DZS Inc.

Ladies and gentlemen, today's conference is scheduled to begin shortly. Please continue to stand by and thank you for your patience. THE END Thank you. Ladies and gentlemen, thank you for standing by, and welcome to the DZS Q4 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker for today, Ted Moreau, Vice President and Best of Relations. Sir, you may begin.

Thank you, Tawanda. Welcome to DZS's fourth quarter 2020 earnings conference call. This is an incredibly exciting time at DZS as our newly assembled senior management team implements a strategic vision for the accelerating broadband access and mobile transport markets. This vision and the strategic milestones necessary to achieve it, along with guidance and context for the quarter and 2021, are all outlined in our Q4 2020 and full year 2020 stockholder report published this morning in the Investor Relations section of our website at DZSI.com. I look forward to interacting with our analysts, shareholders, and prospective shareholders. Joining me today are President and CEO Charlie Vogt, CFO Tom Cancro, and CTO Andrew Bender. I would now like to provide the DZS Safe Harbor Statement. During this call, we will provide projections and other forward-looking statements regarding future events or the future financial performance of the company. The company cautions you that such statements are only current expectations and actual events or results may differ materially. Please refer to documents that the company files with the SEC including its most recent 10Q and 10K reports in the forward-looking statement section of the letter to stockholders that it was filed on a form 8K as well as being available on our investor relations section of our website. These documents identify important risk factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. Please note that unless otherwise indicated, the financial metrics being provided to you on this call are determined on a non-GAAP basis. These items, together with corresponding GAAP numbers and the reconciliation to GAAP, are contained in the letter to stockholders. With that, I will now turn the call over to Charlie.

Thank you, Ted, and welcome investors and guests. Prior to the market opening today, DZS released our quarterly stockholder report, providing a market, business, and financial update for the fourth quarter and full year 2020. Specifically, our stockholder report provides an in-depth insight, milestones, and performance achieved during the fourth quarter and full year 2020, such as the numerous technology supply chain and growth initiatives that are underway, our mobile transport milestone eclipsing 1.5 million ports shipped, Our exceptional second half and full year revenue growth across our mobile transport customer sector. Our acquisition of Coherent Optics technology innovator, Optillion, complementing and expanding our mobile transport portfolio. Omnia's market outlook for open RAN and fiber-based passive optical networking. And the introduction of Velocity and Kronos, our new portfolio brands, for our market-leading broadband and mobile transport solutions. Also included in our stockholder report are timely business governance and financial updates, such as the addition of two new board members, Matt Bross, who was formerly the CTO of Williams Communications, the former CTO of British Telecom, and the former CTO of Huawei. And Barbara Carbone, a former KPMG partner with four decades of experience working with public Fortune 1000 companies and subject matter expertise, in the areas of mergers and acquisitions, business transformation, and workforce management. And our execution of a $64 million follow-on equity raise, which was led by Stiefel, Needham, and B. Riley, and co-managed by Craig Hallam and Northland Securities, with advisory services provided by Woodruff & Company. And finally, our Q1 2021 and full-year 2021 guidance. As Ted mentioned, our stockholder report can be viewed and downloaded by visiting the DZS website. Over the past six months, management has been diligently transforming and investing in our future. For our employees, our customer-first culture is comprised of a faster pace, higher expectations, a relentless pursuit of operational excellence, unification across our global R&D supply chain and customer support teams, and a higher level of accountability. For our customers, partners, and suppliers, our improved communications, attention to detail, sponsored technology workshops, and results have fostered better alignment and trust. And while we have much more to accomplish, measurable progress has been achieved. We anticipate that over the course of 2021 and into 2022, our vision strategy, financial discipline, and our pursuit of operational excellence will translate into a better experience for customers, market-first innovation, and geographic and margin expansion. Briefly, regarding our financial performance, we are pleased to report fourth quarter revenue of $88.7 million, representing a 14% year-over-year increase compared with the fourth quarter of 2019, and exceeding our $75 to $80 million guidance. When combined with our third quarter revenue Our second half revenue resulted in the two best consecutive revenue quarters in the company's history, and a 22% increase compared to the same period in 2019. In addition to our record-setting second half revenue, we achieved mobile revenue of $77.6 million for the full year, representing a year-over-year increase of 150%, and a fourth quarter increase of 250% compared to the same period in 2019. Our mobile transport growth continues to be fueled by the emergence of 5G and Open RAN, and design wins with marquee operators. Recognizing 10 of the top 25 wireline and wireless service providers as customers, and with customers spanning more than 100 countries, we remain laser-focused on innovation, exceeding customer expectations, and market share growth. With the healthcare of the COVID-19 pandemic improving, our primary risk as we enter 2021 is supply chain and component availability. Many of our products rely on semiconductor chips that require the fabrication of silicon wafers, which are experiencing extraordinary long lead times due to the impacts of the pandemic and the global demands for such chips from the communications, consumer electronics, smartphone, and the automobile sectors. With that as a backdrop and a summary, I'll now turn the call back over to the moderator to facilitate questions that you might have.