dzs investor presentation

© 2021 DZS – Proprietary and Confidential © 2021 DZS – Proprietary and Confidential

DZS Investor Presentation

May 2021

© 2021 DZS – Proprietary and Confidential

Safe Harbor and Forward-Looking Statements

2

This presentation contains forward-looking statements regarding future events and our future results that are subject to the safe harborscreated under the Private Securities Litigation Reform Act of 1995. These statements reflect the beliefs and assumptions of theCompany’s management as of the date hereof. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,”“goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” variations of such words, the negative of such words, andsimilar expressions are intended to identify forward-looking statements. In addition, statements that refer to projections or estimates ofearnings, revenue, operating expenses, gross profit, costs or other financial items (including non-GAAP measures) in prior or futureperiods are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and aresubject to risks, uncertainties and assumptions that are difficult to predict. The Company’s actual results could differ materially andadversely from those expressed in or contemplated by the forward-looking statements. In addition to factors discussed herein, factors thatcould cause actual results to differ include, but are not limited to, those risk factors contained in the Company’s SEC filings availableat www.sec.gov, including without limitation, the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and subsequentfilings. In addition, additional or unforeseen affects from the COVID-19 pandemic and the global economic climate may give rise to oramplify many of these risks. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only asof the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements for anyreason.

This presentation includes financial measures that are not in accordance with generally accepted accounting principles (“GAAP”), such asAdjusted EBITDA, which the Company believes is appropriate to provide meaningful comparison with, and to enhance an overallunderstanding of the Company’s past financial performance and prospects for the future. The Company believes these non-GAAPfinancial measures provide useful information to both management and investors to evaluate operations and operating performance andare widely used in the telecommunications and manufacturing industries. Other companies in the telecommunications and manufacturingindustries may calculate these metrics differently than the Company does. The presentation of this additional information is not meant tobe considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. Please see theaccompanying table at the end of this presentation for reconciliations of those measures to comparable GAAP measures.

This presentation shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there by any sale of the securities in anyjurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration, qualification, or exemption under the securitieslaws of any such jurisdiction.

http://www.sec.gov/


Introducing DZS

3

A Global Leader in the development of innovative packet-based Mobile Transport, Broadband Connectivity and Cloud-Native Software Defined Networking solutions

Mobile Transport and Broadband Connectivity Pure-Play:• Incumbent to ~750 Tier I and Alternate Service Providers

• Favorable Secular and Geo-Political tailwinds

• ~$15B Total Addressable Market in 2020 grows to $24B in 2024 (9.3% CAGR)

Business & Technology Transformation yielding Compelling Results:• Visionary CEO with a 30-year proven track record, delivering standard-

setting innovation, exponential growth and financial results

• New Management Team representing three consecutive quarters of Record Orders, Backlog, Revenue and Margin Expansion

• Two recent technology Acquisitions (mobile transport, software defined networking/automation) – Potential for significant future upside via amplified expansion playbook and operational streamlining

• Recent Follow-on Equity Raise of $64M in Gross Proceeds

*2021 revenues reflect the midpoint of guidance as of May 3, 2021


Market Leader in Next Generation 10Gig PON (XGS / 10GE)

Software Defined Networking and Automation Disruptor

4

*Source: Omdia (Fiber and Copper Access Equipment: Revenue 4Q20 2017-Present), Results

are not an endorsement of DZS. Any reliance on these results is at the third-party’s own risk

O-RAN InnovatorMobile xHaul5G

Supplier to Many of World’s Leading Service Providers

Regional Leader in Broadband Connectivity and 5G Mobile transport to South Korea and Japan


~750 Customers balanced across Americas, EMEA and Asia

5

Q1’21 YoY North America

100%+ YoY (orders)

Q1’21 YoY EMEA

~60% YoY (orders)


Cyclical Pillars Driving Communications Investment

6

B

Mobile Spend Cycle

Open &

Software

Defined

Networks

Geo-Political

Kbps Mbps Gbps

DSL BPON GPON

→ →

CLEC

WorldCom NbN

CAF

RDOF

GDRP

→ →

Mobile

Spend

Cycle

Broadband

Spend

Cycle

1G 2G 3G 4G


DZS Growth Pillars

Broadband Connectivity

5G / Open RAN

North

America and

EMEA

Expansion

7

Security

Bans

ps+


5G requires Mobile Transport Solutions

Wireline Spend Cycle

5G / Open RAN

Open &

Software

Defined

Networks

8

ps+

DZS Recent Results

Business Drivers

5G Mobile Network

Diagram

Market Size

▪ $100M in revenue in 2020

▪ $22.8M in revenue in Q1’21

▪ 635% YoY Revenue Growth

▪ 1.5M Mobile xHaul ports shipped

▪ Major Customers Include:

▪ 4G to 5G Upgrade Cycle

▪ Rapid adoption of Open RAN

▪ O-RAN Validation from

Rakuten Mobile (4M+ subs)

▪ Leadership in 5G Fronthaul,

Mid-haul and Backhaul

Technology

▪ $7.1B Revenue forecast for

Mobile Backhaul Equipment

(Omdia) up 28% vs. FY2020


Mobile Fronthaul Equipment

(Omdia) up 116% vs. FY2020

▪ Fronthaul drives ~40%

increase in backhaul TAM


Open and Software Defined = New Age of O-RAN


Wireless Spend Cycle

Open &

Software

Defined

Networks

9

Geo-Political

Influences

ps+

Open RAN market is rapidly accelerating, growing 600%+ over next 4 years and becoming significant part of mobile market

▪ The world’s first commercial O-RAN deployment

▪ 4M subscribers in Japan

▪ Rakuten Communications Platform (RCP) has 15

confirmed global partners

Source: Omdia, Mobile Infrastructure Market Tracker 3Q20 Analysis, December 2020. Results are not an endorsement of DZS. Any reliance on these results is at the third-party’s own risk.


Broadband Undergoing Historic Upgrade Cycle



Open &

Software

Defined

Networks

10

Geo-Political

Influences

ps+

DZS Results

Business Drivers

FTTx Network Diagram

Market Size

▪ 30% YoY Revenue Growth in

Broadband Connectivity Segment

(72% of Overall Revenue)

▪ 24 New Customers

▪ Symmetrical Broadband Services

▪ 10-25Gbps Upgrade Cycle

▪ ~$120B of Broadband Initiatives

▪ Hybrid Work From Home

▪ FiberLAN (Enterprise)

▪ Reoccurring SDN/Automation

Software License Model

▪ Reoccurring SLA Model


Broadband Access

Equipment (Omdia) up 50%

vs. FY2020

▪ $8.7B SAM (Excluding

China), forecast up 56% vs.

FY2020

30%

Source: Omdia, Fiber and Copper Access Equipment Forecast, February 2021. Results are not an endorsement of DZS. Any reliance on these results is at the third-party’s own risk.


Security Environment creating Investment Cycle



Open &

Software

Defined

Networks

11

Security

Bans

ps+

▪ Chinese suppliers represent ~63% of global market, representing a generational opportunity for cap & grow, replacement and future expansion

▪ Banned countries represent nearly 50% of global communications equipment spend

▪ U.S, Japan, Australia, UK, and India are among over a dozen countries that have banned China suppliers with many other countries evaluating

Source: New Statesman (NS Tech) and DZS Analysis.


North America & EMEA Take-Share Opportunity



North

America &

EMEA

Take-Share

12

Geo-Political

Influences

ps+

Open &

Software

Defined

Networks

ps+

DZS Results

Business Drivers

AEMEA Customers

Market Size

▪ Americas delivered 11%

sequential and 72% YoY

revenue growth in Q1’21

▪ Americas represented 24.9%

of Q1’21 Revenue

▪ EMEA delivered 58% YoY

revenue growth in Q1’21

▪ EMEA represented 22.1% of

Q1’21 Revenue

▪ FTTx 10G+ Upgrade Cycle

▪ Phase I $9.2B RDOF awarded

– orders expected during 2H’21

▪ $100B Biden Broadband

Internet Infrastructure Bill

▪ European countries undergoing

cycle from copper to fiber

▪ 7-10 year 5G Upgrade Cycle,

O-RAN creating opportunity

$12.3B Revenue forecast for

Broadband Access Equipment by

FY2024 (Omdia):

NA/EMEA: 43% growth to $5.6B

$7.1B Revenue forecast for Mobile

Backhaul/Fronthaul Equipment

(Omdia)

NA/EMEA: 25% growth to $3.2B

North America and EMEA represent 2 of the world’s fastest growing PON markets

Source: Omdia, Fiber and Copper Access Equipment Forecast, February 2021. Results are not an endorsement of DZS. Any reliance on these results is at the third-party’s own risk.




An Emerging Wireless/Wireline Technology Race


5G Open RAN

North

America &

EMEA

13

Geo-Political

+

▪ 5G Densification requires Fiber-based Mobile Transport solutions to deliver competitive broadband-speed wireless services

▪ Wireline equipment TAM expands as service providers extend their fiber network for 5G services

▪ 5G and Fixed Fiber solutions will compete for residential and business users

▪ Competition for subscribers among non-traditional competitors will increase infrastructure demand


Vision, Transformation and Execution Yielding Results

New Executive Management

Team

Expanded Customer Base

Executed Equity Offering

Rationalized Product Portfolio

Enhanced Mobile Transport and

Software Product Portfolios

14

▪ Upgraded 60 positions

▪ New management

pedigree

▪ 12 of top 25 fixed &

mobile carriers

▪ 24 new customers

including:

▪ $64M follow-on offering

▪ Strengthened balance

sheet, no debt - Q221

▪ Realigned/Accelerated R&D

▪ Launch new global portfolios

▪ Acquired Optelian (Mobile

Transport)

▪ Acquired RIFT (SDN

Orchestration & Control)

https://forums.xfinity.com/t5/media/gallerypage/album-id/6072/image-id/25530i198049A3E33852C8


Leading with Innovation

15

Automation

Service

Orchestration

Life Cycle Mgmt

5G Mobile

xHaul

100G

Access Nodes

Switching/Routing

Wi-Fi 6

ONT/ONU

5G Slicing

Analytics

AI / ML

Enhanced O-RAN

100G/200G/400G

Cloud

Disaggregation

5G mmWave

Fixed Wireless


Broadband Connectivity (FTTx)

Core

NetworkInternet

Building

Aggregation

Access Ring(s)n x 10-100G

NeighborhoodxPON (1 – 10G+)

Wi-Fi 6 CPE

Mesh Wi-Fi

G.Fast / VDSL2(>100M)

XGS-PON ONT

CO / Remote

OLT

BroadbandACCESS

ConnectedPREMISES

BroadbandACCESS

= Addressed by DZS

16


Mobile Transport (5G / O-RAN)

Core

NetworkInternet

4G / 5G

Radio

Fronthaul

GWvBBU /

CU

Wi-Fi6 / Small Cell

Midhaul

n x 25-50GBackhaul

100-200Gn x

100-200G

10G PON Backhaul

eCPRI /

OpenFH

O-RAN

DU4G / 5G

Fixed Wireless

MOBILETransport

ConnectedPREMISES

= Addressed by DZS

Transport

Aggregation

Cell Site

Router

Backhaul

Transport

Existing

Radio Site

CPRI

<10G

Software Defined / Virtual Network Functions

Physical Network Functions

17

© 2021 DZS – Proprietary and Confidential 18

Converged Fixed and Mobile

4G / 5G

Radio

Fronthaul

GWvBBU /

O-RAN CU

Core

NetworkInternet

Midhaul

n x 25-50GBackhaul

100-200G

n x

100-200G

10G PON Backhaul

eCPRI /

OpenFH

Cell Site

Router

Backhaul

Transport

O-RAN

DU

Building

Aggregation

Access Ring(s)n x 10-100G

NeighborhoodxPON (1 – 10G+)

Wi-Fi 6 CPE

Mesh Wi-Fi

G.Fast / VDSL2(>100M)

XGSPON ONTCO /

Remote

OLT

4G / 5G

Fixed Wireless

MOBILETransport

ConnectedPREMISES

Existing

Radio Site

CPRI

<10G

= Addressed by

DZS

Wi-Fi6 / Small Cell


10G - 400G ZR+ outside plant / network edge

hardened optical transport system

Market first 10G PON FTTx solutions

delivering ultra-high speed Internet servicesPoLAN solutions delivering security, reliability, cost

and space savings for Fiber-based enterprises

Innovative and agile 5G Transport solutions

enabling more capacity, coverage and QoS

Delivering Fiber as a Utility – High-speed internet service, always-on, service assurance and

advanced WiFi service, whole home coverage and QOS prioritization of data and video content

GPON ONTs Fixed WirelessEnterprise ONTs XGS PON ONTs

Mobile Transport & Broadband Connectivity “Pure Play”

A powerful platform for end-to-end intelligence for software and network orchestration

and automation, advanced data analytics and service management that reduces OPEX


Why Customers Partner with DZS

▪ Innovation / First to Market

▪ Fixed & Mobile Portfolio

▪ Global Footprint

▪ Trusted Relationships

▪ Strategic Channel Partners

▪ Future ready - Software-Defined Networking, Orchestration & Automation

5G ReadyInnovation

Aligned

Business

Models

20

Customer

Relationships


DZS Differentiators

Able to accommodate customized

solutions and rapidly adapt them

for global sale

With 12 of top 25 wireline/wireless

communications providers as

customers, we know how to serve

global leader and innovators alike

Adept in leveraging ecosystems

and channels – Valued partner

and standards based

Bringing innovations and

advanced experiences of Eastern

markets to Western service

providers

Leaders in the Open movement –

Alignment with O-RAN, Open

Broadband, and other standards

facilities network insertion

Enabling Networks of FutureFreedom of Choice

Tier I Aligned/ Alternate Provider Savvy Agility at Scale

Play Well with Others

21

Over a decade of experience with

advanced mobile xHaul and

innovators in environmentally

hardened solutions

At the Intersection of wireline, wireless, & cloud

© 2021 DZS – Proprietary and Confidential© 2021 DZS – Proprietary and Confidential

Financial Overview


Revenue Adjusted EPS(1,2)Adjusted EBITDA(1,2)

Q1’21 Financial Overview

Note: $ in millions, except per share data

(1) Refer to “Q1 2021 Shareholder Report dated May 3, 2021” as an exhibit to the 8-K filed with the SEC on May 3, 2021

(2) Refer to “GAAP to Adjusted (non-GAAP) reconciliations in the Appendix”

$47.5

$81.0

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Q1'20 Q1'21($4.8)

$3.6

($6.0)

($5.0)

($4.0)

($3.0)

($2.0)

($1.0)

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

Q1'20 Q1'21

($0.25)

$0.10

($0.30)

($0.25)

($0.20)

($0.15)

($0.10)

($0.05)

$0.00

$0.05

$0.10

$0.15

Q1'20 Q1'21


Record Revenue Results

24


Revenue by Customer Segment & Geography


Margin Expansion Initiatives

32.9%35.0%

47.0%

2020 Adj.Gross

Margin

GeographicMix

Q1'21 OperationalSynergies

ServicesExpansion

Software 2021+ Adj.Gross

Margin


Balance Sheet Highlights

($ in millions)

March 31,

2020

June 30,

2020

September 30,

2020

December 31,

2020

March 31,

2021

Cash, cash equivalents and restricted cash 35.7$ 47.2$ 40.4$ 54.4$ 63.7$

Debt 39.7$ 56.8$ 51.5$ 43.5$ 1.8$

DSO 169 129 105 105 98

Inventory 39.9$ 48.2$ 43.9$ 39.6$ 41.1$

Inventory Turns 3.2x 4.2x 5.6x 5.6x 5.1x


Q2 and Full Year 2021 Guidance

Source: Company filings

(1) Item represents a non-GAAP financial measure; see reconciliation to the comparable GAAP measure in the appendix section of this presentation.

Low High Low High

Net revenue 76.0$ 81.0$ 320.0$ 340.0$

Adjusted Gross margin %(1)

32.5% 34.0% 34.0% 35.5%

Adjusted Operating expenses(1)

26.5 25.5 104.5 100.5

Adjusted EBITDA(1)

(3.0) 2.0 2.0 20.0

Q2 2021 Full Year 2021

($ in millions)

*Reflects the Company’s guidance as of May 3, 2021


World Class Management Team: Newly formed Management team with disruptive technology heritage and global customer relationships. In addition, ~60 “top-graded” R&D, PLM, supply chain & sales team members and two new Board Members

Mobile Transport and Broadband Access Pure Play: 20 million products in service globally. Incumbency with 12 of the

largest Mobile and Broadband Access Service Providers in the world; amplifying expansion playbook in Americas and EMEA

Revenue and Margin Expansion: Broadband Connectivity and Mobile Transport upgrade cycle combined with a near term focus to capture market-share to drive double-digit annual revenue growth while streamlining operations to drive margin expansion

Multi Faceted Secular and Geopolitical Tailwinds: 4G/5G Mobile Transport, U.S. Rural Digital Opportunity Fund

($20.4B), Secured & Trusted Communications Networks Act ($1.9B) and China Supplier Bans ($Billions)

~$97B TAM: Favorably positioned for 5G and work-from-home Broadband Access trends – first to market with 5G Open-RAN

Mobile Transport (Rakuten Mobile Network) and 10 Gigabit PON (many networks around the world)

DZS (NASDAQ: DZSI)

29

© 2021 DZS – Proprietary and Confidential6

31

Reconciliation of GAAP to Adjusted (Non-GAAP) Results –Three Months Ended March 31, 2021 and 2020

Note: $ in 000’s, except per share data


Cost of Revenue Gross Profit

Operating

Expenses

Operating

Income (Loss)

Net Income

(Loss)

Net Income

(Loss) per

Diluted Share

GAAP amount 52,936$ 28,095$ 51,192$ (23,097)$ (23,225)$ (0.92)$

Adjustments to GAAP amounts:

Depreciation and amortization (209) 209 (1,056) 1,265 1,265 0.05

Stock-based compensation (42) 42 (1,310) 1,352 1,352 0.05

Loss on debt extinguishment - - - - - -

Headquarters relocation - - (1,920) 1,920 1,920 0

Executive transition - - (71) 71 71 -

Restructuring and other charges - - (6,252) 6,252 6,252 0.25

Acquisition costs - - (643) 643 643 0.03

Bad debt expense - - (14,206) 14,206 14,206 0.56

Adjusted (Non-GAAP) amount 52,685$ 28,346$ 25,734$ 2,612$ 2,484$ 0.10$

Three Months Ended March 31, 2021


Operating

Expenses

Operating

Income (Loss)

Net Income

(Loss)

Net Income

(Loss) per

Diluted Share

GAAP amount 31,485$ 15,995$ 23,589$ (7,594)$ (8,771)$ (0.41)$


Depreciation and amortization (472) 472 (784) 1,256 1,256 0.06

Stock-based compensation (9) 9 (773) 782 782 0.04

Loss on debt extinguishment - - - - 1,369 0.06

Adjusted (Non-GAAP) amount 31,004$ 16,476$ 22,032$ (5,556)$ (5,364)$ (0.25)$

Three Months Ended March 31, 2020


32

Reconciliation of GAAP to Adjusted (Non-GAAP) Results –Twelve Months Ended December 31, 2020 and 2019

Note: $ in 000’s, except per share data



Operating

Expenses

Operating

Income (Loss)

Net Income

(Loss)

Attributable to

DZS Inc.

Net Income

(Loss) per

Diluted Share

Attributable to

DZS Inc.

GAAP amount 203,761$ 96,879$ 109,404$ (12,525)$ (23,082)$ (1.07)$


Depreciation and amortization (1,842) 1,842 (3,301) 5,143 5,143 0.24


Loss on debt extinguishment - - - - 1,369 0.06

Headquarters relocation - - (61) 61 61 0.00

Executive transition - - (2,047) 2,047 2,047 0.09

Intangibles impairment - - (6,472) 6,472 6,472 0.30

Bad debt expenses - - (3,119) 3,119 3,119 0.14

Adjusted (Non-GAAP) amount 201,833$ 98,807$ 89,877$ 8,930$ (258)$ (0.01)$


Operating

Expenses

Operating

Income (Loss)

Net Income

(Loss)

Attributable to

DZS Inc.

Net Income

(Loss) per

Diluted Share

Attributable to

DZS Inc.

GAAP amount 206,771$ 100,111$ 107,140$ (7,029)$ (13,457)$ (0.69)$


Depreciation and amortization (2,012) 2,012 (3,103) 5,115 5,115 0.26


Merger and acquisition costs - - (337) 337 337 0.02

Inventory step-up amortization (577) 577 - 577 577 0.03

Restructuring cost - - (4,908) 4,908 4,908 0.25

Goodwill impairment - - (1,003) 1,003 1,003 0.05

Adjusted (Non-GAAP) amount 204,141$ 102,741$ 94,322$ 8,419$ 1,991$ 0.10$

Twelve Months Ended December 31, 2020

Twelve Months Ended December 31, 2019


33

Reconciliation of Net Income to Adjusted EBITDA

Note: $ in 000’s


March 31,

2021

December 31,

2020

March 31,

2020

Reconciliation of net income (loss) to Adjusted EBITDA:

Net income (loss) (23,225)$ (14,040)$ (8,771)$

Interest expense, net 207 553 573

Income tax (benefit) provision 893 1,049 (5)

Depreciation and amortization 1,265 1,208 1,256

EBITDA (20,860)$ (11,230)$ (6,947)$

Stock-based compensation 1,352 1,303 782

Acquisition costs 643 - -

Loss on debt extinguishment - - 1,369

Headquarters relocation 1,920 26 -

Executive transition 71 664 -

Intangibles impairment - 6,472 -

Bad debt expense 14,206 3,119 -

Restructuring and other charges 6,252 - -

Adjusted EBITDA 3,584$ 354$ (4,796)$

For the Quarters Ended


34

Reconciliation of Net Income to Adjusted EBITDA

Note: $ in 000’s


December 31,

2020

September 30,

2020

December 31,

2019

December 31,

2020

December 31,

2019

Reconciliation of net income (loss) to Adjusted EBITDA:

Net income (loss) (14,040)$ (115)$ (10,194)$ (23,082)$ (13,263)$

Interest expense, net 553 432 810 1,958 3,525

Income tax (benefit) provision 1,049 1,619 2,487 3,501 3,585

Depreciation and amortization 1,208 1,386 1,005 5,143 5,115

EBITDA (11,230)$ 3,322$ (5,892)$ (12,480)$ (1,038)$

Stock-based compensation 1,303 1,660 690 4,613 3,508

Merger and acquisition costs - - - - 337

Loss on debt extinguishment - - - 1,369 -

Inventory step-up amortization - - - - 577

Bargain purchase gain on acquisition - - 334 - -

Headquarters relocation 26 35 - 61 -

Executive transition 664 1,383 - 2,047 -

Intangibles impairment 6,472 - - 6,472 -

Bad debt expense 3,119 - - 3,119 -

Restructuring and other charges - - 4,908 - 4,908

Goodwill impairment charge - - 1,003 - 1,003

Adjusted EBITDA 354$ 6,400$ 1,043$ 5,201$ 9,295$

DZS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

($ in thousands, except per share data)

For the Quarters Ended For the Twelve Months Ended


35

Reconciliation of Q2 and 2021 Guidance

Note: $ in 000’s


Low High Low High

Reconciliation of Net Income (Loss) to Adjusted EBITDA:

Net income (loss) (5.4)$ (0.9)$ (44.7)$ (28.5)$

Interest expense, net - - 0.2 0.2

Income tax expense 0.3 0.8 3.8 5.2

Depreciation and amortization 0.8 0.8 4.2 4.2

EBITDA (4.3) 0.7 (36.5) (18.9)

Stock-based compensation 1.1 1.1 4.5 4.5

Executive transition 0.2 0.2 0.6 0.6

Acquisition costs - - 0.6 0.6

Headquarters relocation - - 1.9 1.9

Transformational initiatives - - 30.9 31.3

Adjusted EBITDA (3.0)$ 2.0$ 2.0$ 20.0$

Reconciliation of Gross Margin to Adjusted Gross Margin:

GAAP Gross Margin 32.0% 33.5% 33.2% 34.7%

COGS Depreciation and amortization 0.5% 0.5% 0.8% 0.8%

Adjusted Gross Margin 32.5% 34.0% 34.0% 35.5%

Reconciliation of Operating Expenses to Adjusted Operating Expenses:

Operating Expenses 28.5$ 27.5$ 145.8$ 141.8$

Depreciation and amortization 0.7 0.7 3.4 3.4

Stock-based compensation 1.0 1.0 4.3 4.3

Acquisition costs - - 0.6 0.6

Executive transition 0.3 0.3 0.6 0.6

Headquarters relocation - - 1.9 1.9

Transformational initiatives - - 30.5 30.5

Adjusted Operating Expenses 26.5$ 25.5$ 104.5$ 100.5$

Q2 2021 Full Year 2021

dzs investor presentation

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