Hong Kong UTStarcom (“UT” or “the Company”) (NASDAQ: UTSI), a
global telecommunications infrastructure provider, today reported
its unaudited financial results for the first quarter ended March
31, 2019.
UTStarcom’s Chief Executive Officer Mr. Tim Ti commented, “We
are off to a solid start to 2019. Revenue was at the higher
end of expectations and we returned to profitability. We have
made significant operating progress in the last few months.
Our latest 5G optical backhaul solution performed very well in the
laboratory evaluation by a major telecom carrier in China.
Additionally, we launched a goBox product designed to target the
‘Unattended Retail’ market and commenced cross-selling activities
in key geographies with our strategic partner TongDing.”
Ti continued, “Momentum is building in our business and we are
driving that by investing in R&D to develop new products that
capitalize on important new trends in technology. As we look
ahead to the remainder of 2019, we will drive more product
development and marketing, which we believe positions us for strong
growth in the next several years.”
Recent Business Highlights
- 5G Transport Network Opportunity with a Major Mobile
Carrier in China. UTStarcom is collaborating with a
partner to develop critical 5G transport network technologies to
support the 5G migration in China. The Company is leveraging
its expertise in optical backhaul technology to develop
state-of-the-art 5G products, which are performing well in ongoing
laboratory evaluations by a major China carrier.
- 5G Readiness. To meet important 5G
transport network requirements, UTStarcom
continues to develop solutions based on Segment Routing, FlexE and
Software Defined Network technologies. These solutions offer
benefits such as high bandwidth, network scalability,
extremely low latency, high synchronization accuracy and network
slicing capabilities. The company delivers these 5G solutions
in its SkyFlux product line. Both hardware and software
development are proceeding as planned.
- goBox Ramp. UTStarcom expanded its
retail footprint beyond selling smart refrigerators and further
penetrated the “Unattended Retail” market with the launch of its
goBox smart vending machine in China in March 2019. The Company is
seeing strong interest for this latest smart retail product
offering from China and international markets.
- Joint Marketing Underway with Strategic Partner
TongDing. In September 2018, UTStarcom formed a
strategic partnership with Tongding Internet Information Co., Ltd.
(“TD”) to jointly market and distribute each company’s respective
products and services in China and international markets.
UTStarcom has successfully sold TD’s optical fiber cables in India
and is expanding its customer base and geographic coverage in the
area. Meanwhile, the Company is supporting TD’s sales
efforts for its flagship products, including PTN and SyncRing.
- Project Wins in India. In January 2019,
the Company announced two significant Wi-Fi project wins in India
with Bharat Sanchar Nigam Limited (“BSNL”), a large public sector
company that provides a comprehensive range of telecom services in
India. UTStarcom will provide Wireless Access Points, Power
over Ethernet (“PoE”) Switches, Wireless Controllers and other
related components and services for the projects.
First Quarter 2019 Financial Results
Summary of Q1 2019 Key
Financials
|
Q1 2019 |
Y/Y Change* |
Q/Q Change* |
Revenue |
$ |
24.7 |
|
+9.1% |
|
|
+93.7% |
|
Gross Profit |
$ |
7.0 |
|
-23.6% |
|
|
+21.2% |
|
Operating Expenses |
$ |
7.3 |
|
+6.1% |
|
|
-12.3% |
|
Operating Income (Loss) |
-$ |
0.3 |
|
-$2.6 |
|
|
+$2.2 |
|
Net Income (Loss) |
$ |
0.4 |
|
-$3.6 |
|
|
+$1.7 |
|
Basic EPS |
$ |
0.01 |
|
-$0.10 |
|
|
+$0.05 |
|
Cash Balance (including Restricted Cash) |
$ |
64.1 |
|
-35.2% |
|
|
-13.0% |
|
*Dollar comparisons are used where percentage comparisons are
not meaningful.*All the numbers in U.S. Dollars are in millions
except for EPS
Total Revenues
Q1 2019 total revenues were $24.7 million, compared to $22.6
million in the corresponding period in 2018.
- Q1 2019 net equipment sales were $21.0 million, an increase of
12.0% from $18.7 million in the corresponding period in 2018.
The increase was due to higher sales in India.
- Q1 2019 net services sales were $3.7 million, a decrease of
4.9% from $3.9 million in the corresponding period in 2018.
The decrease was due to reduced services revenue in China.
Gross Profit
Q1 2019 gross profit was $7.0 million, or 28.3% of net sales,
compared to $9.1 million, or 40.5% of net sales, in the
corresponding period in 2018.
- Q1 2019 equipment gross profit was $6.3 million, compared to
$7.9 million in the corresponding period in 2018. Q1 2019
equipment gross margin was 30.0%, compared to 42.1% for the
corresponding period in 2018. The decrease in gross margin
was mainly due to product and geographic mix.
- Q1 2019 service gross profit was $0.7 million, compared to $1.2
million in the corresponding period in 2018. Q1 2019 service
gross margin was 18.6%, compared to 32.6% for the corresponding
period in 2018. The decrease in gross margin was mainly due
to increased competiveness in the service sector.
Operating Expenses
Q1 2019 operating expenses were $7.3 million, compared to $6.8
million in the corresponding period in 2018.
- Q1 2019 selling, general and administrative (“SG&A”)
expenses were $3.9 million, which was flat when compared to the
corresponding period in 2018.
- Q1 2019 research and development expenses were $3.4 million,
compared to $2.9 million in the corresponding period in 2018.
The increase reflected our continuing investment in 5G technologies
and product development.
Operating Income (loss)
Q1 2019 operating loss was $0.3 million, compared to operating
income of $2.3 million in the corresponding period in 2018.
Interest Income, Net
Q1 2019 net interest income was $0.4 million, compared to $0.5
million in the corresponding period in 2018.
Other Income (Expenses), Net
Q1 2019 net other income was $1.0 million, compared to net other
expense of $0.02 million in the corresponding period in 2018.
The increase in other income was due to foreign exchange gains
resulting from the appreciation of Renminbi and India Rupee against
U.S. dollar during the quarter.
Net Income
Q1 2019 net income attributable to shareholders was $0.4
million, compared to $4.0 million in the corresponding period in
2018. Q1 2019 basic net income per share was $0.01, compared
to $0.11 for the corresponding period in 2018.
Cash Flow
During Q1 2019, cash used in operating activities was $8.5
million, cash used in investing activities was $0.3 million, and
cash used in financing activities was $0.2 million. As of
March 31, 2019, UTStarcom had cash, cash equivalent and restricted
cash of $64.1 million.
Outlook
For the second quarter of 2019, the Company expects to generate
revenue in the range of $13 to $17 million. The Company’s
quarterly revenue pattern is typically uneven due to the timing of
large project fulfillment.
First Quarter 2019 Conference Call Details
The Company’s management will host an earnings conference call
at 8:00 a.m. U.S. Eastern Time on Friday, May 10, 2019 (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:
+852-3018-6771
China: 4006-208-038 Other International: +65 6713-5090
The attendee passcode is 5063377.
A replay of the call will be available approximately two hours
after the conclusion and will remain available until June 10,
2019.
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 also
5063377.
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 operations and customers around the
world, with a special focus on Japan and India. 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: +852-3951-9757Ms. 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
|
|
March 31, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
(In thousands) |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
48,069 |
|
|
$ |
57,049 |
|
Short-term investments |
|
|
21 |
|
|
|
— |
|
Accounts and notes receivable, net |
|
|
78,770 |
|
|
|
60,666 |
|
Inventories and deferred costs |
|
|
13,116 |
|
|
|
26,837 |
|
Short-term restricted cash |
|
|
8,158 |
|
|
|
8,827 |
|
Prepaid and other current assets |
|
|
20,619 |
|
|
|
6,776 |
|
Total current assets |
|
|
168,753 |
|
|
|
160,155 |
|
Long-term assets: |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
1,392 |
|
|
|
1,258 |
|
Operating lease right-of-use assets, net |
|
|
2,371 |
|
|
|
— |
|
Long-term restricted cash |
|
|
7,861 |
|
|
|
7,823 |
|
Other long-term assets |
|
|
8,173 |
|
|
|
8,199 |
|
Total long-term assets |
|
|
19,797 |
|
|
|
17,280 |
|
Total assets |
|
$ |
188,550 |
|
|
$ |
177,435 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
58,352 |
|
|
$ |
50,757 |
|
Customer advances |
|
|
1,106 |
|
|
|
561 |
|
Deferred revenue |
|
|
1,074 |
|
|
|
968 |
|
Other current liabilities |
|
|
18,132 |
|
|
|
17,507 |
|
Operating lease liabilities, current |
|
|
764 |
|
|
|
— |
|
Total current liabilities |
|
|
79,428 |
|
|
|
69,793 |
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Long-term deferred revenue and other liabilities |
|
|
5,408 |
|
|
|
5,476 |
|
Operating Lease liabilities, non-current |
|
|
1,621 |
|
|
|
— |
|
Total liabilities |
|
|
86,457 |
|
|
|
75,269 |
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
102,093 |
|
|
|
102,166 |
|
Total liabilities and equity |
|
$ |
188,550 |
|
|
$ |
177,435 |
|
UTStarcom Holdings
Corp.Unaudited Condensed Consolidated Statements
of Operations
|
|
Three months ended March 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
(In thousands, except per share data) |
|
Net sales |
|
$ |
24,654 |
|
|
$ |
22,590 |
|
Cost of net sales |
|
|
17,670 |
|
|
|
13,445 |
|
Gross profit |
|
|
6,984 |
|
|
|
9,145 |
|
|
|
|
28.3 |
% |
|
|
40.5 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and
administrative |
|
|
3,896 |
|
|
|
3,895 |
|
Research and development |
|
|
3,361 |
|
|
|
2,943 |
|
Total operating expenses |
|
|
7,257 |
|
|
|
6,838 |
|
|
|
|
|
|
|
|
|
|
Operating Income (loss) |
|
|
(273 |
) |
|
|
2,307 |
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
|
356 |
|
|
|
474 |
|
Other income (expense), net |
|
|
1,031 |
|
|
|
(16 |
) |
Income before income taxes |
|
|
1,114 |
|
|
|
2,765 |
|
Income tax benefit (expense) |
|
|
(712 |
) |
|
|
1,266 |
|
Net Income attributable to
UTStarcom Holdings Corp. |
|
$ |
402 |
|
|
$ |
4,031 |
|
|
|
|
|
|
|
|
|
|
Net Income per share attributable
to UTStarcom Holdings Corp.—Basic |
|
$ |
0.01 |
|
|
$ |
0.11 |
|
Weighted average shares
outstanding—Basic |
|
|
35,498 |
|
|
|
35,746 |
|
UTStarcom Holdings
Corp.Unaudited Condensed Consolidated Statements
of Cash Flows
|
|
Three months ended March 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
(In thousands) |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
402 |
|
|
$ |
4,031 |
|
Depreciation |
|
|
140 |
|
|
|
187 |
|
Provision for doubtful accounts |
|
|
1,026 |
|
|
|
52 |
|
Provision for deferred costs |
|
|
— |
|
|
|
21 |
|
Stock-based compensation expense |
|
|
379 |
|
|
|
201 |
|
Deferred income taxes |
|
|
20 |
|
|
|
(81 |
) |
Changes in operating assets and liabilities |
|
|
(10,430 |
) |
|
|
(9,518 |
) |
Net cash used in operating activities |
|
|
(8,463 |
) |
|
|
(5,107 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(296 |
) |
|
|
(251 |
) |
Purchase of short-term investment |
|
|
(21 |
) |
|
|
— |
|
Proceeds from short-term investments |
|
|
— |
|
|
|
3,123 |
|
Net cash provided by (used in) investing activities |
|
|
(317 |
) |
|
|
2,872 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
— |
|
|
|
22 |
|
Repurchase of ordinary share |
|
|
(208 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
(208 |
) |
|
|
22 |
|
Effect of exchange rate changes
on cash and cash equivalents |
|
|
(624 |
) |
|
|
416 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
(9,612 |
) |
|
|
(1,797 |
) |
Cash, cash equivalents and
restricted cash at beginning of period |
|
|
73,700 |
|
|
|
100,686 |
|
Cash, cash equivalents and
restricted cash at end of period |
|
$ |
64,088 |
|
|
$ |
98,889 |
|
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