Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 12, 2019 | |
Cover [Abstract] | ||
Entity Registrant Name | DASAN ZHONE SOLUTIONS INC | |
Entity Central Index Key | 0001101680 | |
Trading Symbol | DZSI | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 21,388,445 | |
Entity Small Business | true | |
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 Line One | 7195 Oakport Street | |
Entity Address, City or Town | Oakland | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 94621 | |
City Area Code | 510 | |
Local Phone Number | 777-7000 | |
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 | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 47,851 | $ 27,709 |
Restricted cash | 4,448 | 7,003 |
Accounts receivable, net, trade receivables | 100,613 | 71,034 |
Accounts receivable, net, related parties | 252 | 583 |
Other receivables, others | 8,002 | 12,923 |
Other receivables, related parties | 1 | 65 |
Contract assets | 9,351 | 11,381 |
Inventories | 43,046 | 33,868 |
Prepaid expenses and other current assets | 6,253 | 4,185 |
Total current assets | 219,817 | 168,751 |
Property, plant and equipment, net | 6,575 | 5,518 |
Right-of-use assets from operating leases | 18,349 | |
Goodwill | 3,977 | 3,977 |
Intangible assets, net | 14,539 | 5,649 |
Deferred tax assets | 1,691 | 2,752 |
Long-term restricted cash | 501 | 936 |
Other assets | 2,784 | 2,424 |
Total assets | 268,233 | 190,007 |
Current liabilities: | ||
Accounts payable, trade | 43,320 | 36,865 |
Accounts payable, related parties | 96 | 1,743 |
Short-term debt - bank and trade facilities | 34,606 | 31,762 |
Other payables, others | 1,652 | 1,792 |
Other payables, related parties | 2,711 | 1,281 |
Contract liabilities - current | 3,609 | 8,511 |
Operating lease liabilities - current | 3,496 | |
Accrued and other liabilities | 10,389 | 11,517 |
Total current liabilities | 99,879 | 93,471 |
Long-term debt, bank and trade facilities | 10,407 | |
Long-term debt, related parties | 9,049 | 14,142 |
Contract liabilities - non-current | 2,597 | 1,801 |
Deferred tax liabilities | 1,021 | |
Operating lease liabilities - non-current | 15,957 | |
Pension liabilities | 13,269 | |
Other long-term liabilities | 1,658 | 2,739 |
Total liabilities | 153,837 | 112,153 |
Commitments and contingencies (Note 15) | ||
Stockholders’ equity and non-controlling interest: | ||
Common stock, authorized 36,000 shares, 21,388 and 16,587 shares outstanding as of September 30, 2019 and December 31, 2018, respectively, at $0.001 par value | 21 | 16 |
Additional paid-in capital | 138,860 | 93,192 |
Accumulated other comprehensive loss | (5,445) | (192) |
Accumulated deficit | (19,040) | (15,777) |
Total stockholders’ equity | 114,396 | 77,239 |
Non-controlling interest | 615 | |
Total stockholders’ equity and non-controlling interest | 114,396 | 77,854 |
Total liabilities, stockholders’ equity and non-controlling interest | $ 268,233 | $ 190,007 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Statement Of Financial Position [Abstract] | ||
Common stock, authorized (in shares) | 36,000 | 36,000 |
Common stock, outstanding (in shares) | 21,388 | 16,587 |
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 | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Third parties | $ 71,292 | $ 70,227 | $ 227,407 | $ 203,317 |
Related parties | 232 | 1,687 | 1,870 | 4,358 |
Total net revenue | 71,524 | 71,914 | 229,277 | 207,675 |
Products and services - third parties | 48,755 | 46,852 | 151,805 | 135,208 |
Products and services - related parties | 190 | 1,478 | 1,427 | 3,677 |
Amortization of intangible assets | 402 | 153 | 1,216 | 459 |
Total cost of revenue | 49,347 | 48,483 | 154,448 | 139,344 |
Gross profit | 22,177 | 23,431 | 74,829 | 68,331 |
Operating expenses: | ||||
Research and product development | 9,898 | 8,655 | 29,512 | 26,346 |
Selling, marketing, general and administrative | 15,716 | 11,106 | 45,684 | 35,212 |
Amortization of intangible assets | 464 | 131 | 1,406 | 393 |
Total operating expenses | 26,078 | 19,892 | 76,602 | 61,951 |
Operating income (loss) | (3,901) | 3,539 | (1,773) | 6,380 |
Interest income | 374 | 42 | 524 | 203 |
Interest expense | (1,124) | (447) | (3,239) | (1,330) |
Other income (loss), net | 944 | (572) | 2,517 | (859) |
Income (loss) before income taxes | (3,707) | 2,562 | (1,971) | 4,394 |
Income tax provision | 289 | 735 | 1,098 | 1,071 |
Net income (loss) | (3,996) | 1,827 | (3,069) | 3,323 |
Net income attributable to non-controlling interest | 37 | 29 | 194 | 2 |
Net income (loss) attributable to DASAN Zhone Solutions, Inc. | (4,033) | 1,798 | (3,263) | 3,321 |
Foreign currency translation adjustments | (2,426) | 391 | (4,123) | (1,839) |
Actuarial gain (loss) | 38 | (1,115) | ||
Comprehensive income (loss) | (6,384) | 2,218 | (8,307) | 1,484 |
Comprehensive income (loss) attributable to non- controlling interest | 31 | 16 | 209 | (3) |
Comprehensive income (loss) attributable to DASAN Zhone Solutions, Inc. | $ (6,415) | $ 2,202 | $ (8,516) | $ 1,487 |
Net income (loss) per share attributable to DASAN Zhone Solutions, Inc. | ||||
Basic | $ (0.19) | $ 0.11 | $ (0.17) | $ 0.20 |
Diluted | $ (0.19) | $ 0.11 | $ (0.17) | $ 0.20 |
Weighted average shares outstanding used to compute basic net income (loss) per share | 21,384 | 16,683 | 18,732 | 16,425 |
Weighted average shares outstanding used to compute diluted net income (loss) per share | 21,384 | 16,891 | 18,732 | 16,640 |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Stockholders' Equity and Non-Controlling Interest - USD ($) shares in Thousands, $ in Thousands | Total | Common stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated deficit | Total stockholders equity | Non-controlling interest |
Beginning Balance, Stockholders' equity at Dec. 31, 2017 | $ 73,767 | $ 16 | $ 90,198 | $ 1,871 | $ (18,852) | $ 73,233 | $ 534 |
Beginning Balances, Stockholders' equity (in shares) at Dec. 31, 2017 | 16,410 | ||||||
ASC 606 opening balance adjustment | 342 | 342 | 342 | ||||
Exercise of stock options and restricted stock grant | 111 | 111 | 111 | ||||
Exercise of stock options and restricted stock grant (in shares) | 21 | ||||||
Stock-based compensation | 363 | 363 | 363 | ||||
Net income (loss) | 141 | 107 | 107 | 34 | |||
Other comprehensive income(loss) | 287 | 257 | 257 | 30 | |||
Ending Balances, Stockholders' equity at Mar. 31, 2018 | 75,011 | $ 16 | 90,672 | 2,128 | (18,403) | 74,413 | 598 |
Ending Balances, Stockholders' equity (in shares) at Mar. 31, 2018 | 16,431 | ||||||
Beginning Balance, Stockholders' equity at Dec. 31, 2017 | 73,767 | $ 16 | 90,198 | 1,871 | (18,852) | 73,233 | 534 |
Beginning Balances, Stockholders' equity (in shares) at Dec. 31, 2017 | 16,410 | ||||||
Net income (loss) | 3,323 | ||||||
Ending Balances, Stockholders' equity at Sep. 30, 2018 | 77,770 | $ 16 | 92,408 | 5 | (15,190) | 77,239 | 531 |
Ending Balances, Stockholders' equity (in shares) at Sep. 30, 2018 | 16,566 | ||||||
Beginning Balance, Stockholders' equity at Mar. 31, 2018 | 75,011 | $ 16 | 90,672 | 2,128 | (18,403) | 74,413 | 598 |
Beginning Balances, Stockholders' equity (in shares) at Mar. 31, 2018 | 16,431 | ||||||
ASC 606 opening balance adjustment | (1) | (1) | (1) | ||||
Exercise of stock options and restricted stock grant | 77 | 77 | 77 | ||||
Exercise of stock options and restricted stock grant (in shares) | 19 | ||||||
Stock-based compensation | 377 | 377 | 377 | ||||
Net income (loss) | 1,355 | 1,416 | 1,416 | (61) | |||
Other comprehensive income(loss) | (2,549) | (2,527) | (2,527) | (22) | |||
Ending Balances, Stockholders' equity at Jun. 30, 2018 | 74,270 | $ 16 | 91,126 | (399) | (16,988) | 73,755 | 515 |
Ending Balances, Stockholders' equity (in shares) at Jun. 30, 2018 | 16,450 | ||||||
Exercise of stock options and restricted stock grant | 665 | 665 | 665 | ||||
Exercise of stock options and restricted stock grant (in shares) | 116 | ||||||
Stock-based compensation | 617 | 617 | 617 | ||||
Net income (loss) | 1,827 | 1,798 | 1,798 | 29 | |||
Other comprehensive income(loss) | 391 | 404 | 404 | (13) | |||
Ending Balances, Stockholders' equity at Sep. 30, 2018 | 77,770 | $ 16 | 92,408 | 5 | (15,190) | 77,239 | 531 |
Ending Balances, Stockholders' equity (in shares) at Sep. 30, 2018 | 16,566 | ||||||
Beginning Balance, Stockholders' equity at Dec. 31, 2018 | $ 77,854 | $ 16 | 93,192 | (192) | (15,777) | 77,239 | 615 |
Beginning Balances, Stockholders' equity (in shares) at Dec. 31, 2018 | 16,587 | 16,587 | |||||
Stock-based compensation | $ 825 | 825 | 825 | ||||
Stock-based compensation (in shares) | 9 | ||||||
Net income (loss) | (1,457) | (1,638) | (1,638) | 181 | |||
Other comprehensive income(loss) | (1,125) | (1,124) | (1,124) | (1) | |||
Ending Balances, Stockholders' equity at Mar. 31, 2019 | 76,097 | $ 16 | 94,017 | (1,316) | (17,415) | 75,302 | 795 |
Ending Balances, Stockholders' equity (in shares) at Mar. 31, 2019 | 16,596 | ||||||
Beginning Balance, Stockholders' equity at Dec. 31, 2018 | $ 77,854 | $ 16 | 93,192 | (192) | (15,777) | 77,239 | 615 |
Beginning Balances, Stockholders' equity (in shares) at Dec. 31, 2018 | 16,587 | 16,587 | |||||
Purchase of non-controlling interest in subsidiary | $ (823) | ||||||
Net income (loss) | (3,069) | ||||||
Ending Balances, Stockholders' equity at Sep. 30, 2019 | $ 114,396 | $ 21 | 138,860 | (5,445) | (19,040) | 114,396 | |
Ending Balances, Stockholders' equity (in shares) at Sep. 30, 2019 | 21,388 | 21,388 | |||||
Beginning Balance, Stockholders' equity at Mar. 31, 2019 | $ 76,097 | $ 16 | 94,017 | (1,316) | (17,415) | 75,302 | 795 |
Beginning Balances, Stockholders' equity (in shares) at Mar. 31, 2019 | 16,596 | ||||||
Issuance of common stock in public offering, net of issuance costs | 42,509 | $ 5 | 42,504 | 42,509 | |||
Issuance of common stock in public offering, net of issuance costs (in shares) | 4,718 | ||||||
Exercise of stock options and restricted stock grant | 473 | 473 | 473 | ||||
Exercise of stock options and restricted stock grant (in shares) | 55 | ||||||
Stock-based compensation | 811 | 811 | 811 | ||||
Stock-based compensation (in shares) | 11 | ||||||
Net income (loss) | 2,384 | 2,408 | 2,408 | (24) | |||
Other comprehensive income(loss) | (1,725) | (1,748) | (1,748) | 23 | |||
Ending Balances, Stockholders' equity at Jun. 30, 2019 | 120,549 | $ 21 | 137,805 | (3,064) | (15,007) | 119,755 | 794 |
Ending Balances, Stockholders' equity (in shares) at Jun. 30, 2019 | 21,380 | ||||||
Purchase of non-controlling interest in subsidiary | (950) | (127) | (127) | (823) | |||
Stock-based compensation | 1,182 | 1,182 | 1,182 | ||||
Stock-based compensation (in shares) | 8 | ||||||
Net income (loss) | (3,996) | (4,033) | (4,033) | 37 | |||
Other comprehensive income(loss) | (2,389) | (2,381) | (2,381) | $ (8) | |||
Ending Balances, Stockholders' equity at Sep. 30, 2019 | $ 114,396 | $ 21 | $ 138,860 | $ (5,445) | $ (19,040) | $ 114,396 | |
Ending Balances, Stockholders' equity (in shares) at Sep. 30, 2019 | 21,388 | 21,388 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (3,069) | $ 3,323 |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization | 4,110 | 2,033 |
Amortization of deferred financing costs | 453 | |
Bargain purchase gain on acquisition | (334) | |
Stock-based compensation | 2,818 | 1,357 |
Provision for inventory write-down | 2,289 | 753 |
Allowance for doubtful accounts | 148 | 2 |
Provision for sales returns | 413 | 839 |
Unrealized loss (gain) on foreign currency transactions | (2,080) | 226 |
Deferred taxes | 884 | (56) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (29,724) | (15,377) |
Contract assets | 819 | (5,984) |
Inventories | (3,454) | (21,967) |
Prepaid expenses and other assets | 3,859 | (1,958) |
Accounts payable | 9,275 | 24,790 |
Contract liabilities | (4,246) | |
Accrued and other liabilities | (4,049) | (3,695) |
Net cash used in operating activities | (21,888) | (15,714) |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (1,461) | (753) |
Proceeds from disposal of property and equipment and other assets | 1 | |
Acquisition of business, net of cash acquired | (4,697) | |
Net cash used in investing activities | (6,158) | (752) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock in public offering, net of issuance costs | 42,509 | |
Proceeds from short-term borrowings and line of credit | 25,884 | 61,419 |
Repayments of short-term borrowings and line of credit | (38,486) | (48,739) |
Proceeds from long-term borrowings | 25,000 | |
Repayments of long-term borrowings | (1,250) | |
Proceeds from related party term loan | 6,098 | |
Repayments of related party term loan | (5,000) | (4,460) |
Deferred financing costs | (1,998) | |
Purchase of non-controlling interest | (950) | |
Proceeds from exercise of stock options | 473 | 853 |
Net cash provided by financing activities | 46,182 | 15,171 |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (984) | (1,417) |
Net increase in cash, cash equivalents and restricted cash | 17,152 | (2,712) |
Cash, cash equivalents and restricted cash at beginning of period | 35,648 | 31,412 |
Cash, cash equivalents and restricted cash at end of period | 52,800 | 28,700 |
Reconciliation of cash, cash equivalents and restricted cash to statement of financial position | ||
Reconciliation of cash, cash equivalents and restricted cash | $ 35,648 | $ 31,412 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
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 DASAN Zhone Solutions, Inc. (referred to, collectively with its subsidiaries, as “DZS” or the “Company”) is a global provider of ultra-broadband network access solutions and communications platforms deployed by advanced Tier 1, 2 and 3 service providers and enterprise customers. 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 that includes more than 900 customers in more than 80 countries worldwide. DZS was incorporated under the laws of the state of Delaware in June 1999, under the name Zhone Technologies, Inc. On September 9, 2016, the Company acquired Dasan Network Solutions, Inc., a California corporation (“DNS”), through the merger of a wholly owned subsidiary of the Company with and into DNS, with DNS surviving as a wholly owned subsidiary of the Company (the “Merger”). At the effective time of the Merger, all issued and outstanding shares of capital stock of DNS held by DASAN Networks, Inc. (“DNI”) were canceled and converted into the right to receive shares of the Company's common stock in an amount equal to 58% of the issued and outstanding shares of the Company's common stock immediately following the Merger. In connection with the Merger, the Company changed its name from Zhone Technologies, Inc. to DASAN Zhone Solutions, Inc. The Company is headquartered in Oakland, California with flexible in-house production facilities in Seminole, Florida and Hanover, Germany (acquired as part of the Keymile Acquisition (defined below) in January 2019), 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 ) DNI Ownership As of September 30, 2019, DNI owned approximately 44.4% of the outstanding shares of the Company's common stock. As a result, DNI is able to significantly influence corporate and management policies and the outcome of any corporate transaction or other matter submitted to the Company’s stockholders for approval. Such transactions may include mergers and acquisitions, sales of all or some of the Company’s assets or purchases of assets, and other significant corporate transactions. The interests of DNI may not coincide with the interests of the Company's other stockholders or with holders of the Company's indebtedness. See Note 11 and Note 15 to the unaudited condensed consolidated financial statements for additional information. (c ) Basis of Presentation 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, 2018. 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 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. 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. All intercompany transactions and balances have been eliminated in consolidation. 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. 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, 2018 filed with the Securities and Exchange Commission (“SEC”) on March 12, 2019. (d ) Use of Estimates The preparation of the 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. (e) Reclassifications For the three and nine months ended September 30, 2018, certain previously reported statement of comprehensive income (loss) and statement of cash flows amounts have been adjusted for certain immaterial reclassifications to correctly reflect: (i) cost of products and services to related parties; and (ii) changes in accounts receivable and contract assets. ( f ) Revenue The following table presents the revenues by source (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Revenue by source: Products $ 66,447 $ 68,787 $ 214,890 $ 198,830 Services 5,077 3,127 14,387 8,845 Total $ 71,524 $ 71,914 $ 229,277 $ 207,675 The following summarizes required disclosures about geographical concentrations (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Revenue by geography: United States $ 9,662 $ 11,125 $ 28,993 $ 41,373 Canada 1,062 1,131 2,950 3,344 Total North America 10,724 12,256 31,943 44,717 Latin America 6,273 6,841 18,829 21,713 Europe, Middle East, Africa 15,838 10,425 59,429 27,264 Korea 20,877 19,609 55,682 50,844 Other Asia Pacific 17,812 22,783 63,394 63,137 Total International 60,800 59,658 197,334 162,958 Total $ 71,524 $ 71,914 $ 229,277 $ 207,675 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 opening and closing balances of contract assets and contract liabilities related to contracts with customers are as follows: Contract Assets Contract Liabilities Opening, January 1, 2019 $ 12,175 $ 10,312 Closing, September 30, 2019 10,328 6,206 Decrease $ (1,847 ) $ (4,106 ) The amount of revenue recognized in the three months ended September 30, 2019 that was included in the prior period contract liability balance was $1.7 million. The amount of revenue recognized in the nine months ended September 30, 2019 that was included in the January 1, 2019 contract liability balance was $7.3 million. This revenue consists of services provided to customers who had prepaid for those services prior to the current year. (g ) Concentration of Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents which totaled $47.9 million at September 30, 2019, including $7.4 million held by its international subsidiaries. Cash and cash equivalents 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. For the three months ended September 30, 2019, one customer accounted for 11% of net revenue. For the nine months ended September 30, 2019, no single customer accounted for 10% or more of net revenue. For the three and nine months ended September 30, 2018, one customer accounted for 11% of net revenue. As of September 30, 2019, two customers represented 17% and 12% of net accounts receivable, respectively. As of December 31, 2018, two customers represented 11% and 10% of net accounts receivable, respectively. As of September 30, 2019 and December 31, 2018, receivables from customers in countries other than the United States represented 94% and 88%, respectively, of net accounts receivable. ( h ) 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. (i) Defined Benefit Plans and Plan Assumptions The Company provides certain defined benefit pension plans to employees in Germany. Pension accounting is intended to reflect the recognition of future benefit costs over the employees' average expected future service to the Company based on the terms of the plans and investment and funding decisions. To estimate the impact of these future payments and the Company’s decisions concerning funding of these obligations, the Company is required to make assumptions using actuarial concepts within the framework of U.S. GAAP. Two critical assumptions are the discount rate and the expected long-term return on plan assets. Other important assumptions include expected future salary increases, expected future increases to benefit payments, expected retirement dates, employee turnover, retiree mortality rates and portfolio composition. The Company evaluates these assumptions at least annually. ( j ) Recent Accounting Pronouncements Recent Accounting Pronouncements Adopted Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases The Company adopted the new standard on January 1, 2019, the first day of fiscal 2019, using the modified retrospective approach whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net cumulative effect adjustment to retained earnings as of January 1, 2019 as a result of this adoption. ASC 842 sets out the principles for the recognition, measurement, presentation and disclosure of leases. The Company has elected to use a certain package of practical expedients permitted under the transition guidance within ASC 842. Those practical expedients are as follows: • The Company did not reassess (i) whether expired or existing contracts contain leases under the new definition of a lease; (ii) lease classification for expired or existing leases; and (iii) whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. • The Company did not reassess a lease whose term is 12 months or less and does not include a purchase option that the lessee is reasonably certain to exercise. • The Company did not elect to use hindsight for transition when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset. • For all asset classes, the Company elected to not recognize a right-of-use asset and lease liability for leases with a term of 12 months or less. • For all asset classes, the Company elected to not separate non-lease components from lease components to which they relate and has accounted for the combined lease and non-lease components as a single lease component. The Company applies significant judgment in considering all relevant factors that create an economic benefit (e.g., contract-based, asset-based, entity-based, and market-based, among others) as of the commencement date in determining the initial lease term and future lease payments. For example, the Company exercises judgment in determining whether renewal periods will be exercised during the initial measurement process. If the Company believes it will exercise the renewal option, and the lease payments associated with the renewal periods are known or calculable, such renewal lease payments would be included in the initial measurement of the lease liability. Otherwise, even if the Company believes that it will exercise the renewal period, if the renewal payments are unknown or not calculable, they would not be included until they become known or calculable at which time the Company would remeasure the remaining lease payments similar to a lease modification. Adoption of ASC 842 resulted in the balance sheet recognition of right of use assets and lease liabilities of approximately $22.5 million as of January 1, 2019. Adoption of ASC 842 did not materially impact the Company’s unaudited condensed consolidated statements of comprehensive income (loss) and cash flows. See Note 14 in the notes to unaudited condensed consolidated financial statements. Income Tax Effects within Accumulated Other Comprehensive Income In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost Other Recent Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other Internal-Use Software - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments - Credit Losses Codification Improvements to Topic 326, Financial Instruments - Credit Losses Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief In January 2017, FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment On August 28, 2018, the FASB issued ASU 2018-13, Fair Value Measurement In August 2018, the FASB issued ASU 2018-14, Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans |
Business Combinations
Business Combinations | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
Business Combinations | (2 ) Business Combinations Keymile Acquisition On January 3, 2019, ZTI Merger Subsidiary III Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“ZTI”), acquired all of the outstanding shares of Keymile GmbH (“Keymile”), a limited liability company organized under the laws of Germany, from Riverside KM Beteiligung GmbH (“Riverside”), a limited liability company organized under the laws of Germany, pursuant to a share purchase agreement (the “Keymile Acquisition”). The allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to refinement, within the measurement period (up to one year from the Acquisition Date). Measurement period adjustments, with the corresponding adjustment to the bargain purchase gain or goodwill, will be recorded in the reporting period in which the adjustment to the provisional amounts are determined based upon the final valuation. The aggregate cash purchase price paid for all of the shares of Keymile and certain of its subsidiaries, was €10,250,000 (approximately $11.8 million), subject to adjustment for the lockbox mechanism described below. The Company also assumed pension obligations of approximately $12.7 million, net of pension assets of $3.5 million. Following the closing of the Keymile Acquisition, Keymile became the Company’s wholly owned subsidiary. The Keymile Acquisition also provided for a lockbox mechanism such that normal operations were observed by Keymile management and any excess cash flows generated from operating activities for the period from October 1, 2018 to December 31, 2018 remained with Keymile following the closing, with the Company as the beneficiary, as the purchaser of Keymile. At December 31, 2018, cash received from the lockbox mechanism amounted to $2.5 million. On October 1, 2018, as a condition for the Keymile Acquisition, Riverside extended a €4.0 million ($4.4 million, which represents the cash and cash equivalents and short-term debt, in the “Allocation of Purchase Consideration” table below) working capital loan to Keymile. The working capital loan bears interest at a rate of 3.5% per annum and is scheduled for repayment in two equal installments in April and November 2019. The first payment of €2.0 million ($2.2 million) was made in April 2019 and the balance is due in November 2019. As of September 30, 2019, the outstanding balance under this working capital loan was €2.0 million ($2.2 million). Subsequently in November 2019, the Company fully repaid all the outstanding borrowings under this working capital loan. Keymile is a leading solution provider and manufacturer of telecommunication systems for broadband access. The Company believes Keymile strengthens its portfolio of broadband access solutions, which now includes a series of multi-service access platforms for FTTx network architectures, including ultra-fast broadband copper access based on VDSL/Vectoring and G. Fast technology. A summary of the preliminary estimated purchase price allocation to the fair value of assets acquired and liabilities assumed is as follows (in thousands): Purchase consideration Cash consideration $ 11,776 Working capital adjustment: cash received from lockbox mechanism (2,497 ) Adjusted purchase consideration $ 9,279 The following summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for the Keymile Acquisition (in thousands): Allocation of purchase consideration Current assets Cash and cash equivalents $ 4,582 Accounts receivable - trade, net 6,820 Other receivables 798 Inventories 9,943 Property, plant and equipment 983 Other assets 163 Intangible assets 12,030 Accounts payable - trade (3,303 ) Short-term debt (4,582 ) Contract liabilities (364 ) Accrued liabilities (3,614 ) Deferred tax liabilities (1,071 ) Pension obligations (12,656 ) Other long term liabilities (116 ) Bargain purchase gain (334 ) Total purchase consideration $ 9,279 The purchase price allocation resulted in the recognition of a gain on bargain purchase of approximately $0.3 million, which was included in the unaudited condensed consolidated statements of comprehensive income (loss) for the nine months ended September 30, 2019. The gain on bargain purchase was the result of the preliminary fair value of the identifiable net assets acquired exceeding the purchase price paid for the Keymile Acquisition which was reduced by the lockbox mechanism. The estimated weighted average useful lives of the acquired property, plant and equipment is 5 years. Depreciation is calculated using the straight-line method. The following table represents the preliminary estimated fair value and useful lives of identifiable intangible assets acquired: Estimated Fair Value (in thousands) Estimated Useful Life Intangible assets acquired Customer relationships $ 3,667 5 years Trade name 3,208 5 years Technology - developed core 5,155 5 years Total intangible assets $ 12,030 As of the valuation date, there was value attributable to Keymile’s existing customer relationships. Keymile’s key customer base is made up of independent telecommunication service providers and network operators, a base of customers that have seen growth since 2012. Keymile is seen as a market leader and historically has had low customer attrition. In addition, switching costs are considered to be high due to the disruption of switching platforms as well as the additional training necessary. The Company valued the customer relationships using the Income Approach, specifically the Multi-Period Excess Earnings Method (“MPEEM”). The Company utilized the Relief from Royalty Method (“RFRM”) to value the tradename and developed technology. The RFRM assumes that the value of the asset equals the amount a third party would pay to use the asset and capitalize on the related benefits of the asset. Therefore, a revenue stream for the asset is estimated, and then an appropriate royalty rate is applied to the forecasted revenue to estimate the pre-tax income associated with the asset. The pre-tax income is then tax-effected to estimate the after-tax net income associated with the asset. Finally, the after tax net income is discounted to the present value using an appropriate rate of return that considers both the risk of the asset and the associated cash flow estimates. Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the Keymile Acquisition as if it had occurred as of January 1, 2018. The unaudited pro forma financial information has been prepared by management for illustrative purposes only and does not purport to represent what the results of operations, financial condition or other financial information of the Company would have been if the Keymile Acquisition had occurred on January 1, 2018 or what such results or financial condition will be for any future periods. The unaudited pro forma financial information is based on estimates and assumptions and on the information available at the time of the preparation thereof. These estimates and assumptions may change, be revised or prove to be materially different, and the estimates and assumptions may not be representative of facts existing at the time of the Keymile Acquisition. The pro forma adjustments primarily relate to acquisition related costs, amortization of acquired intangibles and interest expense related to financing arrangements. Below is the pro forma financial information (in thousands): Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 Pro forma net revenues $ 84,870 $ 242,086 Pro forma net income attributable to DASAN Zhone Solutions, Inc. 726 2,885 Acquisition of the Non-controlling Interest in DZS Japan On July 31, 2019, the Company acquired the remaining 30.94% non-controlling interest of DZS Japan, Inc. (“DZS Japan”), and DZS Japan became a wholly owned subsidiary of the Company. The Company acquired the remaining interest in DZS Japan for total cash consideration of $950,000, consisting entirely of payments to the former shareholder (Handysoft). This transaction resulted in a decrease to “Additional paid-in capital” of $127,000, a decrease to “Non- controlling interest” of $823,000, and a total impact of $950,000 in the unaudited condensed consolidated balance sheet as of September 30, 2019. |
Fair Value Measurement
Fair Value Measurement | 9 Months Ended |
Sep. 30, 2019 | |
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. The following financial instruments are not measured at fair value on the Company’s condensed consolidated balance sheet as of September 30, 2019 and the consolidated balance sheet as of December 31, 2018, but require disclosure of their fair values: cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable, accrued liabilities, lease liabilities and debt. 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 carrying value of the Company's lease liabilities and debt approximates their fair values based on the current rates available to the Company for debt of similar terms and maturities. |
Cash and Cash Equivalents and R
Cash and Cash Equivalents and Restricted Cash | 9 Months Ended |
Sep. 30, 2019 | |
Cash And Cash Equivalents [Abstract] | |
Cash, Cash Equivalents and Restricted Cash | (4 ) Cash, Cash Equivalents and Restricted Cash As of September 30, 2019 and December 31, 2018, the Company's cash and cash equivalents consisted of financial deposits and money market accounts that are principally held with various domestic and international financial institutions with high credit standing. Restricted cash consisted primarily of cash restricted for performance bonds, warranty bonds and collateral for borrowings. |
Balance Sheet Details
Balance Sheet Details | 9 Months Ended |
Sep. 30, 2019 | |
Balance Sheet Related Disclosures [Abstract] | |
Balance Sheet Details | (5 ) Balance Sheet Details Accounts receivable, net consisted of the following (in thousands): September 30, 2019 December 31, 2018 Gross accounts receivable $ 101,253 $ 71,945 Less: allowance for doubtful accounts (388 ) (328 ) Total accounts receivable, net $ 100,865 $ 71,617 Inventories consisted of the following (in thousands): September 30, 2019 December 31, 2018 Raw materials $ 16,630 $ 15,688 Work in process 3,582 2,429 Finished goods 22,834 15,751 Total inventories $ 43,046 $ 33,868 Inventories provided as collateral for borrowings from Export-Import Bank of Korea amounted to $6.5 million and $9.5 million as of September 30, 2019 and December 31, 2018, respectively. |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Sep. 30, 2019 | |
Property Plant And Equipment [Abstract] | |
Property, Plant and Equipment | (6 ) Property, Plant and Equipment Property, plant and equipment consisted of the following (in thousands): September 30, 2019 December 31, 2018 Furniture and fixtures $ 10,139 $ 8,029 Machinery and equipment 2,341 3,553 Leasehold improvements 4,063 3,715 Computers and software 1,856 922 Other 745 982 19,144 17,201 Less: accumulated depreciation and amortization (12,228 ) (11,271 ) Less: government grants (341 ) (412 ) Total property and equipment, net $ 6,575 $ 5,518 Depreciation expense associated with property and equipment for the three and nine months ended September 30, 2019 was $0.5 million and $1.5 million, respectively. Depreciation expense for the three and nine months ended September 30, 2018 was $0.4 million and $1.2 million, respectively. The Company receives grants from various government entities mainly to support capital expenditures. 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. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | (7 ) Goodwill and Intangible Assets Goodwill was as follows (in thousands): September 30, 2019 December 31, 2018 Gross carrying amount $ 3,977 $ 3,977 Less: accumulated impairment — — Net $ 3,977 $ 3,977 The Company did not recognize impairment loss on goodwill during the nine months ended September 30, 2019 or 2018. Intangible assets consisted of the following (in thousands): September 30, 2019 Gross Carrying Amount Accumulated Amortization Net Developed technology $ 7,972 $ (2,624 ) $ 5,348 Customer relationships 8,733 (2,140 ) 6,593 Trade name 3,056 (458 ) 2,598 Total intangible assets, net $ 19,761 $ (5,222 ) $ 14,539 December 31, 2018 Gross Carrying Amount Accumulated Amortization Net Developed technology $ 3,060 $ (1,428 ) $ 1,632 Customer relationships 5,240 (1,223 ) 4,017 Total intangible assets, net $ 8,300 $ (2,651 ) $ 5,649 Intangible assets as of September 30, 2019 include the customer relationships, trade name and developed technology acquired through the Keymile Acquisition (see Note 2) as well as previously acquired intangible assets. Amortization expense associated with intangible assets for the three and nine months ended September 30, 2019 was $0.9 million and $2.6 million, respectively. Amortization expense for the three and nine months ended September 30, 2018 was $0.3 million and $0.9 million, respectively. The following table presents the future amortization expense of the Company’s intangible assets as of September 30, 2019 (in thousands): Remainder of 2019 $ 857 2020 3,429 2021 3,225 2022 2,816 2023 2,816 Thereafter 1,396 Total $ 14,539 Weighted average remaining life: Developed technology 3.74 years Customer relationships 5.72 years Trade name 4.25 years |
Debt
Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt | (8 ) Debt The following tables summarize the Company’s debt (in thousands): As of September 30, 2019 Short-term Long-term Total PNC Bank Facility $ 12,500 $ 11,250 $ 23,750 Working Capital Loan 2,183 — 2,183 Bank and Trade Facilities - Foreign Operations 20,625 — 20,625 Related Party — 9,049 9,049 $ 35,308 $ 20,299 $ 55,607 Less: unamortized deferred financing costs on the PNC Bank Facility (702 ) (843 ) (1,545 ) $ 34,606 $ 19,456 $ 54,062 As of December 31, 2018 Short-term Long-term Total Wells Fargo Bank Facility $ 7,000 — $ 7,000 Bank and Trade Facilities - Foreign Operations 24,762 — 24,762 Related Party — 14,142 14,142 $ 31,762 $ 14,142 $ 45,904 PNC Bank Facility On February 27, 2019, the Company and ZTI (collectively, the “Borrowers”), and certain direct and indirect subsidiaries of the Borrowers, as guarantors, entered into a Revolving Credit, Term Loan, Guaranty and Security Agreement (the “Domestic Credit Agreement”) and an Export-Import Revolving Credit, Guaranty and Security Agreement (the “Ex-Im Credit Agreement,” and together with the Domestic Credit Agreement, the “Credit Agreements”), in each case with PNC Bank, National Association (“PNC”) and Citibank, N.A. as lenders, and PNC as agent for the lenders (the “PNC Facility”), which replaced the Company’s former senior secured credit facilities with Wells Fargo Bank (the “Former WFB Facility”). The Credit Agreements provide for a $25.0 million term loan and a $15.0 million revolving line of credit (including sub-facilities for export-import transactions, letters of credit and swing loans). The amount the Company is able to borrow on the revolving line of credit at any time is based on eligible accounts receivable and other conditions, less certain reserves. Borrowings under the PNC Facility bear interest at the Company’s option, at either (i) a base rate equal to the highest of the federal funds rate plus 0.50%, PNC’s prime rate, or the daily LIBOR rate plus 1.00%, or (ii) the LIBOR rate for the applicable interest period, subject to a floor of 1.00% (with respect to the term loans only), plus in each case, an applicable margin. The applicable margin for term loans is 5.00% for base rate loans and 6.00% for LIBOR rate loans, and the applicable margin for borrowings under the revolving line of credit is 1.50% for base rate loans and 2.50% for LIBOR rate loans. The Company used a portion of the funds borrowed from the term loan under the Credit Agreements to (i) repay $5.0 million in principal amount of existing related-party indebtedness with DNI plus accrued interest, (ii) repay $1.5 million in outstanding borrowings under the Company’s former revolving line of credit plus accrued interest and fees and cash collateralize $3.6 million in outstanding letters of credit under the Former WFB Facility, and (iii) repay $5.6 million short-term debt in Korea and Japan. The Company intends to use the remaining funds for ongoing working capital needs. Obligations under the Credit Agreements are secured by substantially all of the personal property assets of the Borrowers and the subsidiaries that guarantee the Credit Agreements, including their intellectual property. The maturity date under the Credit Agreements is February 27, 2022. The term loan under the Credit Agreements is repayable in eight quarterly installments of $625,000 beginning June 30, 2019, followed by quarterly installments of $937,500 beginning on June 30, 2021, with all remaining unpaid principal and accrued interest due on the maturity date. The Credit Agreements contain certain covenants, limitations, and conditions with respect to the Borrowers and their subsidiaries, including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a minimum liquidity covenant, as well as financial reporting obligations, and customary events of default. If an event of default occurs, the agent and lenders will be entitled to take various actions, including requiring the immediate repayment of all outstanding amounts under the Credit Agreements, terminating commitments to make additional advances and selling the assets of the Borrowers and their subsidiary guarantors to satisfy the obligations under the Credit Agreements. At September 30, 2019, the Company was not in compliance with the maximum leverage ratio financial covenant in the Credit Agreements, which represents an event of default thereunder. On November 8, 2019, the Company obtained a waiver of the foregoing event of default from the lenders under the Credit Agreements. As a condition for the issuance of the waiver, the Company voluntarily prepaid $10.0 million of the outstanding term loan and paid a one-time fee of $150,000. As of September 30, 2019, the Company had $23.8 million in outstanding term loan borrowings under its PNC Facility, and no outstanding borrowings under the revolving line of credit. The interest rate on the term loan was 8.12% Former Wells Fargo Bank Facility On February 27, 2019, in connection with the entry into the PNC Facility, the Company repaid $1.5 million in principal amount of outstanding borrowings plus accrued interest and fees under the Former WFB Facility and cash collateralized $3.6 million in outstanding letters of credit under the Former WFB Facility and terminated the Former WFB Facility. Working Capital Loan On October 1, 2018, as a condition for the Keymile Acquisition, Riverside, the former stockholder of Keymile, extended a €4.0 million ($4.4 million) working capital loan to Keymile. The working capital loan bears interest at a rate of 3.5% per annum and is scheduled for repayment in two equal installments. The first payment of €2.0 million ($2.2 million) was made in April 2019 and the balance is due in November 2019. As of September 30, 2019, the outstanding balance under this working capital loan was €2.0 million ($2.2 million). Subsequently in November 2019, the Company fully repaid all the outstanding borrowings under this working capital loan. Bank and Trade Facilities - Foreign Operations Certain of the Company's foreign subsidiaries have entered into various financing arrangements with foreign banks and other lending institutions consisting primarily of revolving lines of credit, trade facilities, term loans and export development loans. These facilities are renewed as they mature and are generally secured by a security interest in certain assets of the applicable foreign subsidiaries and supported by guarantees given by DNI or third parties. Payments under such facilities are made in accordance with the given lender’s amortization schedules. As of September 30, 2019 and December 31, 2018, the Company had an aggregate outstanding balance of $20.6 million and $24.8 million, respectively, under such financing arrangements. The maturity dates and interest rates per annum applicable to outstanding borrowings under these financing arrangements are listed in the tables below (amount in thousands). As of September 30, 2019 Maturity Date Denomination Interest rate (%) Amount (in U.S. dollars) Industrial Bank of Korea Credit facility 10/02/2019 - 11/12/2019 USD 5.34 - 5.49 $ 512 NongHyup Bank Credit facility 10/07/2019 - 02/24/2020 USD 3.69 - 4.49 3,097 The Export-Import Bank of Korea Export development loan 7/1/2020 KRW 2.75 4,995 Korea Development Bank General loan 8/8/2020 KRW 3.0 4,162 Korea Development Bank Credit facility 10/07/2019 - 02/18/2020 USD 3.11 - 3.47 6,194 LGUPlus General loan 6/17/2020 KRW 0 1,665 $ 20,625 As of September 30, 2019, the Company had $10.8 million in outstanding borrowings and $9.8 million committed as security for letters of credit under the Company's $20.6 million credit facilities with certain foreign banks. As of December 31, 2018 Maturity Date Denomination Interest rate (%) Amount (in U.S. dollars) Industrial Bank of Korea Credit facility 01/02/2019 - 05/15/2019 USD 3.96 - 4.36 $ 1,982 Industrial Bank of Korea Trade finance 02/18/2019 - 02/25/2019 USD 5.31 - 6.08 1,920 Shinhan Bank General loan 3/30/2019 KRW 6.06 2,862 NongHyup Bank Credit facility 01/07/2019 - 04/29/2019 USD 3.71 - 4.50 2,053 The Export-Import Bank of Korea Export development loan 07/01/2019 KRW 3.44 6,439 The Export-Import Bank of Korea Import development loan 02/14/2019 USD 4.31 850 Korea Development Bank General loan 08/08/2019 KRW 3.48 4,472 Korea Development Bank Credit facility 02/07/2019 - 03/06/2019 USD 3.64 - 3.91 1,489 LGUPlus General loan 06/17/2019 KRW 0 1,789 Shoko Chukin Bank General loan 06/28/2019 JPY 1.33 906 $ 24,762 As of December 31, 2018, the Company had $5.5 million in outstanding borrowings and $2.6 million committed as security for letters of credit under the Company's $19.0 million credit facilities with certain foreign banks. See Note 11 Related-Party Transactions for a discussion of related-party debt. |
Defined Benefit Plans
Defined Benefit Plans | 9 Months Ended |
Sep. 30, 2019 | |
Compensation And Retirement Disclosure [Abstract] | |
Defined Benefit Plans | (9) Defined Benefit Plans The Company provides certain defined benefit pension plans in Germany for active and former employees of Keymile and their surviving dependents. These benefits were promised upon an employee either reaching retirement age or becoming disabled. Benefits paid depend on an employee’s years of service and annual earnings. These plans were frozen as of September 30, 2003 and have not been offered to new employees after that date. Employees who were already covered by such plans ceased earning benefits under such plans from the freeze date forward. The benefit obligations are determined separately for each plan by estimating the present value of future benefits that employees have earned in prior periods. Given that all plans are frozen; the Company does not have any current service costs to recognize within its defined benefit obligation or pension expense. The only component of pension expense relates to $0.1 million of interest expense on the defined benefit pension plans, which is recognized in Other income (loss), net in the condensed consolidated statement of comprehensive income (loss). The interest expense is determined by multiplying the defined benefit obligation by the discount rate used to determine the defined benefit obligation. Actuarial gains and losses from changes in assumptions are included in Other comprehensive loss in the condensed consolidated statement of comprehensive income (loss). The following key actuarial assumptions were made in determining the benefit obligation: September 30, 2019 Discount rate 1.20% Rate of pension increase 1.70% Retirement age 63-67 years As of September 30, 2019, the Company’s employee benefit obligations under the defined benefit plans is approximately $13.3 million, net of pension assets of $3.4 million which is under a reinsurance contract policy. During the three and nine months ended September 30, 2019, the Company made no cash contributions to the defined benefit plans. |
Non-Controlling Interests
Non-Controlling Interests | 9 Months Ended |
Sep. 30, 2019 | |
Noncontrolling Interest [Abstract] | |
Non-Controlling Interests | (10 ) Non-Controlling Interests Non-controlling interests were as follows (in thousands): Nine Months Ended September 30, 2019 2018 Beginning non-controlling interests $ 615 $ 534 Net income (loss) attributable to non-controlling interests 194 2 Purchase of noncontrolling interest in subsidiary (823 ) — Foreign currency translation adjustments (OCI) 14 (5 ) Ending non-controlling interests $ — $ 531 |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | (11 ) Related-Party Transactions Related-Party Debt In connection with the Merger, on September 9, 2016, the Company entered into a loan agreement with DNI for a $5.0 million unsecured subordinated term loan facility. The term loan was scheduled to mature in September 2021 and was pre-payable at any time by the Company without premium or penalty. The interest rate under this facility was 4.6% per annum. In February 2019, the Company repaid the term loan in full plus accrued interest in connection with the entry into the PNC Facility, thereby terminating the loan agreement. In February 2016, DNS borrowed $1.8 million from DNI for capital investment with an interest rate of 4.6% per annum. On February 27, 2019, in connection with the entry into the PNC Facility, the Company amended the terms of this loan to extend the repayment date to May 27, 2022. As of September 30, 2019, the $1.8 million balance of the loan remained outstanding. On December 27, 2018, the Company entered into a loan agreement with DNI, for a $6.0 million term loan with an interest rate of 4.6% per annum. On February 27, 2019, in connection with the entry into the PNC Facility, the Company amended the terms of the term loan to extend the repayment date to May 27, 2022 and to terminate any security granted to DNI with respect to such term loan As of September 30, 2019, the $6.0 million balance of the loan remained outstanding. In March 2018, Dasan Network Solutions, Inc., a subsidiary of the Company incorporated under the laws of Korea (“DNS Korea”) borrowed KRW6.5 billion ($5.8 million) from DNI, of which KRW5.0 billion ($4.5 million) was repaid on August 8, 2018. On February 27, 2019, in connection with the entry into the PNC Facility, the Company amended the terms of this loan to extend the repayment date to May 27, 2022. The modifications resulting from the amendments described above were limited to the extension of the maturity dates and removal of the collateral on the outstanding term loans with DNI. There were no fees paid to DNI or external costs otherwise incurred in connection with these modifications. Interest expense on these related-party borrowings for the three and nine months ended September 30, 2019 was $0.1 million and $0.3 million, respectively. Interest expense for the three and nine months ended September 30, 2018 was $0.1 million and $0.3 million, respectively. Other Related-Party Transactions Sales, cost of revenue, purchases (included in manufacturing (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 and nine months ended September 30, 2019 and September 30, 2018: Three Months Ended September 30, 2019 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue) Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 232 $ 190 $ — $ — $ 966 $ 104 $ 84 Tomato Soft Ltd. 100% — — 29 — — — — Tomato Soft (Xi'an) Ltd. 100% — — — 137 — — — Chasan Networks Co., Ltd. 100% — — 279 16 — — — $ 232 $ 190 $ 308 $ 153 $ 966 $ 104 $ 84 Three Months Ended September 30, 2018 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue) Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 1,472 $ 1,270 $ — $ — $ 784 $ 112 $ 89 Tomato Soft Ltd. 100% — — 27 — — — — Tomato Soft (Xi'an) Ltd. 100% — — — 119 — — — Chasan Networks Co., Ltd. 100% — — 260 21 — — — HANDYSOFT, Inc. 17.63% 215 208 — — 2 — — $ 1,687 $ 1,478 $ 287 $ 140 $ 786 $ 112 $ 89 Nine Months Ended September 30, 2019 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue) Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 1,828 $ 1,346 $ — $ — $ 2,984 $ 349 $ 255 Tomato Soft Ltd. 100% — — 88 — — — — Tomato Soft (Xi'an) Ltd. 100% — — — 392 — — — Chasan Networks Co., Ltd. 100% — — 837 55 — — — J-Mobile Corporation 90.47% 42 81 — — — — — $ 1,870 $ 1,427 $ 925 $ 447 $ 2,984 $ 349 $ 255 Nine Months Ended September 30, 2018 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue) Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 3,683 $ 3,143 $ — $ — $ 2,950 $ 338 $ 234 Tomato Soft Ltd. 100% — — 84 — — — — Tomato Soft (Xi'an) Ltd. 100% — — 10 396 — — — Chasan Networks Co., Ltd. 100% — — 880 57 — — — Dasan France 100% 202 177 — — — — — HANDYSOFT, Inc. 17.63% 473 357 — — 4 — — $ 4,358 $ 3,677 $ 974 $ 453 $ 2,954 $ 338 $ 234 The Company has entered into sales agreements with DNI and certain of its subsidiaries. Sales and cost of revenue to DNI and Dasan France, a wholly-owned subsidiary of DNI, represent finished goods produced by the Company that are sold to these related parties who sell the Company's products in Korea and France, respectively. The Company has entered into an agreement with Chasan Networks Co., Ltd. to provide manufacturing and research and development services for the Company. Under the agreement with Chasan Networks., Ltd., the Company is charged a cost plus 7% fee for the manufacturing and development of certain deliverables. The Company has entered into an agreement with Tomato Soft Ltd., a wholly owned subsidiary of DNI, to provide sourcing and inspection services for the Company. Under the agreement with Tomato Soft Ltd., the Company is charged a cost plus 7% fee for sourcing and inspection services. The Company has entered into an agreement with Tomato Soft (Xi'an) Ltd., a wholly owned subsidiary of DNI, to provide research and development services for the Company. Under the agreement with Tomato Soft (Xi'an) Ltd., the Company is charged an expected annual fee of $0.8 million for the development of certain deliverables. Prior to the Merger, as DNS was then a wholly owned subsidiary of DNI, DNI had sales agreements with certain customers on DNS' behalf. Since the Merger, due to these prior sales agreements, the Company has entered into an agreement with DNI pursuant to which DNI acts as a sales channel to these customers. Sales to DNI necessary for DNI to fulfill agreements with its customers are recorded net of royalty fees in related-party revenue. The Company shares office and certain administrative functions with DNI and certain of DNI's subsidiaries. Prior to the Merger, DNS, then a wholly owned subsidiary of DNI, shared human resources, treasury and other administrative support with DNI. The Company entered into certain service sharing agreements with DNI and certain of its subsidiaries for continued use of the shared office space and shared administrative services. Expenses related to rent and administrative services are allocated to the Company based on square footage occupied and headcount, respectively. Other expenses to related parties represent expenses to DNI for its payment guarantees relating to the Company's borrowings. See Note 15 for more information regarding such guarantees. The Company pays DNI a guarantee fee which is calculated as 0.9% of the guaranteed amount. 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 were as follows (in thousands) as of September 30, 2019 and December 31, 2018: As of September 30, 2019 Counterparty DNI ownership interest Account receivables Other receivables Deposits for lease * Long- term debt Accounts payable Other payables Accrued and other liabilities** DNI N/A $ 252 1 $ 683 $ 9,049 $ — $ 2,656 $ 90 Tomato Soft Ltd. 100% — — — — — 10 — Tomato Soft (Xi'an) Ltd. 100% — — — — — 45 — Chasan Networks Co., Ltd. 100% — — — — 96 — — $ 252 $ 1 $ 683 $ 9,049 $ 96 $ 2,711 $ 90 As of December 31, 2018 Counterparty DNI ownership interest Account receivables Other receivables Deposits for lease* Loan Payable Accounts payable Other payables Accrued and other liabilities** DNI N/A $ — $ — $ 735 $ 14,142 $ 1,000 $ 1,231 $ 169 Tomato Soft Ltd. 100% — — — — — 9 — Tomato Soft (Xi'an) Ltd. 100% — — — — — 41 — Dasan France 100% 280 65 — — — — — HANDYSOFT, Inc. 14.77% 303 — — — 654 — — Chasan Networks Co., Ltd. 100% — — — — 89 — — $ 583 $ 65 $ 735 $ 14,142 $ 1,743 $ 1,281 $ 169 * Included in other assets related to deposits for lease in the condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018. ** Included in accrued and other liabilities in the condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018. |
Common Stock
Common Stock | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Common Stock | (12) Common Stock On May 20, 2019, the Company completed a public offering of 4,717,949 shares of its common stock, inclusive of 615,384 shares sold upon full exercise of the underwriters’ option to purchase additional shares of common stock, at a price to the public of $9.75 per share. All shares of common stock were sold by the Company. The total gross proceeds from the offering, before deducting underwriting discounts, commissions and offering expenses, were approximately $46.0 million. After deducting the underwriters’ discount, commissions and other offering expenses, the net proceeds were approximately $42.5 million. |
Net Income Per Share Attributab
Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. | (13 ) Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. Basic net income per share attributable to DASAN Zhone Solutions, Inc. is computed by dividing the net income attributable to DASAN Zhone Solutions, Inc. for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net income per share attributable to DASAN Zhone Solutions, Inc. 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 and nine months ended September 30, 2019 and September 30, 2018: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Net income (loss) attributable to DASAN Zhone Solutions, Inc. $ (4,033 ) $ 1,798 $ (3,263 ) $ 3,321 Weighted average number of shares outstanding: Basic 21,384 16,683 18,732 16,425 Effect of dilutive securities: Stock options, restricted stock units and share awards — 208 — 215 Diluted 21,384 16,891 18,732 16,640 Net income (loss) per share attributable to DASAN Zhone Solutions, Inc.: Basic $ (0.19 ) $ 0.11 $ (0.17 ) $ 0.20 Diluted $ (0.19 ) $ 0.11 $ (0.17 ) $ 0.20 |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Leases | (14 ) 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 2027. At September 30, 2019, the Company had one outstanding finance lease. The Company determines if an arrangement contains a lease at inception. The Company evaluates each service contract upon inception to determine whether it is, or contains, a lease. Such determination is made by applying judgment in evaluating each service contract within the context of the 5-step decision making process under ASC 842. The key concepts of the 5-step decision making process that the Company evaluated can be summarized as: (1) is there an identified physical asset; (2) does the Company have the right to substantially all the economic benefits from the asset throughout the contract period; (3) does the Company control how and for what purpose the asset is used; (4) does the Company operate the asset; and (5) did the Company design the asset in a way that predetermines how it will be used. Assets and liabilities related to operating leases are included in the condensed consolidated balance sheet as right-of-use assets from operating leases, operating lease liabilities - current and operating lease liabilities - non-current. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Many of the Company’s lease agreements contain renewal options; however, the Company does not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. Some of the Company’s lease agreements contain rent escalation clauses, rent holidays, capital improvement funding or other lease concessions. 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 lessor makes an underlying asset available for use. Variable lease components represent amounts that are not fixed in nature, are not tied to an index or rate, and are recognized as incurred. In determining its right-of-use assets and lease liabilities, the Company applies a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires the Company to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company determines the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region. When the Company cannot readily determine the discount rate implicit in the lease agreement, the Company utilizes an incremental borrowing rate based on the most recent debt facilities interest rates and applicable to the local geography and with similar term to lease. For the measurement and classification of its lease agreements, the Company groups lease and non-lease components into a single lease component for all underlying asset classes. Variable lease payments include payments for non-lease components of maintenance costs. The components of lease expense were as follows for the three and nine months ended September 30, 2019: Three Months Ended September 30, 2019 (in thousands) Nine Months Ended September 30, 2019 (in thousands) Operating lease cost $ 1,064 $ 3,327 Variable lease cost 194 520 Total net lease cost $ 1,258 $ 3,847 Supplemental cash flow information related to the Company’s operating leases was as follows for the three and nine months ended September 30, 2019: Three Months Ended September 30, 2019 (in thousands) Nine Months Ended September 30, 2019 (in thousands) Cash paid for amounts included in the measurement of operating lease liabilities $ 1,265 $ 3,888 ROU assets obtained in exchange for operating lease obligations $ 35 $ 35 The following table presents the lease balances within the Company’s condensed consolidated balance sheet, weighted average remaining lease term, and weighted average discount rates related to the Company’s operating leases as of September 30, 2019 (in thousands): Lease Assets and Liabilities Assets: Right-of-use assets from operating leases $ 18,349 Liabilities: Operating lease liabilities - current $ 3,496 Operating lease liabilities - non-current 15,957 Total operating lease liabilities $ 19,453 Weighted average remaining lease term 4.77 years Weighted average discount rate 6.6 % The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2019 (in thousands): Remainder of 2019 $ 1,259 2020 4,197 2021 3,890 2022 3,609 2023 3,460 Thereafter 6,373 Total operating lease payments 22,788 Less: imputed interest (3,335 ) Total operating lease liabilities $ 19,453 As of December 31, 2018, the estimated future lease payments under non-cancelable operating leases as defined under the previous lease accounting guidance of ASC Topic 840, for the following five fiscal years and thereafter are as follows (in thousands): Operating Leases Year ending December 31: 2019 $ 4,100 2020 3,005 2021 2,590 2022 2,664 2023 2,494 Thereafter 5,929 Total minimum lease payments $ 20,782 On August 29, 2019, the Company cancelled a warehouse lease in Germany and recorded $0.2 million of lease cancellation expense to cover early termination costs and renovation obligations. The Company recognized the non-recurring lease cancellation expense in Selling, marketing, general and administrative in the condensed consolidated statement of comprehensive income (loss). In connection with the lease cancellation, balance sheet recognition of approximately $0.6 million right-of-use assets and operating lease liabilities are removed from the condensed consolidated balance sheets as of September 30, 2019. New Office Lease On July 9, 2019, the Company entered into a lease agreement (the “Lease”) with Family Stations, Inc., a California corporation (“Lessor”). The Lease covers approximately 16,500 square feet of space located at 1350 South Loop Road, Alameda, California (the “Premises”). The Lease provides for a term of 63 months, commencing on November 1, 2019, with a basic monthly rent ranging from $41,273 to $47,846 per month. The Company recognized approximately $2.1 million right-of-use assets and operating lease liabilities as of the commencement date of November 1, 2019. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (15 ) Commitments and Contingencies Warranties The Company accrues warranty costs based on historical trends for the expected material and labor costs to provide warranty services. Warranty periods are generally one to five years from the date of shipment. The following table reconciles changes in the Company’s accrued warranties and related costs included in accrued and other liabilities (in thousands) for the nine months ended September 30, 2019 and September 30, 2018: Nine Months Ended September 30, 2019 2018 Beginning balance $ 1,319 $ 931 Assumed balance from Keymile 230 — Charged to cost of revenue 732 1,022 Claims and settlements (782 ) (598 ) Foreign exchange impact (27 ) 6 Ending balance $ 1,472 $ 1,361 Performance Bonds In the normal course of operations, from time to time, the Company arranges for the issuance of various types of surety bonds, such as bid and performance bonds, which are agreements under which the surety company guarantees that the Company will perform in accordance with contractual or legal obligations. As of September 30, 2019, the Company had $13.8 million of surety bonds guaranteed by third parties. Purchase Commitments The Company has agreements with various contract manufacturers which include non-cancellable inventory purchase commitments. The Company’s inventory purchase commitments typically allow for cancellation of orders 30 days in advance of the required inventory availability date as set by the Company at time of order. The amount of non-cancellable purchase commitments outstanding, net of reserve, was $3.2 million as of September 30, 2019. Royalties The Company has certain royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally based on a dollar amount per unit shipped or a percentage of the underlying revenue and is recorded in cost of revenue. Payment Guarantees provided by Third Parties and DNI The following table sets forth payment guarantees of the Company's indebtedness and other obligations as of September 30, 2019 (in thousands) that have been provided by third parties and DNI. DNI owns approximately 44.4% of the outstanding shares of the Company's common stock: Guarantor Amount Guaranteed (in thousands) Description of Obligations Guaranteed DNI $ 8,400 Credit facility from Industrial Bank of Korea DNI 1,998 Purchasing Card from Industrial Bank of Korea DNI 8,400 Credit facility from Korea Development Bank DNI 4,995 Borrowings from Korea Development Bank DNI 6,000 Credit facility from NongHyup Bank DNI 3,566 Borrowings from Export-Import Bank of Korea DNI 3,000 Payment Guarantee from Shinhan Bank DNI 1,598 Backed Loan from Shinhan Bank PNC Bank, N.A. 4,550 Letter of Credit Seoul Guarantee Insurance Co. 5,516 Performance Bond, Warranty Bond, etc. (*) Industrial Bank of Korea 1,096 Letter of Credit Industrial Bank of Korea 1,010 Bank Guarantee Korea Development Bank 6,908 Letter of Credit NongHyup Bank 3,596 Letter of Credit Woori Bank 1,932 Bank Guarantee Shinhan Bank 573 Purchasing Card Shinhan Bank 683 Payment Guarantee AXA Insurance Company 175 Guarantee for flexible retirement program Polska Agencja Zeglugi Powietrznej 112 Performance Bond, Warranty Bond, etc. (*) DDE 64 Ltd. 64 Guarantee Bond $ 64,172 * The Company is generally responsible for warranty liabilities for a period of two years with respect to major product sales and has, therefore, contracted for surety insurance for a portion of the warranty liabilities. Legal Proceedings 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 of the period in which the ruling occurs, or future periods. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (16 ) Income Taxes Income tax expense for the three and nine months ended September 30, 2019 was approximately $0.3 million and $1.1 million, respectively, on pre-tax loss of $3.7 million and $2.0 million, respectively. Income tax expense for the three and nine months ended September 30, 2018 was $0.7 million and $1.1 million, respectively, on pre-tax income of $2.6 million and $4.4 million, respectively. For the three and nine months ended September 30, 2019 and 2018, the effective income tax rate varied from the United States statutory income tax rate primarily due to valuation allowances in the United States and the mix of earnings generated by the Company’s wholly owned foreign subsidiaries. The total amount of unrecognized tax benefits, including interest and penalties, at September 30, 2019 was $0.8 million. The amount of tax benefits that would impact the effective income tax rate, if recognized, is $0.1 million. There were no significant changes to unrecognized tax benefits during the three and nine months ended September 30, 2019 and 2018. The Company does not anticipate any significant changes with respect to unrecognized tax benefits within the next 12 months. |
Enterprise-Wide Information
Enterprise-Wide Information | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Enterprise-Wide Information | (1 7 ) Enterprise-Wide Information The Company is a global provider of ultra-broadband network access solutions and communications platforms deployed by advanced Tier 1, 2 and 3 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 reporting segment and operating unit structure. The Company's property, plant and equipment, net of accumulated depreciation, were located in the following geographical areas (in thousands) as of September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 United States $ 2,872 $ 3,036 Korea 1,976 1,543 Japan and Vietnam 874 910 Taiwan and India 25 29 Germany 828 — $ 6,575 $ 5,518 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | (18) Subsequent Events On November 8, 2019, the Company received a waiver from the Lenders under the Credit Agreements with respect to the Company’s violation at September 30, 2019 of the maximum leverage ratio financial covenant set forth in the Credit Agreements. As a condition for the issuance of the waiver, the Company voluntarily prepaid $10.0 million of the outstanding term loan and paid a one-time fee of $150,000. |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Basis of Presentation | (c ) Basis of Presentation 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, 2018. 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 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. 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. All intercompany transactions and balances have been eliminated in consolidation. 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. 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, 2018 filed with the Securities and Exchange Commission (“SEC”) on March 12, 2019. |
Use of Estimates | (d ) Use of Estimates The preparation of the 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. |
Reclassifications | (e) Reclassifications For the three and nine months ended September 30, 2018, certain previously reported statement of comprehensive income (loss) and statement of cash flows amounts have been adjusted for certain immaterial reclassifications to correctly reflect: (i) cost of products and services to related parties; and (ii) changes in accounts receivable and contract assets. |
Revenue | ( f ) Revenue The following table presents the revenues by source (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Revenue by source: Products $ 66,447 $ 68,787 $ 214,890 $ 198,830 Services 5,077 3,127 14,387 8,845 Total $ 71,524 $ 71,914 $ 229,277 $ 207,675 The following summarizes required disclosures about geographical concentrations (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Revenue by geography: United States $ 9,662 $ 11,125 $ 28,993 $ 41,373 Canada 1,062 1,131 2,950 3,344 Total North America 10,724 12,256 31,943 44,717 Latin America 6,273 6,841 18,829 21,713 Europe, Middle East, Africa 15,838 10,425 59,429 27,264 Korea 20,877 19,609 55,682 50,844 Other Asia Pacific 17,812 22,783 63,394 63,137 Total International 60,800 59,658 197,334 162,958 Total $ 71,524 $ 71,914 $ 229,277 $ 207,675 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 opening and closing balances of contract assets and contract liabilities related to contracts with customers are as follows: Contract Assets Contract Liabilities Opening, January 1, 2019 $ 12,175 $ 10,312 Closing, September 30, 2019 10,328 6,206 Decrease $ (1,847 ) $ (4,106 ) The amount of revenue recognized in the three months ended September 30, 2019 that was included in the prior period contract liability balance was $1.7 million. The amount of revenue recognized in the nine months ended September 30, 2019 that was included in the January 1, 2019 contract liability balance was $7.3 million. This revenue consists of services provided to customers who had prepaid for those services prior to the current year. |
Concentration of Risk | (g ) Concentration of Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents which totaled $47.9 million at September 30, 2019, including $7.4 million held by its international subsidiaries. Cash and cash equivalents 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. For the three months ended September 30, 2019, one customer accounted for 11% of net revenue. For the nine months ended September 30, 2019, no single customer accounted for 10% or more of net revenue. For the three and nine months ended September 30, 2018, one customer accounted for 11% of net revenue. As of September 30, 2019, two customers represented 17% and 12% of net accounts receivable, respectively. As of December 31, 2018, two customers represented 11% and 10% of net accounts receivable, respectively. As of September 30, 2019 and December 31, 2018, receivables from customers in countries other than the United States represented 94% and 88%, respectively, of net accounts receivable. |
Business Combinations | ( h ) 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. |
Defined Benefit Plans and Plan Assumptions | (i) Defined Benefit Plans and Plan Assumptions The Company provides certain defined benefit pension plans to employees in Germany. Pension accounting is intended to reflect the recognition of future benefit costs over the employees' average expected future service to the Company based on the terms of the plans and investment and funding decisions. To estimate the impact of these future payments and the Company’s decisions concerning funding of these obligations, the Company is required to make assumptions using actuarial concepts within the framework of U.S. GAAP. Two critical assumptions are the discount rate and the expected long-term return on plan assets. Other important assumptions include expected future salary increases, expected future increases to benefit payments, expected retirement dates, employee turnover, retiree mortality rates and portfolio composition. The Company evaluates these assumptions at least annually. |
Recent Accounting Pronouncements | ( j ) Recent Accounting Pronouncements Recent Accounting Pronouncements Adopted Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases The Company adopted the new standard on January 1, 2019, the first day of fiscal 2019, using the modified retrospective approach whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net cumulative effect adjustment to retained earnings as of January 1, 2019 as a result of this adoption. ASC 842 sets out the principles for the recognition, measurement, presentation and disclosure of leases. The Company has elected to use a certain package of practical expedients permitted under the transition guidance within ASC 842. Those practical expedients are as follows: • The Company did not reassess (i) whether expired or existing contracts contain leases under the new definition of a lease; (ii) lease classification for expired or existing leases; and (iii) whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. • The Company did not reassess a lease whose term is 12 months or less and does not include a purchase option that the lessee is reasonably certain to exercise. • The Company did not elect to use hindsight for transition when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset. • For all asset classes, the Company elected to not recognize a right-of-use asset and lease liability for leases with a term of 12 months or less. • For all asset classes, the Company elected to not separate non-lease components from lease components to which they relate and has accounted for the combined lease and non-lease components as a single lease component. The Company applies significant judgment in considering all relevant factors that create an economic benefit (e.g., contract-based, asset-based, entity-based, and market-based, among others) as of the commencement date in determining the initial lease term and future lease payments. For example, the Company exercises judgment in determining whether renewal periods will be exercised during the initial measurement process. If the Company believes it will exercise the renewal option, and the lease payments associated with the renewal periods are known or calculable, such renewal lease payments would be included in the initial measurement of the lease liability. Otherwise, even if the Company believes that it will exercise the renewal period, if the renewal payments are unknown or not calculable, they would not be included until they become known or calculable at which time the Company would remeasure the remaining lease payments similar to a lease modification. Adoption of ASC 842 resulted in the balance sheet recognition of right of use assets and lease liabilities of approximately $22.5 million as of January 1, 2019. Adoption of ASC 842 did not materially impact the Company’s unaudited condensed consolidated statements of comprehensive income (loss) and cash flows. See Note 14 in the notes to unaudited condensed consolidated financial statements. Income Tax Effects within Accumulated Other Comprehensive Income In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost Other Recent Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other Internal-Use Software - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments - Credit Losses Codification Improvements to Topic 326, Financial Instruments - Credit Losses Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief In January 2017, FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment On August 28, 2018, the FASB issued ASU 2018-13, Fair Value Measurement In August 2018, the FASB issued ASU 2018-14, Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Schedule of Revenues by Source | The following table presents the revenues by source (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Revenue by source: Products $ 66,447 $ 68,787 $ 214,890 $ 198,830 Services 5,077 3,127 14,387 8,845 Total $ 71,524 $ 71,914 $ 229,277 $ 207,675 |
Information about Our Net Revenue for North America and International Markets | The following summarizes required disclosures about geographical concentrations (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Revenue by geography: United States $ 9,662 $ 11,125 $ 28,993 $ 41,373 Canada 1,062 1,131 2,950 3,344 Total North America 10,724 12,256 31,943 44,717 Latin America 6,273 6,841 18,829 21,713 Europe, Middle East, Africa 15,838 10,425 59,429 27,264 Korea 20,877 19,609 55,682 50,844 Other Asia Pacific 17,812 22,783 63,394 63,137 Total International 60,800 59,658 197,334 162,958 Total $ 71,524 $ 71,914 $ 229,277 $ 207,675 |
Summary of Contract Assets and Contract Liabilities Related to Contracts with Customers | The opening and closing balances of contract assets and contract liabilities related to contracts with customers are as follows: Contract Assets Contract Liabilities Opening, January 1, 2019 $ 12,175 $ 10,312 Closing, September 30, 2019 10,328 6,206 Decrease $ (1,847 ) $ (4,106 ) |
Business Combinations (Tables)
Business Combinations (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
Summary of Preliminary Estimated Purchase Price Allocation to Fair Value of Asset Acquired and Liabilities Assumed | A summary of the preliminary estimated purchase price allocation to the fair value of assets acquired and liabilities assumed is as follows (in thousands): Purchase consideration Cash consideration $ 11,776 Working capital adjustment: cash received from lockbox mechanism (2,497 ) Adjusted purchase consideration $ 9,279 |
Schedule of Estimated Fair Value of Assets Acquired and Liabilities Assumed | The following summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for the Keymile Acquisition (in thousands): Allocation of purchase consideration Current assets Cash and cash equivalents $ 4,582 Accounts receivable - trade, net 6,820 Other receivables 798 Inventories 9,943 Property, plant and equipment 983 Other assets 163 Intangible assets 12,030 Accounts payable - trade (3,303 ) Short-term debt (4,582 ) Contract liabilities (364 ) Accrued liabilities (3,614 ) Deferred tax liabilities (1,071 ) Pension obligations (12,656 ) Other long term liabilities (116 ) Bargain purchase gain (334 ) Total purchase consideration $ 9,279 |
Schedule of Preliminary Estimated Fair Value and Useful Lives of Identifiable Intangible Assets | The following table represents the preliminary estimated fair value and useful lives of identifiable intangible assets acquired: Estimated Fair Value (in thousands) Estimated Useful Life Intangible assets acquired Customer relationships $ 3,667 5 years Trade name 3,208 5 years Technology - developed core 5,155 5 years Total intangible assets $ 12,030 |
Summary of Pro Forma Information | The unaudited pro forma information for the periods set forth below gives effect to the Keymile Acquisition as if it had occurred as of January 1, 2018. The unaudited pro forma financial information has been prepared by management for illustrative purposes only and does not purport to represent what the results of operations, financial condition or other financial information of the Company would have been if the Keymile Acquisition had occurred on January 1, 2018 or what such results or financial condition will be for any future periods. The unaudited pro forma financial information is based on estimates and assumptions and on the information available at the time of the preparation thereof. These estimates and assumptions may change, be revised or prove to be materially different, and the estimates and assumptions may not be representative of facts existing at the time of the Keymile Acquisition. The pro forma adjustments primarily relate to acquisition related costs, amortization of acquired intangibles and interest expense related to financing arrangements. Below is the pro forma financial information (in thousands): Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 Pro forma net revenues $ 84,870 $ 242,086 Pro forma net income attributable to DASAN Zhone Solutions, Inc. 726 2,885 |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Balance Sheet Related Disclosures [Abstract] | |
Schedule of Accounts Receivable, Net | Accounts receivable, net consisted of the following (in thousands): September 30, 2019 December 31, 2018 Gross accounts receivable $ 101,253 $ 71,945 Less: allowance for doubtful accounts (388 ) (328 ) Total accounts receivable, net $ 100,865 $ 71,617 |
Schedule of Inventories | Inventories consisted of the following (in thousands): September 30, 2019 December 31, 2018 Raw materials $ 16,630 $ 15,688 Work in process 3,582 2,429 Finished goods 22,834 15,751 Total inventories $ 43,046 $ 33,868 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Property Plant And Equipment [Abstract] | |
Property Plant and Equipment, Net | Property, plant and equipment consisted of the following (in thousands): September 30, 2019 December 31, 2018 Furniture and fixtures $ 10,139 $ 8,029 Machinery and equipment 2,341 3,553 Leasehold improvements 4,063 3,715 Computers and software 1,856 922 Other 745 982 19,144 17,201 Less: accumulated depreciation and amortization (12,228 ) (11,271 ) Less: government grants (341 ) (412 ) Total property and equipment, net $ 6,575 $ 5,518 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | Goodwill was as follows (in thousands): September 30, 2019 December 31, 2018 Gross carrying amount $ 3,977 $ 3,977 Less: accumulated impairment — — Net $ 3,977 $ 3,977 |
Schedule of Intangible Assets | Intangible assets consisted of the following (in thousands): September 30, 2019 Gross Carrying Amount Accumulated Amortization Net Developed technology $ 7,972 $ (2,624 ) $ 5,348 Customer relationships 8,733 (2,140 ) 6,593 Trade name 3,056 (458 ) 2,598 Total intangible assets, net $ 19,761 $ (5,222 ) $ 14,539 December 31, 2018 Gross Carrying Amount Accumulated Amortization Net Developed technology $ 3,060 $ (1,428 ) $ 1,632 Customer relationships 5,240 (1,223 ) 4,017 Total intangible assets, net $ 8,300 $ (2,651 ) $ 5,649 |
Future Amortization Expense of Intangible Assets | The following table presents the future amortization expense of the Company’s intangible assets as of September 30, 2019 (in thousands): Remainder of 2019 $ 857 2020 3,429 2021 3,225 2022 2,816 2023 2,816 Thereafter 1,396 Total $ 14,539 Weighted average remaining life: Developed technology 3.74 years Customer relationships 5.72 years Trade name 4.25 years |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Summary of Debt | The following tables summarize the Company’s debt (in thousands): As of September 30, 2019 Short-term Long-term Total PNC Bank Facility $ 12,500 $ 11,250 $ 23,750 Working Capital Loan 2,183 — 2,183 Bank and Trade Facilities - Foreign Operations 20,625 — 20,625 Related Party — 9,049 9,049 $ 35,308 $ 20,299 $ 55,607 Less: unamortized deferred financing costs on the PNC Bank Facility (702 ) (843 ) (1,545 ) $ 34,606 $ 19,456 $ 54,062 As of December 31, 2018 Short-term Long-term Total Wells Fargo Bank Facility $ 7,000 — $ 7,000 Bank and Trade Facilities - Foreign Operations 24,762 — 24,762 Related Party — 14,142 14,142 $ 31,762 $ 14,142 $ 45,904 |
Schedule of Short-term Debt | As of September 30, 2019 and December 31, 2018, the Company had an aggregate outstanding balance of $20.6 million and $24.8 million, respectively, under such financing arrangements. The maturity dates and interest rates per annum applicable to outstanding borrowings under these financing arrangements are listed in the tables below (amount in thousands). As of September 30, 2019 Maturity Date Denomination Interest rate (%) Amount (in U.S. dollars) Industrial Bank of Korea Credit facility 10/02/2019 - 11/12/2019 USD 5.34 - 5.49 $ 512 NongHyup Bank Credit facility 10/07/2019 - 02/24/2020 USD 3.69 - 4.49 3,097 The Export-Import Bank of Korea Export development loan 7/1/2020 KRW 2.75 4,995 Korea Development Bank General loan 8/8/2020 KRW 3.0 4,162 Korea Development Bank Credit facility 10/07/2019 - 02/18/2020 USD 3.11 - 3.47 6,194 LGUPlus General loan 6/17/2020 KRW 0 1,665 $ 20,625 As of December 31, 2018 Maturity Date Denomination Interest rate (%) Amount (in U.S. dollars) Industrial Bank of Korea Credit facility 01/02/2019 - 05/15/2019 USD 3.96 - 4.36 $ 1,982 Industrial Bank of Korea Trade finance 02/18/2019 - 02/25/2019 USD 5.31 - 6.08 1,920 Shinhan Bank General loan 3/30/2019 KRW 6.06 2,862 NongHyup Bank Credit facility 01/07/2019 - 04/29/2019 USD 3.71 - 4.50 2,053 The Export-Import Bank of Korea Export development loan 07/01/2019 KRW 3.44 6,439 The Export-Import Bank of Korea Import development loan 02/14/2019 USD 4.31 850 Korea Development Bank General loan 08/08/2019 KRW 3.48 4,472 Korea Development Bank Credit facility 02/07/2019 - 03/06/2019 USD 3.64 - 3.91 1,489 LGUPlus General loan 06/17/2019 KRW 0 1,789 Shoko Chukin Bank General loan 06/28/2019 JPY 1.33 906 $ 24,762 |
Defined Benefit Plans (Tables)
Defined Benefit Plans (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Compensation And Retirement Disclosure [Abstract] | |
Schedule of Assumptions Used in Determining the Benefit Obligation | The following key actuarial assumptions were made in determining the benefit obligation: September 30, 2019 Discount rate 1.20% Rate of pension increase 1.70% Retirement age 63-67 years |
Non-Controlling Interests (Tabl
Non-Controlling Interests (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Noncontrolling Interest [Abstract] | |
Non-controlling Interests | Non-controlling interests were as follows (in thousands): Nine Months Ended September 30, 2019 2018 Beginning non-controlling interests $ 615 $ 534 Net income (loss) attributable to non-controlling interests 194 2 Purchase of noncontrolling interest in subsidiary (823 ) — Foreign currency translation adjustments (OCI) 14 (5 ) Ending non-controlling interests $ — $ 531 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | Sales, cost of revenue, purchases (included in manufacturing (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 and nine months ended September 30, 2019 and September 30, 2018: Three Months Ended September 30, 2019 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue) Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 232 $ 190 $ — $ — $ 966 $ 104 $ 84 Tomato Soft Ltd. 100% — — 29 — — — — Tomato Soft (Xi'an) Ltd. 100% — — — 137 — — — Chasan Networks Co., Ltd. 100% — — 279 16 — — — $ 232 $ 190 $ 308 $ 153 $ 966 $ 104 $ 84 Three Months Ended September 30, 2018 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue) Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 1,472 $ 1,270 $ — $ — $ 784 $ 112 $ 89 Tomato Soft Ltd. 100% — — 27 — — — — Tomato Soft (Xi'an) Ltd. 100% — — — 119 — — — Chasan Networks Co., Ltd. 100% — — 260 21 — — — HANDYSOFT, Inc. 17.63% 215 208 — — 2 — — $ 1,687 $ 1,478 $ 287 $ 140 $ 786 $ 112 $ 89 Nine Months Ended September 30, 2019 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue) Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 1,828 $ 1,346 $ — $ — $ 2,984 $ 349 $ 255 Tomato Soft Ltd. 100% — — 88 — — — — Tomato Soft (Xi'an) Ltd. 100% — — — 392 — — — Chasan Networks Co., Ltd. 100% — — 837 55 — — — J-Mobile Corporation 90.47% 42 81 — — — — — $ 1,870 $ 1,427 $ 925 $ 447 $ 2,984 $ 349 $ 255 Nine Months Ended September 30, 2018 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue) Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 3,683 $ 3,143 $ — $ — $ 2,950 $ 338 $ 234 Tomato Soft Ltd. 100% — — 84 — — — — Tomato Soft (Xi'an) Ltd. 100% — — 10 396 — — — Chasan Networks Co., Ltd. 100% — — 880 57 — — — Dasan France 100% 202 177 — — — — — HANDYSOFT, Inc. 17.63% 473 357 — — 4 — — $ 4,358 $ 3,677 $ 974 $ 453 $ 2,954 $ 338 $ 234 Balances of receivables and payables arising from sales and purchases of goods and services with related parties were as follows (in thousands) as of September 30, 2019 and December 31, 2018: As of September 30, 2019 Counterparty DNI ownership interest Account receivables Other receivables Deposits for lease * Long- term debt Accounts payable Other payables Accrued and other liabilities** DNI N/A $ 252 1 $ 683 $ 9,049 $ — $ 2,656 $ 90 Tomato Soft Ltd. 100% — — — — — 10 — Tomato Soft (Xi'an) Ltd. 100% — — — — — 45 — Chasan Networks Co., Ltd. 100% — — — — 96 — — $ 252 $ 1 $ 683 $ 9,049 $ 96 $ 2,711 $ 90 As of December 31, 2018 Counterparty DNI ownership interest Account receivables Other receivables Deposits for lease* Loan Payable Accounts payable Other payables Accrued and other liabilities** DNI N/A $ — $ — $ 735 $ 14,142 $ 1,000 $ 1,231 $ 169 Tomato Soft Ltd. 100% — — — — — 9 — Tomato Soft (Xi'an) Ltd. 100% — — — — — 41 — Dasan France 100% 280 65 — — — — — HANDYSOFT, Inc. 14.77% 303 — — — 654 — — Chasan Networks Co., Ltd. 100% — — — — 89 — — $ 583 $ 65 $ 735 $ 14,142 $ 1,743 $ 1,281 $ 169 * Included in other assets related to deposits for lease in the condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018. ** Included in accrued and other liabilities in the condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018. |
Net Income Per Share Attribut_2
Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
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 and nine months ended September 30, 2019 and September 30, 2018: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Net income (loss) attributable to DASAN Zhone Solutions, Inc. $ (4,033 ) $ 1,798 $ (3,263 ) $ 3,321 Weighted average number of shares outstanding: Basic 21,384 16,683 18,732 16,425 Effect of dilutive securities: Stock options, restricted stock units and share awards — 208 — 215 Diluted 21,384 16,891 18,732 16,640 Net income (loss) per share attributable to DASAN Zhone Solutions, Inc.: Basic $ (0.19 ) $ 0.11 $ (0.17 ) $ 0.20 Diluted $ (0.19 ) $ 0.11 $ (0.17 ) $ 0.20 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Components of Lease Expense | The components of lease expense were as follows for the three and nine months ended September 30, 2019: Three Months Ended September 30, 2019 (in thousands) Nine Months Ended September 30, 2019 (in thousands) Operating lease cost $ 1,064 $ 3,327 Variable lease cost 194 520 Total net lease cost $ 1,258 $ 3,847 |
Supplemental Cash Flow Information Related to Operating Leases | Supplemental cash flow information related to the Company’s operating leases was as follows for the three and nine months ended September 30, 2019: Three Months Ended September 30, 2019 (in thousands) Nine Months Ended September 30, 2019 (in thousands) Cash paid for amounts included in the measurement of operating lease liabilities $ 1,265 $ 3,888 ROU assets obtained in exchange for operating lease obligations $ 35 $ 35 |
Lease Balances within Condensed Consolidated Balance Sheet, Weighted Average Remaining Lease Term, and Weighted Average Discount Rates Related to Operating Leases | The following table presents the lease balances within the Company’s condensed consolidated balance sheet, weighted average remaining lease term, and weighted average discount rates related to the Company’s operating leases as of September 30, 2019 (in thousands): Lease Assets and Liabilities Assets: Right-of-use assets from operating leases $ 18,349 Liabilities: Operating lease liabilities - current $ 3,496 Operating lease liabilities - non-current 15,957 Total operating lease liabilities $ 19,453 Weighted average remaining lease term 4.77 years Weighted average discount rate 6.6 % |
Maturity of Operating Lease Liabilities | The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2019 (in thousands): Remainder of 2019 $ 1,259 2020 4,197 2021 3,890 2022 3,609 2023 3,460 Thereafter 6,373 Total operating lease payments 22,788 Less: imputed interest (3,335 ) Total operating lease liabilities $ 19,453 |
Estimated Future Lease Payments under Non-Cancelable Operating Leases | As of December 31, 2018, the estimated future lease payments under non-cancelable operating leases as defined under the previous lease accounting guidance of ASC Topic 840, for the following five fiscal years and thereafter are as follows (in thousands): Operating Leases Year ending December 31: 2019 $ 4,100 2020 3,005 2021 2,590 2022 2,664 2023 2,494 Thereafter 5,929 Total minimum lease payments $ 20,782 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Commitments And Contingencies Disclosure [Abstract] | |
Reconciliation of Changes in Accrued Warranties and Related Costs Included in Accrued and Other Liabilities | The following table reconciles changes in the Company’s accrued warranties and related costs included in accrued and other liabilities (in thousands) for the nine months ended September 30, 2019 and September 30, 2018: Nine Months Ended September 30, 2019 2018 Beginning balance $ 1,319 $ 931 Assumed balance from Keymile 230 — Charged to cost of revenue 732 1,022 Claims and settlements (782 ) (598 ) Foreign exchange impact (27 ) 6 Ending balance $ 1,472 $ 1,361 |
Payment Guarantees to Third Parties | The following table sets forth payment guarantees of the Company's indebtedness and other obligations as of September 30, 2019 (in thousands) that have been provided by third parties and DNI. DNI owns approximately 44.4% of the outstanding shares of the Company's common stock: Guarantor Amount Guaranteed (in thousands) Description of Obligations Guaranteed DNI $ 8,400 Credit facility from Industrial Bank of Korea DNI 1,998 Purchasing Card from Industrial Bank of Korea DNI 8,400 Credit facility from Korea Development Bank DNI 4,995 Borrowings from Korea Development Bank DNI 6,000 Credit facility from NongHyup Bank DNI 3,566 Borrowings from Export-Import Bank of Korea DNI 3,000 Payment Guarantee from Shinhan Bank DNI 1,598 Backed Loan from Shinhan Bank PNC Bank, N.A. 4,550 Letter of Credit Seoul Guarantee Insurance Co. 5,516 Performance Bond, Warranty Bond, etc. (*) Industrial Bank of Korea 1,096 Letter of Credit Industrial Bank of Korea 1,010 Bank Guarantee Korea Development Bank 6,908 Letter of Credit NongHyup Bank 3,596 Letter of Credit Woori Bank 1,932 Bank Guarantee Shinhan Bank 573 Purchasing Card Shinhan Bank 683 Payment Guarantee AXA Insurance Company 175 Guarantee for flexible retirement program Polska Agencja Zeglugi Powietrznej 112 Performance Bond, Warranty Bond, etc. (*) DDE 64 Ltd. 64 Guarantee Bond $ 64,172 |
Enterprise-Wide Information (Ta
Enterprise-Wide Information (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
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 September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 United States $ 2,872 $ 3,036 Korea 1,976 1,543 Japan and Vietnam 874 910 Taiwan and India 25 29 Germany 828 — $ 6,575 $ 5,518 |
Organization and Summary of S_4
Organization and Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2019USD ($)customercountry | Sep. 30, 2018customer | Sep. 30, 2019USD ($)customercountry | Sep. 30, 2018customer | Dec. 31, 2018customer | Jan. 01, 2019USD ($) | Sep. 09, 2016 | |
Significant Accounting Policies [Line Items] | |||||||
Number of customers | customer | 900 | 900 | |||||
Number of countries in which entity operates | country | 80 | 80 | |||||
Entity Incorporation, State or Country Code | DE | ||||||
Date of entity incorporation | 1999-06 | ||||||
Revenue recognized included in prior period contract liability balance | $ 1,700 | $ 7,300 | |||||
Right-of-use assets from operating leases | 18,349 | 18,349 | $ 22,500 | ||||
Operating lease liabilities | 19,453 | 19,453 | $ 22,500 | ||||
Credit Concentration Risk | |||||||
Significant Accounting Policies [Line Items] | |||||||
Concentration of credit risk, cash and cash equivalents | 47,900 | $ 47,900 | |||||
Credit Concentration Risk | Accounts receivable | |||||||
Significant Accounting Policies [Line Items] | |||||||
Number of major customers | customer | 2 | 2 | |||||
Credit Concentration Risk | Accounts receivable | Customer One | |||||||
Significant Accounting Policies [Line Items] | |||||||
Concentration risk, percentage | 17.00% | 11.00% | |||||
Credit Concentration Risk | Accounts receivable | Customer Two | |||||||
Significant Accounting Policies [Line Items] | |||||||
Concentration risk, percentage | 12.00% | 10.00% | |||||
Credit Concentration Risk | International Subsidiaries | |||||||
Significant Accounting Policies [Line Items] | |||||||
Concentration of credit risk, cash and cash equivalents | $ 7,400 | $ 7,400 | |||||
Customer Concentration Risk | Sales Revenue, Net | |||||||
Significant Accounting Policies [Line Items] | |||||||
Number of major customers | customer | 1 | 1 | 0 | 1 | |||
Concentration risk, percentage | 11.00% | 11.00% | 11.00% | ||||
Geographic Concentration Risk | Accounts receivable | Foreign Countries | |||||||
Significant Accounting Policies [Line Items] | |||||||
Concentration risk, percentage | 94.00% | 88.00% | |||||
Merger Agreement with Dragon Acquisition Company | |||||||
Significant Accounting Policies [Line Items] | |||||||
Percent of voting interest acquired | 44.40% | 44.40% | 58.00% |
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 | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Disaggregation Of Revenue [Line Items] | ||||
Revenue | $ 71,524 | $ 71,914 | $ 229,277 | $ 207,675 |
Product | ||||
Disaggregation Of Revenue [Line Items] | ||||
Revenue | 66,447 | 68,787 | 214,890 | 198,830 |
Service | ||||
Disaggregation Of Revenue [Line Items] | ||||
Revenue | $ 5,077 | $ 3,127 | $ 14,387 | $ 8,845 |
Organization and Summary of S_6
Organization and Summary of Significant Accounting Policies - Summary of Required Disclosures about Geographical Concentrations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Significant Accounting Policies [Line Items] | ||||
Revenue | $ 71,524 | $ 71,914 | $ 229,277 | $ 207,675 |
United States | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue | 9,662 | 11,125 | 28,993 | 41,373 |
Canada | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue | 1,062 | 1,131 | 2,950 | 3,344 |
North America | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue | 10,724 | 12,256 | 31,943 | 44,717 |
Latin America | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue | 6,273 | 6,841 | 18,829 | 21,713 |
Europe, Middle East, Africa | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue | 15,838 | 10,425 | 59,429 | 27,264 |
Korea | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue | 20,877 | 19,609 | 55,682 | 50,844 |
Other Asia Pacific | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue | 17,812 | 22,783 | 63,394 | 63,137 |
International | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue | $ 60,800 | $ 59,658 | $ 197,334 | $ 162,958 |
Organization and Summary of S_7
Organization and Summary of Significant Accounting Policies - Summary of Contract Assets and Contract Liabilities Related to Contracts with Customers (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Accounting Policies [Abstract] | |
Opening, Contract Assets | $ 12,175 |
Closing, Contract Assets | 10,328 |
Decrease, Contract Assets | (1,847) |
Opening, Contract Liabilities | 10,312 |
Closing, Contract Liabilities | 6,206 |
Decrease, Contract Liabilities | $ (4,106) |
Business Combinations - Additio
Business Combinations - Additional Information (Details) | Jul. 31, 2019USD ($) | Jan. 03, 2019USD ($) | Jan. 03, 2019EUR (€) | Oct. 01, 2018USD ($) | Oct. 01, 2018EUR (€) | Apr. 30, 2019USD ($) | Apr. 30, 2019EUR (€) | Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2019EUR (€) | Oct. 01, 2018EUR (€) |
Business Acquisition [Line Items] | ||||||||||||
Gain on bargain purchase | $ 334,000 | |||||||||||
Purchase of interest in subsidiary | $ 950,000 | 823,000 | ||||||||||
Additional paid-in capital | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Purchase of interest in subsidiary | 127,000 | |||||||||||
Non-controlling interest | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Purchase of interest in subsidiary | 823,000 | |||||||||||
Working Capital Loan | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Repayments of borrowings | $ 2,200,000 | € 2,000,000 | ||||||||||
Outstanding borrowings | $ 2,200,000 | 2,200,000 | € 2,000,000 | |||||||||
Keymile GmbH, LLC | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Payment to acquire business, gross | $ 11,800,000 | € 10,250,000 | $ 4,400,000 | € 4,000,000 | ||||||||
Pension obligation | 12,700,000 | |||||||||||
Pension asset | $ 3,500,000 | |||||||||||
Cash received | $ 2,500,000 | |||||||||||
Payment to acquire business, gross | $ 4,400,000 | € 4,000,000 | ||||||||||
Working capital loan interest rate | 3.50% | 3.50% | ||||||||||
Gain on bargain purchase | 300,000 | |||||||||||
Weighted average useful lives of acquired property, plant and equipment | 5 years | 5 years | ||||||||||
DZS Japan, Inc | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Remaining non controlling interest percentage acquired | 30.94% | |||||||||||
Payments to acquire remaining non controlling | $ 950,000 | |||||||||||
Purchase of interest in subsidiary | 950,000 | |||||||||||
DZS Japan, Inc | Additional paid-in capital | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Purchase of interest in subsidiary | 127,000 | |||||||||||
DZS Japan, Inc | Non-controlling interest | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Purchase of interest in subsidiary | $ 823,000 |
Business Combinations - Summary
Business Combinations - Summary of Preliminary Estimated Purchase Price Allocation to Fair Value of Asset Acquired and Liabilities Assumed (Details) - Keymile Acquisition $ in Thousands | Jan. 03, 2019USD ($) |
Purchase consideration | |
Cash consideration | $ 11,776 |
Working capital adjustment: cash received from lockbox mechanism | (2,497) |
Adjusted purchase consideration | $ 9,279 |
Business Combinations - Summa_2
Business Combinations - Summary of Preliminary Estimated Fair Values of Assets Acquired and Liabilities Assumed at the Date of Acquisition (Details) - Keymile Acquisition $ in Thousands | Jan. 03, 2019USD ($) |
Current assets | |
Cash and cash equivalents | $ 4,582 |
Accounts receivable - trade, net | 6,820 |
Other receivables | 798 |
Inventories | 9,943 |
Property, plant and equipment | 983 |
Other assets | 163 |
Intangible assets | 12,030 |
Accounts payable - trade | (3,303) |
Short-term debt | (4,582) |
Contract liabilities | (364) |
Accrued liabilities | (3,614) |
Deferred tax liabilities | (1,071) |
Pension obligations | (12,656) |
Other long term liabilities | (116) |
Bargain purchase gain | (334) |
Total purchase consideration | $ 9,279 |
Business Combinations - Schedul
Business Combinations - Schedule of Preliminary Estimated Fair Value and Useful Lives of Identifiable Intangible Assets (Details) - Keymile Acquisition $ in Thousands | Jan. 03, 2019USD ($) |
Business Acquisition [Line Items] | |
Intangible assets | $ 12,030 |
Customer Relationships | |
Business Acquisition [Line Items] | |
Intangible assets | $ 3,667 |
Estimated Useful Life | 5 years |
Trade name | |
Business Acquisition [Line Items] | |
Intangible assets | $ 3,208 |
Estimated Useful Life | 5 years |
Developed Technology | |
Business Acquisition [Line Items] | |
Intangible assets | $ 5,155 |
Estimated Useful Life | 5 years |
Business Combinations - Summa_3
Business Combinations - Summary of Pro Forma Information (Details) - Keymile Acquisition - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Business Acquisition [Line Items] | ||
Pro forma net revenues | $ 84,870 | $ 242,086 |
Pro forma net income attributable to DASAN Zhone Solutions, Inc. | $ 726 | $ 2,885 |
Balance Sheet Detail - Schedule
Balance Sheet Detail - Schedule of Accounts Receivable, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Balance Sheet Related Disclosures [Abstract] | ||
Gross accounts receivable | $ 101,253 | $ 71,945 |
Less: allowance for doubtful accounts | (388) | (328) |
Total accounts receivable, net | $ 100,865 | $ 71,617 |
Balance Sheet Detail - Schedu_2
Balance Sheet Detail - Schedule of Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 16,630 | $ 15,688 |
Work in process | 3,582 | 2,429 |
Finished goods | 22,834 | 15,751 |
Total inventories | $ 43,046 | $ 33,868 |
Balance Sheet Detail - Addition
Balance Sheet Detail - Additional Information (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Inventory [Line Items] | ||
Total inventories | $ 43,046 | $ 33,868 |
Collateral pledged | ||
Inventory [Line Items] | ||
Total inventories | $ 6,500 | $ 9,500 |
Property, Plant and Equipment -
Property, Plant and Equipment - Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 19,144 | $ 17,201 |
Less: accumulated depreciation and amortization | (12,228) | (11,271) |
Less: government grants | (341) | (412) |
Property, plant and equipment, net | 6,575 | 5,518 |
Furniture and fixtures | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 10,139 | 8,029 |
Machinery and equipment | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 2,341 | 3,553 |
Leasehold improvements | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 4,063 | 3,715 |
Computers and software | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 1,856 | 922 |
Other | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 745 | $ 982 |
Property, Plant and Equipment_2
Property, Plant and Equipment - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Property, Plant and Equipment | ||||
Property Plant And Equipment [Line Items] | ||||
Depreciation and amortization associated with property, plant and equipment | $ 0.5 | $ 0.4 | $ 1.5 | $ 1.2 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Schedule of Goodwill (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Gross carrying amount | $ 3,977 | $ 3,977 |
Net | $ 3,977 | $ 3,977 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |||||
Goodwill, impairment loss | $ 0 | $ 0 | |||
Amortization of intangible assets | $ 900,000 | $ 300,000 | $ 2,600,000 | $ 900,000 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 19,761 | $ 8,300 |
Accumulated Amortization | (5,222) | (2,651) |
Intangible assets, net | 14,539 | 5,649 |
Developed Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 7,972 | 3,060 |
Accumulated Amortization | (2,624) | (1,428) |
Intangible assets, net | 5,348 | 1,632 |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 8,733 | 5,240 |
Accumulated Amortization | (2,140) | (1,223) |
Intangible assets, net | 6,593 | $ 4,017 |
Trade name | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 3,056 | |
Accumulated Amortization | (458) | |
Intangible assets, net | $ 2,598 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Future Amortization Expense of Intangible Assets (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Finite-Lived Intangible Assets [Line Items] | |
Amortization expense of intangible assets, remainder of 2019 | $ 857 |
Amortization expense of intangible assets, 2020 | 3,429 |
Amortization expense of intangible assets, 2021 | 3,225 |
Amortization expense of intangible assets, 2022 | 2,816 |
Amortization expense of intangible assets, 2023 | 2,816 |
Amortization expense of intangible assets, thereafter | 1,396 |
Amortization expense of intangible assets, total | $ 14,539 |
Developed Technology | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted average remaining life | 3 years 8 months 26 days |
Customer Relationships | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted average remaining life | 5 years 8 months 19 days |
Trade name | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted average remaining life | 4 years 3 months |
Debt - Summary of Debt (Details
Debt - Summary of Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | $ 55,607 | |
Less: unamortized deferred financing costs on the PNC Bank Facility | (702) | |
Short-term | 34,606 | $ 31,762 |
Less: unamortized deferred financing costs on the PNC Bank Facility | (843) | |
Long-term | 19,456 | 14,142 |
Less: unamortized deferred financing costs on the PNC Bank Facility | (1,545) | |
Total | 54,062 | 45,904 |
P N C Bank Facility | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 23,750 | |
Working Capital Loan | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 2,183 | |
Short-term | 7,000 | |
Total | 7,000 | |
Bank And Trade Facilities Foreign Operations | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 20,625 | |
Short-term | 24,762 | |
Total | 24,762 | |
Related Party | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 9,049 | |
Long-term | 14,142 | |
Total | $ 14,142 | |
Short-term Debt | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 35,308 | |
Short-term Debt | P N C Bank Facility | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 12,500 | |
Short-term Debt | Working Capital Loan | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 2,183 | |
Short-term Debt | Bank And Trade Facilities Foreign Operations | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 20,625 | |
Long-term Debt | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 20,299 | |
Long-term Debt | P N C Bank Facility | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 11,250 | |
Long-term Debt | Related Party | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | $ 9,049 |
Debt - Additional Information (
Debt - Additional Information (Details) | Nov. 08, 2019USD ($) | Jul. 02, 2019USD ($) | Feb. 27, 2019USD ($) | Jan. 03, 2019USD ($) | Jan. 03, 2019EUR (€) | Oct. 01, 2018USD ($) | Oct. 01, 2018EUR (€) | Apr. 30, 2019USD ($) | Apr. 30, 2019EUR (€) | Sep. 30, 2019USD ($)Installment | Sep. 30, 2018USD ($) | Sep. 30, 2019EUR (€) | Dec. 31, 2018USD ($) |
Line Of Credit Facility [Line Items] | |||||||||||||
Interest rate additional to federal funds rate | 0.50% | ||||||||||||
Interest rate additional to PNC's prime rate or LIBOR rate | 1.00% | ||||||||||||
Interest rate applicable margin | 1.00% | ||||||||||||
Repayment of outstanding letter of credit | $ 38,486,000 | $ 48,739,000 | |||||||||||
Debt discount | $ 1,545,000 | ||||||||||||
Stated interest rate | 3.50% | 3.50% | |||||||||||
Number Of Equal Annual Instalments In Repayment Of Debt | Installment | 2 | ||||||||||||
Debt | $ 20,625,000 | $ 24,762,000 | |||||||||||
Credit facility, commitment as security for various letters of credit | 10,800,000 | 5,500,000 | |||||||||||
Keymile GmbH, LLC | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Payment to acquire business, gross | $ 11,800,000 | € 10,250,000 | $ 4,400,000 | € 4,000,000 | |||||||||
P N C Debt Facility | Dasan Network Solutions, Inc. (DNS) | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Repayments of borrowings | 5,000,000 | ||||||||||||
PNC Bank | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Long-term line of credit | 23,800,000 | ||||||||||||
Debt discount | 1,500,000 | ||||||||||||
Revolving Line of Credit | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Long-term line of credit | 0 | ||||||||||||
Repayment of outstanding letter of credit | $ 4,400,000 | ||||||||||||
Letter of Credit | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Credit facility, commitment as security for various letters of credit | 9,800,000 | 2,600,000 | |||||||||||
Foreign Line of Credit | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Credit facility, commitment as security for various letters of credit | 20,600,000 | $ 19,000,000 | |||||||||||
Base Rate Loans | Term Loans | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Interest rate applicable margin | 5.00% | ||||||||||||
Base Rate Loans | Revolving Line of Credit | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Interest rate applicable margin | 1.50% | ||||||||||||
LIBOR Rate Loans | Term Loans | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Interest rate applicable margin | 6.00% | ||||||||||||
LIBOR Rate Loans | Revolving Line of Credit | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Interest rate applicable margin | 2.50% | ||||||||||||
PNC Bank | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Long-term line of credit | $ 25,000,000 | ||||||||||||
Credit facility, maximum borrowing capacity | 15,000,000 | ||||||||||||
W F B Facility | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Repayment of revolving line of credit outstanding balance plus accrued interest and fees and cash collateralized | 1,500,000 | 1,500,000 | |||||||||||
Repayment of outstanding letter of credit | $ 3,600,000 | 3,600,000 | |||||||||||
Korea And Japan | P N C Debt Facility | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Repayments of short-term debt | $ 5,600,000 | ||||||||||||
Term Loan | P N C Debt Facility | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Credit agreement, expiration date | Feb. 27, 2022 | ||||||||||||
Quarterly installments. repayment of term loan | Installment | 8 | ||||||||||||
Frequency of payments | quarterly | ||||||||||||
Repayment of the term loan, monthly | $ 625,000,000 | ||||||||||||
Monthly payment, beginning date | Jun. 30, 2019 | ||||||||||||
Repayment of the term loan, quarterly | $ 937,500,000 | ||||||||||||
Quarterly payment, beginning date | Jun. 30, 2021 | ||||||||||||
Term Loan | PNC Bank | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Credit facility, interest rate | 8.12% | 8.12% | |||||||||||
Term Loan | Subsequent Event | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
One-time fee, paid | $ 150,000 | ||||||||||||
Term Loan | Subsequent Event | PNC Bank | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Prepayment of outstanding term loan | 10,000,000 | ||||||||||||
One-time fee, paid | $ 150,000 | ||||||||||||
Working Capital Loan | |||||||||||||
Line Of Credit Facility [Line Items] | |||||||||||||
Repayments of borrowings | $ 2,200,000 | € 2,000,000 | |||||||||||
Outstanding borrowings | $ 2,200,000 | € 2,000,000 |
Debt - Schedule of Short-term D
Debt - Schedule of Short-term Debt (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | Oct. 01, 2018 | |
Debt Instrument [Line Items] | |||
Stated interest rate | 3.50% | ||
Debt | $ 20,625 | $ 24,762 | |
Industrial Bankof Korea Credit Facility | |||
Debt Instrument [Line Items] | |||
Debt | $ 512 | $ 1,982 | |
Industrial Bankof Korea Credit Facility | Minimum | |||
Debt Instrument [Line Items] | |||
Maturity Date, start | Oct. 2, 2019 | Jan. 2, 2019 | |
Stated interest rate | 5.34% | 3.96% | |
Industrial Bankof Korea Credit Facility | Maximum | |||
Debt Instrument [Line Items] | |||
Maturity Date, end | Nov. 12, 2019 | May 15, 2019 | |
Stated interest rate | 5.49% | 4.36% | |
NongHyup Bank, Credit facility | |||
Debt Instrument [Line Items] | |||
Debt | $ 3,097 | $ 2,053 | |
NongHyup Bank, Credit facility | Minimum | |||
Debt Instrument [Line Items] | |||
Maturity Date, start | Oct. 7, 2019 | Jan. 7, 2019 | |
Stated interest rate | 3.69% | 3.71% | |
NongHyup Bank, Credit facility | Maximum | |||
Debt Instrument [Line Items] | |||
Maturity Date, end | Feb. 24, 2020 | Apr. 29, 2019 | |
Stated interest rate | 4.49% | 4.50% | |
The Export Import Bankof Korea Export Development Loan | |||
Debt Instrument [Line Items] | |||
Maturity Date | Jul. 1, 2020 | Jul. 1, 2019 | |
Stated interest rate | 2.75% | 3.44% | |
Debt | $ 4,995 | $ 6,439 | |
Korea Development Bank, General loan | |||
Debt Instrument [Line Items] | |||
Maturity Date | Aug. 8, 2020 | Aug. 8, 2019 | |
Stated interest rate | 3.00% | 3.48% | |
Debt | $ 4,162 | $ 4,472 | |
Korea Development Bank, Credit facility | |||
Debt Instrument [Line Items] | |||
Debt | $ 6,194 | $ 1,489 | |
Korea Development Bank, Credit facility | Minimum | |||
Debt Instrument [Line Items] | |||
Maturity Date, start | Oct. 7, 2019 | Feb. 7, 2019 | |
Stated interest rate | 3.11% | 3.64% | |
Korea Development Bank, Credit facility | Maximum | |||
Debt Instrument [Line Items] | |||
Maturity Date, end | Feb. 18, 2020 | Mar. 6, 2019 | |
Stated interest rate | 3.47% | 3.91% | |
L G U Plus General Loan | |||
Debt Instrument [Line Items] | |||
Maturity Date | Jun. 17, 2020 | Jun. 17, 2019 | |
Stated interest rate | 0.00% | 0.00% | |
Debt | $ 1,665 | $ 1,789 | |
Industrial Bankof Korea Trade Finance | |||
Debt Instrument [Line Items] | |||
Debt | $ 1,920 | ||
Industrial Bankof Korea Trade Finance | Minimum | |||
Debt Instrument [Line Items] | |||
Maturity Date, start | Feb. 18, 2019 | ||
Stated interest rate | 5.31% | ||
Industrial Bankof Korea Trade Finance | Maximum | |||
Debt Instrument [Line Items] | |||
Maturity Date, end | Feb. 25, 2019 | ||
Stated interest rate | 6.08% | ||
Shinhan Bank, General Loan | |||
Debt Instrument [Line Items] | |||
Maturity Date | Mar. 30, 2019 | ||
Stated interest rate | 6.06% | ||
Debt | $ 2,862 | ||
The Export Import Bank Of Korea Import Development Loan | |||
Debt Instrument [Line Items] | |||
Maturity Date | Feb. 14, 2019 | ||
Stated interest rate | 4.31% | ||
Debt | $ 850 | ||
Shoko Chukin Bank General Loan | |||
Debt Instrument [Line Items] | |||
Maturity Date | Jun. 28, 2019 | ||
Stated interest rate | 1.33% | ||
Debt | $ 906 |
Defined Benefit Plans - Additio
Defined Benefit Plans - Additional Information (Details) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract] | ||
Defined benefit pension plans, interest expense | $ 100,000 | |
Defined benefit plans obligation | $ 13,300,000 | 13,300,000 |
Defined benefit plans assets | 3,400,000 | 3,400,000 |
Defined benefit plans cash contributions | $ 0 | $ 0 |
Defined Benefit Plans - Schedul
Defined Benefit Plans - Schedule of Assumptions Used in Determining the Benefit Obligation (Details) | 9 Months Ended |
Sep. 30, 2019 | |
Discount rate | 1.20% |
Rate of pension increase | 1.70% |
Minimum | |
Retirement age | 63 years |
Maximum | |
Retirement age | 67 years |
Non-Controlling Interests - Non
Non-Controlling Interests - Non-Controlling Interests (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | ||||
Beginning balance, non-controlling interests | $ 615 | $ 534 | ||
Net income (loss) attributable to non-controlling interests | $ 37 | $ 29 | 194 | 2 |
Purchase of noncontrolling interest in subsidiary | $ (950) | (823) | ||
Foreign currency translation adjustments (OCI) | $ 14 | (5) | ||
Ending balance, non-controlling interests | $ 531 | $ 531 |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Details) ₩ in Billions | Feb. 27, 2019 | Aug. 08, 2018USD ($) | Aug. 08, 2018KRW (₩) | Sep. 09, 2016USD ($) | Mar. 31, 2018USD ($) | Mar. 31, 2018KRW (₩) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2019KRW (₩) | Dec. 31, 2018USD ($) | Oct. 01, 2018 |
Related Party Transaction [Line Items] | |||||||||||||
Stated interest rate | 3.50% | ||||||||||||
Long-term debt | $ 54,062,000 | $ 54,062,000 | $ 45,904,000 | ||||||||||
Debt instrument, collateral fees paid to DNI | 0 | ||||||||||||
Interest expense, related party | 100,000 | $ 100,000 | 300,000 | $ 300,000 | |||||||||
Research and product development | $ 9,898,000 | $ 8,655,000 | $ 29,512,000 | $ 26,346,000 | |||||||||
Term Loan | Loan Agreement | |||||||||||||
Related Party Transaction [Line Items] | |||||||||||||
Stated interest rate | 4.60% | 4.60% | 4.60% | ||||||||||
Debt instrument maturity date | May 27, 2022 | ||||||||||||
Long-term debt | $ 6,000,000 | $ 6,000,000 | |||||||||||
Line of credit | 6,000,000 | 6,000,000 | |||||||||||
DASAN | Loan Agreement | Dasan Network Solutions, Inc. (DNS) | |||||||||||||
Related Party Transaction [Line Items] | |||||||||||||
Stated interest rate | 4.60% | 4.60% | |||||||||||
Origination of notes receivable from related parties | $ 5,800,000 | ₩ 6.5 | |||||||||||
Debt instrument maturity date | May 27, 2022 | ||||||||||||
Long-term debt | $ 1,300,000 | $ 1,300,000 | ₩ 1.5 | ||||||||||
Repayments of borrowings | $ 4,500,000 | ₩ 5 | |||||||||||
DASAN | Majority Shareholder | |||||||||||||
Related Party Transaction [Line Items] | |||||||||||||
Guarantee fee, percent | 0.90% | ||||||||||||
DASAN | Junior Lien | Majority Shareholder | Loan Agreement | Dasan Network Solutions, Inc. (DNS) | |||||||||||||
Related Party Transaction [Line Items] | |||||||||||||
Stated interest rate | 4.60% | 4.60% | 4.60% | ||||||||||
Origination of notes receivable from related parties | $ 1,800,000 | ||||||||||||
Debt instrument maturity date | May 27, 2022 | ||||||||||||
Long-term debt | $ 1,800,000 | $ 1,800,000 | |||||||||||
DASAN | Junior Lien | Term Loan | Unsecured Debt | Majority Shareholder | Loan Agreement | |||||||||||||
Related Party Transaction [Line Items] | |||||||||||||
Maximum borrowing amount | $ 5,000,000 | ||||||||||||
Debt instrument maturity month and year | 2021-09 | ||||||||||||
Stated interest rate | 4.60% | ||||||||||||
Chasan Networks Co., Ltd | Junior Lien | Affiliated Entity | Loan Agreement | Dasan Network Solutions, Inc. (DNS) | |||||||||||||
Related Party Transaction [Line Items] | |||||||||||||
Manufacturing and development fee, percent | 7.00% | 7.00% | 7.00% | ||||||||||
Tomato Soft Ltd. | Junior Lien | Affiliated Entity | Loan Agreement | Dasan Network Solutions, Inc. (DNS) | |||||||||||||
Related Party Transaction [Line Items] | |||||||||||||
Sourcing and inspection services fee, percent | 7.00% | 7.00% | 7.00% | ||||||||||
Tomato Soft (Xi'an) Ltd. | |||||||||||||
Related Party Transaction [Line Items] | |||||||||||||
Research and product development | $ 800,000 |
Related Party Transactions - Sa
Related Party Transactions - Sales and Purchases To and From Related Parties (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Related Party Transaction [Line Items] | ||||
Sales | $ 232 | $ 1,687 | $ 1,870 | $ 4,358 |
Cost of revenue | 190 | 1,478 | 1,427 | 3,677 |
Interest expense | 100 | 100 | 300 | 300 |
Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
Sales | 232 | 1,687 | 1,870 | 4,358 |
Cost of revenue | 190 | 1,478 | 1,427 | 3,677 |
Manufacturing (cost of revenue) | 308 | 287 | 925 | 974 |
Research and product development | 153 | 140 | 447 | 453 |
Selling, marketing, general and administrative | 966 | 786 | 2,984 | 2,954 |
Interest expense | 104 | 112 | 349 | 338 |
Other expenses | 84 | 89 | 255 | 234 |
DASAN | Majority Shareholder | Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
Sales | 232 | 1,472 | 1,828 | 3,683 |
Cost of revenue | 190 | 1,270 | 1,346 | 3,143 |
Selling, marketing, general and administrative | 966 | 784 | 2,984 | 2,950 |
Interest expense | 104 | 112 | 349 | 338 |
Other expenses | $ 84 | $ 89 | $ 255 | $ 234 |
Tomato Soft Ltd. | Affiliated Entity | Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
DNI ownership interest | 100.00% | 100.00% | 100.00% | 100.00% |
Manufacturing (cost of revenue) | $ 29 | $ 27 | $ 88 | $ 84 |
Tomato Soft (Xi'an) Ltd. | Affiliated Entity | Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
DNI ownership interest | 100.00% | 100.00% | 100.00% | 100.00% |
Manufacturing (cost of revenue) | $ 10 | |||
Research and product development | $ 137 | $ 119 | $ 392 | $ 396 |
Chasan Networks Co., Ltd | Affiliated Entity | Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
DNI ownership interest | 100.00% | 100.00% | 100.00% | 100.00% |
Manufacturing (cost of revenue) | $ 279 | $ 260 | $ 837 | $ 880 |
Research and product development | $ 16 | $ 21 | $ 55 | $ 57 |
Handysoft Inc | Affiliated Entity | Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
DNI ownership interest | 17.63% | 17.63% | ||
Sales | $ 215 | $ 473 | ||
Cost of revenue | 208 | 357 | ||
Selling, marketing, general and administrative | $ 2 | $ 4 | ||
J Mobile | Affiliated Entity | Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
DNI ownership interest | 90.47% | 90.47% | ||
Sales | $ 42 | |||
Cost of revenue | $ 81 | |||
Dasan France | Affiliated Entity | Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
DNI ownership interest | 100.00% | 100.00% | ||
Sales | $ 202 | |||
Cost of revenue | $ 177 |
Related Party Transactions - Ba
Related Party Transactions - Balances of Receivables and Payables with Related Parties (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Related Party Transaction [Line Items] | |||
Long-term debt | $ 54,062 | $ 45,904 | |
Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
Account receivables | 252 | 583 | |
Other receivables | 1 | 65 | |
Deposits for lease | [1] | 683 | 735 |
Long-term debt | 9,049 | 14,142 | |
Accounts payable | 96 | 1,743 | |
Other payables | 2,711 | 1,281 | |
Accrued and other liabilities | [2] | 90 | 169 |
DASAN | Majority Shareholder | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
Account receivables | 252 | ||
Other receivables | 1 | ||
Deposits for lease | [1] | 683 | 735 |
Long-term debt | 9,049 | 14,142 | |
Accounts payable | 1,000 | ||
Other payables | 2,656 | 1,231 | |
Accrued and other liabilities | [2] | $ 90 | $ 169 |
Tomato Soft Ltd. | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | 100.00% | |
Other payables | $ 10 | $ 9 | |
Tomato Soft (Xi'an) Ltd. | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | 100.00% | |
Other payables | $ 45 | $ 41 | |
Chasan Networks Co., Ltd | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | 100.00% | |
Accounts payable | $ 96 | $ 89 | |
Dasan France | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | ||
Account receivables | $ 280 | ||
Other receivables | $ 65 | ||
Handysoft Inc | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 14.77% | ||
Account receivables | $ 303 | ||
Accounts payable | $ 654 | ||
[1] | Included in other assets related to deposits for lease in the condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018. | ||
[2] | Included in accrued and other liabilities in the condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018. |
Common Stock - Additional Infor
Common Stock - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | May 20, 2019 | Jun. 30, 2019 | Sep. 30, 2019 |
Subsidiary Sale Of Stock [Line Items] | |||
Net proceeds from offering | $ 42,509 | ||
Common stock | |||
Subsidiary Sale Of Stock [Line Items] | |||
Number of shares issued | 4,717,949 | 4,718,000 | |
Shares issued upon exercise of underwriters option | 615,384 | ||
Price per share | $ 9.75 | ||
Gross proceeds from offering | $ 46,000 | ||
Net proceeds from offering | $ 42,500 |
Net Income Per Share Attribut_3
Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. - Reconciliation of Basic and Diluted Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Earnings Per Share [Abstract] | ||||
Net income (loss) attributable to DASAN Zhone Solutions, Inc. | $ (4,033) | $ 1,798 | $ (3,263) | $ 3,321 |
Basic (in shares) | 21,384 | 16,683 | 18,732 | 16,425 |
Effect of dilutive securities: | ||||
Stock options, restricted stock units and share awards | 208 | 215 | ||
Diluted (in shares) | 21,384 | 16,891 | 18,732 | 16,640 |
Basic (in dollar per share) | $ (0.19) | $ 0.11 | $ (0.17) | $ 0.20 |
Diluted (in dollar per share) | $ (0.19) | $ 0.11 | $ (0.17) | $ 0.20 |
Leases - Additional Information
Leases - Additional Information (Details) | Jul. 09, 2019USD ($)ft² | Sep. 30, 2019USD ($) | Nov. 01, 2019USD ($) | Jan. 01, 2019USD ($) |
Leases Operating Lease [Line Items] | ||||
Finance lease | $ 1 | |||
Area under lease | ft² | 16,500 | |||
Lease term | 63 months | |||
Lease commenced date | Nov. 1, 2019 | |||
Right-of-use assets from operating leases | 18,349,000 | $ 22,500,000 | ||
Operating lease liabilities | 19,453,000 | $ 22,500,000 | ||
Subsequent Event | ||||
Leases Operating Lease [Line Items] | ||||
Right-of-use assets from operating leases | $ 2,100,000 | |||
Operating lease liabilities | $ 2,100,000 | |||
Minimum | ||||
Leases Operating Lease [Line Items] | ||||
Monthly rent expenses | $ 41,273 | |||
Maximum | ||||
Leases Operating Lease [Line Items] | ||||
Monthly rent expenses | $ 47,846 | |||
Warehouse Lease Cancellation | ||||
Leases Operating Lease [Line Items] | ||||
Lease cancellation expense | 200,000 | |||
Right use assets | 600,000 | |||
Operating lease liabilities | $ 600,000 |
Leases - Components of Lease Ex
Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Leases [Abstract] | ||
Operating lease cost | $ 1,064 | $ 3,327 |
Variable lease cost | 194 | 520 |
Total net lease cost | $ 1,258 | $ 3,847 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Leases [Abstract] | ||
Cash paid for amounts included in the measurement of operating lease liabilities | $ 1,265 | $ 3,888 |
ROU assets obtained in exchange for operating lease obligations | $ 35 | $ 35 |
Leases - Lease Balances within
Leases - Lease Balances within Condensed Consolidated Balance Sheet, Weighted Average Remaining Lease Term, and Weighted Average Discount Rates Related to Operating Leases (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jan. 01, 2019 |
Assets: | ||
Right-of-use assets from operating leases | $ 18,349 | $ 22,500 |
Liabilities: | ||
Operating lease liabilities - current | 3,496 | |
Operating lease liabilities - non-current | 15,957 | |
Total operating lease liabilities | $ 19,453 | $ 22,500 |
Weighted average remaining lease term | 4 years 9 months 7 days | |
Weighted average discount rate | 6.60% |
Leases - Maturity of Operating
Leases - Maturity of Operating Lease Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jan. 01, 2019 |
Leases [Abstract] | ||
Remainder of 2019 | $ 1,259 | |
2020 | 4,197 | |
2021 | 3,890 | |
2022 | 3,609 | |
2023 | 3,460 | |
Thereafter | 6,373 | |
Total operating lease payments | 22,788 | |
Less: imputed interest | (3,335) | |
Total operating lease liabilities | $ 19,453 | $ 22,500 |
Leases - Estimated Future Lease
Leases - Estimated Future Lease Payments Under Non-cancelable Operating Leases (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Year ending December 31: | |
2019 | $ 4,100 |
2020 | 3,005 |
2021 | 2,590 |
2022 | 2,664 |
2023 | 2,494 |
Thereafter | 5,929 |
Total minimum lease payments | $ 20,782 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Purchase Commitment | |
Guarantee Obligations [Line Items] | |
Number of notice days required to notice in advance for cancellation of orders | 30 days |
Amount of non-cancellable purchase commitments outstanding | $ 3.2 |
Performance Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 13.8 |
Minimum | |
Guarantee Obligations [Line Items] | |
Product warranty period from the date of shipment | 1 year |
Maximum | |
Guarantee Obligations [Line Items] | |
Product warranty period from the date of shipment | 5 years |
Commitments and Contingencies_2
Commitments and Contingencies - Reconciliation of Changes in Accrued Warranties and Related Costs Included in Accrued and Other Liabilities (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | ||
Beginning balance | $ 1,319 | $ 931 |
Assumed balance from Keymile | 230 | |
Charged to cost of revenue | 732 | 1,022 |
Claims and settlements | (782) | (598) |
Foreign exchange impact | (27) | 6 |
Ending balance | $ 1,472 | $ 1,361 |
Commitments and Contingencies_3
Commitments and Contingencies - Payment Guarantees to Third Parties (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Guarantee Obligations [Line Items] | |
Product warranty term | 2 years |
Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 64,172 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
DNI ownership interest | 44.40% |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Credit facility from Industrial Bank of Korea | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 8,400 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Purchasing Card from Industrial Bank of Korea | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 1,998 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Korea Development Bank, Credit facility | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 8,400 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Korea Development Bank, General loan | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 4,995 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | NongHyup Bank, Credit facility | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 6,000 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Borrowings from Korea Development Bank | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 3,566 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Payment Guarantee from Shinhan Bank | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 3,000 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Shinhan Bank, General Loan | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 1,598 |
PNC Bank | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 4,550 |
Seoul Guarantee Insurance Co. | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 5,516 |
Industrial Bank of Korea | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 1,010 |
Industrial Bank of Korea | Payment Guarantee | Letter of Credit | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 1,096 |
Korea Development Bank | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 6,908 |
NongHyup Bank | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 3,596 |
Woori Bank | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 1,932 |
Shinhan Bank | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 683 |
Shinhan Bank | Payment Guarantee | Purchasing Card | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 573 |
AXA Insurance Company | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 175 |
Polska Agencja Zeglugi Powietrznej | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 112 |
DDE 64 LTD | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 64 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 289 | $ 735 | $ 1,098 | $ 1,071 |
Income before income taxes | (3,700) | 2,600 | (2,000) | 4,400 |
Unrecognized tax benefits | 800 | 800 | ||
Unrecognized tax benefits that would impact effective tax rate | 100 | 100 | ||
Unrecognized tax benefits, period increase (decrease) | $ 0 | $ 0 | $ 0 | $ 0 |
Enterprise-Wide Information - P
Enterprise-Wide Information - Property, Plant and Equipment, Net of Accumulated Depreciation (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, net | $ 6,575 | $ 5,518 |
United States | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, net | 2,872 | 3,036 |
Korea | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, net | 1,976 | 1,543 |
Japan and Vietnam | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, net | 874 | 910 |
Taiwan and India | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, net | 25 | $ 29 |
Germany | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, net | $ 828 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Details) - Subsequent Event - Term Loan | Nov. 08, 2019USD ($) |
Subsequent Event [Line Items] | |
Prepayment of outstanding term loan | $ 10,000,000 |
One-time fee, paid | $ 150,000 |