Transcript PowerPoint Template

Corporate Presentation
NASDAQ: UTSI
August 2011
Disclosure & Forward Looking
Statements
This investor presentation contains forward-looking statements, including statements regarding the
Company's strategy to reduce operating expenses, ability to achieve profitability, investment in
selective products and certain geographic regions, diversification of business and customer base,
transition to a new business model and anticipated or assumed future financial results. Forwardlooking 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, successfully transition to a new management team and
headquarters location and execute on its business plan, as well as risk factors identified in its latest
Annual Report on Form 10-K, as amended, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-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 and 2010 earnings conference
calls, restructuring announcements on December 18, 2008 and November 9, 2009 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.
2
Agenda
1
Corporate Overview
2
Market Dynamics & Growth Strategy
3
Financial Overview and Outlook
3
CORPORATE OVERVIEW
Company Introduction
 A leading provider of interactive, IP-based network solutions in iDTV, IPTV,
Internet TV and Broadband for cable and telecom operators
 Technology and services expand and help modernize communications
networks, giving operator customers the capability to provide their
subscribers with interactive communications experiences while opening up
increased revenue opportunities for operator clients
 The new service business represents a “business model innovation” that
leverages UTStarcom’s current core technology and management
background to generate more recurring, higher margin returns.
Share Price:
Shares Outstanding:
Market Cap:
Legal Counsel:
Auditors:
$1.37 (as of July 30, 2011)
156.1 m
$213.9 m (as of June 30, 2011)
Wilson Sonsini Goodrich & Rosati
Price Waterhouse
5
Investment Highlights
 Focused on achieving breakeven in 2011
 Strong existing relationships with leading telecom, cable and media
players in China and across the rest of Asia
 Well positioned to benefit from China’s Three Network Convergence
policy and development
 Diversifying business model into high-margin new service business
(“Operation Support Business”) with recurring revenues
 Diversifying customer base to broaden profit opportunities
 Strong cash position and no debt
6
Our Positioning and Growth Strategy
A leading
provider of interactive, IP-based network
solutions in iDTV, IPTV, Internet TV and
Broadband to cable and telecom operators
Strategy 1: Return to China
Strategy 2: Telecom and
Cable in Parallel
Strategy 3: Equipment
AND Service
• Enables focus on Chinese
and Asian markets
• Leverage Three Network
Convergence (TNC) policy in
China
• Senior management close to
client decision-makers
• Improved internal
communication & lower costs
• Core IP technology applied
across different networks
• Strong competitive edge and
opportunity with both
telecom and cable operator
• Demand for interactive
services creates opportunity
for equipment AND services
revenues with higher margin
earnings
• New service business model
moves UTStarcom up the
value chain and closer to
interactive TV operators
Our existing telecommunication equipment products, RollingStream technology
and sales channels are the foundation of new service business, which taps a
major opportunity in video content services over the broadband network and internet.
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RollingStream Technology
SOLUTION AND VALUE
TO CUSTOMER
PRODUCTS OR SERVICE PROVIDED
TARGET
CUSTOMERS
RollingStream®
Technology: provides
customers market leading interactive TV
solutions
RollingStream enables operators to
1.Telecom
provide IPTV, iDTV, Internet TV, mobileTV, operators
video information and other industrial
applications. Hardware includes:
2. Cable
operators
Infrastructure
Components:
3. TV stations
and content
Video Storage and
OSS
license holders
Streaming Servers
who, in China,
run broadcast
Terminals:
control
IP STB
Dual-mode STB platforms
8
Broadband and NGN Solutions
SOLUTION AND VALUE
TO CUSTOMER
PRODUCTS OR SERVICE
PROVIDED
TARGET CUSTOMER
Broadband Solution:
provides high
bandwidth network
infrastructure for
communications
networks
• PTN
1.Telecom operators
TN725
2. Cable operators
• MSTP
NetRing 4K
NetRing2500
• G/E-PON
BBS 4000
NGN Solution:
Provides a multiservice IP-based soft
switch system for
voice, data, mobile
and multimedia
operations
TN705
ONU
1.Telecom operators
2. Cable operators
Call server
Media Gateway
9
Market Dynamics & Growth Strategy
China’s Three Network Convergence:
a growth catalyst for UTStarcom
Equipment Spending & Network
Buildout
Media
Platform
Spending
16%
Set Top
Box Sales
28%
Telecom
Network
Buildout
42%
Cable
Network
Buildout
14%
 Three Network Convergence (TNC)
is the Chinese government policy
dedicated to integration of telecom,
broadband and cable TV networks
 Three Network Convergence
related market will reach RMB
688B over the next three years,
including RMB 249B on equipment
and network buildout and RMB
439B from interactive media user
demand
Pilots concluded and
expansion drives ahead
Focused on cable / teleco
two-way entrance
National Implementation
Policy Launched
2010
Pilots Conducted
2010—2012
2013—2015
Source: iChina Research Center, 2010.4, “Analysis of Market Size, Industry and Region for Three-Network
Convergence” and policy directives issued by China’s State Council.
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Strategy 1: Opportunities in Other
Asian Markets
Market & Focus
Area
UTStarcom’s Achievements
South Asia:
IPTV:
 Cooperate with MTNL, BSNL, Bharti, SLT and other leading South
Asia operators to secure our market leading position
 Exploring a joint venture with local partner in India with better
government relations and local market support to retain and
extend leading position in IPTV sector
 Received the first Purchase Order of IPTV systems from TOT in
Thailand in the fourth quarter of 2010
Focused on IPTV
and Broadband
Broadband:
 Currently have more than 30% market share
Japan:
Focused on
Broadband
 50% of SoftBank Broadband (SBB)’s MSTP transmissions. SBB is
currently Japan’s 3rd largest telecom operator
 Preferred PTN supplier of next generation IP transmission
equipment for SBB
 Received sizable orders of PTN product from Japan following the
successful completion of previously disclosed field trial in 2010
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Strategy 2: Parallel Growth
Opportunities
Service
•
•
TNC will increase
opportunities with
cable and telecom
operators because of
infrastructure
investment
Our Broadband,
RollingStream video
platform and mSwitch
NGN solutions help
meet the TNC needs of
both sectors
Cable
Telco
Interactive video
services
4million
(iDTV)
6.7million
(IPTV)
Broadband service
<5million
>100million
Bi-directional
network
percentage
<25%
100%
Voice services
none
>1 billion
187 million
88 million
none
TV and
Digital TV service
Source: SARFT Report January 2011 and UTStarcom
13
Strategy 3: Our Operational Support
Services
 RollingStream platform allows our clients to provide end-to-end solutions including,
video content service and other value added services like on-line gaming, on-line
shopping and video phone service through their networks
 Cable network operators need partners that can provide continued technological and
operational support services for these platforms
 Operational Support Services (OSS) expands our revenue stream with higher margin,
recurring revenues
Enterprise
Operators
TV and
Cable
Operators
iDTV
Platforms
Equipment Sales Related
Service Business
Telecom
Operators
IPTV,
Internet TV
Platforms
IP Signage
Platforms
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An Overview of the New Service or
“Operational Support Services” Business
Content
Producers /Providers
VAS
Solutions
RollingStream
Video Platform
Ad Management
Solutions
Content
Distribution
Internet TV Platform by
Stage Smart Acquisition
Mobile TV
Subscriber Base
IPTV/iDTV
Subscriber Base
Internet TV
Subscriber Base
15
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
16
Financial Overview and Outlook
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
18
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 $0.2
million decrease, compared to1H 2010
19
Booking Trend in Q2
 Without PAS deferred revenue, book-to-bill ratio for the second
quarter was 0.85.
 With the PAS deferred revenue, book-to-bill ratio was 0.64.
 Actual booking amount increased from Q1 2011; however book to
bill ratio dropped due to significantly higher revenue in Q2 2011.
US$ (mm)
70
60
50
Booking
40
30
20
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
20
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
21
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
22
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%
25
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
Ms. Jing Ou-Yang
T: + 8610 8520 5153
E: [email protected]