Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2022 | Apr. 27, 2022 | |
Cover [Abstract] | ||
Entity Registrant Name | DZS INC | |
Entity Central Index Key | 0001101680 | |
Trading Symbol | DZSI | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2022 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 27,616,165 | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity File Number | 000-32743 | |
Entity Tax Identification Number | 22-3509099 | |
Entity Address, Address Line1 | 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 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Incorporation, State or Country Code | DE | |
Entity Interactive Data Current | Yes | |
Title of each class | Common stock, $0.001 par value | |
Name of each exchange on which registered | NASDAQ |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 34,160 | $ 46,666 |
Restricted cash | 6,343 | 6,808 |
Accounts receivable - trade, net of allowance for doubtful accounts of $17,058 as of March 31, 2022 and $17,735 as of December 31, 2021 | 82,607 | 86,114 |
Other receivables | 9,898 | 10,621 |
Inventories | 66,459 | 56,893 |
Contract assets | 902 | 2,184 |
Prepaid expenses and other current assets | 13,039 | 5,690 |
Total current assets | 213,408 | 214,976 |
Property, plant and equipment, net | 10,277 | 9,842 |
Right-of-use assets from operating leases | 11,751 | 12,640 |
Goodwill | 6,145 | 6,145 |
Intangible assets, net | 4,820 | 5,115 |
Other assets | 9,904 | 8,950 |
Total assets | 256,305 | 257,668 |
Current liabilities: | ||
Accounts payable - trade | 63,774 | 64,258 |
Contract liabilities | 7,103 | 6,091 |
Operating lease liabilities | 3,927 | 4,097 |
Accrued and other liabilities | 16,832 | 16,032 |
Total current liabilities | 91,636 | 90,478 |
Contract liabilities - non-current | 2,881 | 3,044 |
Operating lease liabilities - non-current | 11,029 | 12,103 |
Pension liabilities | 16,106 | 16,527 |
Other long-term liabilities | 3,704 | 3,609 |
Total liabilities | 125,356 | 125,761 |
Commitments and contingencies (Note 13) | ||
Stockholders’ equity: | ||
Common stock, 36,000 shares authorized, 27,603 and 27,505 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively, at $0.001 par value | 27 | 27 |
Additional paid-in capital | 226,163 | 223,336 |
Accumulated other comprehensive loss | (4,793) | (4,457) |
Accumulated deficit | (90,448) | (86,999) |
Total stockholders’ equity | 130,949 | 131,907 |
Total liabilities and stockholders’ equity | $ 256,305 | $ 257,668 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Statement Of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 17,058 | $ 17,735 |
Common stock, authorized (in shares) | 36,000 | 36,000 |
Common stock, issued (in shares) | 27,603 | 27,505 |
Common stock, outstanding (in shares) | 27,603 | 27,505 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Income Statement [Abstract] | ||
Net revenue | $ 77,040 | $ 81,031 |
Cost of revenue | 50,215 | 52,936 |
Gross profit | 26,825 | 28,095 |
Operating expenses: | ||
Research and product development | 11,844 | 11,119 |
Selling, marketing, general and administrative | 17,742 | 31,824 |
Restructuring and other charges | 436 | 6,252 |
Impairment of long-lived assets | 1,735 | |
Amortization of intangible assets | 294 | 262 |
Total operating expenses | 30,316 | 51,192 |
Operating loss | (3,491) | (23,097) |
Interest income | 37 | 42 |
Interest expense | (127) | (249) |
Other income (expense), net | (800) | 972 |
Loss before income taxes | (4,381) | (22,332) |
Income tax provision (benefit) | (1,333) | 893 |
Net loss | (3,048) | (23,225) |
Foreign currency translation adjustments | (268) | (2,270) |
Actuarial loss | (28) | |
Comprehensive loss | $ (3,316) | $ (25,523) |
Net loss per share | ||
Basic | $ (0.11) | $ (0.92) |
Diluted | $ (0.11) | $ (0.92) |
Weighted average shares outstanding | ||
Basic | 27,530 | 25,252 |
Diluted | 27,530 | 25,252 |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Total | Cumulative effect of ASC 326 adoption | Common stock | Additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Accumulated deficitCumulative effect of ASC 326 adoption |
Beginning Balance, Stockholders' equity at Dec. 31, 2020 | $ 93,579 | $ 22 | $ 147,997 | $ (2,124) | $ (52,316) | ||
Beginning Balances, Stockholders' equity (in shares) at Dec. 31, 2020 | 21,958 | ||||||
Issuance of common stock in public offering, net of issuance costs | 59,525 | $ 5 | 59,520 | ||||
Issuance of common stock in public offering, net of issuance costs (in shares) | 4,600 | ||||||
Exercise of stock awards and employee stock plan purchases | 2,569 | 2,569 | |||||
Exercise of stock awards and employee stock plan purchases (in shares) | 325 | ||||||
Stock-based compensation | 1,352 | 1,352 | |||||
Net income loss | (23,225) | (23,225) | |||||
Other comprehensive loss | (2,298) | (2,298) | |||||
Ending Balances, Stockholders' equity at Mar. 31, 2021 | 131,502 | $ 27 | 211,438 | (4,422) | (75,541) | ||
Ending Balances, Stockholders' equity (in shares) at Mar. 31, 2021 | 26,883 | ||||||
Beginning Balance, Stockholders' equity at Dec. 31, 2021 | $ 131,907 | $ (401) | $ 27 | 223,336 | (4,457) | (86,999) | $ (401) |
Beginning Balances, Stockholders' equity (in shares) at Dec. 31, 2021 | 27,505 | 27,505 | |||||
Exercise of stock awards and employee stock plan purchases | $ 156 | 156 | |||||
Exercise of stock awards and employee stock plan purchases (in shares) | 98 | ||||||
Stock-based compensation | 2,671 | 2,671 | |||||
Net income loss | (3,048) | (3,048) | |||||
Subsidiary dissolution | (68) | (68) | |||||
Other comprehensive loss | (268) | (268) | |||||
Ending Balances, Stockholders' equity at Mar. 31, 2022 | $ 130,949 | $ 27 | $ 226,163 | $ (4,793) | $ (90,448) | ||
Ending Balances, Stockholders' equity (in shares) at Mar. 31, 2022 | 27,603 | 27,603 |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Cash flows from operating activities: | ||
Net loss | $ (3,048) | $ (23,225) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 1,081 | 1,265 |
Impairment of long-lived assets and non-cash restructuring | 4,443 | |
Amortization of deferred financing costs | 12 | |
Stock-based compensation | 2,671 | 1,352 |
Provision for inventory write-down | 705 | 666 |
Bad debt expense, net of recoveries | (752) | 14,228 |
Provision for sales returns | 1,448 | 239 |
Provision for warranty | 121 | 269 |
Unrealized loss (gain) on foreign currency transactions | 874 | (883) |
Subsidiary dissolution | (68) | |
Deferred taxes | (134) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,761 | (846) |
Other receivable | 126 | (2,678) |
Inventories | (10,931) | (3,239) |
Contract assets | 1,261 | (267) |
Prepaid expenses and other assets | (7,577) | (1,186) |
Accounts payable | 1,586 | 3,539 |
Contract liabilities | (1,446) | 32 |
Accrued and other liabilities | 456 | (523) |
Net cash used in operating activities | (10,732) | (6,936) |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (1,317) | (1,266) |
Acquisition of business, net of cash acquired | (4,258) | |
Net cash used in investing activities | (1,317) | (5,524) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock in public offerings, net of issuance costs | 59,525 | |
Repayments of short-term borrowings and line of credit | (11,494) | |
Repayments of related party term loan | (29,298) | |
Payments for debt issue costs | (178) | |
Proceeds from exercise of stock awards and employee stock plan purchases | 156 | 2,569 |
Net cash provided by (used in) financing activities | (22) | 21,302 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (903) | 404 |
Net increase in cash, cash equivalents and restricted cash | (12,974) | 9,246 |
Cash, cash equivalents and restricted cash at beginning of period | 53,639 | 54,587 |
Cash, cash equivalents and restricted cash at end of period | 40,665 | 63,833 |
Reconciliation of cash, cash equivalents and restricted cash to statement of financial position | ||
Cash and cash equivalents | 34,160 | 56,818 |
Restricted cash | 6,343 | 6,848 |
Long-term restricted cash | 162 | 167 |
Cash, cash equivalents and restricted cash at end of period | 40,665 | 63,833 |
Cash paid during the period for: | ||
Interest - bank and trade facilities | 36 | 83 |
Interest - related party | 94 | |
Income taxes | $ 283 | $ 1,206 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2022 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization and Summary of Significant Accounting Policies | (1) Organization and Summary of Significant Accounting Policies (a) Description of Business DZS Inc. (referred to, collectively with its subsidiaries, as “DZS” or the “Company”) is a global provider of leading-edge access, 5G transport, and enterprise communications platforms that enable the emerging hyper-connected, hyper-broadband world. The Company provides a wide array of reliable, cost-effective networking technologies, including broadband access, Ethernet switching, mobile backhaul, Passive Optical LAN and software-defined networks, to a diverse customer base. DZS was incorporated under the laws of the state of Delaware in June 1999 . The Company is headquartered in Plano, Texas with flexible in-house production facilities in Seminole, Florida, and contract manufacturers located in China, India, Korea and Vietnam. The Company also maintains offices to provide sales and customer support at global locations. (b) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 3 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements include the accounts of the Company and its wholly owned subsidiaries. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 9, 2022. For a complete description of what the Company believes to be the critical accounting policies and estimates used in the preparation of its unaudited condensed consolidated financial statements, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. All intercompany transactions and balances have been eliminated in consolidation. Certain prior-year amounts have been reclassified to conform to the current-quarter presentation. The unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the current interim period are not necessarily indicative of results to be expected for the current year or any other period. (c) Risks and Uncertainties The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, assuming the Company will continue as a going concern. The COVID-19 pandemic continued to adversely affect significant portions of our business and our financial condition and results of operations in the first quarter of 2022. T he emergence of the Omicron variant in late 2021 with a resulting increase in COVID cases in early 2022 resulted in re-implementation of various measures, including travel bans and restrictions, limitations on public and private gatherings, business closures or operating restrictions, social distancing, and shelter-in-place orders. The health effects of the pandemic and the above measures taken in response thereto have had an effect on the global economy in general and have materially impacted and will likely continue to impact the Company’s financial condition, results of operations and cash flows. Given the ongoing and dynamic nature of the virus and its variants, and the worldwide response related thereto, it is difficult to predict the full impact of the COVID-19 pandemic on our business. We have experienced and continue to experience disruptions in our supply chain due to the pandemic, which has also impacted and may adversely impact our operations (including, without limitation, logistical and other operational costs) and the operations of some of our key suppliers. Supply chain pricing, freight and logistics costs, product and component availability, and extended lead-times became a challenge in 2021 and continue into 2022 as the world economy recovers from the COVID-19 pandemic. As we continue to incur elevated costs for components and expedite fees, our supply chain and operations teams continue to focus on managing through a constrained environment, thereby enabling DZS to maximize shipments despite elongated lead times. We remain cautious about continued supply chain headwinds that challenge the industry and anticipate a constrained supply chain environment to persist throughout 2022. For additional risks to the corporation related to the COVID-19 pandemic, see Item 1A, Risk Factors of our 2021 Form 10-K. (d) Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. (e) Disaggregation of Revenue The following table presents revenues by source (in thousands): Three Months Ended March 31, 2022 2021 Products $ 72,462 $ 76,252 Services and other 4,578 4,779 Total $ 77,040 $ 81,031 The following table present revenues by geographical concentration (in thousands): Three Months Ended March 31, 2022 2021 Americas $ 23,061 $ 20,169 Europe, Middle East, Africa 18,649 17,918 Asia 35,330 42,944 Total $ 77,040 $ 81,031 (f) Concentration of Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash, accounts receivables, and contract assets. Cash, cash equivalents and restricted cash consist of financial deposits and money market accounts that are principally held with various domestic and international financial institutions with high credit standing. The Company’s customers include competitive and incumbent local exchange carriers, competitive access providers, internet service providers, wireless carriers and resellers serving these markets. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Allowances are maintained for potential doubtful accounts based upon the expected collectability of accounts receivable using historical loss rates adjusted for customer-specific factors and current economic conditions. The Company performs periodic assessments of its customers’ liquidity and financial condition through analysis of information obtained from credit rating agencies, financial statement review and historical and current collection trends. Activity under the Company’s allowance for doubtful accounts is comprised as follows (in thousands): Three Months Ended March 31, 2022 2021 Balance at beginning of period $ 17,735 $ 3,954 Charged to expense, net of recoveries ( 752 ) 14,228 Utilization/write offs/exchange rate differences — ( 94 ) Cumulative effect of ASC 326 adoption 401 — Foreign exchange impact ( 326 ) ( 148 ) Balance at end of period $ 17,058 $ 17,940 For the three months ended March 31, 2022, two customers accounted for 13 % and 12 % o f net revenue, respectively. For the three months ended March 31, 2021, two customers accounted for 18 % and 10 % of net revenue, respectively. As of March 31, 2022, no customers represented more than 10 % of net accounts receivable. As of December 31, 2021, two customers represented 26 % and 10 % of net accounts receivable, respectively. As of March 31, 2022, and December 31, 2021, net accounts receivables from customers in countries other than the United States represented 77 % and 79 %, respectively. In 2017, the Company entered into an agreement with a customer in India to supply product for a state sponsored broadband project. The Company substantially completed its obligations under the agreement in 2018. The Company billed the customer, which is a state government sponsored entity, approximately $ 59.0 million and collected payments of approximately $ 41.7 million by December 31, 2020. In late March 2021, the customer’s state government parent experienced difficulty passing a budget impacting the ability of the customer to make remaining agreed-upon payments to us. In light of this development, the Company recorded an allowance that covered the entire balance unpaid by the customer. Subsequent to March 2021, the Company recovered approximately $ 1.9 million of accounts receivable related to the customer. As of March 31, 2022 the Company has a recorded allowance for doubtful accounts of $ 14.8 million related to this receivable. The Company will continue to pursue collection of the entire outstanding balance and any amounts collected will be recognized in the period which they are received. In the event the Company’s efforts to collect from this customer prove unsuccessful, DZS may seek payment through other means, including through legal action. (g) Business Combinations The Company allocates the fair value of purchase consideration to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets and certain tangible assets such as inventory. Critical estimates in valuing certain tangible and intangible assets include but are not limited to future expected cash flows from the underlying assets and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (which cannot exceed one year from the acquisition date), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date. When the consideration transferred by the Company in a business combination includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the total consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are made retrospectively, with corresponding adjustments against goodwill. Changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments are made in the current period, with corresponding adjustments recognized in earnings. (h) Restructuring and Other Charges Restructuring and other charges primarily consists of severance and other termination benefits and non-cash impairment charges related to right-of-use assets from operating leases related to the restructuring activities in Hanover, Germany and Ottawa, Canada. The Company recognizes contractual termination benefits when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated. The Company recognizes one-time employee termination benefits when (i) management commits to a plan of termination, (ii) the plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date, (iii) the plan establishes the terms of the benefit arrangement in sufficient detail to enable employees to determine the type and amount of benefits they will receive, and (iv) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. These charges are included in restructuring and other charges in the unaudited condensed consolidated statement of comprehensive income (loss). (i) Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses , ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses , and ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief , which provided additional implementation guidance on the previously issued ASU. The Company adopted the updated guidance on January 1, 2022 , utilizing the modified retrospective transition method and recorded a cumulative-effect adjustment of $ 0.4 million to retained earnings. In March 2020 , the FASB issued ASU No. 2020-04 (Topic 848), Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. The standard was effective upon issuance and may generally be applied through December 31, 2022, to any new or amended contracts, hedging relationships, and other transactions that reference LIBOR. The ASU is not expected to have a material impact on our consolidated financial statements. |
Business Combinations
Business Combinations | 3 Months Ended |
Mar. 31, 2022 | |
Business Combinations [Abstract] | |
Business Combinations | (2) Business Combinations Optelian Acquisition On February 5, 2021, the Company acquired Optelian Access Networks Corporation (“Optelian”), a corporation incorporated under the laws of Canada and registered extra-provincially in the Province of Ontario, pursuant to an acquisition agreement whereby the Company purchased all the outstanding shares of Optelian (the “Optelian Acquisition”). Following the closing of the Optelian Acquisition, Optelian became the Company’s wholly owned subsidiary. Optelian was a leading optical networking solution provider. This acquisition introduced the “O-Series” to the DZS portfolio of carrier grade optical networking products with 100 gigabits per second (Gig) and above capability, expanding the DZS product portfolio by providing environmentally hardened, high capacity, and flexible solutions at the network edge. The purchase price of $ 7.5 million included cash paid to the shareholders and option holders of Optelian, cash paid to retire Optelian's outstanding debt on the date of acquisition, and contingent payments to shareholders. The payment to shareholders and option holders includes a $ 0.3 million holdback and $ 1.9 million contingent consideration based on a certain percentage of future revenue of certain Optelian products through the end of 2023. We completed the purchase price allocation for Optelian acquisition in 2021. The purchase price allocation resulted in the recognition of goodwill of approximately $ 1.9 million, which primarily related to the expected synergies from combining operations. RIFT Acquisition On March 3, 2021, the Company acquired substantially all of the assets of RIFT, Inc., a network automation solutions company, and all the outstanding shares of RIFT.IO India Private Limited, a wholly owned subsidiary of RIFT, Inc. (collectively “RIFT”). RIFT developed a carrier-grade RIFT.ware software platform that simplifies the deployment of any slice, service, or application on any cloud. The total purchase consideration was $ 0.5 million, including a $ 0.2 million holdback that was released in April of 2021 following the fulfillment of certain requirements in the purchase agreement. We completed the purchase price allocation for RIFT acquisition in 2021. The purchase price allocation resulted in the recognition of goodwill of approximately $ 0.2 million, which primarily related to the expected synergies from combining operations. |
Fair Value Measurement
Fair Value Measurement | 3 Months Ended |
Mar. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | (3) Fair Value Measurement The Company utilizes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels: Level 1 Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable Assets and Liabilities Measured at Fair Value on a Recurring Basis: The carrying values of financial instruments such as cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The Company classifies its contingent liability from Optelian acquisition within Level 3 as it includes inputs not observable in the market. The Company estimates the fair value of contingent consideration as the present value of the expected contingent payments, determined using the revenue forecast for certain Optelian products through the end of 2023. The fair value of contingent liability is generally sensitive to changes in the revenue forecast. As of March 31, 2022 and December 31, 2021, the Company’s Level 3 contingent liability was $ 2.2 million and $ 2.1 million, respectively. During the three months ended March 31, 2022, the Company recorded $ 0.1 million expense related to the change in fair value of the Company’s contingent liability. The change in fair value is included in selling, marketing, general and administrative expenses on the unaudited condensed consolidated statement of comprehensive income (loss). |
Cash and Cash Equivalents and R
Cash and Cash Equivalents and Restricted Cash | 3 Months Ended |
Mar. 31, 2022 | |
Cash And Cash Equivalents [Abstract] | |
Cash, Cash Equivalents and Restricted Cash | (4) Cash, Cash Equivalents and Restricted Cash As of March 31, 2022 and December 31, 2021, the Company's cash, cash equivalents and restricted cash consisted of financial deposits. Cash, cash equivalents and restricted cash held within the U.S. totaled $ 8.7 million and $ 22.3 million as of March 31, 2022 and December 31, 2021, respectively. Cash, cash equivalents and restricted cash held within the U.S. are held at FDIC insured depository institutions. Cash, cash equivalents and restricted cash held outside the U.S. totaled $ 32.0 million and $ 31.3 million as of March 31, 2022 and December 31, 2021, respectively. Restricted cash consisted primarily of cash collateral for performance bonds and warranty bonds. Long-term restricted cash was $ 0.2 million as of March 31, 2022 and December 31, 2021 and is included in other assets on the unaudited condensed consolidated balance sheets. |
Balance Sheet Details
Balance Sheet Details | 3 Months Ended |
Mar. 31, 2022 | |
Balance Sheet Related Disclosures [Abstract] | |
Balance Sheet Details | (5) Balance Sheet Details Balance sheet detail as of March 31, 2022 and December 31, 2021 is as follows (in thousands): Inventories March 31, 2022 December 31, 2021 Raw materials $ 45,527 $ 34,512 Work in process 1,216 1,427 Finished goods 19,716 20,954 Total inventories $ 66,459 $ 56,893 Inventories are stated at the lower of cost or net realizable value, with cost being computed based on an adjusted standard basis, which approximates actual cost on an average or first-in, first-out basis. Property, plant and equipment March 31, 2022 December 31, 2021 Property, plant and equipment, net: Machinery and equipment $ 17,090 $ 14,278 Leasehold improvements 5,251 5,219 Computers and software 3,278 3,217 Furniture and fixtures 1,726 1,771 Construction in progress and other 1,052 2,937 28,397 27,422 Less: accumulated depreciation and amortization ( 17,971 ) ( 17,394 ) Less: government grants ( 149 ) ( 186 ) Total property, plant and equipment, net $ 10,277 $ 9,842 Depreciation expense associated with property, plant and equipment was $ 0.8 million and $ 0.9 million for the three months ended March 31, 2022 and 2021, respectively. The Company receives grants from certain foreign government entities mainly to support capital expenditures in the region. Such grants are deferred and are generally refundable to the extent the Company does not utilize the funds for qualifying expenditures. Once earned, the Company records the grants as a contra amount to the assets and amortizes such amount over the useful lives of the related assets as a reduction to depreciation expense. Warranties The Company accrues warranty costs based on historical trends for the expected material and labor costs to provide warranty services. The Company's standard warranty period is one year from the date of shipment with the ability for customers to purchase an extended warranty of up to five years from the date of shipment. The following table summarizes the activity related to the product warranty liability: Three Months Ended March 31, 2022 2021 Balance at beginning of period $ 1,981 $ 1,522 Charged to cost of revenue 121 269 Claims and settlements ( 149 ) ( 267 ) Foreign exchange impact ( 17 ) 56 Balance at end of period $ 1,936 $ 1,580 Contract Balances The Company records contract assets when it has a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. The majority of the Company's performance obligations in its contracts with customers relate to contracts with duration of less than one year . The opening and closing balances of current and long-term contract assets and contract liabilities related to contracts with customers are as follows: Contract Contract December 31, 2021 $ 2,184 $ 9,135 March 31, 2022 902 9,984 Increase (decrease) $ ( 1,282 ) $ 849 The decrease in contract assets during the three months ended March 31, 2022 was primarily due to invoicing that occurred in 2022 from unbilled balances reflected as contract assets as of December 31, 2021. The increase in contract liabilities during the three months ended March 31, 2022 was primarily due to amounts being invoiced for certain customers that have not yet met the revenue recognition criteria. The amount of revenue recognized in the three months ended March 31, 2022 that was included in the prior period contract liability balance was $ 2.4 million. This revenue consists of services provided to customers who had been invoiced prior to the current year. We expect to recognize approximately 71 % of outstanding contract liabilities as revenue over the next 12 months and the remainder thereafter. The balance of contract cost deferred as of March 31, 2022 and December 31, 2021 was $ 0.6 million and $ 0.8 million , respectively. During the three months ended March 31, 2022, the Company recorde d $ 0.2 million in amortization related to contract cost deferred as of December 31, 2021. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2022 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | (6) Goodwill and Intangible Assets The following table summarizes the activity related to goodwill (in thousands): March 31, 2022 2021 Balance at beginning of period, gross $ 7,148 $ 4,980 Accumulated impairment at beginning of period ( 1,003 ) ( 1,003 ) Goodwill from acquisitions — 1,698 Balance at end of period $ 6,145 $ 5,675 Intangible assets consisted of the following (in thousands): March 31, 2022 Gross Carrying Accumulated Net Developed technology $ 5,007 $ ( 3,559 ) $ 1,448 Customer relationships 5,730 ( 3,041 ) 2,689 In-process research and development 890 ( 207 ) 683 Total intangible assets, net $ 11,627 $ ( 6,807 ) $ 4,820 December 31, 2021 Gross Carrying Accumulated Net Developed technology $ 5,007 $ ( 3,464 ) $ 1,543 Customer relationships 5,730 ( 2,886 ) 2,844 In-process research and development 890 ( 162 ) 728 Total intangible assets, net $ 11,627 $ ( 6,512 ) $ 5,115 Amortization expense associated with intangible assets for the three months ended March 31, 2022 and 2021 was $ 0.3 million and $ 0.4 million, respectively. The following table presents the future amortization expense of the Company’s intangible assets as of March 31, 2022 (in thousands): Remainder of 2022 $ 883 2023 1,177 2024 1,177 2025 1,177 2026 406 Total $ 4,820 |
Debt
Debt | 3 Months Ended |
Mar. 31, 2022 | |
Debt Disclosure [Abstract] | |
Debt | (7) Debt The Company had no debt obligations as of March 31, 2022 and December 31, 2021. During the first half of 2021, the Company paid off the outstanding balance of debt with related parties, foreign banks and other lending institutions. The Company has no contractual principal payments due in the next five years. Bank and Trade Facilities - Foreign Operations During prior periods, certain of the Company's foreign subsidiaries entered into financing arrangements with foreign banks and other lending institutions consisting primarily of revolving lines of credit, trade facilities, term loans and export development loans. During 2021, the Company paid the entire outstanding balance under such financing arrangements. Related Party Debt During prior periods, certain of the Company's subsidiaries entered into term loan arrangements with DASAN Networks, Inc. (“DNI”), a related party as discussed in Note 10. During 2021, the entire outstanding balance on these term loans was repaid. JPMorgan Credit Facility On February 9, 2022, the Company entered into a Credit Agreement with the Company, as borrower, certain subsidiaries of the Company, as guarantors, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for revolving loans in an aggregate principal amount of up to $ 30 million, up to $ 15 million of which is available for letters of credit. The Credit Agreement matures on February 9, 2024 . The maximum amount that the Company can borrow under the Credit Agreement is subject to a borrowing base, which is based on a percentage of eligible accounts receivable and eligible inventory, subject to reserves and other adjustments, plus $ 10 million. Loans under the Credit Agreement bear interest at the Company’s option at (i) the prime rate plus 2.00 %, (ii) the adjusted term SOFR rate plus 2.90 % or (iii) the adjusted daily simple SOFR rate plus 2.90 %. The Company pays a per annum fee of 2.90 % on all letters of credit issued under the Credit Agreement, and a commitment fee of 0.25 % per annum on the unused revolving credit availability under the Credit Agreement. As of March 31, 2022, there was no amount outstanding under the revolving credit facility. The Company was in compliance with all debt covenants as of March 31, 2022. |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Mar. 31, 2022 | |
Compensation And Retirement Disclosure [Abstract] | |
Employee Benefit Plans | (8) Employee Benefit Plans Defined Contribution Plans The Company maintains a 401(k) plan for its employees in the US whereby eligible employees may contribute up to a specified percentage of their earnings, on a pretax basis, subject to the maximum amount permitted by the Internal Revenue Code. Under the 401(k) plan, the Company made discretionary contributions to the plan in 2021. For the three months ended March 31, 2022 and 2021, the Company recorded an expense of $ 0.2 million and $ 0.1 million, respectively. The Company maintains a defined contribution plan for its employees in Korea. Under the defined contribution plan, the Company contributes the equivalent of 8.3 % of an employee's gross salary into the plan. For the three months ended March 31, 2022 and 2021, the Company recorded an expense of $ 0.3 million. Defined Benefit Plans The Company sponsors defined benefit plans for its employees in Germany and Japan. Defined benefit plans provide pension benefits based on compensation and years of service. The Germany plans were frozen as of September 30, 2003 and have not been offered to new employees after that date. The Company has recorded the underfunded status as of March 31, 2022 and December 31, 2021 as a long-term liability on the unaudited condensed consolidated balance sheets. The accumulated benefit obligation for the plans in Germany and Japan was $ 16.1 million and $ 16.5 million as of March 31, 2022 and December 31, 2021, respectively. Periodic benefit costs for the three months ended March 31, 2022 and 2021 were $ 0.1 million. The Company holds life insurance contracts, with the Company as beneficiary, in the amount of $ 2.8 million as of March 31, 2022 and $ 2.9 million as of December 31, 2021, respectively, related to individuals under the pension plans. The Company records these insurance contracts based on their cash surrender value at the balance sheet dates. These insurance contracts are classified as other assets on the Company’s unaudited condensed consolidated balance sheet. The Company intends to use any proceeds from these policies to fund the pension plans. However, since the Company is the beneficiary on these policies, these assets have not been designated pension plan assets. |
Restructuring and Other Charges
Restructuring and Other Charges | 3 Months Ended |
Mar. 31, 2022 | |
Restructuring And Related Activities [Abstract] | |
Restructuring and Other Charges | (9) Restructuring and Other Charges In 2021, the Company made the strategic decision to relocate manufacturing functions of DZS GmbH and Optelian to Seminole, Florida and to transition the above subsidiaries to sales and research and development centers. The Company incurred approximately $ 12.7 million of restructuring and other charges since the beginning of its restructuring activities in the first quarter of 2021. For the three months ended March 31, 2022, the Company recorded $ 0.4 million of restructuring related costs, consisting primarily of logistics costs and professional services related to legal and accounting support. For the three months ended March 31, 2021, the Company recorded $ 6.3 million of restructuring related costs, consisting primarily of severance and other termination related benefits of $ 3.5 million, an impairment of long-lived assets charge of $ 2.7 million primarily related to right-of-use assets from operating leases, and $ 0.1 million of other charges. The Company paid in full its liability related to termination benefits as of March 31, 2022. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | (10) Related Party Transactions Related Party Debt and Guarantees The following table sets forth payment guarantees of the Company's obligations as of March 31, 2022 that have been provided by DNI. DNI owns approximately 36.6 % of the outstanding shares of the Company's common stock. The amount guaranteed exceeds the principal amounts of outstanding obligations due to collateral requirements by the banks. Guarantor Amount Guaranteed Description of Obligations Guaranteed Dasan Networks, Inc. $ 4,375 Payment guarantee to Industrial Bank of Korea Dasan Networks, Inc. 1,486 Payment guarantee to Shinhan Bank $ 5,861 Other Related Party Transactions Sales, cost of revenue, research and product development, selling, marketing, general and administrative, interest expense and other expenses to and from related parties were as follows (in thousands) for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 Counterparty Sales Cost of Research Selling, Interest Other Dasan Networks, Inc. $ 198 $ 177 $ 90 $ 317 $ 17 DS Commerce, Inc. — 11 1 11 — — $ 198 $ 188 $ 91 $ 328 $ — $ 17 Three Months Ended March 31, 2021 Counterparty Sales Cost of Research Selling, Interest Other Dasan Networks, Inc. $ 1,770 $ 1,655 $ 261 $ 402 $ 132 $ 85 Dasan Invest Co., Ltd. — 10 46 18 — — $ 1,770 $ 1,665 $ 307 $ 420 $ 132 $ 85 The Company has entered into sales agreements with DNI to sell certain services and finished goods produced by the Company. The Company also has an agreement with DNI in which DNI acts as a sales channel to third party customers. The above transactions are included in sales and cost of revenue on the unaudited condensed consolidated statement of comprehensive income (loss). Sales to DNI are recorded net of royalty fees for a sales channel arrangement. DNS Korea had two separate lease agreements with DNI related to the lease of office space and warehouse facilities. In the first quarter of 2022, DNI sold the above facilities to the unrelated third party, and the respective leases were reassigned to the new landlord. Operating lease cost related to the DNI leases totaled $ 0.2 million a nd $ 0.5 million for three months ended March 31, 2022 and 2021, respectively. Operating lease expense is allocated between cost of revenue, research and product development, and selling, marketing, general and administrative expenses on the unaudited condensed consolidated statement of comprehensive income (loss). Deposits for the DNI leases were included in other assets on the consolidated balance sheets as of December 31, 2021. DNS Korea had an agreement with Dasan Invest Co., Ltd. to provide IT services for the Company. The agreement was terminated in the fourth quarter of 2021 and the new agreement was signed with DS Commerce, Inc. Both entities have an affiliation with DZS board members. The expense related to the above IT services is allocated between cost of revenue, research and product development, and selling, marketing, general and administrative expenses on the unaudited condensed consolidated statement of comprehensive income (loss). Interest expense represents interest paid to DNI for the related party debt. Refer to Note 7 Debt for further information. Other expenses represent charges from DNI for its payment guarantees relating to the Company's borrowings. The Company pays DNI a guarantee fee which is calculated as 0.9 % of the guaranteed amount. Refer to the table above for further information about obligations guaranteed by DNI. Balances of Receivables and Payables with Related Parties Balances of receivables and payables arising from sales and purchases of goods and services with related parties as of March 31, 2022 and December 31, 2021 were included in the following balance sheet captions on the unaudited condensed consolidated balance sheets, as follows (in thousands): As of March 31, 2022 Counterparty Account Other Other assets Accounts Dasan Networks, Inc. $ 207 $ 368 $ — $ 202 DS Commerce, Inc. — — — 25 $ 207 $ 368 $ — $ 227 As of December 31, 2021 Counterparty Account Other Other assets Accounts Dasan Networks, Inc. $ 181 $ 215 $ 691 $ 785 DS Commerce, Inc. — — — 46 $ 181 $ 215 $ 691 $ 831 |
Net Income (Loss) Per Share
Net Income (Loss) Per Share | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
Net Income (Loss) Per Share | (11) Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net income (loss) per share gives effect to common stock equivalents; however, potential common stock equivalents are excluded if their effect is antidilutive. Potential common stock equivalents are composed of incremental shares of common stock issuable upon the exercise of stock options and the vesting of restricted stock units. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same. The following table is a reconciliation of the numerator and denominator in the basic and diluted net income (loss) per share calculation (in thousands, except per share data) for the three months ended March 31, 2022 and 2021: Three months ended March 31 2022 2021 Net income (loss) $ ( 3,048 ) $ ( 23,225 ) Weighted average number of shares outstanding: Basic 27,530 25,252 Effect of dilutive securities: Stock options, restricted stock units and share awards — — Diluted $ 27,530 $ 25,252 Net income (loss) per share: Basic $ ( 0.11 ) $ ( 0.92 ) Diluted $ ( 0.11 ) $ ( 0.92 ) The following table sets forth potential common stock that is not included in the diluted net income (loss) per share calculation above because their effect would be anti-dilutive for the periods indicated (in thousands): Three months ended March 31, 2022 2021 Outstanding stock options 939 628 Unvested restricted stock units 278 197 |
Leases
Leases | 3 Months Ended |
Mar. 31, 2022 | |
Leases [Abstract] | |
Leases | (12) Leases The Company leases certain properties and buildings (including manufacturing facilities, warehouses, and office spaces) and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists of operating leases which expire at various dates through 2028. Assets and liabilities related to operating leases are included in the consolidated balance sheets as right-of-use assets from operating leases, operating lease liabilities - current and operating lease liabilities - non-current. The Company recognizes minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. The Company amortizes this expense over the term of the lease beginning with the date of initial possession, which is the date the lessor makes an underlying asset available for use. For the three months ended March 31, 2022 and 2021, the Company recognized lease expense of $ 1.2 million and $ 1.6 million, respectively. The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2022 (in thousands): Remainder of 2022 $ 3,572 2023 4,380 2024 3,825 2025 2,550 2026 1,666 Thereafter 830 Total operating lease payments 16,823 Less: imputed interest ( 1,867 ) Total operating lease liabilities $ 14,956 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2022 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (13) Commitments and Contingencies Performance Bonds In the normal course of operations, from time to time, the Company arranges for the issuance of various types of performance bonds, such as performance, warranty, and bid bonds, in the form of bank guarantees or surety bonds. These instruments are arrangements under which the financial institution or surety provides a financial guarantee that the Company will perform in accordance with contractual or legal obligations. As of March 31, 2022, the Company had $ 8.0 million of performance bonds in the form of bank guarantees or surety bonds guaranteed by third parties. Trade Compliance Matter During the first quarter of 2022, the Company received a notice letter from the Office of the Commissioner of Customs of the India Department of Revenue (the “Notice”) claiming the Company had mis-declared and wrongly classified certain products imported to India by the Company at the time of clearance of customs. The Notice claims that due to such mis-declaration and wrong classification of the imported products, the Company and its contract manufacturer in India underpaid duties approximating $ 3.9 million related to such products. The Company intends to vigorously defend itself in this matter. As we have not yet received the full contents of the Notice, we are unable to estimate a potential loss related to this matter, if any, which could range up to the full amount of the unpaid duties, plus penalties and interest. In addition to the Notice discussed above, from time to time, the Company is subject to various legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, the Company records an accrual for legal contingencies that it has determined to be probable to the extent that the amount of the loss can be reasonably estimated. The Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the results of operations and cash flows of the reporting period in which the ruling occurs, or future periods. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (14) Income Taxes Income tax benefit for the three months ended March 31, 2022 was approximately $ 1.3 million on pre-tax loss of $ 4.4 million. Income tax expense for the three months ended March 31, 2021 was approximately $ 0.9 million on pre-tax loss of $ 22.3 million. As of March 31, 2022, the income tax rate varied from the United States statutory income tax rate primarily due to valuation allowances in North America, EMEA and Asia, as well as foreign and state income tax rate differentials. The total amount of unrecognized tax benefits, including interest and penalties, as of March 31, 2022 was $ 4.2 million. There were no significant changes to unrecognized tax benefits during the three months ended March 31, 2022. The Company does not anticipate any significant changes with respect to unrecognized tax benefits within the next twelve months. |
Enterprise-Wide Information
Enterprise-Wide Information | 3 Months Ended |
Mar. 31, 2022 | |
Segment Reporting [Abstract] | |
Enterprise-Wide Information | (15) Enterprise-Wide Information The Company is a global provider of ultra-broadband network access solutions and communications platforms deployed by advanced Tier 1, national and regional service providers and enterprise customers. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the Company unit level. Accordingly, the Company is considered to be in a single operating segment. The Company’s chief operating decision maker is the Company’s Chief Executive Officer, who reviews financial information presented on a consolidated basis accompanied with disaggregated revenues by geographic region for purposes of making operating decisions and assessing financial performance. The Company attributes revenue from customers to individual countries based on location shipped. Refer to Note 1(e) Disaggregation of Revenue for the required disclosures on geographical concentrations and revenues by source. The Company's property, plant and equipment, net of accumulated depreciation, were located in the following geographical areas (in thousands) as of March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 United States $ 6,826 $ 6,105 Korea 2,169 2,367 Japan 736 799 Canada 270 280 Germany 185 210 Other 91 81 $ 10,277 $ 9,842 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | (16) Subsequent Events On April 29, 2022 , t he Company entered an Asset Purchase Agreement to acquire certain assets and liabilities of Adaptive Spectrum and Signal Alignment, Incorporated (“ASSIA”) a software quality-of-experience innovator. These assets include the CloudCheck® Wi-Fi experience management and Expresse® access network optimization software platforms and the acquisition will expand DZS’ footprint into approximately 50 service providers including many Tier I marquee operators in North America, Europe and Asia. The transaction is expected to close in the second quarter of 2022, subject to satisfaction of closing conditions, including receipt of ASSIA shareholder approval. |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Basis of Presentation | (b) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 3 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements include the accounts of the Company and its wholly owned subsidiaries. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 9, 2022. For a complete description of what the Company believes to be the critical accounting policies and estimates used in the preparation of its unaudited condensed consolidated financial statements, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. All intercompany transactions and balances have been eliminated in consolidation. Certain prior-year amounts have been reclassified to conform to the current-quarter presentation. The unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the current interim period are not necessarily indicative of results to be expected for the current year or any other period. |
Risks and Uncertainties | (c) Risks and Uncertainties The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, assuming the Company will continue as a going concern. The COVID-19 pandemic continued to adversely affect significant portions of our business and our financial condition and results of operations in the first quarter of 2022. T he emergence of the Omicron variant in late 2021 with a resulting increase in COVID cases in early 2022 resulted in re-implementation of various measures, including travel bans and restrictions, limitations on public and private gatherings, business closures or operating restrictions, social distancing, and shelter-in-place orders. The health effects of the pandemic and the above measures taken in response thereto have had an effect on the global economy in general and have materially impacted and will likely continue to impact the Company’s financial condition, results of operations and cash flows. Given the ongoing and dynamic nature of the virus and its variants, and the worldwide response related thereto, it is difficult to predict the full impact of the COVID-19 pandemic on our business. We have experienced and continue to experience disruptions in our supply chain due to the pandemic, which has also impacted and may adversely impact our operations (including, without limitation, logistical and other operational costs) and the operations of some of our key suppliers. Supply chain pricing, freight and logistics costs, product and component availability, and extended lead-times became a challenge in 2021 and continue into 2022 as the world economy recovers from the COVID-19 pandemic. As we continue to incur elevated costs for components and expedite fees, our supply chain and operations teams continue to focus on managing through a constrained environment, thereby enabling DZS to maximize shipments despite elongated lead times. We remain cautious about continued supply chain headwinds that challenge the industry and anticipate a constrained supply chain environment to persist throughout 2022. For additional risks to the corporation related to the COVID-19 pandemic, see Item 1A, Risk Factors of our 2021 Form 10-K. |
Use of Estimates | (d) Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. |
Disaggregation of Revenue | (e) Disaggregation of Revenue The following table presents revenues by source (in thousands): Three Months Ended March 31, 2022 2021 Products $ 72,462 $ 76,252 Services and other 4,578 4,779 Total $ 77,040 $ 81,031 The following table present revenues by geographical concentration (in thousands): Three Months Ended March 31, 2022 2021 Americas $ 23,061 $ 20,169 Europe, Middle East, Africa 18,649 17,918 Asia 35,330 42,944 Total $ 77,040 $ 81,031 |
Concentration of Risk | (f) Concentration of Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash, accounts receivables, and contract assets. Cash, cash equivalents and restricted cash consist of financial deposits and money market accounts that are principally held with various domestic and international financial institutions with high credit standing. The Company’s customers include competitive and incumbent local exchange carriers, competitive access providers, internet service providers, wireless carriers and resellers serving these markets. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Allowances are maintained for potential doubtful accounts based upon the expected collectability of accounts receivable using historical loss rates adjusted for customer-specific factors and current economic conditions. The Company performs periodic assessments of its customers’ liquidity and financial condition through analysis of information obtained from credit rating agencies, financial statement review and historical and current collection trends. Activity under the Company’s allowance for doubtful accounts is comprised as follows (in thousands): Three Months Ended March 31, 2022 2021 Balance at beginning of period $ 17,735 $ 3,954 Charged to expense, net of recoveries ( 752 ) 14,228 Utilization/write offs/exchange rate differences — ( 94 ) Cumulative effect of ASC 326 adoption 401 — Foreign exchange impact ( 326 ) ( 148 ) Balance at end of period $ 17,058 $ 17,940 For the three months ended March 31, 2022, two customers accounted for 13 % and 12 % o f net revenue, respectively. For the three months ended March 31, 2021, two customers accounted for 18 % and 10 % of net revenue, respectively. As of March 31, 2022, no customers represented more than 10 % of net accounts receivable. As of December 31, 2021, two customers represented 26 % and 10 % of net accounts receivable, respectively. As of March 31, 2022, and December 31, 2021, net accounts receivables from customers in countries other than the United States represented 77 % and 79 %, respectively. In 2017, the Company entered into an agreement with a customer in India to supply product for a state sponsored broadband project. The Company substantially completed its obligations under the agreement in 2018. The Company billed the customer, which is a state government sponsored entity, approximately $ 59.0 million and collected payments of approximately $ 41.7 million by December 31, 2020. In late March 2021, the customer’s state government parent experienced difficulty passing a budget impacting the ability of the customer to make remaining agreed-upon payments to us. In light of this development, the Company recorded an allowance that covered the entire balance unpaid by the customer. Subsequent to March 2021, the Company recovered approximately $ 1.9 million of accounts receivable related to the customer. As of March 31, 2022 the Company has a recorded allowance for doubtful accounts of $ 14.8 million related to this receivable. The Company will continue to pursue collection of the entire outstanding balance and any amounts collected will be recognized in the period which they are received. In the event the Company’s efforts to collect from this customer prove unsuccessful, DZS may seek payment through other means, including through legal action. |
Business Combinations | (g) Business Combinations The Company allocates the fair value of purchase consideration to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets and certain tangible assets such as inventory. Critical estimates in valuing certain tangible and intangible assets include but are not limited to future expected cash flows from the underlying assets and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (which cannot exceed one year from the acquisition date), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date. When the consideration transferred by the Company in a business combination includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the total consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are made retrospectively, with corresponding adjustments against goodwill. Changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments are made in the current period, with corresponding adjustments recognized in earnings. |
Restructuring and Other Charges | (h) Restructuring and Other Charges Restructuring and other charges primarily consists of severance and other termination benefits and non-cash impairment charges related to right-of-use assets from operating leases related to the restructuring activities in Hanover, Germany and Ottawa, Canada. The Company recognizes contractual termination benefits when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated. The Company recognizes one-time employee termination benefits when (i) management commits to a plan of termination, (ii) the plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date, (iii) the plan establishes the terms of the benefit arrangement in sufficient detail to enable employees to determine the type and amount of benefits they will receive, and (iv) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. These charges are included in restructuring and other charges in the unaudited condensed consolidated statement of comprehensive income (loss). |
Recent Accounting Pronouncements | (i) Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses , ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses , and ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief , which provided additional implementation guidance on the previously issued ASU. The Company adopted the updated guidance on January 1, 2022 , utilizing the modified retrospective transition method and recorded a cumulative-effect adjustment of $ 0.4 million to retained earnings. In March 2020 , the FASB issued ASU No. 2020-04 (Topic 848), Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. The standard was effective upon issuance and may generally be applied through December 31, 2022, to any new or amended contracts, hedging relationships, and other transactions that reference LIBOR. The ASU is not expected to have a material impact on our consolidated financial statements. |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Schedule of Revenues by Source | The following table presents revenues by source (in thousands): Three Months Ended March 31, 2022 2021 Products $ 72,462 $ 76,252 Services and other 4,578 4,779 Total $ 77,040 $ 81,031 |
Schedule of Information Revenues by Geographical Concentration | The following table present revenues by geographical concentration (in thousands): Three Months Ended March 31, 2022 2021 Americas $ 23,061 $ 20,169 Europe, Middle East, Africa 18,649 17,918 Asia 35,330 42,944 Total $ 77,040 $ 81,031 |
Schedule of Allowances for Doubtful Accounts | Activity under the Company’s allowance for doubtful accounts is comprised as follows (in thousands): Three Months Ended March 31, 2022 2021 Balance at beginning of period $ 17,735 $ 3,954 Charged to expense, net of recoveries ( 752 ) 14,228 Utilization/write offs/exchange rate differences — ( 94 ) Cumulative effect of ASC 326 adoption 401 — Foreign exchange impact ( 326 ) ( 148 ) Balance at end of period $ 17,058 $ 17,940 |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Balance Sheet Related Disclosures [Abstract] | |
Schedule of Inventories | Inventories March 31, 2022 December 31, 2021 Raw materials $ 45,527 $ 34,512 Work in process 1,216 1,427 Finished goods 19,716 20,954 Total inventories $ 66,459 $ 56,893 |
Schedule of Property, Plant and Equipment, Net | Property, plant and equipment March 31, 2022 December 31, 2021 Property, plant and equipment, net: Machinery and equipment $ 17,090 $ 14,278 Leasehold improvements 5,251 5,219 Computers and software 3,278 3,217 Furniture and fixtures 1,726 1,771 Construction in progress and other 1,052 2,937 28,397 27,422 Less: accumulated depreciation and amortization ( 17,971 ) ( 17,394 ) Less: government grants ( 149 ) ( 186 ) Total property, plant and equipment, net $ 10,277 $ 9,842 |
Summary of Product Warranty Liability | The Company accrues warranty costs based on historical trends for the expected material and labor costs to provide warranty services. The Company's standard warranty period is one year from the date of shipment with the ability for customers to purchase an extended warranty of up to five years from the date of shipment. The following table summarizes the activity related to the product warranty liability: Three Months Ended March 31, 2022 2021 Balance at beginning of period $ 1,981 $ 1,522 Charged to cost of revenue 121 269 Claims and settlements ( 149 ) ( 267 ) Foreign exchange impact ( 17 ) 56 Balance at end of period $ 1,936 $ 1,580 |
Summary of Contract Assets and Contract Liabilities Related to Contracts with Customers | The opening and closing balances of current and long-term contract assets and contract liabilities related to contracts with customers are as follows: Contract Contract December 31, 2021 $ 2,184 $ 9,135 March 31, 2022 902 9,984 Increase (decrease) $ ( 1,282 ) $ 849 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table summarizes the activity related to goodwill (in thousands): March 31, 2022 2021 Balance at beginning of period, gross $ 7,148 $ 4,980 Accumulated impairment at beginning of period ( 1,003 ) ( 1,003 ) Goodwill from acquisitions — 1,698 Balance at end of period $ 6,145 $ 5,675 |
Schedule of Intangible Assets | Intangible assets consisted of the following (in thousands): March 31, 2022 Gross Carrying Accumulated Net Developed technology $ 5,007 $ ( 3,559 ) $ 1,448 Customer relationships 5,730 ( 3,041 ) 2,689 In-process research and development 890 ( 207 ) 683 Total intangible assets, net $ 11,627 $ ( 6,807 ) $ 4,820 December 31, 2021 Gross Carrying Accumulated Net Developed technology $ 5,007 $ ( 3,464 ) $ 1,543 Customer relationships 5,730 ( 2,886 ) 2,844 In-process research and development 890 ( 162 ) 728 Total intangible assets, net $ 11,627 $ ( 6,512 ) $ 5,115 |
Future Amortization Expense of Intangible Assets | The following table presents the future amortization expense of the Company’s intangible assets as of March 31, 2022 (in thousands): Remainder of 2022 $ 883 2023 1,177 2024 1,177 2025 1,177 2026 406 Total $ 4,820 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | The following table sets forth payment guarantees of the Company's obligations as of March 31, 2022 that have been provided by DNI. DNI owns approximately 36.6 % of the outstanding shares of the Company's common stock. The amount guaranteed exceeds the principal amounts of outstanding obligations due to collateral requirements by the banks. Guarantor Amount Guaranteed Description of Obligations Guaranteed Dasan Networks, Inc. $ 4,375 Payment guarantee to Industrial Bank of Korea Dasan Networks, Inc. 1,486 Payment guarantee to Shinhan Bank $ 5,861 Sales, cost of revenue, research and product development, selling, marketing, general and administrative, interest expense and other expenses to and from related parties were as follows (in thousands) for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 Counterparty Sales Cost of Research Selling, Interest Other Dasan Networks, Inc. $ 198 $ 177 $ 90 $ 317 $ 17 DS Commerce, Inc. — 11 1 11 — — $ 198 $ 188 $ 91 $ 328 $ — $ 17 Three Months Ended March 31, 2021 Counterparty Sales Cost of Research Selling, Interest Other Dasan Networks, Inc. $ 1,770 $ 1,655 $ 261 $ 402 $ 132 $ 85 Dasan Invest Co., Ltd. — 10 46 18 — — $ 1,770 $ 1,665 $ 307 $ 420 $ 132 $ 85 Balances of receivables and payables arising from sales and purchases of goods and services with related parties as of March 31, 2022 and December 31, 2021 were included in the following balance sheet captions on the unaudited condensed consolidated balance sheets, as follows (in thousands): As of March 31, 2022 Counterparty Account Other Other assets Accounts Dasan Networks, Inc. $ 207 $ 368 $ — $ 202 DS Commerce, Inc. — — — 25 $ 207 $ 368 $ — $ 227 As of December 31, 2021 Counterparty Account Other Other assets Accounts Dasan Networks, Inc. $ 181 $ 215 $ 691 $ 785 DS Commerce, Inc. — — — 46 $ 181 $ 215 $ 691 $ 831 |
Net Income (Loss) Per Share (Ta
Net Income (Loss) Per Share (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
Reconciliation of Basic and Diluted Net Income (Loss) per Share | The following table is a reconciliation of the numerator and denominator in the basic and diluted net income (loss) per share calculation (in thousands, except per share data) for the three months ended March 31, 2022 and 2021: Three months ended March 31 2022 2021 Net income (loss) $ ( 3,048 ) $ ( 23,225 ) Weighted average number of shares outstanding: Basic 27,530 25,252 Effect of dilutive securities: Stock options, restricted stock units and share awards — — Diluted $ 27,530 $ 25,252 Net income (loss) per share: Basic $ ( 0.11 ) $ ( 0.92 ) Diluted $ ( 0.11 ) $ ( 0.92 ) |
Potential Common Stock not Included Diluted Net Income (Loss) Per Share Calculation | The following table sets forth potential common stock that is not included in the diluted net income (loss) per share calculation above because their effect would be anti-dilutive for the periods indicated (in thousands): Three months ended March 31, 2022 2021 Outstanding stock options 939 628 Unvested restricted stock units 278 197 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Leases [Abstract] | |
Maturity of Operating Lease Liabilities | The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2022 (in thousands): Remainder of 2022 $ 3,572 2023 4,380 2024 3,825 2025 2,550 2026 1,666 Thereafter 830 Total operating lease payments 16,823 Less: imputed interest ( 1,867 ) Total operating lease liabilities $ 14,956 |
Enterprise-Wide Information (Ta
Enterprise-Wide Information (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Segment Reporting [Abstract] | |
Property, Plant and Equipment, Net of Accumulated Depreciation | The Company's property, plant and equipment, net of accumulated depreciation, were located in the following geographical areas (in thousands) as of March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 United States $ 6,826 $ 6,105 Korea 2,169 2,367 Japan 736 799 Canada 270 280 Germany 185 210 Other 91 81 $ 10,277 $ 9,842 |
Organization and Summary of S_4
Organization and Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Apr. 30, 2021USD ($) | Mar. 31, 2022USD ($)Customer | Mar. 31, 2021Customer | Dec. 31, 2021USD ($)Customer | Dec. 31, 2020USD ($) | Jan. 01, 2022USD ($) | |
Significant Accounting Policies [Line Items] | ||||||
Entity Incorporation, State or Country Code | DE | |||||
Date of entity incorporation | 1999-06 | |||||
Billed amount under agreement | $ 59,000 | |||||
Amount of payments collected | $ 41,700 | |||||
Accounts receivable recovered | $ 1,900 | |||||
Allowance for doubtful accounts | $ 14,800 | |||||
Adjustment to retained earnings | $ (90,448) | $ (86,999) | ||||
Cumulative effect of ASC 326 adoption | ||||||
Significant Accounting Policies [Line Items] | ||||||
Change In Accounting Principle Accounting Standards Update Adopted | true | |||||
Change In Accounting Principle Accounting Standards Update Adoption Date | Jan. 1, 2022 | |||||
Cumulative effect of ASC 326 adoption | Cumulative Effect, Period of Adoption, Adjustment | ||||||
Significant Accounting Policies [Line Items] | ||||||
Adjustment to retained earnings | $ 400 | |||||
ASU 2020-04 | ||||||
Significant Accounting Policies [Line Items] | ||||||
Change In Accounting Principle Accounting Standards Update Adopted | true | |||||
Change In Accounting Principle Accounting Standards Update Adoption Date | Mar. 31, 2020 | |||||
Customer Concentration Risk | Sales Revenue, Net | ||||||
Significant Accounting Policies [Line Items] | ||||||
Number of major customers | Customer | 2 | 2 | ||||
Customer Concentration Risk | Sales Revenue, Net | Customer One | ||||||
Significant Accounting Policies [Line Items] | ||||||
Concentration risk, percentage | 13.00% | 18.00% | ||||
Customer Concentration Risk | Sales Revenue, Net | Customer Two | ||||||
Significant Accounting Policies [Line Items] | ||||||
Concentration risk, percentage | 12.00% | 10.00% | ||||
Customer Concentration Risk | Accounts receivable | ||||||
Significant Accounting Policies [Line Items] | ||||||
Number of major customers | Customer | 0 | 2 | ||||
Concentration risk, threshold percentage | 10.00% | |||||
Customer Concentration Risk | Accounts receivable | Customer One | ||||||
Significant Accounting Policies [Line Items] | ||||||
Concentration risk, percentage | 26.00% | |||||
Customer Concentration Risk | Accounts receivable | Customer Two | ||||||
Significant Accounting Policies [Line Items] | ||||||
Concentration risk, percentage | 10.00% | |||||
Geographic Concentration Risk | Accounts receivable | Foreign Countries | ||||||
Significant Accounting Policies [Line Items] | ||||||
Concentration risk, percentage | 77.00% | 79.00% |
Organization and Summary of S_5
Organization and Summary of Significant Accounting Policies - Schedule of Revenues by Source (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Disaggregation Of Revenue [Line Items] | ||
Net revenue | $ 77,040 | $ 81,031 |
Product | ||
Disaggregation Of Revenue [Line Items] | ||
Net revenue | 72,462 | 76,252 |
Service and Other | ||
Disaggregation Of Revenue [Line Items] | ||
Net revenue | $ 4,578 | $ 4,779 |
Organization and Summary of S_6
Organization and Summary of Significant Accounting Policies - Schedule of Information Revenues by Geographical Concentration (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Significant Accounting Policies [Line Items] | ||
Net revenue | $ 77,040 | $ 81,031 |
Americas | ||
Significant Accounting Policies [Line Items] | ||
Net revenue | 23,061 | 20,169 |
Europe, Middle East, Africa | ||
Significant Accounting Policies [Line Items] | ||
Net revenue | 18,649 | 17,918 |
Asia | ||
Significant Accounting Policies [Line Items] | ||
Net revenue | $ 35,330 | $ 42,944 |
Organization and Summary of S_7
Organization and Summary of Significant Accounting Policies - Schedule of Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Significant Accounting Policies [Line Items] | ||
Balance at beginning of period | $ 17,735 | $ 3,954 |
Charged to expense, net of recoveries | (752) | 14,228 |
Utilization/write offs/exchange rate differences | 94 | |
Foreign exchange impact | (326) | (148) |
Balance at end of period | 17,058 | $ 17,940 |
Cumulative effect of ASC 326 adoption | ||
Significant Accounting Policies [Line Items] | ||
Balance at beginning of period | $ 401 |
Business Combinations - Additio
Business Combinations - Additional Information (Details) - USD ($) $ in Thousands | Mar. 03, 2021 | Feb. 05, 2021 | Apr. 30, 2021 | Mar. 31, 2022 | Dec. 31, 2021 | Mar. 31, 2021 |
Business Acquisition [Line Items] | ||||||
Goodwill | $ 6,145 | $ 6,145 | $ 5,675 | |||
Optelian Access Networks Corporation | ||||||
Business Acquisition [Line Items] | ||||||
Purchase price | $ 7,500 | |||||
Goodwill | 1,900 | |||||
Optelian Access Networks Corporation | Optelian Products | ||||||
Business Acquisition [Line Items] | ||||||
Purchase price | 1,900 | |||||
Held back amount | $ 300 | |||||
RIFT Inc | ||||||
Business Acquisition [Line Items] | ||||||
Purchase price | $ 500 | |||||
Goodwill | $ 200 | |||||
Held back amount released | $ 200 |
Fair Value Measurement - Additi
Fair Value Measurement - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Dec. 31, 2021 | |
Selling, Marketing, General and Administrative Expenses | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Net change in fair value | $ 0.1 | |
Level 3 | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Contingent liability | $ 2.2 | $ 2.1 |
Cash, Cash Equivalents and Rest
Cash, Cash Equivalents and Restricted Cash - Additional Information (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 | Mar. 31, 2021 |
Cash And Cash Equivalents [Line Items] | |||
Cash and cash equivalents | $ 34,160 | $ 46,666 | $ 56,818 |
Long term restricted cash | $ 200 | $ 200 | |
Restricted Cash Equivalents, Noncurrent, Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssets | us-gaap:OtherAssets | |
Outside U.S. | |||
Cash And Cash Equivalents [Line Items] | |||
Cash and cash equivalents | $ 32,000 | $ 31,300 | |
Within U.S. | |||
Cash And Cash Equivalents [Line Items] | |||
Cash and cash equivalents | $ 8,700 | $ 22,300 |
Balance Sheet Details - Schedul
Balance Sheet Details - Schedule of Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 45,527 | $ 34,512 |
Work in process | 1,216 | 1,427 |
Finished goods | 19,716 | 20,954 |
Total inventories | $ 66,459 | $ 56,893 |
Balance Sheet Details - Additio
Balance Sheet Details - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Balance Sheet Details [Line Items] | |||
Performance obligations contracts with customer | The majority of the Company's performance obligations in its contracts with customers relate to contracts with duration of less than one year | ||
Percentage of revenue expected to recognize | 71.00% | ||
Contract with customer, liability, revenue recognized | $ 2.4 | ||
Contract cost deferred | 0.6 | $ 0.8 | |
Amortization related to contract cost deferred | 0.2 | ||
Property, Plant and Equipment | |||
Balance Sheet Details [Line Items] | |||
Depreciation and amortization associated with property, plant and equipment | $ 0.8 | $ 0.9 |
Balance Sheet Details - Sched_2
Balance Sheet Details - Schedule of Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Property, plant and equipment, net: | ||
Property, plant and equipment, gross | $ 28,397 | $ 27,422 |
Less: accumulated depreciation and amortization | (17,971) | (17,394) |
Less: government grants | (149) | (186) |
Total property, plant and equipment, net | 10,277 | 9,842 |
Machinery and equipment | ||
Property, plant and equipment, net: | ||
Property, plant and equipment, gross | 17,090 | 14,278 |
Leasehold improvements | ||
Property, plant and equipment, net: | ||
Property, plant and equipment, gross | 5,251 | 5,219 |
Computers and software | ||
Property, plant and equipment, net: | ||
Property, plant and equipment, gross | 3,278 | 3,217 |
Furniture and fixtures | ||
Property, plant and equipment, net: | ||
Property, plant and equipment, gross | 1,726 | 1,771 |
Construction in progress and other | ||
Property, plant and equipment, net: | ||
Property, plant and equipment, gross | $ 1,052 | $ 2,937 |
Balance Sheet Details - Summary
Balance Sheet Details - Summary of Product Warranty Liability (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Payables And Accruals [Abstract] | ||
Balance at beginning of period | $ 1,981 | $ 1,522 |
Charged to cost of revenue | 121 | 269 |
Claims and settlements | (149) | (267) |
Foreign exchange impact | (17) | 56 |
Balance at end of period | $ 1,936 | $ 1,580 |
Balance Sheet Details - Summa_2
Balance Sheet Details - Summary of Contract Assets and Contract Liabilities Related to Contracts with Customers (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Dec. 31, 2021 | |
Contract With Customer Asset And Liability [Abstract] | ||
Contract assets | $ 902 | $ 2,184 |
Increase (decrease) contract assets | (1,282) | |
Contract liabilities | 9,984 | $ 9,135 |
Increase (decrease) contract liabilities | $ 849 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Schedule of Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Goodwill [Line Items] | ||
Balance at beginning of period, gross | $ 7,148 | $ 4,980 |
Accumulated impairment at beginning of period | (1,003) | (1,003) |
Balance at end of period | 6,145 | 5,675 |
Optelian and RIFT Acquisitions | ||
Goodwill [Line Items] | ||
Goodwill from acquisitions | $ 1,698 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Goodwill And Intangible Asset [Line Items] | ||
Amortization of intangible assets | $ 0.3 | $ 0.4 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 11,627 | $ 11,627 |
Accumulated Amortization | (6,807) | (6,512) |
Intangible assets, net | 4,820 | 5,115 |
Developed Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 5,007 | 5,007 |
Accumulated Amortization | (3,559) | (3,464) |
Intangible assets, net | 1,448 | 1,543 |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 5,730 | 5,730 |
Accumulated Amortization | (3,041) | (2,886) |
Intangible assets, net | 2,689 | 2,844 |
In-Process Research And Development | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 890 | 890 |
Accumulated Amortization | (207) | (162) |
Intangible assets, net | $ 683 | $ 728 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Future Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Amortization expense of intangible assets, remainder of 2022 | $ 883 | |
Amortization expense of intangible assets, 2023 | 1,177 | |
Amortization expense of intangible assets, 2024 | 1,177 | |
Amortization expense of intangible assets, 2025 | 1,177 | |
Amortization expense of intangible assets, 2026 | 406 | |
Intangible assets, net | $ 4,820 | $ 5,115 |
Debt - Additional Information (
Debt - Additional Information (Details) - USD ($) | Feb. 09, 2022 | Mar. 31, 2022 | Dec. 31, 2021 |
Line Of Credit Facility [Line Items] | |||
Debt obligations | $ 0 | $ 0 | |
JPMorgan Credit Facility | Letter of Credit | |||
Line Of Credit Facility [Line Items] | |||
Maximum borrowing amount | $ 15,000,000 | ||
Revolving Credit Agreement | |||
Line Of Credit Facility [Line Items] | |||
Debt outstanding | $ 0 | ||
Revolving Credit Agreement | JPMorgan Credit Facility | |||
Line Of Credit Facility [Line Items] | |||
Maximum borrowing amount | $ 30,000,000 | ||
Credit facility, expiration date | Feb. 9, 2024 | ||
Credit facility, current borrowing capacity | $ 10,000,000 | ||
Commitment fee percentage on unused capacity | 0.25% | ||
Revolving Credit Agreement | JPMorgan Credit Facility | Prime Rate | |||
Line Of Credit Facility [Line Items] | |||
Interest rate | 2.00% | ||
Revolving Credit Agreement | JPMorgan Credit Facility | Adjusted Term SOFR Rate | |||
Line Of Credit Facility [Line Items] | |||
Interest rate | 2.90% | ||
Revolving Credit Agreement | JPMorgan Credit Facility | Simple SOFR Rate | |||
Line Of Credit Facility [Line Items] | |||
Interest rate | 2.90% | ||
Revolving Credit Agreement | JPMorgan Credit Facility | Letter of Credit | |||
Line Of Credit Facility [Line Items] | |||
Commitment fee percentage | 2.90% |
Employee Benefit Plans - Additi
Employee Benefit Plans - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Employer matching contribution, percent of match | 8.30% | ||
Defined benefit plan, accumulated benefit obligation | $ 16.1 | $ 16.5 | |
Periodic benefit costs | 0.1 | $ 0.1 | |
Pension Plan | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Defined benefit plan, insurance contract amount | 2.8 | $ 2.9 | |
US | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Defined contribution plan expense | 0.2 | 0.1 | |
Korea | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Defined contribution plan expense | $ 0.3 | $ 0.3 |
Restructuring and Other Charg_2
Restructuring and Other Charges - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Restructuring Cost And Reserve [Line Items] | ||
Restructuring related costs | $ 0.4 | $ 6.3 |
Termination cost | 3.5 | |
Other charges | 0.1 | |
Relocate Manufacturing Functions | ||
Restructuring Cost And Reserve [Line Items] | ||
Termination cost | 12.7 | |
Restructuring Charges | ||
Restructuring Cost And Reserve [Line Items] | ||
Impairment of long-lived assets charge of right-of-use assets | $ 2.7 |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
DASAN | Majority Shareholder | ||
Related Party Transaction [Line Items] | ||
DNI direct ownership interest | 36.60% | |
Guarantee fee, percent | 0.90% | |
DNS Korea | ||
Related Party Transaction [Line Items] | ||
Operating lease cost | $ 0.2 | $ 0.5 |
Related Party Transactions - In
Related Party Transactions - Indebtedness And Other Obligations Payment Guarantees (Details) $ in Thousands | Mar. 31, 2022USD ($) |
Related Party Transaction [Line Items] | |
Amount Guaranteed | $ 5,861 |
Payment Guarantee to Industrial Bank of Korea | |
Related Party Transaction [Line Items] | |
Amount Guaranteed | 4,375 |
Payment Guarantee to Shinhan Bank | |
Related Party Transaction [Line Items] | |
Amount Guaranteed | $ 1,486 |
Related Party Transactions - Sa
Related Party Transactions - Sales and Purchases To and From Related Parties (Details) - Sales And Purchases To And From Related Parties - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Related Party Transaction [Line Items] | ||
Sales | $ 198 | $ 1,770 |
Cost of revenue | 188 | 1,665 |
Research and product development | 91 | 307 |
Selling, marketing, general and administrative | 328 | 420 |
Interest expense | 132 | |
Other expenses | 17 | 85 |
DASAN | Majority Shareholder | ||
Related Party Transaction [Line Items] | ||
Sales | 198 | 1,770 |
Cost of revenue | 177 | 1,655 |
Research and product development | 90 | 261 |
Selling, marketing, general and administrative | 317 | 402 |
Interest expense | 132 | |
Other expenses | 17 | 85 |
DASAN | Affiliated Entity | ||
Related Party Transaction [Line Items] | ||
Cost of revenue | 10 | |
Research and product development | 46 | |
Selling, marketing, general and administrative | $ 18 | |
DS | Affiliated Entity | ||
Related Party Transaction [Line Items] | ||
Cost of revenue | 11 | |
Research and product development | 1 | |
Selling, marketing, general and administrative | $ 11 |
Related Party Transactions - Ba
Related Party Transactions - Balances of Receivables and Payables with Related Parties (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Related Party Transaction [Line Items] | ||
Other assets | $ 9,904 | $ 8,950 |
Receivables And Payables With Related Parties | ||
Related Party Transaction [Line Items] | ||
Account receivables | 207 | 181 |
Other receivables | 368 | 215 |
Other assets | 691 | |
Accounts payable | 227 | 831 |
DASAN | Receivables And Payables With Related Parties | ||
Related Party Transaction [Line Items] | ||
Account receivables | 207 | 181 |
Other receivables | 368 | 215 |
Other assets | 691 | |
Accounts payable | 202 | 785 |
DS | Receivables And Payables With Related Parties | ||
Related Party Transaction [Line Items] | ||
Accounts payable | $ 25 | $ 46 |
Net Income (Loss) Per Share - R
Net Income (Loss) Per Share - Reconciliation of Basic and Diluted Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Earnings Per Share [Abstract] | ||
Net income (loss) | $ (3,048) | $ (23,225) |
Weighted average number of shares outstanding: | ||
Basic | 27,530 | 25,252 |
Effect of dilutive securities: | ||
Diluted | 27,530 | 25,252 |
Net income (loss) per share: | ||
Basic (in dollar per share) | $ (0.11) | $ (0.92) |
Diluted (in dollar per share) | $ (0.11) | $ (0.92) |
Net Income (Loss) Per Share - A
Net Income (Loss) Per Share - Antidilutive Securities Excluded from Computation of Earning Per Share (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Outstanding Stock Options | ||
Antidilutive Securities Excluded From Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of loss per share calculation, shares | 939 | 628 |
Unvested Restricted Stock Units | ||
Antidilutive Securities Excluded From Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of loss per share calculation, shares | 278 | 197 |
Leases - Additional Information
Leases - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Lessee Lease Description [Line Items] | ||
Operating lease expense | $ 1.2 | $ 1.6 |
Leases - Maturity of Operating
Leases - Maturity of Operating Lease Liabilities (Details) $ in Thousands | Mar. 31, 2022USD ($) |
Leases [Abstract] | |
Remainder of 2022 | $ 3,572 |
2023 | 4,380 |
2024 | 3,825 |
2025 | 2,550 |
2026 | 1,666 |
Thereafter | 830 |
Total operating lease payments | 16,823 |
Less: imputed interest | (1,867) |
Total operating lease liabilities | $ 14,956 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2022USD ($) | |
Guarantee Obligations [Line Items] | |
Underpaid duties | $ 3.9 |
Performance Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 8 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 1,333 | $ (893) |
Income (loss) before income taxes | (4,381) | $ (22,332) |
Unrecognized tax benefits | 4,200 | |
Unrecognized tax benefits, period increase (decrease) | $ 0 |
Enterprise-Wide Information - P
Enterprise-Wide Information - Property, Plant and Equipment, Net of Accumulated Depreciation (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | $ 10,277 | $ 9,842 |
US | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 6,826 | 6,105 |
Korea | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 2,169 | 2,367 |
Japan | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 736 | 799 |
Canada | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 270 | 280 |
Germany | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 185 | 210 |
Other | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | $ 91 | $ 81 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Details) - Subsequent Event - ASSIA | Apr. 29, 2022ServiceProvider |
Subsequent Event [Line Items] | |
Asset purchase agreement, execution date | Apr. 29, 2022 |
Number of service providers to be acquired | 50 |