dzsi-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-Q

__________________________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to

000-32743

(Commission File Number)

__________________________________________________

DZS INC.

(Exact name of registrant as specified in its charter)

__________________________________________________


Delaware			22-3509099
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

5700 Tennyson Parkway, Suite 400 Plano, Texas			75024
(Address of principal executive offices)			(Zip code)

(469) 327-1531

(Registrant’s telephone number, including area code)

__________________________________________________

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	DZSI	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 o No x

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 o No x

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x


As of August 15, 2024, there were 38,035,977 shares outstanding of the registrant’s common stock, $0.001 par value.


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	4
	Unaudited Condensed Consolidated Statements of Stockholders' Equity	5
	Unaudited Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
	Signatures	37


	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	2,636	$	13,822
Restricted cash	1,285		1,280
Accounts receivable - trade, net of allowance for credit losses of $4,110 as of March 31, 2024 and $4,282 as of December 31, 2023	38,428		44,816
Other receivables	453		452
Inventories	31,807		33,113
Contract assets	756		825
Prepaid expenses and other current assets	7,807		7,685
Current assets held for sale	89,378		94,375
Total current assets	172,550		196,368
Property, plant and equipment, net	2,801		3,108
Right-of-use assets from operating leases	3,929		3,661

Intangible assets, net	23,875		25,065
Other assets	12,959		13,371
Non-current assets held for sale	6,574		7,808
Total assets	$	222,688	$	249,381
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade	$	35,805	$	46,003
Contract liabilities	14,825		14,945
Operating lease liabilities	2,647		2,732
Accrued and other liabilities	25,109		32,704
Current liabilities held for sale	71,204		69,427
Total current liabilities	149,590		165,811
Long-term debt	7,641		7,308
Contract liabilities - non-current	2,021		2,834
Operating lease liabilities - non-current	3,909		3,994
Pension liabilities	11,136		11,504
Other long-term liabilities	1,547		1,797
Non-current liabilities held for sale	31,849		33,574
Total liabilities	207,693		226,822
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value, 72,000 shares authorized, 37,610 and 32,122 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.	36		31
Preferred stock, $0.001 par value, 25,000 shares authorized, and no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.	—		—
Additional paid-in capital	307,358		294,863
Accumulated other comprehensive loss	(9,805)		(8,447)
Accumulated deficit	(282,594)		(263,888)
Total stockholders’ equity	14,995		22,559
Total liabilities and stockholders’ equity	$	222,688	$	249,381


	Three Months Ended March 31,
	2024		2023
Net revenue	$	27,667	$	44,367
Cost of revenue	15,054		27,202
Gross profit	12,613		17,165
Operating expenses:
Research and product development	7,034		9,601
Selling, marketing, general and administrative	14,993		19,579
Restructuring and other charges	288		4,152

Amortization of intangible assets	1,190		1,271
Total operating expenses	23,505		34,603
Operating loss	(10,892)		(17,438)
Interest expense, net	(1,213)		(626)
Other income (expense), net	(324)		481
Loss from continuing operations before income taxes	(12,429)		(17,583)
Income tax provision	1,106		2,452
Net Loss from continuing operations	(13,535)		(20,035)
Loss from discontinued operations, net of income tax provision	(5,171)		(3,782)
Net loss	(18,706)		(23,817)

Foreign currency translation adjustments (a)	(1,320)		(1,889)
Actuarial loss	(38)		(60)
Comprehensive loss	$	(20,064)	$	(25,766)
Net loss per share from continuing operations
Basic	$	(0.36)	$	(0.65)
Diluted	$	(0.36)	$	(0.65)
Net loss per share from discontinued operations
Basic	$	(0.14)	$	(0.12)
Diluted	$	(0.14)	$	(0.12)
Weighted average shares outstanding
Basic	37,399		31,045
Diluted	37,399		31,045


	Common stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity
	Shares	Amount
Three months ended March 31, 2024:
Balance as of December 31, 2023	32,122	$	31	$	294,863	$	(8,447)	$	(263,888)	$	22,559
Issuance of common stock upon vesting of restricted stock units, exercise of stock options and employee stock plan purchases, net of shares withheld for taxes	53	—		(33)		—		—		(33)
Private placement of shares	5,435	5		9,920		—		—		9,925
Stock-based compensation	—	—		2,608		—		—		2,608
Net loss	—	—		—		—		(18,706)		(18,706)
Other comprehensive loss	—	—		—		(1,358)		—		(1,358)
Balance as of March 31, 2024	37,610	$	36	$	307,358	$	(9,805)	$	(282,594)	$	14,995











Three months ended March 31, 2023:
Balance as of December 31, 2022	30,968	$	30	$	271,884	$	(4,662)	$	(128,670)	$	138,582
Issuance of common stock upon vesting of restricted stock units, exercise of stock options and employee stock plan purchases, net of shares withheld for taxes	134	1		(88)		—		—		(87)
Stock-based compensation	—	—		4,486		—		—		4,486
Net loss	—	—		—		—		(23,817)		(23,817)

Other comprehensive loss	—	—		—		(1,949)		—		(1,949)
Balance as of March 31, 2023	31,102	$	31	$	276,282	$	(6,611)	$	(152,487)	$	117,215


Restricted cash	1,285		1,278
Cash, cash equivalents and restricted cash held for sale	3,959		7,692
	$	7,880	$	31,016

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Continuing Operations:
Interest - bank and trade facilities	$	337	$	660

Income taxes	$	17	$	—
Discontinued Operations:
Interest - bank and trade facilities	$	187	$	—
Interest - related party	$	—	$	64
Income taxes	$	32	$	480


	Three Months Ended March 31,
	2024		2023
Access Networking Infrastructure	$	20,232	$	35,005
Cloud Software & Services	7,435		9,362
Total	$	27,667	$	44,367


	March 31, 2024		December 31, 2023
Raw materials	$	14,781	$	18,133

Finished goods	17,026		14,980
Total inventories	$	31,807	$	33,113


	March 31, 2024		December 31, 2023
Machinery and equipment	$	3,910	$	3,903
Leasehold improvements	1,317		1,321
Computers and software	1,315		1,302
Furniture and fixtures	1,642		1,656
Construction in progress and other	56		13
	8,240		8,195
Less: accumulated depreciation and amortization	(5,439)		(5,087)
Total property, plant and equipment, net	$	2,801	$	3,108


	Contract assets		Contract liabilities
December 31, 2023	$	825	$	17,779
March 31, 2024	$	756	$	16,846


	March 31, 2024
	Gross Carrying Amount		Accumulated Amortization		Net
Customer relationships	$	19,090	$	(4,244)	$	14,846
Customer backlog	5,100		(1,591)		3,509
Developed technology	8,147		(3,199)		4,948
In-process research and development	890		(563)		327
Tradenames	300		(55)		245
Total intangible assets, net	$	33,527	$	(


	Three Months Ended March 31,
	2024		2023
Americas	$	15,957	$	24,966
Europe, Middle East, Africa	10,823		18,054
Asia	887		1,347
Total	$	27,667	$	44,367

SEC Form 10-Q filed by DZS Inc.