DASAN Zhone Solutions, Inc. (NASDAQ: DZSI), a global leader in
fiber access transformation for enterprise and service provider
networks, today reported its financial results for the quarter
ended September 30, 2017. Revenue for the third quarter of 2017 was
$66.4 million, compared to $59.9 million for the second quarter of
2017 and $31.2 million for the third quarter of 2016. The results
for the third quarter of 2016 included the combined results of
Dasan Network Solutions, Inc. and legacy Zhone Technologies, Inc.
from and after September 9, 2016, following the completion of the
merger. The Company’s financial results prior to September 9, 2016
do not include the operations of legacy Zhone Technologies, Inc.
"With the successful integration of our businesses, we are seeing
improved financial performance sooner than expected which has been
led by stronger than expected revenue growth," stated Yung Kim,
President, CEO and Acting CFO of DASAN Zhone Solutions.
Net income attributable to DASAN Zhone Solutions, Inc. for the
third quarter of 2017, calculated in accordance with generally
accepted accounting principles (“GAAP”), was $1.4 million or $0.09
per share compared with a net loss of $0.8 million or $0.05 per
share for the second quarter of 2017 and a net loss of $4.7 million
or $0.42 per share for the third quarter of 2016. Adjusted earnings
before stock-based compensation, interest income (expense), net,
income tax provision (benefit), depreciation and amortization, and
merger transaction costs (“adjusted EBITDA”) was $2.7 million for
the third quarter of 2017, compared to $0.9 million for the second
quarter of 2017 and ($0.9) million for the third quarter of
2016.
Cash and cash equivalents at September 30, 2017 were $10.1
million compared to $17.9 million at December 31, 2016.
DASAN Zhone Solutions will conduct a conference call and audio
webcast today, November 1, 2017, at approximately 2:00 p.m. PT /
5:00 p.m. ET to review its third quarter 2017 results. This call is
open to the public by dialing +1 (888) 306-9369 for U.S. callers
and +1 (503) 406-4059 for international callers, and then providing
passcode 96204168. The audio webcast will be simultaneously
available on the Investor Relations section of DASAN Zhone
Solution's website at
http://www.dasanzhone.com/about/investor-relations/investor-events/.
A replay of the conference call will be available after the
original call by dialing +1 (855) 859-2056 for U.S. callers and +1
(404) 537-3406 for international callers, and then providing
passcode 96204168. An audio webcast replay will also be available
online at
http://www.dasanzhone.com/about/investor-relations/investor-events/
for approximately one week following the original call.
Non-GAAP Financial Measures
To supplement DASAN Zhone's consolidated financial statements
presented in accordance with GAAP, DASAN Zhone uses adjusted
EBITDA, a non-GAAP measure DASAN Zhone believes is appropriate to
enhance an overall understanding of DASAN Zhone's past financial
performance and prospects for the future. These adjustments to GAAP
results are made with the intent of providing greater transparency
to supplemental information used by management in its financial and
operational decision-making. These non-GAAP results are among the
primary indicators that management uses as a basis for making
operating decisions because they provide meaningful supplemental
information regarding the Company's operational performance,
including the Company's ability to provide cash flows to invest in
research and development, and to fund capital expenditures. In
addition, these non-GAAP financial measures facilitate management's
internal comparisons to the Company's historical operating results
and comparisons to competitors' operating results. The presentation
of this additional information is not meant to be considered in
isolation or as a substitute for measures of financial performance
prepared in accordance with GAAP. A reconciliation between net
income (loss) and adjusted EBITDA is provided in a table
immediately following the Unaudited Condensed Consolidated
Statements of Comprehensive Income (Loss) below.
About DASAN Zhone Solutions
DASAN Zhone Solutions, Inc. is a global leader in broad-based
network access solutions. The company provides solutions in five
major product areas including broadband access, Ethernet switching,
mobile backhaul, passive optical LAN (POL) and software defined
networks (SDN). More than 750 of the world’s most innovative
network operators, service providers and enterprises turn to DASAN
Zhone Solutions for fiber access transformation. The IP Zhone is
the only solution that enables service providers to build the
network of the future today, supporting end-to-end voice, data,
entertainment, social media, business, mobile backhaul and mobility
service. DASAN Zhone Solutions is committed to building the fastest
and highest quality All IP Multi-Service solution for its
customers. DASAN Zhone Solutions is headquartered in Oakland,
California.
DASAN Zhone Solutions, the DASAN Zhone Solutions logo, and al
DASAN Zhone product names are trademarks of DASAN Zhone Solutions,
Inc. Other brand and product names are trademarks of their
respective holders. Specifications, products, and/or products names
are all subject to change without notice.
Forward-Looking Statements
This press release contains forward-looking statements that are
subject to the safe harbors created under the Securities Act of
1933 and the Securities Exchange Act of 1934. Words such as
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,”
“target,” “will,” “would,” variations of such words, and similar
expressions are intended to identify forward-looking statements. In
addition, forward-looking statements include, among others,
statements that refer to financial estimates; projections of
revenue, margins, expenses or other financial items. Readers are
cautioned that actual results could differ materially from those
expressed in or contemplated by the forward-looking statements.
Factors that could cause actual results to differ include, but are
not limited to, the Company’s ability to realize the anticipated
cost savings, synergies and other benefits of the merger of Dasan
Networks, Inc. and legacy Zhone Technologies, Inc. and any
integration risks relating to the merger, the ability to generate
sufficient revenue to achieve or sustain profitability, the ability
to raise additional capital to fund existing and future operations
or to refinance or repay the Company’s existing indebtedness,
defects or other performance problems in the Company’s products,
any economic slowdown in the telecommunications industry that
restricts the ability of the Company’s customers to purchase its
products, commercial acceptance of the Company’s products, intense
competition in the communications equipment market, higher than
anticipated expenses that the Company may incur, any failure to
comply with the periodic filing and other requirements of The
Nasdaq Stock Market for continued listing, material weaknesses or
other deficiencies in the Company internal control over financial
reporting, and the initiation of any civil litigation, regulatory
proceedings, government enforcement actions or other adverse
effects relating to the Audit Committee investigation or errors in
the consolidated financial statements of legacy Zhone Technologies,
Inc. In addition, please refer to the risk factors contained
in the Company's SEC filings available at www.sec.gov,
including without limitation, the Company's filings on Forms
10-K, 10-Q and 8-K. Readers are cautioned not to place undue
reliance on any forward-looking statements, which speak only as of
the date on which they are made. The Company undertakes no
obligation to update or revise any forward-looking statements for
any reason.
DASAN ZHONE SOLUTIONS INC. AND
SUBSIDIARIES
Unaudited Condensed Consolidated
Statements of Comprehensive Income (Loss)
(In thousands, except per share
data)
Three Months Ended Nine Months Ended
September 30,2017
June 30,2017
September 30, 2016
(2)
September 30, 2017
September 30, 2016
(2)
Net revenue: Net revenue $ 60,513 $ 49,080 $ 24,772 $ 150,834 $
68,424 Net revenue - related parties 5,925 10,861
6,468 27,657 22,408 Total net revenue 66,438
59,941 31,240 178,491 90,832 Cost of revenue: Products and services
38,643 32,025 16,483 96,127 48,750 Products and services - related
parties 5,569 8,574 5,406 22,851 19,118 Amortization of intangible
assets 153 153 51 459 51 Total
cost of revenue 44,365 40,752 21,940 119,437
67,919 Gross profit 22,073 19,189 9,300 59,054 22,913
Operating expenses: Research and product development (1) 8,804
8,995 5,885 27,028 15,583 Selling, general and administrative (1)
11,454 10,453 8,278 32,506 16,691 Amortization of intangible assets
154 544 251 1,191 259 Total
operating expenses 20,412 19,992 14,414 60,725
32,533 Operating income (loss) 1,661 (803 ) (5,114 )
(1,671 ) (9,620 ) Interest income 36 20 31 82 137 Interest expense
(263 ) (256 ) (204 ) (793 ) (600 ) Other expense, net 60 264
(112 ) 43 (41 ) Income (loss) before income taxes
1,494 (775 ) (5,399 ) (2,339 ) (10,124 ) Income tax provision
(benefit) 107 99 (610 ) 646 (1,041 ) Net
income (loss) 1,387 (874 ) (4,789 ) (2,985 ) (9,083 ) Net income
(loss) attributable to non-controlling interest (12 ) (65 ) (56 )
172 (17 ) Net income (loss) attributable to DASAN Zhone
Solutions, Inc. $ 1,399 $ (809 ) $ (4,733 ) $ (3,157 ) $
(9,066 ) Foreign currency translation adjustments (284 )
(824 ) 2,291 1,782 2,690 Comprehensive income
(loss) 1,103 (1,698 ) (2,498 ) (1,203 ) (6,393 ) Comprehensive
income (loss) attributable to non-controlling interest (14 ) (64 )
(54 ) 191 48 Comprehensive income (loss) attributable
to DASAN Zhone Solutions, Inc. $ 1,117 $ (1,634 ) $ (2,444 )
$ (1,394 ) $ (6,441 ) Earnings (losses) per share
attributable to DASAN Zhone Solutions, Inc.: Basic and diluted $
0.09 $ (0.05 ) $ (0.42 ) $ (0.19 ) $ (0.90 ) Weighted
average shares outstanding: Basic and diluted 16,382 16,380 11,139
16,380 10,046 ___________________________________________________
(1) Amounts include stock-based compensation costs as follows:
Research and product development $ 12 $ 16 $ 3 $ 42 $ 3 Selling,
general and administrative 183 204 125 628
125 $ 195 $ 220 $ 128 $ 670
$ 128 Reconciliation of net income (loss) to Adjusted
EBITDA: Net income (loss) $ 1,387 $ (874 ) $ (4,789 ) $ (2,985 ) $
(9,083 ) Stock-based compensation 195 220 128 670 128 Interest
income (expense), net 227 236 173 711 463 Income tax provision
(benefit) 107 99 (610 ) 646 (1,041 ) Depreciation and amortization
752 1,172 628 3,105 1,165 Merger transaction costs — —
3,536 — 3,536 Adjusted EBITDA $ 2,668
$ 853 $ (934 ) $ 2,147 $ (4,832 )
(2) The results for the third quarter of 2016 included the
combined results of Dasan Network Solutions, Inc. and legacy Zhone
Technologies, Inc. from and after September 9, 2016, following the
completion of the merger. The Company’s financial results prior to
September 9, 2016 do not include the operations of legacy Zhone
Technologies, Inc.
DASAN ZHONE SOLUTIONS, INC. AND
SUBSIDIARIES
Unaudited Condensed Consolidated
Balance Sheets
(In thousands)
September 30,2017
December 31, 2016
Assets Current assets: Cash and cash equivalents $ 10,145 $
17,893 Restricted cash 13,058 6,650 Short-term investments — 993
Accounts receivable, net: Trade receivables 43,478 38,324 Related
parties 12,941 13,311 Other receivables: Others 13,851 12,068
Related parties 22 171 Inventories 31,966 31,032 Prepaid expenses
and other current assets 3,198 4,131 Total current
assets 128,659 124,573 Property and equipment, net 5,812 6,288
Goodwill 3,977 3,977 Intangible assets, net 7,174 8,767 Other
assets 1,536 1,842 Total assets $ 147,158 $
145,447
Liabilities, Stockholders' Equity and
Non-controlling Interest Current liabilities: Accounts payable:
Others $ 35,224 $ 30,681 Related parties 106 430 Short-term debt:
Others 18,382 17,599 Related parties 3,544 — Other payables: Others
1,691 2,040 Related parties 210 6,940 Deferred revenue 2,073 1,901
Accrued and other liabilities 10,108 8,163 Total
current liabilities 71,338 67,754 Long-term debt 5,000 6,800
Deferred revenue 1,875 1,674 Other long-term liabilities 2,581
2,351 Total liabilities 80,794 78,579
Stockholders’ equity and non-controlling interest: Common stock 16
16 Additional paid-in capital 89,873 89,174 Other comprehensive
income (loss) (1,052 ) (2,815 ) Accumulated deficit (23,080 )
(19,923 ) Total stockholders’ equity 65,757 66,452 Non-controlling
interest 607 416 Total stockholders’ equity and
non-controlling interest 66,364 66,868 Total
liabilities, stockholders’ equity and non-controlling interest $
147,158 $ 145,447
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171101006812/en/
DASAN Zhone Investor Relations:Tel: +1 510-777-7013Fax: +1
510-777-7001investor-relations@dasanzhone.comorDASAN Zhone Public
Relations:Tel: +1 760-814-8194carla.vallone@portavocepr.com
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