DZS Files Q1 2024 Financial Results

Rhea-AI Summary

DZS (OTC: DZSI) has filed its Q1 2024 financial results, marking the completion of restatements for 2022 and 2023. The company has divested its low-margin Asia business, acquired NetComm's business, and raised approximately $40 million in the first half of 2024. DZS reported a 33% reduction in operating expenses in Q1 2024 compared to 2022 and has $102 million in scheduled backlog. The company is focusing on converting $31.8 million of paid inventory to cash and capitalizing on its sales pipeline. DZS noted an industry-wide pause in capital investments due to inventory over-rotation and delays in government broadband stimulus programs. The company is now current with SEC filings through Q1 2024 and plans to host an earnings call to discuss restated results after releasing Q2 2024 financials.

Positive

• Completed restatements for 2022 and 2023, filing Q1 2024 results
• Acquired NetComm's fixed wireless, fiber extension, IoT, and broadband connectivity business
• Raised approximately $40 million in the first half of 2024
• Reduced operating expenses by 33% in Q1 2024 compared to 2022
• $102 million in scheduled backlog
• $31.8 million of paid inventory available for conversion to cash

Negative

• Divested low-margin Asia business
• Industry-wide pause in capital investments affecting Q1 2024 performance
• Delays in government broadband stimulus programs, including BEAD
• Suspended from Nasdaq trading and received delisting notice due to delayed filings

Insights

Financial Analyst

DZS's Q1 2024 filing marks a important step in addressing its financial reporting challenges. The company has completed restatements for 2022 and 2023, demonstrating a commitment to transparency. However, the "industry-wide pause in capital investments" and delays in government broadband stimulus programs have impacted Q1 performance. The $31.8 million in paid inventory and $102 million scheduled backlog present both a challenge and opportunity for cash conversion. The 33% reduction in operating expenses compared to 2022 is significant, indicating aggressive cost-cutting measures. The divestiture of the low-margin Asia business and acquisition of NetComm signal a strategic shift towards higher-margin operations. While these moves could improve profitability, the transition period may bring short-term volatility. Investors should closely monitor the company's ability to convert trials into orders and capitalize on its sales pipeline in the coming quarters.

Tech Expert

DZS's focus on Network Edge, Connectivity and Cloud Software solutions positions it well in the evolving telecom landscape. The industry's shift towards moving bandwidth and intelligence closer to the network edge aligns with DZS's strategy. The company's emphasis on FTTx (Fiber-to-the-x) trials and AI-influenced broadband solutions demonstrates a forward-thinking approach. However, the delay in the BEAD Program and other government stimulus initiatives could slow down the adoption of these technologies in the short term. The acquisition of NetComm's fixed wireless and fiber extension technologies could strengthen DZS's product portfolio, potentially opening up new market opportunities. The company's ability to integrate these new technologies and capitalize on the growing demand for edge computing and 5G infrastructure will be important for its future growth. Investors should watch for updates on the progress of ongoing trials and the rate of conversion to commercial deployments.

Market Research Analyst

DZS's Q1 2024 results reflect broader market trends, with an industry-wide slowdown in capital investments. The company's strategic moves, including divesting its Asia business and acquiring NetComm, indicate a shift towards higher-growth markets in North America, EMEA and ANZ. This geographical realignment could prove beneficial as these regions are expected to see significant investments in broadband infrastructure. The $102 million scheduled backlog provides some revenue visibility, but the challenge lies in execution and conversion to sales. The company's focus on emerging applications and AI-influenced solutions aligns with market demands, potentially positioning DZS for growth as the industry recovers. However, the delisting from Nasdaq due to delayed filings is a significant concern that may impact investor confidence and liquidity. The upcoming earnings call will be important for providing clarity on the company's financial health and future prospects. Investors should pay close attention to guidance on revenue growth, margin improvement and the timeline for potential relisting on Nasdaq.

DALLAS, Aug. 20, 2024 (GLOBE NEWSWIRE) -- DZS (OTC: DZSI), a developer of Network Edge, Connectivity and Cloud Software solutions enabling gigabit broadband everywhere, today announced that it has filed its Q1 2024 financial results.

“As previously disclosed, we completed the restatements with respect to 2022 and the first quarter of 2023, as well as the reports for the remaining periods in 2023 and now completed the delayed filing for Q1 2024,” said Charlie Vogt, President and CEO, DZS. “Our priority throughout this process has been thoroughness and accuracy.”

Vogt added, “During the first six months of 2024, we divested our low margin Asia business, acquired NetComm’s fixed wireless, fiber extension, IoT and broadband connectivity business and raised approximately $40 million. On August 13, 2024, we filed our 2022 and 2023 GAAP financials and shortly we expect to provide non-GAAP financials for 2022 and 2023 which will illustrate the adjustments to bridge GAAP to non-GAAP. Today, we filed our Form 10-Q for Q1 2024 which reflects our former Asia business reported as discontinued operations. Our Q1 2024 financial results do not include our newly acquired NetComm business, which closed on June 1, 2024. Our priorities are aligning with customer requirements, completing our numerous FTTx trials currently underway, converting $31.8 million (exclusive of NetComm) of paid inventory as of March 31, 2024, to cash, executing on $102 million of scheduled backlog and capitalizing on our encouraging sales pipeline.”

DZS is taking advantage of new opportunities fueled by the accelerating demands of emerging applications, the industry evolution moving bandwidth and intelligence closer to the network edge and the operational requirements to deliver enhanced network assurance for improving the subscriber experience. The Company continues to advance its fiber, fixed wireless and AI-influenced broadband solutions aligned with service providers spanning North America, Europe, Middle East and Africa (EMEA) and Australia and New Zealand (ANZ) while optimizing its operational cost.

“Q1 2024 represented an industry-wide pause in capital investments due to an over-rotation of inventory by many service providers and delays with government broadband stimulus programs, including the United States Broadband Equity, Access and Deployment (BEAD) Program,” said Misty Kawecki, CFO, DZS.   “We are in the final phase of optimizing our cost savings initiatives that began in Q3 2023. We reduced operating expenses 33% in Q1 2024 compared to 2022. We are laser-focused on working through our $102 million of scheduled backlog, transitioning our numerous on-going trials to orders, cultivating a robust sales pipeline and converting our paid inventory to cash which, as of the end of Q1 2024 was $31.8 million, excluding any acquired inventory with NetComm.”

DZS is now current with its Form 10-Q and 10-K filings with the SEC through Q1 2024. The inability to file these reports prior to August 5, 2024, was the reason for the Company’s suspension of trading from Nasdaq and announced delisting notice.

Following the release of second quarter 2024 financial results, DZS intends to host an earnings call to discuss restated results, which will include all of 2022, 2023, the financial results for the first and second quarters of 2024, and the divestiture of its Asia business along with its recent acquisition of NetComm.

About DZS

DZS Inc. (OTC: DZSI) is a developer of Network Edge, Connectivity and Cloud Software solutions enabling gigabit broadband everywhere.

DZS, the DZS logo, and all DZS product names are trademarks of DZS Inc. Other brand and product names are trademarks of their respective holders. Specifications, products, and/or product names are all subject to change.

This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Private Securities Litigation Reform Act of 1995. These statements reflect the beliefs and assumptions of the Company’s management as of the date hereof. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” variations of such words, and similar expressions are intended to identify forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. The Company’s actual results could differ materially and adversely from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, those risk factors contained in the Company’s SEC filings available at www.sec.gov, including without limitation, the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and subsequent filings.  In addition, additional or unforeseen affects from the COVID-19 pandemic and the global economic climate may give rise to or amplify many of these risks. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. DZS undertakes no obligation to update or revise any forward-looking statements for any reason.

For further information see: www.DZSi.com
DZS on Twitter: https://twitter.com/dzs_innovation
DZS on LinkedIn: https://www.linkedin.com/company/DZSi/

FAQ

What were DZS's (DZSI) key financial actions in Q1 2024?

In Q1 2024, DZS completed restatements for 2022 and 2023, filed Q1 2024 results, divested its low-margin Asia business, acquired NetComm's business, and raised approximately $40 million.

How much did DZS (DZSI) reduce its operating expenses in Q1 2024?

DZS reduced its operating expenses by 33% in Q1 2024 compared to 2022.

What is the current scheduled backlog for DZS (DZSI) as of Q1 2024?

DZS reported a scheduled backlog of $102 million as of Q1 2024.

Why was DZS (DZSI) suspended from Nasdaq trading?

DZS was suspended from Nasdaq trading and received a delisting notice due to its inability to file required reports with the SEC prior to August 5, 2024.

What factors affected DZS's (DZSI) Q1 2024 performance?

DZS's Q1 2024 performance was affected by an industry-wide pause in capital investments due to inventory over-rotation and delays in government broadband stimulus programs, including the BEAD Program.