Ladies and gentlemen, thank you for standing by for the UTStarcom's Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to introduce the host for today, Ms. Fei Wang. Fei, you may begin.

Hey, thank you Gina. Hello everyone and welcome to UTStarcom's Second Quarter 2016 Earnings Conference Call. Earlier today, we distributed our earnings press release. You can find a copy on our website at www.utstar.com. In addition, we have posted a slideshow presentation on our website, which you can download and use to follow along with today's call. On today's call, we have Mr. Tim Ti, Chief Executive Officer, and Mr. Min Xu, Chief Financial Officer. Before we get started, I will read the company's advisory on forward-looking statements that you can see on slide 2. This call will include forward-looking statements relating to the company's business and strategic initiatives. Those statements are forward-looking in nature and are subject to risks and uncertainties that may cause actual results to differ materially and adversely from the company's current expectations. This includes 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 transactions, 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 conference call are based upon information available to the company as of the date of this call, which may change, and the company assumes no obligation to update any such forward-looking statements. I will now hand the call over to UTStarcom's CEO, Mr. Tim Ti.

Thank you, Fei and hello everyone. As Fei mentioned, you can follow along with today's call by downloading the presentation from our website at www.utstar.com. Also, unless otherwise stated, all figures mentioned during this call are in U.S. dollars. I will first take you through an overview of our financial and operating highlights for the second quarter of 2016 and then I will share with you an update of our strategic initiatives and our near-term business outlook. I will then turn the call over to our CFO, Xu Min, who will share with you the details about our second quarter financial performance. Please turn to slide 3. While Min will walk you through the full details in just a bit, let me provide a top line summary of our overall financial results for the second quarter. In addition to disclosing financial measures prepared in accordance with the GAAP, we will also provide non-GAAP financial measures which we believe better reflect the company's core business status and the development trend. Min will give more information on the GAAP and the non-GAAP financial measures specifically related to the second quarter during his remarks. During the second quarter we achieved positive operating income and the net profitability due to our continued focus on margin and the operation efficiency. Second quarter non-GAAP revenues were $20 million at the high-end of our guidance of $15 million to $20 million. Second quarter non-GAAP gross margin was 41.2%, the highest since Q1 2012. Second quarter non-GAAP operating income of $1.9 million was the second highest since Q1 2012. Second quarter non-GAAP net income of $5.5 million was the highest since Q1 2012. We had a positive operating cash flow of $0.6 million and ended the quarter with $81.5 million cash and no debt. Now let me walk…

Thank you Tim and hello everyone. I will now take a few minutes to discuss our second quarter 2016 non-GAAP financial results. Please turn to slide 6. Before I walk through the specific numbers, I would like to highlight a few key items for the second quarter. Q2 non-GAAP revenue was $20.0 million at the high-end of our guidance of $15 million to $20 million. Non-GAAP gross margin improved sequentially to 41.2%, helped by favorable product mix. We achieved a consecutive quarter of profitability with positive non-GAAP net income of $5.5 million and non-GAAP EPS of $0.15. Our cash balance at the end of the quarter was $81.5 million, slightly up from last quarter and we have zero debt. Please turn to slide 7 for a non-GAAP revenue review. Please note that non-GAAP revenue excluded legacy IPTV revenues and legacy Indian DoT revenues. In the second quarter, total non-GAAP revenue was $20.0 million, compared with $22.3 million for the previous quarter. The revenue decline was due to a decrease in Japan partially offset by increase in India. Please turn to slide 8 and 9 for gross profit and gross margin. Please note that non-GAAP cost of sales and non-GAAP operating expenses excluded stock based compensation legacy IPTV cost and costs related to legacy Indian DoT revenues. In the second quarter non-GAAP gross profit was $8.3 million up from $6.1 million in the previous quarter and $2.7 million a year ago. Non-GAAP gross margin was 41.2% up from 27.2% in the previous quarter, and a 16.2% a year ago. Second quarter margin benefitted from a onetime non-cash margin related to a legacy product revenue amortization in India. Excluding the onetime benefit, the margin would have been 34%. I would also like to point out that due to relatively soft demand in…

Thank you, Min. Turning now to slide 14, I would like to recap our strategy and priorities with you. Going forward our first priority continues to be working with our customers to develop innovative and first class communication solution. We will continue to emphasize effective communication, collaboration, and accountability in order to achieve productivity, efficiency and a great response time. Second, we are accelerating our investment in communication solutions, data center, and smart city markets. DGO will become part of the ICI Group focusing on VBG based communication solution and related products. We expect to work with any potential partners to fill the gaps in the market with our innovative offering. Third, we will remain prudent on cost management and continue to improve overall operational efficiency and productivity. We expect that moving of our global R&D and operations center to save any facility cost and we will continue to look for ways to further improve our operational efficiency. Now please turn to slide 15 for our near-term outlook. In the first half of 2016, we have achieved $1.3 million operating income and $5.7 million net income. In the second half of 2016 we will continue our focus on profitability and shareholder value despite relatively soft demand. Looking specifically at the third quarter of 2016, the company expects to generate non-GAAP revenues in the range $15 million to $20 million. We see the opportunities and the challenges in front of us and is confident on our trend towards profitability. We will continue to optimize our core optical network business to meet our customer’s demand. We will also invest in new products which will be cornerstone of our future growth. We thank you for your support and look forward to delivering improved value for our business and our stakeholders. With that, Min and I would like to take your questions. Operator, please open the line for Q&A.

Certainly, we will now begin the question-and-answer session. [Operator Instructions]. We will now take our first question from Tim Savageaux from Northland Capital Markets. Please go ahead. Your line is open.

Hello, good morning and good evening. Wanted to ask a question about your comments around softening demand trends in the second half and sort of contrast that with I think what has been a fair bit of sort of positive commentary and results around at least the beginnings of 100GE metro optical ramps among carriers and cloud providers in the U.S. and perhaps elsewhere. So, realizing you have a fair bit of concentration with your major customer, I think you referenced some expectations of seasonality, their last quarter wonder if you could talk about the drivers of the soft demand commentary where that’s more related to Japan and your largest customer or other factors?

Hey Tim, this is Min. So yes, I agree with your general comment that in general the 100GE adoption is actually increasing and it’s a very positive environment out there. However, specific to our largest customer in Japan I wouldn’t say it is -- our largest customer they are actually adopting 100GE very aggressively. However, the soft demand is more related to one, seasonality and second, the deployment cycle. So we previously thought our Q2 will be relatively weak but turns out to be pretty strong. And now we’re seeing probably there will be some quite periods in the second half but we’re working very hard on our potential deal pipeline.

Great, understood. Also question on the gross margin side, even excluding the onetime item, right you did see some pretty significant improvement in what have been positive on the operating profit line even excluding that item. So I wonder if you could talk about drivers of that expansion and understanding it may be coming back down with your overall demand commentary but for the quarter itself assuming it is 34% or what have you that is still pretty solid gross margin performance, any key sort of moving parts driving that higher?

Right, so there is some color for the quarter I would say for our margin in our key markets in Japan, the margin has always been pretty high. And in the previous quarters we did have some relatively low margin for example third party sales and in some cases some of the legacy revenue amortizations. So luckily in Q2 we didn’t have any of those. As Tim mentioned in previous comments all the margins or all the regions actually have margins higher than 25% which is pretty unusual. However, we also caution that in second half we are expecting to see some of the lower margin legacy revenue amortizations come back which could impact our margin a little bit.

Got it and a final question for me is on the cash side. I mean cash balance increased a little bit despite I think some of your benefits there being non cash in nature. But in general I think you have done a nice job maintaining that cash balance up around $80 million as you sort of move back down on the revenue line and maybe back down to a modest or solid operating loss position. I wonder if you could speak to expectations for cash into the second half of the year, whether you have got any sources of cash upcoming that are non-operating or generally how you see the cash balance playing out from its current level of almost $2.20 a share I guess?

Right, so yes. So for this quarter cash balance we did benefit from our operating profit and also some of the positive foreign exchange impact. Looking forward we might get less of a foreign exchange impact that benefit. And in addition as I mentioned we are seeing probably relatively soft demand and the lower margin so we expect our operating line will probably not as great as in the first half. So in addition we are actually investing in our working capital for some of the future business. So we do see the cash will probably decline from the current level.

Okay, thank you very much.

Alright, thank you Tim.

Thank you.

Our next question comes from Jim Packolmy [ph], a Private Investor. Please go ahead, your line is open.

Yes, good morning and just had a question on the share repurchase program, where were those shares bought, were they bought from an individual or in the open market?

Those were bought from mostly from open market with one large block purchase.

Alright, and it was all open market and no private individual.

No private individuals.

Okay, very good. Alright, thank you.

Alright, thanks.

[Operator Instructions]. Our next question comes from Kevin Lu [ph] from Rosenblatt Securities. Please go ahead, your line is open.

So when do you expect you could expand to the new product which could drive some growth?

As we mentioned in previous quarters we are focusing on the R&D activities for those products and we are making good progress and we already announced our SyncRing products and we are looking forward to announce some of the new -- other new products towards the end of this year.

Okay, so my next question is what is market opportunity in Japan going forward?

Yes, this is Tim, for the opportunity in Japan it is pretty, pretty, pretty exciting and even though our major customer in Japan has slow a little bit 100GE expansion but with the other bandwidth demand in global, special LTE global we will expect a little delay that we could highly expect in the first half of next year. In addition to our traditional co-business we are also starting to introduce -- that we just introduced a new product -- SynRing product which is providing the precise timing placed clock. It is perfect for the highly demand accuracy timing for the next generation mobile network, specially 5GE [ph] and LTE Advanced. That’s our product which already have our new customer in Japan try it and hopefully we can get the order in the next year.

Okay, so my last question is on the operation leverage, do you guys have any further way to improve cash flow?

For the operation as we mentioned we continued to streamline and optimize our organization. So I just mentioned we just move our new facility for the R&D and the global R&D and operation center which again dramatically save our overall operation cost, okay. But in average you will see that continues our goal to seeing how to optimize and how to improve our efficiency in terms of our operation and also our design.

Thank you very much.

Thank you.

There are no further questions from the phone [Operator Instructions]. As there are no further questions I’ll turn the call back to your host for any additional or closing remarks.

Thank you Gina. Okay, thank you for joining us on our second quarter 2016 earnings conference call. We look forward to updating you on our third quarter 2016 results in a few months. Feel free to get in touch with us at any time if you have further questions, concerns or comments. Thank you everyone.

That will conclude today’s conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.