Company Quick10K Filing
Quick10K
Dasan Zhone Solutions
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$10.40 17 $173
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-10-07 Earnings, Exhibits
8-K 2019-08-26 Officers
8-K 2019-08-13 Earnings, Exhibits
8-K 2019-07-31 Enter Agreement, Exhibits
8-K 2019-06-10 Accountant, Exhibits
8-K 2019-05-28 Shareholder Vote
8-K 2019-05-15 Other Events, Exhibits
8-K 2019-05-14 Officers
8-K 2019-05-09 Earnings, Exhibits
8-K 2019-02-28 Earnings, Exhibits
8-K 2019-02-28 Enter Agreement, Off-BS Arrangement
8-K 2019-01-03 Enter Agreement, M&A, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-11-08 Earnings, Exhibits
8-K 2018-10-05 Enter Agreement, Exhibits
8-K 2018-08-13 Officers
8-K 2018-08-09 Earnings, Exhibits
8-K 2018-07-12 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-22 Officers, Shareholder Vote
8-K 2018-05-10 Earnings, Exhibits
8-K 2018-04-09 Officers
8-K 2018-03-27 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-02-28 Earnings, Exhibits
TI TIM 108,702
PHI PLDT 4,604
SHEN Shenandoah Telecommunications 1,601
PLT Plantronics 1,181
CNSL Consolidated Communications Holdings 299
UTSI Utstarcom Holdings 102
FTR Frontier Communications 81
APWC Asia Pacific Wire & Cable 37
ABIL Ability 4
AMX America Movil 0
DZSI 2019-06-30
Part I. Financial Information
Item 1.Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 5. Other Information
Item 6. Exhibits
EX-10.1 dzsi-ex101_8.htm
EX-10.2 dzsi-ex102_6.htm
EX-10.3 dzsi-ex103_9.htm
EX-31.1 dzsi-ex311_11.htm
EX-31.2 dzsi-ex312_12.htm
EX-32.1 dzsi-ex321_7.htm

Dasan Zhone Solutions Earnings 2019-06-30

DZSI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 dzsi-10q_20190630.htm 10-Q dzsi-10q_20190630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to

000-32743

(Commission File Number)

 

DASAN ZHONE SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

22-3509099

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

7195 Oakport Street

Oakland, California

 

94621

(Address of principal executive offices)

 

(Zip code)

 

(510) 777-7000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 

 

 

Common stock, $0.001 par value

DZSI

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No

 

As of August 12, 2019, there were 21,386,231 shares outstanding of the registrant’s common stock, $0.001 par value.

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

3

 

Unaudited Condensed Consolidated Balance Sheets

3

 

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

4

 

Unaudited Condensed Consolidated Statements of Stockholders' Equity and Non-Controlling Interest

5

 

Unaudited Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

36

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 5.

Other Information

38

Item 6.

Exhibits

40

 

Signatures

41

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except par value)

 

 

 

June 30,

2019

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

56,421

 

 

$

27,709

 

Restricted cash

 

 

8,364

 

 

 

7,003

 

Accounts receivable, net

 

 

 

 

 

 

 

 

Third parties

 

 

88,372

 

 

 

71,034

 

Related parties

 

 

 

 

 

583

 

Other receivables

 

 

 

 

 

 

 

 

Suppliers and others

 

 

8,115

 

 

 

12,923

 

Related parties

 

 

17

 

 

 

65

 

Contract assets

 

 

17,093

 

 

 

11,381

 

Inventories

 

 

43,306

 

 

 

33,868

 

Prepaid expenses and other current assets

 

 

4,857

 

 

 

4,185

 

Total current assets

 

 

226,545

 

 

 

168,751

 

Property, plant and equipment, net

 

 

6,173

 

 

 

5,518

 

Right-of-use assets from operating leases

 

 

20,310

 

 

 

 

Goodwill

 

 

3,977

 

 

 

3,977

 

Intangible assets, net

 

 

15,831

 

 

 

5,649

 

Deferred tax assets

 

 

2,175

 

 

 

2,752

 

Long-term restricted cash

 

 

572

 

 

 

936

 

Other assets

 

 

4,345

 

 

 

2,424

 

Total assets

 

$

279,928

 

 

$

190,007

 

Liabilities, Stockholders’ Equity and Non-controlling Interest

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable - trade

 

 

 

 

 

 

 

 

Third parties

 

$

42,394

 

 

$

36,865

 

Related parties

 

 

98

 

 

 

1,743

 

Short-term debt - bank and trade facilities

 

 

28,867

 

 

 

31,762

 

Other payables

 

 

 

 

 

 

 

 

Third parties

 

 

2,454

 

 

 

1,792

 

Related parties

 

 

1,586

 

 

 

1,281

 

Contract liabilities - current

 

 

3,365

 

 

 

8,511

 

Operating lease liabilities - current

 

 

3,892

 

 

 

 

Accrued and other liabilities

 

 

10,347

 

 

 

11,517

 

Total current liabilities

 

 

93,003

 

 

 

93,471

 

Long-term debt

 

 

 

 

 

 

 

 

Bank and trade facilities

 

 

20,866

 

 

 

 

Related party

 

 

9,097

 

 

 

14,142

 

Contract liabilities - non-current

 

 

2,467

 

 

 

1,801

 

Deferred tax liabilities

 

 

1,064

 

 

 

 

Operating lease liabilities - non-current

 

 

17,542

 

 

 

 

Pension liabilities

 

 

13,625

 

 

 

 

Other long-term liabilities

 

 

1,715

 

 

 

2,739

 

Total liabilities

 

 

159,379

 

 

 

112,153

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Stockholders’ equity and non-controlling interest:

 

 

 

 

 

 

 

 

Common stock, authorized 36,000 shares, 21,380 and 16,587 shares outstanding as

   of June 30, 2019 and December 31, 2018, respectively, at $0.001 par value

 

 

21

 

 

 

16

 

Additional paid-in capital

 

 

137,805

 

 

 

93,192

 

Accumulated other comprehensive loss

 

 

(3,064

)

 

 

(192

)

Accumulated deficit

 

 

(15,007

)

 

 

(15,777

)

Total stockholders’ equity

 

 

119,755

 

 

 

77,239

 

Non-controlling interest

 

 

794

 

 

 

615

 

Total stockholders’ equity and non-controlling interest

 

 

120,549

 

 

 

77,854

 

Total liabilities, stockholders’ equity and non-controlling interest

 

$

279,928

 

 

$

190,007

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third parties

 

$

82,790

 

 

$

75,187

 

 

$

156,115

 

 

$

133,093

 

Related parties

 

 

874

 

 

 

1,070

 

 

 

1,638

 

 

 

2,668

 

Total net revenue

 

 

83,664

 

 

 

76,257

 

 

 

157,753

 

 

 

135,761

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products and services - third parties

 

 

54,855

 

 

 

52,150

 

 

 

103,050

 

 

 

88,356

 

Products and services - related parties

 

 

621

 

 

 

789

 

 

 

1,237

 

 

 

2,199

 

Amortization of intangible assets

 

 

406

 

 

 

153

 

 

 

814

 

 

 

306

 

Total cost of revenue

 

 

55,882

 

 

 

53,092

 

 

 

105,101

 

 

 

90,861

 

Gross profit

 

 

27,782

 

 

 

23,165

 

 

 

52,652

 

 

 

44,900

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and product development

 

 

9,430

 

 

 

8,714

 

 

 

19,614

 

 

 

17,691

 

Selling, marketing, general and administrative

 

 

14,929

 

 

 

11,712

 

 

 

29,968

 

 

 

24,106

 

Amortization of intangible assets

 

 

470

 

 

 

131

 

 

 

942

 

 

 

262

 

Total operating expenses

 

 

24,829

 

 

 

20,557

 

 

 

50,524

 

 

 

42,059

 

Operating income

 

 

2,953

 

 

 

2,608

 

 

 

2,128

 

 

 

2,841

 

Interest income

 

 

62

 

 

 

75

 

 

 

150

 

 

 

161

 

Interest expense

 

 

(1,244

)

 

 

(560

)

 

 

(2,115

)

 

 

(883

)

Other income (loss), net

 

 

1,345

 

 

 

(427

)

 

 

1,573

 

 

 

(287

)

Income before income taxes

 

 

3,116

 

 

 

1,696

 

 

 

1,736

 

 

 

1,832

 

Income tax provision

 

 

732

 

 

 

341

 

 

 

809

 

 

 

336

 

Net income

 

 

2,384

 

 

 

1,355

 

 

 

927

 

 

 

1,496

 

Net income (loss) attributable to non-controlling

   interest

 

 

(24

)

 

 

(61

)

 

 

157

 

 

 

(27

)

Net income attributable to DASAN Zhone Solutions,

   Inc.

 

$

2,408

 

 

$

1,416

 

 

$

770

 

 

$

1,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(573

)

 

 

(2,548

)

 

 

(1,697

)

 

 

(2,230

)

Actuarial loss

 

 

(1,153

)

 

 

 

 

 

(1,153

)

 

 

 

Comprehensive income (loss)

 

 

658

 

 

 

(1,193

)

 

 

(1,923

)

 

 

(734

)

Comprehensive income (loss) attributable to non-

   controlling interest

 

 

(2

)

 

 

(83

)

 

 

178

 

 

 

(19

)

Comprehensive income (loss) attributable to DASAN

   Zhone Solutions, Inc.

 

$

660

 

 

$

(1,110

)

 

$

(2,101

)

 

$

(715

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to DASAN Zhone

   Solutions, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

 

$

0.09

 

 

$

0.04

 

 

$

0.09

 

Diluted

 

$

0.13

 

 

$

0.08

 

 

$

0.04

 

 

$

0.09

 

Weighted average shares outstanding used to compute

   basic net income per share

 

 

18,166

 

 

 

16,438

 

 

 

17,384

 

 

 

16,425

 

Weighted average shares outstanding used to compute

   diluted net income per share

 

 

18,482

 

 

 

16,672

 

 

 

17,710

 

 

 

16,645

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity and Non-Controlling Interest

(In thousands, except per share data)

 

 

 

Common stock

 

 

Additional

paid-in

 

 

Accumulated

other

comprehensive

 

 

Accumulated

 

 

Total

stockholders'

 

 

Non-

controlling

 

 

Total

stockholders'

equity and

non-

controlling

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

equity

 

 

interest

 

 

interest

 

For the Six-Month Period

   Ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31,

   2018

 

 

16,587

 

 

$

16

 

 

$

93,192

 

 

$

(192

)

 

$

(15,777

)

 

$

77,239

 

 

$

615

 

 

$

77,854

 

Stock-based compensation

 

 

9

 

 

 

 

 

 

825

 

 

 

 

 

 

 

 

 

825

 

 

 

 

 

 

825

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,638

)

 

 

(1,638

)

 

 

181

 

 

 

(1,457

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(1,124

)

 

 

 

 

 

(1,124

)

 

 

(1

)

 

 

(1,125

)

Balance as of March 31, 2019

 

 

16,596

 

 

 

16

 

 

 

94,017

 

 

 

(1,316

)

 

 

(17,415

)

 

 

75,302

 

 

 

795

 

 

 

76,097

 

Issuance of common stock in

   public offering, net of issuance

   costs

 

 

4,718

 

 

 

5

 

 

 

42,504

 

 

 

 

 

 

 

 

 

42,509

 

 

 

 

 

 

42,509

 

Exercise of stock options and

   restricted stock grant

 

 

55

 

 

 

 

 

 

473

 

 

 

 

 

 

 

 

 

473

 

 

 

 

 

 

473

 

Stock-based compensation

 

 

11

 

 

 

 

 

 

811

 

 

 

 

 

 

 

 

 

811

 

 

 

 

 

 

811

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,408

 

 

 

2,408

 

 

 

(24

)

 

 

2,384

 

Other comprehensive income

   (loss)

 

 

 

 

 

 

 

 

 

 

 

(1,748

)

 

 

 

 

 

(1,748

)

 

 

23

 

 

 

(1,725

)

Balance as of June 30, 2019

 

 

21,380

 

 

$

21

 

 

$

137,805

 

 

$

(3,064

)

 

$

(15,007

)

 

$

119,755

 

 

$

794

 

 

$

120,549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six-Month Period

   Ended June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31,

   2017

 

 

16,410

 

 

$

16

 

 

$

90,198

 

 

$

1,871

 

 

$

(18,852

)

 

$

73,233

 

 

$

534

 

 

$

73,767

 

ASC 606 opening balance

   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

342

 

 

 

342

 

 

 

 

 

 

342

 

Exercise of stock options and

   restricted stock grant

 

 

21

 

 

 

 

 

 

111

 

 

 

 

 

 

 

 

 

111

 

 

 

 

 

 

111

 

Stock-based compensation

 

 

 

 

 

 

 

 

363

 

 

 

 

 

 

 

 

 

363

 

 

 

 

 

 

363

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 

 

107

 

 

 

34

 

 

 

141

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

257

 

 

 

 

 

 

257

 

 

 

30

 

 

 

287

 

Balance as of March 31, 2018

 

 

16,431

 

 

 

16

 

 

 

90,672

 

 

 

2,128

 

 

 

(18,403

)

 

 

74,413

 

 

 

598

 

 

 

75,011

 

ASC 606 opening balance

   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

 

 

 

 

 

(1

)

Exercise of stock options and

   restricted stock grant

 

 

19

 

 

 

 

 

 

77

 

 

 

 

 

 

 

 

 

77

 

 

 

 

 

 

77

 

Stock-based compensation

 

 

 

 

 

 

 

 

377

 

 

 

 

 

 

 

 

 

377

 

 

 

 

 

 

377

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,416

 

 

 

1,416

 

 

 

(61

)

 

 

1,355

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(2,527

)

 

 

 

 

 

(2,527

)

 

 

(22

)

 

 

(2,549

)

Balance as of June 30, 2018

 

 

16,450

 

 

$

16

 

 

$

91,126

 

 

$

(399

)

 

$

(16,988

)

 

$

73,755

 

 

$

515

 

 

$

74,270

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

5


 

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

927

 

 

$

1,496

 

Adjustments to reconcile net income to net cash

   used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,767

 

 

 

1,381

 

Amortization of deferred financing costs

 

 

264

 

 

 

 

Bargain purchase gain on acquisition

 

 

(334

)

 

 

 

Stock-based compensation

 

 

1,636

 

 

 

740

 

Provision for inventory write-down

 

 

1,569

 

 

 

411

 

Allowance for doubtful accounts

 

 

114

 

 

 

 

Provision for sales returns

 

 

374

 

 

 

 

Unrealized gain on foreign currency transactions

 

 

(1,117

)

 

 

(141

)

Deferred taxes

 

 

479

 

 

 

(82

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(11,643

)

 

 

(17,198

)

Contract assets

 

 

(8,236

)

 

 

(1,645

)

Inventories

 

 

(1,543

)

 

 

(14,641

)

Prepaid expenses and other assets

 

 

262

 

 

 

219

 

Accounts payable

 

 

6,905

 

 

 

18,498

 

Contract liabilities

 

 

(4,730

)

 

 

 

Accrued and other liabilities

 

 

(3,528

)

 

 

(4,448

)

Net cash used in operating activities

 

 

(15,834

)

 

 

(15,410

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(811

)

 

 

(414

)

Acquisition of business, net of cash acquired

 

 

(4,697

)

 

 

 

Net cash used in investing activities

 

 

(5,508

)

 

 

(414

)

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

 

 

22,327

 

 

 

44,368

 

Repayments of short-term borrowings and line of credit

 

 

(31,262

)

 

 

(26,455

)

Proceeds from long-term borrowings

 

 

25,000

 

 

 

 

Repayments of long-term borrowings

 

 

(625

)