UTStarcom Reports Unaudited FR for the Third Quarter of 2017
OREANDA-NEWS. UTStarcom (“UTStarcom” or “the Company”) (NASDAQ:UTSI), a global telecommunications infrastructure provider, today reported its unaudited financial results for the third quarter ended September 30, 2017.
UTStarcom’s Chief Executive Officer Tim Ti stated, “We are encouraged by our solid third quarter results and the momentum we have been building throughout 2017. Our continued focus on customers, product quality, operational efficiencies, and overall cost control is yielding results as demonstrated by the significant improvement in our operating margin on both a sequential and year-over-year basis.”
Ti continued, “We have made significant strategic investments in our business over the past 24 months as we strive to build a state-of-the-art technology company in our targeted business segments. Our work continues, and I am excited about the progress we are making. We are confident that the diversity in our product solutions and geographic coverage is a solid foundation for continued profitable growth.”
Recent Key Events
- Subsequent to third quarter of 2017, the Company announced that the special committee of the Company’s board of directors had received a notice from Shah Capital Opportunity Fund LP, Himanshu H. Shah, Hong Liang Lu and certain of his affiliates and Tenling Ti (collectively, the “Consortium”) to withdraw the preliminary non-binding take-private proposal letter dated March 31, 2017 from the Consortium to the Board.
- The Company announced the filing of its annual report on Form 20-F for the year ended December 31, 2016 with the Securities and Exchange Commission (the "SEC") on November 14, 2017.
Third Quarter 2017 Financial Highlights
In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company also provides non-GAAP financial measures. The Company believes that the public’s understanding of the Company’s business is enhanced when it has access to the same information that management uses to analyze and operate the business. The Company believes that the non-GAAP measures presented here offer additional insight into the condition and trends of its business. Further explanation of the use of non-GAAP financial information, and reconciliation to the corresponding GAAP measures, can be found at the end of this release.
Summary of Y/Y Comparisons | |||||||||||
Q3 2017 GAAP |
Y/Y Change* |
Q3 2017 Non-GAAP |
Y/Y Change* |
||||||||
Revenue | $26.0 | +58.9% | $26.0 | +58.9% | |||||||
Gross Margin | 40.5% | +1620 bps | 40.6% | +1620 bps | |||||||
Operating Expenses | $7.5 | +38.5% | $7.2 | +41.9% | |||||||
Operating Income | $3.1 | +$4.5 | $3.3 | +$4.4 | |||||||
Net Income | $2.2 | +$4.0 | $2.5 | +$4.0 | |||||||
Basic EPS | $0.06 | +$0.11 | $0.07 | +$0.11 | |||||||
Operating Cash Flow | $1.9 | +$0.4 | |||||||||
Cash Balance | $91.2 | +12.4% | |||||||||
* Dollar comparisons are used where percentage comparisons are not meaningful.
*All the numbers in U.S. Dollars are in million except EPS
Total Revenues
Total revenues for the third quarter of 2017 were $26.0 million, an increase of 58.9 % from $16.4 million for the corresponding period of 2016.
Total Non-GAAP revenues for the third quarter of 2017 were $26.0 million, an increase of 58.9% from $16.4 million for the corresponding period of 2016.
- Non-GAAP net sales from equipment for the third quarter of 2017 were $20.5 million, an increase of 98.3% from $10.3 million for the corresponding period in 2016. The increase was mainly due to the increased sales of the 100G Packet Transport Network (“PTN”) products
- Non-GAAP net sales from services for the third quarter of 2017 were $5.5 million, a decrease of 8.4% from $6.0 million for the corresponding period in 2016.
Gross Profit
Gross profit was $10.6 million, or 40.5% of net sales, for the third quarter of 2017, compared to $4.0 million, or 24.3% of net sales, for the corresponding period in 2016.
Non-GAAP gross profit was $10.6 million, or 40.6 % of net sales, for the third quarter of 2017, compared to $4.0 million or 24.4% of net sales, for the corresponding period in 2016.
- Non-GAAP gross profit from equipment sales for the third quarter of 2017 was $8.2 million, compared to $2.6 million for the corresponding period in 2016. Non-GAAP gross margin from equipment sales for the third quarter of 2017 was 39.9%, compared to 24.8% for the corresponding period in 2016. The increase was due to higher sales of PTN products.
- Non-GAAP gross profit from services for the third quarter of 2017 was $2.4 million, compared to gross profit of $1.4 million for the corresponding period in 2016. Non-GAAP gross margin from services for the third quarter of 2017 was 42.6%, compared to 23.6% for the corresponding period in 2016. The increase was due to revenue from a large 3-year service contract in India.
Operating Expenses
Operating expenses for the third quarter of 2017 were $7.5 million, compared to $5.4 million for the corresponding period in 2016.
Non-GAAP operating expenses for the third quarter of 2017 were $7.2 million, an increase of 41.9% from $5.1 million for the corresponding period in 2016.
- Non-GAAP selling, general and administrative (SG&A) expenses in the third quarter of 2017 were $5.0 million, compared to $3.0 million for the corresponding period in 2016. The increase was mainly due to higher sales commission/bonus and one-time service fees related to privatization and auditing.
- Non-GAAP research and development expenses in the third quarter of 2017 were $2.2 million, compared to $2.1 million for the corresponding period in 2016.
Operating Income (Loss)
Operating income for the third quarter of 2017 was $3.1 million, compared to operating loss of $1.4 million for the corresponding period of 2016.
Non-GAAP operating income for the third quarter of 2017 was $3.3 million, compared to non-GAAP operating loss of $1.1 million for the corresponding period of 2016.
Equity pick up of loss of an associate
Equity pick up of losses of an associate, AioTV was $0.3 million and nil for the third quarter of 2017 and 2016 respectively.
Net Income (Loss)
Net income attributable to UTStarcom’s shareholders for the third quarter of 2017 was $2.2 million, compared to net loss attributable to UTStarcom’s shareholders of $1.8 million for the corresponding period in 2016. Basic income per share for the third quarter of 2017 was $0.06, compared to basic net loss per share of $0.05 for the corresponding period of 2016.
Non-GAAP net income attributable to UTStarcom’s shareholders for the third quarter of 2017 was $2.5 million, compared to Non-GAAP net loss attributable to UTStarcom’s shareholders of $1.5 million for the corresponding period in 2016. Non-GAAP basic income per share for the third quarter of 2017 was $0.07, compared to non-GAAP basic net loss per share of $0.04 for the corresponding period of 2016.
Cash Flow
Cash provided by operating activities was $1.9 million.
Cash used in investing activities was $3.3 million.
As of September 30, 2017, UTStarcom had cash and equivalents of $91.2 million.
Third Quarter 2017 Conference Call Details
The Company’s management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on Monday, November 20, 2017 (9:00 p.m. Hong Kong/Beijing Time).
The conference call dial-in numbers are as follows:
United States / Canada: +1 (800) 239-9838
Hong Kong: +852-3008-1527
China: 4001-209-101
The attendee pass code is: 9760293
A replay of the call will be available two hours after the end of the conference call until 11:00 a.m. U.S. Eastern Time on December 20, 2017.
The conference call replay numbers are as follows:
United States: +1 (888) 203-1112
Hong Kong: 800-901-108
China: 4001-201-651
International: +61-2-9101-1954
The replay passcode for accessing the recording is 9760293.
About UTStarcom Holdings Corp.
UTStarcom (NASDAQ:UTSI) is a global telecom infrastructure provider dedicated to developing technology that will serve the rapidly growing demand for bandwidth from cloud-based services, mobile, streaming, and other applications. We work with carriers globally, from Asia to the Americas, to meet this demand through a range of innovative broadband packet optical transport and wireless/fixed-line access products and solutions. The Company’s end-to-end broadband product portfolio, enhanced through in-house Software Defined Networking (SDN)-based orchestration, enables mobile and fixed-line network operators and enterprises worldwide to build highly efficient and resilient future-proof networks for a range of applications, including mobile backhaul, metro aggregation, broadband access and Wi-Fi data offload. Our strategic investments in media operational support service providers expand UTStarcom’s capabilities in the field of next generation video platforms. UTStarcom was founded in 1991, started trading on NASDAQ in 2000, and has operating entities in Hong Kong; Tokyo, Japan; San Jose, USA; Delhi and Bangalore, India; Hangzhou, China. For more information about UTStarcom, please visit http://www.utstar.com.
UTStarcom Holdings Corp. | ||||||
Unaudited Condensed Consolidated Balance Sheets | ||||||
September 30, | December 31, | |||||
2017 | 2016 | |||||
ASSETS | (In thousands) |
|||||
Current assets: | ||||||
Cash, cash equivalents | $ | 91,225 | $ | 83,922 | ||
Short-term investments | 3,373 | 479 | ||||
Accounts and notes receivable, net | 14,593 | 18,329 | ||||
Inventories and deferred costs | 29,565 | 41,896 | ||||
Prepaids and other current assets | 20,652 | 18,392 | ||||
Total current assets | 159,408 | 163,018 | ||||
Long-term assets: | ||||||
Property, plant and equipment, net | 1,492 | 1,610 | ||||
Long-term deferred costs | 275 | 276 | ||||
Other long-term assets | 15,827 | 13,799 | ||||
Total long-term assets | 17,594 | 15,685 | ||||
Total assets | $ | 177,002 | $ | 178,703 | ||
LIABILITIES AND EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 21,662 | $ | 22,480 | ||
Customer advances | 24,276 | 29,046 | ||||
Deferred revenue | 7,001 | 10,779 | ||||
Other current liabilities | 23,962 | 24,863 | ||||
Total current liabilities | 76,901 | 87,168 | ||||
Long-term liabilities: | ||||||
Long-term deferred revenue and other liabilities | 6,415 | 8,794 | ||||
Total liabilities | 83,316 | 95,962 | ||||
Total equity | 93,686 | 82,741 | ||||
Total liabilities and equity | $ | 177,002 | $ | 178,703 | ||
UTStarcom Holdings Corp. | ||||||||||||||||
Unaudited Condensed Consolidated Statements of Operations | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands,except per share data) | ||||||||||||||||
Net sales | $ | 26,034 | $ | 16,389 | 80,057 | $ | 58,966 | |||||||||
Cost of net sales | 15,479 | 12,400 | 51,474 | 40,669 | ||||||||||||
Gross profit | 10,555 | 3,989 | 28,583 | 18,297 | ||||||||||||
40.5 | % | 24.3 | % | 35.7 | % | 31.0 | % | |||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 5,284 | 3,251 | 13,839 | 13,303 | ||||||||||||
Research and development | 2,207 | 2,158 | 6,296 | 7,080 | ||||||||||||
Total operating expenses | 7,491 | 5,409 | 20,135 | 20,383 | ||||||||||||
Operating Income (loss) | 3,064 | (1,420 | ) | 8,448 | (2,086 | ) | ||||||||||
Interest income, net | 214 | 232 | 794 | 564 | ||||||||||||
Other income (expense), net | (3 | ) | (140 | ) | 2,395 | 1,728 | ||||||||||
Equity pick up of gains (losses) of an associate | (290 | ) | - | (290 | ) | - | ||||||||||
Investment Impairment | - | - | (1,308 | ) | - | |||||||||||
Income (loss) before income taxes | 2,985 | (1,328 | ) | 10,039 | 206 | |||||||||||
Income taxes expenses | (795 | ) | (507 | ) | 495 | 1,711 | ||||||||||
Net Income (loss) | 2,190 | (1,835 | ) | 10,534 | 1,917 | |||||||||||
Net loss attributable to noncontrolling interests | - | - | - | - | ||||||||||||
Net Income (loss) attributable to UTStarcom Holdings Corp. | $ | 2,190 | $ | (1,835 | ) | $ | 10,534 | $ | 1,917 | |||||||
Net Income (loss) per share attributable to UTStarcom Holdings Corp.—Basic | $ | 0.06 | $ | (0.05 | ) | $ | 0.30 | $ | 0.05 | |||||||
Weighted average shares outstanding—Basic | 35,484 | 35,507 | 35,550 | 35,946 | ||||||||||||
UTStarcom Holdings Corp. | |||||||||||||||||
Unaudited Condensed Consolidated Statements of Cash Flows | |||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
(In thousands) | |||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||
Net Income (Loss) | $ | 2,190 | $ | (1,835 | ) | $ | 10,534 | $ | 1,917 | ||||||||
Depreciation | 152 | 243 | 473 | 1,037 | |||||||||||||
Provision for doubtful accounts | 819 | 110 | 713 | 724 | |||||||||||||
Provision for(recovery of) deferred costs | 405 | (129 | ) | 3,825 | (2,827 | ) | |||||||||||
Stock-based compensation expense | 264 | 312 | 655 | 2,292 | |||||||||||||
Net loss on disposal of assets | - | 7 | - | (84 | ) | ||||||||||||
Gain on release of tax liability due to expiration of the statute of limitations | - | - | (1,478 | ) | (807 | ) | |||||||||||
Deferred income taxes | (324 | ) | - | (93 | ) | 49 | |||||||||||
Loss from equity investments, net | 290 | - | 290 | - | |||||||||||||
Other-than-temporary impairment of equity investments | - | - | 1,308 | - | |||||||||||||
Gain on Cumulative Transfer Adjustment recognition from liquidation subsidiaries | - | - | (1,703 | ) | (47 | ) | |||||||||||
Gain (loss) on sale investments | - | 57 | - | (83 | ) | ||||||||||||
Changes in operating assets and liabilities | (1,872 | ) | 2,801 | (2,663 | ) | 1,985 | |||||||||||
Net cash provided by operating activities | 1,924 | 1,566 | 11,861 | 4,156 | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||
Additions to property, plant and equipment | (147 | ) | (749 | ) | (292 | ) | (1,366 | ) | |||||||||
Proceeds from sale of property, plant and equipment | - | - | - | 85 | |||||||||||||
Change in restricted cash | 606 | (510 | ) | (3,078 | ) | 741 | |||||||||||
Purchase of an investment interest | (381 | ) | - | (481 | ) | 57 | |||||||||||
Proceeds from refund of investment interests | - | - | 499 | 363 | |||||||||||||
Net cash provided by (used in) investing activities | 78 | (1,259 | ) | (3,352 | ) | (120 | ) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||
Repurchase of ordinary share | - | (721 | ) | (140 | ) | (3,621 | ) | ||||||||||
Net cash used in financing activities | - | (721 | ) | (140 | ) | (3,621 | ) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 285 | 82 | 2,307 | 3,660 | |||||||||||||
Net increase in cash and cash equivalents | 2,287 | (332 | ) | 10,676 | 4,075 | ||||||||||||
Cash and cash equivalents at beginning of period | 92,311 | 81,457 | 83,922 | 77,050 | |||||||||||||
Cash and cash equivalents at end of period | $ | 94,598 | $ | 81,125 | $ | 94,598 | $ | 81,125 | |||||||||
UTStarcom Holdings Corp. | |||||||||||||||
Unaudited Condensed Consolidated Statements of Operations | |||||||||||||||
To supplement our unaudited condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if stock compensation expenses and China IPTV- related deferred revenue amortization had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom’s underlying results and trends. In addition, these adjusted non-GAAP results 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. | |||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Non-GAAP Revenue | $ | 26,026 | $ | 16,381 | $ | 80,032 | $ | 58,681 | |||||||
Non-GAAP Gross profit | 10,559 | 3,989 | 28,587 | 18,296 | |||||||||||
Non-GAAP Gross Margin % | 40.6 | % | 24.4 | % | 35.7 | % | 31.2 | % | |||||||
Non-GAAP Operating Income (loss) | 3,328 | (1,108 | ) | 9,103 | 206 | ||||||||||
Non-GAAP Net Income (loss) attributable to UTStarcom | $ | 2,454 | $ | (1,523 | ) | $ | 11,189 | $ | 4,209 | ||||||
Non-GAAP Net Income (loss) per share attributable to UTStarcom Holdings Corp.—Basic | $ | 0.07 | $ | (0.04 | ) | $ | 0.31 | $ | 0.12 | ||||||
Weighted average shares outstanding—Basic | 5,484 | 35,507 | 35,550 | 35,946 | |||||||||||
UTStarcom Holdings Corp. | |||||||||||||
Unaudited GAAP to unaudited Non-GAAP Reconciliation | |||||||||||||
To supplement our unaudited condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if stock compensation expenses and China IPTV- related deferred revenue amortization had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom’s underlying results and trends. In addition, these adjusted non-GAAP results 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. | |||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
(In thousands) | |||||||||||||
Reconciliation of Revenue | |||||||||||||
GAAP Net revenue | $ | 26,034 | $ | 16,389 | $ | 80,057 | $ | 58,966 | |||||
Less: China IPTV revenue | 8 | 8 | 25 | 285 | |||||||||
Non-GAAP Net revenue | $ | 26,026 | $ | 16,381 | $ | 80,032 | $ | 58,681 | |||||
GAAP Gross Margin | |||||||||||||
US. GAAP as reported | $ | 10,555 | $ | 3,989 | $ | 28,583 | $ | 18,297 | |||||
Add: Stock based compensation - COGS | 4 | - | 4 | (1 | ) | ||||||||
Non-GAAP Gross Margin | $ | 10,559 | $ | 3,989 | $ | 28,587 | $ | 18,296 | |||||
Reconciliation of Operation Income(loss) | |||||||||||||
GAAP Operation Income(loss) | $ | 3,064 | $ | (1,420 | ) | $ | 8,448 | $ | (2,086 | ) | |||
Add: Stock based compensation | 264 | 312 | 655 | 2,292 | |||||||||
Non-GAAP Operation Income(loss) | $ | 3,328 | $ | (1,108 | ) | $ | 9,103 | $ | 206 | ||||
Reconciliation of Net Income(loss) | |||||||||||||
GAAP Net Income(loss) | $ | 2,190 | $ | (1,835 | ) | $ | 10,534 | $ | 1,917 | ||||
Add: Stock based compensation | 264 | 312 | 655 | 2,292 | |||||||||
Non-GAAP Net Income(loss) | $ | 2,454 | $ | (1,523 | ) | $ | 11,189 | $ | 4,209 | ||||
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