IR/インベスターリレーションズ
UTStarcom Reports Unaudited Financial Results for Third Quarter 2019
HONG KONG, Nov. 08, 2019 (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, 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) 519-4004
Canada: + 1 (866) 386-1016
Hong Kong: +852-3018-6771
China: 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) 452-5696
Hong Kong: 800-963-117
China: 4006-022-065
Other 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: +852-3951-9757
Ms. Fei Wang, Director of Investor Relations
Email: fei.wang@utstar.com
Ms. Ning Jiang, Investor Relations
Email: njiang@utstar.com
In the United States:
The Blueshirt Group
Mr. Ralph Fong
Tel: +1 (415) 489-2195
Email: 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 | |||||||||
