DASAN Zhone Solutions, Inc. DZSI, a global leader in fiber access transformation for enterprise and service provider networks, today reported its financial results for the quarter ended December 31, 2016.
Revenue for the fourth quarter of 2016 was $59.2 million compared to $31.6 million for the third quarter of 2016 and $46.7 million for the fourth quarter of 2015. Net loss for the fourth quarter of 2016, calculated in accordance with generally accepted accounting principles ("GAAP"), was $5.3 million or $0.07 per share compared with net loss of $5.0 million or $0.09 per share for the third quarter of 2016 and net income of $2.0 million or $0.04 per share for the fourth quarter of 2015. Adjusted earnings before stock-based compensation, interest, taxes, and depreciation ("adjusted EBITDA") was an adjusted EBITDA loss of $0.5 million for the fourth quarter of 2016, compared to an adjusted EBITDA loss of $3.4 million for the third quarter of 2016 and an adjusted EBITDA income of $2.1 million for the fourth quarter of 2015.
Cash and cash equivalents at December 31, 2016 was $17.9 million compared to $10.0 million at December 31, 2015.
DASAN Zhone Solutions will conduct a conference call and audio webcast to discuss further details of its fourth quarter 2016 results at approximately 2:00 p.m. PT / 5:00 p.m. ET on Tuesday, February 21, 2017. 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 63172138. The audio webcast will be simultaneously available on the Investor Relations section of DASAN Zhone Solution's website at http://www.zhone.com/investors/.
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 entering passcode 63172138. An audio webcast replay will also be available online at http://www.zhone.com/investors/ 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 calculated on a GAAP basis and adjusted EBITDA on a non-GAAP basis is provided in a table immediately following the Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss).
About DASAN Zhone Solutions
DASAN Zhone Solutions, Inc. DZSI 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 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, commercial acceptance of the Company's products; intense competition in the communications equipment market; the Company's ability to execute on its strategy and operating plans; and economic conditions specific to the communications, networking, internet and related industries. 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 most recent reports 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.
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DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (In thousands, except per share data) |
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| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||||
| 2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| Net revenue | $ | 59,196 | $ | 31,574 | $ | 46,686 | $ | 151,861 | $ | 140,025 | |||||||||||
| Cost of revenue: | |||||||||||||||||||||
| Products and services | 41,123 | 22,603 | 34,099 | 110,030 | 103,386 | ||||||||||||||||
| Amortization of intangible assets | 153 | 51 | — | 204 | — | ||||||||||||||||
| Gross profit | 17,920 | 8,920 | 12,587 | 41,627 | 36,639 | ||||||||||||||||
| Operating expenses: | |||||||||||||||||||||
| Research and product development (1) | 9,565 | 5,885 | 4,785 | 25,146 | 21,331 | ||||||||||||||||
| Selling, general and administrative (1) | 9,938 | 8,055 | 5,465 | 26,698 | 17,919 | ||||||||||||||||
| Amortization of intangible assets | 1,308 | 251 | — | 1,556 | 4 | ||||||||||||||||
| Gain from sale of assets | (304 | ) | — | — | (304 | ) | — | ||||||||||||||
| Total operating expenses | 20,507 | 14,191 | 10,250 | 53,096 | 39,254 | ||||||||||||||||
| Operating loss | (2,587 | ) | (5,271 | ) | 2,337 | (11,469 | ) | (2,615 | ) | ||||||||||||
| Interest expense, net | (184 | ) | (173 | ) | (110 | ) | (647 | ) | (396 | ) | |||||||||||
| Other income (expense) , net | (120 | ) | (193 | ) | (501 | ) | (250 | ) | 279 | ||||||||||||
| Income (expense) before income taxes | (2,891 | ) | (5,637 | ) | 1,726 | (12,366 | ) | (2,732 | ) | ||||||||||||
| Income tax expense (benefit) | 2,443 | (610 | ) | (248 | ) | 1,402 | 232 | ||||||||||||||
| Net income (loss) | $ | (5,334 | ) | $ | (5,027 | ) | $ | 1,974 | $ | (13,768 | ) | $ | (2,964 | ) | |||||||
| Less: Net loss attributable to the non-controlling interests | 15 | (213 | ) | — | (2 | ) | — | ||||||||||||||
| Net loss attributable to DASAN Zhone Solutions, Inc. | (5,349 | ) | (4,814 | ) | 1,974 | (13,766 | ) | (2,964 | ) | ||||||||||||
| Foreign currency translation adjustments | (3,817 | ) | 2,331 | (2,907 | ) | (1,085 | ) | (2,800 | ) | ||||||||||||
| Comprehensive loss | $ | (9,151 | ) | $ | (2,696 | ) | $ | (933 | ) | $ | (14,853 | ) | $ | (5,764 | ) | ||||||
| Less: Comprehensive income attributable to the non-controlling interests | (48 | ) | (211 | ) | — | 1 | — | ||||||||||||||
| Comprehensive loss attributable to DASAN Zhone Solutions, Inc. | $ | (9,103 | ) | $ | (2,485 | ) | $ | (933 | ) | $ | (14,854 | ) | $ | (5,764 | ) | ||||||
| Basic and diluted net (loss) income per share | $ | (0.07 | ) | $ | (0.09 | ) | $ | 0.04 | $ | (0.24 | ) | $ | (0.06 | ) | |||||||
| Weighted average shares outstanding used to compute basic and diluted net (loss) income per share | 81,874 | 55,693 | 46,654 | 58,183 | 46,569 | ||||||||||||||||
| (1) Amounts include stock-based compensation costs as follows: | |||||||||||||||||||||
| Research and product development | 12 | 3 | — | 15 | — | ||||||||||||||||
| Selling, general and administrative | 196 | 125 | — | 321 | — | ||||||||||||||||
| $ | 208 | $ | 128 | $ | — | $ | 336 | $ | — | ||||||||||||
| GAAP net income (loss) | $ | (5,334 | ) | $ | (5,027 | ) | $ | 1,974 | $ | (13,768 | ) | $ | (2,964 | ) | |||||||
| Stock-based compensation | 208 | 128 | — | 336 | — | ||||||||||||||||
| Interest expense, net | 184 | 173 | 110 | 647 | 396 | ||||||||||||||||
| Income taxes | 2,443 | (610 | ) | (248 | ) | 1,402 | 232 | ||||||||||||||
| Depreciation and amortization | 2,024 | 628 | 292 | 3,189 | 1,404 | ||||||||||||||||
| Merger transaction costs | — | 1,273 | — | 1,273 | — | ||||||||||||||||
| Non-GAAP Adjusted EBITDA (loss) income | $ | (475 | ) | $ | (3,435 | ) | $ | 2,128 | $ | (6,921 | ) | $ | (932 | ) | |||||||
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DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands, except par value) |
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December 31, 2016 |
December 31, 2015 |
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| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 17,893 | $ | 10,015 | ||||
| Restricted cash | 6,650 | 3,844 | ||||||
| Short-term investments | 993 | — | ||||||
| Accounts receivable, net | 52,799 | 32,728 | ||||||
| Other receivables | 12,286 | 13,010 | ||||||
| Current deferred income tax assets | 85 | 327 | ||||||
| Inventories, net | 29,553 | 13,900 | ||||||
| Prepaid expenses and other current assets | 4,171 | 951 | ||||||
| Total current assets | 124,430 | 74,775 | ||||||
| Property and equipment, net | 6,288 | 2,251 | ||||||
| Goodwill | 3,513 | — | ||||||
| Intangible assets, net | 8,767 | 696 | ||||||
| Non-current deferred income tax assets | — | 1,058 | ||||||
| Other assets | 4,254 | 4,811 | ||||||
| Total assets | $ | 147,252 | $ | 83,591 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 30,415 | $ | 14,936 | ||||
| Short-term debt | 17,599 | 21,848 | ||||||
| Accrued and other liabilities | 21,484 | 4,467 | ||||||
| Total current liabilities | 69,498 | 41,251 | ||||||
| Long-term debt | 5,000 | — | ||||||
| Other long-term liabilities | 4,004 | 510 | ||||||
| Total liabilities | 78,502 | 41,761 | ||||||
| Stockholders' equity: | ||||||||
| Common stock | 82 | 47 | ||||||
| Additional paid-in capital | 89,109 | 47,642 | ||||||
| Other comprehensive loss | (2,870 | ) | (1,775 | ) | ||||
| Accumulated deficit | (17,987 | ) | (4,222 | ) | ||||
| Non-controlling interest | 416 | 138 | ||||||
| Total stockholders' equity | 68,750 | 41,830 | ||||||
| Total liabilities and stockholders' equity | $ | 147,252 | $ | 83,591 | ||||
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