HONG KONG, Nov. 09, 2018 (GLOBE NEWSWIRE) — 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 2018 | Y/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.
Outlook
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) 519-4004
Canada: + 1 (866) 386-1016
Hong 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) 452-5696
Hong Kong: 800-963-117
China: 4006-022-065
Other 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: +852-3951-9757
Ms. 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]
| UTStarcom Holdings Corp. | |||||||
| Unaudited Condensed Consolidated Balance Sheets | |||||||
| September 30, | December 31, | ||||||
| 2018 | 2017 | ||||||
| (In thousands) | |||||||
| ASSETS | |||||||
| 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 | |||
| LIABILITIES AND EQUITY | |||||||
| 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, |
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| 2018 | 2017 |
2018 |
2017 |
|||||||||||||||||
| (In thousands) |
||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
| 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 | ||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
| 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 | ) | |||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
| 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 | ||||||||||||
