News & Press

DASAN Zhone Solutions Reports Fourth Quarter 2016 Financial Results

DASAN Zhone Solutions, Inc. (NASDAQ: DZSI or the Company), 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.

 

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share data)


 
 


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 )





















 
 

DASAN ZHONE SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except par value)


 
 


December 31,
2016

December 31,
2015
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  

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. 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.

Contacts:

DASAN Zhone Public Relations
+1 760-814-8194
carla.vallone@portavocepr.com
DASAN Zhone Investor Relations
+1 510-777-7013
+1 510-777-7001
investor-relations@zhone.com

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.

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).

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.