DZS(US:DZSI)2024-09-05 18:57Financial Data and Key Metrics Changes - The company has restated its financial results, with $17 million of revenue previously recorded in 2022 deferred and not recognized [9] - Revenue for the first half of 2024 was $58.7 million, a decline of 21% year-over-year from $74.9 million in the first half of 2023 [11] - Adjusted gross margin from continuing operations improved to 39.8% in the first half of 2024 from 38.1% in the same period of 2023 [12] Business Line Data and Key Metrics Changes - The divestiture of the ASSIA business in April 2024 represented approximately 50% of the consolidated business, impacting results from continuing operations starting Q1 2024 [10] - Software revenue as a percentage of revenue from continuing operations increased to 17% in the first half of 2024 from 14% in the same period of the prior year [11] Market Data and Key Metrics Changes - Industry revenue associated with shipments of access equipment declined over 25% in 2023 compared to 2022 due to a spending pause by telecom service providers [10] - The company experienced a significant increase in inventory in the second half of 2023, leading to a $25 million charge for excess inventory [10] Company Strategy and Development Direction - The focus for the second half of 2024 and full year 2025 will be on achieving synergies from the NetComm acquisition, drawing down inventory levels, and converting inventory to cash [14] - The acquisition of NetComm is seen as strategic, expected to be accretive and add significant scale and new revenues to the company's connectivity products [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the broadband market, anticipating double-digit growth in orders and revenue in the second half of 2024 [20] - The company aims to be relisted on NASDAQ, with a focus on delivering for customers and generating positive cash flow during the second half of 2024 [16] Other Important Information - The company has approximately $128 million of working capital on the balance sheet as of June 30, 2024, with $75 million of paid inventory [13] - The company has invested approximately $130 million in advancing its broadband access, optical connectivity, and cloud software portfolios over the past few years [19] Q&A Session Summary Question: Insights on fiber opportunities in Europe and the Americas - Management noted that while the Americas business is down, there is optimism about the fiber opportunities in Europe, with expectations for trials to convert in the second half of the year [29][30] Question: Update on the Middle Mile opportunity with Saber - Management highlighted the market opportunity for the Saber-4400, which addresses bottlenecks at the access edge and is now past the initial deployment phase with satisfied customers [33][34] Question: Guidance for the second half and organic growth expectations - Management indicated a cautious approach to guidance, with expectations for breakeven by the end of 2024, driven by the inclusion of NetComm and organic growth [36][38] Question: Update on U.S. rural fiber market opportunities - Management reported progress in the BEAD process and emphasized the importance of product certification for accessing funding, with meaningful dollars expected to flow in the second half of next year [39][40]