DZSI
DASAN ZHONE SOLUTIONS INC
8-K
  2019-Aug-13 at 04:39 pm Get Reserve Plan For Historical Filings Read Filing at SEC

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1 Difficult 24 Loss
1 Better 11 Gains
6 Growth 14 Profitability
1 Progress 1 Strong
1 Ceo 5 Contract
1 Expect 8 Merger
1 Predict 4 Press
3 Product 3 Risk
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DOCUMENT: dzsi-8k_20190813.htm
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): August 13, 2019

 

DASAN ZHONE SOLUTIONS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

Delaware

000-32743

22-3509099

(State or Other Jurisdiction

of Incorporation)

(Commission

File No.)

(I.R.S. Employer

Identification No.)

 

7195 Oakport Street

Oakland, California 94621

(Address of Principal Executive Offices, Including Zip Code)

 

(510) 777-7000

(Registrant’s Telephone Number, Including Area Code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.

 

 

 


 

Item 2.02 Results of Operations and Financial Condition.

On August 13, 2019, DASAN Zhone Solutions, Inc. issued a press release announcing its second quarter 2019 results, a copy of which is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure. The information furnished in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes, or otherwise subject to the liabilities, of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

The following exhibit is filed herewith:

 

Exhibit

Number

 

Description

 

 

 

 

 

2


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

 

 

Date: August 13, 2019

 

DASAN Zhone Solutions, Inc.

 

 

 

 

 

 

 

By:

 

/s/ Michael Golomb

 

 

 

 

Michael Golomb

 

 

 

 

Chief Financial Officer, Corporate Treasurer and Corporate Secretary

 

3

DOCUMENT: dzsi-ex991_6.htm
 

Exhibit 99.1

Contacts

 

 

Pei Hung, DASAN Zhone Investor Relations

 

DZSI Strategic Communications:

Tel: +1 510.777.7386

 

Matt Glover or Najim Mostamand, CFA

Fax: +1 510.777.7001

 

Tel: +1 949.574.3860

E: [email protected]

 

E: [email protected]

 

DASAN Zhone Solutions Reports Strong Second Quarter 2019 Financial Results

 

Oakland, Calif., August 13, 2019 - DASAN Zhone Solutions, Inc. (NASDAQ: DZSI or the "Company" or “DZS”), a global provider of ultra-broadband network access solutions and communications platforms deployed by advanced Tier 1, 2 and 3 service providers and enterprise customers, today reported second quarter results for the period ended June 30, 2019.

 

Second Quarter 2019 Financial Performance:

Non-GAAP financial measures are reconciled to the most comparable GAAP measures in the tables set forth at the end of this press release.

 

Q2 2019

 

Guidance

(provided on May 9, 2019)

Net Revenue

% increase vs Prior Year (Q2 2018)

$83.7 million

9.7%

 

$82.5 - $86.0 million

8% - 13%

GAAP Gross Margin %

33.2%

 

32.5% - 33.5%

Non-GAAP Gross Margin % (1)

34.2%

 

Not applicable

GAAP Operating Expenses

$24.8 million

(29.7% of net revenue)

 

Not applicable

Non-GAAP Adjusted Operating Expenses (2)

$23.3 million

(27.8% of net revenue)

 

$24.5 - $26.0 million

(~30% of net revenue)

GAAP Net Income (attributable to DZSI)

 

Diluted EPS (GAAP)

$2.4 million

(2.9% of net revenue)

$0.13

 

Not applicable

Non-GAAP Net Income (attributable to DZSI) (1)

 

Diluted EPS (non-GAAP)

$4.8 million

(5.7% of net revenue)

$0.26

 

Not applicable

GAAP Net Income

$2.4 million

(2.8% of net revenue)

 

Not applicable

Adjusted EBITDA (3)

$6.7 million

(8.0% of net revenue)

 

$2.0 - $3.0 million

(2% - 4% of net revenue)

_______

(1) Includes add-back of stock-based compensation (SBC), depreciation and amortization (D&A) and inventory step-up amortization expenses.

(2) Excludes SBC and D&A expenses.

(3) See definition of Adjusted EBITDA in the section below titled “Non-GAAP Financial Measures”.

 

 

Net revenue for the second quarter of 2019 was $83.7 million, which was in-line with the Company’s guidance of $82.5 million to $86 million and reflected an increase of 9.7% year-over-year against a challenging


 

 

comparison from the second quarter of 2018, where the Company benefitted from a large $16.5 million contract signed with a government customer based in India.

 

GAAP gross margin for the second quarter of 2019 was 33.2%, which was in-line with the Company's gross margin guidance of 32.5% to 33.5%.

 

GAAP net income attributable to DZS for the second quarter of 2019 totaled $2.4 million, or $0.13 per diluted share. Non-GAAP net income attributable to DZS for the second quarter of 2019 totaled $4.8 million, or $0.26 per diluted share. The Company benefited from a positive foreign currency gain of $1.6 million in the quarter.

 

GAAP operating expenses for the second quarter of 2019 were $24.8 million. Non-GAAP adjusted operating expenses for the second quarter of 2019 were $23.3 million, which was better than the Company's guidance of $24.5 million to $26.0 million.

 

Non-GAAP adjusted EBITDA for the second quarter of 2019 totaled $6.7 million and non-GAAP adjusted EBITDA margin was 8.0%, which exceeded the Company's guidance of $2 million to $3 million. On a year-over-year basis, non-GAAP adjusted EBITDA for the second quarter of 2019 increased more than 100% from $3.2 million, or 4.2% non-GAAP adjusted EBITDA margin, in the same year-ago period.  

 

Total cash and cash equivalents (excluding restricted cash) as of June 30, 2019 were $56.4 million, compared to $27.7 million as of December 31, 2018.

 

Management Commentary:

"We are encouraged by the progress we have made on our 5G growth initiatives,” said Yung Kim, CEO of DZS. “We recently won a multi-tens-of-million-dollar contract with a top tier carrier in Japan, which is a long-standing customer that we supported in their previous 4G LTE deployment cycle. We are pleased we can continue to play a key role in the rollout of their new 5G networks with the potential for further revenue upside from higher unit volumes and multi-year extensions. This 5G Japan win, along with two previously announced significant 5G commercial contracts with Tier 1 service providers in South Korea, gives us confidence that we will be well-positioned to capture additional spend when the 5G upgrade cycle accelerates globally.”

 

Michael Golomb, CFO of DZS, said: "We are excited to have once again achieved our revenue and gross margin guidance during the second quarter, while significantly outperforming our adjusted operating expenses and Adjusted EBITDA guidance. Our profitability improved significantly, as demonstrated by our record net income and earnings per share. During the quarter, we also strengthened our cash position with a successful $43 million primary equity raise, on a net basis, to support the continued growth in our business.”

Business Outlook:

DZS’s business outlook is based on current expectations.  The following statements are forward-looking, and actual results can differ materially and adversely from those expressed below based on market conditions and risk factors set forth under “Forward-Looking Statements” below and in the sections entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 and our subsequent filings with the U.S. Securities and Exchange Commission.  Accordingly, undue reliance should not be placed on these projections.

 

The Company does not provide guidance for GAAP operating expenses or GAAP net income, the measures the Company considers to be the most directly U.S. GAAP financial measures to Non-GAAP Adjusted Operating Expenses and Adjusted EBITDA, and no reconciliations of the forecasted ranges for Adjusted Operating Expenses or Adjusted EBITDA for the quarter


 

ending September 30, 2019 or year ending December 31, 2019 are included because DZS does not provide specific guidance for the various reconciling items, such as merger and acquisition transaction costs, unusual gains or losses, net gains or losses on sales of assets or potential future asset impairments, as certain items that impact these measures have not occurred, are out of DZS’s control or cannot be easily be predicted.  Accordingly, DZS is unable to quantify certain amounts that would be required to be included in the corresponding GAAP measures without unreasonable effort and DZS believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.  Please note that the unavailable reconciling items could significantly impact the Company’s results.

Third Quarter 2019 Guidance:

 

Q3 2019

Guidance

Net Revenue

% increase vs Prior Year (Q3 2018)

$88 - $94 million

22% - 31%

GAAP Gross Margin %

32.5% - 33.5%

Non-GAAP Adjusted Operating Expenses

(excl. SBC and D&A expenses)

$24.5 - $25.5 million

(27% - 28% of net revenue)

Adjusted EBITDA

$4 - $6 million

(4.5% - 6% of net revenue)

 

Revised Guidance for Full Year 2019:

 

Full Year 2019 Guidance

Prior Guidance

(provided on May 9, 2019

Net Revenue

% increase vs Prior Year (2018)

$345 - $355 million

22% - 26%

$350 - $360 million

24% - 28%

GAAP Gross Margin %

32.5% - 33.5%

32.5% - 34.0%

Non-GAAP Adjusted Operating Expenses

(excl. SBC and D&A expenses)

$96.5 - $99.5 million

(~28% of net revenue)

$97 - $102 million

(~28% of net revenue)

Adjusted EBITDA

$19 - $22 million

(5.5% - 6% of net revenue)

$17 - $20 million

(5% - 6% of net revenue)

 

The revised revenue guidance reflects modest impact from a large carrier in Europe that is delaying capex spend until 2020, impacting both the Company and its peers, and a slower-than-expected ramp up of network infrastructure spend by a large government customer in India in Q3 2019, which the Company believes was impacted by the country’s month-long national elections that concluded at the end of May. The Company expects that the India business will reaccelerate in Q4 2019.

 

The revised GAAP gross margin guidance of 32.5% to 33.5% reflects higher geographic mix in Asia Pacific and the Middle East regions.

 

The revised Non-GAAP adjusted operating expenses guidance of $96.5 million to $99.5 million reflects continued focus on cost controls.

 

The revised Adjusted EBITDA of $19 million to $22 million, or margin of 5.5% and 6%, reflects the Company’s continued commitment to deliver on profitability guidance.

Non-GAAP Financial Measures

To supplement DZS's consolidated financial statements presented in accordance with GAAP, DZS uses Non-GAAP Gross Margin, Adjusted EBITDA (including as a percentage of net revenue), Non-GAAP net income attributable to DZS (including as a percentage of net revenue), and Non-GAAP Adjusted Operating Expenses (including as a percentage of net revenue), which are non-GAAP measures DZS believes are appropriate to provide meaningful comparison with, and to enhance an overall understanding of, DZS's past financial performance and prospects for the future. DZS believes these non-GAAP financial measures provide useful information to both management and investors by excluding specific expenses and gains that DZS believes are not indicative of core operating results. Further, Adjusted EBITDA is a measure of operating performance used by management, as well as industry analysts,


 

to evaluate operations and operating performance and is widely used in the telecommunications and manufacturing industries. Other companies in the telecommunications and manufacturing industries may calculate Adjusted EBITDA differently than DZS does.  The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of net income (loss) to Adjusted EBITDA is included at the end of the Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) below, and reconciliations of Non-GAAP Gross Profit (a component of Non-GAAP Gross Margin) to gross profit, net income (loss) attributable to DZS to non-GAAP net income (loss) attributable to DZS and total operating expenses to Adjusted Operating Expenses are provided in tables immediately following the Unaudited Condensed Consolidated Balance Sheets below.

 

DZS calculates “Non-GAAP Gross Margin” as Non-GAAP Gross Profit as a percentage of net revenue, and DZS defines “Non-GAAP Gross Profit” as gross profit plus (i) depreciation and amortization expense, (ii) stock-based compensation expenses and (iii) expenses incurred in connection with material transactions or events that the Company believes are not indicative of our core operating performance, such as inventory step-up valuation amortization, which may or may not be recurring in nature.

 

DZS defines “Adjusted EBITDA” as net income (loss) plus (i) interest expense, net, (ii) provision (benefit) for taxes, (iii) depreciation and amortization expense, (iv) stock-based compensation expenses, and (v) expenses incurred in connection with material transactions or events that the Company believes are not indicative of our core operating performance, such as merger and acquisition transaction costs, inventory step-up valuation amortization, bargain purchase gain, or a gain (loss) on sale of assets or impairment of fixed assets, which may or may not be recurring in nature.

 

DZS defines “non-GAAP net income attributable to DZS as net income (loss) plus (i) depreciation and amortization expense, (ii) stock-based compensation expenses, and (iii) material non-recurring transactions or events, such as merger and acquisition transaction costs or a gain (loss) on sale of assets or impairment of fixed assets or bargain purchase gain.  

 

DZS defines “Adjusted Operating Expenses” as total operating expenses less (i) depreciation and amortization, (ii) stock-based compensation, and (iii) expenses incurred in connection with material transactions or events that the Company believes are not indicative of our core operating performance, such as merger and acquisition transaction costs, inventory step-up valuation amortization, bargain purchase gain, or a gain (loss) on sale of assets or impairment of fixed assets, which may or may not be recurring in nature.

Forward-Looking Statements

This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934.  These statements are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and 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. In addition, statements that refer to projections of earnings, revenue, operating expenses, gross margin, costs or other financial items (including Adjusted EBITDA and Adjusted Operating Expenses) in future periods and to anticipated growth and trends in our business or key markets are 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, the Company’s ability to realize the anticipated cost savings, synergies and other benefits of its acquisitions, including the KEYMILE acquisition and any integration risks relating thereto; the ability to generate sufficient revenue to achieve or sustain profitability; the Company’s ability to raise additional capital to fund existing and future operations or to refinance or repay its existing indebtedness; defects or other performance problems in the Company’s products; any economic slowdown in the telecommunications industry that restricts or delays the purchase of the Company’s products by its customers; the loss of any of our large customers, a significant reduction in their spending, or a material change in their networking or procurement strategies; commercial acceptance of the Company’s products; intense competition in the communications equipment market; higher than anticipated expenses that the Company may incur; any failure to comply with the periodic filing and other requirements of The Nasdaq Stock Market for continued listing; fluctuations in foreign currency exchange rates; the Company’s ability to enforce its intellectual property rights; the initiation of any civil litigation, regulatory proceedings, government enforcement actions or other adverse effects relating to the Audit Committee investigation or errors in the consolidated financial statements of Zhone Technologies, Inc.; the Company’s ability to execute on its strategy and operating plans; and economic conditions. In addition, please refer to the 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 current reports on Form 8-K. 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. The Company undertakes no obligation to update or revise any forward-looking statements for any reason.

About DASAN Zhone Solutions, Inc.

DASAN Zhone Solutions, Inc. (NASDAQ: DZSI) is a global provider of ultra-broadband network access solutions and communications platforms deployed by advanced Tier 1, 2 and 3 service providers and enterprise customers.  Our solutions are deployed by over 900 customers in more than 80 countries worldwide. Our ultra-broadband solutions are focused on creating significant value for our customers by delivering innovative solutions that empower global communication advancement by shaping the internet connection experience.  Every connection matters, and the first connection to the internet and cloud services applications matters the most. Our principal focus is centered around enabling our customers to connect everything and everyone to the internet-cloud economy via ultra-broadband connectivity solutions. The Company provides a wide array of reliable, cost-effective networking technologies, including: broadband access, mobile backhaul, Ethernet switching with Software Defined Networking (“SDN”) capabilities, new enterprise solutions based on Passive Optical LAN (“POL”), and new generation of SDN/ Network Function Virtualization (“NFV”) solutions for unified wired and wireless networks.

 

DASAN Zhone Solutions, the DASAN Zhone Solutions logo, and DASAN Zhone Solutions product names are trademarks of DASAN Zhone Solutions, Inc. Other brand and product names are trademarks of their respective holders.  Specifications, products, and/or products names are all subject to change without notice.


 

 

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

 

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

 

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

March 31, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

Net revenue

 

$

83,664

 

 

$

74,089

 

 

$

76,257

 

 

$

157,753

 

 

$

135,761

 

Cost of revenue

 

 

55,882

 

 

 

49,219

 

 

 

53,092

 

 

 

105,101

 

 

 

90,861

 

Gross profit

 

 

27,782

 

 

 

24,870

 

 

 

23,165

 

 

 

52,652

 

 

 

44,900

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and product development

 

 

9,430

 

 

 

10,184

 

 

 

8,714

 

 

 

19,614

 

 

 

17,691

 

Selling, general and administrative

 

 

14,929

 

 

 

15,039

 

 

 

11,712

 

 

 

29,968

 

 

 

24,106

 

Amortization of intangible assets

 

 

470

 

 

 

472

 

 

 

131

 

 

 

942

 

 

 

262

 

Total operating expenses

 

 

24,829

 

 

 

25,695

 

 

 

20,557

 

 

 

50,524

 

 

 

42,059

 

Operating income (loss)

 

 

2,953

 

 

 

(825

)

 

 

2,608

 

 

 

2,128

 

 

 

2,841

 

Interest income

 

 

62

 

 

 

88

 

 

 

75

 

 

 

150

 

 

 

161

 

Interest expense

 

 

(1,244

)

 

 

(871

)

 

 

(560

)

 

 

(2,115

)

 

 

(883

)

Other income (expenses), net

 

 

1,345

 

 

 

228

 

 

 

(427

)

 

 

1,573

 

 

 

(287

)

Income (loss) before income taxes

 

 

3,116

 

 

 

(1,380

)

 

 

1,696

 

 

 

1,736

 

 

 

1,832

 

Income tax provision

 

 

732

 

 

 

77

 

 

 

341

 

 

 

809

 

 

 

336

 

Net income (loss)

 

 

2,384

 

 

 

(1,457

)

 

 

1,355

 

 

 

927

 

 

 

1,496

 

Net income (loss) attributable to non-controlling interest

 

 

(24

)

 

 

181

 

 

 

(61

)

 

 

157

 

 

 

(27

)

Net income (loss) attributable to DASAN Zhone Solutions, Inc.

 

$

2,408

 

 

$

(1,638

)

 

$

1,416

 

 

$

770

 

 

$

1,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to DASAN Zhone Solutions, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

 

$

(0.10

)

 

$

0.09

 

 

$

0.04

 

 

$

0.09

 

Diluted

 

$

0.13

 

 

$

(0.10

)

 

$

0.08

 

 

$

0.04

 

 

$

0.09

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

18,166

 

 

 

16,593

 

 

 

16,438

 

 

 

17,384

 

 

 

16,425

 

Diluted

 

 

18,482

 

 

 

16,593

 

 

 

16,672

 

 

 

17,710

 

 

 

16,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of net income (loss) to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

2,384

 

 

$

(1,457

)

 

$

1,355

 

 

$

927

 

 

$

1,496

 

Stock-based compensation

 

 

811

 

 

 

825

 

 

 

377

 

 

 

1,636

 

 

 

740

 

Interest expense, net

 

 

1,182

 

 

 

783

 

 

 

485

 

 

 

1,965

 

 

 

722

 

Income tax expense

 

 

732

 

 

 

77

 

 

 

341

 

 

 

809

 

 

 

336

 

Depreciation and amortization

 

 

1,350

 

 

 

1,417

 

 

 

682

 

 

 

2,767

 

 

 

1,381

 

Merger and acquisition costs

 

 

-

 

 

 

337

 

 

 

-

 

 

 

337

 

 

 

-

 

Inventory step-up amortization

 

 

201

 

 

 

201

 

 

 

-

 

 

 

402

 

 

 

-

 

Bargain purchase gain on acquisition

 

 

-

 

 

 

(334

)

 

 

-

 

 

 

(334

)

 

 

-

 

Adjusted EBITDA

 

$

6,660

 

 

$

1,849

 

 

$

3,240

 

 

$

8,509

 

 

$

4,675

 

 

 

 

 

 

 


 

 

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

 

Unaudited Condensed Consolidated Balance Sheets

 

(In thousands)

 

 

 

 

 

 

 

June 30,

2019

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

56,421

 

 

$

27,709

 

Restricted cash

 

 

8,364

 

 

 

7,003

 

Accounts receivable, net

 

 

88,372

 

 

 

71,617

 

Other receivables

 

 

8,132

 

 

 

12,988

 

Contract assets

 

 

17,093

 

 

 

11,381

 

Inventories

 

 

43,306

 

 

 

33,868

 

Prepaid expenses and other current assets

 

 

4,857

 

 

 

4,185

 

Total current assets

 

 

226,545

 

 

 

168,751

 

Property, plant and equipment, net

 

 

6,173

 

 

 

5,518

 

Right-of-use assets from operating leases

 

 

20,310

 

 

 

-

 

Goodwill

 

 

3,977

 

 

 

3,977

 

Intangible assets, net

 

 

15,831

 

 

 

5,649

 

Non-current deferred tax assets

 

 

2,175

 

 

 

2,752

 

Long-term restricted cash

 

 

572

 

 

 

936

 

Other assets

 

 

4,345

 

 

 

2,424

 

Total assets

 

$

279,928

 

 

$

190,007

 

Liabilities, Stockholders' Equity and Non-controlling Interest

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

42,492

 

 

$

38,608

 

Short-term debt

 

 

28,867

 

 

 

31,762

 

Other payables

 

 

4,040

 

 

 

3,073

 

Contract liabilities - current

 

 

3,365

 

 

 

8,511

 

Operating lease liabilities - current

 

 

3,892

 

 

 

-

 

Accrued and other liabilities

 

 

10,347

 

 

 

11,517

 

Total current liabilities

 

 

93,003

 

 

 

93,471

 

Long-term debt

 

 

29,963

 

 

 

14,142

 

Contract liabilities - non-current

 

 

2,467

 

 

 

1,801

 

Deferred tax liabilities

 

 

1,064

 

 

 

-

 

Operating lease liabilities - non-current

 

 

17,542

 

 

 

-

 

Pension liabilities

 

 

13,625

 

 

 

-

 

Other long-term liabilities

 

 

1,715

 

 

 

2,739

 

Total liabilities

 

 

159,379

 

 

 

112,153

 

Stockholders’ equity and non-controlling interest:

 

 

 

 

 

 

 

 

Common stock

 

 

21

 

 

 

16

 

Additional paid-in capital

 

 

137,805

 

 

 

93,192

 

Accumulated other comprehensive loss

 

 

(3,064

)

 

 

(192

)

Accumulated deficit

 

 

(15,007

)

 

 

(15,777

)

Total stockholders’ equity

 

 

119,755

 

 

 

77,239

 

Non-controlling interest

 

 

794

 

 

 

615

 

Total stockholders’ equity and non-controlling interest

 

 

120,549

 

 

 

77,854

 

Total liabilities, stockholders’ equity and non-controlling

   interest

 

$

279,928

 

 

$

190,007

 

 

 

 

 


 

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

 

Reconciliation of GAAP to Non-GAAP Results

 

(Unaudited, in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The reconciliation of Adjusted EBITDA to net income is included above in the Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss).  Set forth below are reconciliations of Non-GAAP Gross Profit, Non-GAAP Operating Expenses, and Non-GAAP Net Income Attributable to DZS to gross profit, total operating expenses and net income attributable to DZS, respectively, which the Company considers to be the most directly comparable U.S. GAAP financial measures to Non-GAAP Gross Profit, Non-GAAP Operating Expenses, and Non-GAAP Net Income Attributable to DZS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

 

Cost of Revenue

 

 

Gross Profit

 

 

Operating Expenses

 

 

Operating Income

 

 

Net Income Attributable to DZSI

 

 

Net Income per Diluted Share Attributable to DZSI

 

GAAP amount

 

$

55,882

 

 

$

27,782

 

 

$

24,829

 

 

$

2,953

 

 

$

2,408

 

 

$

0.13

 

Adjustments to GAAP amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

(594

)

 

 

594

 

 

 

(756

)

 

 

1,350

 

 

 

1,350

 

 

 

0.07

 

Stock-based compensation

 

 

(10

)

 

 

10

 

 

 

(801

)

 

 

811

 

 

 

811

 

 

 

0.05

 

Merger and acquisition costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Inventory step-up amortization

 

 

(201

)

 

 

201

 

 

 

-

 

 

 

201

 

 

 

201

 

 

 

0.01

 

Bargain purchase gain on acquisition

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Non-GAAP amount

 

$

55,077

 

 

$

28,587

 

 

$

23,272

 

 

$

5,315

 

 

$

4,770

 

 

$

0.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

 

 

Cost of Revenue

 

 

Gross Profit

 

 

Operating Expenses

 

 

Operating Income (Loss)

 

 

Net Income (Loss) Attributable to DZSI

 

 

Net Income (Loss) per Diluted Share Attributable to DZSI

 

GAAP amount

 

$

49,219

 

 

$

24,870

 

 

$

25,695

 

 

$

(825

)

 

$

(1,638

)

 

$

(0.10

)

Adjustments to GAAP amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

(517

)

 

 

517

 

 

 

(900

)

 

 

1,417

 

 

 

1,417

 

 

 

0.09

 

Stock-based compensation

 

 

(10

)

 

 

10

 

 

 

(815

)

 

 

825

 

 

 

825

 

 

 

0.05

 

Merger and acquisition costs

 

 

-

 

 

 

-

 

 

 

(337

)

 

 

337

 

 

 

337

 

 

 

0.02

 

Inventory step-up amortization

 

 

(201

)

 

 

201

 

 

 

-

 

 

 

201

 

 

 

201

 

 

 

0.01

 

Bargain purchase gain on acquisition

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(334

)

 

 

(0.02

)

Non-GAAP amount

 

$

48,491

 

 

$

25,598

 

 

$

23,643

 

 

$

1,955

 

 

$

808

 

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

Three Months Ended June 30, 2018

 

 

 

Cost of Revenue

 

 

Gross Profit

 

 

Operating Expenses

 

 

Operating Income

 

 

Net Income Attributable to DZSI

 

 

Net Income per Diluted Share Attributable to DZSI

 

GAAP amount

 

$

53,092

 

 

$

23,165

 

 

$

20,557

 

 

$

2,608

 

 

$

1,416

 

 

$

0.08

 

Adjustments to GAAP amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

(256

)

 

 

256

 

 

 

(426

)

 

 

682

 

 

 

682

 

 

 

0.04

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

(377

)

 

 

377

 

 

 

377

 

 

 

0.03

 

Non-GAAP amount

 

$

52,836

 

 

$

23,421

 

 

$

19,754

 

 

$

3,667

 

 

$

2,475

 

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

Cost of Revenue

 

 

Gross Profit

 

 

Operating Expenses

 

 

Operating Income