Earnings Labs

UTStarcom Holdings Corp. (UTSI)

Q2 2019 Earnings Call· Tue, Aug 13, 2019

$2.50

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Transcript

Operator

Operator

Hello, ladies and gentlemen. Thank you for standing by for UTStarcom's Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today's conference is being recorded. I would now turn over the call to Mr. Gary Dvorchak, Managing Director of The Blueshirt Group Asia. Please go ahead, Mr. Dvorchak.

Gary Dvorchak

Analyst

Thank you, Christian. Hello, everyone, and welcome to UTStarcom's second quarter 2018 earnings conference call. We distributed our earnings press release earlier. You can find a copy at our website at www.utstar.com. In addition, we have posted a presentation on the 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. Eric Lam, Vice President of Finance. Before we get started, let me refer you to the company's Safe Harbor statement on page 2 of the slide. 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. The risks and uncertainties include factors identified in the company's latest Annual Report on Form 20-F and the current reports on Form 6-K that are filed with the Securities and Exchange Commission. All forward-looking statements included in this call are based on information available to the company as of the date of this call. That information may change. If so, the company assumes no obligation to update any such forward-looking statements. Also please note that unless otherwise stated, all figures mentioned in the call are in U.S. dollars. I will now hand the call over to UTStarcom's CEO, Mr. Tim Ti. Tim?

Tim Ti

Analyst

Thank you, Gary. Thank you, everyone for joining our call today. We appreciate your interest in UTStarcom. As Gary mentioned, you can download the presentation from the Investors section of our website. Now let me quickly recap our Q2 results as shown on page 3. The second quarter came in largely as expected. Revenue of $13.9 million was within our guidance range. Gross margin increased 10 percentage points from a year ago. And we achieved $1.7 million in net income, which represent our second consecutive profitable quarter. Eric would get into the detailed financials in his remarks shortly. The first half also played out as expected. We continued to fund more product development and expand our marketing efforts, which should pay-off in recent growth in the years ahead. Now, let me walk you through key operating highlights. First, we are actively engaged in a large 5G opportunity in China. We are pleased with the excellent initial result. We are collaborating with a partner on this. We are leveraging our expertise in optical backhaul technology to develop state-of-the-art 5G products. We achieved excellent lab evaluation results with this major China carrier. While we cannot offer a lot of detail yet we anticipate receiving initial 5G product orders in the first quarter of 2019. We view this cooperation as a key game-changing event with significant potential revenue opportunities for us in the years to come. 5G is driving significant new investment by network operators. This advance standard requires greater network capacity, better super-strong efficiency and higher data throughput in the network architecture. As a result of this small sale deployment and heavy traffic, a 5G network needs to support hundreds of gigabits of traffic from the core network. With our expertise in optical backhaul, we have the capability to meet business challenges.…

Eric Lam

Analyst

Thank you, Tim, and thank you, everyone for joining the call today. As I review our financial performance, please keep in mind that all figures refer to the second quarter of 2019 unless I state otherwise. Also all comparisons are with the same period last year, unless I specify differently. So starting on page 15, revenue was nearly $14 million, down 51% but within our guidance range. India accounted for majority of the revenue. As shown on page 16, gross profit was $5 million and the gross margin was 36%. This is well above the 26% gross margin we had this period last year. Margin was higher due to favorable product and geographic mix. Page 17 shows operating expenses, which were a little bit over $7 million. This is flat versus last year and down 2% sequentially. While SG&A expenses were down 27%, R&D was up 45%. The increased R&D spending demonstrates our commitment to new product development. Lower SG&A spending reflects stringent cost control on our overhead functions. We had an operating loss of $2 million as compared to an operating income of $0.5 million last year due to lower revenue. Now the fluctuation and lumpiness of our revenue stream reflect revenue recognition based on project fulfillment. Turning to page 18. The net income for the quarter was $1.7 million or $0.05 per share, compared to the small net loss of $87,000 or essentially breakeven last year. Net other income was $3.7 million compared to net other expense of $0.3 million a year ago. In this quarter, we benefit from a large write-off of an aged account payable item as well as a tax reserve adjustment as the statute of limitation ran out. The net other income is partially offset by foreign exchange loss as the Chinese yen depreciate…

Operator

Operator

Tim Ti

Analyst

Thank you, operator. We are optimistic about our future. We are very confident of our technological direction and our leading-edge product and the service offerings. We look forward to updating you on our business progress in a few months. Thank you.

Operator

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.