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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 20, 2024
DZS INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware000-3274322-3509099
(State or Other Jurisdiction
of Incorporation)
(Commission
File No.)
(I.R.S. Employer
Identification No.)
5700 Tennyson Parkway, Suite 400
Plano, TX 75024
(Address of Principal Executive Offices, Including Zip Code)
(469) 327-1531
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueDZSIThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


Item 2.02 Results of Operations and Financial Condition.
On August 20, 2024, DZS Inc. (the “Company”) issued a press release relating to the filing of its Form 10-Q for the quarter ended March 31, 2024 and related financial results. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The Company is also providing (i) the unaudited reconciliation of GAAP to non-GAAP results for reporting periods in 2022 and 2023 as detailed in Exhibit 99.2 and (ii) the unaudited reconciliation of GAAP to non-GAAP results from continuing operations for the first quarter of 2024 as detailed in Exhibit 99.3, and, in each case, is incorporated herein by reference.
The information furnished on this Current Report on Form 8-K, including Exhibit 99.1, 99.2 and 99.3, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.Description
 
99.1
99.2
99.3
104Cover Page Interactive Data File (embedded within the Inline XBRL document)


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 20, 2024DZS Inc.
 
By:/s/ Misty Kawecki
Misty Kawecki
Chief Financial Officer


RELEASE
EXHIBIT 99.1
August 2024
image_0a.jpg
DZS Files Q1 2024 Financial Results
DALLAS, Texas, USA, Aug. 20, 2024 – DZS (OTC: DZSI), a developer of Network Edge, Connectivity and Cloud Software solutions enabling gigabit broadband everywhere, today announced that it has filed its Q1 2024 financial results.
“As previously disclosed, we completed the restatements with respect to 2022 and the first quarter of 2023, as well as the reports for the remaining periods in 2023 and now completed the delayed filing for Q1 2024,” said Charlie Vogt, President and CEO, DZS. “Our priority throughout this process has been thoroughness and accuracy.”
Vogt added, “During the first six months of 2024, we divested our low margin Asia business, acquired NetComm’s fixed wireless, fiber extension, IoT and broadband connectivity business and raised approximately $40 million. On August 13, 2024, we filed our 2022 and 2023 GAAP financials and shortly we expect to provide non-GAAP financials for 2022 and 2023 which will illustrate the adjustments to bridge GAAP to non-GAAP. Today, we filed our Form 10-Q for Q1 2024 which reflects our former Asia business reported as discontinued operations. Our Q1 2024 financial results do not include our newly acquired NetComm business, which closed on June 1, 2024. Our priorities are aligning with customer requirements, completing our numerous FTTx trials currently underway, converting $31.8 million (exclusive of NetComm) of paid inventory as of March 31, 2024, to cash, executing on $102 million of scheduled backlog and capitalizing on our encouraging sales pipeline.”
DZS is taking advantage of new opportunities fueled by the accelerating demands of emerging applications, the industry evolution moving bandwidth and intelligence closer to the network edge and the operational requirements to deliver enhanced network assurance for improving the subscriber experience. The Company continues to advance its fiber, fixed wireless and AI-influenced broadband solutions aligned with service providers spanning North America, Europe, Middle East and Africa (EMEA) and Australia and New Zealand (ANZ) while optimizing its operational cost.
“Q1 2024 represented an industry-wide pause in capital investments due to an over-rotation of inventory by many service providers and delays with government broadband stimulus programs, including the United States Broadband Equity, Access and Deployment (BEAD) Program,” said Misty Kawecki, CFO, DZS. “We are in the final phase of optimizing our cost savings initiatives that began in Q3 2023. We reduced operating expenses 33% in Q1 2024 compared to 2022. We are laser-focused on working through our $102 million of scheduled backlog, transitioning our numerous on-going trials to orders, cultivating a robust sales pipeline and converting our paid inventory to cash which, as of the end of Q1 2024 was $31.8 million, excluding any acquired inventory with NetComm.”
DZS is now current with its Form 10-Q and 10-K filings with the SEC through Q1 2024. The inability to file these reports prior to August 5, 2024, was the reason for the Company’s suspension of trading from Nasdaq and announced delisting notice.
Following the release of second quarter 2024 financial results, DZS intends to host an earnings call to discuss restated results, which will include all of 2022, 2023, the financial results for the first and second quarters of 2024, and the divestiture of its Asia business along with its recent acquisition of NetComm.


About DZS
DZS Inc. (OTC: DZSI) is a developer of Network Edge, Connectivity and Cloud Software solutions enabling gigabit broadband everywhere.
DZS, the DZS logo, and all DZS product names are trademarks of DZS Inc. Other brand and product names are trademarks of their respective holders. Specifications, products, and/or product names are all subject to change.
This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Private Securities Litigation Reform Act of 1995. These statements reflect the beliefs and assumptions of the Company’s management as of the date hereof. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” variations of such words, and similar expressions are intended to identify forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. The Company’s actual results could differ materially and adversely from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, those risk factors contained in the Company’s SEC filings available at www.sec.gov, including without limitation, the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and subsequent filings. In addition, additional or unforeseen affects from the COVID-19 pandemic and the global economic climate may give rise to or amplify many of these risks. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. DZS undertakes no obligation to update or revise any forward-looking statements for any reason.
For further information see: www.DZSi.com
DZS on Twitter: https://twitter.com/dzs_innovation
DZS on LinkedIn: https://www.linkedin.com/company/DZSi/
Investor Inquiries:
Ted Moreau, Vice President, Investor Relations
Email: IR@dzsi.com


Exhibit 99.2
DZS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP results (2022-2023)
($ in thousands, except per share data)

Set forth below are reconciliations of Non-GAAP Cost of Revenue, Non-GAAP Gross Profit, Non-GAAP Operating Expenses, Non-GAAP Operating Income (Loss) (also referred to as Adjusted EBITDA), Non-GAAP Net Income (Loss), and Non-GAAP Net Income (Loss) per Diluted Share to GAAP Cost of Revenue, Gross Profit, Operating Expenses, Operating Income (Loss), Net Income (Loss), and Net Income (Loss) per Diluted Share, respectively, which the Company considers to be the most directly comparable U.S. GAAP financial measures.
Twelve Months Ended December 31, 2022
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$244,046 $113,482 31.7%$150,509 $(37,027)$(41,270)$(1.47)
Adjustments to GAAP amounts:
Depreciation and amortization(1,096)1,096 0.3%(6,029)7,125 7,125 0.25 
Stock-based compensation(801)801 0.2%(15,001)15,802 15,802 0.56 
Headquarters and facilities relocation(827)827 827 0.03 
Acquisition costs(1,150)1,150 1,150 0.04 
Restructuring and other charges— — 0.0%(4,617)4,617 4,617 0.16 
Executive transition(927)927 927 0.03 
Litigation(36)36 36 — 
Bad debt expense, net of recoveries1,153 (1,153)(1,153)(0.04)
Unrealized foreign exchange (gains) losses448 0.02 
Non-GAAP adjustments to tax rate9,328 0.33 
Tax effect on Non-GAAP adjustments(6,192)(0.22)
Adjusted (Non-GAAP) amount$242,149 $115,379 32.3 %$123,075 $(7,696)$(8,355)$(0.30)

Three Months Ended September 30, 2022
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$66,860 $32,030 32.4%$41,815 $(9,785)$(10,954)$(0.39)
Adjustments to GAAP amounts:
Depreciation and amortization(295)295 0.3%(1,814)2,109 2,109 0.08 
Stock-based compensation(280)280 0.3%(4,743)5,023 5,023 0.18 
Headquarters and facilities relocation(827)827 827 0.03 
Acquisition costs(111)111 111 — 
Restructuring and other charges(601)601 601 0.02 
Executive transition(464)464 464 0.02 
Bad debt expense, net of recoveries120 (120)(120)— 
Unrealized foreign exchange (gains) losses643 0.02 
Non-GAAP adjustments to tax rate1,311 0.05 
Tax effect on Non-GAAP adjustments(2,004)(0.07)
Adjusted (Non-GAAP) amount$66,285 $32,605 33.0 %$33,375 $(770)$(1,989)$(0.07)


Three Months Ended June 30, 2022
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$59,663 $23,285 28.1%$33,681 $(10,396)$(12,564)$(0.45)
Adjustments to GAAP amounts:
Depreciation and amortization(303)303 0.4%(1,061)1,364 1,364 0.05 
Stock-based compensation(146)146 0.2%(2,723)2,869 2,869 0.10 
Acquisition costs(571)571 571 0.02 
Restructuring and other charges(356)356 356 0.01 
Executive transition(91)91 91 — 
Bad debt expense, net of recoveries(317)317 317 0.02 
Unrealized foreign exchange (gains) losses(174)(0.01)
Non-GAAP adjustments to tax rate4,146 0.15 
Tax effect on Non-GAAP adjustments(864)(0.03)
Adjusted (Non-GAAP) amount$59,214 $23,734 28.6 %$28,562 $(4,828)$(3,888)$(0.14)

Three Months Ended March 31, 2022
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$46,599 $25,391 35.3%$30,316 $(4,925)$(7,586)$(0.28)
Adjustments to GAAP amounts:
Depreciation and amortization(146)146 0.2%(935)1,081 1,081 0.04 
Stock-based compensation(130)130 0.2%(2,541)2,671 2,671 0.10 
Acquisition costs(51)51 51 — 
Restructuring and other charges(436)436 436 0.02 
Executive transition(247)247 247 0.01 
Bad debt expense, net of recoveries1,227 (1,227)(1,227)(0.04)
Unrealized foreign exchange (gains) losses877 0.03 
Non-GAAP adjustments to tax rate2,977 0.11 
Tax effect on Non-GAAP adjustments(1,113)(0.04)
Adjusted (Non-GAAP) amount$46,323 $25,667 35.7 %$27,333 $(1,666)$(1,586)$(0.05)


Twelve Months Ended December 31, 2023
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$204,102 $40,439 16.5%$169,428 $(128,989)$(135,218)$(4.29)
Adjustments to GAAP amounts:
Depreciation and amortization(586)586 0.2%(7,593)8,179 8,179 0.26 
Stock-based compensation(1,211)1,211 0.5%(14,632)15,843 15,843 0.50 
Acquisition costs313 (313)(313)(0.01)
Restructuring and other charges(6,731)6,731 2.8%(4,491)11,222 11,222 0.36 
Executive transition2 (2)(2)— 
Litigation and restatement(6,257)6,257 6,257 0.20 
Bad debt expense, net of recoveries998 (998)(998)(0.03)
Amortization of capitalized costs(1,133)1,133 1,133 0.04 
Goodwill impairment(12,594)12,594 12,594 0.40 
Long lived assets impairment(3,073)3,073 3,073 0.10 
Loss on debt extinguishment594 0.02 
Unrealized foreign exchange (gains) losses3,765 0.12 
Non-GAAP adjustments to tax rate25,125 0.80 
Tax effect on Non-GAAP adjustments(12,731)(0.40)
Adjusted (Non-GAAP) amount$195,574 $48,967 20.0 %$120,968 $(72,001)$(61,477)$(1.93)
Three Months Ended September 30, 2023
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$47,517 $1,931 3.9%$36,319 $(34,388)$(34,013)$(1.07)
Adjustments to GAAP amounts:
Depreciation and amortization(129)129 0.3%(1,909)2,038 2,038 0.06 
Stock-based compensation(328)328 0.7%(3,370)3,698 3,698 0.12 
Acquisition costs256 (256)(256)(0.01)
Restructuring and other charges(4,673)4,673 9.5%(135)4,808 4,808 0.15 
Litigation and restatement(3,641)3,641 3,641 0.11 
Bad debt expense, net of recoveries473 (473)(473)(0.01)
Amortization of capitalized costs(303)303 303 0.01 
Loss on debt extinguishment375 0.01 
Unrealized foreign exchange (gains) losses(610)(0.02)
Non-GAAP adjustments to tax rate5,384 0.17 
Tax effect on Non-GAAP adjustments(2,807)(0.09)
Adjusted (Non-GAAP) amount$42,387 $7,061 14.3 %$27,690 $(20,629)$(17,912)$(0.56)


Three Months Ended June 30, 2023
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$43,384 $16,964 28.1%$40,525 $(23,561)$(24,836)$(0.80)
Adjustments to GAAP amounts:
Depreciation and amortization(148)148 0.2%(1,917)2,065 2,065 0.07 
Stock-based compensation(499)499 0.8%(3,826)4,325 4,325 0.14 
Acquisition costs228 (228)(228)(0.01)
Restructuring and other charges(557)557 0.9%(594)1,151 1,151 0.04 
Litigation and restatement(246)246 246 0.01 
Bad debt expense, net of recoveries(260)260 260 0.01 
Amortization of capitalized costs(306)306 306 0.01 
Long lived assets impairment(499)499 499 0.02 
Unrealized foreign exchange (gains) losses21 — 
Non-GAAP adjustments to tax rate4,780 0.15 
Tax effect on Non-GAAP adjustments(1,794)(0.06)
Adjusted (Non-GAAP) amount$42,180 $18,168 30.1 %$33,105 $(14,937)$(13,205)$(0.42)
Three Months Ended March 31, 2023
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$47,318 $22,494 32.2%$45,055 $(22,561)$(23,817)$(0.77)
Adjustments to GAAP amounts:
Depreciation and amortization(171)171 0.2%(1,905)2,076 2,076 0.07 
Stock-based compensation(246)246 0.4%(4,240)4,486 4,486 0.14 
Acquisition costs(107)107 107 — 
Restructuring and other charges(4,152)4,152 4,152 0.13 
Executive transition2 (2)(2)— 
Bad debt expense, net of recoveries23 (23)(23)— 
Amortization of capitalized costs(221)221 221 0.01 
Long lived assets impairment(230)230 230 0.01 
Unrealized foreign exchange (gains) losses1,397 0.05 
Non-GAAP adjustments to tax rate5,289 0.17 
Tax effect on Non-GAAP adjustments(2,624)(0.08)
Adjusted (Non-GAAP) amount$46,901 $22,911 32.8 %$34,225 $(11,314)$(8,508)$(0.27)


Non-GAAP Measures
To supplement DZS’s consolidated financial statements presented in accordance with GAAP, DZS reports Adjusted Cost of Revenue, Adjusted Gross Margin, Adjusted Operating Expenses, Adjusted Operating Income (Loss), Adjusted Net Income (including on a per share basis), EBITDA, and Adjusted EBITDA, which are non-GAAP measures DZS believes are appropriate to provide meaningful comparison with, and to enhance an overall understanding of, DZS’s past financial performance and prospects for the future. DZS believes these non-GAAP financial measures provide useful information to both management and investors by excluding specific items that DZS believes are not indicative of core operating results. These items share one or more of the following characteristics: they are unusual and DZS does not expect them to recur in the ordinary course of its business;[1] they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of the Company’s control. Further, each of these non-GAAP measures of operating performance are used by management, as well as industry analysts, to evaluate operations and operating performance and are widely used in the telecommunications and manufacturing industries. Other companies in the telecommunications and manufacturing industries may calculate these metrics differently than DZS does. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP.
DZS defines Adjusted Cost of Revenue as GAAP Cost of Revenue less (i) depreciation and amortization, (ii) stock-based compensation, (iii) restructuring charges, including freight charges and other elevated inventory related costs directly related to the transition to a contract manufacturer, and (iv) the impact of material transactions or events that we believe are not indicative of our core product cost and are not expected to be recurring in nature. We believe Adjusted Cost of Revenue provides the investor more accurate information regarding the actual cost of our products and services, excluding the impact of costs of revenue that are not routine components of our core product cost, for better comparability of our costs of revenue between periods and to other companies.
DZS defines Adjusted Gross Margin as GAAP Gross Margin less (i) depreciation and amortization, (ii) stock-based compensation, (iii) restructuring charges, including freight charges and other elevated inventory related costs directly related to the transition to a contract manufacturer, and (iv) the impact of material transactions or events that we believe are not indicative of our core operating performance and are not expected to be recurring in nature. We believe Adjusted Gross Margin provides the investor more accurate information regarding our core profit margin on sales, excluding the impact of cost of revenue that are not routine components of our core product cost, for better comparability of gross margin between periods and to other companies.
DZS defines Adjusted Operating Expenses as GAAP operating expenses plus or minus (as applicable) (i) depreciation and amortization, (ii) stock-based compensation, and (iii) the impact of material transactions or events that we believe are not indicative of our core operating performance, such as acquisition costs, restructuring and other charges, including termination related benefits, headquarters and facilities relocation, executive transition, bad debt expense primarily related to a large customer in India, restatement related costs, and legal costs related to certain litigation, each of which is not expected to be recurring in nature. We believe Adjusted Operating Expenses provides the investor more accurate information regarding our core operating expenses, which include research and development costs, selling, general and administrative costs, and amortization of intangible assets, excluding the impact of charges that are not routine components of our core operating expenses, for better comparability between periods and to other companies.
DZS defines EBITDA as Net Income (Loss) plus or minus (as applicable) (i) interest expense, net, (ii) income tax provision (benefit), and (iii) depreciation and amortization expense.
DZS defines Adjusted Operating Income (Loss), or Adjusted EBITDA, as GAAP Operating Income (Loss) plus or minus (as applicable) (i) depreciation and amortization, (ii) stock-based compensation, and (iii) the impact of material transactions or events that we believe are not indicative of our core operating performance, such as acquisition costs, restructuring and other charges, including termination related benefits, headquarters and facilities relocation, executive transition, bad debt expense primarily related to a large customer in India, restatement related costs, and legal costs related to certain litigation, each of which is not expected to be recurring in nature. We believe Adjusted Operating Income (Loss) provides the investor more accurate information regarding our core operating Income (Loss), excluding the impact of charges that are not routine components of our core operating expenses, for better comparability between periods and to other companies. The DZS definition of Adjusted Operating Income (Loss) equates to the DZS definition of Adjusted EBITDA.
DZS defines Non-GAAP Net Income (Loss) as GAAP Net Income plus or minus (as applicable) (i) depreciation and amortization, (ii) stock-based compensation, (iii) the impact of material transactions or events that we believe are not indicative of our core operating performance, such as acquisition costs, restructuring and other charges, including termination related benefits and restructuring charges, including freight charges and other elevated inventory related costs directly related to the transition to a contract manufacturer, headquarters and facilities relocation, executive transition, bad debt expense primarily related to a large customer in India, restatement related costs, and legal costs related to certain litigation, each of which is not expected to be recurring in nature, (iv) unrealized foreign exchange gains and losses, (v) a non-GAAP income tax benefit (provision) based on an estimated tax rate applied against forecasted annual non-GAAP income and (vi) i the tax effect of non-GAAP adjustments to Adjusted Net Income and Adjusted EPS. DZS determines non-GAAP income taxes by computing an annual rate for the Company and applying that single rate (rather than multiple rates by jurisdiction) to its consolidated quarterly results. For 2023, the non-GAAP income tax rate was 18.1% and for 2022 the rate was 20.8%. DZS expects that this methodology will provide a consistent rate throughout the year and allow investors to better understand the impact of income taxes on its results. Due to the methodology applied to its estimated annual tax rate, the Company’s estimated tax rate on non-GAAP income will differ from its GAAP tax rate and from its actual tax liabilities. DZS believes Non-GAAP Net Income (Loss) provides the investor more accurate information regarding our core income, excluding the impact of charges that are not routine components of our core product cost or core operating expenses, for better comparability between periods and to other companies.

Exhibit 99.3
DZS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP Results from Continuing Operations
($ in thousands, except per share data)

Set forth below are reconciliations of Non-GAAP Cost of Revenue, Non-GAAP Gross Profit, Non-GAAP Operating Expenses, Non-GAAP Operating Income (Loss) (also referred to as Adjusted EBITDA), Non-GAAP Net Income (Loss), and Non-GAAP Net Income (Loss) per Diluted Share to GAAP Cost of Revenue, Gross Profit, Operating Expenses, Operating Income (Loss), Net Income (Loss), and Net Income (Loss) per Diluted Share, respectively, which the Company considers to be the most directly comparable U.S. GAAP financial measures.
Three Months Ended March 31, 2024 - Continuing Operations
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss)Net Income (Loss) per Diluted Share
GAAP amount$15,054 $12,613 45.6%$23,505 $(10,892)$(13,535)$(0.36)
Adjustments to GAAP amounts:
Depreciation and amortization(71)71 0.3%(1,502)1,573 1,573 0.04 
Stock-based compensation11 (11)0.0%(2,143)2,132 2,132 0.06 
Acquisition costs(52)52 52 — 
Restructuring and other charges— — 0.0%(288)288 288 0.01 
Litigation and restatement(2,666)2,666 2,666 0.07 
Amortization of capitalized costs(303)303 303 0.01 
Unrealized foreign exchange (gains) losses325 0.01 
Non-GAAP adjustments to tax rate3,519 0.09 
Tax effect on Non-GAAP adjustments(1,308)(0.04)
Adjusted (Non-GAAP) amount$14,994 $12,673 45.8 %$16,551 $(3,878)$(3,985)$(0.11)

Three Months Ended March 31, 2023 - Continuing Operations
Cost of RevenueGross ProfitGross Margin PercentageOperating ExpensesOperating Income (Loss)Net Income (Loss) Net Income (Loss) per Diluted Share
GAAP amount$27,202 $17,165 38.7%$34,603 $(17,438)$(20,035)$(0.65)
Adjustments to GAAP amounts:
Depreciation and amortization(104)104 0.2%(1,650)1,754 1,754 0.06 
Stock-based compensation(193)193 0.4%(3,725)3,918 3,918 0.13 
Acquisition costs(107)107 107 — 
Restructuring and other charges(4,152)4,152 4,152 0.13 
Executive transition2 (2)(2)— 
Long lived assets impairment(230)230 230 0.01 
Amortization of capitalized costs(221)221 221 0.01 
Unrealized foreign exchange (gains) losses127 — 
Non-GAAP adjustments to tax rate(1,739)(0.06)
Tax effect on Non-GAAP adjustments5,768 0.19 
Adjusted (Non-GAAP) amount$26,905 $17,462 39.4 %$24,520 $(7,058)$(5,500)$(0.18)


Non-GAAP Measures
To supplement DZS’s consolidated financial statements presented in accordance with GAAP, DZS reports Adjusted Cost of Revenue, Adjusted Gross Margin, Adjusted Operating Expenses, Adjusted Operating Income (Loss), Adjusted Net Income (including on a per share basis), EBITDA, and Adjusted EBITDA, which are non-GAAP measures DZS believes are appropriate to provide meaningful comparison with, and to enhance an overall understanding of, DZS’s past financial performance and prospects for the future. DZS believes these non-GAAP financial measures provide useful information to both management and investors by excluding specific items that DZS believes are not indicative of core operating results. These items share one or more of the following characteristics: they are unusual and DZS does not expect them to recur in the ordinary course of its business;[1] they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of the Company’s control. Further, each of these non-GAAP measures of operating performance are used by management, as well as industry analysts, to evaluate operations and operating performance and are widely used in the telecommunications and manufacturing industries. Other companies in the telecommunications and manufacturing industries may calculate these metrics differently than DZS does. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP.
DZS defines Adjusted Cost of Revenue as GAAP Cost of Revenue less (i) depreciation and amortization, (ii) stock-based compensation, (iii) restructuring charges, including freight charges and other elevated inventory related costs directly related to the transition to a contract manufacturer, and (iv) the impact of material transactions or events that we believe are not indicative of our core product cost and are not expected to be recurring in nature. We believe Adjusted Cost of Revenue provides the investor more accurate information regarding the actual cost of our products and services, excluding the impact of costs of revenue that are not routine components of our core product cost, for better comparability of our costs of revenue between periods and to other companies.
DZS defines Adjusted Gross Margin as GAAP Gross Margin less (i) depreciation and amortization, (ii) stock-based compensation, (iii) restructuring charges, including freight charges and other elevated inventory related costs directly related to the transition to a contract manufacturer, and (iv) the impact of material transactions or events that we believe are not indicative of our core operating performance and are not expected to be recurring in nature. We believe Adjusted Gross Margin provides the investor more accurate information regarding our core profit margin on sales, excluding the impact of cost of revenue that are not routine components of our core product cost, for better comparability of gross margin between periods and to other companies.
DZS defines Adjusted Operating Expenses as GAAP operating expenses plus or minus (as applicable) (i) depreciation and amortization, (ii) stock-based compensation, and (iii) the impact of material transactions or events that we believe are not indicative of our core operating performance, such as acquisition costs, restructuring and other charges, including termination related benefits, headquarters and facilities relocation, executive transition, bad debt expense primarily related to a large customer in India, restatement related costs, and legal costs related to certain litigation, each of which is not expected to be recurring in nature. We believe Adjusted Operating Expenses provides the investor more accurate information regarding our core operating expenses, which include research and development costs, selling, general and administrative costs, and amortization of intangible assets, excluding the impact of charges that are not routine components of our core operating expenses, for better comparability between periods and to other companies.
DZS defines EBITDA as Net Income (Loss) plus or minus (as applicable) (i) interest expense, net, (ii) income tax provision (benefit), and (iii) depreciation and amortization expense.
DZS defines Adjusted Operating Income (Loss), or Adjusted EBITDA, as GAAP Operating Income (Loss) plus or minus (as applicable) (i) depreciation and amortization, (ii) stock-based compensation, and (iii) the impact of material transactions or events that we believe are not indicative of our core operating performance, such as acquisition costs, restructuring and other charges, including termination related benefits, headquarters and facilities relocation, executive transition, bad debt expense primarily related to a large customer in India, restatement related costs, and legal costs related to certain litigation, each of which is not expected to be recurring in nature. We believe Adjusted Operating Income (Loss) provides the investor more accurate information regarding our core operating Income (Loss), excluding the impact of charges that are not routine components of our core operating expenses, for better comparability between periods and to other companies. The DZS definition of Adjusted Operating Income (Loss) equates to the DZS definition of Adjusted EBITDA.
DZS defines Non-GAAP Net Income (Loss) as GAAP Net Income plus or minus (as applicable) (i) depreciation and amortization, (ii) stock-based compensation, (iii) the impact of material transactions or events that we believe are not indicative of our core operating performance, such as acquisition costs, restructuring and other charges, including termination related benefits and restructuring charges, including freight charges and other elevated inventory related costs directly related to the transition to a contract manufacturer, headquarters and facilities relocation, executive transition, bad debt expense primarily related to a large customer in India, restatement related costs, and legal costs related to certain litigation, each of which is not expected to be recurring in nature, (iv) unrealized foreign exchange gains and losses, (v) a non-GAAP income tax benefit (provision) based on an estimated tax rate applied against forecasted annual non-GAAP income and (vi) i the tax effect of non-GAAP adjustments to Adjusted Net Income and Adjusted EPS. DZS determines non-GAAP income taxes by computing an annual rate for the Company and applying that single rate (rather than multiple rates by jurisdiction) to its consolidated quarterly results. For 2023, the non-GAAP income tax rate was 18.1% and for 2022 the rate was 20.8%. DZS expects that this methodology will provide a consistent rate throughout the year and allow investors to better understand the impact of income taxes on its results. Due to the methodology applied to its estimated annual tax rate, the Company’s estimated tax rate on non-GAAP income will differ from its GAAP tax rate and from its actual tax liabilities. DZS believes Non-GAAP Net Income (Loss) provides the investor more accurate information regarding our core income, excluding the impact of charges that are not routine components of our core product cost or core operating expenses, for better comparability between periods and to other companies.

v3.24.2.u1
Cover
Aug. 20, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Aug. 20, 2024
Entity Incorporation, State or Country Code DE
Entity Registrant Name DZS INC.
Entity File Number 000-32743
Entity Tax Identification Number 22-3509099
Entity Address, Address Line One 5700 Tennyson Parkway, Suite 400
Entity Address, City or Town Plano
Entity Address, State or Province TX
Entity Address, Postal Zip Code 75024
City Area Code 469
Local Phone Number 327-1531
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, $0.001 par value
Trading Symbol DZSI
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Entity Central Index Key 0001101680
Amendment Flag false
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