DZSI - Earnings call transcript Q3 2024

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Operator

Good day, ladies and gentlemen. Thank you for standing by. My name is John, and I'll be your conference operator today. At this time, I would like to welcome everyone to the DZS Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. and Marketing SVP, Burke, Investor Relations. Geoff ahead. go Please

Geoff Burke

DZS Thank discuss to the you, and welcome John, conference QX call to XXXX results. financial

CFO, today me Vogt; are President Brian Interim and Chesnut. Joining CEO, DZS and Charlie

will its November provide files may current results uncertainties, recent of and differ risks our future statements the During basis. in documents our to XX-K the Such regarding materially and and differ from Please XX-Q identify those call, most These projections X materially. Please release. have we metrics, including together other call website are GAAP reports that based expectations financial forward-looking the future and or or and documents with posted to statements results X-K. actual and events Wednesday, company. the events on determined statements those forward-looking in provide section this on to press a and projections performance which the Form SEC, issued actual the to cause that we to were company November risk of X refer the These we factors, SEC non-GAAP important forward-looking DZS' press can Wednesday, note financial our our numbers statements. include on on otherwise reconciliation a or unless with indicated, metrics release filed with on contained corresponding you which GAAP contained subject

to the information release. Charlie. and over statistical information financial discuss regarding business turn in will We of historical now the I and press other this and our also is included will call operations some

Charles Vogt

for night a Thank you, It was Americans. Geoff. long

joining. So good for thank morning, and you

quarter-over-quarter. $XX.X representing of results third an quarter pleased are that XX% to in revenue, We delivered million increase financial report our

representing Our non-GAAP adjusted margin quarter-over-quarter. XX.X%, an increase X.X% was of gross

to costs costs. final increased incremental operating with quarter acquisition NetComm our the the associated restatement-related our and primarily due Our expense during

though challenging Despite end, by convert was million have assurance quarters. resulting us, our to pipeline and EBITDA over the us. We revenue divest management delays X on the Our compared unfavorable cost to market filings shipments management XXXX chose our that inability QX the network create the industry, sequential WiFi restatement savings are last various to broader government our programs, realized closed and adjusted portfolio backlog management operating for cost reduce and and software a assurance recognition and during WiFi our our we quarter believe to of initiatives due was robust not revenue optimism sales committed days an $X WiFi we we were independence timing a rotation a experiencing by the inventory, continuing reasons: quarter. and of peers. with to friction growth in-home connectivity our behind the over environment our are higher capital ahead stimulus of and backlog, sale and delivered with in-home of current, growing across competitive numerous WiFi best from planned with With network software portfolio first X basis and

sheet, third, software balance access broadband our securing in transaction. connectivity accomplished recalibrate all-cash our an was and and which $XX to The Cloud systems And on core second and we technology improve was centered focus our Edge by go-to-market to million solutions.

The tactical several quarter, quarter strategic progress third and third during across -- meaningful made we the initiatives.

quarter, anchor us fourth that initiatives and we X established XXXX. into will As we key in enter performance the

customers divestiture cash WiFi sheet. network to profitability assurance sales sheet. pipeline, and paid improving strategic and the channel our sale with on QX interaction The combined with around end Our of October. Based balance compared and improve anticipate a backlog million first shipments, of to have management as sheet of our recent we our balance of XXXX. profitability KPI inventory partners, The added is debt balance QX QX growing by $XX $XX million revenue reduced portfolio centered inclusive million and $XX and our and growth, to our of improved scheduled

we spend ahead will levels As return service to deployment anticipate patterns. pre-COVID normalized to XXXX, and providers we look

the various government programs anticipate including accelerate United will world, second program and equity the the access broadband also XXXX. begin We stimulus around to during the funding deployment of States half

savings half and These to completing is be expect Our second cost completed cost focused the we in of total and NetComm. year-end recent in savings KPI first associated QX synergies XXXX. the initiatives on acquisition reflected of cost our XXXX, initiatives, our with began savings by XXXX including the

former inclusive of programs optimization divestiture the assurance management our network portfolio. our unit Our as the of WiFi business and divestiture are Asia cost of well as in-home

the synergies is which broadband portfolio. sales to of from home fiber market-leading wireless third KPI access broadband adds fixed resulting NetComm, technology market-leading and acquisition the executing Our access connectivity our and extension,

since with NetComm. acquiring sales growing the encouraged just are in We created conversion the pipeline and and revenue days XXX backlog

the X established begun synergies for of and our validate core likewise, with During part prospective the with as thesis. have customers NetComm cross-selling we former existing the acquisition customers months, to portfolio the our past synergies our broadband

monetizing which is Our with fourth million sales of in KPI flight. projects aligned our is backlog and inventory, $XX focused pipeline, on scheduled

improved of paid sight and line was gives backlog sales revitalized a with growing to to progress in the of X quarters. cash scheduled and made conversion QX inventory, While sales inventory relative visibility to X our over better next and to us pipeline shipments

overbuilders the several introduction access service has broadband centered Our of vision incumbent over and standards-based open years established around large-scale with the cloud next-generation orchestration automation been software and network past systems aligned the and as certified and strategy solutions and equity compliant $XX broadband formally America, Build fiber aligned with the ago, deployment was and providers billion as portfolio weeks program. access Buy well our few broadband America a access providers. Announced as utility emerging

for emerging as providers, center excitement operators incumbent of as other garnered USB euros has fiber other the our of the as make While the service of in to available ISPs. well the billions and providers, Germany types has industry, States countries program utility front United much been across broadband and such aim alternative

We invested and in of technology than expect made which over ultimately the continued result positive sustained investments growth few that decisions includes years, cash and profitability $XXX the will that million and we've past flow. more the

As Continental many we following are as Chief Interim appointed months he in Prior States managing Brian the process. Officer, the as the Brian our Canada. distribution aware, where across September Vice of global and was and Controller; U.S. operations phase and leading our to Accounting of X DZS, Chesnut CFO President United Corporate $X restatement you company, final Systems, accounting of billion a oversaw Battery

controls, began at PricewaterhouseCoopers. senior thank management career for Brian, Engineering held the work Jacobs Brian and share corporate want our the and over the results. results brief past that you more overall to introduction, and and improved financial I our have months. at to as finance accomplished positions process. With X now Additionally, turn he I'll and you on over governance a to team internal diligent close the The OneMain comprehensive Financial his you call

Brian Chesnut

good Thank you, morning, and Charlie, everyone.

months I've we sustainable the Charlie the restatement. DZS completing focused for as on months as on and X lead interim forward, X been As first profitability. CFO with mentioned, the finance look appreciate opportunity focused with our growth to I

chain including business, security, year, cash. has to past supply management improvements the controls, and the the across governance, corporate quote internal company Over made cyber

various by of $XX incrementally to our XXXX operational been Adjusted and in loss the favorable the adjusted overall of leadership initiatives the compared and by million of in XX.X% decreased to underway costs expenses of by with have $XX.X the reduction operations results on $XX.X with XXXX during was deliver third was third revenue and margin we encouraging XX.X% year-over-year. $X.X million work in quarter of and same X.X% the $XX.X a from $XX.X or XX.X% third a primarily XXXX. The months in profitable increase an continuing are first ago. Adjusted same an XXXX sales a Year-over-year streams pipeline gross team across operations operations million was months quarter driven a expenses and compared second the better million the our XX.X% and compared focused cost XXXX, million continuing operating quarter or growth X million QX to X period associated flow. cash acquisition. While delivered to the QX as quarter for third to XX% in year NetComm for million expectations million $XX.X XX.X% improvement Revenue by through and additional margin designed the compared gross in management compared of period to quarter, balancing XX.X%. EBITDA basis, loss during and from implemented. Adjusted QX quarter-over-quarter growth or quarter, increase is third taken first XXXX, operating $X.X million free increased operational to of continuing the in the $X.X an on from during

with divestiture closed $XX and our $X.X cash million. million sheet assurance million quarter debt cash on XX, increased our generating reduced in-home balance our by $XX cash, While which cash October by our and of ended $XX million network balance WiFi of the management equivalents,

significantly result our quarter, collections. the days improved days XXX of DSO favorable from During XX a to as

was Our million, was first to valued quarter plus and the quarter management our and $XX with of capital network the to into the quarter, our we the interest end expense includes quarter, million WiFi during was of during in-home continued debt $X.X DPO and assurance million, of combination third lag at interest favorable which expect during sale discount inventory XXX the sales days improve the quarterly fourth XXXX. At third the and $XX third though DPO quarter at working amortization.

our public outcomes. to favorable restatement With page behind current, more turning us the we the are SEC and filings

on to our operating EBITDA we converting and KPIs results lowering to managing are positive working scheduled inventory breakeven XXXX. executing expect our work cash our and Current adjusted in underway, and achieve streams cash, micro We capital basis by expenses. an backlog,

of market-leading providers as extension, connectivity accretive fixed broadband States, The our and NetComm portfolio wireless solutions in and access to as Australia. has X Our spend broadband service with in marquee acquisition Europe acquisition home results well date. enhanced United resulted the fiber

quarter prepare are and call sheet million the savings and cash. With I'll NetComm to As improvements, inventory performance Charlie optimization converting his Charlie as synergies acquisition balance hand final our for the focused back cost growth, to X on from that, and XXXX, and we highlighted of we business enter comments. profitability, the $XX our key indicators, for which fourth

Charles Vogt

our trials medium-term projects ahead and look to active revenue in flight expected As immediate of many technology we are the in into design future, wins to and convert to XXXX.

prospective overall channel and sector a is and an the indicate customers, years. improvement over partners with fiber wireless coming to underway deployments resounding commitment interactions the across and Our customers fixed

$XX than excess the backlog, of our million providers abnormal $XX we improve and operating by by XXXX. With annual lead distributors will expect million, over and caused continue of XXXX. pipeline, in of to inventory million also among expenses QX course and with lower $XX to more sales an We performance times anticipate normalize financial service throughout encouraging inventory

We design also NetComm technology Board I Directors who from who closing, converting I committed differentiation focused and to customer-first of to synergies into loyal our employees inventory we the expect thank acquisition, and wins favorable and cash. In the and our to sales our benefit company. continue want to support in our from want technology and thank remain on Furthermore, culture. effectively relentlessly to customers continue trials

technology, want I our thank remained chapter together. ecosystem our manufacturing and who Finally, to committed broader aligned supplier next and to

and any results Looking thank to ahead, call questions today. I'll you, attention for there's we Thank you in Brian share financial operator, assuming and and our business the then, time Until for back early to you. turn March. now your I. plan QX

Operator

[Operator comes of line Instructions] with the Needham. first Koontz question Ryan Our from

Ryan Koontz

the Charlie. Are couple market? U.S. like A for frozen into questions you of last seeing first of What's of climate Great. year in we've in kind 'XX look any visibility your had half the in current signs the you, the plus?

Charles Vogt

mean preliminary buckets. last we encompasses just XXXX really I our finished week, which AOP Yes. X

is first scheduled next our year. backlog The just for

beginning we our the going our is had way a to then and thesis a overall it. of dice that second There's acquisition, synergies The actually we into lot validating, which pipeline. are And the validate. the it's slice that of pipeline the we're just NetComm synergies from lot in think I

we're the in took that due least and of lot that the over to are that if think customers under seeing on has year. inventory you through that, a you last cloud a all the lot fact been excess I and our lift a So working the that XXXX certainly of with coupled certainly company they year. of restatement that, at this see And

of half first the about optimistic cautiously we're so And year. next

reporting which and New built U.S. the that Zealand, new East. bring And Europe so more be that's market, those core we're with NetComm, certainly. -- in are visibility, and Australia mean, and I seeing Middle to primarily the region in a will region begin we obviously, on on but do a XXXX, markets X

Ryan Koontz

And particular on you large maybe European to opportunities, competing East. don't opportunities some names, larger in you're opportunities the Middle then have kind can out that you You double-clicking of customer Okay. the but of international. point characterize for? Any list

Charles Vogt

the Well, the with a as been who've in I begin Middle East. that company in incumbent of half first year design the did X the think we to last know win operators announce we're in following deployments business most today people we doing expect Europe, that And XXXX. large

that are So involved France worked that evolve revenue next markets Across and Spain, projects there, certainly the with years. for will will 'XX certainly that in we on significant hoping hard X we've over that. large X and XXXX. And we're us there X like the we're incumbents believe, certainly very in generate, and to

efforts know us, joined we've we're on a made quietly expecting the service providers have efforts very challenging lot revenue I some while and our those a progress I lot scale for know so following marketing of was of are think, where been years And ago. sales trials, year, others to focused gone I design since these I and And the as that innovation industry, very, into larger you wins last year. and That's we've X next and whole convert think on into.

Ryan Koontz

is and historical like Great. Is more the and competitive the landscape Ericssons the last the for Taranas And one. types fixed incumbents, like? your products? Samsungs smaller the like going or Cambiums the X wireless it wispy up What's against and Nokia, look big that NetComm in

Charles Vogt

so Cambium. not Yes, with much

perspective, from spectrum. is Cambium's because unlicensed think complementary more think I probably aspects the they're more focused I on

focused wireless the spectrum. on portfolio more Our fixed license is

So certainly the certainly we're proprietary from core a and to your to into Tarana emerge point, emerging. them the the is home, platform They seeing have market.

that they a on and just bit focused even more cost Xs, different a is I structure proprietary market, that, Tier it's which think, think in larger that I have the challenging. we're

of So our more wireless fixed as else. to answer the question, your than traditional seeing peers competitive Nokias with we're anyone portfolio, our

Ryan Koontz

how margin it. any gross going Got the there And terms in forward? feel that trajectory commentary you about front, on of

Charles Vogt

been wasn't in in We it XXs. quarter. commentary, inventory some look, mean, I Well, during have the reserves did the the margins would take

to higher quarter. some had So basis we inventory our margin was in profile actually had not XXX chosen reserves close to the points take

returning expected our as core you I that say I'd And to our which them timing broadband fiber when now access has know the which fixed deployments quarter-to-quarter. the portfolio and to you transport to from to we So quarter-to-quarter your our are this represents which be. and margins know actually a know mix where from wireless and margins. OLTs are in a peers cycle much lower from when compared optical NetComm, our of look includes has profile products, with the portfolio, . The lot do connectivity broader margin cycle at and

margin which a to was margins get a think us can we software forward. even margin certainly that go to to the Asia, more from profile former ASSIA more hoping we business balanced But we a as We challenged there's to perspective. obviously path divested sustaining we're as without So XX%. get close much and blended

So think at least that's that this we're I our goal. proving out year. And

Operator

you, Thank this a There conference questions at the day. session are no Q&A pleasant and everyone, Instructions] call. today's [Operator Have participating. time, that further concludes for

DZS (DZSI) 6 Nov 242024 Q3 Earnings call transcript