Restructuring and Other Charges

6 Months Ended

Jun. 30, 2023

Restructuring and Related Activities [Abstract]

Restructuring and Other Charges

Restructuring and Other Charges

In 2021, the Company made the strategic decision to relocate manufacturing functions of DZS GmbH and Optelian to Seminole, Florida and to transition the above subsidiaries to sales and research and development centers. For the three and six months ended June 30, 2022, the Company recorded $0.4 million and $0.8 million of restructuring related costs, respectively, consisting primarily of logistics costs and professional services related to legal and accounting support. The restructuring of DZS GmbH and Optelian was completed in 2022 and no related restructuring costs were recorded for the three and six months ended June 30, 2023.

On September 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's Seminole, Florida facility to Fabrinet. The transition to Fabrinet began in October 2022 and substantially completed in the beginning of 2023. Post transition, the DZS Seminole, Florida-based operations, supply chain and manufacturing workforce was reduced by approximately two-thirds and the remaining team was relocated to an appropriately sized facility. For the three months ended June 30, 2023, the Company recorded $0.9 million of restructuring related costs, consisting of facility and labor costs of $0.6 million and other costs of $0.3 million. For the six months ended June 30, 2023, the Company recorded $4.4 million of restructuring related costs, consisting of freight costs of $0.9 million, facility and labor costs of $1.7 million, accelerated depreciation of manufacturing related assets of $0.4 million, inventory write-off of $0.5 million, and other costs of $0.9 million. The above expenses were included in restructuring and other charges on the unaudited condensed consolidated statement of comprehensive loss.

For the three and six months ended June 30, 2023, the Company also incurred $0.6 million of expedite fees and other elevated inventory related costs, which directly related to the Fabrinet transition. These costs were included in cost of revenue on the unaudited condensed consolidated statement of comprehensive loss.

For the three and six months ended June 30, 2023, the Company also incurred certain maintenance costs related to impaired facilities and non-capitalizable implementation costs related to replacement of the Company’s legacy enterprise resource planning and reporting software. The Company included such costs in restructuring and other charges on the unaudited condensed consolidated statement of comprehensive loss