictability of our sales cycle; (6) any difficulties we may face in expanding our platform into the wireless market; (7) any failure to maintain the synergies we have realized from our acquisition of NetComm; (8) increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates and interest rates; and (9) other factors discussed in the “Risk Factors” section of our public reports filed with the Securities and Exchange Commission (the “SEC”), including our most recent Quarterly Report on Form 10-Q and our most recent Annual Report on Form 10-K, which are on file with the SEC and available in the investor relations section of our website at http://investors.casa-systems.com and on the SEC’s website at www.sec.gov. In addition, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements that we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this press release are inherently uncertain and may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely upon forward-looking statements as predictions of future events. We disclaim any obligation to update publicly or revise any forward-looking statements for any reason after the date of this press release. Any reference to our website address in this press release is intended to be an inactive textual reference only and not an active hyperlink.

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 (loss) income as reported in our condensed consolidated statements of operations, excluding the impact of stock-based compensation expense and amortization of acquired intangible assets, which are non-cash charges; and the tax effect on these excluded items. We believe that excluding amortization expense of acquired intangible assets results in more useful disclosure to investors and others as it is a significant non-cash charge related to an event that is generally infrequent based on our historical activities. We further note that while amortization of acquired intangible assets is excluded from the measures, the revenue of the acquired company is reflected in the measures and the acquired assets contribute to revenue generation. The tax effect of the excluded items was calculated based on specific calculations of each item’s effect on the tax provision. We believe that excluding these discrete tax benefits from our effective income tax rate results in more useful disclosure to investors and others regarding income tax effects of excluded items as these amounts may vary from period to period independent of the operating performance of our business. We define non-GAAP diluted net income per share as diluted net (loss) income per share reported in our condensed consolidated statements of operations, excluding the impact of items that we exclude in calculating non-GAAP net income. We have presented non-GAAP net income and non-GAAP diluted net income per share because they are key measures 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. The presentation of non-GAAP net income and non-GAAP diluted net income per share also allows our management and board of directors to make additional comparisons of our results of operations to other companies in our industry.

Adjusted EBITDA. We define adjusted EBITDA as our net (loss) income, excluding the impact of stock-based compensation expense; other income (expense), net; depreciation and amortization expense; and our (benefit from) 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, by excluding the impact of these expenses, 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, equipment and software licenses, 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 to 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 and enhance 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:

  • each of non-GAAP net income, non-GAAP diluted net income per share and adjusted EBITDA exclude stock-based compensation expense and amortization of acquired intangible assets because they have recently been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business;
     
  • 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;
     
  • adjusted EBITDA does not reflect foreign currency transaction gains and losses, 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 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 or report 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 Casa Systems, Inc.

Casa Systems, Inc. (Nasdaq: CASA) delivers the core-to-customer building blocks to speed 5G transformation with future-proof solutions and cutting-edge bandwidth for all access types. In today’s increasingly personalized world, Casa Systems creates disruptive architectures built specifically to meet the needs of service provider networks.  Our suite of open, cloud-native network solutions unlocks new ways for service providers to build networks without boundaries and maximize revenue-generating capabilities. Commercially deployed in more than 70 countries, Casa Systems serves over 475 Tier 1 and regional communications service providers worldwide. For more information, visit http://www.casa-systems.com.

CONTACT INFORMATION:
IR Contact
Michael Picariello
978-688-6706
investorrelations@casa-systems.com

Michael Cummings
617-982-0475
investorrelations@casa-systems.com

Source: Casa Systems

CASA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(unaudited)
(in thousands, except per share amounts)

  Three Months Ended June 30,     Six Months Ended June 30,  
  2022     2021     2022     2021  
Revenue $ 70,836     $ 92,730     $ 135,235     $ 197,007  
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  
                       
Net (loss) income per share:                      
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:                      
Basic   92,504       85,036       88,565       84,641  
Diluted   92,504       85,036       88,565       89,013  

CASA SYSTEMS, INC.
RECONCILIATION OF SELECTED GAAP AND NON-GAAP FINANCIAL MEASURES
(unaudited)
(in thousands)

  Three Months Ended June 30,     Six Months Ended June 30,  
  2022     2021     2022     2021  
Reconciliation of Net (Loss) Income to Non-GAAP Net (Loss) Income:                      
Net (loss) income $ (16,697 )   $ (3,193 )   $ (49,281 )   $ 2,556  
Stock-based compensation   2,879       4,094       5,507       7,547  
Amortization of acquired intangible assets   1,426       1,426       2,852       2,852  
Tax effect of excluded items   (1,091 )     (1,370 )     (2,123 )     (2,592 )
Non-GAAP net (loss) income $ (13,483 )   $ 957     $ (43,045 )   $ 10,363  
Non-GAAP net (loss) income margin   (19.0 )%     1.0 %     (31.8 )%     5.3 %
                       
Reconciliation of Diluted Net (Loss) Income Per Share to Non-GAAP Diluted Net (Loss) Income Per Share:                      
Diluted net (loss) income per share $ (0.18 )   $ (0.04 )   $ (0.56 )   $ 0.03  
Non-GAAP adjustments to net (loss) income   0.03       0.05       0.07       0.09  
Non-GAAP diluted net (loss) income per share $ (0.15 )   $ 0.01     $ (0.49 )   $ 0.12  
Weighted-average shares used in computing diluted net (loss) income per share   92,504       85,036       88,565       89,013  
                       
Reconciliation of Net (Loss) Income to Adjusted EBITDA:                      
Net (loss) income $ (16,697 )   $ (3,193 )   $ (49,281 )   $ 2,556  
Stock-based compensation   2,879       4,094       5,507       7,547  
Amortization of acquired intangible assets   1,426       1,426       2,852       2,852  
Depreciation and amortization   2,099       2,580       4,288       5,345  
Other income (expense)   2,569       3,648       6,478       8,127  
Benefit from (provision for) income taxes   (4,020 )     3,182       6,332       5,508  
Adjusted EBITDA $ (11,744 )   $ 11,737     $ (23,824 )   $ 31,935  
Adjusted EBITDA margin   (16.6 )%     12.7 %     (17.6 )%     16.2 %

CASA SYSTEMS, INC.
RECONCILIATION OF SELECTED GAAP AND NON-GAAP FINANCIAL MEASURES
(unaudited)
(in thousands)

  Three Months Ended June 30,     Six Months Ended June 30,  
  2022     2021     2022     2021  
Reconciliation of Net Cash Provided by (Used in) Operating Activities to Free Cash Flow:                      
Net cash (used in) provided by operating activities $ (8,487 )   $ 31,870     $ 9,610     $ 26,715  
Purchases of property and equipment and software licenses   (1,144 )     (662 )     (2,110 )     (2,914 )
Free cash flow $ (9,631 )   $ 31,208     $ 7,500     $ 23,801  
                       
Summary of Stock-Based Compensation Expense:                      
Cost of revenue $ 26     $ 33     $ 61     $ 66  
Research and development   694       543       1,289       1,414  
Selling, general and administrative   2,159       3,518       4,157       6,067  
Total $ 2,879     $ 4,094     $ 5,507     $ 7,547  
                       
Summary of Revenue:                      
Product revenue:                      
Wireless   27,100       33,323       48,156       73,011  
Fixed telco   15,939       16,137       27,654       31,022  
Cable   16,102       31,009       35,876       70,234  
Product revenue $ 59,141     $ 80,469     $ 111,686     $ 174,267  
Service revenue:                      
Wireless   1,410       1,684       2,885       2,275  
Fixed telco   1,187       1,043       2,711       2,649  
Cable   9,098       9,534       17,953       17,816  
Service revenue $ 11,695     $ 12,261     $ 23,549     $ 22,740  
Total revenue $ 70,836     $ 92,730     $ 135,235     $ 197,007  

CASA SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)

  June 30,     December 31,  
  2022     2021  
Assets          
Current assets:          
Cash and cash equivalents $ 195,832     $ 154,703  
Accounts receivable, net   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   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  
           
Stockholders’ equity:          
Common stock   98       88  
Treasury Stock   (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  

CASA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 (in thousands)

  Six Months Ended June 30,  
  2022     2021  
Operating activities:          
Net (loss) income $ (49,281 )   $ 2,556  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:          
Depreciation and amortization   7,140       8,197  
Stock-based compensation   5,507       7,547  
Deferred income taxes   (2,210 )     173  
Change in provision for doubtful accounts   152       89  
Change in provision for excess and obsolete inventory   4,230       (6 )
Gain on disposal of assets         4  
Changes in operating assets and liabilities:          
Accounts receivable   17,585       28,433  
Inventory   2,249       5,372  
Prepaid expenses and other assets   1,226       (3,792 )
Prepaid income taxes   21,441       (441 )
Accounts payable   (13,865 )     (14,456 )
Accrued expenses and other current liabilities   (11,375 )     (10,210 )
Accrued income taxes   3,839       (3,240 )
Deferred revenue   22,972       6,489  
Net cash provided by operating activities   9,610       26,715  
Investing activities:          
Purchases of property and equipment   (1,597 )     (1,514 )
Purchases of software licenses   (513 )     (1,400 )
Net cash used in investing activities   (2,110 )     (2,914 )
Financing activities:          
Principal repayments of debt   (1,500 )     (8,275 )
Proceeds from exercise of stock options   254       1,187  
Employee taxes paid related to net share settlement of equity awards   (1,628 )     (5,675 )
Proceeds from sale of common stock, net of issuance costs   39,370        
Payments of dividends and equitable adjustments   (1 )     (59 )
Repurchases of common stock   (1,192 )      
Net cash provided by (used in) financing activities   35,303       (12,822 )
Effect of exchange rate changes on cash and cash equivalents   (1,671 )     214  
Net increase in cash, cash equivalents and restricted cash   41,132       11,193  
Cash, cash equivalents and restricted cash at beginning of period   157,804       158,461  
Cash, cash equivalents and restricted cash at end of period $ 198,936     $ 169,654  
Supplemental disclosures of cash flow information:          
Cash paid for interest $ 6,999     $ 7,358  
Cash paid for income taxes $ 7,511     $ 7,564  
Supplemental disclosures of non-cash operating, investing and financing activities:          
Purchases of property and equipment included in accounts payable $ 469     $ 265  
Unpaid equitable adjustments included in accrued expenses and other current liabilities $     $ 4  

Casa Systems Inc



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