DZS faces Nasdaq delisting over filing delay

DALLAS – DZS Inc. (NASDAQ:DZSI), a network software solutions company, announced today that it will be delisted from the Nasdaq Stock Market. This decision follows the company’s failure to meet the Nasdaq’s deadline for submitting periodic financial reports. The Nasdaq Hearing Panel has determined that DZS did not comply with the Listing Rule 5250(c)(1) by the set deadline of August 5, 2024.

Trading of DZS common stock is expected to be suspended at the start of business on August 8, 2024, with delisting procedures to follow. Despite this setback, DZS is actively working to complete the necessary restatements and file its delayed quarterly and annual reports for the periods ending June 30, 2023, September 30, 2023, March 31, 2024, and December 31, 2023.

The company’s Chief Financial Officer, Misty Kawecki, stated that the delay in filing was due to a comprehensive approach to completing these reports, which involved assessing the impact of the company’s divested Asia business and its acquisition of NetComm. While DZS has not met the Nasdaq’s timeline for filing, it plans to apply for a relisting once all financial reports are submitted.

Following the suspension and delisting from Nasdaq, DZS expects its shares to trade over-the-counter using its existing ticker symbol DZSI. The company intends to host an earnings call after filing all restated periodic reports, delayed reports, and the Form 10-Q for the second quarter of 2024.

DZS specializes in developing solutions for gigabit broadband connectivity and has recently been involved in strategic moves, including divestitures and acquisitions, to strengthen its market position. However, the delay in meeting Nasdaq’s requirements has led to the current delisting situation.

In other recent news, DZS Inc. has announced a definitive agreement to acquire NetComm Wireless Pty Ltd, a broadband technology specialist. This strategic acquisition, expected to finalize in the second quarter of 2024, aims to enhance DZS’s portfolio with the addition of NetComm’s Fiber Extension, Fixed Wireless Access, Home Broadband, and Industrial Internet of Things (IoT) offerings.

DZS will incorporate a majority of NetComm’s workforce, particularly focusing on research and development and customer care. The deal involves a payment of $7 million upon closing, with an additional earn-out of up to $3 million contingent on NetComm achieving a net revenue of $87.5 million in 2024.

This transaction is expected to position DZS as a leader in last-mile broadband access, combining its optical, access, subscriber, and cloud edge portfolio with NetComm’s technologies. DZS’s CEO, Charlie Vogt, emphasized the alignment of the acquisition with the company’s vision to lead in broadband networking and cloud software management solutions.

InvestingPro Insights

As DZS Inc. faces the challenges of delisting from the Nasdaq, the company’s financial metrics and market performance reflect its current situation. According to InvestingPro data, DZS has a market capitalization of approximately $39.06 million, which is relatively small given the competitive landscape of network software solutions. The company’s P/E ratio stands at -0.66, indicating that investors are facing losses and may have concerns about profitability.

In the short term, DZS’s stock has experienced a decline, with a one-week total price return of -3.31% and a one-month price return of -0.85%. These figures suggest a downward trend in investor confidence, possibly influenced by the delisting news. Over a longer period, the six-month total price return of -25.0% and a significant one-year price return drop of -63.55% highlight the stock’s underperformance. The price is currently at 33.44% of its 52-week high, with a previous close at $1.17.

InvestingPro Tips further illuminate the company’s financial health. DZS suffers from weak gross profit margins, which could be a contributing factor to its inability to meet Nasdaq’s listing requirements. Additionally, the valuation implies a poor free cash flow yield, suggesting that the company may struggle to generate enough cash to support operations and investments. With no dividends being paid to shareholders, the incentive for holding the stock is reduced, particularly during times of financial uncertainty.

For investors seeking a deeper analysis, InvestingPro offers additional tips and insights on DZS, which can be accessed through their platform. As of now, there are more InvestingPro Tips available that could provide further guidance on the potential risks and opportunities associated with DZS’s stock.

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