DZS(US:DZSI)2023-05-08 16:00Financial Performance - For the three months ended March 31, 2023, net revenue increased by 17.9% to $90.8 million, compared to $77.0 million in the same period last year [126]. - Access networking infrastructure revenue rose by 9.7% to $79.5 million, driven by higher spending from major customers in Asia [129]. - Cloud software and services revenue surged by 148.0% to $11.4 million, primarily due to increased product and software sales related to the ASSIA Acquisition [128]. - The company reported a net loss of $17.1 million for Q1 2023, compared to a net loss of $3.0 million in Q1 2022, marking a 462.2% increase in losses [126]. - Total operating expenses increased by 48.6% to $45.1 million, with significant rises in research and product development (25.4%) and selling, marketing, general and administrative expenses (39.7%) [126]. Cost and Profitability - Gross profit margin decreased to 33% in Q1 2023 from 35% in Q1 2022, reflecting higher cost of revenue which increased by 21.4% [126]. - Total cost of revenue increased by 21.4% to $61.0 million for the three months ended March 31, 2023, compared to $50.2 million for the same period in 2022 [133]. - Gross profit percentage decreased to 32.8% for the three months ended March 31, 2023, down from 34.8% for the same period in 2022 [133]. - Research and product development expenses rose by 25.4% to $14.9 million for the three months ended March 31, 2023, compared to $11.8 million for the same period in 2022 [135]. - Selling, marketing, general and administrative expenses increased by 39.7% to $24.8 million for the three months ended March 31, 2023, compared to $17.7 million for the same period in 2022 [138]. Cash Flow and Working Capital - Net cash used in operating activities increased by $4.3 million to $15.0 million for the three months ended March 31, 2023, from $10.7 million for the same period in 2022 [151]. - As of March 31, 2023, the Company had $72.2 million in working capital and $28.9 million in unrestricted cash and cash equivalents [145]. - Net cash provided by financing activities totaled $6.6 million for the three months ended March 31, 2023, primarily from net drawings on the Revolving Credit Facility [153]. Debt and Obligations - As of March 31, 2023, the company's debt obligation under the Term Loan was $23.7 million, with $1.3 million scheduled for payment in the next 12 months [124]. - The company's contractual debt obligation under the Term Loan was $24.1 million as of March 31, 2023 [167]. - The company's exposure to interest rate risk is primarily from borrowings under the JPMorgan Credit Agreement, with interest rates ranging from 3.5% to 4.5% per year [166]. Geographic and Customer Concentration - The geographic revenue breakdown showed a 32.4% increase in Asia, contributing $46.8 million to total revenue [130]. - Two customers accounted for 13% of net revenue in Q1 2023, indicating reliance on a small number of large customers for revenue stability [131]. Foreign Exchange and Market Risks - The company reported a net translation loss of $2.1 million due to foreign exchange rate fluctuations for the three months ended March 31, 2023 [169]. - If the USD had appreciated or depreciated by 10% relative to KRW, JPY, EUR, and GBP, the company's operating income for Q1 2023 would have changed by approximately $3.0 million [168]. - If the USD had appreciated or depreciated by 10% relative to EUR, the company's net income for Q1 2023 would have changed by approximately $2.0 million [170]. - The company does not have material exposure to market risk with respect to investments, as they consist primarily of highly liquid investments [165]. - Market risk exposure is primarily due to fluctuations in interest rates and foreign currency exchange risks [164]. Restructuring and Strategic Investments - The Company recorded $3.5 million in restructuring and other charges related to outsourcing manufacturing to Fabrinet for the three months ended March 31, 2023 [139]. - The company anticipates continued investments in strategic research and product development to maximize potential returns [121]. - As of March 31, 2023, net receivables from customers in countries other than the United States represented 86% of total receivables [158].