HANGZHOU, China, Oct. 30, 2020 (GLOBE NEWSWIRE) -- UTStarcom (“UT” or the “Company”) (NASDAQ: UTSI), a global telecommunications infrastructure provider, today reported its unaudited financial results for the six months ended June 30, 2020.
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 in China. 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 on FlexE/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 of China, 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 in India raised INR8,500 Crore (approximately USD1.13 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 in India, 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
Cash Balance (including Restricted Cash)
* 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 for the first half of 2020 were $13.7 million, compared to $38.6 million in the corresponding period in 2019.
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 major India 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 in India related to the COVID-19 pandemic.
Gross profit was $2.6 million, or 19.1% of net sales, for the first half of 2020, compared to $12.0 million, or 31.2% of net sales, in the corresponding period in 2019.
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 in India.
Operating expenses for the first half of 2020 were $11.9 million, compared to $14.4 million in the corresponding period in 2019.
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 our India 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 in China and lower expenditure during the mandatory shutdowns related to COVID-19.
Operating loss for the first half of 2020 was $9.3 million, compared to $2.3 million in the corresponding period in 2019.
Interest Income, Net
Net interest income for the first half of 2020 was $0.5 million, compared to $0.6 million in the corresponding period in 2019.
Other Income (Expenses), Net
Net other expense for the first half of 2020 was $3.1 million, compared to net other income of $4.8 million in the corresponding period in 2019. Other expense for the first half of 2020 was mainly due to foreign exchange losses resulting from the devaluation of Indian Rupee against the U.S. dollar.
Net Income (Loss)
Net loss attributable to shareholders for the first half of 2020 was $12.0 million, compared to net income of $2.1 million in the corresponding period in 2019. Basic net loss per share for the first half of 2020 was $0.34, compared to basic net income per share of $0.06 for the corresponding period in 2019.
Cash used in operating activities in the first half of 2020 was $0.8 million, cash generated from investing activities was $2.0 million, and cash used in financing activities was $0.2 million. As of June 30, 2020, UTStarcom had cash, cash equivalent and restricted cash of $48.6 million.
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 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.
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 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:
In the United States:
The Blueshirt Group
Mr. Ralph Fong
Tel: +1 (415) 489-2195
UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Balance Sheets
Cash and cash equivalents
Accounts and notes receivable, net
Inventories and deferred costs
Short-term restricted cash
Prepaid and other current assets
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets, net
Long-term restricted cash
Other long-term assets
Total long-term assets
LIABILITIES AND EQUITY
Income tax payable
Operating lease liabilities, current
Other current liabilities
Total current liabilities
Operating Lease liabilities, non-current
Long-term deferred revenue and other liabilities
Total liabilities and equity
UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Statements of Operations
Six months ended June 30,
(In thousands, except per share data)
Cost of net sales
Selling, general and administrative
Research and development
Total operating expenses
Interest income, net
Other income (expense), net
Income (loss) before income taxes
Income tax expense
Net Income (loss) attributable to UTStarcom
Net Income (loss) per share attributable to
Weighted average shares outstanding—Basic
UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Statements of Cash Flows
Six months ended June 30,
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)
Provision for doubtful accounts
Stock-based compensation expense
Net gain on disposal of assets
Gain on release of tax liability due to expiration of the statute of limitations
Deferred income taxes
Gain on write-off long-term account payable due to expiration of the statute of limitations
Changes in operating assets and liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment
Purchase of short-term investment
Proceeds from short-term investments
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options
Repurchase of ordinary share
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period