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, 2019.
UTStarcom’s Chief Executive Officer Mr. Tim Ti
commented, "Third quarter results were mixed, reflecting the
competitive environment and activities in advance of the transition
to 5G. We achieved excellent gross margin from a favorable product
mix and tightly controlled ongoing operating expenses. However,
operating profit and net income were adversely affected due to an
accounts receivable reserve for one of our major customers, a state
owned enterprise in India.”
Ti elaborated, “We are confident that we will be
paid, because the Indian Government has publicly committed to a $10
billion revival plan for this state-owned enterprise.
However, the precise timing of payment is uncertain. To be prudent
and consistent, we continue to reserve in accordance with our
receivable reserve policy based on aging.”
Ti continued, “Looking ahead, we are excited by
the number and size of the opportunities related to 5G and this
will continue to be our main focus. However, our optimism is
guarded as the India situation and the network transition at our
Japan customer create uncertainties. There is plenty of work to be
done over the next few quarters, which we believe will lead to
attractive and sustained longer-term growth."
Business Highlights
- Large 5G Network Opportunity in China.
UT’s leading Skyflux products have already passed laboratory and
field tests. The Company expects to begin initial shipments
in the fourth quarter.
- Collections. A state-owned enterprise in
India, one of our major customers, has delayed payment on a large
receivable. In accordance with our accounting policies, the
Company reserved an additional $3.6 million for AR reserve.
The Company is confident in eventual payment. The Indian
government is implementing a $10 billion capital infusion to this
enterprise as part of its revival plan. Additionally, the
Indian government also authorized the monetization of over $5
billion of the enterprise’s assets over the next several years,
which will provide it with additional operating funds.
- goSmart Automated Retail. UTStarcom has
strengthened its goSmart product line with the addition of the
goCube and goGrid lines. The Company is in the midst of
expanding to the Americas and Taiwan.
- Participation at Indian Mobile Congress
2019. At this year’s Indian Mobile Congress (“IMC”),
UTStarcom showcased a comprehensive suite of its product offerings
inclusive of the 5G based next-generation technologies. In
addition, the Company participated in several panel discussions
focused on the development of emerging and future technologies,
investment in India, infrastructure requirements and the impact of
those technologies on the telecom industry.
Third Quarter 2019 Financial
Results
Summary of Q3 2019 Key
Financials
|
Q3 2019 |
Y/Y Change* |
Q/Q Change* |
Revenue |
$13.1 |
-74.9% |
-6.0% |
Gross Profit |
$7.2 |
-27.2% |
+43.0% |
Operating Expenses |
$9.6* |
+64.8% |
+34.8% |
Operating Loss |
($2.4) |
-$6.4 |
-$0.3 |
Net Loss |
($2.1) |
-$4.2 |
-$3.8 |
Basic EPS |
($0.06) |
-$0.12 |
-$0.11 |
Cash Balance (including Restricted Cash) |
$47.6 |
-28.8% |
-13.6% |
*Operating expenses included a non-cash
provision for Accounts Receivable reserve of $3.6 million for
BNSL.*Dollar comparisons are used where percentage comparisons are
not meaningful*All the numbers in U.S. Dollars are in million
except EPS
Total Revenues
Q3 2019 total revenues were $13.1 million,
compared to $52.1 million in the corresponding period of 2018.
- Q3 2019 net equipment sales were $8.7 million, a decrease of
81.3% from $46.3 million in the corresponding period in 2018.
- Q3 2019 net services sales were $4.4 million, a decrease of
24.1% from $5.8 million in the corresponding period in 2018.
The decrease in both equipment and services
revenue was due to the completion of the BNSL project in India,
which contributed significant revenue in the prior year period.
Gross Profit
Q3 2019 gross profit was $7.2 million, or 55.0%
of net sales, compared to $9.9 million, or 19.0% of net sales, in
the corresponding period in 2018.
- Q3 2019 equipment gross profit was $5.8 million, compared to
$6.4 million in the corresponding period in 2018. Q3 2019
equipment gross margin was 67.3%, compared to 13.9% for the
corresponding period in 2018. The increase in gross margin
was mainly due to favorable product mix.
- Q3 2019 service gross profit was $1.4 million, compared to $3.5
million in the corresponding period in 2018. Q3 2019 service
gross margin was 30.9%, compared to 60.2% for the corresponding
period in 2018. Gross margin was exceptionally high in the
prior year period, when the Company was heavily engaged with a
large project for its major India customer.
Operating Expenses
Q3 2019 operating expenses were $9.6 million,
compared to $5.8 million in the corresponding period in 2018.
- Q3 2019 selling, general and administrative (“SG&A”)
expenses were $6.3 million, compared to $3.2 million in the
corresponding period in 2018. The increase was due mainly to
the non-cash Accounts Receivable reserve of $3.6 million related to
BNSL. The Company used tight cost controls on all other
SG&A expenses year over year.
- Q3 2019 research and development expenses were $3.3 million,
compared to $2.6 million in the corresponding period in 2018.
The increase reflected investment in 5G technologies and product
development.
Operating Income (Loss)
Q3 2019 operating loss was $2.4 million,
compared to operating income of $4.1 million in the corresponding
period in 2018.
Interest Income, Net
Q3 2019 net interest income was $0.4 million,
compared to $0.4 million in the corresponding period in 2018.
Other Expense, Net
Q3 2019 net other expense was $0.2 million,
compared to $1.8 million in the corresponding period in 2018.
Other expenses in Q3 2018 was mainly due to foreign exchange losses
resulting from the devaluation of Indian Rupee against U.S.
dollars.
Net Income (Loss)
Q3 2019 net loss attributable to shareholders
was $2.1 million, compared to net income attributable to
shareholders of $2.1 million in the corresponding period in
2018. Q3 2019 basic net loss per share was $0.06, compared to
basic net income per share of $0.06 for the corresponding period in
2018.
Cash Flow
During Q3 2019, cash used in operating
activities was $9.3 million, cash used in investing activities was
$0.2 million, and cash provided by financing activities was $4.4
million. As of September 30, 2019, UTStarcom had cash, cash
equivalents and restricted cash of $47.6 million.
Outlook
For the fourth quarter of 2019, the Company
expects to generate revenue in the range of $12 to $15
million. While revenue is anticipated to be similar to the
third quarter, the mix is unlikely to match that of the third
quarter and may affect the level of profitability.
Third 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, November
8, 2019 (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: +852-3018-6771China: 4006-208-038 Other
International: +65 6713-5090
The attendee passcode is
4874479.
A replay of the call will be available
approximately two hours after the conclusion and will remain
available until December 9, 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 4874479.
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
|
|
September 30, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
33,488 |
|
|
$ |
57,049 |
|
Short-term investments |
|
|
— |
|
|
|
— |
|
Accounts and notes receivable, net |
|
|
87,524 |
|
|
|
60,666 |
|
Inventories and deferred costs |
|
|
9,687 |
|
|
|
26,837 |
|
Short-term restricted cash |
|
|
10,295 |
|
|
|
8,827 |
|
Prepaid and other current assets |
|
|
6,034 |
|
|
|
6,776 |
|
Total current assets |
|
|
147,028 |
|
|
|
160,155 |
|
Long-term assets: |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
1,220 |
|
|
|
1,258 |
|
Operating lease right-of-use assets, net |
|
|
1,781 |
|
|
|
— |
|
Long-term restricted cash |
|
|
3,800 |
|
|
|
7,823 |
|
Other long-term assets |
|
|
8,201 |
|
|
|
8,199 |
|
Total long-term assets |
|
|
15,002 |
|
|
|
17,280 |
|
Total assets |
|
$ |
162,030 |
|
|
$ |
177,435 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
36,839 |
|
|
$ |
50,757 |
|
Customer advances |
|
|
840 |
|
|
|
561 |
|
Deferred revenue |
|
|
571 |
|
|
|
968 |
|
Short-term borrowing |
|
|
4,625 |
|
|
|
— |
|
Operating lease liabilities, current |
|
|
885 |
|
|
|
— |
|
Other current liabilities |
|
|
14,288 |
|
|
|
17,507 |
|
Total current liabilities |
|
|
58,048 |
|
|
|
69,793 |
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Operating Lease liabilities, non-current |
|
|
927 |
|
|
|
— |
|
Long-term deferred revenue and other liabilities |
|
|
2,678 |
|
|
|
5,476 |
|
Total liabilities |
|
|
61,653 |
|
|
|
75,269 |
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
100,377 |
|
|
|
102,166 |
|
Total liabilities and equity |
|
$ |
162,030 |
|
|
$ |
177,435 |
|
|
|
|
|
|
|
|
|
|
UTStarcom Holdings
Corp.Unaudited Condensed Consolidated Statements
of Operations
|
|
Three months ended September
30, |
|
|
Nine months ended September 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
(In thousands,
except per share data) |
|
Net sales |
|
$ |
13,078 |
|
|
$ |
52,092 |
|
|
$ |
51,641 |
|
|
$ |
103,218 |
|
Cost of net sales |
|
5,882 |
|
|
42,209 |
|
|
32,430 |
|
|
76,713 |
|
Gross profit |
|
7,196 |
|
|
9,883 |
|
|
19,211 |
|
|
26,505 |
|
|
|
55.0 |
% |
|
19.0 |
% |
|
37.2 |
% |
|
25.7 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative |
|
6,243 |
|
|
3,234 |
|
|
13,226 |
|
|
11,354 |
|
Research and development |
|
3,322 |
|
|
2,571 |
|
|
10,690 |
|
|
8,272 |
|
Total operating expenses |
|
9,565 |
|
|
5,805 |
|
|
23,916 |
|
|
19,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (loss) |
|
(2,369 |
) |
|
4,078 |
|
|
(4,705 |
) |
|
6,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
380 |
|
|
418 |
|
|
967 |
|
|
1,215 |
|
Other income (expense),
net |
|
(162 |
) |
|
(1,842 |
) |
|
4,592 |
|
|
(2,174 |
) |
Equity pick up of losses of an
associate |
|
— |
|
|
(114 |
) |
|
— |
|
|
(262 |
) |
Income (Loss) before income
taxes |
|
(2,151 |
) |
|
2,540 |
|
|
854 |
|
|
5,658 |
|
Income taxes benefit
(expenses) |
|
59 |
|
|
(393 |
) |
|
(822 |
) |
|
433 |
|
Net Income (Loss) attributable to UTStarcom Holdings Corp. |
|
$ |
(2,092 |
) |
|
$ |
2,147 |
|
|
$ |
32 |
|
|
$ |
6,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) per share
attributable to UTStarcom Holdings Corp.—Basic |
|
$ |
(0.06 |
) |
|
$ |
0.06 |
|
|
$ |
0.00 |
|
|
$ |
0.17 |
|
Weighted average shares
outstanding—Basic |
|
35,564 |
|
|
35,626 |
|
|
35,542 |
|
|
35,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UTStarcom Holdings
Corp.Unaudited Condensed Consolidated Statements
of Cash Flows
|
|
Three months ended September
30, |
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
(In thousands) |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
(2,092 |
) |
|
$ |
2,147 |
|
|
$ |
32 |
|
|
$ |
6,091 |
|
Depreciation |
|
160 |
|
|
170 |
|
|
487 |
|
|
542 |
|
Provision for doubtful accounts |
|
3,560 |
|
|
(24 |
) |
|
4,820 |
|
|
519 |
|
Recovery of deferred costs |
|
— |
|
|
(1,611 |
) |
|
— |
|
|
(3,365 |
) |
Stock-based compensation expense |
|
307 |
|
|
293 |
|
|
1,064 |
|
|
693 |
|
Net Loss (gain) on disposal of assets |
|
10 |
|
|
10 |
|
|
5 |
|
|
(21 |
) |
Gain on release of tax liability due to expiration of the statute
of limitations |
|
(54 |
) |
|
— |
|
|
(1,182 |
) |
|
— |
|
Deferred income taxes |
|
(7 |
) |
|
21 |
|
|
(3 |
) |
|
45 |
|
Loss from equity investments, net |
|
— |
|
|
114 |
|
|
— |
|
|
262 |
|
Gain on write-off long-term account payable due to expiration of
the statute of limitations |
|
— |
|
|
— |
|
|
(3,161 |
) |
|
— |
|
Changes in operating assets and liabilities |
|
(11,210 |
) |
|
(12,723 |
) |
|
(29,518 |
) |
|
(35,136 |
) |
Net cash used in operating activities |
|
(9,326 |
) |
|
(11,603 |
) |
|
(27,456 |
) |
|
(30,370 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
(205 |
) |
|
— |
|
|
(501 |
) |
|
(221 |
) |
Purchase of investment interests |
|
— |
|
|
(76 |
) |
|
— |
|
|
(1,847 |
) |
Purchase of short-term investments |
|
— |
|
|
— |
|
|
(41 |
) |
|
— |
|
Proceeds from sale of short term investment |
|
41 |
|
|
— |
|
|
41 |
|
|
3,143 |
|
Net cash provided by (used in) investing activities |
|
(164 |
) |
|
(76 |
) |
|
(501 |
) |
|
1,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
— |
|
|
— |
|
|
56 |
|
|
71 |
|
Repurchase of ordinary share |
|
(199 |
) |
|
(885 |
) |
|
(1,049 |
) |
|
(2,019 |
) |
Short-term borrowing |
|
4,625 |
|
|
— |
|
|
4,625 |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
4,426 |
|
|
(885 |
) |
|
3,632 |
|
|
(1,948 |
) |
Effect of exchange rate changes
on cash and cash equivalents |
|
(2,449 |
) |
|
(1,130 |
) |
|
(1,791 |
) |
|
(2,658 |
) |
Net decrease in cash and cash equivalents |
|
(7,513 |
) |
|
(13,694 |
) |
|
(26,116 |
) |
|
(33,901 |
) |
Cash, cash equivalents and
restricted cash at beginning of period |
|
55,096 |
|
|
80,479 |
|
|
73,699 |
|
|
100,686 |
|
Cash, cash equivalents and
restricted cash at end of period |
|
$ |
47,583 |
|
|
$ |
66,785 |
|
|
$ |
47,583 |
|
|
$ |
66,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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