DZS (DZSI) 6 Nov 24 2024 Q3 Earnings call transcript

In a recent earnings call, DZS Inc. (DZS) reported a strong third quarter with a 23% increase in revenue compared to the previous quarter. The company's adjusted gross margin also saw a significant improvement, rising by 6.5% quarter-over-quarter. Despite facing challenges in the broader industry due to inventory overhangs and delayed government stimulus programs, DZS has managed to maintain sequential revenue growth over the past four quarters.

Strategic Divestitures and Acquisitions

DZS has recently divested its network assurance and in-home WiFi management portfolio, a move aimed at creating software independence, improving the balance sheet, and recalibrating its technology and go-to-market focus. The company also acquired NetComm, a move that adds market-leading fiber extension, home broadband, and fixed wireless access technology to DZS' portfolio. These strategic moves are expected to contribute significantly to DZS' growth and profitability in the coming years.

Financial Performance and Outlook

The company's financial performance in the third quarter was mixed, with a loss on an adjusted EBITDA basis. However, DZS is optimistic about its future prospects, anticipating a return to pre-COVID spend levels and normalized deployment patterns in 2025. The company also expects to achieve breakeven on an adjusted EBITDA basis and positive cash results in 2025, thanks to cost savings initiatives, sales pipeline growth, and inventory conversion.

Competitive Landscape and Growth Opportunities

In the competitive landscape, DZS faces competition from traditional players like Nokia, Ericsson, and Samsung in the fixed wireless market. However, the company is also seeing emerging players like Tarana and Cambium as potential competitors. DZS' focus on large-scale service providers and its innovative technology differentiation position it well for growth in the market.

Looking Ahead

DZS is expected to share its Q4 business and financial results in early March. The company's strategic initiatives, including the acquisition of NetComm and the divestiture of its network assurance and in-home WiFi management portfolio, are set to position DZS for growth and profitability in the coming years. With a strong focus on cost savings, sales pipeline growth, and inventory conversion, DZS is poised to capitalize on the opportunities in the broadband and connectivity markets.