DZS(US:DZSI)2024-11-06 20:28Financial Data and Key Metrics Changes - The company reported Q3 2024 revenue of $38.1 million, a 23% increase quarter-over-quarter and a 67.8% increase year-over-year [4][17] - Non-GAAP adjusted gross margin was 36.7%, up 6.5% from the previous quarter [4][17] - Adjusted EBITDA for Q3 was a loss of $9.3 million, an improvement of $8.2 million or 46.8% compared to Q3 2023 [19] - Cash and cash equivalents at the end of the quarter were $5.7 million, with a significant cash inflow from the divestiture of the network assurance and in-home WiFi management portfolio [19][21] Business Line Data and Key Metrics Changes - The company divested its network assurance and in-home WiFi management portfolio for $34 million, which improved the balance sheet by reducing debt by $15 million and increasing cash by $15 million [6][19] - Adjusted operating expenses increased by $1.9 million or 8.9% in Q3 compared to the same period in 2023, primarily due to the NetComm acquisition [18] Market Data and Key Metrics Changes - The company anticipates improved revenue and profitability in Q4 2024, driven by a growing sales pipeline and scheduled backlog [8][25] - The company expects service providers to return to pre-COVID spending levels and normalized deployment patterns in 2025 [8] Company Strategy and Development Direction - The company has established four key performance initiatives focused on growth, profitability, balance sheet improvement, and cost savings [7][23] - The strategic divestiture aims to create software independence and recalibrate technology focus on core broadband access and connectivity systems [6][12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the first half of 2025, citing improvements in customer inventory management and a positive sales pipeline [29] - The company expects to achieve breakeven on an adjusted EBITDA basis and positive cash results in 2025 [21] Other Important Information - The company has made significant improvements in internal controls, corporate governance, and supply chain management over the past year [16] - The broadband access portfolio was certified as Build America, Buy America compliant, aligning with the $42 billion broadband equity access and deployment program [13] Q&A Session Summary Question: Current visibility into the first half of '25 in the U.S. market - Management noted that they are cautiously optimistic based on scheduled backlog, pipeline analysis, and synergies from the NetComm acquisition [28][29] Question: Large opportunities in the European and Middle Eastern markets - Management highlighted ongoing business with incumbent operators in the Middle East and a significant design win in Europe expected to generate revenue in 2025 [30][32] Question: Competitive landscape for fixed wireless products - Management indicated that the competitive landscape includes traditional incumbents like Nokia, with emerging players like Tarana also present [33] Question: Commentary on gross margin trajectory - Management stated that margins would have been higher without taking inventory reserves, and they aim to sustain margins close to 40% moving forward [34][35]