UTStarcom Reports Unaudited Financial Results for Third Quarter 2018

Globe Newswire 9-Nov-2018 6:00 AM

HONG KONG, Nov. 09, 2018 (GLOBE NEWSWIRE) -- UTStarcom ("UT" or "the Company") (NASDAQ:UTSI), a global telecommunications infrastructure provider, today reported its unaudited financial results for the third quarter ended September 30, 2018.

UTStarcom's Chief Executive Officer Mr. Tim Ti commented, "Third quarter revenue of $52 million far exceeded expectations, as we continued our penetration of the India market.  Our customer relationships are strong and in particular this quarter we were fulfilling a large order for a top customer building out a major project.  Gross profit of $10 million was up sequentially, reflecting increased revenue from India.  We exercised disciplined expense control, resulting in significant operating income growth."

Ti continued, "Innovation is our core competency and we remain committed to technology leadership through continuing investments in our R&D capabilities.  We are excited about the opportunity presented by the worldwide transition to 5G.  Our steadily expanding product portfolio positions us well to capture market share and drive growth in the quarters ahead."

Recent Business Highlights

  • The Company formed a strategic partnership with Tongding Internet Information Co., Ltd. (TD) to jointly market and distribute the respective companies' products and services in China and international markets.  Upon the formation of this strategic partnership, UTStarcom and TD intend to focus on developing their optical fiber cable businesses in India as well as marketing and selling UTStarcom's flagship PTN and SyncRing products in China

  • The Company introduced the SyncRing XGM30, the latest product offering in its SyncRing family of network synchronization equipment.  Designed as a robust IP65-compliant compact outdoor device, the XGM30 uses the GNSS satellite signal as a primary time reference.  It supports PTP IEEE 1588-2008 (1588V2) and Sync technologies to deliver highly accurate frequency and time synchronization.  Additionally, the XGM30 enables mobile network operators to cost-effectively meet the stringent time synchronization requirements of LTE/LTE-A and 5G networks

  • The Company participated in the International Timing & Sync Forum (ITSF) in Bucharest, Romania, where the Company showcased the SyncRing XGM30 product.  ITSF is the largest specialist time and synchronization conference in the world, covering a number of emerging applications across various industry sectors including telecommunication, finance, energy, transport, broadcast and defense.  In addition, the Company delivered a keynote address, "Sync over Packet for the 5G Era", highlighting the challenges related to the cost-effectiveness of highly accurate synchronization in mobile networks

Third Quarter 2018 Financial Results

Summary of Q3 2018 Key Financials
 
  Q3 2018 Y/Y Change* Q/Q Change*
Revenue   $52.1   +100.1%     +82.5%  
Gross Profit   $9.9   -6.4%     +32.2%  
Operating Expenses   $5.8   -22.5%     -16.9%  
Operating Income   $4.1   +33.1%     +728.9%  
Net Income   $2.1   -$0.0     +$2.2  
Basic EPS   $0.06   --     +$0.06  
Cash Balance (including Restricted Cash)   $66.8   -39.0%     -17.0%  

*Dollar comparisons are used where percentage comparisons are not meaningful.
*All the numbers in U.S. Dollars are in millions except for Earnings Per Share (EPS)

Total Revenues

Q3 2018 total revenues were $52.1 million, compared to $26.0 million in the corresponding period in 2017.

  • Q3 2018 net equipment sales were $46.3 million, an increase of 126.0% from $20.5 million in the corresponding period in 2017.  The increase was due to rapidly growing sales in India

  • Q3 2018 net services sales were $5.8 million, an increase of 4.7% from $5.5 million in the corresponding period in 2017.  The slight increase was due to higher India annual maintenance services

Gross Profit

Q3 2018 gross profit was $9.9 million, or 19.0% of net sales, compared to $10.6 million, or 40.5% of net sales, in the corresponding period in 2017.

  • Q3 2018 equipment gross profit was $6.4 million, compared to $8.2 million in the corresponding period in 2017.  Q3 2018 equipment gross margin was 13.8%, compared to 39.9% for the corresponding period in 2017.  The decreased gross margin was mainly due to the higher proportion of equipment revenue from India which typically commands a lower gross margin in this competitive market

  • Q3 2018 service gross profit was $3.5 million, compared to $2.4 million in the corresponding period in 2017.  Q3 2018 service gross margin was 60.2%, compared to 42.6% for the corresponding period in 2017.  The increased gross margin was mainly due to higher India annual maintenance services

Operating Expenses

Q3 2018 operating expenses were $5.8 million, compared to $7.5 million in the corresponding period in 2017.

  • Q3 2018 selling, general and administrative ("SG&A") expenses were $3.2 million, compared to $5.3 million in the corresponding period in 2017.  SG&A was lower in third quarter of 2018 due to the absence of non-recurring expenses related to privatization and change of auditors in 2017

  • Q3 2018 research and development expenses were $2.6 million, compared to $2.2 million in the corresponding period in 2017.  The increase reflected our continuing investment in new technology and product development

Operating Income

Q3 2018 operating income was $4.1 million, compared to $3.1 million in the corresponding period in 2017.

Interest Income, Net

Q3 2018 net interest income was $0.4 million, compared to $0.2 million in the corresponding period in 2017.

Other Expenses, Net

Q3 2018 net other expenses were $1.8 million, compared to net other expenses of $3,000 in the corresponding period in 2017.  The increase in other expenses were due to foreign exchange losses resulting from the devaluation of Indian Rupee against U.S. dollars.

Net Income

Q3 2018 net income attributable to shareholders was $2.1 million, compared to net income of $2.2 million in the corresponding period in 2017.  Q3 2018 basic net income per share was $0.06, compared to basic net income per share of $0.06 for the corresponding period in 2017.

Cash Flow

During Q3 2018, cash used in operating activities was $11.6 million, cash used in investing and financing activities (stock repurchases) were $1.0 million.  As of September 30, 2018, UTStarcom had cash, cash equivalent and restricted cash of $66.8 million.

Outlook

For the fourth quarter, the Company expects to generate revenue in the range of $10 million to $15 million.  The Company's quarterly revenue pattern is naturally uneven due to the timing of large project fulfillment.

Third 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, November 9, 2018 (9:00 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 2958189.

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 December 10, 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 2958189.

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 committed to helping network operators offer their customers the most innovative, reliable, and cost-effective communication services.  UTStarcom offers high performance advanced equipment optimized for the most rapidly growing network functions, such as mobile backhaul, metro aggregation and broadband access.  UTStarcom is further leveraging its technology expertise to bring smart networked products to new applications, such as its goBox automated refrigerated dispenser for retail stores.  UTStarcom has operating entities in Hong Kong, Taipei, Tokyo (Japan), San Jose (USA), New Delhi, Bangalore, Mumbai and Kolkata (India), Hangzhou and Chengdu (China).  UTStarcom was founded in 1991 and listed its shares on the Nasdaq Market in 2000 (symbol: UTSI).  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  
   
    September 30,   December 31,  
    2018   2017  
           
    (In thousands)  
ASSETS          
Current assets:          
Cash and cash equivalents   $ 50,610   $ 79,749  
Short-term investments   -   3,143  
Accounts and notes receivable, net   98,547   16,911  
Inventories and deferred costs   20,705   40,684  
Short-term restricted cash   8,596   12,099  
Prepaid and other current assets   13,541   14,227  
Total current assets   191,999   166,813  
Long-term assets:          
Property, plant and equipment, net   1,364   1,714  
Long-term deferred costs   21   277  
Long-term restricted cash   7,579   8,839  
Other long-term assets   11,034   9,401  
Total long-term assets   19,998   20,231  
Total assets   $ 211,997   $ 187,044  
           
LIABILITIES AND EQUITY          
Current liabilities:          
Accounts payable   $ 75,395   $ 27,452  
Customer advances   4,701   21,828  
Deferred revenue   1,762   7,286  
Other current liabilities   23,919   31,698  
Total current liabilities   105,777   88,264  
Long-term liabilities:          
Long-term deferred revenue and other liabilities   5,589   7,788  
Total liabilities   111,366   96,052  
           
Total equity   100,631   90,992  
Total liabilities and equity   $ 211,997   $ 187,044  
               


UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Statements of Operations
 
    Three months ended September 30,
    Nine months ended September 30,
   
    2018   2017     2018   2017    
                       
    (In thousands, except per share data)  
Net sales   $ 52,092   $ 26,034     103,218   $ 80,057    
Cost of net sales   42,209   15,479     76,713   51,474    
Gross profit   9,883   10,555     26,505   28,583    
    19.0 % 40.5 %   25.7 % 35.7 %  
Operating expenses:   3,234              
Selling, general and administrative   3,234   5,284     11,354   13,839    
Research and development   2,571   2,207     8,272   6,296    
Total operating expenses   5,805   7,491     19,626   20,135    
                       
                       
                   
Operating Income   4,078   3,064     6,879   8,448    
                       
                       
                   
Interest income, net   418   214     1,215   794    
Other income (expense), net   (1,842 ) (3 )   (2,174 ) 2,395    
Equity pick up of losses of an associate   (114 ) (290 )   (262 ) (290 )  
Investment Impairment           (1,308 )  
Income before income taxes   2,540   2,985     5,658   10,039    
Income tax benefit (expense)   (393 ) (795 )   433   495    
Net Income attributable to UTStarcom Holdings Corp.   $ 2,147   $ 2,190     $ 6,091   $ 10,534    
                               
                   
Net Income per share attributable to UTStarcom Holdings Corp.—Basic   $ 0.06   $ 0.06     $ 0.17   $ 0.30    
Weighted average shares outstanding—Basic   35,626   35,484     35,642   35,550    
                       


UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Statements of Cash Flows
 
    Three months ended September 30,
      Nine months ended September 30,
   
    2018   2017
    2018
  2017
   
                     
    (In thousands)
 
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net Income   $ 2,147   $ 2,190       $ 6,091   $ 10,534    
Depreciation   170     151     542   466    
Provision for doubtful accounts   (24 )   844     519   715    
Provision for (recovery of) deferred costs   (1,611 )   652     (3,365 ) 4,179    
Stock-based compensation expense   293     265     693   655    
Net loss (gain) on disposal of assets   10         (21 )    
Gain on release of tax liability due to expiration of the statute of limitations             (1,478 )  
Deferred income taxes   21     (3 )   45   228    
Loss from equity investments, net   114     290     262   290    
Other-than-temporary impairment of equity investments             1,308    
Gain on Cumulative Transfer Adjustment recognition from liquidation subsidiaries             (1,703 )  
Changes in operating assets and liabilities   (12,723   (1,793 )   (35,136 ) (1,721 )  
Net cash provided by (used in) operating activities   (11,603 )   2,596     (30,370 ) 13,473    
                         
                   
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Additions to property, plant and equipment       (147 )   (221 ) (348 )  
Purchase of investment interests   (76 )   (381   (1,847 ) (481  
Purchase of short term investment       (3,373     (3,373 )  
Proceeds from refund of investment interest             479    
Proceeds from sale of short term investment           3,143      
Net cash provided by (used in) investing activities   (76 )   (3,901 )   1,075   (3,701 )  
                         
                   
CASH FLOWS FROM FINANCING ACTIVITIES:                  
Proceeds from exercise of stock options           71      
Repurchase of ordinary share   (885 )       (2,019 ) (140 )  
Net cash used in financing activities   (885 )       (1,948 ) (140 )  
Effect of exchange rate changes on cash and cash equivalents   (1,130   (519 )   (2,658 ) 1,253    
Net increase (decrease) in cash and cash equivalents   (13,694 )   (1,824 )   (33,901 ) 10,885    
Cash, cash equivalents and restricted cash at beginning of period   80,479     111,350     100,686   98,641    
Cash, cash equivalents and restricted cash at end of period   $ 66,785     $ 109,526     $ 66,785   $ 109,526    
                                 

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