dzsi-20240930

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 September 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	OTC Markets Group, Inc.

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 October 31, 2024, there were 38,789,398 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	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
	Signatures	43

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)


	September 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	4,297	$	13,822
Restricted cash	1,439		1,280
Accounts receivable - trade, net of allowance for credit losses of $4,185 as of September 30, 2024 and $4,282 as of December 31, 2023	34,216		44,816
Other receivables, net of allowance for credit losses of $877 as of September 30, 2024 and 0 as of December 31, 2023	962		452
Inventories	79,087		33,113
Contract assets	598		825
Prepaid expenses and other current assets	13,625		7,685
Current assets held for sale	—		94,375
Total current assets	134,224		196,368
Property, plant and equipment, net	2,930		3,108
Right-of-use assets from operating leases	4,453		3,661
Intangible assets, net	25,840		25,065
Other assets	11,056		13,371
Non-current assets held for sale	—		7,808
Total assets	$	178,503	$	249,381
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade	$	63,072	$	46,003


Contract liabilities	12,105		14,945
Operating lease liabilities	2,473		2,732
Accrued and other liabilities	32,431		32,704
Current liabilities held for sale	—		69,427
Total current liabilities	110,081		165,811
Long-term debt	16,424		7,308
Contract liabilities - non-current	1,831		2,834
Operating lease liabilities - non-current	3,539		3,994
Pension liabilities	11,358		11,504
Other long-term liabilities	2,936		1,797
Non-current liabilities held for sale	—		33,574
Total liabilities	146,169		226,822
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value, 72,000 shares authorized, 38,741 and 32,122 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.	37		31
Preferred stock, $0.001 par value, 25,000 shares authorized and no shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.	—		—
Additional paid-in capital	317,291		294,863
Accumulated other comprehensive income (loss)	1,124		(8,447)
Accumulated deficit	(286,118)		(263,888)
Total stockholders’ equity	$	32,334	22,559
Total liabilities and stockholders’ equity	$	178,503	$	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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net revenue	$	38,149	$	22,737	$	96,882	$	97,727
Cost of revenue	26,924		23,774		62,605		71,579
Gross profit (loss)	11,225		(1,037)		34,277		26,148
Operating expenses:
Research and product development	10,656		8,327		25,114		27,802
Selling, marketing, general and administrative	20,386		19,562		54,414		57,945
Restructuring and other charges	266		135		510

SEC Form 10-Q filed by DZS Inc.