Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 05, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | DASAN ZHONE SOLUTIONS INC | |
Entity Central Index Key | 0001101680 | |
Trading Symbol | DZSI | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 21,513,373 | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity File Number | 000-32743 | |
Entity Tax Identification Number | 22-3509099 | |
Entity Address, Address Line One | 1350 South Loop Road | |
Entity Address, Address Line Two | Suite 130 | |
Entity Address, City or Town | Alameda | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 94502 | |
City Area Code | 510 | |
Local Phone Number | 777-7000 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Incorporation, State or Country Code | DE | |
Entity Interactive Data Current | Yes | |
Title of each class | Common stock, $0.001 par value | |
Name of each exchange on which registered | NASDAQ |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 26,437 | $ 28,747 |
Restricted cash | 9,281 | 4,646 |
Accounts receivable - trade, net of allowance for doubtful accounts of $417 as of March 31, 2020 and $393 as of December 31, 2019 | 86,270 | 96,865 |
Other receivables | 10,020 | 8,124 |
Contract assets | 3,128 | 16,680 |
Inventories | 39,912 | 35,439 |
Prepaid expenses and other current assets | 5,974 | 4,185 |
Total current assets | 181,022 | 194,686 |
Property, plant and equipment, net | 6,716 | 6,769 |
Right-of-use assets from operating leases | 18,778 | 20,469 |
Goodwill | 3,977 | 3,977 |
Intangible assets, net | 11,464 | 12,381 |
Deferred tax assets | 2,364 | 1,622 |
Other assets | 5,053 | 6,243 |
Total assets | 229,374 | 246,147 |
Current liabilities: | ||
Accounts payable - trade | 35,634 | 38,427 |
Other payables | 1,966 | 3,278 |
Short-term debt - bank and trade facilities | 12,323 | 17,484 |
Contract liabilities - current | 3,305 | 3,567 |
Operating lease liabilities - current | 4,005 | 4,201 |
Accrued and other liabilities | 10,203 | 12,844 |
Total current liabilities | 67,436 | 79,801 |
Long-term debt, bank and trade facilities | 9,937 | |
Long-term debt, related parties | 27,348 | 9,096 |
Contract liabilities - non-current | 3,152 | 3,230 |
Operating lease liabilities - non-current | 16,667 | 18,154 |
Pension liabilities | 15,768 | 17,671 |
Other long-term liabilities | 1,714 | 1,710 |
Total liabilities | 132,085 | 139,599 |
Commitments and contingencies (Note 15) | ||
Stockholders’ equity: | ||
Common stock, authorized 36,000 shares, 21,513 and 21,419 shares outstanding as of March 31, 2020 and December 31, 2019, respectively, at $0.001 par value | 21 | 21 |
Additional paid-in capital | 141,191 | 139,700 |
Accumulated other comprehensive loss | (5,918) | (3,939) |
Accumulated deficit | (38,005) | (29,234) |
Total stockholders’ equity | 97,289 | 106,548 |
Total liabilities and stockholders’ equity | $ 229,374 | $ 246,147 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Statement Of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 417 | $ 393 |
Common stock, authorized (in shares) | 36,000 | 36,000 |
Common stock, outstanding (in shares) | 21,513 | 21,419 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Third parties | $ 47,318 | $ 73,234 |
Related parties | 162 | 855 |
Total net revenue | 47,480 | 74,089 |
Products and services - third parties | 30,956 | 48,172 |
Products and services - related parties | 133 | 639 |
Amortization of intangible assets | 396 | 408 |
Total cost of revenue | 31,485 | 49,219 |
Gross profit | 15,995 | 24,870 |
Operating expenses: | ||
Research and product development | 9,600 | 10,184 |
Selling, marketing, general and administrative | 13,617 | 15,039 |
Amortization of intangible assets | 372 | 472 |
Total operating expenses | 23,589 | 25,695 |
Operating loss | (7,594) | (825) |
Interest income | 70 | 88 |
Interest expense | (643) | (871) |
Loss on extinguishment of debt | (1,369) | |
Other income, net | 760 | 228 |
Loss before income taxes | (8,776) | (1,380) |
Income tax (benefit) provision | (5) | 77 |
Net loss | (8,771) | (1,457) |
Net income attributable to non-controlling interest | 181 | |
Net loss attributable to DASAN Zhone Solutions, Inc. | (8,771) | (1,638) |
Foreign currency translation adjustments | (3,435) | (1,124) |
Actuarial gain | 1,456 | |
Comprehensive loss | (10,750) | (2,581) |
Comprehensive loss attributable to non- controlling interest | 180 | |
Comprehensive loss attributable to DASAN Zhone Solutions, Inc. | $ (10,750) | $ (2,761) |
Net loss per share attributable to DASAN Zhone Solutions, Inc. | ||
Basic | $ (0.41) | $ (0.10) |
Diluted | $ (0.41) | $ (0.10) |
Weighted average shares outstanding used to compute basic net loss per share | 21,474 | 16,593 |
Weighted average shares outstanding used to compute diluted net loss per share | 21,474 | 16,593 |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Stockholders' Equity and Non-Controlling Interest - USD ($) shares in Thousands, $ in Thousands | Total | Common stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated deficit | Total stockholders' equity | Non-controlling interest |
Beginning Balance, Stockholders' equity at Dec. 31, 2018 | $ 77,854 | $ 16 | $ 93,192 | $ (192) | $ (15,777) | $ 77,239 | $ 615 |
Beginning Balances, Stockholders' equity (in shares) at Dec. 31, 2018 | 16,587 | ||||||
Stock-based compensation | 825 | 825 | 825 | ||||
Stock-based compensation (in shares) | 9 | ||||||
Net loss | (1,457) | (1,638) | (1,638) | 181 | |||
Other comprehensive loss | (1,125) | (1,124) | (1,124) | (1) | |||
Ending Balances, Stockholders' equity at Mar. 31, 2019 | 76,097 | $ 16 | 94,017 | (1,316) | (17,415) | 75,302 | 795 |
Ending Balances, Stockholders' equity (in shares) at Mar. 31, 2019 | 16,596 | ||||||
Beginning Balance, Stockholders' equity at Dec. 31, 2018 | 77,854 | $ 16 | 93,192 | (192) | (15,777) | 77,239 | $ 615 |
Beginning Balances, Stockholders' equity (in shares) at Dec. 31, 2018 | 16,587 | ||||||
Net loss | (13,300) | ||||||
Ending Balances, Stockholders' equity at Dec. 31, 2019 | $ 106,548 | $ 21 | 139,700 | (3,939) | (29,234) | 106,548 | |
Ending Balances, Stockholders' equity (in shares) at Dec. 31, 2019 | 21,419 | 21,419 | |||||
Exercise of stock options and restricted stock grant | $ 709 | 709 | 709 | ||||
Exercise of stock options and restricted stock grant (in shares) | 94 | ||||||
Stock-based compensation | 782 | 782 | 782 | ||||
Net loss | (8,771) | (8,771) | (8,771) | ||||
Other comprehensive loss | (1,979) | (1,979) | (1,979) | ||||
Ending Balances, Stockholders' equity at Mar. 31, 2020 | $ 97,289 | $ 21 | $ 141,191 | $ (5,918) | $ (38,005) | $ 97,289 | |
Ending Balances, Stockholders' equity (in shares) at Mar. 31, 2020 | 21,513 | 21,513 |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Cash flows from operating activities: | |||
Net loss | $ (8,771) | $ (1,457) | $ (13,300) |
Adjustments to reconcile net loss to net cash Provided by (used in) operating activities: | |||
Depreciation and amortization | 1,256 | 1,417 | |
Loss on extinguishment of debt | 1,343 | ||
Amortization of deferred financing costs | 141 | 73 | |
Bargain purchase gain on acquisition | (334) | ||
Stock-based compensation | 782 | 825 | |
Provision for inventory write-down | 1,421 | 14 | |
Allowance for doubtful accounts | 24 | 223 | |
Provision for sales returns | (231) | 218 | |
Unrealized gain on foreign currency transactions | 1,983 | 95 | |
Deferred taxes | (820) | 19 | |
Changes in operating assets and liabilities: | |||
Accounts receivable | 9,109 | 7,930 | |
Contract assets | 14,129 | (6,967) | |
Inventories | (7,048) | 3,828 | |
Prepaid expenses and other assets | (3,285) | (207) | |
Accounts payable | (1,261) | (3,966) | |
Contract liabilities | (275) | (5,166) | |
Accrued and other liabilities | (3,937) | (1,331) | |
Net cash provided by (used in) operating activities | 594 | (4,976) | |
Cash flows from investing activities: | |||
Purchases of property, plant and equipment | (560) | (109) | |
Acquisition of business, net of cash acquired | (4,697) | ||
Net cash used in investing activities | (560) | (4,806) | |
Cash flows from financing activities: | |||
Proceeds from short-term borrowings and line of credit | 1,307 | 4,324 | |
Repayments of short-term borrowings and line of credit | (4,167) | ||
Proceeds from long-term borrowings | 25,000 | ||
Repayments of borrowings | 13,125 | 17,052 | |
Proceeds from related party term loan | 18,361 | ||
Repayments of related party term loan | (5,000) | ||
Deferred financing costs | (2,184) | ||
Proceeds from exercise of stock options | 709 | ||
Net cash provided by financing activities | 3,085 | 5,088 | |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (873) | (306) | |
Net increase in cash, cash equivalents and restricted cash | 2,246 | (5,000) | |
Cash, cash equivalents and restricted cash at beginning of period | 33,635 | 35,648 | 35,648 |
Cash, cash equivalents and restricted cash at end of period | 35,881 | 30,648 | $ 33,635 |
Cash paid during the period for: | |||
Interest - bank and trade facilities | 424 | 642 | |
Interest - related party | 152 | 173 | |
Income taxes | $ 1,504 | $ 589 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization and Summary of Significant Accounting Policies | (1) Organization and Summary of Significant Accounting Policies (a) Description of Business DASAN Zhone Solutions, Inc. (referred to, collectively with its subsidiaries, as “DZS” or the “Company”) is a global provider of ultra-broadband network access solutions and communications platforms deployed by advanced Tier 1, 2 and 3 service providers and enterprise customers. The Company provides a wide array of reliable, cost-effective networking technologies, including broadband access, Ethernet switching, mobile backhaul, Passive Optical LAN and software-defined networks, to a diverse customer base that includes more than 1,200 DZS was incorporated under the laws of the state of Delaware in June 1999, under the name Zhone Technologies, Inc. The Company is headquartered in Alameda, California with flexible in-house production facilities in Seminole, Florida and Hannover, Germany, and contract manufacturers located in China, India, Korea and Vietnam. The Company also maintains offices to provide sales and customer support at global locations. On March 2, 2020, the Company announced its plans to relocate its corporate headquarters from Alameda, California to Plano, Texas and to establish a new U.S.-based Engineering Center of Excellence in Plano. ( b ) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements include the accounts of the Company, its wholly owned subsidiaries and a subsidiary in which it had a controlling interest. All inter-company transactions and balances have been eliminated in consolidation. The unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the current interim period are not necessarily indicative of results to be expected for the current year or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 24, 2020. For a complete description of what the Company believes to be the critical accounting policies and estimates used in the preparation of its unaudited condensed consolidated financial statements, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. (c) Risks and Uncertainties The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, assuming the Company will continue as a going concern. The Company had net loss of $8.8 million for the three months ended March 31, 2020, and a net loss of $13.3 million for the year ended December 31, 2019. Additionally, the Company incurred significant losses in years prior to 2019. As of March 31, 2020, the Company had an accumulated deficit of $38.0 million and working capital of $113.5 million. As of March 31, 2020, the Company had $26.4 million in cash and cash equivalents, which included $8.7 million in cash balances held by its international subsidiaries, and $39.7 million in aggregate principal debt of which $12.3 million was reflected in current liabilities. The Company’s liquidity could be impacted by: • its vulnerability to adverse economic conditions in its industry or the economy in general; • debt servicing requiring substantial amounts of cash, rather than being available for other purposes, including operations; • its ability to plan for, or react to, changes in its business and industry; and • investor and customer perceptions about its financial stability and limiting its ability to obtain financing or acquire customers. The Company’s ability to meet its obligations as they become due in the ordinary course of business for the next twelve (12) months will depend on its ability to (i) achieve forecasted results of operations, (ii) access funds approved under existing or new credit facilities and/or raise additional capital through sale of the Company’s common stock to the public, and (iii) effectively manage working capital requirements. If the Company cannot raise additional funds when it needs or wants them, its operations and prospects could be negatively affected. Management’s belief that it will achieve forecasted results of operations assumes that, among other things, the Company will continue to be successful in implementing its business strategy. If one or more of these factors do not occur as expected, it could cause the Company to fail to meet its obligations as they come due. In December 2019, a strain of coronavirus, now known as COVID-19, was reported to have surfaced in Wuhan, China. Since that time, the widespread and sustained transmission of the virus has reached global pandemic status. In response to the pandemic, many national and international health agencies have recommended, and many countries and state, provincial and local governments have implemented, various measures, including travel bans and restrictions, limitations on public and private gatherings, business closures or operating restrictions, social distancing, and shelter-in-place orders. The health effects of the pandemic and the above measures taken in response thereto have had an effect on the global economy in general and has materially impacted and will likely continue to impact the Company’s financial condition, results of operations and cash flows. Based on the Company's current plans and current business conditions, as of the date of this Quarterly Report on Form 10-Q, the Company believes that its existing cash, cash equivalents and available credit facilities will be sufficient to satisfy its anticipated cash requirements for at least the next twelve months from the date of this Quarterly Report on Form 10-Q. ( d ) Use of Estimates The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. ( e ) Revenue Disaggregation Information The following table presents the revenues by source (in thousands): Three Months Ended March 31, 2020 2019 Revenue by source: Products $ 40,644 $ 69,582 Services 6,836 4,507 Total $ 47,480 $ 74,089 The following summarizes required disclosures about geographical concentrations (in thousands): Three Months Ended March 31, 2020 2019 Revenue by geography: United States $ 7,598 $ 9,578 Canada 767 923 Total North America 8,365 10,501 Latin America 2,241 6,585 Europe, Middle East, Africa 12,447 18,414 Korea 9,624 15,851 Other Asia Pacific 14,803 22,738 Total International 39,115 63,588 Total $ 47,480 $ 74,089 Contract Balances The Company records contract assets when it has a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. The opening and closing balances of contract assets and contract liabilities related to contracts with customers are as follows: Contract Assets Contract Liabilities December 31, 2019 $ 16,680 $ 6,797 March 31, 2020 3,128 6,457 Decrease $ (13,552 ) $ (340 ) The decrease in contract liabilities during the three months ended March 31, 2020 was primarily due to the revenue recognition criteria being met for previously deferred revenue, partially offset by invoiced amounts that did not yet meet the revenue recognition criteria. The amount of revenue recognized in the three months ended March 31, 2020 that was included in the prior period contract liability balance was $1.7 million. This revenue consists of services provided to customers who had been invoiced prior to the current year. The decrease in contract assets during the three months ended March 31, 2020 was primarily due to billed products and services during the period. ( f ) Concentration of Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and restricted cash which totaled $35.9 million at March 31, 2020, including $12.9 million held by its international subsidiaries. Cash and cash equivalents consist of financial deposits and money market accounts that are principally held with various domestic and international financial institutions with high credit standing. The Company’s customers include competitive and incumbent local exchange carriers, competitive access providers, internet service providers, wireless carriers and resellers serving these markets. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Allowances are maintained for potential doubtful accounts. For the three months ended March 31, 2020, two customer accounted for 14% and 10% of net revenue, respectively. For the three months ended March 31, 2019, no customer accounted for 10% of net revenue. As of March 31, 2020, two customers each represented 19% of net accounts receivable. As of December 31, 2019, two customers represented 18% and 11% of net accounts receivable, respectively, of net accounts receivable. As of March 31, 2020 and December 31, 2019, receivables from customers in countries other than the United States represented 96% and 94%, respectively, of net accounts receivable. ( g ) Business Combinations The Company allocates the fair value of purchase consideration to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets and certain tangible assets such as inventory. Critical estimates in valuing certain tangible and intangible assets include but are not limited to future expected cash flows from the underlying assets and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. (h) Defined Benefit Plans and Plan Assumptions The Company provides certain defined benefit pension plans to employees in Germany and Japan. Pension accounting is intended to reflect the recognition of future benefit costs over the employees' average expected future service to the Company based on the terms of the plans and investment and funding decisions. To estimate the impact of these future payments and the Company’s decisions concerning funding of these obligations, the Company is required to make assumptions using actuarial concepts within the framework of U.S. GAAP. The critical assumption is the discount rate. Other important assumptions include expected future salary increases, expected future increases to benefit payments, expected retirement dates, employee turnover, retiree mortality rates and portfolio composition. The Company evaluates these assumptions at least annually, or more frequently when certain qualifying events occur. ( i ) Recent Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments - Credit Losses Codification Improvements to Topic 326, Financial Instruments - Credit Losses Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief In August 2018, the FASB issued ASU 2018-14, Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans |
Business Combinations
Business Combinations | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
Business Combinations | (2 ) Business Combinations Keymile Acquisition On January 3, 2019, ZTI Merger Subsidiary III Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“ZTI”), acquired all of the outstanding shares of Keymile GmbH (“Keymile”), a limited liability company organized under the laws of Germany, from Riverside KM Beteiligung GmbH (“Riverside”), a limited liability company organized under the laws of Germany, pursuant to a share purchase agreement (the “Keymile Acquisition”) for a final adjusted acquisition price of $9.3 million . Following the closing of the acquisition, Keymile became a wholly owned subsidiary of the Company. The purchase price allocation resulted in the recognition of goodwill of approximately $1.0 million and the results of operations of Keymile are consolidated with the Company subsequent to the date of acquisition. During the fourth quarter of 2019, the Company recognized an impairment charge for the full amount of the goodwill recognized in the Keymile Acquisition. |
Fair Value Measurement
Fair Value Measurement | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | (3 ) Fair Value Measurement The Company utilizes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels: Level 1 Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. The following financial instruments are not measured at fair value on the Company’s condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019, but require disclosure of their fair values: cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable, accrued liabilities, lease liabilities and debt. The carrying values of financial instruments such as cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The carrying value of the Company's lease liabilities and debt approximates their fair values based on the current rates available to the Company for debt of similar terms and maturities. |
Cash and Cash Equivalents and R
Cash and Cash Equivalents and Restricted Cash | 3 Months Ended |
Mar. 31, 2020 | |
Cash And Cash Equivalents [Abstract] | |
Cash, Cash Equivalents and Restricted Cash | (4 ) Cash, Cash Equivalents and Restricted Cash As of March 31, 2020 and December 31, 2019, the Company's cash and cash equivalents consisted of financial deposits. Restricted cash consisted primarily of cash restricted for performance bonds, warranty bonds and collateral for borrowings, and Long term restricted cash is included in other assets. Long term restricted cash was $0.2 million as of March 31, 2020 and December 31, 2019, respectively. |
Balance Sheet Details
Balance Sheet Details | 3 Months Ended |
Mar. 31, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |
Balance Sheet Details | (5 ) Balance Sheet Details Balance sheet detail as of March 31, 2020 and December 31, 2019 is as follows (in thousands): Inventories consisted of the following (in thousands): March 31, 2020 December 31, 2019 Raw materials $ 18,695 $ 15,774 Work in process 1,890 1,458 Finished goods 19,327 18,207 Total inventories $ 39,912 $ 35,439 Inventories provided as collateral for borrowings from Export-Import Bank of Korea amounted to $6.4 million and $6.7 million as of March 31, 2020 and December 31, 2019, respectively. Property, plant and equipment consisted of the following (in thousands): March 31, 2020 December 31, 2019 Furniture and fixtures $ 10,370 $ 10,803 Machinery and equipment 2,846 2,550 Leasehold improvements 4,231 4,267 Computers and software 2,076 1,990 Other 644 660 20,167 20,270 Less: accumulated depreciation and amortization (13,133 ) (13,130 ) Less: government grants (318 ) (371 ) Total property, plant and equipment , net $ 6,716 $ 6,769 Depreciation expense associated with property, plant and equipment for the three months ended March 31, 2020 and 2019 was $0.5 million for each period, respectively. The Company receives grants from various government entities mainly to support capital expenditures. Such grants are deferred and are generally refundable to the extent the Company does not utilize the funds for qualifying expenditures. Once earned, the Company records the grants as a contra amount to the assets and amortizes such amount over the useful lives of the related assets as a reduction to depreciation expense. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | (6 ) Goodwill and Intangible Assets Goodwill was as follows (in thousands): March 31, 2020 December 31, 2019 Gross carrying amount $ 4,980 $ 4,980 Less: accumulated impairment (1,003 ) (1,003 ) Goodwill, net $ 3,977 $ 3,977 As of March 31, 2020 and December 31, 2019, the net carrying value of goodwill is all attributable to the Company’s US reporting unit. As of March 31, 2020, the Company performed a goodwill impairment assessment for the US reporting unit, due to operating losses incurred by the US reporting unit during the first quarter of 2020 amid the worldwide effects of the COVID-19 pandemic. The fair value of the US reporting unit was estimated using an equal weighting of the guideline company and discounted cash flow methods. During the quarter ended March 31, 2020, the Company also refined its estimated cost allocations between the US reporting unit and the Korea and German reporting units to more appropriately estimate the projected cash flows expected to be generated from each of the Company’s reporting units used in the valuation models. The refinements in cost allocations had no impact on the Company’s segment conclusions and would not have impacted the 2019 annual goodwill impairment conclusions. During the quarter ended March 31, 2020, the Company also refined its estimated cost allocations between the US reporting unit and the Korea and German reporting units to more appropriately estimate the projected cash flows expected to be generated from each of the Company’s reporting units used in the valuation models. The refinements in cost allocations had no impact on the Company’s segment conclusions and would not have impacted the 2019 annual goodwill impairment conclusions. The Company did not recognize any impairment of goodwill during the three months ended March 31, 2020 or 2019. Intangible assets consisted of the following (in thousands): March 31, 2020 Gross Carrying Amount Accumulated Amortization Net Developed technology $ 7,900 $ (3,335 ) $ 4,565 Customer relationships 8,727 (2,642 ) 6,085 Trade name 1,320 (506 ) 814 Total intangible assets, net $ 17,947 $ (6,483 ) $ 11,464 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Developed technology $ 7,994 $ (3,027 ) $ 4,967 Customer relationships 8,795 (2,458 ) 6,337 Trade name 1,346 (269 ) 1,077 Total intangible assets, net $ 18,135 $ (5,754 ) $ 12,381 Amortization expense associated with intangible assets for each of the three months ended March 31, 2020 and 2019 was $0.8 million The following table presents the future amortization expense of the Company’s intangible assets as of March 31, 2020 (in thousands): Remainder of 2020 $ 2,299 2021 2,862 2022 2,454 2023 2,454 2014 524 Thereafter 871 Total $ 11,464 Weighted average remaining life: Developed technology 3.7 years Customer relationships 5.7 years Trade name 4.3 years |
Debt
Debt | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt | ( 7 ) Debt The following tables summarize the Company’s debt (in thousands): March 31, 2020 Short-term Long-term Total Bank and Trade Facilities - Foreign Operations $ 12,323 $ — $ 12,323 Related Party — 27,348 27,348 $ 12,323 $ 27,348 $ 39,671 December 31, 2019 Short-term Long-term Total PNC Credit Facilities $ 2,500 $ 10,625 $ 13,125 Bank and Trade Facilities - Foreign Operations 15,779 — 15,779 Related Party — 9,096 9,096 $ 18,279 $ 19,721 $ 38,000 Less: unamortized deferred financing costs on the PNC Credit Facilities (795 ) (688 ) (1,483 ) $ 17,484 $ 19,033 $ 36,517 The future principal maturities of our Term Loans for each of the next five years are as follows (in thousands): Year ended December 31, 2020 $ 12,323 2021 — 2022 27,348 2023 — 2024 — Thereafter — Total $ 39,671 PNC Credit Facilities On February 27, 2019, the Company and ZTI (collectively, the “Borrowers”), and certain direct and indirect subsidiaries of the Borrowers, as guarantors, entered into a Revolving Credit, Term Loan, Guaranty and Security Agreement (the “Domestic Credit Agreement”) and an Export-Import Revolving Credit, Guaranty and Security Agreement (the “Ex-Im Credit Agreement,” and together with the Domestic Credit Agreement, the “Credit Agreements”), in each case with PNC Bank, National Association (“PNC”) and Citibank, N.A. as lenders, and PNC as agent for the lenders (the “PNC Credit Facilities”), which replaced the Company’s former senior secured credit facilities with Wells Fargo Bank (the “Former WFB Facility”). We refer to such transactions and the agreements referenced above as the “PNC Credit Facilities.” The PNC Credit Facilities provided for a $25 million term loan and a $15 million revolving line of credit (including subfacilities for Ex-Im transactions, letters of credit and swing loans) with a $10 million incremental increase option. The amount the Company was able to borrow on the revolving line of credit at any time was based on eligible accounts receivable and other conditions, less certain reserves. Borrowings under the PNC Credit Facilities bore interest at a floating rate equal to either the PNC prime rate or the LIBOR rate for the applicable period, plus a margin that was based on the type of advance. The Company used a portion of the funds borrowed from the term loan under the PNC Credit Facilities to (i) repay $5.0 million of existing related party indebtedness with Dasan Networks, Inc., the Company’s largest stockholder Dasan Networks, Inc. (“DNI”) plus accrued interest, (ii) repay $1.5 million revolving line of credit outstanding balance plus accrued interest and fees and cash collateralize $3.6 million in outstanding letters of credit under the Former WFB Facility, and (iii) repay $5.6 million in short-term debt in Korea and Japan. The Company’s obligations under the PNC Credit Facilities were secured by substantially all of the personal property assets of the Company and its subsidiaries that were co-borrowers or guarantors under the PNC Credit Facilities, including their intellectual property. The PNC Credit Facilities had a three-year term and was scheduled to mature on February 27, 2022. The PNC Credit Facilities contemplated repayment of the term loan in quarterly installments over the term of the loan, with the balance of the term loan and revolving line of credit due at maturity. As of December 31, 2019, the Company had $13.1 million in outstanding term loan borrowings under the PNC term loan, and no outstanding borrowings under the revolving line of credit. The interest rate on the term loan was 8.12% at December 31, 2019. On March 26, 2020, the Company paid the outstanding term loan borrowings in full and terminated the PNC Credit Facilities. In association with this debt repayment, the Company recorded a loss on extinguishment of debt of $1.4 million during the three months ended March 31, 2020. Bank and Trade Facilities - Foreign Operations Certain of the Company's foreign subsidiaries have entered into various financing arrangements with foreign banks and other lending institutions consisting primarily of revolving lines of credit, trade facilities, term loans and export development loans. These facilities are renewed as they mature and are generally secured by a security interest in certain assets of the applicable foreign subsidiaries and supported by guarantees given by DNI or third parties. Payments under such facilities are made in accordance with the given lender’s amortization schedules. As of March 31, 2020 and December 31, 2019, the Company had an aggregate outstanding balance of $12.3 million and $15.8 million, respectively, under such financing arrangements. The maturity dates and interest rates per annum applicable to outstanding borrowings under these financing arrangements are listed in the tables below (amount in thousands). As of March 31, 2020 Maturity Date Denomination Interest rate (%) Amount (in U.S. dollars) The Export-Import Bank of Korea Export development loan 7/1/2020 KRW 2.75 $ 4,908 Korea Development Bank General loan 8/8/2020 KRW 3.0 4,090 Korea Development Bank Credit facility 8/7/2020 USD 1.80 - 3.05 1,689 LGUPlus General loan 6/17/2020 KRW 0 1,636 $ 12,323 As of December 31, 2019 Maturity Date Denomination Interest rate (%) Amount (in U.S. dollars) NongHyup Bank Credit facility 09/30/2020 USD 3.50 ~ 4.50 $ 2,091 The Export-Import Bank of Korea Export development loan 07/01/2020 KRW 2.75 5,182 Korea Development Bank General loan 08/08/2020 USD 3 4,319 Korea Development Bank Credit facility 08/07/2020 KRW 3.00 ~ 3.15 2,460 LGUPlus General loan 06/17/2020 KRW 0 1,727 $ 15,779 As of March 31, 2020 and December 31, 2019, the Company had $1.7 million and $4.6 million in outstanding borrowings, respectively, and $1.2 million and $0.8 million committed as security for letters of credit under the Company's $19.0 million credit facility with certain foreign banks. Related Party Debt In February 2016, DNS California borrowed $1.8 million from DNI for capital investment with an interest rate of 4.6% per annum, payable annually. On February 27, 2019, in connection with the entry into the PNC Credit Facilities, the Company amended the terms of this loan to extend the repayment date to May 27, 2022. As of March 31, 2020, $1.8 million remained outstanding. In September 2016, we entered into a loan agreement with DNI for a $5.0 million unsecured subordinated term loan facility. The term loan was scheduled to mature in September 2021 and was pre-payable at any time by the Company without premium or penalty. The interest rate under this facility was 4.6% per annum. In February 2019, we repaid the term loan in full plus accrued interest in connection with the entry into the PNC Credit Facilities, thereby terminating the loan agreement. In March 2018, DNS Korea borrowed $5.8 million from DNI of which $4.5 million was repaid on August 8, 2018. The loan bears interest at a rate of 4.6%. On February 27, 2019, in connection with the entry into the PNC Credit Facilities, the w amended the terms of this loan to extend the repayment date to May 27, 2022. As of March 31, 2020, $1.3 million remained outstanding. In December 2018, we entered into a Loan Agreement with DNI for a $6.0 million term loan with an interest rate of 4.6% per annum. On February 27, 2019, in connection with the entry into the PNC Credit Facilities, we amended the terms of the term loan to extend the repayment date until May 27, 2022 and to terminate any security granted to DNI with respect to such term loan. As of March 31, 2020, $6.0 million remained outstanding. The modifications resulting from the amendments described in the four preceding paragraphs were limited to the extension of the maturity dates and removal of the collateral on the outstanding term loans with DNI. There were no fees paid to DNI or external costs otherwise incurred in connection with these modifications. On March 5, 2020, DNS Korea, the our wholly-owned, indirect subsidiary entered into a Loan Agreement with DNI (the “March 2020 DNI Loan”). The March 2020 DNI Loan was negotiated and approved on behalf of the Company and its subsidiaries by a special committee of the Board of Directors of the Company (the “Special Committee”) consisting of directors determined to be independent from DNI. The March 2020 DNI Loan consists of a term loan in the amount of KRW 22.4 billion ($18.5 million USD) with interest payable semi-annually at an annual rate of 4.6% and maturing on March 11, 2022. No principal payments are due on the March 2020 DNI Loan until the maturity date, but DNS Korea may prepay the loan, or a portion thereof, without penalty. As security for the March 2020 DNI Loan (and other existing loans between DNI and DNS Korea and/or DNS California), (i) DNS California, a wholly-owned, direct subsidiary of the Company and the sole stockholder of DNS Korea, agreed to pledge the outstanding shares of DNS Korea to DNI and (ii) DNS Korea granted a security interest in its personal property assets, accounts receivable and intellectual property assets to DNI. The March 2020 DNI Loan includes certain covenants consisting of financial reporting obligations, a maintenance covenant whereby DNS Korea agreed to maintain a minimum stockholders’ equity value in an amount equal to or greater than KRW 43.3 billion ($35.8 million USD), and customary events of default. If an event of default occurs and is not remedied within the applicable cure period, DNI will be entitled to take various actions, including requiring the immediate repayment of all outstanding amounts under the March 2020 DNI Loan and selling the shares or assets of DNS Korea. DNS Korea loaned the funds borrowed under the March 2020 DNI Loan to the Company, and the Company utilized a portion of such funds to repay in full and terminate the PNC Credit Facilities. As of March 31, 2020, we had had borrowings of $27.3 million in outstanding from DN. The outstanding balance at March 31, 2020 consisted of the March 2020 DNI Loan of KRW 22.4 billion ($18.5 million USD), a $6.0 million unsecured subordinated term loan facility which matures in March 2022, a $1.8 million loan for capital investment which matures in May 2022, and KRW 1.5 billion ($1.3 million) outstanding under a secured loan from DNS Korea which matures in May 2022. All four loans bear interest at a rate of 4.6% per annum. Interest expense on these related party borrowings was $0.2 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively. |
Defined Benefit Plans
Defined Benefit Plans | 3 Months Ended |
Mar. 31, 2020 | |
Compensation And Retirement Disclosure [Abstract] | |
Defined Benefit Plans | (8 ) Defined Benefit Plans The Company sponsors defined benefit plans for its employees in Keymile. Defined benefit plans provide pension benefits based on compensation and years of service. These plans were frozen as of September 30, 2003 and have not been offered to new employees after that date. Periodic benefit costs were as follows (in thousands): March 31, 2020 March 31, 2019 Interest costs $ 38 $ 100 Net amortization costs 5 — Period costs $ 43 $ 100 During the three months ended March 31, 2020, the Company performed a voluntary interim measurement of the plan obligations, due to a significant increase in the discount rate since the last annual measurement date on December 31, 2019, and recorded an actuarial gain on pension plan of $1.5 million, as reflected on the unaudited condensed consolidated statement of comprehensive loss. The Company holds life insurance contracts, with the Company as beneficiary, in the amount of $3.3 million as of March 31, 2020, related to individuals under the pension plans. These insurance contracts are classified as other assets on the Company’s consolidate consolidated balance sheet. The Company intends to use any proceeds from these policies to fund the pension plans. However, since the Company is the beneficiary on these policies, these assets have not been designated pension plan assets. The weighted average assumptions used in determining the benefit obligation related to the plans are as follows: March 31, 2020 December 31, 2019 Discount rate 1.5% 0.9% Rate of pension increase 1.7% 1.7% |
Non-Controlling Interests
Non-Controlling Interests | 3 Months Ended |
Mar. 31, 2020 | |
Noncontrolling Interest [Abstract] | |
Non-Controlling Interests | (9 ) Non-Controlling Interests Non-controlling interests were as follows (in thousands): Three Months Ended March 31, 2019 Beginning non-controlling interests $ 615 Net income (loss) attributable to non-controlling interests 181 Foreign currency translation adjustments (OCI) (1 ) Ending non-controlling interests $ 795 On July 31, 2019, the Company acquired the remaining 30.94% non-controlling interest of DZS Japan. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | (1 0 ) Related Party Transactions Related Party Debt As of March 31, 2020 and December 31, 2019, the Company had $27.3 million and $9.1 million, respectively, outstanding from related party borrowings from DNI. See Note 7 Debt for further information about the Company’s related party debt. Other Related Party Transactions Sales, cost of revenue, manufacturing (included in cost of revenue), research and product development, selling, marketing, general and administrative, interest expense and other expenses to and from related parties were as follows (in thousands) for the three months ended March 31, 2020 and March 31, 2019: Three Months Ended March 31, 2020 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue)* Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 162 $ 133 $ — $ — $ 571 $ 151 $ 86 DASAN Ventures 33% — — 8 33 38 — — $ 162 $ 133 $ 8 $ 33 $ 609 $ 151 $ 86 Three Months Ended March 31, 2019 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue)* Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 722 $ 535 $ — $ — $ 998 $ 141 $ 89 Tomato Soft Ltd. 100% — — 30 — — — — Tomato Soft (Xi'an) Ltd. 100% — — — 121 — — — CHASAN Networks Co., Ltd 100% — — 278 21 — — 161 HANDYSOFT, Inc. 18% 91 23 — — 2 — — J-Mobile Corporation 90% 42 81 — — — — — $ 855 $ 639 $ 308 $ 142 $ 1,000 $ 141 $ 250 * Manufacturing costs represent product purchases from and manufacturing activities performed by related parties, and are included in Cost of revenue on the unaudited consolidated statement of comprehensive loss. The Company has entered into sales agreements with DNI and certain of its subsidiaries. Sales and cost of revenue to DNI, DASAN France, DASAN INDIA Private Limited, and D-Mobile, represent finished goods produced by the Company that are sold to these related parties who sell the Company's products in Korea, France, India and Taiwan, respectively. The Company has entered into an agreement with CHASAN Networks Co., Ltd. to provide manufacturing and research and development services for the Company. Under the agreement with CHASAN Networks., Ltd., the Company is charged a cost plus 7% fee for the manufacturing and development of certain deliverables. The Company has entered into an agreement with Tomato Soft Ltd, a wholly owned subsidiary of DNI, to provide manufacturing and research and development services for the Company. The Company has entered into an agreement with Tomato Soft (Xi'an) Ltd. to provide research and development services for the Company. Under the agreement with Tomato Soft (Xi'an) Ltd., the Company is charged an expected annual fee of $0.7 million for the development of certain deliverables. On September 9, 2016, DZS acquired DNS California, through the merger of a wholly owned subsidiary of Zhone Technologies, Inc. with and into DNS California, with DNS California surviving as our wholly owned subsidiary (the “Merger”). Prior to the Merger, as DNS California was then a wholly owned subsidiary of DNI, DNI had sales agreements with certain customers on DNS California's behalf. Since the Merger, due to these prior sales agreements, the Company has entered into an agreement with DNI in which DNI acts as a sales channel to these customers. Sales to DNI necessary for DNI to fulfill agreements with its customers are recorded net of royalty fees in related party revenue. The Company shares office space with DNI and certain of DNI's subsidiaries. Prior to the Merger, DNS California, then a wholly owned subsidiary of DNI, shared human resources, treasury and other administrative support with DNI. As such, the Company entered into certain service sharing agreements with DNI and certain of its subsidiaries for the shared office space and shared administrative services. Expenses related to rent and administrative services are allocated to the Company based on square footage occupied and headcount, respectively. Other expenses to related parties represent expenses to DNI for its payment guarantees relating to the Company's borrowings. The Company pays DNI a guarantee fee which is calculated as 0.9% of the guaranteed amount. Refer to Note 14 Commitments and Contingencies for more details about obligations guaranteed by DNI. Balances of Receivables and Payables with Related Parties Balances of receivables and payables arising from sales and purchases of goods and serviced with related parties as of March 31, 2020 and December 31, 2019 were included in the following balance sheet captions on the unaudited consolidated balance sheet, as follows (in thousands): As of March 31.2020 Counterparty DNI ownership interest Account receivables Other receivables Deposits for lease * Long- term debt Accounts payable Other payables Accrued and other liabilities DNI N/A $ 28 $ 30 $ 672 $ 27,348 $ 180 $ 57 $ 118 DASAN Ventures 33% — — — — — 28 — $ 28 $ 30 $ 672 $ 27,348 $ 180 $ 85 $ 118 As of December 31, 2019 Counterparty DNI ownership interest Account receivables Other receivables Deposits for lease* Loan Payable Accounts payable Other payables Accrued and other liabilities DNI N/A $ — $ 32 $ 709 $ 9,096 $ — $ 1,475 $ 119 Tomato Soft Ltd. 100% — — — — — 10 — Tomato Soft (Xi'an), Ltd 100% — — — — — 45 — Chasan Networks Co., Ltd. 100% — — — — 96 — — $ — $ 32 $ 709 $ 9,096 $ 96 $ 1,530 $ 119 The related party receivables and payables balances are reflected in the respective balance sheet captions noted in the table headers above, other than: * Deposits for leases are included in Other assets in the unaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019. |
Net Income Per Share Attributab
Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. | (1 1 ) Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. Basic net income per share attributable to DASAN Zhone Solutions, Inc. is computed by dividing the net income attributable to DASAN Zhone Solutions, Inc. for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net income per share attributable to DASAN Zhone Solutions, Inc. gives effect to common stock equivalents; however, potential common stock equivalents are excluded if their effect is antidilutive. Potential common stock equivalents are composed of incremental shares of common stock issuable upon the exercise of stock options and the vesting of restricted stock units. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same. The following table is a reconciliation of the numerator and denominator in the basic and diluted net loss per share calculation (in thousands, except per share data) for the three months ended March 31, 2020 and March 31, 2019: Three Months Ended March 31, 2020 2019 Net loss attributable to DASAN Zhone Solutions, Inc. $ (8,771 ) $ (1,638 ) Weighted average number of shares outstanding: Basic 21,474 16,593 Effect of dilutive securities: Stock options, restricted stock units and share awards — — Diluted 21,474 16,593 Net loss per share attributable to DASAN Zhone Solutions, Inc.: Basic $ (0.41 ) $ (0.10 ) Diluted $ (0.41 ) $ (0.10 ) |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | (12 ) Leases The Company leases certain properties and buildings (including manufacturing facilities, warehouses, and office spaces) and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists of operating leases which expire at various dates through 2027. The components of lease expense were as follows for the three months ended March 31, 2020 and 2019, respectively (in thousands): March 31, 2020 March 31, 2019 Operating lease cost $ 1,410 $ 1,123 Variable lease cost 158 164 Short-term lease cost 36 101 Total net lease cost $ 1,604 $ 1,388 Supplemental cash flow information related to the Company’s operating leases was as follows for the three months ended March 31, 2020 and 2019, respectively (in thousands): March 31, 2020 March 31, 2019 Operating cash flows from operating leases $ 1,403 $ 1,304 ROU assets obtained in exchange for operating lease obligations $ 26 $ — The following table presents the weighted average remaining lease term and weighted average discount rates related to the Company’s operating leases as of March 31, 2020 and December 31, 2019, respectively: March 31, 2020 December 31, 2019 Weighted average remaining lease term 2.3 years 3.5 years Weighted average discount rate 6.1 % 6.0 % The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2020 (in thousands): Remainder of 2020 $ 3,793 2021 4,825 2022 4,417 2023 3,991 2024 3,553 Thereafter 3,376 Total operating lease payments 23,955 Less: imputed interest (3,283 ) Total operating lease liabilities $ 20,672 On March 2, 2020, the Company announced its plans to relocate its corporate headquarters from Oakland, California to Plano, Texas and establish a new U.S.-based Engineering Center of Excellence in Plano. On February 24, 2020, in connection with the planned relocation of the Company headquarters to Plano, the Company entered into two separate sublease agreements for office and laboratory space in Plano, TX. The commencement date of these leases is expected to occur in the second quarter of 2020. On the commencement date of these leases, the Company will recognize an aggregate of approximately $1.2 million in right-of-use assets and operating lease liabilities in connection with these leases. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (1 3 ) Commitments and Contingencies Warranties The Company accrues warranty costs based on historical trends for the expected material and labor costs to provide warranty services. Warranty periods are generally one to five years from the date of shipment. The following table reconciles changes in the Company’s accrued warranties and related costs included in accrued and other liabilities (in thousands) for the three months ended March 31, 2020 and March 31, 2019: Three Months Ended March 31, 2020 2019 Beginning balance $ 1,610 $ 1,549 Charged to cost of revenue 33 140 Claims and settlements (495 ) (194 ) Foreign exchange impact (37 ) (11 ) Ending balance $ 1,111 $ 1,484 Performance Bonds In the normal course of operations, from time to time, the Company arranges for the issuance of various types of surety bonds, such as bid and performance bonds, which are agreements under which the surety company guarantees that the Company will perform in accordance with contractual or legal obligations. As of March 31, 2020, the Company had $7.3 million of surety bonds guaranteed by third parties. Purchase Commitments The Company’s inventory purchase commitments typically allow for cancellation of orders 30 days in advance of the required inventory availability date as set by the Company at time of order. However, the Company has agreements with various contract manufacturers which include non-cancellable inventory purchase commitments. Royalties The Company has certain royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally based on a dollar amount per unit shipped or a percentage of the underlying revenue and is recorded in cost of revenue. Payment Guarantees provided by Third Parties and DNI The following table sets forth payment guarantees of the Company's indebtedness and other obligations as of March 31, 2020 that have been provided by third parties and DNI. DNI owns approximately 44.1% of the outstanding shares of the Company's common stock. The amount guaranteed exceeds the principal amounts of outstanding obligations due to collateral requirements by the banks. Guarantor Amount Guaranteed (in thousands) Description of Obligations Guaranteed DNI $ 8,400 Credit facility from Industrial Bank of Korea DNI 1,963 Purchasing Card from Industrial Bank of Korea DNI 8,400 Credit facility from Korea Development Bank DNI 4,908 Borrowings from Korea Development Bank DNI 6,000 Credit facility from NongHyup Bank DNI 3,504 Borrowings from Export-Import Bank of Korea DNI 3,000 Payment Guarantee from Shinhan Bank DNI 1,570 Backed Loan from Shinhan Bank PNC Bank, N.A. 4,859 Collateral for Standby Letter of Credit Seoul Guarantee Insurance Co. 5,690 Performance Bond, Warranty Bond, etc. (*) Industrial Bank of Korea 508 Bank Guarantee Korea Development Bank 2,105 Letter of Credit NongHyup Bank 765 Letter of Credit Woori Bank 968 Bank Guarantee Shinhan Bank 266 Purchasing Card Shinhan Bank 685 Payment Guarantee Citibank 291 Collateral for Standby Letter of Credit $ 53,882 *The Company is generally responsible for warranty liabilities for a period of two years with respect to major product sales and has, therefore, contracted for surety insurance for a portion of the warranty liabilities. Litigation From time to time, the Company is subject to various legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, the Company records an accrual for legal contingencies that it has determined to be probable to the extent that the amount of the loss can be reasonably estimated. The Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the results of operations and cash flows of the reporting period in which the ruling occurs, or future periods. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (1 4 ) Income Taxes Income tax expense (benefit) for the three months ended March 31, 2020 and 2019 was approximately $0.0 million and $0.1 million respectively, on pre-tax loss of $8.8 million and $1.4 million, respectively. As of March 31, 2020, the income tax rate varied from the United States statutory income tax rate primarily due to valuation allowances in the United States and taxable income generated by some of the Company’s wholly-owned foreign subsidiaries. The total amount of unrecognized tax benefits, including interest and penalties, at March 31, 2020 was $1.0 million. There were no significant changes to unrecognized tax benefits during the quarter ended March 31, 2020. The Company does not anticipate any significant changes with respect to unrecognized tax benefits within the next 12 months. On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law. The Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company is currently analyzing the impact of these changes and therefore an estimate of the impact to income taxes is not yet available. |
Enterprise-Wide Information
Enterprise-Wide Information | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Enterprise-Wide Information | (1 5 ) Enterprise-Wide Information The Company is a global provider of ultra-broadband network access solutions and communications platforms deployed by advanced Tier 1, 2 and 3 service providers and enterprise customers. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the Company unit level. Accordingly, the Company is considered to be in a single reporting segment and operating unit structure. The Company’s chief operating decision maker is the Company’s Chief Executive Officer, who reviews financial information presented on a consolidated basis accompanied with disaggregated revenues by geographic region for purposes of making operating decisions and assessing financial performance. The Company attributes revenue from customers to individual countries based on location shipped. Refer to Note 1(e) Revenue disaggregation information, for the required disclosures about geographical concentrations and revenue by products and services and geography. The Company's property, plant and equipment, net of accumulated depreciation, were located in the following geographical areas (in thousands) as of March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 United States $ 3,007 $ 2,809 Korea 1,883 2,020 Japan and Vietnam 1,049 1,074 Taiwan and India 21 24 Germany 756 842 $ 6,716 $ 6,769 |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Basis of Presentation | ( b ) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements include the accounts of the Company, its wholly owned subsidiaries and a subsidiary in which it had a controlling interest. All inter-company transactions and balances have been eliminated in consolidation. The unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the current interim period are not necessarily indicative of results to be expected for the current year or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 24, 2020. For a complete description of what the Company believes to be the critical accounting policies and estimates used in the preparation of its unaudited condensed consolidated financial statements, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. |
Risks and Uncertainties | (c) Risks and Uncertainties The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, assuming the Company will continue as a going concern. The Company had net loss of $8.8 million for the three months ended March 31, 2020, and a net loss of $13.3 million for the year ended December 31, 2019. Additionally, the Company incurred significant losses in years prior to 2019. As of March 31, 2020, the Company had an accumulated deficit of $38.0 million and working capital of $113.5 million. As of March 31, 2020, the Company had $26.4 million in cash and cash equivalents, which included $8.7 million in cash balances held by its international subsidiaries, and $39.7 million in aggregate principal debt of which $12.3 million was reflected in current liabilities. The Company’s liquidity could be impacted by: • its vulnerability to adverse economic conditions in its industry or the economy in general; • debt servicing requiring substantial amounts of cash, rather than being available for other purposes, including operations; • its ability to plan for, or react to, changes in its business and industry; and • investor and customer perceptions about its financial stability and limiting its ability to obtain financing or acquire customers. The Company’s ability to meet its obligations as they become due in the ordinary course of business for the next twelve (12) months will depend on its ability to (i) achieve forecasted results of operations, (ii) access funds approved under existing or new credit facilities and/or raise additional capital through sale of the Company’s common stock to the public, and (iii) effectively manage working capital requirements. If the Company cannot raise additional funds when it needs or wants them, its operations and prospects could be negatively affected. Management’s belief that it will achieve forecasted results of operations assumes that, among other things, the Company will continue to be successful in implementing its business strategy. If one or more of these factors do not occur as expected, it could cause the Company to fail to meet its obligations as they come due. In December 2019, a strain of coronavirus, now known as COVID-19, was reported to have surfaced in Wuhan, China. Since that time, the widespread and sustained transmission of the virus has reached global pandemic status. In response to the pandemic, many national and international health agencies have recommended, and many countries and state, provincial and local governments have implemented, various measures, including travel bans and restrictions, limitations on public and private gatherings, business closures or operating restrictions, social distancing, and shelter-in-place orders. The health effects of the pandemic and the above measures taken in response thereto have had an effect on the global economy in general and has materially impacted and will likely continue to impact the Company’s financial condition, results of operations and cash flows. Based on the Company's current plans and current business conditions, as of the date of this Quarterly Report on Form 10-Q, the Company believes that its existing cash, cash equivalents and available credit facilities will be sufficient to satisfy its anticipated cash requirements for at least the next twelve months from the date of this Quarterly Report on Form 10-Q. |
Use of Estimates | ( d ) Use of Estimates The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. |
Revenue Disaggregation Information | ( e ) Revenue Disaggregation Information The following table presents the revenues by source (in thousands): Three Months Ended March 31, 2020 2019 Revenue by source: Products $ 40,644 $ 69,582 Services 6,836 4,507 Total $ 47,480 $ 74,089 The following summarizes required disclosures about geographical concentrations (in thousands): Three Months Ended March 31, 2020 2019 Revenue by geography: United States $ 7,598 $ 9,578 Canada 767 923 Total North America 8,365 10,501 Latin America 2,241 6,585 Europe, Middle East, Africa 12,447 18,414 Korea 9,624 15,851 Other Asia Pacific 14,803 22,738 Total International 39,115 63,588 Total $ 47,480 $ 74,089 Contract Balances The Company records contract assets when it has a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. The opening and closing balances of contract assets and contract liabilities related to contracts with customers are as follows: Contract Assets Contract Liabilities December 31, 2019 $ 16,680 $ 6,797 March 31, 2020 3,128 6,457 Decrease $ (13,552 ) $ (340 ) The decrease in contract liabilities during the three months ended March 31, 2020 was primarily due to the revenue recognition criteria being met for previously deferred revenue, partially offset by invoiced amounts that did not yet meet the revenue recognition criteria. The amount of revenue recognized in the three months ended March 31, 2020 that was included in the prior period contract liability balance was $1.7 million. This revenue consists of services provided to customers who had been invoiced prior to the current year. The decrease in contract assets during the three months ended March 31, 2020 was primarily due to billed products and services during the period. |
Concentration of Risk | ( f ) Concentration of Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and restricted cash which totaled $35.9 million at March 31, 2020, including $12.9 million held by its international subsidiaries. Cash and cash equivalents consist of financial deposits and money market accounts that are principally held with various domestic and international financial institutions with high credit standing. The Company’s customers include competitive and incumbent local exchange carriers, competitive access providers, internet service providers, wireless carriers and resellers serving these markets. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Allowances are maintained for potential doubtful accounts. For the three months ended March 31, 2020, two customer accounted for 14% and 10% of net revenue, respectively. For the three months ended March 31, 2019, no customer accounted for 10% of net revenue. As of March 31, 2020, two customers each represented 19% of net accounts receivable. As of December 31, 2019, two customers represented 18% and 11% of net accounts receivable, respectively, of net accounts receivable. As of March 31, 2020 and December 31, 2019, receivables from customers in countries other than the United States represented 96% and 94%, respectively, of net accounts receivable. |
Business Combinations | ( g ) Business Combinations The Company allocates the fair value of purchase consideration to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets and certain tangible assets such as inventory. Critical estimates in valuing certain tangible and intangible assets include but are not limited to future expected cash flows from the underlying assets and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. |
Defined Benefit Plans and Plan Assumptions | (h) Defined Benefit Plans and Plan Assumptions The Company provides certain defined benefit pension plans to employees in Germany and Japan. Pension accounting is intended to reflect the recognition of future benefit costs over the employees' average expected future service to the Company based on the terms of the plans and investment and funding decisions. To estimate the impact of these future payments and the Company’s decisions concerning funding of these obligations, the Company is required to make assumptions using actuarial concepts within the framework of U.S. GAAP. The critical assumption is the discount rate. Other important assumptions include expected future salary increases, expected future increases to benefit payments, expected retirement dates, employee turnover, retiree mortality rates and portfolio composition. The Company evaluates these assumptions at least annually, or more frequently when certain qualifying events occur. |
Recent Accounting Pronouncements | ( i ) Recent Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments - Credit Losses Codification Improvements to Topic 326, Financial Instruments - Credit Losses Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief In August 2018, the FASB issued ASU 2018-14, Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Schedule of Revenues by Source | The following table presents the revenues by source (in thousands): Three Months Ended March 31, 2020 2019 Revenue by source: Products $ 40,644 $ 69,582 Services 6,836 4,507 Total $ 47,480 $ 74,089 |
Schedule of Information about the Company's Net Revenue for North America and International Markets | The following summarizes required disclosures about geographical concentrations (in thousands): Three Months Ended March 31, 2020 2019 Revenue by geography: United States $ 7,598 $ 9,578 Canada 767 923 Total North America 8,365 10,501 Latin America 2,241 6,585 Europe, Middle East, Africa 12,447 18,414 Korea 9,624 15,851 Other Asia Pacific 14,803 22,738 Total International 39,115 63,588 Total $ 47,480 $ 74,089 |
Summary of Contract Assets and Contract Liabilities Related to Contracts with Customers | The opening and closing balances of contract assets and contract liabilities related to contracts with customers are as follows: Contract Assets Contract Liabilities December 31, 2019 $ 16,680 $ 6,797 March 31, 2020 3,128 6,457 Decrease $ (13,552 ) $ (340 ) |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |
Schedule of Inventories | Inventories consisted of the following (in thousands): March 31, 2020 December 31, 2019 Raw materials $ 18,695 $ 15,774 Work in process 1,890 1,458 Finished goods 19,327 18,207 Total inventories $ 39,912 $ 35,439 |
Schedule of Property, Plant and Equipment, Net | Property, plant and equipment consisted of the following (in thousands): March 31, 2020 December 31, 2019 Furniture and fixtures $ 10,370 $ 10,803 Machinery and equipment 2,846 2,550 Leasehold improvements 4,231 4,267 Computers and software 2,076 1,990 Other 644 660 20,167 20,270 Less: accumulated depreciation and amortization (13,133 ) (13,130 ) Less: government grants (318 ) (371 ) Total property, plant and equipment , net $ 6,716 $ 6,769 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | Goodwill was as follows (in thousands): March 31, 2020 December 31, 2019 Gross carrying amount $ 4,980 $ 4,980 Less: accumulated impairment (1,003 ) (1,003 ) Goodwill, net $ 3,977 $ 3,977 |
Schedule of Intangible Assets | Intangible assets consisted of the following (in thousands): March 31, 2020 Gross Carrying Amount Accumulated Amortization Net Developed technology $ 7,900 $ (3,335 ) $ 4,565 Customer relationships 8,727 (2,642 ) 6,085 Trade name 1,320 (506 ) 814 Total intangible assets, net $ 17,947 $ (6,483 ) $ 11,464 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Developed technology $ 7,994 $ (3,027 ) $ 4,967 Customer relationships 8,795 (2,458 ) 6,337 Trade name 1,346 (269 ) 1,077 Total intangible assets, net $ 18,135 $ (5,754 ) $ 12,381 |
Future Amortization Expense of Intangible Assets | The following table presents the future amortization expense of the Company’s intangible assets as of March 31, 2020 (in thousands): Remainder of 2020 $ 2,299 2021 2,862 2022 2,454 2023 2,454 2014 524 Thereafter 871 Total $ 11,464 Weighted average remaining life: Developed technology 3.7 years Customer relationships 5.7 years Trade name 4.3 years |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Summary of Debt | The following tables summarize the Company’s debt (in thousands): March 31, 2020 Short-term Long-term Total Bank and Trade Facilities - Foreign Operations $ 12,323 $ — $ 12,323 Related Party — 27,348 27,348 $ 12,323 $ 27,348 $ 39,671 December 31, 2019 Short-term Long-term Total PNC Credit Facilities $ 2,500 $ 10,625 $ 13,125 Bank and Trade Facilities - Foreign Operations 15,779 — 15,779 Related Party — 9,096 9,096 $ 18,279 $ 19,721 $ 38,000 Less: unamortized deferred financing costs on the PNC Credit Facilities (795 ) (688 ) (1,483 ) $ 17,484 $ 19,033 $ 36,517 |
Schedule of Future Principal Maturities of Our Term Loans | The future principal maturities of our Term Loans for each of the next five years are as follows (in thousands): Year ended December 31, 2020 $ 12,323 2021 — 2022 27,348 2023 — 2024 — Thereafter — Total $ 39,671 |
Schedule of Short-term Debt | As of March 31, 2020 and December 31, 2019, the Company had an aggregate outstanding balance of $12.3 million and $15.8 million, respectively, under such financing arrangements. The maturity dates and interest rates per annum applicable to outstanding borrowings under these financing arrangements are listed in the tables below (amount in thousands). As of March 31, 2020 Maturity Date Denomination Interest rate (%) Amount (in U.S. dollars) The Export-Import Bank of Korea Export development loan 7/1/2020 KRW 2.75 $ 4,908 Korea Development Bank General loan 8/8/2020 KRW 3.0 4,090 Korea Development Bank Credit facility 8/7/2020 USD 1.80 - 3.05 1,689 LGUPlus General loan 6/17/2020 KRW 0 1,636 $ 12,323 As of December 31, 2019 Maturity Date Denomination Interest rate (%) Amount (in U.S. dollars) NongHyup Bank Credit facility 09/30/2020 USD 3.50 ~ 4.50 $ 2,091 The Export-Import Bank of Korea Export development loan 07/01/2020 KRW 2.75 5,182 Korea Development Bank General loan 08/08/2020 USD 3 4,319 Korea Development Bank Credit facility 08/07/2020 KRW 3.00 ~ 3.15 2,460 LGUPlus General loan 06/17/2020 KRW 0 1,727 $ 15,779 |
Defined Benefit Plans (Tables)
Defined Benefit Plans (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Compensation And Retirement Disclosure [Abstract] | |
Schedule of Periodic Benefit Costs | Periodic benefit costs were as follows (in thousands): March 31, 2020 March 31, 2019 Interest costs $ 38 $ 100 Net amortization costs 5 — Period costs $ 43 $ 100 |
Schedule of Weighted Average Assumptions Used in Determining the Benefit Obligation | The weighted average assumptions used in determining the benefit obligation related to the plans are as follows: March 31, 2020 December 31, 2019 Discount rate 1.5% 0.9% Rate of pension increase 1.7% 1.7% |
Non-Controlling Interests (Tabl
Non-Controlling Interests (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Noncontrolling Interest [Abstract] | |
Schedule of Non-controlling Interests | Non-controlling interests were as follows (in thousands): Three Months Ended March 31, 2019 Beginning non-controlling interests $ 615 Net income (loss) attributable to non-controlling interests 181 Foreign currency translation adjustments (OCI) (1 ) Ending non-controlling interests $ 795 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | Sales, cost of revenue, manufacturing (included in cost of revenue), research and product development, selling, marketing, general and administrative, interest expense and other expenses to and from related parties were as follows (in thousands) for the three months ended March 31, 2020 and March 31, 2019: Three Months Ended March 31, 2020 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue)* Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 162 $ 133 $ — $ — $ 571 $ 151 $ 86 DASAN Ventures 33% — — 8 33 38 — — $ 162 $ 133 $ 8 $ 33 $ 609 $ 151 $ 86 Three Months Ended March 31, 2019 Counterparty DNI ownership interest Sales Cost of revenue Manufacturing (cost of revenue)* Research and product development Selling, marketing, general and administrative Interest expense Other expenses DNI N/A $ 722 $ 535 $ — $ — $ 998 $ 141 $ 89 Tomato Soft Ltd. 100% — — 30 — — — — Tomato Soft (Xi'an) Ltd. 100% — — — 121 — — — CHASAN Networks Co., Ltd 100% — — 278 21 — — 161 HANDYSOFT, Inc. 18% 91 23 — — 2 — — J-Mobile Corporation 90% 42 81 — — — — — $ 855 $ 639 $ 308 $ 142 $ 1,000 $ 141 $ 250 Balances of receivables and payables arising from sales and purchases of goods and serviced with related parties as of March 31, 2020 and December 31, 2019 were included in the following balance sheet captions on the unaudited consolidated balance sheet, as follows (in thousands): As of March 31.2020 Counterparty DNI ownership interest Account receivables Other receivables Deposits for lease * Long- term debt Accounts payable Other payables Accrued and other liabilities DNI N/A $ 28 $ 30 $ 672 $ 27,348 $ 180 $ 57 $ 118 DASAN Ventures 33% — — — — — 28 — $ 28 $ 30 $ 672 $ 27,348 $ 180 $ 85 $ 118 As of December 31, 2019 Counterparty DNI ownership interest Account receivables Other receivables Deposits for lease* Loan Payable Accounts payable Other payables Accrued and other liabilities DNI N/A $ — $ 32 $ 709 $ 9,096 $ — $ 1,475 $ 119 Tomato Soft Ltd. 100% — — — — — 10 — Tomato Soft (Xi'an), Ltd 100% — — — — — 45 — Chasan Networks Co., Ltd. 100% — — — — 96 — — $ — $ 32 $ 709 $ 9,096 $ 96 $ 1,530 $ 119 The related party receivables and payables balances are reflected in the respective balance sheet captions noted in the table headers above, other than: * Deposits for leases are included in Other assets in the unaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019. |
Net Income Per Share Attribut_2
Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Reconciliation of Basic and Diluted Net Loss per Share | The following table is a reconciliation of the numerator and denominator in the basic and diluted net loss per share calculation (in thousands, except per share data) for the three months ended March 31, 2020 and March 31, 2019: Three Months Ended March 31, 2020 2019 Net loss attributable to DASAN Zhone Solutions, Inc. $ (8,771 ) $ (1,638 ) Weighted average number of shares outstanding: Basic 21,474 16,593 Effect of dilutive securities: Stock options, restricted stock units and share awards — — Diluted 21,474 16,593 Net loss per share attributable to DASAN Zhone Solutions, Inc.: Basic $ (0.41 ) $ (0.10 ) Diluted $ (0.41 ) $ (0.10 ) |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Components of Lease Expense | The components of lease expense were as follows for the three months ended March 31, 2020 and 2019, respectively (in thousands): March 31, 2020 March 31, 2019 Operating lease cost $ 1,410 $ 1,123 Variable lease cost 158 164 Short-term lease cost 36 101 Total net lease cost $ 1,604 $ 1,388 |
Supplemental Cash Flow Information Related to Operating Leases | Supplemental cash flow information related to the Company’s operating leases was as follows for the three months ended March 31, 2020 and 2019, respectively (in thousands): March 31, 2020 March 31, 2019 Operating cash flows from operating leases $ 1,403 $ 1,304 ROU assets obtained in exchange for operating lease obligations $ 26 $ — |
Weighted Average Remaining Lease Term, and Weighted Average Discount Rates Related to Operating Leases | The following table presents the weighted average remaining lease term and weighted average discount rates related to the Company’s operating leases as of March 31, 2020 and December 31, 2019, respectively: March 31, 2020 December 31, 2019 Weighted average remaining lease term 2.3 years 3.5 years Weighted average discount rate 6.1 % 6.0 % |
Maturity of Operating Lease Liabilities | The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2020 (in thousands): Remainder of 2020 $ 3,793 2021 4,825 2022 4,417 2023 3,991 2024 3,553 Thereafter 3,376 Total operating lease payments 23,955 Less: imputed interest (3,283 ) Total operating lease liabilities $ 20,672 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Reconciliation of Changes in Accrued Warranties and Related Costs Included in Accrued and Other Liabilities | The following table reconciles changes in the Company’s accrued warranties and related costs included in accrued and other liabilities (in thousands) for the three months ended March 31, 2020 and March 31, 2019: Three Months Ended March 31, 2020 2019 Beginning balance $ 1,610 $ 1,549 Charged to cost of revenue 33 140 Claims and settlements (495 ) (194 ) Foreign exchange impact (37 ) (11 ) Ending balance $ 1,111 $ 1,484 |
Payment Guarantees to Third Parties | The following table sets forth payment guarantees of the Company's indebtedness and other obligations as of March 31, 2020 that have been provided by third parties and DNI. DNI owns approximately 44.1% of the outstanding shares of the Company's common stock. The amount guaranteed exceeds the principal amounts of outstanding obligations due to collateral requirements by the banks. Guarantor Amount Guaranteed (in thousands) Description of Obligations Guaranteed DNI $ 8,400 Credit facility from Industrial Bank of Korea DNI 1,963 Purchasing Card from Industrial Bank of Korea DNI 8,400 Credit facility from Korea Development Bank DNI 4,908 Borrowings from Korea Development Bank DNI 6,000 Credit facility from NongHyup Bank DNI 3,504 Borrowings from Export-Import Bank of Korea DNI 3,000 Payment Guarantee from Shinhan Bank DNI 1,570 Backed Loan from Shinhan Bank PNC Bank, N.A. 4,859 Collateral for Standby Letter of Credit Seoul Guarantee Insurance Co. 5,690 Performance Bond, Warranty Bond, etc. (*) Industrial Bank of Korea 508 Bank Guarantee Korea Development Bank 2,105 Letter of Credit NongHyup Bank 765 Letter of Credit Woori Bank 968 Bank Guarantee Shinhan Bank 266 Purchasing Card Shinhan Bank 685 Payment Guarantee Citibank 291 Collateral for Standby Letter of Credit $ 53,882 |
Enterprise-Wide Information (Ta
Enterprise-Wide Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Property, Plant and Equipment, Net of Accumulated Depreciation | The Company's property, plant and equipment, net of accumulated depreciation, were located in the following geographical areas (in thousands) as of March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 United States $ 3,007 $ 2,809 Korea 1,883 2,020 Japan and Vietnam 1,049 1,074 Taiwan and India 21 24 Germany 756 842 $ 6,716 $ 6,769 |
Organization and Summary of S_4
Organization and Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020USD ($)customercountry | Mar. 31, 2019USD ($)customer | Dec. 31, 2019USD ($)customer | |
Significant Accounting Policies [Line Items] | |||
Number of customers | customer | 1,200 | ||
Number of countries in which entity operates | country | 120 | ||
State of entity incorporated | DE | ||
Date of entity incorporation | 1999-06 | ||
Net loss | $ (8,771) | $ (1,457) | $ (13,300) |
Accumulated deficit | 38,005 | 29,234 | |
Working capital | 113,500 | ||
Cash and cash equivalents | 26,437 | 28,747 | |
Debt | 39,671 | $ 38,000 | |
Debt, current | 12,300 | ||
Revenue recognized included in prior period contract liability balance | 1,700 | ||
Credit Concentration Risk | |||
Significant Accounting Policies [Line Items] | |||
Concentration of credit risk, cash, cash equivalents and restricted cash | 35,900 | ||
Credit Concentration Risk | International Subsidiaries | |||
Significant Accounting Policies [Line Items] | |||
Concentration of credit risk, cash, cash equivalents and restricted cash | $ 12,900 | ||
Customer Concentration Risk | Sales Revenue, Net | |||
Significant Accounting Policies [Line Items] | |||
Number of major customers | customer | 2 | 0 | |
Concentration risk, percentage | 14.00% | 10.00% | |
Customer Concentration Risk | Accounts receivable | |||
Significant Accounting Policies [Line Items] | |||
Number of major customers | customer | 2 | 2 | |
Customer Concentration Risk | Accounts receivable | Customer One | |||
Significant Accounting Policies [Line Items] | |||
Concentration risk, percentage | 19.00% | 18.00% | |
Customer Concentration Risk | Accounts receivable | Customer Two | |||
Significant Accounting Policies [Line Items] | |||
Concentration risk, percentage | 19.00% | 11.00% | |
Geographic Concentration Risk | Accounts receivable | Foreign Countries | |||
Significant Accounting Policies [Line Items] | |||
Concentration risk, percentage | 96.00% | 94.00% | |
Dasan Network Solutions, Inc. (Korean subsidiary) | |||
Significant Accounting Policies [Line Items] | |||
Cash and cash equivalents | $ 8,700 |
Organization and Summary of S_5
Organization and Summary of Significant Accounting Policies - Schedule of Revenues by Source (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation Of Revenue [Line Items] | ||
Revenue | $ 47,480 | $ 74,089 |
Product | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 40,644 | 69,582 |
Service | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | $ 6,836 | $ 4,507 |
Organization and Summary of S_6
Organization and Summary of Significant Accounting Policies - Schedule of Information about the Company's Net Revenue for North America and International Markets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Significant Accounting Policies [Line Items] | ||
Revenue | $ 47,480 | $ 74,089 |
United States | ||
Significant Accounting Policies [Line Items] | ||
Revenue | 7,598 | 9,578 |
Canada | ||
Significant Accounting Policies [Line Items] | ||
Revenue | 767 | 923 |
North America | ||
Significant Accounting Policies [Line Items] | ||
Revenue | 8,365 | 10,501 |
Latin America | ||
Significant Accounting Policies [Line Items] | ||
Revenue | 2,241 | 6,585 |
Europe, Middle East, Africa | ||
Significant Accounting Policies [Line Items] | ||
Revenue | 12,447 | 18,414 |
Korea | ||
Significant Accounting Policies [Line Items] | ||
Revenue | 9,624 | 15,851 |
Other Asia Pacific | ||
Significant Accounting Policies [Line Items] | ||
Revenue | 14,803 | 22,738 |
International | ||
Significant Accounting Policies [Line Items] | ||
Revenue | $ 39,115 | $ 63,588 |
Organization and Summary of S_7
Organization and Summary of Significant Accounting Policies - Summary of Contract Assets and Contract Liabilities Related to Contracts with Customers (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Accounting Policies [Abstract] | |
Opening, Contract Assets | $ 16,680 |
Closing, Contract Assets | 3,128 |
Decrease, Contract Assets | (13,552) |
Opening, Contract Liabilities | 6,797 |
Closing, Contract Liabilities | 6,457 |
Decrease, Contract Liabilities | $ (340) |
Business Combinations - Additio
Business Combinations - Additional Information (Details) - Keymile Gmb H L L C - USD ($) $ in Millions | Jan. 03, 2019 | Dec. 31, 2019 |
Business Acquisition [Line Items] | ||
Final adjusted acquisition price | $ 9.3 | |
Goodwill | $ 1 | |
Goodwill, impairment loss | $ 1 |
Cash, Cash Equivalents and Rest
Cash, Cash Equivalents and Restricted Cash - Additional Information (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Cash And Cash Equivalents [Abstract] | ||
Long term restricted cash | $ 0.2 | $ 0.2 |
Restricted Cash Equivalents, Noncurrent, Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssetsMember | us-gaap:OtherAssetsMember |
Balance Sheet Details - Schedul
Balance Sheet Details - Schedule of Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 18,695 | $ 15,774 |
Work in process | 1,890 | 1,458 |
Finished goods | 19,327 | 18,207 |
Total inventories | $ 39,912 | $ 35,439 |
Balance Sheet Details - Additio
Balance Sheet Details - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Balance Sheet Details [Line Items] | |||
Inventories | $ 39,912 | $ 35,439 | |
Property, Plant and Equipment | |||
Balance Sheet Details [Line Items] | |||
Depreciation and amortization associated with property, plant and equipment | 500 | $ 500 | |
Collateral pledged | |||
Balance Sheet Details [Line Items] | |||
Inventories | $ 6,400 | $ 6,700 |
Balance Sheet Details - Sched_2
Balance Sheet Details - Schedule of Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 20,167 | $ 20,270 |
Less: accumulated depreciation and amortization | (13,133) | (13,130) |
Less: government grants | (318) | (371) |
Total property, plant and equipment , net | 6,716 | 6,769 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 10,370 | 10,803 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 2,846 | 2,550 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 4,231 | 4,267 |
Computers and software | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 2,076 | 1,990 |
Others | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 644 | $ 660 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Schedule of Goodwill (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Gross carrying amount | $ 4,980 | $ 4,980 |
Less: accumulated impairment | (1,003) | (1,003) |
Goodwill, net | $ 3,977 | $ 3,977 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 17,947 | $ 18,135 |
Accumulated Amortization | (6,483) | (5,754) |
Intangible assets, net | 11,464 | 12,381 |
Developed Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 7,900 | 7,994 |
Accumulated Amortization | (3,335) | (3,027) |
Intangible assets, net | 4,565 | 4,967 |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 8,727 | 8,795 |
Accumulated Amortization | (2,642) | (2,458) |
Intangible assets, net | 6,085 | 6,337 |
Trade name | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 1,320 | 1,346 |
Accumulated Amortization | (506) | (269) |
Intangible assets, net | $ 814 | $ 1,077 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 0.8 | $ 0.8 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Future Amortization Expense of Intangible Assets (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Finite-Lived Intangible Assets [Line Items] | |
Amortization expense of intangible assets, remainder of 2020 | $ 2,299 |
Amortization expense of intangible assets, 2021 | 2,862 |
Amortization expense of intangible assets, 2022 | 2,454 |
Amortization expense of intangible assets, 2023 | 2,454 |
Amortization expense of intangible assets, 2024 | 524 |
Amortization expense of intangible assets, thereafter | 871 |
Amortization expense of intangible assets, total | $ 11,464 |
Developed Technology | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted average remaining life | 3 years 8 months 12 days |
Customer Relationships | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted average remaining life | 5 years 8 months 12 days |
Trade name | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted average remaining life | 4 years 3 months 18 days |
Debt - Summary of Debt (Details
Debt - Summary of Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | $ 39,671 | $ 38,000 |
Less: unamortized deferred financing costs on the PNC Credit Facilities, short-term | (795) | |
Short-term | 17,484 | |
Less: unamortized deferred financing costs on the PNC Credit Facilities, long-term | (688) | |
Long-term | 19,033 | |
Less: unamortized deferred financing costs on the PNC Credit Facilities | (1,483) | |
Total | 36,517 | |
Bank and Trade Facilities - Foreign Operations | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 12,323 | 15,779 |
Related Party | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 27,348 | 9,096 |
PNCCredit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 13,125 | |
Short-term Debt | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 12,323 | 18,279 |
Short-term Debt | Bank and Trade Facilities - Foreign Operations | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 12,323 | 15,779 |
Short-term Debt | PNCCredit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 2,500 | |
Long-term Debt | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | 27,348 | 19,721 |
Long-term Debt | Related Party | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | $ 27,348 | 9,096 |
Long-term Debt | PNCCredit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Debt before unamortized deferred financing costs | $ 10,625 |
Debt - Schedule of Future Princ
Debt - Schedule of Future Principal Maturities of Our Term Loans (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
Year ended December 31, 2020 | $ 12,323 | |
2022 | 27,348 | |
Total | $ 39,671 | $ 38,000 |
Debt - Additional Information (
Debt - Additional Information (Details) ₩ in Billions | Mar. 05, 2020USD ($) | Feb. 27, 2019USD ($) | Aug. 08, 2018USD ($) | Mar. 31, 2018USD ($) | Feb. 29, 2016USD ($) | Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Mar. 31, 2020KRW (₩) | Mar. 05, 2020KRW (₩) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2016USD ($) |
Line Of Credit Facility [Line Items] | ||||||||||||
Repayments of borrowings | $ 13,125,000 | $ 17,052,000 | ||||||||||
Loss on extinguishment of debt | 1,369,000 | |||||||||||
Debt | 12,323,000 | $ 15,779,000 | ||||||||||
Credit facility, commitment as security for various letters of credit | 1,700,000 | 4,600,000 | ||||||||||
Long-term debt | 36,517,000 | |||||||||||
Interest expense, related party | 200,000 | 100,000 | ||||||||||
DASAN | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | 27,300,000 | |||||||||||
DASAN | Unsecured Debt | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | $ 6,000,000 | |||||||||||
Interest rate | 4.60% | 4.60% | ||||||||||
Debt instrument maturity month and year | 2022-03 | |||||||||||
DASAN | Capital Investment | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | $ 1,800,000 | |||||||||||
Interest rate | 4.60% | 4.60% | ||||||||||
Debt instrument maturity month and year | 2022-05 | |||||||||||
Junior Lien | DASAN | Majority Shareholder | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Origination of notes receivable from related parties | $ 1,800,000 | |||||||||||
Long-term debt | $ 1,800,000 | |||||||||||
Interest rate | 4.60% | |||||||||||
Maturity Date | May 27, 2022 | |||||||||||
Dasan Network Solutions, Inc. (DNS) | DASAN | Loan Agreement | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Repayments of borrowings | $ 4,500,000 | |||||||||||
Origination of notes receivable from related parties | $ 5,800,000 | |||||||||||
Long-term debt | 1,300,000 | |||||||||||
Interest rate | 4.60% | |||||||||||
Maturity Date | May 27, 2022 | |||||||||||
PNC Credit Facilities | Dasan Network Solutions, Inc. (DNS) | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Repayments of borrowings | 5,000,000 | |||||||||||
Revolving Credit Facility | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | 0 | |||||||||||
PNC Credit Facilities | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | 13,100,000 | |||||||||||
Letter of Credit | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Credit facility, commitment as security for various letters of credit | 1,200,000 | $ 800,000 | ||||||||||
Foreign Line of Credit | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Credit facility, commitment as security for various letters of credit | 19,000,000 | |||||||||||
Term Loans | DASAN | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | $ 18,500,000 | ₩ 22.4 | ||||||||||
Interest rate | 4.60% | 4.60% | ||||||||||
Debt instrument maturity month and year | 2022-05 | |||||||||||
Secured Debt | DASAN | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | $ 1,300,000 | ₩ 1.5 | ||||||||||
Interest rate | 4.60% | 4.60% | ||||||||||
Debt instrument maturity month and year | 2022-05 | |||||||||||
PNC Credit Facilities | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | $ 25,000,000 | |||||||||||
Credit facility, maximum borrowing capacity | 15,000,000 | |||||||||||
PNC Credit Facilities | Revolving Credit Facility | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Line of credit facility, incremental increase option | 10,000,000 | |||||||||||
WFB Facility | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Repayment of revolving line of credit outstanding balance plus accrued interest and fees and cash collateralized | 1,500,000 | |||||||||||
Repayment of outstanding letter of credit | $ 3,600,000 | |||||||||||
Korea And Japan | PNC Credit Facilities | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Repayments of borrowings | $ 5,600,000 | |||||||||||
Term Loan | Loan Agreement | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | $ 6,000,000 | |||||||||||
Long-term debt | $ 6,000,000 | |||||||||||
Interest rate | 4.60% | |||||||||||
Maturity Date | May 27, 2022 | |||||||||||
Term Loan | Junior Lien | DASAN | Majority Shareholder | Unsecured Debt | Loan Agreement | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Credit facility, maximum borrowing capacity | $ 5,000,000 | |||||||||||
Interest rate | 4.60% | |||||||||||
Term Loan | PNC Credit Facilities | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term debt, Term | 3 years | 3 years | ||||||||||
Credit agreement, expiration date | Feb. 27, 2022 | |||||||||||
Credit facility, interest rate | 8.12% | |||||||||||
Bank and Trade Facilities - Foreign Operations | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Debt | $ 12,300,000 | $ 15,800,000 | ||||||||||
March 2020 DNI Loan | ||||||||||||
Line Of Credit Facility [Line Items] | ||||||||||||
Long-term line of credit | $ 18,500,000 | ₩ 22.4 | ||||||||||
Credit agreement, expiration date | Mar. 11, 2022 | |||||||||||
Interest rate | 4.60% | 4.60% | ||||||||||
Fees Paid To Related Parties | $ 0 | |||||||||||
Term loan covenant, minimum stockholders’ equity value | $ 35,800,000 | ₩ 43.3 | ||||||||||
Term loan, covenant terms | The March 2020 DNI Loan consists of a term loan in the amount of KRW 22.4 billion ($18.5 million USD) with interest payable semi-annually at an annual rate of 4.6% and maturing on March 11, 2022. No principal payments are due on the March 2020 DNI Loan until the maturity date, but DNS Korea may prepay the loan, or a portion thereof, without penalty.As security forthe March 2020 DNI Loan (and other existingloans between DNI and DNS Korea and/or DNS California), (i) DNS California, awholly-owned, direct subsidiary of the Company and the sole stockholder of DNSKorea, agreed to pledge the outstanding shares of DNS Korea to DNI and (ii) DNSKorea granted a security interest in its personal property assets, accounts receivableand intellectual property assets to DNI. The March 2020 DNI Loan includes certain covenants consisting of financial reportingobligations, a maintenance covenant whereby DNS Korea agreed to maintain aminimum stockholders’ equity value in an amount equal to or greater than KRW 43.3 billion ($35.8 million USD), and customary events of default. If an eventof default occurs and is not remedied within the applicable cure period, DNIwill be entitled to take various actions, including requiring the immediaterepayment of all outstanding amounts under the March 2020 DNI Loan and selling the shares or assets of DNS Korea. |
Debt - Schedule of Short-term D
Debt - Schedule of Short-term Debt (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | ||
Debt | $ 12,323 | $ 15,779 |
The Export Import Bankof Korea Export Development Loan | ||
Debt Instrument [Line Items] | ||
Maturity Date | Jul. 1, 2020 | Jul. 1, 2020 |
Interest rate | 2.75% | 2.75% |
Debt | $ 4,908 | $ 5,182 |
Korea Development Bank, General loan | ||
Debt Instrument [Line Items] | ||
Maturity Date | Aug. 8, 2020 | Aug. 8, 2020 |
Interest rate | 3.00% | 3.00% |
Debt | $ 4,090 | $ 4,319 |
Korea Development Bank, Credit facility | ||
Debt Instrument [Line Items] | ||
Maturity Date | Aug. 7, 2020 | Aug. 7, 2020 |
Debt | $ 1,689 | $ 2,460 |
Korea Development Bank, Credit facility | Minimum | ||
Debt Instrument [Line Items] | ||
Interest rate | 1.80% | 3.00% |
Korea Development Bank, Credit facility | Maximum | ||
Debt Instrument [Line Items] | ||
Interest rate | 3.05% | 3.15% |
L G U Plus General Loan | ||
Debt Instrument [Line Items] | ||
Maturity Date | Jun. 17, 2020 | Jun. 17, 2020 |
Interest rate | 0.00% | 0.00% |
Debt | $ 1,636 | $ 1,727 |
NongHyup Bank, Credit facility | ||
Debt Instrument [Line Items] | ||
Maturity Date | Sep. 30, 2020 | |
Debt | $ 2,091 | |
NongHyup Bank, Credit facility | Minimum | ||
Debt Instrument [Line Items] | ||
Interest rate | 3.50% | |
NongHyup Bank, Credit facility | Maximum | ||
Debt Instrument [Line Items] | ||
Interest rate | 4.50% |
Defined Benefit Plans - Additio
Defined Benefit Plans - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract] | ||
Accumulated benefit obligation | $ 15.8 | $ 17.7 |
Actuarial gain on pension plan | $ 1.5 | |
Life insurance contracts under pension plans | $ 3.3 |
Defined Benefit Plans - Schedul
Defined Benefit Plans - Schedule of Periodic Benefit Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Pension Benefir Costs | ||
Interest costs | $ 38 | $ 100 |
Net amortization costs | 5 | |
Period costs | $ 43 | $ 100 |
Defined Benefit Plans - Sched_2
Defined Benefit Plans - Schedule of Weighted Average Assumptions Used in Determining the Benefit Obligation (Details) | Mar. 31, 2020 | Dec. 31, 2019 |
Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract] | ||
Discount rate | 1.50% | 0.90% |
Rate of pension increase | 1.70% | 1.70% |
Non-Controlling Interests - Sch
Non-Controlling Interests - Schedule of Non-controlling Interests (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | |
Net income (loss) attributable to non-controlling interests | $ 181 |
Non-controlling interest | |
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | |
Beginning balance, non-controlling interests | 615 |
Net income (loss) attributable to non-controlling interests | 181 |
Foreign currency translation adjustments (OCI) | (1) |
Ending balance, non-controlling interests | $ 795 |
Non-Controlling Interests - Add
Non-Controlling Interests - Additional Information (Details) | Jul. 31, 2019 |
DZS Japan Inc. | |
Minority Interest [Line Items] | |
Remaining non controlling interest percentage acquired | 30.94% |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transaction [Line Items] | ||||
Research and product development | $ 9,600 | $ 10,184 | ||
DASAN | Majority Shareholder | ||||
Related Party Transaction [Line Items] | ||||
Guarantee fee, percent | 0.90% | |||
DASAN | Majority Shareholder | Sales And Purchases To And From Related Parties | ||||
Related Party Transaction [Line Items] | ||||
Outstanding from related party borrowings | $ 27,300 | $ 9,100 | ||
CHASAN Networks Co., Ltd | Affiliated Entity | Loan Agreement | Dasan Network Solutions, Inc. (DNS) | Junior Lien | ||||
Related Party Transaction [Line Items] | ||||
Manufacturing and development fee, percent | 7.00% | |||
Tomato Soft (Xi'an) Ltd. | ||||
Related Party Transaction [Line Items] | ||||
Research and product development | $ 700 |
Related Party Transactions - Sa
Related Party Transactions - Sales and Purchases To and From Related Parties (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Related Party Transaction [Line Items] | |||
Sales | $ 162 | $ 855 | |
Cost of revenue | 133 | 639 | |
Interest expense | 200 | 100 | |
Sales And Purchases To And From Related Parties | |||
Related Party Transaction [Line Items] | |||
Sales | 162 | 855 | |
Cost of revenue | 133 | 639 | |
Manufacturing (cost of revenue)* | [1] | 8 | 308 |
Research and product development | 33 | 142 | |
Selling, marketing, general and administrative | 609 | 1,000 | |
Interest expense | 151 | 141 | |
Other expenses | 86 | 250 | |
DASAN | Majority Shareholder | Sales And Purchases To And From Related Parties | |||
Related Party Transaction [Line Items] | |||
Sales | 162 | 722 | |
Cost of revenue | 133 | 535 | |
Selling, marketing, general and administrative | 571 | 998 | |
Interest expense | 151 | 141 | |
Other expenses | $ 86 | $ 89 | |
DASAN Ventures | Affiliated Entity | Sales And Purchases To And From Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 33.00% | ||
Manufacturing (cost of revenue)* | [1] | $ 8 | |
Research and product development | 33 | ||
Selling, marketing, general and administrative | $ 38 | ||
Tomato Soft Ltd. | Affiliated Entity | Sales And Purchases To And From Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | ||
Manufacturing (cost of revenue)* | [1] | $ 30 | |
Tomato Soft (Xi'an) Ltd. | Affiliated Entity | Sales And Purchases To And From Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | ||
Research and product development | $ 121 | ||
CHASAN Networks Co., Ltd | Affiliated Entity | Sales And Purchases To And From Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | ||
Manufacturing (cost of revenue)* | [1] | $ 278 | |
Research and product development | 21 | ||
Other expenses | $ 161 | ||
J-Mobile Corporation | Affiliated Entity | Sales And Purchases To And From Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 90.00% | ||
Sales | $ 42 | ||
Cost of revenue | $ 81 | ||
HANDYSOFT, Inc. | Affiliated Entity | Sales And Purchases To And From Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 18.00% | ||
Sales | $ 91 | ||
Cost of revenue | 23 | ||
Selling, marketing, general and administrative | $ 2 | ||
[1] | Manufacturing costs represent product purchases from and manufacturing activities performed by related parties, and are included in Cost of revenue on the unaudited consolidated statement of comprehensive loss. |
Related Party Transactions - Ba
Related Party Transactions - Balances of Receivables and Payables with Related Parties (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | |||
Long- term debt | $ 36,517 | ||
Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
Account receivables | $ 28 | ||
Other receivables | 30 | 32 | |
Deposits for lease | [1] | 672 | 709 |
Long- term debt | 27,348 | 9,096 | |
Accounts payable | 180 | 96 | |
Other payables | 85 | 1,530 | |
Accrued and other liabilities | 118 | 119 | |
DASAN | Majority Shareholder | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
Account receivables | 28 | ||
Other receivables | 30 | 32 | |
Deposits for lease | [1] | 672 | 709 |
Long- term debt | 27,348 | 9,096 | |
Accounts payable | 180 | ||
Other payables | 57 | 1,475 | |
Accrued and other liabilities | $ 118 | $ 119 | |
DASAN Ventures | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 33.00% | ||
Other payables | $ 28 | ||
Tomato Soft Ltd. | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | ||
Other payables | $ 10 | ||
Tomato Soft (Xi'an) Ltd. | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | ||
Other payables | $ 45 | ||
CHASAN Networks Co., Ltd | Affiliated Entity | Receivables And Payables With Related Parties | |||
Related Party Transaction [Line Items] | |||
DNI ownership interest | 100.00% | ||
Accounts payable | $ 96 | ||
[1] | Deposits for leases are included in Other assets in the unaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019. |
Net Income Per Share Attribut_3
Net Income Per Share Attributable to DASAN Zhone Solutions, Inc. - Reconciliation of Basic and Diluted Net Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share [Abstract] | ||
Net loss attributable to DASAN Zhone Solutions, Inc. | $ (8,771) | $ (1,638) |
Weighted average number of shares outstanding: | ||
Basic (in shares) | 21,474 | 16,593 |
Effect of dilutive securities: | ||
Diluted (in shares) | 21,474 | 16,593 |
Net loss per share attributable to DASAN Zhone Solutions, Inc.: | ||
Basic (in dollar per share) | $ (0.41) | $ (0.10) |
Diluted (in dollar per share) | $ (0.41) | $ (0.10) |
Leases - Components of Lease Ex
Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Operating lease cost | $ 1,410 | $ 1,123 |
Variable lease cost | 158 | 164 |
Short-term lease cost | 36 | 101 |
Total net lease cost | $ 1,604 | $ 1,388 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Operating cash flows from operating leases | $ 1,403 | $ 1,304 |
ROU assets obtained in exchange for operating lease obligations | $ 26 | $ 0 |
Leases - Weighted Average Remai
Leases - Weighted Average Remaining Lease Term, and Weighted Average Discount Rates Related to Operating Leases (Details) | Mar. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Weighted average remaining lease term | 2 years 3 months 18 days | 3 years 6 months |
Weighted average discount rate | 6.10% | 6.00% |
Leases - Maturity of Operating
Leases - Maturity of Operating Lease Liabilities (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Leases [Abstract] | |
Remainder of 2020 | $ 3,793 |
2021 | 4,825 |
2022 | 4,417 |
2023 | 3,991 |
2024 | 3,553 |
Thereafter | 3,376 |
Total operating lease payments | 23,955 |
Less: imputed interest | (3,283) |
Total operating lease liabilities | $ 20,672 |
Leases - Additional Information
Leases - Additional Information (Details) $ in Millions | Feb. 24, 2020USD ($) |
Leases [Abstract] | |
Operating sublease, not yet commenced, right-of-use asset | $ 1.2 |
Operating sublease, not yet commenced, liability | $ 1.2 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Purchase Commitment | |
Guarantee Obligations [Line Items] | |
Number of notice days required to notice in advance for cancellation of orders | 30 days |
Amount of non-cancellable purchase commitments outstanding | $ 5.6 |
Performance Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 7.3 |
Minimum | |
Guarantee Obligations [Line Items] | |
Product warranty period from the date of shipment | 1 year |
Maximum | |
Guarantee Obligations [Line Items] | |
Product warranty period from the date of shipment | 5 years |
Commitments and Contingencies_2
Commitments and Contingencies - Reconciliation of Changes in Accrued Warranties and Related Costs Included in Accrued and Other Liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Commitments And Contingencies Disclosure [Abstract] | ||
Beginning balance | $ 1,610 | $ 1,549 |
Charged to cost of revenue | 33 | 140 |
Claims and settlements | (495) | (194) |
Foreign exchange impact | (37) | (11) |
Ending balance | $ 1,111 | $ 1,484 |
Commitments and Contingencies_3
Commitments and Contingencies - Payment Guarantees to Third Parties (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Guarantee Obligations [Line Items] | |
Product warranty term | 2 years |
Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 53,882 |
Payment Guarantee | Purchasing Card | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 266 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
DNI ownership interest | 44.10% |
Guarantor obligations | $ 1,570 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Credit facility from Industrial Bank of Korea | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 8,400 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Purchasing Card from Industrial Bank of Korea | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 1,963 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Korea Development Bank, Credit facility | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 8,400 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Korea Development Bank, General loan | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 4,908 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | NongHyup Bank, Credit facility | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 6,000 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Borrowings from Korea Development Bank | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 3,504 |
Dasan Network Solutions, Inc. (DNS) | Payment Guarantee | Payment Guarantee from Shinhan Bank | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 3,000 |
PNC Bank N.A. | Payment Guarantee | Letter of Credit | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 4,859 |
Seoul Guarantee Insurance Co. | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 5,690 |
Industrial Bank of Korea | Payment Guarantee | Letter of Credit | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 508 |
Korea Development Bank | Payment Guarantee | Letter of Credit | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 2,105 |
NongHyup Bank | Payment Guarantee | Letter of Credit | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 765 |
Woori Bank | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 968 |
Shinhan Bank | Payment Guarantee | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | 685 |
Citibank | Payment Guarantee | Letter of Credit | |
Guarantee Obligations [Line Items] | |
Guarantor obligations | $ 291 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Income tax expense (benefit) | $ (5) | $ 77 |
Loss before income taxes | 8,800 | $ 1,400 |
Unrecognized tax benefits | 1,000 | |
Unrecognized tax benefits, period increase (decrease) | $ 0 |
Enterprise-Wide Information - P
Enterprise-Wide Information - Property, Plant and Equipment, Net of Accumulated Depreciation (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | $ 6,716 | $ 6,769 |
United States | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 3,007 | 2,809 |
Korea | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 1,883 | 2,020 |
Japan and Vietnam | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 1,049 | 1,074 |
Taiwan and India | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | 21 | 24 |
Germany | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | $ 756 | $ 842 |