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Nature of Business and Basis of Presentation
9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Business and Basis of Presentation

1. Nature of Business and Basis of Presentation

Casa Systems, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on February 28, 2003. The Company is a global communications technology company headquartered in Andover, Massachusetts and has wholly- owned subsidiaries in Australia, Canada, China, France, Germany, Hong Kong, Ireland, the Netherlands, Spain, the United Kingdom, the United States and New Zealand.

The Company offers physical, virtual and cloud-native 4G and 5G infrastructure and customer premise networking equipment solutions to help communications service providers ("CSPs"), transform and expand their public and private high-speed data and multi-service communications networks so they can meet the growing demand for bandwidth and new services. Through the development of cloud, access devices and cable products, the Company’s core and edge convergence technology enables CSPs and enterprises to cost-effectively and dynamically increase network speed, add bandwidth capacity and new services, reduce network complexity and reduce operating and capital expenditures regardless of access technology. As technology has changed, the Company is now viewing offerings across three major product lines, cloud, access devices (which includes the Company's 4G/5G cell radio products) and cable, as opposed to its historical view of cable, wireless and fixed telco. The Company's revenue disclosures have been updated accordingly.

The Company is subject to a number of risks similar to other companies of comparable size and other companies selling and providing services to the CSP industry. These risks include, but are not limited to, the level of capital spending by CSPs, lengthy sales cycles, dependence on the development of new products and services, unfavorable economic and market conditions, competition from larger and more established companies, limited management resources, dependence on a limited number of contract manufacturers and suppliers, the rapidly changing nature of the technology used by CSPs, and reliance on resellers and sales agents. Failure by the Company to anticipate or to respond adequately to technological developments in its industry, changes in customer or supplier requirements, changes in regulatory requirements or industry standards, or any significant delays in the development or introduction of products could have a material adverse effect on the Company’s operating results, financial condition and cash flows.

Prior to December 31, 2022, the Company was an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act provided that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company elected not to “opt out” of such extended transition period, which means that when a standard was issued or revised and it had different application dates for public or private companies, the Company was required to adopt the new or revised standard at or prior to the time private companies were required to adopt the new or revised standard. As of December 31, 2022, the Company no longer qualified as an emerging growth company and is now required to adopt new or revised standards at the same time as other public companies.

The accompanying condensed consolidated balance sheet as of September 30, 2023, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022, the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022, and the condensed consolidated statements of stockholders’ (deficit) equity for the three and nine months ended September 30, 2023 and 2022 are unaudited. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2023 and 2022 are also unaudited. The accompanying condensed consolidated balance sheet as of December 31, 2022 was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2022, which was included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 15, 2023 (the “Annual Report on Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K. There have been no changes to the Company’s accounting policies from those disclosed in the Annual Report on Form 10-K that would have a material impact on the Company’s condensed consolidated financial statements.

The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and, in the opinion of management, include all adjustments consisting of only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations and cash flows to be anticipated for the full year ending December 31, 2023 or any future period.

The accompanying condensed consolidated financial statements include the accounts and results of operations of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.

Going Concern

In accordance with the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. In making its assessment, management considered the Company’s current financial condition and liquidity sources including current funds available, forecasted future cash flows, conditional and unconditional obligations due over the next twelve months as well as other factors including the provisions of the Company’s senior secured debt facility, and the temporary difficult market and customer demand dynamics for the Company’s Cable and Access Device products now being experienced.

As described further in Note 10, Debt, the Company has debt outstanding that is expected to mature on December 20, 2027, unless earlier repaid or accelerated (the “Superpriority Credit Facility”). The Superpriority Credit Facility contains a liquidity covenant that is tested on a monthly basis, and is further tested on November 15, 2023 and December 10, 2023. The amount of liquidity to be maintained for the monthly minimum liquidity covenant increases monthly starting in Q1 2024. Failure to comply with such covenant would result in a non-monetary event of default under the Superpriority Credit Facility and, as a result, would contractually afford the lenders thereunder the right to declare the Superpriority Term Loans immediately due and payable.

The Company was in compliance with monthly minimum liquidity covenant at September 30, 2023 and October 31, 2023, and as of the date of filing of this Form 10-Q. The Company is also taking actions to try to ensure future compliance including (i) acceleration of collections of receivables, (ii) deferral of expenditures, (iii) cost reductions to align the Company’s cost structure with current revenue levels, (iv) sales of excess inventory and (v) sales of non-core assets, among other actions. The Company believes these actions will produce positive results and improve the Company’s liquidity position. However, due to the inherent uncertainty regarding the Company's ability to meet the liquidity covenant over the next twelve months from the filing of this Quarterly Report on Form 10-Q, management concluded that substantial doubt exists with respect to the Company's ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.