DZS(US:DZSI)2024-11-12 13:50Financial Performance - Net revenue for Q3 2024 reached $38,149 million, a 67.8% increase from $22,737 million in Q3 2023 [126]. - Gross profit for Q3 2024 was $11,225 million, compared to a loss of $1,037 million in Q3 2023, marking a significant improvement of 1182.4% [126]. - Operating expenses totaled $33,227 million in Q3 2024, up 13.2% from $29,345 million in Q3 2023 [126]. - Total cost of revenue for Q3 2024 was $26,924 million, representing 71% of net revenue, down from 105% in Q3 2023 [126]. - For the nine months ended September 30, 2024, net revenue was $96,882 million, a slight decrease of 0.9% from $97,727 million in the same period of 2023 [127]. - Operating loss for the nine months ended September 30, 2024 was $50,060 million, a 27.3% improvement from a loss of $68,892 million in the same period of 2023 [127]. - The company reported a net loss of $25,646 million from continuing operations for Q3 2024, a 12.7% improvement from a loss of $29,385 million in Q3 2023 [126]. - Net loss from discontinued operations decreased by 42.5% to $6.1 million for the nine months ended September 30, 2024, compared to $10.6 million for the same period in 2023 [136]. Acquisitions and Divestitures - The company completed the divestiture of DASAN Network Solutions and related entities for $3.8 million in cash and the elimination of approximately $34.3 million in debt [121]. - The acquisition of NetComm Wireless Pty Ltd was finalized for approximately $8.1 million, with a potential contingent consideration of up to $3.0 million based on revenue thresholds [121]. - The company received a cash purchase price of $34.0 million from the sale of its Network Assurance and WiFi Management software portfolio, with $30.0 million received at closing [123]. - The company recognized a bargain purchase gain of approximately $41.5 million from the NetComm Acquisition, reflecting the excess of the fair value of net assets acquired over the purchase consideration [134]. Research and Development - The company is focused on increasing revenue while controlling costs and investing in strategic research and product development [120]. - Research and product development expenses increased by 28.0% to $10,656 million in Q3 2024, compared to $8,327 million in Q3 2023 [126]. - Research and product development expenses increased by 28.0% to $10.7 million for the three months ended September 30, 2024, compared to $8.3 million for the same period in 2023, primarily due to the NetComm Acquisition [134]. Operational Highlights - The company’s DZS Velocity portfolio enables rapid transition from GPON to XGSPON and future 50G PON technologies, enhancing service provider capabilities [114]. - The DZS Saber portfolio supports mobile operators with scalable solutions for 5G transport, capable of speeds up to 400 Gbps [115]. - The company’s DZS Helix optical network terminals and smart gateway solutions are designed for high bandwidth services in FTTx deployments [116]. - The company’s IIoT products provide ultra-fast connectivity for machines in harsh environments, utilizing 4G/5G technology [118]. - Access networking infrastructure revenue increased by 98.4% to $29.1 million for Q3 2024, primarily due to the NetComm Acquisition [130]. Financial Position and Cash Flow - The company has entered into a Loan Agreement for a three-year term loan of $15.0 million at a fixed interest rate of 13.0% per annum [121]. - Net cash used in operating activities from continuing operations decreased by $5.6 million to $28.1 million for the nine months ended September 30, 2024, from $33.7 million for the same period in 2023 [141]. - Net cash provided by financing activities totaled $23.9 million for the nine months ended September 30, 2024, compared to $4.9 million for the same period in 2023, primarily from private placement of shares and the Second EdgeCo Loan [143]. - As of September 30, 2024, the company had $24.1 million in working capital and $4.3 million in unrestricted cash and cash equivalents [138]. - Cash, cash equivalents, and restricted cash totaled $5.7 million at September 30, 2024, including $2.7 million held by international subsidiaries [145]. Debt and Interest Expenses - Interest expense, net for the three and nine months ended September 30, 2024, was $2.2 million and $4.8 million, respectively, compared to $0.8 million and $2.3 million for the same periods in 2023 [134]. - The company's contractual debt obligation under the EdgeCo Loan Agreements was $30.0 million as of September 30, 2024 [146]. Future Outlook - The company anticipates that future results may depend significantly on sales to a small number of large customers, indicating potential revenue volatility [131].