DZS INC. As used in this Quarterly Report on Form 10-Q, unless the context suggests
otherwise, the terms "DZS," the "Company" "we," "our" and "us" refer to
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate, and reflect the beliefs and assumptions of our management as of the date hereof. We use 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 to identify forward-looking statements. In addition, statements that refer to projections of earnings, revenue, costs or other financial items in future periods; anticipated growth and trends in our business, industry or key markets; cost synergies, growth opportunities and other potential financial and operating benefits of our acquisitions; future growth and revenues from our products; our plans and our ability to refinance or repay our existing indebtedness prior to the applicable maturity dates; our ability to access capital to fund our future operations; future economic conditions and performance; the impact of the global outbreak of COVID-19, also known as the coronavirus; the impact of interest rate and foreign currency fluctuations; anticipated performance of products or services; competition; plans, objectives and strategies for future operations, including our pursuit or strategic acquisitions and our continued investment in research and development; other characterizations of future events or circumstances; and all other statements that are not statements of historical fact, are forward-looking statements within the meaning of the Securities Act and the Exchange Act. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Readers are cautioned not to place undue reliance on such forward-looking statements, which are being made as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include factors discussed in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K, as well as factors described from time to time in our future reports filed with theU.S. Securities and Exchange Commission (the "SEC"). OVERVIEW We are a global provider of access and optical networking infrastructure and cloud software solutions that enable the emerging hyper-connected, hyper-broadband world and broadband experiences. The Company provides a wide array of reliable, cost-effective networking technologies and software to a diverse customer base. We research, develop, test, sell, manufacture and support platforms in the areas of mobile transport and fixed broadband access, as discussed below. We have extensive regional development and support centers around the world to support our customer needs.
Our solutions and platforms portfolio include products in the Access Edge,
Subscriber Edge, Optical Edge, and
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Access Edge. Our DZS Velocity portfolio offers a variety of solutions for
carriers and service providers to connect residential and business customers,
either using high-speed fiber or leveraging their existing deployed copper
networks to offer broadband services to customer premises. Once our broadband
access products are deployed, the service provider can offer voice,
high-definition and ultra-high-definition video, highspeed internet access and
business class services to their customers. In addition, the switching and
routing products we provide in this space offer a high-performance and
manageable solution that bridges the gap from carrier access technologies to the
core network. XCelerate by DZS increases the velocity with which service
providers can leap to multi-gigabit services at scale by enabling rapid
transition from Gigabit Ethernet Passive Optical Network ("GPON") to 10 Gigabit
Symmetrical Passive Optical Network ("XGS-PON") and Gigabit Ethernet to 10
Gigabit Ethernet via any service port across a range of existing DZS Velocity
chassis and 10 gig optimized stackable fixed form factor units.
•
Subscriber Edge. Our DZS Helix connected premises product portfolio offers a
large collection of optical network terminals ("ONTs") and smart gateway
solutions for any fiber to the "x" ("FTTx") deployment. DZS ONTs and Smart
Gateway platforms are designed for high bandwidth services being deployed to the
home or business. Our connected premises portfolio consists of indoor/outdoor
ONTs and gateways delivering best-in-class data and WiFi
21
--------------------------------------------------------------------------------throughout the premises to support the most demanding FTTx applications. The product feature set gives service providers an elegant migration path from legacy to soft switch architectures without replacing ONTs.
•
Optical Edge. Our DZS Chronos portfolio provides a robust, manageable and
scalable solution for mobile operators and service providers that enable them to
upgrade their mobile fronthaul/midhaul/backhaul ("xHaul") systems and migrate to
fifth generation wireless technologies ("5G") and beyond as well as deliver
robust edge transport. DZS Chronos provides a full range of 5G-ready xHaul and
coherent optical capable solutions that are open, software-defined, and field
proven. Our mobile xHaul and edge transport products may be collocated at the
radio access node base station and can aggregate multiple radio access node base
stations into a single backhaul for delivery of mobile traffic to the radio
access node network controller or be leveraged as transport vehicles for FTTx
deployments. Our products support pure Ethernet switching as well as layer 3 IP
and Multiprotocol Label Switching ("MPLS"), and we interoperate with other
vendors in these networks.
•
Cloud Software . Our DZS Cloud platform provides software capabilities specifically in the areas of network orchestration, application slicing, automation, analytics, service assurance, and consumer broadband experience. Via our DZS Xtreme solutions we offer a commercial, carrier-grade network-slicing enabled orchestration platform complementing our position with physical network devices supporting Open RAN ("O-RAN") and 4G/5G networks. Communications service providers are implementing software defined networking ("SDN") and network functions virtualization ("NFV") architectures to reduce reliance on proprietary systems and hardware, which increase service agility, flexibility, and deployment of new network services while lowering costs. Via our DZS Xperience solutions, we enable advanced WiFi experience management and analytics solutions. Communications service providers are implementing experience and service assurance solutions to reduce support costs, including specifically the costs of WiFi troubleshooting and truck rolls, improve service performance and customer satisfaction, and ultimately reduce subscriber churn and increase average revenue per user (ARPU).
Our key financial objectives include the following:
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Increasing revenue while continuing to carefully control costs;
•
Continuing investments in strategic research and product development activities that will provide the maximum potential return on investment
•
Minimizing consumption of our cash and cash equivalents; and
•
Improving gross margin through a wide range of initiatives, including an increase in the mix of recurring software revenue.
RECENT DEVELOPMENTS
OnFebruary 9, 2022 , the Company entered into a Credit Agreement with the Company, as borrower, certain subsidiaries of the Company, as guarantors, the lenders party thereto andJPMorgan Chase Bank, N.A ., as administrative agent. The Credit Agreement originally provided for revolving loans in an aggregate principal amount of up to$30.0 million , up to$15.0 million of which is available for letters of credit, and was scheduled to mature onFebruary 9, 2024 . OnMay 27, 2022 , the Company entered into a First Amendment to Credit Agreement, which amends the Credit Agreement datedFebruary 9, 2022 . The Amendment, among other things, provides for a Term Loan in an aggregate principal amount of$25.0 million with a maturity date ofMay 27, 2027 and extends the maturity date of the$30.0 million Revolving Credit Facility toMay 27, 2025 . OnMay 27, 2022 , the Company borrowed the full amount of the Term Loan to finance the ASSIA Acquisition discussed below. During the third quarter of 2022, the Company borrowed$9.0 million and repaid$2.0 million under the revolving facility. OnMay 27, 2022 , the Company acquired certain assets and liabilities of ASSIA, an industry pioneer of broadband access quality-of-experience software solutions. The core assets acquired include the CloudCheck® Wi-Fi experience management and Expresse® access network optimization software solutions. These software solutions add powerful data analytics and network intelligence capabilities to DZS Cloud, including cloud-managed WiFi solutions, access network optimization and intelligent automation tools. The total purchase consideration was$25.0 million , including a$2.5 million holdback that will be released 13 months following the transaction close date. InOctober 2022 , the Company agreed to pay an additional$1.35 million of purchase consideration to settle certain unresolved matters related to the ASSIA acquisition. OnSeptember 17, 2022 , DZS signed an agreement with Fabrinet, a third-party provider of electro-mechanical and electronic manufacturing and distribution services, to transition the sourcing, procurement, order-fulfillment, manufacturing and return merchandise authorization activities in the Company'sSeminole, Florida facility to Fabrinet. The agreement was announced onOctober 4, 2022 and the transition to Fabrinet began inOctober 2022 with the goal of being fully operational by the beginning of 2023. Post transition, the DZSSeminole, Florida -based operations, supply chain and manufacturing workforce will be reduced by approximately two-thirds and the remaining team will be relocated to an appropriately sized facility. 22 --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The table below presents the unaudited condensed consolidated statement of (loss) income with year-over-year changes (in thousands except percent change).
Three months ended Nine months ended September
September 30, 30,
2022 2021 % change 2022 2021 % change
Net revenue $ 107,394 $ 88,412 21.5 % $ 275,514 $ 252,143 9.3 %
Cost of revenue 70,864 56,213 26.1 % 187,216 164,771 13.6 %
Gross profit 36,530 32,199 13.5 % 88,298 87,372 1.1 %
Operating expenses:
Research and product
development 15,499 11,707 32.4 % 39,691 34,788 14.1 %
Selling, marketing,
general and
administrative 23,698 19,539 21.3 % 61,953 69,619 -11.0 %
Restructuring and other
charges 601 6,754 -91.1 % 1,393 12,098 -88.5 %
Impairment of long-lived
assets 827 - 100.0 % 827 1,735 -52.3 %
Amortization of
intangible assets 1,190 312 281.4 % 1,948 888 119.4 %
Total operating expenses 41,815 38,312 9.1 % 105,812 119,128 -11.2 %
Operating loss (5,285 ) (6,113 ) -13.5 % (17,514 ) (31,756 ) -44.8 %
Interest income 47 20 135.0 % 120 81 48.1 %
Interest expense (446 ) (49 ) 810.2 % (773 ) (326 ) 137.1 %
Other income (expense),
net (1,984 ) 922 -315.2 % (2,847 ) 1,633 -274.3 %
Loss before income taxes (7,668 ) (5,220 ) 46.9 % (21,014 ) (30,368 ) -30.8 %
Income tax provision
(benefit) 6,128 676 806.5 % 1,858 2,032 -8.6 %
Net loss $ (13,796 ) $ (5,896 ) 134.0 % $ (22,872 ) $ (32,400 ) -29.4 %
The table below presents the unaudited condensed consolidated statement of (loss) income as a percentage of total net revenue for the periods indicated.
Three months ended September 30 ,
Nine months ended
2022 2021 2022 2021
Net revenue 100 % 100 % 100 % 100 %
Cost of revenue 66 % 64 % 68 % 65 %
Gross profit 34 % 36 % 32 % 35 %
Operating expenses:
Research and product development 14 % 13 % 14 % 14 %
Selling, marketing, general and
administrative 22 % 22 % 22 % 28 %
Restructuring and other charges 1 % 8 % 1 % 5 %
Impairment of long-lived assets 1 % - - 1 %
Amortization of intangible assets 1 % - 1 % -
Total operating expenses 39 % 43 % 38 % 48 %
Operating income (loss) (5 )% (7 )% (6 )% (13 )%
Interest income - - - -
Interest expense - - - -
Other income (expense), net (2 )% 1 % (1 )% 1 %
Income (loss) before income taxes (7 )% (6 )% (7 )% (12 )%
Income tax provision (benefit) 6 % 1 % 1 % 1 %
Net income (loss) (13 )% (7 )% (8 )% (13 )%
Net Revenue
The following table presents our revenues by source (in millions):
Three months ended September 30 ,
Nine months ended
2022 2021 % change 2022 2021 % change
Products $ 91.7 $ 82.9 10.6 % $ 247.5 $ 237.1 4.4 %
Services and software 15.7 5.5 185.5 % 28.0 15.1 85.4 %
Total $ 107.4 $ 88.4 21.5 % $ 275.5 $ 252.2 9.2 %
23-------------------------------------------------------------------------------- For the three months endedSeptember 30, 2022 , product revenue increased by 10.6% or$8.8 million to$91.7 million from$82.9 million in the same period last year. The increase in product revenue during the period was primarily attributable to higher spending levels from our major customers inAsia , partially offset by the impact of unfavorable foreign exchange rate fluctuations. Service and software revenue represents revenue from maintenance and other services associated with product shipments as well as ASSIA related software revenue. The increase in service and software revenue was primarily due to the increased product and software sales, including revenue related to ASSIA. For the nine months endedSeptember 30, 2022 , product revenue increased by 4.4% or$10.4 million to$247.5 million from$237.1 million in the same period last year. The increase in product revenue during the period was primarily attributable to increased sales of our mobile transport and fixed broadband connectivity products and partly as a result of recovering from the impacts of the COVID-19 pandemic. The increase in service and software revenue was primarily due to the increased product and software sales and revenue related to the ASSIA Acquisition.
The following table presents our revenues by geographical concentration (in millions):
Three months ended September 30 ,
Nine months ended
2022 2021 % change 2022 2021 % change
Americas $ 27.6 $ 27.3 1.1 % $ 78.9 $ 74.0 6.6 %
Europe , Middle East ,
Africa 26.6 20.4 30.4 % 58.4 55.0 6.2 %
Asia 53.2 40.7 30.7 % 138.2 123.2 12.2 %
Total $ 107.4 $ 88.4 21.5 % $ 275.5 $ 252.2 9.2 %
Our geographic diversification reflects the combination of market demand, a strategic focus on capturing market share through new customer wins and new product introductions.
From a geographical perspective, the increase in net revenue for the three and nine months endedSeptember 30, 2022 was attributable to increased revenue in all regions driven by increased spending levels from our major customers and revenue related to the ASSIA Acquisition. For the three and nine months endedSeptember 30, 2022 , one customer accounted for 12% of net revenue. For the three months endedSeptember 30, 2021 , two customers accounted for 15% and 11% of net revenue, respectively. For the nine months endedSeptember 30, 2021 , two customers accounted for 18% and 12% of net revenue, respectively. We anticipate that our results of operations in any given period may depend to a significant extent on sales to a small number of large customers. As a result, our revenue for any quarter may be subject to significant volatility based upon changes in orders from one or a small number of key customers.
Cost of Revenue and Gross Profit
Total cost of revenue increased by 26.1% to$70.9 million for the three months endedSeptember 30, 2022 , compared to$56.2 million for the three months endedSeptember 30, 2021 . Total cost of revenue was 66.0% of net revenue for the three months endedSeptember 30, 2022 , compared to 63.6% of net revenue for the three months endedSeptember 30, 2021 , which resulted in an decrease in gross profit percentage to 34.0% for the three months endedSeptember 30, 2022 from 36.4% for the three months endedSeptember 30, 2021 . The increase in total cost of revenue was primarily due to an increase in revenue combined with fees paid to expedite certain product components, while the decrease in gross profit percentage was primarily due to the change in number and mix of products sold, including the geographic mix of those sales, negative exchange rate impacts on revenues and such expedite fees. Total cost of revenue increased by 13.6% to$187.2 million for the nine months endedSeptember 30, 2022 , compared to$164.8 million for the nine months endedSeptember 30, 2021 . Total cost of revenue was 68.0% of net revenue for the nine months endedSeptember 30, 2022 , compared to 65.3% of net revenue for the nine months endedSeptember 30, 2021 , which resulted in an decrease in gross profit percentage to 32.0% for the nine months endedSeptember 30, 2022 from 34.7% for the nine months endedSeptember 30, 2021 . The increase in total cost of revenue was primarily due to an increase in revenue combined with fees paid to expedite certain product components, while the decrease in gross profit percentage was primarily due to the change in number and mix of products sold, including the geographic mix of those sales, negative exchange rate impacts on revenues and such expedite fees. Operating Expenses
Research and Product Development Expenses: Research and product development expenses include personnel costs, outside contractor and consulting services, depreciation on lab equipment, costs of prototypes and overhead allocations.
Research and product development expenses increased by 32.4% to$15.5 million for the three months endedSeptember 30, 2022 compared to$11.7 million for the three months endedSeptember 30, 2021 . Research and product development expenses increased by 14.1% to$39.7 million for the nine months endedSeptember 30, 2022 compared to$34.8 million for the nine 24 --------------------------------------------------------------------------------
months ended
We intend to continue to invest in research and product development to attain our strategic product development objectives, while seeking to manage the associated costs through expense controls.
Selling, Marketing, General and Administrative Expenses: Selling, marketing, general and administrative expenses include personnel costs for sales, marketing, administration, finance, information technology, human resources and general management as well as legal and accounting expenses, rent, utilities, trade show expenses and related travel costs. Selling, marketing, general and administrative expenses increased by 21.3% to$23.7 million for the three months endedSeptember 30, 2022 compared to$19.5 million for the three months endedSeptember 30, 2021 . The increase was primarily due to higher stock-based compensation and strategic hiring decisions across sales and administration with the intent to accelerate growth and capture market share. Selling, marketing, general and administrative expenses decreased by 11.0% to$62.0 million for the nine months endedSeptember 30, 2022 compared to$69.6 million for the nine months endedSeptember 30, 2021 . The decrease was primarily due to$14.2 million of bad debt expense recorded in the first quarter of 2021 for one customer inIndia . Refer to Note 1 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information on the bad debt expense. The above impact was partially offset by higher stock-based compensation and strategic hiring decisions across sales and administration with the intent to accelerate growth and capture market share. Restructuring and Other Charges: Restructuring and other charges for the nine months endedSeptember 30, 2022 and 2021 related primarily to the strategic decisions in the third quarter of 2022 to outsource manufacturing from the Company'sSeminole, Florida facility to Fabrinet, and in 2021, to transitionDZS GmbH and Optelian to sales and research and development centers. For the three months endedSeptember 30, 2022 , the Company recorded$0.6 million , consisting of$0.2 million of personnel costs and$0.4 million of inventory valuation adjustments related to theSeminole transition and for the nine months endedSeptember 30, 2022 , the Company recorded$1.4 million , consisting of$0.6 million related to theSeminole transition and$0.8 million of logistics costs and professional services related to legal and accounting support for theDZS GmbH transition. See Note 9 Restructuring and Other Charges of the Notes to Unaudited Condensed Consolidated Financial Statements, for further information. Impairment of Long-lived Assets: Impairment of long-lived assets for the three and nine months endedSeptember 30, 2022 was$0.8 million for the right-of use assets from operating leases in connection with vacating the office space inRedwood City, California . Refer to Note 12 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information. Impairment of long-lived assets for the nine months endedSeptember 30, 2021 was$1.7 million for the right-of use assets from operating leases in connection with the relocation of the headquarters toPlano, Texas . Interest Income (Expense), net: Interest income (expense) relates mainly to earnings from our cash and cash equivalents, interest expense associated with the credit facilities and amortization of debt issuance costs associated with obtaining such credit facilities. For the three and nine months endedSeptember 30, 2022 , the Company recorded$0.4 million and$0.6 million of interest expense, net, respectively. For the three and nine months endedSeptember 30, 2021 , the Company recorded$0.1 million and$0.2 million of interest expense, net, respectively. Other Income (Expense), net: Other income (expense) relates mainly to realized and unrealized foreign exchange gains and losses. For the three and nine months endedSeptember 30, 2022 , the Company recorded$2.0 million and$2.8 million of other expense, net, respectively. For the three and nine months endedSeptember 30, 2021 , the Company recorded$0.9 million and$1.6 million of other income, net, respectively. The change in other income (expense), net was primarily due to foreign currency exchange rates fluctuation during the above periods. Income Tax Provision: Income tax expense for the three and nine months endedSeptember 30, 2022 was$6.1 million and$1.9 million on pre-tax losses of$7.7 million and$21.0 million , respectively. In the third quarter of 2022, the Company derecognized the tax benefits previously recorded in the first and second quarters of 2022 based on its quarterly realizability assessment of such benefits. Income tax expense for the three and nine months endedSeptember 30, 2021 was approximately$0.7 million and$2.0 million respectively, on pre-tax losses of$5.2 and$30.4 million , respectively. As ofSeptember 30, 2022 , the income tax rate varied fromthe United States statutory income tax rate primarily due to the derecognition of tax benefits previously recognized in the first and second quarters of 2022 as discussed above. Consistent with the prior periods, the Company continued to maintain valuation allowances inNorth America , EMEA andAsia .
NON-GAAP FINANCIAL MEASURES
In managing our business and assessing our financial performance, we supplement the information provided by ourU.S. GAAP results with adjusted earnings before stock-based compensation, interest, taxes, and depreciation, or Adjusted EBITDA, a 25 -------------------------------------------------------------------------------- non-U.S. GAAP financial measure. We define Adjusted EBITDA as net income (loss) plus (i) interest expense, net, (ii) other income and expense, (iii) provision (benefit) for taxes, (iv) depreciation and amortization, (v) stock-based compensation, and (vi) the impact of material transactions or events that we believe are not indicative of our core operating performance, such as acquisition costs, impairment of goodwill, intangibles or long-lived assets, loss on debt extinguishment, restructuring and other charges, including termination related benefits, headquarters and facilities relocation, executive transition, and bad debt expense primarily related to a large customer inIndia , any of which may or may not be recurring in nature. We believe that the presentation of Adjusted EBITDA enhances the usefulness of our financial information by presenting a measure that management uses internally to monitor and evaluate our operating performance and to evaluate the effectiveness of our business strategies. We believe Adjusted EBITDA also assists investors and analysts in comparing our performance across reporting periods on a consistent basis because it excludes the impact of items that we do not believe reflect our core operating performance.
Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:
•
Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual requirements;
•
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•
Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
•
Although depreciation and amortization are non-cash expenses, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
•
Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period; and
•
Other companies in our industry may calculate Adjusted EBITDA and similar measures differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss) or any other performance measures calculated in accordance withU.S. GAAP or as a measure of liquidity. Management understands these limitations and compensates for these limitations by relying primarily on ourU.S. GAAP results and using Adjusted EBITDA only as a supplemental measure. Beginning in the third quarter of 2022, the Company updated its presentation of non-GAAP financial measures to exclude the impact of Other Income/Other Expense in its reported Adjusted EBITDA. The change to Adjusted EBITDA reflects exclusion of transactions that we believe are not indicative of our core operating performance. All prior periods presented have been restated to reflect this change. Set forth below is a reconciliation of net income (loss) to Adjusted EBITDA, which we consider to be the most directly comparableU.S. GAAP financial measure to Adjusted EBITDA (in thousands): Nine months ended September Three months ended September 30, 30, 2022 2021 2022 2021 Net income (loss)$ (13,796 ) $ (5,896 ) $ (22,872 ) $ (32,400 ) Add (deduct): Interest expense, net 399 29 653 245 Other expense (income)* 1,984 (14 ) 2,847 (725 ) Income tax provision (benefit) 6,128 676 1,858 2,032 Depreciation and amortization 2,109 1,112 4,551 3,555 Stock-based compensation 5,023 3,104 10,562 6,450 Headquarters and facilities relocation 827 (908 ) 827 1,012 Restructuring and other charges 601 6,754 1,393 12,098 Acquisition costs 111 9 733 689 Executive transition 464 200 802 372 Bad debt expense, net of recoveries** (120 ) - (1,030 ) 14,206 Adjusted EBITDA$ 3,730 $ 5,066$ 324 $ 7,534 * For the three and nine months of 2021, previously reported Adjusted EBITDA excluded a component of Other Income related to the lease termination inAlameda . The related amount is included in the Headquarters and facilities relocation line on the net income (loss) to Adjusted EBITDA reconciliation table and is not included in Other expense (income) here. ** See Note 1 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information. 26 --------------------------------------------------------------------------------
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
For a complete description of what we believe to be the critical accounting policies and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to Note 1 Organization and Summary of Significant Accounting Policies in the Notes to our Audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , as supplemented by Note 1 Organization and Summary of Significant Accounting Policies of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
LIQUIDITY AND CAPITAL RESOURCES
Our operations are financed through a combination of our existing cash, cash equivalents, available credit facilities, and issuance of equity or debt instruments, based on our operating requirements and market conditions.
The following table summarizes the information regarding our cash and cash equivalents and working capital (in thousands):
September 30, 2022 December 31, 2021
Cash and cash equivalents $ 17,861 $ 46,666
Working capital 83,834 124,498
The Company had a net loss of $13.8 million and $22.9 million for the three and
nine months ended September 30, 2022 , respectively. The Company had a net loss
of $5.9 million and $32.4 million for the three months and nine months ended
September 30, 2021 , respectively.
As of
As ofSeptember 30, 2022 , we had$7.0 million outstanding debt and$1.5 million in letters of credit issued under the$30.0 million Revolving Credit Facility, and$21.5 million was available to the Company for additional borrowings. We continue to focus on cost management, operating efficiency and efficient discretionary spending. In addition, if necessary, we may leverage our Revolving Credit Facility or issue debt or equity securities. We may also rationalize the number of products we sell, adjust our manufacturing footprint, and reduce our operations in low margin regions, including reductions in headcount. Based on our current plans and current business conditions, we believe that these measures along with our existing cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements for at least the next 12 months from the date of this Quarterly Report on Form 10-Q.
The following table presents a summary of our cash flow activity for the periods set forth below (in thousands):
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