DZS Inc.

DZS reported Q3 2024 revenue of $38.1 million, up 23% sequentially from $31.1 million in Q2 and up 67.8% year over year. Adjusted gross margin was 36.7%, versus 34.5% in Q2 and 17.4% in the prior-year period. Adjusted EBITDA was a loss of $9.3 million, an improvement from a $17.5 million loss in Q3 2023. Operating expenses rose in the quarter due mainly to NetComm acquisition costs and final restatement-related costs, while 9M24 adjusted operating expenses declined to $57.8 million from $69.8 million in 9M23. The company ended Q3 with $5.7 million of cash and cash equivalents, $79 million of inventory, $24 million of working capital, and $2.2 million of quarterly interest expense. Management also said the divestiture closed on October 25, generated $30 million of cash, reduced debt by $15 million, and increased cash by $15 million. For outlook, management expects Q4 revenue and profitability to improve versus Q3 and sees further improvement through 2025 as backlog converts, costs come out, inventory is monetized, and customer spending normalizes.

Charlie Vogt framed the quarter as evidence that DZS is moving past the restatement and repositioning the business around broadband access, connectivity, and Cloud Edge software. He emphasized the strategic logic of the divestiture: reducing competitive friction, improving the balance sheet, and sharpening focus on core markets. His tone was cautiously optimistic, pointing to a growing sales pipeline, robust backlog, expected design wins, and a belief that the company’s “best days are ahead.”

Brian Chesnut highlighted operating progress across internal controls, governance, cybersecurity, supply chain, and quote-to-cash, while stressing a push toward sustainable growth and free cash flow. He cited revenue of $38.1 million, adjusted gross margin of 36.7%, and a $9.3 million adjusted EBITDA loss versus a $17.5 million loss a year earlier; he also noted that 9M24 adjusted operating expenses fell to $57.8 million from $69.8 million in 9M23. On the balance sheet, he said cash and cash equivalents were $5.7 million at quarter-end, DSO improved from 120 days to 83 days, DPO was 242 days, inventory was $79 million, and the company expects to achieve adjusted EBITDA breakeven and positive cash results in 2025.

Analysts focused on visibility into the first half of 2025, especially in the U.S. and Europe/Middle East, and management said the current AOP is built around scheduled backlog, pipeline, and NetComm synergies. Vogt said the company is cautiously optimistic, noting customers are still working through excess inventory and that improved visibility is strongest in the U.S., Europe, and the Middle East. On competition, he said NetComm’s fixed wireless products are more aligned against traditional players like Nokia than against smaller unlicensed-spectrum vendors. He also said margin pressure from inventory reserves and product mix reduced Q3 margins, but without reserves margins would have been roughly 650 basis points higher.