(“DZS” or the “Company”) (Nasdaq: DZSI), a global leader of access,
optical and AI-driven cloud software solutions, announced today
that it will not file its Quarterly Report on Form 10-Q for the
three months ended September 30, 2023 (the “Third Quarter 10-Q”)
within the filing deadline established by the Securities and
Exchange Commission (the “SEC”) and will be a late filer with
respect to such report.
As previously reported in the Company’s Current Report on Form
8-K filed with the SEC on June 1, 2023, the Audit Committee of the
Board of Directors of the Company, in consultation with the
Company’s management, determined that the Company’s previously
issued unaudited condensed consolidated financial statements as of
and for the three months ended March 31, 2023 (the “Q1 2023
Financial Statements”) should no longer be relied upon and should
be restated due to an accounting error relating to revenue
recognition with respect to certain customer projects. As a result
of this error, the Audit Committee initiated a review of the
Company’s accounting for revenue recognition and the extent to
which these matters affect the Company’s internal controls over
financial reporting (the “Review”).
Although the Review is ongoing, based on preliminary findings,
the Audit Committee, in consultation with the Company’s management,
determined on November 7, 2023 that the Company’s previously issued
audited condensed consolidated financial statements as of and for
the year ended December 31, 2022 (the “2022 Annual Financial
Statements”), as well as the Company’s previously issued unaudited
condensed consolidated financial statements as of and for each of
the three months ended March 31, 2022, the three and six months
ended June 30, 2022 and the three and nine months ended September
30, 2022 (collectively, the “2022 Interim Financial Statements”
and, together with the 2022 Annual Financial Statements, the “2022
Financial Statements” and, together with the Q1 2023 Financial
Statements, the “Affected Financial Statements”), should no longer
be relied upon and should be restated due to accounting errors in
each of the 2022 Financial Statements relating to revenue
recognition. Similarly, any previously issued or filed reports,
press releases, earnings releases, investor presentations or other
communications of the Company describing the Company’s financial
results or other financial information relating to the periods
covered by the 2022 Financial Statements should no longer be relied
upon. In addition, the report of Ernst & Young LLP included in
the previously issued 2022 Annual Financial Statements should no
longer be relied upon.
As a result, the Company has not yet filed its Quarterly Report
on Form 10-Q for the three months ended June 30, 2023 (the “Second
Quarter 10-Q” and, together with the Third Quarter 10-Q, the
“Delinquent Reports”) and is unable to complete its unaudited
condensed consolidated financial statements and file the Third
Quarter 10-Q by the prescribed due date for such filing.
Although the Company cannot at this time estimate when it will
file its restated financial statements or the Delinquent Reports,
it is diligently pursuing completion of the restatements and
intends to make such filings as soon as reasonably practicable
following the completion of the Review and the restatements. Once
the Review is completed, the DZS finance team will work with the
Company’s independent registered public accounting firm to make the
necessary accounting changes as well as implement improved controls
and governance.
The Company continues to invest in innovation and strategic
customer projects, including the Company’s recently announced
successful pilot program with Europe’s largest fiber-to-home
service provider. While innovation continues, during calendar year
2023, the Company has actioned approximately $30 million in
annualized cost savings that we expect will be fully realized in
2024. These cost savings are a result of the Company’s successful
execution of its global ERP, outsourced manufacturing and
integration of acquisitions as well as peak investments across its
Access, Subscriber and Optical edge portfolios. The Company is also
assessing and optimizing its global inventory.
“The past several months resulting from our revenue recognition
matters have been difficult for the Company but have enabled us to
streamline and improve several operational processes at DZS,” said
Misty Kawecki, Chief Financial Officer, DZS. “We look forward to
implementing organizational and personnel improvements in our IT
systems, controls and governance.”
Kawecki added, “I want to thank and appreciate our talented and
dedicated employees and the valuable partnership we maintain with
our marquee customers, technology, manufacturing, and logistics
business partners. We look forward to emerging more prepared, more
disciplined and with a relentless commitment to profitable
growth.”
About DZS
DZS Inc. (Nasdaq: DZSI) is a global leader of access,
optical and AI-driven cloud software solutions.
DZS, the DZS logo, and all DZS product names are trademarks of
DZS Inc. Other brand and product names are trademarks of their
respective holders. Specifications, products, and/or product names
are all subject to change.
This press release contains forward-looking statements regarding
future events and our future results that are subject to the safe
harbors created under the Private Securities Litigation Reform Act
of 1995, including statements regarding the expected impacts of the
restatements of the Affected Financial Statements, the Company’s
plans to file such restated financial statements and the Company’s
expected improvements in controls and governance. These statements
reflect the beliefs and assumptions of the Company’s management as
of the date hereof. Words such as “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “forecast,” “goal,”
“intend,” “may,” “plan,” “project,” “seek,” “should,” “target,”
“will,” “would,” variations of such words, and similar expressions
are intended to identify forward-looking statements. Readers are
cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties and assumptions
that are difficult to predict. The Company’s actual results could
differ materially and adversely from those expressed in or
contemplated by the forward-looking statements. Factors that could
cause actual results to differ include, but are not limited to,
those risk factors contained in the Company’s SEC filings available
at www.sec.gov, including without limitation, the Company’s annual
report on Form 10-K, quarterly reports on Form 10-Q and subsequent
filings. In addition, these risks and uncertainties include, but
are not limited to, the discovery of additional information
relevant to the periods covered by the Affected Financial
Statements or other periods, changes in the effects of the
restatements on the Company’s financial statements or financial
results and delay in the filing of the Company’s periodic reports
with the SEC due to the Company’s efforts to complete the
restatements. Readers are cautioned not to place undue reliance on
any forward-looking statements, which speak only as of the date on
which they are made. DZS undertakes no obligation to update or
revise any forward-looking statements for any reason.
The description of the restatements and accounting errors above
is preliminary, unaudited and subject to further change in
connection with the ongoing Review and the completion of the
restatements. Accordingly, there can be no assurance as to the
actual effects of the restatements or that the Company will not
determine to restate any financial statements other than the
Affected Financial Statements or with respect to any additional
accounting errors.
For further information see: www.DZSi.com.DZS on Twitter:
https://twitter.com/dzs_innovationDZS on LinkedIn:
https://www.linkedin.com/company/DZSi/
Contact:
info@dzsi.com
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