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Form 6-K UTSTARCOM HOLDINGS CORP. For: Oct 30

October 30, 2020 5:01 PM EDT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of October 2020

 

Commission File Number: 001-35216

 

 

 

UTSTARCOM HOLDINGS CORP.

 

 

 

 

4th Floor, South Wing, 368 Liuhe Road,

Binjiang District, Hangzhou, P.R. China

(Address of principal executive office)

 

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F          Form 40-F

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes            No  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

EXHIBIT INDEX

 

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

UTSTARCOM HOLDINGS CORP.

 

 

Date: October 30, 2020

By:

/s/ Dan Xie

 

 

Name:  Dan Xie

 

 

Title:   Director of Global Finance

 

 

 

                                                                                                                                                          Exhibit 99.1

UTStarcom Reports Unaudited Financial Results for First Half of 2020

 

Hangzhou, October 30, 2020— UTStarcom (“UT” or the “Company”) (NASDAQ: UTSI), a global telecommunications infrastructure provider, today reported its unaudited financial results for the six months ended June 30, 2020.

 

Business Update

 

         Status of 5G Transport Network Opportunity with a Major Mobile Carrier in China UTStarcom collaborated with a partner to develop critical 5G transport network technologies to support the 5G migration in China. The Company in-house developed product and its network management and controller has passed the operator’s Benchmark Testing of its Central Procurement Phase 1. UTStarcom and our partner were recognized as qualified vendors and awarded certain portion of the 5G network project in two provinces. However, due to the small size of business opportunity, we decided not to move forward with commercial deployment.

 

         Launch of 5G Transport Network Solution In September 2020, the Company launched its state-of-the-art 5G product solution, SkyFlux Converged Packet Transport platform. It combines Segment Routing/MPLS-TP tunneling, TDM-like Ethernet based on FlexE/G.mtn, highly accurate time synchronization and SDN-based network intelligence into an efficient future-proof architecture of 5G-ready transport network. The new platform includes two products, SkyFlux SPN805S & 803S and a network management and controller “SOO Station R3.2”.

 

         Development of Network Disaggregation Telecom operators are increasingly focused on networking device disaggregation. This encompasses the decoupling of hardware and software that enables operator to choose independently the most suitable hardware, operating system and set of features and control interfaces. UTStarcom is leveraging its expertise in 5G transport network to develop network disaggregation solutions, including White Box Switch (WBS) and Network Operating System (NOS). The Company is seeing initial interest for those solutions from a handful of operators.

 

       Impact of the COVID-19 Virus Businesses in most parts of the world were negatively impacted in the first half of 2020 due to mandatory shutdowns related to the COVID-19 pandemic. Since then, production and operations in China have returned to normal. However, outside of China, the COVID-19 situation remains a health threat with a resurgence of COVD-19 cases in various parts of the world. As a result, the impact to the Company’s future operations continues to be significant and prolonged.

1


 

 

         India Receivable The Company continues to collect amounts due from its major customer in India. The major customer in India raised INR8,500 Crore (approximately USD1.13 billion) through sovereign guaranteed bonds (issued at coupon rate of 6.79 per cent per annum for 10 year period) and cleared a portion of its payables to vendors, including the Company. Since the Company’s last earnings release on March 27, 2020, over $16 million has been collected, with $49 million outstanding. However, as the customer’s operating status has no significant improvement, as well as the ongoing payment processing was delayed by COVID-19 pandemic in India, the timing of future payments remains uncertain.

 

UTStarcom’s acting Chief Executive Officer Dr. Zhaochen Huang commented, “Our results for the first half of 2020 were negatively impacted by the COVID-19 pandemic. While we continue to navigate this challenging macro environment, we are focused on developing new products that capitalize on important technology trends and engaging with network operators to address and support their requirements.”

 

 

First Half 2020 Financial Results

 

Summary of 1H 2020 Key Financials

 

 

1H 2020

1H 2019

Y/Y Change

Revenue

$13.7

$38.6

-64.5%

Gross Profit

$2.6

$12.0

-78.2%

Operating Expenses

$11.9

$14.4

-17.1%

Operating Loss

($9.3)

($2.3)

-$7.0

Net Income/Loss

($12.0)

$2.1

-$14.2

Basic EPS

($0.34)

$0.06

-$0.40

Cash Balance (including Restricted Cash)

$48.6

$55.1

-11.7%

 

* Dollar comparisons are used where percentage comparisons are not meaningful.

* All the numbers in U.S. Dollars are in millions except for Earnings Per Share (EPS)

 

Total Revenues

 

Total revenues for the first half of 2020 were $13.7 million, compared to $38.6 million in the corresponding period in 2019.

 

Net equipment sales for the first half of 2020 were $9.3 million, a decrease of 67.9% from $29.0 million in the corresponding period in 2019. The decrease was due to order cancellations during the COVID-19 pandemic coupled with the decreased revenue from our major India customer because of its financial status. Concern around risk of second wave of COVID-19 infection in many countries, continues to affect our revenue.

 

Net services sales for the first half of 2020 were $4.4 million, a decrease of 54.2% from $9.6 million in the corresponding period in 2019. The decrease was mainly due to the mandatory shutdowns in India related to the COVID-19 pandemic.

 

 

2


 

Gross Profit

 

Gross profit was $2.6 million, or 19.1% of net sales, for the first half of 2020, compared to $12.0 million, or 31.2% of net sales, in the corresponding period in 2019.

 

Equipment gross profit for the first half of 2020 was $3.2 million, compared to $8.9 million in the corresponding period in 2019. Equipment gross margin for the first half of 2020 was 34.3%, compared to 30.7% for the corresponding period in 2019. The increase in gross margin was attributed to favorable product mix.

 

Service gross margin for the first half of 2020 was ($0.6) million, compared to $3.1 million in the corresponding period in 2019. Service gross margin for the first half of 2020 was (12.7%), compared to 32.5% for the corresponding period in 2019. The decrease in gross margin was mainly due to one-time expense incurred in India.

 

 

Operating Expenses

 

Operating expenses for the first half of 2020 were $11.9 million, compared to $14.4 million in the corresponding period in 2019.

 

Selling, general and administrative (“SG&A”) expenses for the first half of 2020 were $7.5 million, compared to $7.0 million in the corresponding period in 2019. SG&A was higher in the first half of 2020 due to higher accounts receivable allowance provided for long aged receivables during the period for our India customer, which partially offset by the decreased expenses from continued tight cost control.

 

Research and development (“R&D”) expenses for the first half of 2020 were $4.4 million, compared to $7.4 million in the corresponding period in 2019. The decrease reflected lower 5G investments due to diminishing 5G prospects in China and lower expenditure during the mandatory shutdowns related to COVID-19.

 

 

Operating Loss

 

Operating loss for the first half of 2020 was $9.3 million, compared to $2.3 million in the corresponding period in 2019.

 

 

Interest Income, Net

 

Net interest income for the first half of 2020 was $0.5 million, compared to $0.6 million in the corresponding period in 2019.

 

 

Other Income (Expenses), Net

 

Net other expense for the first half of 2020 was $3.1 million, compared to net other income of $4.8 million in the corresponding period in 2019. Other expense for the first half of 2020 was mainly due to foreign exchange losses resulting from the devaluation of Indian Rupee against the U.S. dollar.

3


 

 

 

Net Income (Loss)

 

Net loss attributable to shareholders for the first half of 2020 was $12.0 million, compared to net income of $2.1 million in the corresponding period in 2019. Basic net loss per share for the first half of 2020 was $0.34, compared to basic net income per share of $0.06 for the corresponding period in 2019.

 

 

Cash Flow

 

Cash used in operating activities in the first half of 2020 was $0.8 million, cash generated from investing activities was $2.0 million, and cash used in financing activities was $0.2 million. As of June 30, 2020, UTStarcom had cash, cash equivalent and restricted cash of $48.6 million.

 

 

About UTStarcom Holdings Corp.

 

UTStarcom is committed to helping network operators offer their customers the most innovative, reliable and cost-effective communication services. UTStarcom offers high performance advanced equipment optimized for the most rapidly growing network functions, such as mobile backhaul, metro aggregation and broadband access. UTStarcom has operations and customers around the world, with a special focus on Japan and India. UTStarcom was founded in 1991 and listed its shares on the Nasdaq Market in 2000 (symbol: UTSI). For more information about UTStarcom, please visit http://www.utstar.com.

 

Forward-Looking Statements

 

This press release includes forward-looking statements, including statements regarding the Company’s strategic initiatives and the Company’s business outlook. These statements are forward-looking in nature and subject to risks and uncertainties that may cause actual results to differ materially and adversely from the Company’s current expectations. These include risks and uncertainties related to, among other things, the effect of the COVID-19 pandemic on the Company’s business, 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 transaction, 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 press release are based upon information available to the Company as of the date of this press release, which may change and the Company assumes no obligation to update any such forward-looking statements.

 

For investor and media inquiries, please contact:

 

UTStarcom Holdings Corp.

Tel: +86 571 8192 8888

Ms. Ning Jiang, Investor Relations

4


 

Email: [email protected]/ [email protected] /

 

In the United States:

The Blueshirt Group

Mr. Ralph Fong

Tel: +1 (415) 489-2195

Email: [email protected]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Balance Sheets

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

33,011

 

 

$

34,966

 

Short-term investments

 

 

 

 

 

2,095

 

Accounts and notes receivable, net

 

 

64,157

 

 

 

77,831

 

Inventories and deferred costs

 

 

7,289

 

 

 

6,655

 

Short-term restricted cash

 

 

11,257

 

 

 

10,007

 

Prepaid and other current assets

 

 

4,158

 

 

 

5,524

 

Total current assets

 

 

119,872

 

 

 

137,078

 

Long-term assets:

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

842

 

 

 

1,092

 

Operating lease right-of-use assets, net

 

 

1,869

 

 

 

2,860

 

Long-term restricted cash

 

 

4,377

 

 

 

3,634

 

Other long-term assets

 

 

6,614

 

 

 

6,639

 

Total long-term assets

 

 

13,702

 

 

 

14,225

 

Total assets

 

$

133,574

 

 

$

151,303

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

28,187

 

 

$

30,875

 

Customer advances

 

 

217

 

 

 

160

 

Deferred revenue

 

 

1,208

 

 

 

1,320

 

Income tax payable

 

 

7,198

 

 

 

7,480

 

Operating lease liabilities, current

 

 

1,700

 

 

 

1,595

 

Other current liabilities

 

 

6,600

 

 

 

7,603

 

Total current liabilities

 

 

45,110

 

 

 

49,033

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Operating Lease liabilities, non-current

 

 

589

 

 

 

1,364

 

Long-term deferred revenue and other liabilities

 

 

1,411

 

 

 

1,718

 

Total liabilities

 

 

47,110

 

 

 

52,115

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

86,464

 

 

 

99,188

 

Total liabilities and equity

 

$

133,574

 

 

$

151,303

 

 

 

 

 

 

 

 

 

 

6


 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Statements of Operations

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

 

(In thousands, except per share data)

 

Net sales

 

$

13,708

 

 

$

38,562

 

Cost of net sales

 

 

11,094

 

 

 

26,548

 

Gross profit

 

 

2,614

 

 

 

12,014

 

 

 

 

19.1

%

 

 

31.2

%

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

7,549

 

 

 

6,983

 

Research and development

 

 

4,355

 

 

 

7,368

 

Total operating expenses

 

 

11,904

 

 

 

14,351

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(9,290

)

 

 

(2,337

)

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

493

 

 

 

587

 

Other income (expense), net

 

 

(3,103

)

 

 

4,754

 

Income (loss) before income taxes

 

 

(11,900

)

 

 

3,004

 

Income tax expense

 

 

(142

)

 

 

(880

)

Net Income (loss) attributable to UTStarcom

   Holdings Corp.

 

$

(12,042

)

 

$

2,124

 

 

 

 

 

 

 

 

 

 

Net Income (loss) per share attributable to

   UTStarcom Holdings Corp.—Basic

 

$

(0.34

)

 

$

0.06

 

Weighted average shares outstanding—Basic

 

 

35,692

 

 

 

35,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7


 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Statements of Cash Flows

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net Income (loss)

 

$

(12,042

)

 

$

2,124

 

Depreciation

 

 

295

 

 

 

327

 

Provision for doubtful accounts

 

 

2,477

 

 

 

1,260

 

Stock-based compensation expense

 

 

497

 

 

 

757

 

Net gain on disposal of assets

 

 

 

 

 

(5

)

Gain on release of tax liability due to expiration of the statute of limitations

 

 

 

 

 

(1,128

)

Deferred income taxes

 

 

116

 

 

 

4

 

Gain on write-off long-term account payable due to expiration of the statute of limitations

 

 

 

 

 

(3,161

)

Changes in operating assets and liabilities

 

 

7,826

 

 

 

(18,308

)

     Net cash used in operating activities

 

 

(831

)

 

 

(18,130

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(85

)

 

 

(296

)

Purchase of short-term investment

 

 

 

 

 

(41

)

Proceeds from short-term investments

 

 

2,095

 

 

 

 

    Net cash provided by (used in) investing activities

 

 

2,010

 

 

 

(337

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

56

 

Repurchase of ordinary share

 

 

(157

)

 

 

(850

)

    Net cash used in financing activities

 

 

(157

)

 

 

(794

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(984

)

 

 

658

 

   Net increase (decrease) in cash and cash equivalents

 

 

38

 

 

 

(18,603

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

48,607

 

 

 

73,699

 

Cash, cash equivalents and restricted cash at end of period

 

$

48,645

 

 

$

55,096

 

 

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