OREANDA-NEWS. UTStarcom, a global telecommunications infrastructure provider, today reported its unaudited financial results for the first quarter ended March 31, 2016.

Mr. Tim Ti, UTStarcom’s Chief Executive Officer, stated, “We are pleased to report a solid quarter with revenues exceeding our initial expectations, gross margin in high twenties percentage, and non-GAAP net profitability. We continue to see healthy demand of our PTN products and benefits from our streamlined business model.”

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company also provides non-GAAP financial measures which better reflect the Company’s core business status and the development trend. A further explanation of the use of non-GAAP financial information and a reconciliation of the non-GAAP financial measures to the GAAP comparative balances can be found at the end of this release.

First Quarter 2016 Milestones and Operating Highlights

  • Announced Tim Ti as the new CEO and promoted Dr. Zhaochen Huang to COO in the first quarter of 2016.
     
  • Established Information & Communication Innovation (ICI) Group to focus on technologies, products, and business opportunities in data center and smart city markets.

First Quarter 2016 Financial Performance Highlights

  • First quarter 2016 GAAP revenues were $22.6 million, a decrease of 31.6% from $33.0 million for the corresponding period of 2015. First quarter 2016 Non-GAAP revenues were $22.3 million, a decrease of 31.3% from $32.4 million for the corresponding period of 2015.
     
  • First quarter 2016 GAAP gross margin was 26.9%, compared to 14.7% for the corresponding period of 2015. First quarter 2016 Non-GAAP gross margin was 27.2%, compared to 14.9% for the corresponding period of 2015.
     
  • First quarter 2016 GAAP operating expenses were $8.0 million, compared to $8.0 million for the corresponding period in 2015. First quarter 2016 Non-GAAP operating expenses were $6.6 million, a decrease of 14.8% from $7.8 million for the corresponding period in 2015.
     
  • First quarter 2016 GAAP operating loss was $1.9 million, compared to operating loss of $3.1 million for the corresponding period of 2015. First quarter 2016 Non-GAAP operating loss was $0.6 million, compared to operating loss of $2.9 million for the corresponding period of 2015.
     
  • First quarter 2016 GAAP net loss attributable to UTStarcom’s shareholders was $1.1 million, compared to net loss of $5.4 million for the corresponding period of 2015. First quarter 2016 Non-GAAP net income attributable to UTStarcom’s shareholders was $0.3 million, compared to net loss of $5.2 million for the corresponding period of 2015.
     
  • First quarter 2016 GAAP basic loss per share was $0.03, compared to basic net loss per share of $0.14 for the corresponding period of 2015. First quarter 2016 Non-GAAP basic net income per share was $0.01, compared to basic net loss per share of $0.14 for the corresponding period of 2015.
     
  • As of March 31, 2016, cash and cash equivalents were $80.2 million.

Mr. Min Xu, UTStarcom’s Chief Financial Officer, commented, “We are glad to see our focus on profitability resulted in a high twenties percentage gross margin and non-GAAP net profitability in the quarter. We achieved positive operating cash flow and continue to strengthen our cash balance. ”

First Quarter 2016 Financial Results

Total Revenues

Three months ended March 31, 2016 and 2015

Total revenues for the first quarter of 2016 were $22.6 million, a decrease of 31.6% from $33.0 million for the corresponding period of 2015.

Total Non-GAAP revenues for the first quarter of 2016 were $22.3 million, a decrease of 31.3% from $32.4 million for the corresponding period of 2015.

  • Non-GAAP net sales from equipment for the first quarter of 2016 were $15.8 million, a decrease of 36.8% from $25.0 million for the corresponding period in 2015. The decrease was mainly due to reduction in the low margin Third Party Sales (“TPS”) and decrease in Multi Service Access Network (“MSAN”) revenues.
     
  • Non-GAAP net sales from equipment-based services for the first quarter of 2016 were $6.5 million, a decrease of 12.9% from $7.4 million for the corresponding period in 2015. The decrease was mainly due to the reduction in India MSAN service revenues.

Gross Profit

Three months ended March 31, 2016 and 2015

Gross profit was $6.1 million, or 26.9% of net sales, for the first quarter of 2016, compared to $4.8 million, or 14.7% of net sales, for the corresponding period in 2015.

Non-GAAP gross profit was $6.1 million, or 27.2% of net sales, for the first quarter of 2016, compared to $4.8 million or 14.9% of net sales, for the corresponding period in 2015.

  • Non-GAAP gross profit for equipment sales for the first quarter of 2016 was $4.9 million, compared to $4.9 million for the corresponding period in 2015. Non-GAAP gross margin for equipment sales for the first quarter of 2016 was 31.2%, compared to 19.7% for the corresponding period in 2015. The increase in gross margin was primarily due to the favorable mix of relatively high margin Packet Transport Network (“PTN”) products.
     
  • Non-GAAP gross profit for equipment-based services for the first quarter of 2016 was $1.1 million, compared to gross profit of negative $0.1 million for the corresponding period in 2015. Non-GAAP gross margin for equipment-based services for the first quarter of 2016 was 17.3%, compared to negative 0.7% for the corresponding period in 2015. The increase in gross margin was primarily caused by the reduction of India MSAN product related service with negative margin.

Operating Expenses

Three months ended March 31, 2016 and 2015

Operating expenses for the first quarter of 2016 were $8.0 million, compared to $8.0 million for the corresponding period in 2015.

Non-GAAP operating expenses for the first quarter of 2016 were $6.6 million, a decrease of 14.8% from $7.8 million for the corresponding period in 2015.

  • Non-GAAP selling, general and administrative (SG&A) expenses in the first quarter of 2016 were $4.3 million, compared to $5.2 million for the corresponding period in 2015. The decrease was mainly due to decreased personnel cost and other operating expense as the result of the Company’s cost reduction effort.
     
  • Non-GAAP research and development expenses in the first quarter of 2016 were $2.3 million, compared to $2.6 million for the corresponding period in 2015. The decrease was mainly due to decreased personnel cost as the result of the Company’s cost reduction effort.

Operating Loss

Three months ended March 31, 2016 and 2015

Operating loss for the first quarter of 2016 was $1.9 million, compared to operating loss of $3.1 million for the corresponding period of 2015.

Non-GAAP operating loss for the first quarter of 2016 was $0.6 million, compared to Non-GAAP operating loss of $2.9 million for the corresponding period of 2015.

Other Income (Expense), Net   

Three months ended March 31, 2016 and 2015

Net other income for the first quarter of 2016 was $0.6 million, compared to net other income of $0.5 million for the corresponding period in 2015. Net other income in the first quarter of 2016 primarily consisted of $0.6 million of foreign exchange gain, which was mainly due to the appreciation of the JPY against the U.S. dollar during the first quarter of 2016. Net other income in first quarter of 2015 was mainly due to the $0.6 million realized gain from the sales of Inphi stock in February 2015.

Equity Pick Up of Losses of an Associate

After recognizing UiTV Media losses of $14.0 million and impairment charges of $6.0 million in 2015, the convertible bond investments balance was reduced to zero as of December 31, 2015.

Three months ended March 31, 2016 and 2015

Equity pick up of losses of an associate was nil for the first quarter of 2016 due to the convertible bond balance was zero as of December 31, 2015. Equity pick up of losses of an associate was $3.2 million for the first quarter of 2015, which represented 100% recognition of UiTV Media losses.

Net Income (Loss)

Three months ended March 31, 2016 and 2015

Net loss attributable to UTStarcom’s shareholders for the first quarter of 2016 was $1.1 million, compared to net loss attributable to UTStarcom’s shareholders of $5.4 million for the corresponding period in 2015. Basic loss per share for the first quarter of 2016 was $0.03, compared to basic net loss per share of $0.14 for the corresponding period of 2015.

Non-GAAP net income attributable to UTStarcom’s shareholders for the first quarter of 2016 was $0.3 million, compared to Non-GAAP net loss attributable to UTStarcom’s shareholders of $5.2 million for the corresponding period in 2015. Non-GAAP basic net income per share for the first quarter of 2016 was $0.01, compared to Non-GAAP basic net loss per share of $0.14 for the corresponding period of 2015.