DZS Inc. Reports 67.8% Revenue Growth, Improved Profitability in Q3 2024

DZS Inc. reported its financial results for the third quarter and nine months ended September 30, 2024, highlighting significant changes in revenue, profitability, and strategic developments compared to the previous fiscal period.

For the three months ended September 30, 2024, DZS achieved net revenue of $38.1 million, a substantial increase of 67.8% from $22.7 million in the same period of 2023. This growth was primarily driven by a 98.4% rise in revenue from Access Networking Infrastructure, which reached $29.1 million, largely due to contributions from the recently acquired NetComm Wireless. Gross profit for the quarter was $11.2 million, a notable recovery from a loss of $1.0 million in the prior year. However, the company reported an operating loss of $22.0 million, an improvement from the $30.4 million loss in Q3 2023.

For the nine months ended September 30, 2024, total revenue was $96.9 million, slightly down from $97.7 million in the same period of 2023. The gross profit increased to $34.3 million, up 31.1% from $26.1 million, reflecting improved cost management as the cost of revenue decreased significantly. The net loss for the nine months was $22.2 million, a 73.1% reduction from the $82.7 million loss reported in the previous year.

Strategically, DZS completed the divestiture of its Asia operations to DASAN Networks in April 2024, which included the sale of equity interests for $3.8 million and the elimination of approximately $34.3 million in debt. This move was aimed at refocusing the company on the Americas and EMEA markets. Additionally, DZS acquired NetComm Wireless for approximately $8.1 million in cash, with contingent consideration based on revenue thresholds, to enhance its product portfolio and accelerate growth in foreign markets.

The company also reported a significant 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. As of September 30, 2024, DZS's total assets decreased to $178.5 million from $249.4 million at the end of 2023, while total stockholders' equity increased to $32.3 million.

Cash and cash equivalents were reported at $4.3 million, down from $13.8 million at the end of 2023, with a focus on managing liquidity and reducing cash outflows. The company is also addressing material weaknesses in internal controls over financial reporting, particularly in the Asia region, and is committed to enhancing its compliance measures.

Overall, DZS Inc. is navigating a challenging market environment while implementing strategic changes to improve its financial performance and operational efficiency.