dzsi-20240630

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 June 30, 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 22, 2024, there were 38,035,977 shares outstanding of the registrant’s common stock, $0.001 par value.

Table of Contents

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income (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	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 5.	Other Information	38
Item 6.	Exhibits	38
	Signatures	41

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DZS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except par value)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	6,869	$	13,822
Restricted cash	1,268		1,280
Accounts receivable - trade, net of allowance for credit losses of $3,937 as of June 30, 2024 and $4,282 as of December 31, 2023	40,162		44,816
Other receivables	691		452
Inventories	80,149		33,113
Contract assets	786		825
Prepaid expenses and other current assets	8,026		7,685
Current assets held for sale	—		94,375
Total current assets	137,951		196,368
Property, plant and equipment, net	3,275		3,108
Right-of-use assets from operating leases	4,581		3,661
Intangible assets, net	27,906		25,065
Other assets	11,680		13,371
Non-current assets held for sale	—		7,808
Total assets	$	185,393	$	249,381
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade	$	49,059	$	46,003


Contract liabilities	13,540		14,945
Operating lease liabilities	2,752		2,732
Accrued and other liabilities	27,710		32,704
Current liabilities held for sale	—		69,427
Total current liabilities	93,061		165,811
Long-term debt	15,674		7,308
Contract liabilities - non-current	2,381		2,834
Operating lease liabilities - non-current	3,819		3,994
Pension liabilities	10,987		11,504
Other long-term liabilities	2,890		1,797
Non-current liabilities held for sale	—		33,574
Total liabilities	128,812		226,822
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value, 72,000 shares authorized, 37,748 and 32,122 shares issued and outstanding as of June 30, 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 June 30, 2024 and December 31, 2023, respectively.	—		—
Additional paid-in capital	315,308		294,863
Accumulated other comprehensive income (loss)	1,709		(8,447)
Accumulated deficit	(260,472)		(263,888)
Total stockholders’ equity	$	56,581	22,559
Total liabilities and stockholders’ equity	$	185,393	$	249,381

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

DZS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net revenue	$	31,066	$	30,623	$	58,733	$	74,990
Cost of revenue	20,627		20,603		35,681		47,805
Gross profit	10,439		10,020		23,052		27,185
Operating expenses:
Research and product development	7,424		9,874		14,458		19,475
Selling, marketing, general and administrative	19,035		18,804		34,028		38,383
Restructuring and other charges	(44)		594		244		4,746
Impairment of long-lived assets	—		499		—		499
Amortization of intangible assets	1,190		1,321		2,380		2,592
Total operating expenses	27,605		31,092		51,110		65,695
Operating loss	(17,166)		(21,072)		(28,058)		(38,510)
Interest expense, net	(1,405)		(882)		(2,618)		(1,508)
Bargain purchase gain	41,544		—		41,544		—
Other income (expense), net	(230)		(146)		(554)		335
Income (loss) from continuing operations before income taxes	22,743		(22,100)		10,314		(39,683)
Income tax provision (benefit)	(330)		504		776		2,956

SEC Form 10-Q filed by DZS Inc.