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) 519-4004Canada: + 1 (866) 386-1016Hong
Kong: +852-3018-6771China: 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) 452-5696Hong Kong: 800-963-117China:
4006-022-065Other 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: +852-3951-9757Ms. Fei Wang, Director of Investor Relations
Email: fei.wang@utstar.com
Ms. Ning Jiang, Investor RelationsEmail: njiang@utstar.com
In the United States:
The Blueshirt Group Mr. Ralph FongTel: +1 (415) 489-2195Email:
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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