Little more than a year after procuring orchestration and automation capabilities via the acquisition of RIFT, DZS hit the M&A market again to round out its portfolio with service assurance and customer experience expertise from Assia.
In a deal that closed on Friday, the telecom vendor plunked down $25 million in cash to pick up Assia’s Expresse service assurance and CloudCheck Wi-Fi experience management solutions. The deal also includes the transfer of Assia’s team of engineers, sales and support staff, as well as nearly 60 key customers. Included among the latter are big names such as Deutsche Telekom, Lumen Technologies, Telefonica and TELUS.
Speaking on a call with investors, DZS CEO Charlie Vogt noted the acquisition will allow it to offer an end-to-end suite of open solutions which provide visibility and control of broadband services and allow it to tackle a $1 billion addressable market. He particularly highlighted opportunities to cross sell its products with the new customers it is acquiring.
“Historically our industry has been served by closed and proprietary solutions. One of DZS’ core technology and investment strategies has been to bring to market innovative and disruptive solutions that are based on open standards,” he stated. “By expanding DZS Cloud to include Expresse and CloudCheck, DZS Cloud will now offer communications service providers an open, standards-based end-to-end cloud-native software portfolio with interoperability that spans access and optical infrastructure and more than 150 unique residential gateways and Wi-Fi devices from a wide array of equipment suppliers.”
Misty Kawecki, DZS CFO, said the Assia assets are expected to contribute between $16 million and $18 million in high margin revenue in 2022. Longer term, she said they will contribute to an annual growth rate of 25% for the company’s software and services business. That increase, combined with expected 10-12% growth in its core access networking business, will put DZS on the path to achieve $600 million in annual revenue and $100 million in adjusted EBITDA by 2025, Kawecki added.
DZS ended Q1 2022 with revenue of $77 million and a net loss of $3 million. The former was down from revenue of $81 million in Q1 2021 but the latter improved from a net loss of $25.5 million. It ended the quarter with an order backlog totaling $243 million, Vogt said.
The move comes as DZS works to build up recurring software-as-a-service revenue, and is the latest acquisition designed to further that goal. Notably, it picked up software for network orchestration and automation, advanced data analytics and service management via its purchase of RIFT in March of last year.
It also sought to flesh out its access networking portfolio last year, scooping up optical network company Optelian for an undisclosed sum in January.