Pei Hung IR
Yung Kim CEO
Mikhail Golomb CFO
Christian Schwab Craig-Hallum
Tim Savageaux Northland Capital
Call transcript
Due to licensing restrictions, you must log in to view earnings call transcripts.

Good day, ladies and gentlemen, and welcome to the DASAN Zhone Solutions First Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Ms. Pei Hung, Vice President of Investor Relations.

You may begin.

Pei Hung

good our and call. first and joining you operator, on us quarter you, afternoon, thank everyone, for Thank XXXX earnings

me quarter Chief today Officer; call afternoon announcing a on Kim, for this Joining Executive its results Chief first press are release and Officer. Financial Yung Golomb, the DZS XXXX. issued Mikhail the

Relations company's website, the You the release press of can online section access in the Investor investors-dzsi.com.

measures These on filed statements today call, we subject will call to are use our During current uncertainties. on no course any based expectations. undertakes differ are or on and a cause and company of expressed revise non-GAAP this in financial our forward-looking risks XK detailed statements. filings. note the we could in actual The are to forward-looking to to also update refer that SEC our this obligation statements Please basis. Factors results other certain that

GAAP these I We in will of mind, to have over press provided now in our Yung. reconciliations measures hand non-GAAP the financial With comments earnings call measures release. those Yung? to financial

Yung Kim

Thank operating quarter us, revenue, we you, March our everyone. afternoon, including outperformed metrics, on expenses adjusted for and guidance all adjusted gross where a was margin, Pei, on good quarter and strong The EBITDA.

back share are our you. access diving of I is opportunities. to enable market those opportunities, about I'm transformative growth expanding excited worldwide, fiber the broadband dates truly why for into are March of delivery pioneers in with in of in of with and the era. lineage strong access rollout quarter a believe our most some the technology the one the speak had to year important and be technology and broadband several results, our services technology, we right we our XXXX. solutions capture company. DZS Telecom opportunities. well Korea leading strong instead into in our like the and can uniquely have the to like we take that are first about However, of which in today I'd year we We to all to I'd the like strategy fiber carriers large our helped proud played time on to of world. country global believe the mission positioned partnership South of Korea ultrafast DZS, the fiber-based Through leader early fiber-to-the-home role one the as to XXXX, innovative carriers as growth connected an with the impact This broadband establish leading a of the assuring partnership we and as profound both governments

cycle to we example, the Asia our instrumental their For well other leverage That's the and out deployment which customize fundamentally now is broadband out in of retain business. carriers, Pacific in to as to relationships we then rolling its India, strategy. our stages fiber the an markets. technology We and role rolling in our as solutions for are upgraded playing broadband early just investment

have we growth runway continues, a As globally. GPON acceleration the large fiber-based of for

fiber, to upgrading advancing countries fiber-rich solutions, next XGS-PON such We emerging generation in fiber-based fiber. into India XXG-EPON. as are markets as invest Meanwhile, copper-rich like seeing to starting are as countries of directly or well

We we copper can market. participate also are these Indeed, address trends. the to fiber-first are of We a clearly positioned all in story.

to acquired reach we with we with solutions help continue copper to carriers fiber. work KEYMILE, G.fast leading to gap the from With the the

in growth: of and growth in our other Now the business. the transport XG significant initiatives particular, enterprise. believe outside talk about broadband our I fiber In X access focused of DZS is me let strategically areas optical

XG. the with start Let's

our here deploy fiber millions the parallel to a We broadband market first with the mobile solution of Korea story contract carrier-grade XG in Uplus a is see the network to commercial to help backhaul very of year the evolving South first XG to wireless I broadband are We This to bringing proud very Korean dollars tens enable early be us. in a for one market. multiyear of and XG XXXX. a in story. our were between pioneer access LG

same are XG We now the doing networks in a reality. making

fiber-based the point put, XG on and to may fiber networks. carry the huge but responsive all Autonomous the is connections connections XG vehicles, it amount everywhere. of will deployment being the on require network. of significant cities Most from data Another shift heavily fast this, from XG. people XG to depends seismic wireless successful cell realize Simply installed is mobile a sites that not pervasive go on smart to high-capacity, and core Internet Things depend and to will

As carriers XG start will their upgrade well systems, given additional fiber-first to lineage. optical we awarded our to positioned be spend, be

touch to wanted on our I Lastly, FiberLAN initiatives.

copper We a we LAN infrastructure, large stages very are and their disrupting old turnkey the enterprises in are believe that of a delivering very replace plug-and-play we market. XX-year early to solution allows

customer than with a thriving. $XX now getting that enterprise We are and on of and footprint, growth FiberLAN very me previously are were to roster million, Pac size, deploying With our next-generation are XGs XG. positive QX capitalize introduction, this high-quality XX% We region increase. deliver given excited opportunities, a deep $XX.X who these about company including we better with who Certainly markets, strength year-over-year XXXX global solutions of product and exceeding growth. now customer let to set to our representing guidance our across seamless from results, significant I'm partners growth. and pleased lines continuing trained broad-based saw expected affirming We're these legacy our manage. well I'm which Asia to up reseller of for broad-based our report feedback and are multiple to turn us on and opportunities technologies experienced million, positioned a solutions million, to $XX revenue

from as strength East revenue well as Middle the KEYMILE, our is expectations benefited in in from which in primarily ahead region. Europe, quarter also of increased We performing

we let me take will to turn call review Mikhail? to questions and Now thereafter. financial detail, your Mikhail this quarterly then performance the over in

Mikhail Golomb

Thank you, Yung. first outlook. our and then by discussing will I quarter start results

quarter of $XX million guidance First million to $XX.X of above and $XX year-over-year. million approximately revenue was XX.X% grew our

X% mid-range $X single very guidance we which growth organic year-over-year and little of at revenue was X% continue for a between million, From Our KEYMILE customer expectations to of more in $X to enjoy exceeded growth, revenue perspective, diversified base. as contributed customer $X a million over customer accounted a than of no million.

markets. and of particular In saw revenue, terms our Pacific Middle our in we East strength market Asia segmentation and of Europe

including tremendous XX% million our contributed of and or revenue $XX in grew or with approximately total XX% year-over-year. Asia million of total KEYMILE, Korea, EMEA Europe. us scale XX% represented revenue giving Pacific, approximately $XX

QX strong revenue. nicely which America X% in also in East revenue. or to Tier revenue with Latin approximately should a single-digit markets QX. soft saw customer million The We of Middle approximately backlog, at America North contributed market contribute X total remain of XX% carrier of traction contributing total millions through high or $X $XX at million

in year large KEYMILE, increase XXXX of of turning the XX% quarter-over-quarter margin guidance favorably XX.X% margin while last In impact QX prior gross revenue compared reflects QX XX.X% of were margin in was XX% but gross gross North of reflects XX.X%. from to $XX.X for Now margins. the unusually America from unfavorable margin immediate an The GAAP gross year-over-year against down our contribution the gross quarter, and our the range and exceeded of operating period. comparison million. expenses quarter our to GAAP accretive

million, operating adjusted of of against EBITDA of non-GAAP previous to efforts guidance $XX came an better expenses EBITDA on range Our $X.X guidance than solid X.X% in our of $XX.X our $X.X adjusted or We cost positive controls. demonstrating our continuing $X.X of million million million. generated to loss between $XX.X million margin adjusted

this We EBITDA expenses outperformance difference are tight KEYMILE. depreciation results in $XXX,XXX both and inventory amortization bargain spend between purchase to step-up Once acquired stock-based headcount in of as stronger-than-expected and this adjusted management a again, and the amortization reported the margin compensation, of particularly quarter on our the fair pleased acquisition-related this gross for noncash attribute value well and DZS significant in discretionary non-GAAP KEYMILE in GAAP expenses, approximately on as price includes controls our around lead businesses. cost very and with quarter, and gained

million Our attributed to income $X.XX GAAP per $X.X for share. net or diluted DZSI approximately QX a loss of was

Now to of the XXXX. quarter looking ahead second

revenue expect million. We of the $XX.X and million $XX between

had approximately $XX we a Indian a quarter recall may year million. You large worth last QX from of order with customer significant our in

we're an approximately so year-over-year is this are tough our of X% XXXX XXXX. outsized year-over-year In spite from to from XX% order guidance still QX QX in customer anticipating expecting not single comparison. a a grow to this, We

between XX.X% be gross Now we QX XX.X%. XXXX expect margin to GAAP and

and We expect operating $XX.X expenses QX $XX be non-GAAP XXXX between million. to adjusted million

continued reflects and controls cost operating Now leverage. this

$XX and $X approximately adjusted year non-GAAP guidance We XXXX to be full million QX expect $XX $XX margin, $XXX million not XXXX this million and At gross $X adjusted and expenses million; operating between EBITDA be million and be between non-GAAP expect or million. our continue X% full 'XX we to and to between XX.X% revising are to GAAP $XXX million adjusted junction, revenue year between margins. and XX%; EBITDA $XXX to of approximately million;

and opportunity it Finally, tariff to the is view actually bring one of up trade more tensions top that for China for security mind concerns given of are our an wanted the I us We topic headline. a as customers.

to deliver have as and well so as positioned Vietnam and relationships well and outsourced schedules. meet we the capacity manufacturing Germany manufacturing We customer our orders India, in-house Korea, U.S. in are in

diversified streams have also revenue globally. We

muted back this So escalate. tensions me point, call to our is turn should U.S. let revenue Yung. impact trade At if the

Yung Kim

was strong To Mikhail. across about excited you, wrap guidance without we first up, beating our are quarter metrics. all how Thank

including including walk products, ready for Q&A. the and our are of opportunities of as our start emerging outlook economies same across the traction excitement segments, FiberLAN market segment XG early the win we our geographies, the like focus I call. SDN different as see School-Net our business momentum broad as with the our India. including have well at on significant through the and different you enterprise now year different full base for We We Operator,


Instructions] And [Operator from Capital. our with comes Christian question Craig-Hallum Schwab first

Christian Schwab

opportunity say, to growth the the which of highlighted, growth As drivers one and we at 'XX Yung, what, most that we the next, multiple be look substantial? in the have the 'XX drivers,

Yung Kim

operator of the backhaul, or that access they were really in in billions, are expect a, XG the has rollout are think and in countries the large spend it's every the And specs, is and Korea I front think the next is we side. X who This and Tier year. well or materializing backhaul we discuss already positioned hall to technical the the there. both going to fronthaul, numbers is the and license portions working I with in spectrum, in I operators into opportunities Japan and

Christian Schwab

And earlier an can will you, mobile that won give currently I know addition, to comments update you you backhaul? there? you of for that how LG, able sell but you many carriers mentioned the on us entire prepared have your XG as forward moves how in Japan many to world Korea and think be Or in you in can kind

Yung Kim

one the then have are We another of in for together on one, system we our final already And lap. spec we their the Japan. that. carrier in And to Korea in stages working are digital final have technical other have negotiation carrier with

Christian Schwab

reseller long partners then it we some deals can on you how us you? disruptive its thinking and power, to think And you takes should your who we be And if are of there? can, reseller bring your how Fabulous. who I, if about as your, begin give to update for leading an material to about FiberLAN partners Okay.

Yung Kim

of to operate. big and the the in with systems so singed Okay. easy have and is very the one positive we already we equipment got and We them, feedback our France, ones already is install

distribution. more have some But numbers and in of for the this probing building already I our having think potentials this said that that, year. of We is ground the

building higher see That's for the in starting the next I year, the But point a And of initial I distribution. we'll the very millions part. I then double-digit think XXXX, we think think to tens lower things. up putting will us start in millions. pretty, of kind see is efforts in encouraging

Christian Schwab

my then if question, may. And I Great. last

consistent? India, can kind how becomes kind opportunity do at long in the walk As and be through of particular, we it will until markets, think your of you there, look you us that material emerging and

Yung Kim


into not in And think, politicians orders, putting sort and had tremendous I dishing this election once I May, are progress, India, and year, a year. fulfilling. having efforts still went see, I don't have the think are what rejuvenate. finished we and will month, is a any in said of okay? we into this the their which out that. all I But But that, last and know, think whole is contract the voting country activity election I still takes Voting election, business


question our And comes next Tim from Capital. with Northland Savageaux

Tim Savageaux

good quarter. on a Congrats

or an like was that any run-rate And of QX? sequential I market up to on you kind going you following are either going at that out on maybe be, that there standpoint can So that growth My about see as more from a India, call for driving end the basis, sounds not strong ask growth standpoint? QX, it, other particular to to drivers from look but forecasting but any you're was QX you areas discussion. question a geographic sequential there

Yung Kim

going their as in East think activities we Middle network. lot have of upgrade I they a

naturally I is don't The area. going very usually growth. world We just one is our any, run rest see see the strong that's Pac So of rate. Asia just

sort think rate. reasonably it a, I we U.S. and and growth not is lot flat flat, run of of a see meaning

don't out in is which speaking I QX, geography, sometimes think something so will particular there be customer to So or good. is

Tim Savageaux

mentioned customers you QX. in no and Right, XX%

for APAC moment. on back a Focusing

if I greater in you in mentioned think the talk that Wonder about XX% you growth year-over-year. aggregate detail. could

And what you the that in mentioned did later terms is QX, growth? in deal of that Or QX see expected ? was from driving contributions of year? LG in kind the In Uplus that you

Yung Kim

QX first a last in to and is And cell the sites think that original amount for quite I lot whole rollout, in we of X small a last, going Korea. XXX,XXX LG QX. it year XX,XXX cell in to did Uplus increase sites phase, operators

to QX equipment. LG buy in see significantly QX, more will naturally we Uplus So

So customers. they X our top LG Uplus figures in got QX, of into the

Japan. for really is everybody they carrier Japan, with the is excitement excited their which may kicking My going. Rakuten really in is Their XG and And competition, putting trying becoming Japan with really number competition build the earmarking up good to more acceleration. valid, for building into spending is everybody is a gearing and in is in about is example, billions So contract X, which networks, be Asia us. really, which into I'm fire their that. for up network the for

Tim Savageaux

OEMs, trade tariff that and Kind one overall is tension of be Okay. as really last whether an I your we you get larger, traditional flip or for mentioned impacting competitors And out not maybe marketplace? of those the ZTE. political China, kind the me for with there impacts the Huawei, as to guys. headwinds of China of now. there Mikhail, any of of you're headwinds any of kind China-based wonder some the facing may U.S. OEMs of for China side Are you competitive some update can seeing if in yet?

Yung Kim


But see about renewed that lot know So in much. I that don't we on some are Africa, America. not the We activity European Latin that a front so front, part. competition some don't we Lat seeing in in there. And coming is Am, compete

and but customers, have that. a having they instead any Chinese no we or are Asian and to of Pac. beat landing new I coming vendor impacting coming of competing of the It's certainly, like and Pac, and supplier capacity compete rollout lot out a But that off, reference big we successfully, are them is market into China with not think the make ZTE, fiber-to-the-home a in we is because tailing contract Huawei overcapacity vendors they some track are Chinese record. because a Asia despite noise, Asia smaller makes, of don't

Mikhail Golomb

People, to and Yung beat and that's want Just where our and just continue customers quality add win. what we performance, to said. to


in today's gentlemen, for and we the all conference. This for questions. time Thank have participating you that's today's Ladies concludes program.

You a all day. may great disconnect. Everyone, have