IR/インベスターリレーションズ

BEIJING, May 16, 2012 /PRNewswire-Asia-FirstCall/ -- UTStarcom Holdings Corp. ("UTStarcom" or "the Company") (NASDAQ: UTSI), a leading provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and broadband for cable and telecom operators, today reported financial results for the first quarter ended March 31, 2012.

First Quarter 2012 Highlights

• First quarter 2012 total revenues increased 23.8% year over year to $46.7 million, compared to $37.7 million of adjusted revenue in the first quarter 2011 excluding $23.6 million amortization of Personal Handy-phone System ("PHS") deferred revenue and is a non-GAAP measure.
• First quarter 2012 gross profit increased 69.6% year over year to $18.4 million, compared to $10.9 million of adjusted gross profit in the first quarter 2011 excluding $8.2 million gross profit related to amortized PHS deferred revenue.
• First quarter 2012 gross profit as a percentage of net sales, or gross margin, was 39.5% compared to 31.1% in the first quarter 2011. First quarter 2011 gross margin excluding PHS deferred revenue amortization was 28.8%.
• First quarter 2012 operating expenses decreased 26.5%, year over year to $22.2 million, compared to $30.2 million in the first quarter 2011.
• As of March 31, 2012, cash, cash equivalents and short-term investments were $285.4 million.
• Net cash used in operating activities for the first quarter 2012 was $14.7 million, compared to $39.4 million net cash used in operating activities for the first quarter 2011.

"Closing out the first quarter, we are pleased with the year-over-year growth of our traditional equipment business and our progress in ramping up our media operational support services business," said UTStarcom Chief Executive Officer and Chairman Jack Lu. "We continue to experience an uptick in demand in China among higher-margin cable customers, as the country's cable operators increase their investments in network infrastructure upgrades. For 2012, we anticipate a healthy revenue growth rate, stable gross margin and improvement in operational cash flow."

Mr. Lu continued, "Our current growth initiative to build out our media operational support service business, namely our video service cloud or VSC platform, is rolling out smoothly. The VSC's video distribution network service and video conferencing service now serve several clients in a trial phase, and we expect some of them to commercialize in the second quarter of this year."

First Quarter 2012 Financial Results

Revenues

UTStarcom's total revenues for the first quarter 2012 were $46.7 million, a decrease of 23.8% year over year from $61.3 million for the corresponding period of 2011. First quarter 2012 and first quarter 2011 GAAP total revenues are not comparable as deferred revenue amortization related to PHS of $23.6 million was only included in the first quarter 2011 but not included in the first quarter 2012 because deferred revenue amortization related to PHS ended at the end of 2011. Excluding first quarter 2011 amortization of PHS deferred revenue, total revenues for the first quarter 2012 increased 23.8% year over year.

• Net sales from equipment for the first quarter 2012 were $38.7 million, a decrease of 26.8% year over year. Deferred revenue amortization related to PHS of $23.6 million was included in net sales from equipment in the first quarter 2011 results.  Excluding first quarter 2011 PHS deferred revenue amortization, net sales from equipment for the first quarter 2012 increased 32.2% year over year. The increase was mainly driven by increased sales of MSTP products in Taiwan and MSAN products in Japan compared to the first quarter 2011.
• Net sales from equipment-based services for the first quarter 2012 were $7.8 million, a decrease of 6.6% year over year. The decrease was primarily driven by less next generation network ("NGN") service contracts in China, partially offset by increased service revenue from the Company's international business.
• Net sales from operational support services for the first quarter 2012 were approximately $0.2 million as a result of IP signage revenue sharing project and technology service revenue generated by the Company's iTV.cn subsidiary.

Gross Profit

UTStarcom's gross profit was $18.4 million, or 39.5% of net sales, for the first quarter 2012, compared to $19.1 million, or 31.1% of net sales, for the corresponding period of 2011. Deferred revenue amortization related to PHS of $23.6 million with 34.8% gross margin was included in the first quarter 2011 results. First quarter 2011 gross profit, excluding PHS-related gross profit, was $10.9 million, or 28.8% of net sales.

• Gross profit for equipment sales in the first quarter 2012 was $16.3 million, a decrease of 5.0% year over year. Gross margin for equipment sales in the first quarter of 2012 was 42.1%, compared to 32.4% for the corresponding period in 2011. The margin increase was primarily due to increased sales of higher gross margin MSAN and MSTP products in the first quarter 2012 and gross margin improvement in China. Gross margin for equipment sales in the first quarter 2012 also included $1.3 million for reversal of third party commission reserve, purchase order liability accrual and sale of previously reserved inventory, which positively impacted the Company's gross margin in the first quarter 2012.
• Deferred revenue amortization related to PHS of $23.6 million with 34.8% gross margin was included in equipment sales in the first quarter 2011 results. Gross profit and gross margin for equipment sales, excluding PHS-related gross profit and gross margin, was $8.9 million and 30.5% for the first quarter 2011.
• Gross profit for equipment-based services in the first quarter 2012 was $2.2 million, an increase of 2.4% year over year. Gross margin for equipment-based services in the first quarter of 2012 was 28.8%, compared to 26.2% for the corresponding period of 2011. The margin increase was primarily due to gross margin improvement of RollingStream® service contracts in China.
• Gross loss for operational support services in the first quarter 2012 was approximately $0.1 million as a result of the amortization of the costs of revenue-sharing projects and equipment leasing by iTV.cn subsidiary.

Operating Expenses

Operating expenses for the first quarter 2012 were $22.2 million, a decrease of 26.5% year over year, from $30.2 million in the corresponding period in 2011.

• Selling, general and administrative expenses in the first quarter 2012 were $14.4 million, a decrease of 25.4% year over year. The decrease was primarily due to a decrease in bad debt expense, a decrease in personnel costs as a result of continued restructuring efforts in 2011, and a reduction in rental costs after relocating the Company's Hangzhou and Beijing offices to new sites in the second quarter 2011.
• Research and Development ("R&D") expenses in the first quarter 2012 were $7.1 million, a decrease of 5.8% year over year. The decrease was primarily due to a reduction in personnel costs as a result of the Company's restructuring efforts in 2011, the proceeds from the sale of certain patents and a decrease in prototype parts used in R&D.
• Amortization of intangible assets in the first quarter 2012 was approximately $0.3 million, which remained the same year over year.
• Restructuring costs for the first quarter 2012 were $0.5 million, compared to costs of $3.1 million for the corresponding period of 2011. The decrease in restructuring costs was primarily the result of substantial completion of the restructuring plans in 2011. UTStarcom does not expect to incur significant additional restructuring charges in 2012 related to previous restructuring plans.
• Net gain on divestitures in the first quarter 2012 was $0.2 million which was the contingent gain realized upon releasing of the remaining obligations in connection with the sale of China Packet Data Services Node ("PDSN") assets in the third quarter of 2010.

Operating Income (Loss)

Operating loss for the first quarter 2012 was $3.8 million, compared to an operating loss of $11.1 million in the corresponding period of 2011.

Net Other Income (Expense)

Net other income for the first quarter of 2012 was $0.6 million, compared to net other income of $1.0 million for the corresponding period of 2011. Net other income for the first quarter of 2012 primarily consisted of a $0.5 million foreign exchange gain, primarily attributed to the depreciation of the Japanese yen against the U.S. dollar and the appreciation of the Indian rupee against the U.S. dollars. Net other income for the first quarter of 2011 primarily consisted of a $0.7 million foreign exchange gain mainly as a result of the appreciation of the Chinese renminbi, Euro and Indian rupee against the U.S. dollar, and the depreciation of the Japanese yen against the U.S. dollar, and $0.4 million of subsidy income from the Chinese government, which was offset by other miscellaneous expenses.

Net Income (Loss)

Net loss attributable to UTStarcom shareholders for the first quarter 2012 was $4.2 million. Net loss attributable to UTStarcom shareholders for the first quarter 2011 was $10.3 million.

Basic and diluted loss per share for the first quarter 2012 amounted to $0.03. Basic and diluted loss per share for the first quarter 2011 was $0.07.

Cash Flow

• Net cash used in operating activities for the first quarter 2012 was $14.7 million. The Company's operating activities were impacted by the change in operating assets and liabilities of $11.7 million.
• Net cash used by investing activities for the first quarter 2012 was $0.7 million.
• Net cash used in financing activities for the first quarter 2012 was $0.4 million.

As of March 31, 2012, UTStarcom had cash, cash equivalents and short-term investments of $285.4 million.

About Non-GAAP Financial Measures

To supplement the Company's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization had been excluded prior to each time period reflected. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliation of GAAP and non-GAAP Financial Data" set forth at the end of this press release.

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating performance by excluding amortization of PHS revenue that may not be indicative of its operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its operating performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The Company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.  However, these non-GAAP measures are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.

First Quarter 2012 Conference Call Details

UTStarcom's management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on Wednesday, May 16, 2012 (8:00 p.m. Beijing/Hong Kong Time on May 16, 2012).

The conference call dial-in numbers are as follows:

United States: + 1-800-860-2442
International:   + 1-412-858-4600
China: 800-712-2304
Hong Kong: 800-962475

The conference ID number is 10014234

A replay of the call will be available until 9:00 a.m. U.S. Eastern Time on May 21, 2012.

The conference call replay numbers are as follows:

United States: + 1-877-344-7529
International:   + 1-412-317-0088

The conference ID number for accessing the recording is 10014234

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 a leading provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and Broadband for cable and telecom operators. The Company sells its solutions to operators in both emerging and established telecommunications and cable markets around the world. UTStarcom enables its customers to rapidly deploy revenue-generating access services using their existing infrastructure, while providing a migration path to cost-efficient, end-to-end IP networks.

UTStarcom was founded in 1991 and listed on the NASDAQ in 2000. With a new management team in 2011, the Company deployed a revamped growth strategy that concentrates on providing media operation support services through its Video Service Cloud (VSC) platform. UTStarcom has its operational headquarters in Beijing, China and research and development operations in China and India. For more information about UTStarcom, visit the Company's Web site at http://www.utstar.com.

Safe Harbor Statement

This press release includes forward-looking statements, including statements regarding the Company's expectations relating to the new operational support services business and the Company's performance in 2012. 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 relate to, among other things, the ability of the Company to realize anticipated results of operational improvements, and the Company's ability to successfully launch its internet TV platform, and its VSC platform, continue to integrate recent acquisitions, successfully operate its new services business and execute on its business plan and managing regulatory matters.  The risks and uncertainties also include the risk factors identified in the Company's latest Annual Report on Form 20-F, previous Annual Reports on Form 10-K, Form 10-K/A, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and Form 6-K, as filed with the Securities and Exchange Commission. The Company is in a period of 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 UTStarcom assumes no obligation to update any such forward-looking statement.

SOURCE UTStarcom, Inc.