Business Update
- Status of 5G Transport Network Opportunity with a Major Mobile Carrier in
China UTStarcom collaborated with a partner to develop critical 5G transport network technologies to support the 5G migration inChina . The Company in-house developed product and its network management and controller has passed the operator’s Benchmark Testing of its Central Procurement Phase 1.UTStarcom and our partner were recognized as qualified vendors and awarded certain portion of the 5G network project in two provinces. However, due to the small size of business opportunity, we decided not to move forward with commercial deployment.
- Launch of 5G Transport Network Solution In
September 2020 , the Company launched its state-of-the-art 5G product solution,SkyFlux Converged Packet Transport platform. It combines Segment Routing/MPLS-TP tunneling, TDM-like Ethernet based onFlexE /G.mtn, highly accurate time synchronization and SDN-based network intelligence into an efficient future-proof architecture of 5G-ready transport network. The new platform includes two products, SkyFlux SPN805S & 803S and a network management and controller “SOO Station R3.2”. - Development of Network Disaggregation Telecom operators are increasingly focused on networking device disaggregation. This encompasses the decoupling of hardware and software that enables operator to choose independently the most suitable hardware, operating system and set of features and control interfaces.
UTStarcom is leveraging its expertise in 5G transport network to develop network disaggregation solutions, including White Box Switch (WBS) and Network Operating System (NOS). The Company is seeing initial interest for those solutions from a handful of operators. - Impact of the COVID-19 Virus Businesses in most parts of the world were negatively impacted in the first half of 2020 due to mandatory shutdowns related to the COVID-19 pandemic. Since then, production and operations in
China have returned to normal. However, outside ofChina , the COVID-19 situation remains a health threat with a resurgence of COVID-19 cases in various parts of the world. As a result, the impact to the Company’s future operations continues to be significant and prolonged. - India Receivable The Company continues to collect amounts due from its major customer in
India . The major customer inIndia raised INR8,500 Crore (approximatelyUSD1.13 billion ) through sovereign guaranteed bonds (issued at coupon rate of 6.79 per cent per annum for 10 year period) and cleared a portion of its payables to vendors, including the Company. Since the Company’s last earnings release on March 27, 2020, over $16 million has been collected, with$49 million outstanding. However, as the customer’s operating status has no significant improvement, as well as the ongoing payment processing was delayed by COVID-19 pandemic inIndia , the timing of future payments remains uncertain.
UTStarcom’s acting Chief Executive Officer Dr. Zhaochen Huang commented, “Our results for the first half of 2020 were negatively impacted by the COVID-19 pandemic. While we continue to navigate this challenging macro environment, we are focused on developing new products that capitalize on important technology trends and engaging with network operators to address and support their requirements.”
First Half 2020 Financial Results
Summary of 1H 2020 Key Financials
1H 2020 | 1H 2019 | Y/Y Change | |
Revenue | -64.5% | ||
Gross Profit | -78.2% | ||
Operating Expenses | -17.1% | ||
Operating Loss | ( | ( | - |
Net Income/Loss | ( | - | |
Basic EPS | ( | - | |
Cash Balance (including Restricted Cash) | -11.7% |
* Dollar comparisons are used where percentage comparisons are not meaningful.
* All the numbers in
Total Revenues
Total revenues for the first half of 2020 were
- Net equipment sales for the first half of 2020 were
$9.3 million , a decrease of 67.9% from$29.0 million in the corresponding period in 2019. The decrease was due to order cancellations during the COVID-19 pandemic coupled with the decreased revenue from our majorIndia customer because of its financial status. Concern around risk of second wave of COVID-19 infection in many countries, continues to affect our revenue. - Net services sales for the first half of 2020 were
$4.4 million , a decrease of 54.2% from$9.6 million in the corresponding period in 2019. The decrease was mainly due to the mandatory shutdowns inIndia related to the COVID-19 pandemic.
Gross Profit
Gross profit was
- Equipment gross profit for the first half of 2020 was
$3.2 million , compared to$8.9 million in the corresponding period in 2019. Equipment gross margin for the first half of 2020 was 34.3%, compared to 30.7% for the corresponding period in 2019. The increase in gross margin was attributed to favorable product mix. - Service gross margin for the first half of 2020 was
($0.6) million , compared to$3.1 million in the corresponding period in 2019. Service gross margin for the first half of 2020 was (12.7%), compared to 32.5% for the corresponding period in 2019. The decrease in gross margin was mainly due to one-time expense incurred inIndia .
Operating Expenses
Operating expenses for the first half of 2020 were
- Selling, general and administrative (“SG&A”) expenses for the first half of 2020 were
$7.5 million , compared to$7.0 million in the corresponding period in 2019. SG&A was higher in the first half of 2020 due to higher accounts receivable allowance provided for long aged receivables during the period for ourIndia customer, which partially offset by the decreased expenses from continued tight cost control. - Research and development (“R&D”) expenses for the first half of 2020 were
$4.4 million , compared to$7.4 million in the corresponding period in 2019. The decrease reflected lower 5G investments due to diminishing 5G prospects inChina and lower expenditure during the mandatory shutdowns related to COVID-19.
Operating Loss
Operating loss for the first half of 2020 was
Interest Income, Net
Net interest income for the first half of 2020 was
Other Income (Expenses), Net
Net other expense for the first half of 2020 was
Net Income (Loss)
Net loss attributable to shareholders for the first half of 2020 was
Cash Flow
Cash used in operating activities in the first half of 2020 was
About
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, the effect of the COVID-19 pandemic on the Company’s business, 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
For investor and media inquiries, please contact:
Tel: +86 571 8192 8888
Ms.
Email: utsi-ir@utstar.com/ njiang@utstar.com /
In the
Mr.
Tel: +1 (415) 489-2195
Email: ralph@blueshirtgroup.com
Unaudited Condensed Consolidated Balance Sheets
2020 | 2019 | |||||
(In thousands) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 33,011 | $ | 34,966 | ||
Short-term investments | — | 2,095 | ||||
Accounts and notes receivable, net | 64,157 | 77,831 | ||||
Inventories and deferred costs | 7,289 | 6,655 | ||||
Short-term restricted cash | 11,257 | 10,007 | ||||
Prepaid and other current assets | 4,158 | 5,524 | ||||
Total current assets | 119,872 | 137,078 | ||||
Long-term assets: | ||||||
Property, plant and equipment, net | 842 | 1,092 | ||||
Operating lease right-of-use assets, net | 1,869 | 2,860 | ||||
Long-term restricted cash | 4,377 | 3,634 | ||||
Other long-term assets | 6,614 | 6,639 | ||||
Total long-term assets | 13,702 | 14,225 | ||||
Total assets | $ | 133,574 | $ | 151,303 | ||
LIABILITIES AND EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 28,187 | $ | 30,875 | ||
Customer advances | 217 | 160 | ||||
Deferred revenue | 1,208 | 1,320 | ||||
Income tax payable | 7,198 | 7,480 | ||||
Operating lease liabilities, current | 1,700 | 1,595 | ||||
Other current liabilities | 6,600 | 7,603 | ||||
Total current liabilities | 45,110 | 49,033 | ||||
Long-term liabilities: | ||||||
Operating Lease liabilities, non-current | 589 | 1,364 | ||||
Long-term deferred revenue and other liabilities | 1,411 | 1,718 | ||||
Total liabilities | 47,110 | 52,115 | ||||
Total equity | 86,464 | 99,188 | ||||
Total liabilities and equity | $ | 133,574 | $ | 151,303 |
Unaudited Condensed Consolidated Statements of Operations
Six months ended June 30, | ||||||
2020 | 2019 | |||||
(In thousands, except per share data) | ||||||
Net sales | $ | 13,708 | $ | 38,562 | ||
Cost of net sales | 11,094 | 26,548 | ||||
Gross profit | 2,614 | 12,014 | ||||
19.1 | % | 31.2 | % | |||
Operating expenses: | ||||||
Selling, general and administrative | 7,549 | 6,983 | ||||
Research and development | 4,355 | 7,368 | ||||
Total operating expenses | 11,904 | 14,351 | ||||
Operating loss | (9,290 | ) | (2,337 | ) | ||
Interest income, net | 493 | 587 | ||||
Other income (expense), net | (3,103 | ) | 4,754 | |||
Income (loss) before income taxes | (11,900 | ) | 3,004 | |||
Income tax expense | (142 | ) | (880 | ) | ||
Net Income (loss) attributable to | $ | (12,042 | ) | $ | 2,124 | |
Net Income (loss) per share attributable to UTStarcom Holdings Corp.—Basic | $ | (0.34 | ) | $ | 0.06 | |
Weighted average shares outstanding—Basic | 35,692 | 35,350 |
Unaudited Condensed Consolidated Statements of Cash Flows
Six months ended June 30, | ||||||
2020 | 2019 | |||||
(In thousands) | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net Income (loss) | $ | (12,042 | ) | $ | 2,124 | |
Depreciation | 295 | 327 | ||||
Provision for doubtful accounts | 2,477 | 1,260 | ||||
Stock-based compensation expense | 497 | 757 | ||||
Net gain on disposal of assets | — | (5 | ) | |||
Gain on release of tax liability due to expiration of the statute of limitations | — | (1,128 | ) | |||
Deferred income taxes | 116 | 4 | ||||
Gain on write-off long-term account payable due to expiration of the statute of limitations | — | (3,161 | ) | |||
Changes in operating assets and liabilities | 7,826 | (18,308 | ) | |||
Net cash used in operating activities | (831 | ) | (18,130 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Additions to property, plant and equipment | (85 | ) | (296 | ) | ||
Purchase of short-term investment | — | (41 | ) | |||
Proceeds from short-term investments | 2,095 | — | ||||
Net cash provided by (used in) investing activities | 2,010 | (337 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Proceeds from exercise of stock options | — | 56 | ||||
Repurchase of ordinary share | (157 | ) | (850 | ) | ||
Net cash used in financing activities | (157 | ) | (794 | ) | ||
Effect of exchange rate changes on cash and cash equivalents | (984 | ) | 658 | |||
Net increase (decrease) in cash and cash equivalents | 38 | (18,603 | ) | |||
Cash, cash equivalents and restricted cash at beginning of period | 48,607 | 73,699 | ||||
Cash, cash equivalents and restricted cash at end of period | $ | 48,645 | $ | 55,096 |
Source:
2020 GlobeNewswire, Inc., source