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UTStarcom Reports Unaudited Financial Results for Second Quarter 2018

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HONG KONG, Aug. 03, 2018 (GLOBE NEWSWIRE) -- UTStarcom ("UT" or "the Company") (NASDAQ:UTSI), a global telecommunications infrastructure provider, today reported its unaudited financial results for the second quarter ended June 30, 2018.

UTStarcom's Chief Executive Officer Tim Ti commented, "Second quarter results met our expectations.  Revenue was at the high end of guidance due to the initiation of two large projects in India.  Despite a gross margin decrease from a year ago due to changes in product and geographic mix, we achieved positive operating income for the quarter.  Importantly, our financial position remains strong, with over $80 million in cash." 

Tim continued, "Innovation is our strength and we are committed to technology leadership through continuing investments in our R&D capabilities.  We are excited about the opportunities presented by the worldwide transition to 5G wireless network and are positioning our product portfolio accordingly.  For instance, we are an early entrant in SRv6 routing platforms, as well as offering leading synchronization and software-defined network products.  Our new product offerings enable network operators to meet the challenges of the rapidly escalating network traffic generated by new trends such as internet of things and 5G mobile data."

Business Highlights

  • In July 2018, UT participated in the SoftBank World 2018 Exhibition and Conference in Tokyo, where the Company displayed a number of its newest products.  Products displayed at the show included the next-generation SRv6-based routing platforms SkyFlux products; 5G-ready timing solution SyncRing; the SDN platform "SOO Station"; the intelligent gateway device "VBG".  In addition, the executive management team presented its view on optimal networking solutions to facilitate 5G deployment and operations

  • In July 2018, the Company showcased a number of its cutting-edge technologies in the UT-sponsored "Network Evolution 2018 – Live Demonstration" event in Tokyo.  These technologies enable networks to evolve to support 5G, IoT ("Internet of Things") and M2M ("Machine-to-Machine").  UT's existing, new and potential customers as well as strategic partners attended the event

  • UT introduced its new smart commercial refrigerator "goBox" featuring a new integrated load and image sensing technology.  The Company began initial commercial deployment of this new retail product in the second quarter and expects to see a significant ramp in shipment in the second half of 2018

Second Quarter 2018 Financial Results

Summary of Q2 2018 Key Financials

  Q2 2018 Y/Y Change* Q/Q Change*
Revenue $28.5 -9.4% +26.3%
Gross Margin 26.2% -210 bps -1430 bps
Operating Expenses $7.0 -2.7% +2.1%
Operating Income $0.5 -$1.3 -$1.8
Net Income (Loss) -$0.1 -$2.5 -$4.1
Basic EPS -$0.00 -$0.07 -$0.11
Cash Balance (including Restricted Cash) $80.5 -27.7% -18.6%

*Dollar comparisons are used where percentage comparisons are not meaningful.
*All the numbers in U.S. Dollars are in million except EPS

Total Revenues

Q2 2018 total revenues were $28.5 million, compared to $31.5 million in the corresponding period of 2017.

  • Q2 2018 net equipment sales were $24.1 million, a decrease of 7.8% from $26.2 million in the corresponding period in 2017.  The decrease was due to the initial sales of SyncRing in Q2 2017 in Japan

  • Q2 2018 net services sales were $4.4 million, a decrease of 17.0% from $5.3 million in the corresponding period in 2017.  Sales decreased due to the expiration of a legacy India service contract

Gross Profit

Q2 2018 gross profit was $7.5 million, or 26.2% of net sales, compared to $8.9 million, or 28.3% of net sales, in the corresponding period in 2017.

  • Q2 2018 equipment gross profit was $6.2 million, compared to $7.5 million in the corresponding period in 2017.  Q2 2018 equipment gross margin was 25.6%, compared to 28.6% for the corresponding period in 2017

  • Q2 2018 service gross profit was $1.3 million, compared to $1.4 million in the corresponding period in 2017.  Q2 2018 service gross margin was 29.5%, compared to 27.2% for the corresponding period in 2017

Operating Expenses

Q2 2018 operating expenses were $7.0 million, compared to $7.2 million in the corresponding period in 2017.

  • Q2 2018 selling, general and administrative ("SG&A") expenses were $4.2 million, compared to $4.9 million in the corresponding period in 2017.  The higher SG&A expenses in second quarter of 2017 were mainly due to professional services expenses associated with change of auditors and the privatization which had been withdrawn in October 2017

  • Q2 2018 research and development expenses were $2.8 million, compared to $2.3 million in the corresponding period in 2017.  The increase was mainly due to higher headcount, as the Company continues to hire engineering talent to address key new market opportunities

Operating Income

Q2 2018 operating income was $0.5 million, compared to $1.7 million in the corresponding period of 2017.

Interest Income, Net

Q2 2018 net interest income was $0.3 million, compared to $0.2 million in the corresponding period in 2017.

Other Income (Expense), Net

Q2 2018 net other expenses were $0.3 million, compared to net other income of $2.0 million in the corresponding period in 2017.

Net Income (Loss)

Q2 2018 net loss attributable to shareholders was $0.1 million, compared to net income of $2.4 million in the corresponding period in 2017.  Q2 2018 basic net loss per share was $0.00, compared to basic net income per share of $0.07 for the corresponding period of 2017.

Cash Flow

In the second quarter of 2018, cash used in operating activities was $13.7 million, cash used in investing activities was $1.8 million, and cash used in financing activities (stock repurchases) was $1.1 million.  As of June 30, 2018, UTStarcom had cash, cash equivalent and restricted cash of $80.5 million.

Outlook

Earnings results in the third quarter will be driven by the ongoing fulfillment of large projects in India.  These projects should result in strong revenue growth, but at reduced gross margin relative to the second quarter of 2018.  For the third quarter, the Company expects to generate revenue in the range of $38 million to $43 million.

Second Quarter 2018 Conference Call Details

The Company's management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on Friday, August 3, 2018 (8:00 p.m. Hong Kong/Beijing Time).

The conference call dial-in numbers are as follows:

United States: +1 (866) 519-4004
Canada: + 1 (866) 386-1016
Hong Kong: +852-3018-6771
China: 4006-208-038
Other International: +65 6713-5090

The attendee passcode is 6394963.

A replay of the call will be available two hours after the end of the conference call until 9:59 a.m. U.S. Eastern Time on September 3, 2018.

The conference call replay numbers are as follows:

United States: +1 (855) 452-5696
Hong Kong: 800-963-117
China: 4006-022-065
Other International: +61-2-8199-0299

The replay passcode for accessing the recording is 6394963.

Investors will also have the opportunity to listen to the live conference call and the replay over the Internet through the investor relations section of UTStarcom's web site at: http://www.utstar.com.

About UTStarcom Holdings Corp.

UTStarcom is a global telecom infrastructure provider dedicated to developing technology that will serve the rapidly growing demand for bandwidth from cloud-based services, mobile, streaming, and other applications.  We work with carriers globally, from Asia to the Americas, to meet this demand through a range of innovative broadband packet optical transport and wireless/fixed-line access products and solutions.  The Company's end-to-end broadband product portfolio, enhanced through in-house Software Defined Networking (SDN)-based orchestration, enables mobile and fixed-line network operators and enterprises worldwide to build highly efficient and resilient future-proof networks for a range of applications, including mobile backhaul, metro aggregation, Broadband access and Wi-Fi data offload.  Our strategic investments in media operational support service providers expand UTStarcom's capabilities in the field of next generation video platforms.  UTStarcom was founded in 1991, started trading on NASDAQ in 2000, and has operating entities in Hong Kong; Tokyo, Japan; San Jose, USA; Delhi and Bangalore, India; Hangzhou and China.  For more information about UTStarcom, please visit http://www.utstar.com.

Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the Company's strategic initiatives and the Company's business outlook. These statements are forward-looking in nature and subject to risks and uncertainties that may cause actual results to differ materially and adversely from the Company's current expectations. These include risks and uncertainties related to, among other things, changes in the financial condition and cash position of the Company, changes in the composition of the Company's management and their effect on the Company, the Company's ability to realize anticipated results of operational improvements and benefits of the divestiture transaction, the ability to successfully identify and acquire appropriate technologies and businesses for inorganic growth and to integrate such acquisitions, the ability to internally innovate and develop new products, assumptions the Company makes regarding the growth of the market and the success of the Company's offerings in the market, and the Company's ability to execute its business plan and manage regulatory matters. The risks and uncertainties also include the risk factors identified in the Company's latest annual report on Form 20-F and current reports on Form 6-K as filed with the Securities and Exchange Commission. The Company is in a period of strategic transition and the conduct of its business is exposed to additional risks as a result. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release, which may change, and the Company assumes no obligation to update any such forward-looking statements.

For investor and media inquiries, please contact:

UTStarcom Holdings Corp.

Tel: +852-3951-9757
Ms. Fei Wang, Director of Investor Relations
Email: fei.wang@utstar.com

Ms. Ning Jiang, Investor Relations
Email: njiang@utstar.com

In the United States:

The Blueshirt Group
Mr. Ralph Fong
Tel: +1 (415) 489-2195
Email: ralph@blueshirtgroup.com


UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Balance Sheets

    June 30,   December 31,  
    2018   2017  
    (In thousands)  
ASSETS          
Current assets:          
Cash, cash equivalents   $ 64,308   $ 79,749  
Short-term investments   -   3,143  
Accounts and notes receivable, net   35,017   16,911  
Inventories and deferred costs   59,360   40,684  
Short-term restricted cash   9,497   12,099  
Prepaids and other current assets   24,335   14,227  
Total current assets   192,517   166,813  
Long-term assets:          
Property, plant and equipment, net   1,595   1,714  
Long-term deferred costs   27   277  
Long-term restricted cash   6,675   8,839  
Other long-term assets   11,131   9,401  
Total long-term assets   19,428   20,231  
Total assets   $ 211,945   $ 187,044  
           
LIABILITIES AND EQUITY          
Current liabilities:          
Accounts payable   $ 65,887   $ 27,452  
Customer advances   6,230   21,828  
Deferred revenue   4,299   7,286  
Other current liabilities   29,266   31,698  
Total current liabilities   105,682   88,264  
Long-term liabilities:          
Long-term deferred revenue and other liabilities   6,018   7,788  
Total liabilities   111,700   96,052  
           
Total equity   100,245   90,992  
Total liabilities and equity   $ 211,945   $ 187,044  


UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Statements of Operations

    Three months ended June 30,   Six months ended June 30,  
    2018   2017   2018   2017  
    (In thousands, except per share data)  
Net sales   $ 28,536   $ 31,485   51,126   $ 54,023  
Cost of net sales   21,059   22,566   34,503   35,996  
Gross profit   7,477   8,919   16,623   18,027  
    26.2 % 28.3 % 32.5 % 33.4 %
Operating expenses:                  
Selling, general and administrative   4,225   4,914   8,120   8,556  
Research and development   2,760   2,263   5,703   4,088  
Total operating expenses   6,985   7,177   13,823   12,644  
                   
Operating Income   492   1,742   2,800   5,383  
                   
Interest income, net   324   214   798   580  
Other income (expense), net   (315 ) 2,045   (332 ) 2,398  
Equity pick up of losses of an associate   (148 )   (148 )  
Investment Impairment     (1,308 )   (1,308 )
Income before income taxes   353   2,693   3,118   7,053  
Income taxes benefit (expenses)   (440 ) (249 ) 826   1,291  
Net Income (Loss) attributable to UTStarcom Holdings Corp.   $ (87 ) $ 2,444   $ 3,944   $ 8,344  
                   
Net Income (Loss) per share attributable to UTStarcom Holdings Corp.—Basic   $ (0.00 ) $ 0.07   $ 0.11   $ 0.24  
                   
Weighted average shares outstanding—Basic   35,740   35,451   35,744   35,421  


UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Statements of Cash Flows

    Three months ended June 30,   Six months ended June 30,  
    2018   2017   2018   2017  
        (In thousands)          
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net Income (Loss)   $ (87 )    $ 2,444   $ 3,944   $ 8,344  
Depreciation   184   152   372   315  
Provision for doubtful accounts   491   (18 )    543   (129 )
Provision for (recovery of) deferred costs   (1,775 ) 1,850   (1,754 )    3,528  
Stock-based compensation expense   198   83   400   390  
Net loss (gain) on disposal of assets   (31 )   (31 )  
Gain on release of tax liability due to expiration of the statute of limitations     (1,478 )   (1,478 )
Deferred income taxes   105   281   24   231  
Loss (gain) from equity investments, net   148     148    
Other-than-temporary impairment of equity investments     1,308     1,308  
Loss (gain) on Cumulative Transfer Adjustment recognition from liquidation subsidiaries     (1,703 )   (1,703 )
Changes in operating assets and liabilities   (12,892 ) (471 ) (22,412 ) 71  
        Net cash provided by (used in) operating activities   (13,659 ) 2,448   (18,766 ) 10,877  
                   
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Additions to property, plant and equipment     (129 ) (221 ) (179 )
Purchase of investment interests   (1,771   (100 ) (1,771 ) (100 )
Proceeds from sale of short term investment       3,143    
Proceeds from refund of investment interests         479  
       Net cash provided by (used in) investing activities   (1,771 ) (229 ) 1,151   200  
                   
CASH FLOWS FROM FINANCING ACTIVITIES:                  
Proceeds from exercise of stock options   48     71    
Repurchase of ordinary share   (1,135 )   (1,135 ) (140 )
       Net cash used in financing activities   (1,087 )   (1,064 ) (140 )
Effect of exchange rate changes on cash and cash equivalents   (1,891 ) (413 ) (1,527 ) 1,771  
       Net increase (decrease) in cash and cash equivalents   (18,408 ) 1,806   (20,206 ) 12,708  
Cash, cash equivalents and restricted cash at beginning of period   98,888   109,543   100,686   98,641  
Cash, cash equivalents and restricted cash at end of period   $ 80,480   $ 111,349   $ 80,480   $ 111,349  

 

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