HANGZHOU, China, March 27, 2020 (GLOBE NEWSWIRE) — UTStarcom (“UT” or “the Company”) (NASDAQ: UTSI), a global telecommunications infrastructure provider, today reported its unaudited financial results for the fourth quarter and full year ended December 31, 2019, and provided a business update.
Business UpdateQ4 Revenue Met Expectations. Fourth quarter revenue of $14.2 million was at the high end of the Company’s guidance range of $10 to $15 million. The net loss for the quarter was attributable to foreign currency losses and a slight operating loss.CEO Leave of Absence. As announced on March 16, 2020, the Company’s Chief Executive Officer (CEO) Mr. Tim Ti has taken a temporary leave of absence due to health reasons (unrelated to the COVID-19 virus). The Company’s Board of Directors appointed UT’s Senior Vice President of Sales and Business Development for Japan and Korea, Dr. Zhaochen Huang as acting CEO.Impact of the COVID-19 Virus. Due to the mandatory shutdowns implemented by the Chinese government, some customer shipments were temporarily interrupted during the first quarter of 2020, but with limited financial impact. As of the date of this release, production and operations in China have generally returned to normal. However, as the Coronavirus pandemic is escalating around the globe, the impact to the Company’s future operations, revenue and earnings is likely to be significant and prolonged.India Receivable. The Company continues to collect amounts due from its major customer in India which is in the process of implementing an India government backed restructuring plan. Since the Company’s last earnings release on November 8, 2019, over $12 million has been collected, with $54 million still outstanding. As a result of the recently announced 21-day national lockdown in India, the timing of future payments is uncertain.Status of Large 5G Network Opportunity in China. The Company was recently informed that the vendor team, of which the Company is a member, will not receive meaningful contract awards to support a large 5G project for a carrier in China for which its team was competing. The carrier recently announced that the majority of the business will be awarded to other local vendors.Business Streamlining. The Company has reassessed its less promising businesses and will discontinue its goSmart product line and exit the retail automation market.UTStarcom’s Acting Chief Executive Officer Dr. Huang commented, “Although the fourth quarter revenue met expectations, the Company faces significant challenges in 2020. We are dealing with slower-than-expected collections from our large customer in India, and the impact from the Coronavirus pandemic, is likely to be significant. Furthermore, our outlook is more uncertain due to diminished 5G prospects in China. In light of these uncertainties, the Company and the Board are evaluating all strategic alternatives available to the Company. As this evaluation is in progress, we are suspending our quarterly earnings conference call until further notice since we will not be able to comment on deliberations.”Fourth Quarter and Full Year 2019 Financial Results *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 RevenuesThree months ended December 31, 2019Q4 2019 total revenues were $14.2 million, compared to $12.7 million in the corresponding period in 2018.Q4 2019 net equipment sales were $6.3 million, a decrease of 26.2% from $8.5 million in the corresponding period in 2018. The decrease was mainly from Japan as our customer began transitioning to the next generation network.
Q4 2019 net services sales were $7.9 million, an increase of 88.0% from $4.2 million in the corresponding period in 2018. The increase was mainly from India from several large projects.Twelve months ended December 31, 20192019 total revenues were $65.8 million, a decrease of 43% from $115.9 million in 2018.2019 net equipment sales were $43.9 million, a decrease of 55.0% from $97.7 million in 2018. The decrease in equipment revenue was due to timing of project fulfillment in India, which contributed significant revenue in the prior year period.
2019 net services sales were $21.9 million, an increase of 19.9% from $18.2 million in 2018. The increase was mainly from India as several large projects were being implemented.Gross ProfitThree months ended December 31, 2019Q4 2019 gross profit was $5.1 million, or 36.3% of net sales, compared to $5.8 million, or 45.3% of net sales, in the corresponding period in 2018.Q4 2019 equipment gross profit was $1.0 million, compared to $5.1 million in the corresponding period in 2018. Q4 2019 equipment gross margin was 15.6%, compared to 60.3% for the corresponding period in 2018. The decrease in gross margin was mainly due to one-time inventory reserve for overstock.
Q4 2019 service gross profit was $4.1 million, compared to $0.7 million in the corresponding period in 2018. Q4 2019 service gross margin was 52.8%, compared to 14.7% for the corresponding period in 2018. The increased gross margin was mainly contributed from India.Twelve months ended December 31, 20192019 gross profit was $24.4 million, or 37.0% of net sales, compared to $32.3 million, or 27.8% of net sales, in 2018.2019 equipment gross profit was $15.8 million, compared to $25.6 million in 2018. 2019 equipment gross margin was 35.8%, compared to 26.2% in 2018 primarily due to product and geographical mix.
2019 service gross profit was $8.6 million, compared to $6.7 million in 2018. 2019 service gross margin was 39.5%, compared to 36.5% in 2018.Operating ExpensesQ4 2019 operating expenses were $6.3 million, compared to $8.3 million in the corresponding period in 2018.Q4 2019 selling, general and administrative (“SG&A”) expenses were $2.5 million, compared to $3.8 million in the corresponding period in 2018. SG&A was lower in fourth quarter of 2019 due to continued tight cost controls.
Q4 2019 research and development expenses were $3.8 million, compared to $4.5 million in the corresponding period in 2018. Twelve months ended December 31, 20192019 operating expenses were $30.2 million, compared to $27.9 million in 2018.2019 SG&A expenses were $15.7 million, compared to $15.2 million in 2018. The increase was mainly attributable to a higher accounts receivable allowance provided during the period for our India customer, partially offset by decreased expenses from continued tight cost controls.
2019 research and development expenses were $14.5 million, compared to $12.7 million in 2018. The increase reflected our continued investment in 5G technology and product development in 2019.Operating Income (loss)Q4 2019 operating loss was $1.1 million, compared to operating loss of $2.5 million in the corresponding period in 2018.Full year 2019 operating loss was $5.8 million, compared to operating income of $4.4 million in 2018.Interest Income, NetQ4 2019 net interest income was $0.3 million, compared to $0.5 million in the corresponding period in 2018.Full year 2019 net interest income was $1.2 million, compared to $1.7 million in 2018.Other Income (Expenses), NetQ4 2019 net other expense was $3.7 million, compared to net other income of $1.2 million in the corresponding period in 2018. Other expense in Q4 2019 was mainly due to foreign exchange losses resulting from the devaluation of Indian Rupee and Chinese Yuan against the U.S. dollar.Full year 2019 net other income was $0.9 million, compared to net other expense of $1.0 million in 2018.Net LossQ4 2019 net loss attributable to shareholders was $3.6 million, compared to net loss of $1.3 million in the corresponding period in 2018. Q4 2019 basic net loss per share was $0.10, compared to basic net loss per share of $0.04 for the corresponding period in 2018.Full year 2019 net loss attributable to shareholders was $3.6 million, compared to net income of $4.8 million in 2018. 2019 basic net loss per share was $0.10, compared to basic net income per share of $0.14 in 2018.Cash FlowDuring Q4 2019, cash generated from operating activities was $3.3 million, cash used in investing activities was $6,088, and cash used in financing activities was $4.6 million. As of December 31, 2019, UTStarcom had cash, cash equivalent and restricted cash of $48.6 million.OutlookFor the first quarter of 2020, the Company expects revenue in the range of $8 to $12 million.Fourth Quarter 2019 Conference Call CancelledSince the Board is considering strategic alternatives and cannot comment on those deliberations, the Company will not conduct a conference call to discuss these results.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, 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. Fei Wang, Director of Investor Relations
Email: [email protected]Ms. Ning Jiang, Investor Relations
Email: [email protected]In the United States:The Blueshirt Group
Mr. Ralph Fong
Tel: +1 (415) 489-2195
Email: [email protected]
Bay Street News
