DZS Inc (DZSI) 2019 Q3 法說會逐字稿

Good afternoon. Welcome to DASAN Zhone Solutions Third Quarter 2019 Earnings Conference Call. My name is Latif, and I will be your operator for today's call. Joining us for today's presentation are the company's CEO, Yung Kim; Vice President, Finance, Blair Kim -- King; Philip Yim, the company's COO; and Corporate Controller, Jerry Borja. Following their remarks, we will open up the call for questions from DASAN Zhone's institutional analyst and investors.

午安.歡迎參加 DASAN Zhone Solutions 2019 年第三季財報電話會議。我叫拉蒂夫，我將擔任今天電話的接線生。加入我們今天的演講的是該公司的執行長 Yung Kim；財務副總裁 Blair Kim -- King； Philip Yim，公司營運長；和公司財務總監 Jerry Borja。在他們發表演說之後，我們將開始向 DASAN Zone 的機構分析師和投資人提問。

Now I would like to turn the call over to Blair King. Sir, please proceed.

現在我想把電話轉給布萊爾金。先生，請繼續。

Okay. Thank you, Latif. Before we begin, I'd like to point out that during this call, we will provide projections and other forward-looking statements regarding future events or the future financial performance of the company. We caution you that such statements are only current expectations and actual events or results may differ materially. We refer you to documents DZS files with the SEC, including our most recent 10-Q and 10-K reports and the forward-looking statements section of today's preliminary results press release. These documents identify important risk factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

好的。謝謝你，拉蒂夫。在開始之前，我想指出，在這次電話會議中，我們將提供有關未來事件或公司未來財務表現的預測和其他前瞻性陳述。我們提醒您，此類陳述僅是當前的預期，實際事件或結果可能存在重大差異。我們請您參閱 DZS 向 SEC 提交的文件，包括我們最新的 10-Q 和 10-K 報告以及今天初步業績新聞稿的前瞻性聲明部分。這些文件確定了可能導致實際結果與我們的預測或前瞻性陳述中包含的結果有重大差異的重要風險因素。

Please note that unless otherwise indicated, the financial metrics we provide on this call are determined on a non-GAAP basis. These items, together with corresponding GAAP numbers and a reconciliation to GAAP, are contained in today's press release, which we have posted on our website and filed with the SEC on Form 8-K.

請注意，除非另有說明，否則我們在本次電話會議中提供的財務指標是根據非公認的會計準則確定。這些項目以及相應的 GAAP 數位和 GAAP 調節表包含在今天的新聞稿中，我們已將其發佈在我們的網站上，並以 8-K 表格形式向 SEC 提交。

We'll also discuss historical, financial and other statistical information regarding our business and operations. And some of this information is included in the press release, and the remainder of the information will be available in a recorded version of this call.

我們還將討論有關我們業務和營運的歷史、財務和其他統計資訊。其中一些資訊包含在新聞稿中，其餘資訊將在本次電話會議的錄音版本中提供。

So with that, I'll turn the call over to our CEO, Yung Kim. Yung?

因此，我會將電話轉給我們的執行長 Yung Kim。容？

Thank you, Blair. Good afternoon, everyone. Our preliminary results for the third quarter reflect a disappointing setback to our near-term financial growth agenda with a revenue of $71.5 million, well below our expected range of $88 million to $94 million. We believe a large portion of the softness in Q3 is a precursor to the move to the next-generation broadband access technologies we have targeted for growth. That is the move to 5G networks, where our sale pipeline has grown much faster than expected, and the upgrade of access networks to support new copper and fiber-based technology.

謝謝你，布萊爾。大家下午好。我們第三季的初步業績反映了我們近期財務成長議程的令人失望的挫折，收入為 7,150 萬美元，遠低於我們 8,800 萬美元至 9,400 萬美元的預期範圍。我們認為，第三季的疲軟很大程度上是轉向我們目標成長的下一代寬頻存取技術的先兆。這就是向 5G 網路的轉變，我們的銷售管道成長速度遠遠快於預期，以及存取網路的升級以支援新的銅纜和光纖技術。

More specifically, as the quarter progressed, we were surprised to see more customers actively engage in the planning process to deploy new 5G services. Coincidentally, our deal pipeline for the ultra-low latency mobile transport switches is running significantly above where we expected it to be. That's the good news. The bad news is that for a service provider, transitioning to 5G is a major change requiring extensive planning and preparation, which has stalled investments for our equipment elsewhere in the network. Similarly, during the quarter, we saw customers in Europe increasingly commence plans to pivot to the next-generation G.fast and the fiber-to-the-home technologies.

更具體地說，隨著本季的進展，我們驚訝地發現越來越多的客戶積極參與部署新 5G 服務的規劃過程。巧合的是，我們的超低延遲行動傳輸交換器交易管道的運作速度明顯高於我們的預期。這是個好消息。壞消息是，對於服務提供者而言，過渡到 5G 是一項重大變革，需要進行廣泛的規劃和準備，這阻礙了我們對網路其他設備的投資。同樣，在本季度，我們看到歐洲客戶越來越多地開始計劃轉向下一代 G.fast 和光纖到府技術。

In summary, these technology trends have created more turbulence in our business than we anticipated just a few months ago. Some of our largest and the most [multiple] customers are really stepping back to actively consider new approaches to the delivery of innovative new services and associated operational complexities.

總之，這些科技趨勢為我們的業務帶來的動盪比我們幾個月前的預期還要多。我們的一些最大和最多[多個]客戶確實正在退後一步，積極考慮提供創新新服務和相關營運複雜性的新方法。

So while on one hand, we are pleased with the activity and are encouraged by the trend, on the other, we will see a near-term transition through in the business. And this is an area we really need to sharpen our execution to successfully navigate through.

因此，一方面，我們對這項活動感到滿意，並受到這一趨勢的鼓舞，但另一方面，我們將看到業務的近期轉型。這是我們真正需要提高執行力才能成功渡過的一個領域。

Now quite separately, at the same time, a secondary challenge during the quarter was an unforeseen global slowdown in carrier spending. Specifically, we saw several anticipated deals postponed in the final few weeks of the quarter. And while we have seen some recent improvements, this change in business conditions certainly heightened our level of caution in the current quarter.

同時，本季的第二個挑戰是不可預見的全球營運商支出放緩。具體來說，我們看到幾項預期的交易在本季的最後幾週被推遲。儘管我們最近看到了一些改善，但商業狀況的這種變化無疑提高了我們在本季度的謹慎程度。

Finally, as it relates to execution, we recognized during the quarter that the breadth and the complexity of our Americas business across developed and emerging markets warranty the structural changes to enable better coverage, feasibility and growth. Consequently, last month, we reorganized our Americas sales organization. And after some stabilization, we expect improved visibility and to be better positioned to drive outperform in the region.

最後，就執行而言，我們在本季度認識到，我們在已開發市場和新興市場的美洲業務的廣度和複雜性保證了結構性變革，以實現更好的覆蓋範圍、可行性和成長。因此，上個月我們重組了美洲銷售組織。經過一定程度的穩定後，我們預計能見度會有所提高，並且能夠更好地推動該地區的表現。

In addition, we implemented several cost measures to optimize our business. This included personnel reductions across the business as well as focused measures to reduce manufacturing overhead. These measures account for $4 million of annual cost savings for the company. And when paired with anticipated contribution from our 5G deployment, we anticipate continued growth and expanded adjusted EBITDA margins in 2020. Blair will provide more color on our Q4 outlook shortly.

此外，我們也實施了多項成本措施來優化我們的業務。這包括整個企業的人員削減以及減少製造費用的集中措施。這些措施每年為公司節省 400 萬美元的成本。與 5G 部署的預期貢獻相結合，我們預計 2020 年將持續成長並擴大調整後的 EBITDA 利潤率。布萊爾很快就會就我們的第四季前景提供更多資訊。

But before I turn the call over, I would like to update all of you on our CFO search. I'm encouraged to report that we have identified a new CFO, and the individual's appointment is pending Board's resolution. This individual will bring a wealth of global finance experience to our company, having served in senior finance roles for 2 Fortune 10 companies, previously a controller of GE Research, General Electric, multidisciplinary technology research and IT licensing business. Prior to that, this individual served as a business unit controller and divisional CFO at both GE and Verizon as well as the Chief Accounting Officer for 2 publicly traded companies, including Fortune 500 company MasTec, an American multinational infrastructure engineering and construction company. We look forward to making a formal announcement in the coming week.

但在我轉交電話之前，我想向大家通報我們財務長搜尋的最新情況。我很高興地報告，我們已經確定了一位新的首席財務官，該人的任命正在等待董事會的決議。此人將為我們公司帶來豐富的全球財務經驗，曾在 2 家財富 10 強公司擔任高級財務職務，此前曾擔任 GE Research、通用電氣、多學科技術研究和 IT 許可業務的財務總監。在此之前，此人曾擔任 GE 和 Verizon 的業務部門總監和部門首席財務官，以及兩家上市公司的首席會計官，其中包括財富 500 強公司 MasTec（一家美國跨國基礎設施工程和建築公司）。我們期待在下週發布正式公告。

With that, Blair will walk you through the financials for the third quarter of 2019. Blair?

接下來，布萊爾將帶您了解 2019 年第三季的財務狀況。布萊爾？

Okay. Well, thank you, Yung. And now turning to our financial results for the third quarter ended September 30, 2019. Net revenue was $71.5 million, which is in line with the preliminary revenue range we provided in early October so as Yung just mentioned, well below our original guidance of $88 million to $94 million. On a comparable basis, the $71.5 million of net revenue in Q3 was down 15% from the prior quarter and down 1% from Q3 of last year. The year-over-year decline was primarily due to a decrease in revenue from the APAC region and to a lesser extent, the Americas. This decline was somewhat offset by growth in the EMEA region.

好的。嗯，謝謝你，勇。現在就來看看我們截至 2019 年 9 月 30 日的第三季財務表現。淨收入為 7,150 萬美元，這與我們 10 月初提供的初步收入範圍一致，正如 Yung 剛才提到的，遠低於我們最初的 8,800 萬美元至 9,400 萬美元的指導。以可比口徑計算，第三季淨收入為 7,150 萬美元，季減 15%，比去年第三季下降 1%。年比下降主要是由於亞太地區以及較小程度上美洲地區的收入下降。這一下降在一定程度上被歐洲、中東和非洲地區的成長所抵消。

From a customer standpoint, LG U+ represented 11% of total revenue in the quarter. The top 10 customers in Q3 [who] represented 60% of our total revenue, which was up from 57% in the same period of last year. The increase was led primarily through continued customer momentum in both Japan and South Korea.

從客戶角度來看，LG U+ 佔本季總營收的 11%。第三季排名前 10 位的客戶占我們總營收的 60%，高於去年同期的 57%。這一成長主要得益於日本和韓國的持續客戶成長動能。

From a market segmentation standpoint, revenue from our international market accounted for 85% in the third quarter, with the remaining 15% coming from North America. Within the international market, Korea accounted for 29%, other APAC was 25%, EMEA was 22% and Latin America was 9% of total revenue in the third quarter.

從市場區隔的角度來看，第三季我們的國際市場營收佔85%，其餘15%來自北美。在國際市場中，韓國佔第三季總營收的29%，其他亞太地區佔25%，歐洲、中東和非洲佔22%，拉丁美洲佔9%。

From a gross margin standpoint, GAAP gross margin in the third quarter was 31%, which was down from 32.6% in Q3 of last year. The lower margin in the quarter reflects a less favorable customer and product mix than we experienced in the year ago period. And when compared to guidance of 32.5% to 33.5%, the decline is largely attributable to lower volumes, which, of course, resulted in less-than-expected overhead absorption. Now as Yung touched on earlier, we've taken steps to improve our efficiency going forward. And while we anticipate realizing some of the benefit through Q4, we anticipate to see the full impact of the restructuring as we exit the year.

從毛利率來看，第三季GAAP毛利率為31%，低於去年第三季的32.6%。本季利潤率較低反映出客戶和產品組合不如去年同期。與 32.5% 至 33.5% 的指導值相比，下降主要歸因於銷量下降，這當然導致了管理費用吸收低於預期。現在，正如 Yung 之前提到的，我們已採取措施提高未來的效率。雖然我們預計在第四季度實現一些收益，但我們預計在今年結束時會看到重組的全面影響。

So looking at our expenses. GAAP operating expenses in the third quarter of 2019 were $26.1 million or 36.5% of total revenue compared to $19.9 million or 27.7% of total revenue in Q3 of last year. The increase in GAAP operating expenses was primarily due to the inclusion of expenses from KEYMILE, which were not included in the year ago period. And we also incurred over $1 million of nonrecurring expenses in the quarter related to severance and early lease termination, relocation and other professional services.

所以看看我們的開支。2019 年第三季的 GAAP 營運費用為 2,610 萬美元，佔總營收的 36.5%，而去年第三季的 GAAP 營運費用為 1,990 萬美元，佔總營收的 27.7%。GAAP 營運費用的增加主要是由於計入了 KEYMILE 的費用，該費用未計入去年同期。本季我們也產生了超過 100 萬美元的非經常性費用，這些費用與遣散費、提前終止租賃、搬遷和其他專業服務有關。

Non-GAAP operating expenses, which excludes depreciation and amortization as well as stock-based compensation, was $24.1 million or 33.6% of total revenue. And this compares to $18.7 million or 26% of total revenue in Q3 of 2018. The cost optimization measures we implemented at the start of the fourth quarter should reduce our operating expenses by approximately $4 million annually.

非 GAAP 營運費用（不包括折舊和攤提以及股票薪酬）為 2,410 萬美元，佔總收入的 33.6%。相比之下，2018 年第三季的營收為 1,870 萬美元，佔總營收的 26%。我們在第四季初實施的成本優化措施將使我們的營運費用每年減少約 400 萬美元。

Adjusted EBITDA in the third quarter of 2019 totaled a loss of $257,000 compared to a $4.4 million gain in Q3 of 2018. Our GAAP net loss attributable to DZSI for the third quarter of 2019 was $4 million or $0.19 per diluted share. This compares to GAAP net income attributable to DZSI of $1.8 million or $0.11 per diluted share.

2019 年第三季調整後 EBITDA 總計虧損 257,000 美元，而 2018 年第三季則獲利 440 萬美元。2019 年第三季 DZSI 的 GAAP 淨虧損為 400 萬美元，或稀釋後每股 0.19 美元。相比之下，DZSI 的 GAAP 淨利潤為 180 萬美元，或稀釋後每股收益 0.11 美元。

Our cash position at quarter end was $47.9 million. Days sales outstanding increased to 127 days from 97 days in Q2 of 2019, with AR increasing to approximately $101 million from $88 million in Q2 of 2019. The increase in accounts receivable is largely due to approximately $7.7 million moving from contract assets to receivables compared, of course, with less favorable payment terms awarded to some customers. The lower-than-expected sales added approximately 18 days to our DSO calculation.

季度末我們的現金部位為 4,790 萬美元。應收帳款天數從 2019 年第二季的 97 天增加到 127 天，AR 從 2019 年第二季的 8,800 萬美元增加到約 1.01 億美元。應收帳款的增加主要是由於約 770 萬美元從合約資產轉為應收帳款，當然，與授予某些客戶的付款條件不太有利有關。低於預期的銷售額使我們的 DSO 計算時間增加了大約 18 天。

And here, given the lower-than-expected revenue in the quarter, we'd be remiss not to mention that during the quarter, we did breach the maximum leverage ratio covenant in our credit agreement with our bank, PNC. It's also worth noting that this breach has just been waived.

在這裡，考慮到本季的營收低於預期，如果不提及本季我們確實違反了與 PNC 銀行的信貸協議中的最大槓桿率條款，那就太失職了。還值得注意的是，這一違規行為剛剛被免除。

So let's now turn to our financial outlook. For the fourth quarter of 2019, we expect net revenue of $80 million to $86 million; GAAP gross margin of 31% to 32% and non-GAAP gross margin of 31.6% to 32.6%; operating expenses of $27.5 million to $28.5 million; and adjusted operating expenses of $21 million to $22 million; an EBITDA loss of $2.2 million (sic -- press release "$2.4 million") to a gain of $1.4 million; and adjusted EBITDA of $3.4 million to $7.2 million.

現在讓我們轉向我們的財務前景。2019年第四季度，我們預計淨收入為8,000萬美元至8,600萬美元； GAAP 毛利率為 31% 至 32%，非 GAAP 毛利率為 31.6% 至 32.6%；營運費用為2,750萬至2,850萬美元；並將營運費用調整為2,100萬美元至2,200萬美元； EBITDA 虧損 220 萬美元（原文如此－新聞稿「240 萬美元」），獲利 140 萬美元；調整後的 EBITDA 為 340 萬美元至 720 萬美元。

For the full year of 2019, we expect net revenue of $309 million to $315 million; GAAP gross margin of 32.2% to 32.5%; and non-GAAP gross margin of 32.5% to 33.3%; operating expenses of $104.1 million to $105.1 million; and adjusted operating expenses of $91.9 million and $92.9 million; EBITDA of $2.5 million to $6.3 million; and adjusted EBITDA of $11.7 million to $15.5 million.

2019年全年，我們預計淨收入為3.09億美元至3.15億美元； GAAP 毛利率為 32.2% 至 32.5%；非公認會計準則毛利率為 32.5% 至 33.3%；營運費用為 1.041 億美元至 1.051 億美元；調整後的營運費用分別為 9,190 萬美元和 9,290 萬美元； EBITDA 為 250 萬至 630 萬美元；調整後的 EBITDA 為 1,170 萬美元至 1,550 萬美元。

As a reminder, this guidance reflects slower-than-anticipated customer spending levels for the balance of 2019, including certain customer orders shifting from the fourth quarter of 2019 to the first quarter of 2020.

提醒一下，指引反映了 2019 年剩餘時間的客戶支出水準低於預期，包括某些客戶訂單從 2019 年第四季轉移到 2020 年第一季。

And with that, I'll turn the call back to Yung before we move to Q&A. Yung?

接下來，在我們進行問答之前，我會將電話轉回 Yung。容？

Thank you. Look, despite the near-term turbulence in our business, we are seeing strong market appeal, and we are in the very early innings of a multiyear investment cycle in 5G and the fiber broadband access solutions. The investments we have made in these technologies are solid. Our customer base is actively engaged. Our pipeline is being built faster than we anticipated.

謝謝。看，儘管我們的業務近期出現動盪，但我們看到了強大的市場吸引力，而且我們正處於 5G 和光纖寬頻存取解決方案多年投資週期的早期階段。我們對這些技術的投資是可靠的。我們的客戶群積極參與。我們的管道建設速度比我們預期的要快。

As we await customer planning cycles that incorporate our new technologies, our visibility will be impacted. However, as history has demonstrated in the past, we have [been seeing] success with a strong demand trends ahead. So while we are not pleased by our Q3 results and the outlook for Q4, our strategic direction remains focused and -- from the impact. We are well armed with a competitively differentiated and the largely refreshed product offering paired with a growing pipeline of exciting new business opportunities and a strong leadership position in the markets we serve. As such, we are increasingly confident in the future top and bottom line growth of our business.

當我們等待納入我們新技術的客戶規劃週期時，我們的知名度將會受到影響。然而，正如過去的歷史所證明的那樣，我們已經看到了成功以及未來強勁的需求趨勢。因此，雖然我們對第三季的業績和第四季的前景不滿意，但我們的策略方向仍然集中，並且不受影響。我們裝備精良，擁有具有競爭力的差異化和大幅更新的產品組合，以及不斷增長的令人興奮的新商機，並在我們所服務的市場中佔據強大的領導地位。因此，我們對業務未來的營收和利潤成長越來越有信心。

Operator, we are ready for Q&A.

接線員，我們已準備好進行問答。

(Operator Instructions) Our first question comes from Tyler Burmeister of Craig-Hallum.

（操作員說明）我們的第一個問題來自 Craig-Hallum 的 Tyler Burmeister。

So as we look into 2020, I understand some visibility might be limited. But it sounds like with some orders pushed out into Q1, you'd expect another quarter of sequential growth into Q1, if that's correct. And then how we should think about just the trend of revenue through the year, if there's anything you should -- we should be thinking about.

因此，當我們展望 2020 年時，我知道一些可見性可能會受到限制。但聽起來，隨著​​一些訂單被推遲到第一季度，您預計第一季還會出現另一個季度的連續成長（如果這是正確的）。然後我們應該如何考慮全年收入的趨勢，如果有什麼你應該考慮的話——我們應該考慮。

I think in 2020, even though some of the products that is moved to the Q1 from Q4, we also see some of the delays in the chipset from our supplier and which subsequently delayed some of the 5G deployment. One is, one customer in Japan is experiencing chipset delay while the other customer, the whole -- the rollout is delayed by 4 months, which also pushes our general 2021 slightly. But I don't think we will have a big impact from that overall for the year, so we still see growth in 2020.

我認為在 2020 年，即使一些產品從第四季度轉移到第一季度，我們也看到我們供應商的晶片組出現了一些延遲，從而導致了一些 5G 部署的延遲。一是，日本的一個客戶遇到了晶片組延遲，而另一個客戶則整個推出延遲了 4 個月，這也略微推遲了我們 2021 年的整體預測。但我認為今年整體不會產生太大影響，因此 2020 年我們仍然會看到成長。

Okay. That's great. And then just a little bit clarification, I guess. You mentioned $4 million of OpEx savings. Is that off of the reported Q3 levels we should think about?

好的。那太棒了。我想，然後稍微澄清一下。您提到了 400 萬美元的營運支出節省。這是否超出了我們應該考慮的第三季報告水準？

No -- oh, go ahead, Yung.

不——哦，繼續吧，勇。

Yes. So the savings -- the $4 million will start from exiting the Q4. So I think there is a little bit of savings which will be in Q4, but that is not -- is offset by the expenses that is incurred with the restructuring. So you should not be able to see any improvement. So I think -- so I will not take into account any savings in Q4 because of expenses required to do the restructuring. So 4 million, let's say, at the beginning of 2020. Every quarter, about $1 million.

是的。因此，節省的 400 萬美元將從退出第四季開始。因此，我認為第四季會有一點節省，但這並沒有被重組產生的費用所抵消。所以你應該看不到任何改進。所以我認為，由於重組所需的費用，我不會考慮第四季度的任何節省。假設 2020 年初為 400 萬。每季約100萬美元。

Tyler, does that answer your question? (inaudible)

泰勒，這能回答你的問題嗎？（聽不清楚）

That makes perfect sense.

這完全有道理。

Our next question comes from Dave Kang of B. Riley FBR.

我們的下一個問題來自 B. Riley FBR 的 Dave Kang。

Just wondering regarding your fourth quarter outlook, $10 million to $15 million sequential growth. Can you just go over some of your assumptions? Specifically interested in how much of that is from 5G contracts.

只是想知道您對第四季的展望，連續成長 1000 萬至 1500 萬美元。您能回顧一下您的一些假設嗎？特別感興趣的是其中有多少來自 5G 合約。

I think that is -- LG U+ will continue. I think the reason they became the top customer is their strength in 5G, all this. And also, we had a small amount of 5G for Korea Telecom. That number is not significant, I would say, maybe a couple of hundred thousand dollars. But the Korea Telecom will start more honestly for next year because we are part of the second vendor's supply to Korea Telecom for 5G. But real 5G in Japan will now be more like Q2, Q3 into Q4 will be the biggest amount. And obviously, the Korea Telecom and LG U+ will continue for the next year as well.

我認為 LG U+ 將繼續下去。我認為他們成為頂級客戶的原因是他們在5G方面的實力，這一切。此外，我們也為韓國電信提供了少量的 5G。我想說，這個數字並不大，也許幾十萬美元。但韓國電信明年將更加誠實地開始，因為我們是第二家向韓國電信提供 5G 服務的供應商的一部分。但真正的5G在日本現在會更像Q2、Q3到Q4的量會是最大的。顯然，韓國電信和 LG U+ 明年也將持續。

Got it. And then regarding on the FiberLAN, besides Legrand, any other partners that you want to share with us?

知道了。那麼關於FiberLAN，除了羅格朗之外，還有哪些合作夥伴可以跟我們分享一下呢？

We are discussing terms with a one and biggest -- big structured cabling solutions company in France because of -- we have moved that agreement from them, yes, I can reveal the terms and conditions are for -- between the 2 companies. And there is another company in the U.S. that we are discussing similar kind of deals. So I think this year, for the -- most of the efforts is verifying our products and get into their system, integrated into their [brochures], training their workforce or sales force to do it. So I would say that there are 3 big ones that we have targeted, and now there is one already announced and done. And there are 2 more: 1 in Europe and 1 in North America.

我們正在與法國一家最大的大型結構化佈線解決方案公司討論條款，因為我們已經從他們那裡移走了該協議，是的，我可以透露兩家公司之間的條款和條件。我們正在討論另一家美國公司的類似交易。所以我認為今年，大部分努力是驗證我們的產品並進入他們的系統，整合到他們的[手冊]中，培訓他們的員工或銷售人員來做到這一點。所以我想說，我們已經瞄準了 3 個大目標，現在已經宣布並完成了一個。還有 2 個：1 個在歐洲，1 個在北美。

Got it. And then just in terms of next year's gross margins, my understanding is that FiberLAN and 5G, their margins are above corporate average. So how should we think about next year's gross margin target with these 2 ramping?

知道了。然後就明年的毛利率而言，我的理解是，FiberLAN 和 5G 的利潤率高於企業平均。那麼，隨著這兩項成長，我們該如何考慮明年的毛利率目標呢？

I think I want to be cautious because last year, I said with the 5G coming in Korea and mostly in Japan, we thought with the FiberLAN. But I think the portions of 5G was not as much would impact our margins. And in fact, we were very much attacked by Chinese companies in Latin America, in South America and Asia Pac. So our overall margin hasn't increased much from last year to 2019. But I think with Japan coming -- becoming probably the biggest the market next year with a high margin, we expect margins will improve. My aim is to improve between 1 and 2 points.

我想我要保持謹慎，因為去年我說過，隨著 5G 在韓國和主要在日本的到來，我們想到了 FiberLAN。但我認為 5G 的部分不會影響我們的利潤率。事實上，我們在拉丁美洲、南美和亞太地區受到了中國公司的強烈攻擊。所以從去年到2019年我們的整體利潤率並沒有增加太多。但我認為，隨著日本明年可能成為最大的市場且利潤率很高，我們預期利潤率將會提高。我的目標是提高 1 到 2 分。

(Operator Instructions) Our next question comes from the line of Timothy Savageaux of Northland Capital Management.

（操作員說明）我們的下一個問題來自 Northland Capital Management 的 Timothy Savageaux。

This is actually Steven on the phone for Tim. I was wondering if you guys could give us a breakout of the APAC region. I know you mentioned that it was 25% of revenue. Just see if we could get like how much of that was Japan, India, et cetera.

這實際上是史蒂文在打電話給蒂姆。我想知道你們能否為我們介紹一下亞太地區的情況。我知道你提到這是收入的 25%。看看我們是否能知道其中有多少是日本、印度等。

For -- you mean Q3, or you were talking about year-to-date?

對於 - 你的意思是第三季度，或者你正在談論今年迄今為止？

Q3 and year-to-date if you wouldn't mind.

如果您不介意的話，第三季和今年至今。

Okay. So Q3 APAC is nearly $40 million, which is way down from our usual run rate. And excluding Korea, I think we've been impacted by all over APAC. India was very small. Japan was reasonably strong, but it was not enough to offset business in Taiwan and Thailand. So did I answer your question?

好的。因此，第三季亞太地區的收入接近 4,000 萬美元，這比我們通常的運行速度要低得多。除了韓國之外，我認為我們受到了整個亞太地區的影響。印度很小。日本的業務相當強勁，但不足以抵消台灣和泰國的業務。那我回答你的問題了嗎？

Yes, I think I can get it from there.

是的，我想我可以從那裡得到它。

Yes. And also, overall, year-to-date, apart from Korea and Japan, APAC has been underperforming.

是的。而且，總體而言，今年迄今為止，除了韓國和日本之外，亞太地區的表現一直不佳。

Okay. And then I know you guys mentioned another contract win here in September. Can you give any bit more color on that, like size, ramp?

好的。然後我知道你們提到了九月在這裡贏得的另一份合約。你能給出更多的顏色嗎，例如尺寸、坡度？

Which portion are you referring to?

您指的是哪一部分？

I believe it was the GTD Group you mentioned early September.

我相信就是你提到的9月初的GTD集團。

(inaudible) that's in Egypt, our distributor in Egypt who is doing a big FiberLAN deployment. Other than that, a significant win was the 5G, which are low latencies, which is for Korea Telecom that we've been qualified. And so we have orders to supply in Q4. That's the beginning of a cycle like LG U+.

（聽不清楚）那是在埃及，我們在埃及的經銷商正在進行大型光纖區域網路部署。除此之外，一個重大勝利是 5G，它具有低延遲，這是我們已經獲得韓國電信資格的。因此，我們有訂單要在第四季供應。這就是像 LG U+ 這樣的循環的開始。

(Operator Instructions) The next question comes from the line of Jon Gruber of Gruger McBaine (sic) [Gruber & McBaine].

（操作員說明）下一個問題來自 Gruger McBaine 的 Jon Gruber（原文如此）[Gruber & McBaine]。

Could you give us an update on the 5G Japan order -- potential orders? And when do they positively impact the company's revenue picture? [Softbank], I believe you announced already the elephant. You haven't announced when does that get announced.

您能否向我們介紹 5G 日本訂單（潛在訂單）的最新情況？它們何時會對公司的收入產生正面影響？[軟銀]，我相信你已經宣布了大象。你還沒有宣布什麼時候公佈。

Okay. So actually, we were working until last night to get it in time, but what -- the reason why it was delayed is our potential customer. Well, they're already customer in other areas for 5G [not Japan]. They changed their procurement and asset management system, which, actually, whatever they order and deliver will become the asset management tool, is automated one. And they having some issues with that integration into their business ERP system.

好的。所以實際上，我們一直工作到昨晚才及時得到它，但是延遲的原因是我們的潛在客戶。嗯，他們已經是其他地區（日本除外）的 5G 客戶。他們改變了採購和資產管理系統，實際上，無論他們訂購和交付什麼，都將成為資產管理工具，並且是自動化的。他們在與業務 ERP 系統整合方面遇到了一些問題。

And that has delayed actually the orders coming. But I think we are looking at imminently that the system has been now going through, and we seeing the signatures going through their hierarchy. So I would say that the press release is going between the 2 companies. So as soon as those (inaudible) I think we will announce -- I'm very sorry that we thought we could well be announcing it in October or before. But I think this is something that they have not seen the system problems (inaudible).

這實際上延遲了訂單的到來。但我認為我們正在立即關注系統現在正在經歷的情況，我們看到簽名正在經歷他們的層次結構。所以我想說的是，新聞稿是兩家公司之間發布的。因此，一旦這些（聽不清楚）我想我們就會宣布——我很抱歉我們認為我們很可能在十月或更早宣布它。但我認為這是他們沒有見過的系統問題（聽不清楚）。

And when will you start shipping on that contract? When do you actually start on that?

你們什麼時候開始按照該合約出貨？你什麼時候真正開始這樣做？

We start shipping on Q2 [on that] on 5G.

我們在第二季開始推出 5G 服務。

I'm sorry, when?

對不起，什麼時候？

Q2 next year.

明年第二季。

Q2.

Q2。

We're not actually developing the system because of a letter that we received. So it's not that the work had [stopped. It's just] overall order has not arrived officially. (inaudible)

我們實際上並不是因為收到一封信而開發該系統。所以這並不是說工作已經[停止。只是]整體訂單還沒正式到達。（聽不清楚）

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Kim for his closing remarks.

至此，我們的問答環節就結束了。現在我想將電話轉回給金先生，讓他作結束語。

Thanks, Latif. Thank you for joining us today. I would like to thank our global employees, customers, partners and shareholders for their continued support. We look forward to updating you on our next call. Thank you.

謝謝，拉蒂夫。感謝您今天加入我們。我要感謝我們的全球員工、客戶、合作夥伴和股東的持續支持。我們期待下次通話時向您通報最新情況。謝謝。

Thank you for joining us today for DASAN Zhone Solutions Third Quarter 2019 Conference Call. You may now disconnect.

感謝您今天參加我們 DASAN Zhone Solutions 第三季 2019 年電話會議。您現在可以斷開連線。