utstarcom third quarter 2011 results jack lu, ceo jin jiang, cfo nasdaq: utsi november 2011
TRANSCRIPT
UTStarcomThird Quarter 2011 Results
Jack Lu, CEO Jin Jiang, CFO
NASDAQ: UTSI
November 2011
2
Disclosure & Forward Looking Statements
This investor presentation contains forward-looking statements, including statements regarding the Company's expectation regarding its new services business, ability to successfully launch its internet TV platform, expected value and target customers from new products launched and anticipated or assumed future financial results in 2011. Forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company, the Company’s future performance and the industries in which the Company operates as well as on the Company management's assumptions and beliefs. These forward-looking statements are only predictions and are subject to risks and uncertainties related to, among other things, the ability of the Company to realize anticipated results of operational improvements, increase bookings, and execute on its business plan, as well as risk factors identified in its latest Annual Report on Form 10-K, Form 10-K/A, Quarterly Reports on Form 8-K and Form 10-Q, and Current Reports Form 8-K on Form 6-K, as filed with the Securities and Exchange Commission. Therefore, actual results could differ materially and adversely from the Company's current expectations. We undertake no obligation to update these forward-looking statements to reflect events or circumstances occurring after the date of this investor presentation. The Company is in a period of significant transition and in the conduct of its business is exposed to additional risks as a result. This investor presentation also includes financial guidance and information about the Company previously disclosed during the Company's 2010 and 2011 earnings conference calls and other filings with the Securities and Exchange Commission. Such guidance and information reflects the Company’s information and expectations as of those dates and this presentation is not intended to confirm or update that information and expectations.
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Agenda
Q3 2011 Highlights1
Financial Overview / Outlook
Business Highlights
3
2
4
Third Quarter 2011 Highlights
Net Income of $8.0 million, or basic earnings per share of 5 cents;
Revenues of $83.3 million, a 35.7% or $21.9 million increase, compared to the same period of 2010;
Gross profit margin of 38.4%, compared to 19.7% in same period of 2010, 37.6% in Q2 2011 and 31.1% in Q1 2011;
Operating income of $14.2 million;
Cash balance of US$305.9 million in cash, cash equivalents, and short-term investments.
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Profitability Improvement
China: Gross margin increased in 2011
Japan: High gross margin PTN products
6
Recent Business Highlights
Successfully completed the construction of first Internet TV platform to support a cable TV network customer
Won sizable EPON contracts from Hebei and Sichuan cable operators and Ningxia Electric Power Company
Won IPTV integrated broadcasting control platform contract in Tianjin
Won MSTP and PTN contracts from Taiwan’s Chunghwa Telecom, the largest integrated telecom operator in Taiwan
Entered into strategic revenue-sharing partnership agreement with Wasu Digital TV Media Group, one of the largest digital TV content providers in China
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New Products Launched at PT/EXPO COMM
NAME OF PRODUCT SOLUTION AND VALUE TARGET CUSTOMER
DOCSIS-EOC standard connection product with 500 access points and provides 800Mbps
bandwidth
Cable Operators
PTN 735 Top tier Packet Transport Network, which has vast loading capacity and has the ability to process different
types of business data
Cable/Telecom Operators
Blade Server / High-Definition STB
Streaming media storage unit that provides customers with larger storage capabilities
Cable Operators
Wi-Fi products Series of smart antenna and wireless controller which enable telecom operators to establish outdoor wireless
networks
Telecom Operators
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iTV.cn: Internet TV for Chinese outside China
Provides Chinese language content targeting the Chinese-speaking population located in North America
Integrated multi-screen viewing from a single managed platform
Time and location shifting
Reliable HD streaming
Multi-language programming
Value-added interactive service, such as distance-learning, gaming and e-commerce
Commercial launch in North America on October 1st
Q3 2011 Q4 2011
EducationEducation
GamingGaming
SocialSocialShoppingShopping
RadioRadio
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Revenue Trend
$83.3 million in Q3 2011, 35.7% or $21.9 million increase, compared to $61.4 million in Q3 2010.
Nine months ended 2011 total revenue was $237.1 million, 10.1% or $21.7 million increase, compared to $215.4 million in the nine months ended 2010.
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Booking Trend
Without PAS deferred revenue, book-to-bill ratio for the third quarter was 0.98.
With the PAS deferred revenue, book-to-bill ratio was 0.70.
20
30
40
50
60
70
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011
Booking
US$ (mm)
Quarterly Booking Amount
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Gross Margin Improvement
Gross margin for the third quarter of 2011 was 38.4% as compared to 19.7% in the third quarter of 2010.
Gross margin for the nine month ended 2011 was 36.2% as compared to 28.9% for the nine months ended 2010.
US$ (mm)
27.2
23
12
8
19
34.832.1
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 20110
5
10
15
20
25
30
35
40
Gross Profit
Gross Margin
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Continued Progress in Cost Cutting
US$ (mm)
46
2835.4 34.7
3025
17.8
4.2
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
0
5
10
15
20
25
30
35
40
45
50
One Time Gainon Divesture
OPEX
OPEX/Sales
Total OPEX of Q3 2011 included $4.2 million one time net gain on divestitures.
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Quarterly Profit Achieved
Quarterly Operating Income of $14.2 million…US$ (mm)
Quarterly Net Income of $8.0 million…
US$ (mm)
-18.8
-5.1
-23.3
-26.6
-11.1
9.7
14.2
-28
-23
-18
-13
-8
-3
2
7
12
17
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011
-16
-9
-17.2
-23
-10.3
11.68.0
-28
-23
-18
-13
-8
-3
2
7
12
17
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011
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Segment Reporting
Note: Deferred revenue related to PAS is included in equipment sales through the end of 2011 at the rate of $23 million per quarter. Gross margin associated with the PAS deferred revenue is approximately 35%.
Revenue by Segment Q3 2011 Q3 2010
Equipment Sales $75.3 $52.0
Service Sales Equipment-based 7.7 9.4
New OSS-based 0.3 -
Total $83.3 $61.4
Revenue by Segment 9 Months Ended
9/30/2011
9 Months Ended
9/30/2010
Equipment Sales $209.4 $183.8
Service Sales Equipment-based 27.2 31.6
New OSS-based 0.5 -
Total $237.1 $215.4
US$ (mm)
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Strong cash balance of $305.9 million in cash, cash equivalents, and short-term investment
Zero debt
Balance Sheet & Deposits
Cash Balance by Region Cash Balance by Currency
INR6% JPY
20%
RMB40%
USD32%
Other2%
China , 43%
Int'l, 57%
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Quarterly operational cash flow was negative $12.1 million
Normal level of collection
$1.5M of share buy back in the third quarter of 2011
Cash Flow Analysis
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Reiterating 2011 Financial Outlook
Total revenue to be within the range of $300 – $320 million (includes PAS deferred revenue)
Annualized operating expenses of less than $100 million
Breakeven in 2011 on a full year basis
OSS business comprising 10% of total sales in 2011 will be difficult due to the rigorous due diligence process, detail terms and condition negotiation with acquisition targets and revenue sharing partners
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Investor Relations Contacts
UTStarcom, Investor Relations
Jing Ou-Yang T: + 8610 8520 5153E: [email protected]
Ogilvy Financial
In China:Agustin BautistaTel: +86-10-8520-6166Email: [email protected] In the U.S.:Jessica Barist CohenTel: +1-646-460-9989Email: [email protected]