Transcript PowerPoint Template

UTStarcom
Second Quarter 2011 Results
Jack Lu, CEO
Edmond Cheng, CFO
NASDAQ: UTSI
August 2011
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
internet TV platform, expected benefits of a joint venture 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 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 2009, 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
1
Q2 2011 Highlights
2
Operational Developments
3
Financial Overview / Outlook
3
Second Quarter 2011 Highlights
Strong Financial Performance & Effective Cash Management
 Net Income of $11.6 million, or basic earnings per share of 7 cents;
UTStarcom’s first profitable quarter after 24 consecutive loss making
quarters
 Revenues of $92.5 million, a 26.4% / $19.3 million increase,
compared to the same period of 2010
 Gross profit margin of 37.6%, compared to 31.3% in same period of
2010 and 31.1% in Q1 2011
 Operating income of $9.7 million
 Positive operational cash flow
 Cash balance of $316.4 million in cash, cash equivalents, and shortterm investments
4
Operational Developments – China
 Launched end-to-end internet TV solution and won first
commercial contract
 Secured leading market position in Hubei province in contracts
with local cable operators to build their bi-directional networks
 Started to move into new Hangzhou facility (to be completed in
3rd quarter) with a dramatic reduction of rental costs
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Operational Development – APAC
Japan:
 Continue to receive sizable orders of PTN product,
which have revenue and gross margin contributions
India:
 Received formalized new rules from India’s DOT that
allows for more fair and open business environment
 Currently reorganize India subsidiary to improve
profitability
 Successfully launched GEPON project with BSNL
 Continue to look for local partner with strong local
market presence
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iTV.cn: Internet TV for Chinese outside
China
Q2 2011
Launched non-commercial
trial
Q3 2011
Q4 2011
launch subscription service to distribute
content globally
 Non-commercial trial underway in 300
households; mostly in North America
 Integrated multi-screen viewing from a
single managed platform
Education
Shoppin
g
Social
 Time and location shifting
 Reliable HD streaming
Gaming
Radio
 Multi-language programming
 Value-added interactive service, such as
distance-learning, gaming and e-commerce
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Our Corporate Governance Commitment
After converting to FPI status, UTStarcom has committed to:
 Keep a majority of the board of directors comprised of independent directors;
 Have executive compensation determined by independent directors or a
committee of independent directors;
 Source director nominees through independent directors or a committee of
independent directors;
 Ensure that the audit committee is comprised of at least three members, each
an independent director and at least one is financial expert;
 Require that any related party transactions be reviewed by the audit committee
or another independent committee within the board of directors;
 Conduct an advisory (non-binding) vote on executive compensation in 2014.
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Revenue Trend and Significant Items
 $92.5 million in Q2 2011, a 26.4% or $19.3 million increase,
compared to $73.2 million in Q2 2010 and a 50.9% or $31.2
million increase when compared to Q1 2011.
 1H 2011 total revenue was $153.8 million, an 0.1% or $0.2
million decrease, compared to1H 2010
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Booking Trend in Q2
 Without PAS deferred revenue, book-to-bill ratio for the second
quarter was 0.85.
 With the PAS deferred revenue, book-to-bill ratio was 0.64.
 Actual booking amount increased from Q1 2011; however book to
bill ratio dropped due to significantly higher revenue in Q2 2011.
US$ (mm)
70
60
50
Booking
40
30
20
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
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Gross Profit Increased
 Gross margin for the second quarter of 2011 was 37.6% as compared to
31.3% in the second quarter of 2010 and 31.1% in the first quarter of 2011.
 Gross profit was $34.8 million in the second quarter of 2011 compared to
$22.9 million in the corresponding period of 2010.
US$ (mm)
40%
40
34.8
35%
30%
35
30
27.2
23
25%
25
19
20%
15%
20
15
12
8
10%
5
0%
0
Q2 2010
Q3 2010
Q4 2010
Gross Margin
10
5%
Q1 2010
Gross Profit
Q1 2011
Q2 2011
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Continued Progress in Cost Cutting
US$ (mm)
60%
55%
50
46
45
50%
40
45%
35.4
40%
34.7
35
OPEX/Sales
30
35%
OPEX
30
28
30%
25
25
25%
20%
20
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
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Quarterly Profit Achieved
Operating income of $9.7 million…
US$ (mm)
9.7
7
2
-3
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
-5.1
-8
-13
-11.1
-18
-18.8
-23
-23.3
-26.6
-28
Net income of $11.6 million…
US$ (mm)
11.6
11
6
1
-4
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
-9
-9
-10.3
-14
-19
-24
-16
-17.2
-23
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Segment Reporting
US$ (mm)
Revenue by Segment
Equipment Sales
Service Sales Equipment-based
New OSS-based
Q2 2011
Q2 2010
$81.3
$62.6
11.1
10.6
0.1
-
$92.5
$73.2
Revenue by Segment
1H 2011
1H 2010
Equipment Sales
$134.2
$131.8
19.4
22.2
Total
Service Sales Equipment-based
New OSS-based
Total
0.2
$153.8
$154.0
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%.
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Balance Sheet & Deposits
 Strong cash balance of $316.4 million in cash, cash equivalents,
and short-term investment
 Zero debt
Cash Balance by Region
Cash Balance by Currency
EUR
Other 1%
0%
INR
8%
USD
31%
JPY
18%
Int'l, 48%
China, 52%
TWD
1%
RMB
41%
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Positive Cash Flow
 Positive quarterly operational cash flow of $12.0 million resulted
from:
1) High collections– caught up from collections delayed in Q1 2011
2) More effective cash management
3) Strict control over inventory purchase
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Reiterating 2011 Financial Outlook
Reiterate
 Total revenue targeted to be within the range of $300 – $320
million (includes PAS deferred revenue)
 Targeting annualized operating expenses of less than $100
million
 Targeting breakeven in 2011 on a full year basis
Delay in progress
 Our target of generating 10% of total sales in 2011 from new OSS
business is subject to the due diligence process and detail terms
and condition negotiation on acquisition targets and revenue
sharing projects which may result in delay.
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Investor Relations Contacts
UTStarcom, Investor Relations:
Ms. Jing Ou-Yang
T: + 8610 8520 5153
E: [email protected]
Kreab Gavin Anderson, IR external advisor:
In Asia:
In the US:
Brion Tingler
Joshua Goldman-Brown
T: + 8610 6535 3567
T: +1 212 515 1858
E: [email protected] E: [email protected]
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