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DZS (DZSIQ)
OTHER OTC:DZSIQ
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DZS
(OTC:DZSIQ)
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Select Model
Rating:53Neutral
Price Target:―
Action:N/ADate:02/01/25
DZS faces substantial financial difficulties, with declining revenues and negative profit margins. Despite technical indicators suggesting potential stock momentum and recent strategic initiatives, the company's valuation remains poor due to negative earnings. Positive earnings call projections and corporate strategies provide some optimism, but significant risks remain.
Positive Factors
Revenue Growth
The significant revenue growth indicates strong market demand and effective sales strategies, positioning DZS for continued expansion in the telecommunications sector.
Strategic Divestitures
Strategic divestitures have strengthened the balance sheet by reducing debt, allowing DZS to focus on core competencies and improve financial health.
Gross Margin Improvement
Improved gross margins reflect enhanced operational efficiency and cost management, supporting long-term profitability and competitive positioning.
Negative Factors
High Leverage
High leverage poses a risk to financial stability, limiting flexibility and increasing vulnerability to economic downturns or interest rate hikes.
Negative Cash Flows
Negative cash flows highlight liquidity challenges, impacting the company's ability to invest in growth opportunities and meet financial obligations.
Declining Revenue Growth
Declining revenue growth suggests challenges in maintaining market share and competitiveness, potentially affecting long-term business sustainability.
DZS (DZSIQ) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$39.00
Dividend YieldN/A
Average Volume (3M)128.03K
Price to Earnings (P/E)―
Beta (1Y)106.33
Revenue GrowthN/A
EPS GrowthN/A
CountryUS
Employees660
SectorGeneral
Sector StrengthN/A
IndustryHardware & Equipment
Share Statistics
EPS (TTM)N/A
Shares Outstanding38,789,400
10 Day Avg. Volume325,975
30 Day Avg. Volume128,025
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)0.00
Price to Sales (P/S)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.04M
Enterprise Value/Revenue0.25
Enterprise Value/Gross Profit1.22
Enterprise Value/Ebitda-0.43
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)2.22
Revenue Forecast (FY)$642.60M
DZS Business Overview & Revenue Model
Company DescriptionDASAN Zhone Solutions Inc. engages in the provision of broad-based network access solutions. It offers solutions for broadband access, Ethernet switching, mobile backhaul, passive optical local-area network (POL), and software defined networks (SDN). The company was founded in June 1999 and is headquartered in Oakland, CA.
How the Company Makes MoneyDZS makes money through the sale of its network access solutions and services to telecommunications service providers and enterprises. The company generates revenue from the sale of hardware products like optical line terminals and customer premises equipment, as well as from software solutions for network management. DZS also offers professional services such as installation, maintenance, and support, which contribute to its earnings. Key revenue streams include the deployment of broadband and mobile transport solutions, which are critical for service providers looking to upgrade their infrastructure to support higher data speeds and increased network capacity. Moreover, strategic partnerships with telecommunications companies and technology providers play a significant role in expanding DZS's market reach and enhancing its revenue opportunities.
DZS Earnings Call Summary
Earnings Call Date:Nov 06, 2024
(Q3-2024)
| % Change Since: |
Next Earnings Date:Aug 11, 2026
Earnings Call Sentiment Neutral
The earnings call presented a strong revenue growth and improved gross margin, driven by strategic divestitures and successful cost-saving measures. However, increased operating expenses and continued EBITDA losses pose challenges. The company remains optimistic about future profitability and cash flow improvements.Q3-2024 Updates
Positive Updates
Revenue Growth
The company reported $38.1 million in revenue for Q3 2024, a 23% increase quarter-over-quarter and a 67.8% increase year-over-year.
Gross Margin Improvement
Non-GAAP adjusted gross margin increased to 36.7%, up 6.5% quarter-over-quarter, indicating improved profitability.
Successful Divestiture
DZS successfully divested its network assurance and in-home WiFi management portfolio for $34 million, reducing debt by $50 million and adding $15 million in cash.
Inventory Monetization Strategy
Progress in monetizing $79 million of inventory, with a growing sales pipeline and improved backlog visibility.
Cost Savings Initiatives
Cost savings initiatives, including synergies from the NetComm acquisition, are expected to be completed by year-end 2024.
Improved Financial Metrics
Adjusted EBITDA improved by $8.2 million or 46.8% from Q3 2023, and Days Sales Outstanding (DSO) significantly improved from 120 days to 83 days.
Negative Updates
Operating Expense Increase
Operating expenses increased incrementally by $1.9 million or 8.9% during Q3 2024 compared to the same period in 2023, primarily due to the NetComm acquisition.
Adjusted EBITDA Loss
Despite improvements, the company still reported an adjusted EBITDA loss of $9.3 million for Q3 2024.
Delayed Cost Savings Realization
Inability to convert backlog shipments by quarter-end and delayed realization of cost savings initiatives affected financial performance.
Company Guidance
During the DZS third quarter 2024 earnings call, the company provided guidance with several key performance indicators and projections. DZS reported a 23% quarter-over-quarter increase in revenue to $38.1 million and a non-GAAP adjusted gross margin of 36.7%, up by 6.5% from the previous quarter. The firm also highlighted a significant inventory of $79 million and a backlog of $90 million. They anticipate improved revenue and profitability in Q4 2024 and throughout 2025, driven by a growing sales pipeline and the benefits of the NetComm acquisition. The strategic divestiture of their network assurance and in-home WiFi management portfolio added $34 million in cash and reduced debt by $50 million. Additionally, DZS set four KPIs: growth and profitability, cost savings, sales synergies from the NetComm acquisition, and monetizing inventory. The company aims to achieve breakeven on an adjusted EBITDA basis and positive cash flow in 2025.DZS Financial Statement Overview
Summary
DZS is facing significant financial challenges with declining revenue, high leverage, and negative profit margins. The company also has negative operating and free cash flows, indicating severe liquidity pressures.Income Statement
The income statement of DZS shows significant challenges. The company has been experiencing declining revenues over the years, with a negative revenue growth rate from 2023 to the TTM period. Gross profit margins have decreased from previous periods, indicating pressure on the company's operational efficiency. The net profit margin is deeply negative, reflecting substantial net losses, which is a critical concern. Both the EBIT and EBITDA margins are negative, highlighting ongoing operational challenges.45
Neutral
Balance Sheet
DZS's balance sheet reveals high leverage, with a debt-to-equity ratio that has fluctuated but remains concerning due to high debt levels relative to equity. The equity ratio has decreased over time, indicating a reduced proportion of equity financing. However, there has been some improvement in equity over the TTM period. Return on equity is negative, further emphasizing profitability issues.50
Neutral
Cash Flow
The cash flow statement indicates cash flow difficulties, with negative operating and free cash flows. The free cash flow growth rate is negative, signaling deteriorating cash generation capability. The operating cash flow to net income ratio shows challenges in converting sales into cash, and the free cash flow to net income ratio is also negative, highlighting liquidity pressures.40
Negative
| Breakdown | TTM | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 161.81M | 244.54M | 375.69M | 350.21M | 300.64M | 306.88M |
| Gross Profit | 33.33M | 40.44M | 118.36M | 120.27M | 96.88M | 100.11M |
| EBITDA | -94.22M | -121.88M | -32.15M | -32.25M | -12.53M | 4.00M |
| Net Income | -74.78M | -135.22M | -37.43M | -34.68M | -23.08M | -13.26M |
Balance Sheet | ||||||
| Total Assets | 178.50M | 249.38M | 385.01M | 257.67M | 252.23M | 243.57M |
| Cash, Cash Equivalents and Short-Term Investments | 4.30M | 18.96M | 38.32M | 53.47M | 54.42M | 33.39M |
| Total Debt | 22.44M | 67.74M | 50.03M | 16.20M | 63.99M | 58.87M |
| Total Liabilities | 146.17M | 226.82M | 242.28M | 125.76M | 158.65M | 137.03M |
| Stockholders Equity | 32.33M | 22.56M | 142.73M | 131.91M | 93.58M | 106.55M |
Cash Flow | ||||||
| Free Cash Flow | -33.25M | -47.45M | -55.43M | -19.91M | 2.79M | -25.02M |
| Operating Cash Flow | -32.72M | -45.88M | -50.90M | -14.33M | 5.06M | -22.70M |
| Investing Cash Flow | -7.99M | 255.00K | -28.01M | -9.48M | -2.27M | -6.97M |
| Financing Cash Flow | 54.63M | 29.29M | 64.77M | 23.78M | 17.62M | 28.04M |
DZS Technical Analysis
0.02
Price Trends
Market Momentum
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DZSIQ, the sentiment is undefined. The current price of 0.02 is equal to the 20-day moving average (MA) of ―, equal to the 50-day MA of ―, and equal to the 200-day MA of ―, indicating a neutral trend. The MACD of ― indicates undefined momentum. The RSI at ― is undefined, neither overbought nor oversold. The STOCH value of ― is undefined, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a undefined sentiment for DZSIQ.
DZS Risk Analysis
DZS disclosed 42 risk factors in its most recent earnings report. DZS reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
DZS Peers Comparison
UnderperformOutperform
Sector (55)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
55 Neutral | $6.65B | 3.83 | -15.92% | 6.20% | 10.91% | 7.18% | |
55 Neutral | $48.71M | -38.14 | -1.26% | ― | -23.87% | -109.71% | |
53 Neutral | $39.00 | >-0.01 | ― | ― | ― | ― | |
50 Neutral | $51.46M | -7.48 | -19.65% | ― | -1.53% | 55.08% | |
43 Neutral | $36.34M | -5.76 | -18.69% | ― | ― | ― | |
42 Neutral | $4.72M | -0.43 | -260.09% | ― | -56.36% | 32.37% | |
41 Neutral | $37.00M | -0.36 | ― | ― | ― | ― |
* General Sector Average
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.