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 2018Y/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.


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) 519-4004Canada: + 1 (866) 386-1016Hong 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) 452-5696Hong Kong: 800-963-117China: 4006-022-065Other 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: +852-3951-9757Ms. 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 
  September 30, December 31, 
  2018 2017 
  (In thousands) 
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 
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) 
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  
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) 
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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