UTStarcom Reports Unaudited Financial Results for First Half of 2020
October 30 2020 - 05:00PM
UTStarcom (“UT” or the “Company”) (NASDAQ: UTSI), a global
telecommunications infrastructure provider, today reported its
unaudited financial results for the six months ended June 30, 2020.
Business Update
- Status of 5G Transport Network Opportunity
with a Major Mobile Carrier in
China UTStarcom collaborated with a partner
to develop critical 5G transport network technologies to support
the 5G migration in China. The Company in-house developed product
and its network management and controller has passed the operator’s
Benchmark Testing of its Central Procurement Phase 1. UTStarcom and
our partner were recognized as qualified vendors and awarded
certain portion of the 5G network project in two provinces.
However, due to the small size of business opportunity,
we decided not to move forward with commercial
deployment.
- Launch of 5G Transport Network
Solution In September 2020, the
Company launched its state-of-the-art 5G product
solution, SkyFlux Converged Packet Transport platform. It combines
Segment Routing/MPLS-TP tunneling, TDM-like Ethernet based on
FlexE/G.mtn, highly accurate time synchronization and SDN-based
network intelligence into an efficient future-proof architecture of
5G-ready transport network. The new platform includes two
products, SkyFlux SPN805S & 803S and a network management and
controller “SOO Station R3.2”.
- Development of Network
Disaggregation Telecom operators are increasingly
focused on networking device disaggregation. This encompasses the
decoupling of hardware and software that enables operator to choose
independently the most suitable hardware, operating system and set
of features and control interfaces. UTStarcom is leveraging its
expertise in 5G transport network to develop network disaggregation
solutions, including White Box Switch (WBS) and Network Operating
System (NOS). The Company is seeing initial interest for those
solutions from a handful of operators.
- Impact of the COVID-19 Virus Businesses
in most parts of the world were negatively impacted in the first
half of 2020 due to mandatory shutdowns related to the COVID-19
pandemic. Since then, production and operations in China have
returned to normal. However, outside of China, the COVID-19
situation remains a health threat with a resurgence of COVID-19
cases in various parts of the world. As a result, the impact to the
Company’s future operations continues to be significant and
prolonged.
- India Receivable The Company continues to
collect amounts due from its major customer in India.
The major customer in India raised INR8,500 Crore
(approximately USD1.13 billion) through sovereign guaranteed bonds
(issued at coupon rate of 6.79 per cent per annum for 10 year
period) and cleared a portion of its payables to vendors, including
the Company. Since the Company’s last earnings release
on March 27, 2020, over $16 million has
been collected, with $49 million outstanding. However, as
the customer’s operating status has no significant improvement, as
well as the ongoing payment processing was delayed by COVID-19
pandemic in India, the timing of future payments
remains uncertain.
UTStarcom’s acting Chief Executive Officer Dr. Zhaochen Huang
commented, “Our results for the first half of 2020 were negatively
impacted by the COVID-19 pandemic. While we continue to navigate
this challenging macro environment, we are focused on developing
new products that capitalize on important technology trends and
engaging with network operators to address and support their
requirements.”
First Half
2020 Financial
Results
Summary of 1H
2020 Key
Financials
|
1H 2020 |
1H 2019 |
Y/Y Change |
Revenue |
$13.7 |
$38.6 |
-64.5% |
Gross Profit |
$2.6 |
$12.0 |
-78.2% |
Operating Expenses |
$11.9 |
$14.4 |
-17.1% |
Operating Loss |
($9.3) |
($2.3) |
-$7.0 |
Net Income/Loss |
($12.0) |
$2.1 |
-$14.2 |
Basic EPS |
($0.34) |
$0.06 |
-$0.40 |
Cash Balance (including Restricted Cash) |
$48.6 |
$55.1 |
-11.7% |
* 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
Total revenues for the first half of 2020 were $13.7 million,
compared to $38.6 million in the corresponding period in 2019.
- Net equipment sales for the first half of 2020 were $9.3
million, a decrease of 67.9% from $29.0 million in the
corresponding period in 2019. The decrease was due to order
cancellations during the COVID-19 pandemic coupled with the
decreased revenue from our major India customer because of its
financial status. Concern around risk of second wave of COVID-19
infection in many countries, continues to affect our revenue.
- Net services sales for the first half of 2020 were $4.4
million, a decrease of 54.2% from $9.6 million in the corresponding
period in 2019. The decrease was mainly due to the mandatory
shutdowns in India related to the COVID-19 pandemic.
Gross Profit
Gross profit was $2.6 million, or 19.1% of net sales, for the
first half of 2020, compared to $12.0 million, or 31.2% of net
sales, in the corresponding period in 2019.
- Equipment gross profit for the first half of 2020 was $3.2
million, compared to $8.9 million in the corresponding period in
2019. Equipment gross margin for the first half of 2020 was 34.3%,
compared to 30.7% for the corresponding period in 2019. The
increase in gross margin was attributed to favorable product
mix.
- Service gross margin for the first half of 2020 was ($0.6)
million, compared to $3.1 million in the corresponding period in
2019. Service gross margin for the first half of 2020 was (12.7%),
compared to 32.5% for the corresponding period in 2019. The
decrease in gross margin was mainly due to one-time expense
incurred in India.
Operating Expenses
Operating expenses for the first half of 2020 were $11.9
million, compared to $14.4 million in the corresponding period in
2019.
- Selling, general and administrative (“SG&A”) expenses for
the first half of 2020 were $7.5 million, compared to $7.0 million
in the corresponding period in 2019. SG&A was higher in the
first half of 2020 due to higher accounts receivable allowance
provided for long aged receivables during the period for our India
customer, which partially offset by the decreased expenses from
continued tight cost control.
- Research and development (“R&D”) expenses for the first
half of 2020 were $4.4 million, compared to $7.4 million in the
corresponding period in 2019. The decrease reflected lower 5G
investments due to diminishing 5G prospects in China and lower
expenditure during the mandatory shutdowns related to
COVID-19.
Operating
Loss
Operating loss for the first half of 2020 was $9.3 million,
compared to $2.3 million in the corresponding period in 2019.
Interest Income, Net
Net interest income for the first half of 2020 was $0.5 million,
compared to $0.6 million in the corresponding period in 2019.
Other Income (Expenses), Net
Net other expense for the first half of 2020 was $3.1 million,
compared to net other income of $4.8 million in the corresponding
period in 2019. Other expense for the first half of 2020 was mainly
due to foreign exchange losses resulting from the devaluation of
Indian Rupee against the U.S. dollar.
Net Income
(Loss)
Net loss attributable to shareholders for the first half of 2020
was $12.0 million, compared to net income of $2.1 million in the
corresponding period in 2019. Basic net loss per share for the
first half of 2020 was $0.34, compared to basic net income per
share of $0.06 for the corresponding period in 2019.
Cash Flow
Cash used in operating activities in the first half of 2020 was
$0.8 million, cash generated from investing activities was $2.0
million, and cash used in financing activities was $0.2 million. As
of June 30, 2020, UTStarcom had cash, cash equivalent and
restricted cash of $48.6 million.
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 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, the effect of the
COVID-19 pandemic on the Company’s business, 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: +86 571 8192 8888Ms. Ning Jiang,
Investor RelationsEmail: utsi-ir@utstar.com/ 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, |
|
|
2020 |
|
2019 |
|
|
|
|
|
|
|
(In thousands) |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
33,011 |
|
$ |
34,966 |
|
Short-term investments |
|
— |
|
|
2,095 |
|
Accounts and notes receivable, net |
|
64,157 |
|
|
77,831 |
|
Inventories and deferred costs |
|
7,289 |
|
|
6,655 |
|
Short-term restricted cash |
|
11,257 |
|
|
10,007 |
|
Prepaid and other current assets |
|
4,158 |
|
|
5,524 |
|
Total current assets |
|
119,872 |
|
|
137,078 |
|
Long-term assets: |
|
|
|
|
|
|
Property, plant and equipment, net |
|
842 |
|
|
1,092 |
|
Operating lease right-of-use assets, net |
|
1,869 |
|
|
2,860 |
|
Long-term restricted cash |
|
4,377 |
|
|
3,634 |
|
Other long-term assets |
|
6,614 |
|
|
6,639 |
|
Total long-term assets |
|
13,702 |
|
|
14,225 |
|
Total assets |
$ |
133,574 |
|
$ |
151,303 |
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
$ |
28,187 |
|
$ |
30,875 |
|
Customer advances |
|
217 |
|
|
160 |
|
Deferred revenue |
|
1,208 |
|
|
1,320 |
|
Income tax payable |
|
7,198 |
|
|
7,480 |
|
Operating lease liabilities, current |
|
1,700 |
|
|
1,595 |
|
Other current liabilities |
|
6,600 |
|
|
7,603 |
|
Total current liabilities |
|
45,110 |
|
|
49,033 |
|
Long-term liabilities: |
|
|
|
|
|
|
Operating Lease liabilities, non-current |
|
589 |
|
|
1,364 |
|
Long-term deferred revenue and other liabilities |
|
1,411 |
|
|
1,718 |
|
Total liabilities |
|
47,110 |
|
|
52,115 |
|
|
|
|
|
|
|
|
Total equity |
|
86,464 |
|
|
99,188 |
|
Total liabilities and equity |
$ |
133,574 |
|
$ |
151,303 |
|
UTStarcom Holdings
Corp.Unaudited Condensed Consolidated Statements
of Operations
|
Six months ended June 30, |
|
|
2020 |
|
2019 |
|
|
|
|
|
|
|
(In thousands, except per share data) |
|
Net sales |
$ |
13,708 |
|
$ |
38,562 |
|
Cost of net sales |
|
11,094 |
|
|
26,548 |
|
Gross profit |
|
2,614 |
|
|
12,014 |
|
|
|
19.1 |
% |
|
31.2 |
% |
Operating expenses: |
|
|
|
|
|
|
Selling, general and
administrative |
|
7,549 |
|
|
6,983 |
|
Research and development |
|
4,355 |
|
|
7,368 |
|
Total operating expenses |
|
11,904 |
|
|
14,351 |
|
|
|
|
|
|
|
|
Operating loss |
|
(9,290 |
) |
|
(2,337 |
) |
|
|
|
|
|
|
|
Interest income, net |
|
493 |
|
|
587 |
|
Other income (expense),
net |
|
(3,103 |
) |
|
4,754 |
|
Income (loss) before income
taxes |
|
(11,900 |
) |
|
3,004 |
|
Income tax expense |
|
(142 |
) |
|
(880 |
) |
Net Income (loss) attributable
to UTStarcom Holdings Corp. |
$ |
(12,042 |
) |
$ |
2,124 |
|
|
|
|
|
|
|
|
Net Income (loss) per share
attributable to UTStarcom Holdings Corp.—Basic |
$ |
(0.34 |
) |
$ |
0.06 |
|
Weighted average shares
outstanding—Basic |
|
35,692 |
|
|
35,350 |
|
UTStarcom Holdings
Corp.Unaudited Condensed Consolidated Statements
of Cash Flows
|
Six months ended June 30, |
|
|
2020 |
|
2019 |
|
|
|
|
|
|
|
(In thousands) |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net Income (loss) |
$ |
(12,042 |
) |
$ |
2,124 |
|
Depreciation |
|
295 |
|
|
327 |
|
Provision for doubtful accounts |
|
2,477 |
|
|
1,260 |
|
Stock-based compensation expense |
|
497 |
|
|
757 |
|
Net gain on disposal of assets |
|
— |
|
|
(5 |
) |
Gain on release of tax liability due to expiration of the statute
of limitations |
|
— |
|
|
(1,128 |
) |
Deferred income taxes |
|
116 |
|
|
4 |
|
Gain on write-off long-term account payable due to expiration of
the statute of limitations |
|
— |
|
|
(3,161 |
) |
Changes in operating assets and liabilities |
|
7,826 |
|
|
(18,308 |
) |
Net cash used in operating activities |
|
(831 |
) |
|
(18,130 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
|
Additions to property, plant and equipment |
|
(85 |
) |
|
(296 |
) |
Purchase of short-term investment |
|
— |
|
|
(41 |
) |
Proceeds from short-term investments |
|
2,095 |
|
|
— |
|
Net cash provided by (used in) investing
activities |
|
2,010 |
|
|
(337 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
— |
|
|
56 |
|
Repurchase of ordinary share |
|
(157 |
) |
|
(850 |
) |
Net cash used in financing activities |
|
(157 |
) |
|
(794 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
(984 |
) |
|
658 |
|
Net increase (decrease) in cash and cash
equivalents |
|
38 |
|
|
(18,603 |
) |
Cash, cash equivalents and
restricted cash at beginning of period |
|
48,607 |
|
|
73,699 |
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
48,645 |
|
$ |
55,096 |
|
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