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UTStarcom Reports Unaudited Third Quarter 2012 Financial Results

BEIJING, Nov. 15, 2012 /PRNewswire/ -- UTStarcom Holdings Corp. ("UTStarcom" or "the Company") (NASDAQ: UTSI), a leading provider of media operational support services and broadband equipment products and services, today reported financial results for the third quarter ended September 30, 2012.

In a separate press release issued today, the Company also announced a strategic plan to transform UTStarcom into a higher growth, more profitable business focused on providing next generation media operational support services as well as higher value-added broadband equipment products and services that are targeted to a specific set of customers.  The strategy builds on recently announced initiatives, such as the divestiture of the IPTV equipment business, acceleration of the media operational support services business, and appointment of new executive leadership. UTStarcom aims to be a Next Generation Media company and the new plan is expected to result in significant overall improvement in UTStarcom's business performance over the long-term.

Third Quarter 2012 Highlights

  • The Company successfully closed the divestiture of its IPTV business on August 31, 2012 as part of a plan to transition the Company into higher growth, more profitable areas.  As of September 30, 2012, the Company did not meet the requirements to report results from the IPTV division separately as discontinued operations.
  • To enable a comparison of the year-to-date and future periods financial results the Company has prepared non-GAAP results. Included in this press release are quarterly and year-to-date non-GAAP comparisons that exclude financial results from the IPTV business and amortization of PHS deferred revenue. Our GAAP financial results and reconciliation with the non-GAAP numbers discussed in this release are at the end of this press release.
  • Third quarter of 2012 non-GAAP net sales decreased 19.1% year over year to $37.0 million, compared to $45.8 million non-GAAP net sales in the third quarter of 2011.
  • Third quarter of 2012 non-GAAP gross profit decreased 37.7% year over year to $12.7 million, compared to $20.5 million non-GAAP gross profit in the third quarter of 2011.
  • Non-GAAP net loss attributable to UTStarcom's shareholders was $0.2 million, or non-GAAP basic loss per share of $0.0, in the third quarter of 2012, compared to non-GAAP net income of $3.4 million, or non-GAAP basic income per share of $0.02, for the corresponding period of 2011.
  • Cash, cash equivalents and short-term investments were $213.1 million as of September 30, 2012.

UTStarcom Chief Financial Officer Robert Pu stated, "During the third quarter we experienced changes to the mix of our product sales at the international level and this had an impact on sales and margins of our underlying business, excluding the divested IPTV portion.  However, our balance sheet is stronger today than it has been in the past as our cash position remains robust, at above the $200M level, and we effectively shed a significant amount of liabilities via the IPTV divestiture.  This said, we have more than sufficient working capital to support our broadband business and the funding of our new initiatives."

UTStarcom President and Chief Executive Officer, William Wong, stated "We are pleased with the fact that our underlying business is still achieving relatively strong gross margins and given the IPTV divestiture we have created a leaner operating model.  Nevertheless, the third quarter and year-to-date financial results do underscore the urgency of the transition that UTStarcom is undergoing to adapt to market conditions.  We have now fully entered a transformation period that will enable us to strengthen the business in the long-term and our leadership team is excited for the direction that the 'new' UTStarcom will take as we build out our capabilities to become a Next Generation Media company."

Third Quarter 2012 Financial Results   

The Company successfully closed the divestiture of its IPTV business on August 31, 2012 as part of a plan to transition the Company into higher growth, more profitable areas.  As of September 30, 2012, the Company did not meet the requirements to report results from the IPTV division separately as discontinued operations. To enable a comparison of the year-to-date and future periods financial results the Company has prepared non-GAAP results. Included below are quarterly and year-to-date non-GAAP comparisons that exclude financial results from the IPTV business and amortization of PHS deferred revenue. Our GAAP financial results and reconciliation with the non-GAAP numbers discussed in this release are at the end of this press release.

Total Revenues

UTStarcom's total revenues for the third quarter of 2012 were $40.3 million, a decrease of 51.6% year-over-year from $83.3 million for the corresponding period of 2011. Total revenues for the nine months ended September 30, 2012 were $143.5 million, a decrease of 39.5% year-over-year from $237.1 million for the corresponding period of 2011.

UTStarcom's non-GAAP total revenues for the third quarter of 2012 were $37.0 million, a decrease of 19.1% year-over-year from $45.8 million for the corresponding period of 2011. Non-GAAP total revenues for the nine months ended September 30, 2012 were $116.3 million, a decrease of 11.9% year-over-year from $132.0 million for the corresponding period of 2011.

Three months ended September 30, 2012 and 2011

  • Non-GAAP net sales from equipment for the third quarter of 2012 were $32.1 million, a decrease of 17.2% year-over-year. The decrease was mainly caused by decreased sales of PTN products in Japan and GEPON products in China which was partially offset by increased sales of MSAN products in Japan.
  • Non-GAAP net sales from equipment-based services for the third quarter of 2012 were $5.0 million, a decrease of 29.6% year-over-year. The decrease was primarily driven by fewer next generation network ("NGN") products related services provided in the third quarter of 2012.

Nine months ended September 30, 2012 and 2011

  • Non-GAAP net sales from equipment for the nine months ended September 30, 2012 were $99.1 million, a decrease of 7.9% year-over-year. The decrease was mainly driven by decreased sales of PTN products in Japan and GEPON products in China which was partially offset by increased sales of MSAN products in Japan. The $7.4 million of equipment revenue recognized from the Jersey Telecom Limited contract in the second quarter of 2011 also contributed to the year-over-year decrease.
  • Non-GAAP net sales from equipment-based services for the nine months ended September 30, 2012 were $16.9 million, a decrease of 30.5% year-over-year. The decrease was mainly due to fewer NGN products related services provided in the third quarter of 2012. The $3.9 million of equipment-based service revenue recognized from the Jersey Telecom Limited contract in the second quarter of 2011 also contributed to the year-over-year decrease.

Gross Profit

UTStarcom's gross profit was $14.3 million, or 35.5% of net sales, for the third quarter of 2012, compared to $31.9 million, or 38.4% of net sales, for the corresponding period of 2011. Gross profit was $54.5 million, or 38.0% of net sales, for the nine months ended September 30, 2012, compared to $85.8 million, or 36.2% of net sales, for the corresponding period of 2011.

UTStarcom's non-GAAP gross profit was $12.7 million, or 34.4% of net sales, for the third quarter of 2012, compared to $20.5 million, or 44.7% of net sales, for the corresponding period of 2011. Non-GAAP gross profit was $40.7 million, or 35.0% of net sales, for the nine months ended September 30, 2012, compared to $56.6 million, or 42.9% of net sales, for the corresponding period of 2011.

Three months ended September 30, 2012 and 2011

  • Non-GAAP gross profit for equipment sales for the third quarter of 2012 was $12.4 million, a decrease of 33.6% year-over-year. Non-GAAP gross margin for equipment sales for the third quarter of 2012 was 38.7%, compared to 48.2% for the corresponding period in 2011. The margin decrease was primarily due to increased sales of MSAN products with relatively lower gross margins compared to PTN products in the third quarter of 2012.
  • Non-GAAP gross profit for equipment-based services for the third quarter of 2012 was $0.3 million, a decrease of 82.8% year-over-year. Gross margin for equipment-based services for the third quarter of 2012 was 6.6%, compared to 27.2% for the corresponding period of 2011. The margin decrease was primarily due to fixed services costs remaining relatively constant, despite fewer NGN products related services provided in 2012.

Nine months ended September 30, 2012 and 2011

  • Non-GAAP gross profit for equipment sales for the nine months ended September 30, 2012 was $38.4 million, a decrease of 21.5% year-over-year. Gross margin for equipment sales for the nine months ended September 30, 2012 was 38.8%, compared to 45.5% for the corresponding period of 2011. The margin decrease was primarily due to higher equipment gross margin generated from $7.4 million equipment revenue recognized from the Jersey Telecom Limited contract in the second quarter of 2011 and from increased sales of relatively lower margin MSAN products compared to PTN products in 2012.
  • Non-GAAP gross profit for equipment-based services for the nine months ended September 30, 2012 was $2.4 million, a decrease of 69.9% year-over-year. Gross margin for equipment-based services for the nine months ended September 30, 2012 was 13.9%, compared to 32.2% for the corresponding period of 2011. The margin decrease was primarily due to fewer NGN products related services provided in 2012, while fixed services costs remained relatively constant.

Operating Expenses

Operating expenses for the third quarter of 2012 were $40.2 million, an increase of 126.3% year-over-year, from $17.8 million for the corresponding period in 2011. Operating expenses for the nine months ended September 30, 2012 were $82.0 million, an increase of 12.2% year-over-year, from $73.0 million for the corresponding period of 2011.

Non-GAAP operating expenses for the third quarter of 2012 were $18.1 million, an increase of 66.7% year-over-year, from $10.8 million for the corresponding period in 2011. Non-GAAP operating expenses for the nine months ended September 30, 2012 were $49.5 million, a decrease of 1.0% year-over-year, from $50.1 million for the corresponding period of 2011.

Three months ended September 30, 2012 and 2011

  • Non-GAAP SG&A expenses in the third quarter of 2012 were $12.6 million, an increase of 6.5% year-over-year. The increase was primarily due to an increase in settlement fee which partially offset by decrease in personnel costs as a result of restructuring efforts.
  • Non-GAAP R&D expenses in the third quarter of 2012 were $6.0 million, an increase of 80.6% year-over-year. The increase was primarily due to an increase in consulting cost for several strategic outsourced design projects.
  • Non-GAAP net gains on restructuring for the third quarter of 2012 were $0.2 million, compared        to costs of $0.5 million for the corresponding period of 2011. The decrease was primarily the result of the latest restructuring plan in 2009 nearing completion. UTStarcom does not expect to incur additional significant restructuring charges for the remainder of 2012 related to the previous restructuring plans.
  • Non-GAAP net gain on divestitures in the third quarter of 2012 was $0.4 million, compared to $4.2 million as a result of contingent gain realized in 2011 upon entering into a three-party assignment agreement to transfer and release all of the remaining obligations in connection with the sale of China PDSN assets in the third quarter of 2010.

Nine months ended September 30, 2012 and 2011

  • Non-GAAP SG&A expenses for the nine months ended September 30, 2012 were $33.5 million, a decrease of 19.6% year-over-year. The decrease was primarily due to a decrease in personnel costs as a result of our restructuring efforts. The lower year-over-year SG&A expenses were also the result of recoveries from bad debt and expenses as a result of the relocation of Hangzhou office facility.
  • Non-GAAP R&D expenses for the nine months ended September 30, 2012 were $16.2 million, an increase of 71.2% year-over-year. The increase was primarily due to an increase in consulting cost for several strategic outsourced design projects.
  • Non-GAAP amortization of intangible assets for the nine months ended September 30, 2012 was approximately $0.4 million compared to $0.9 million for the corresponding period of 2011 as a result of the amortization of intangible assets acquired in the iTV Media investment, formerly Stage Smart. The Company deconsolidated iTV Media in the second quarter of 2012 and the amortization of intangible assets was terminated as of the end of that period.
  • Non-GAAP restructuring costs for the nine months ended September 30, 2012 were approximately $0.4 million, a decrease of 83.5% year-over-year. The decrease was primarily the result of the latest restructuring plan in 2009 nearing completion.
  • Non-GAAP net gain on divestitures for the nine months ended September 30, 2012 was $1.0 million which was the contingent gain realized in 2012 upon releasing of the remaining obligations in connection with the sale of China Packet Data Services Node ("PDSN") assets in the third quarter of 2010.

Operating Loss

Operating loss for the third quarter of 2012 was $25.9 million, compared to operating income of $14.2 million for the corresponding period of 2011. Operating loss for the nine months ended September 30, 2012 was $27.5 million, compared to operating income of $12.7 million for the corresponding period of 2011.

Non-GAAP operating loss for the third quarter of 2012 was $5.3 million, compared to non-GAAP operating income of $9.6 million for the corresponding period of 2011. Non-GAAP operating loss for the nine months ended September 30, 2012 was $8.8 million, compared to non-GAAP operating income of $6.6 million for the corresponding period of 2011.

Other Income (Expense), Net

Three months ended September 30, 2012 and 2011

Net other income for the third quarter of 2012 was $5.4 million compared to net other expense of $7.3 million for the corresponding period of 2011.  Net other income in the third quarter of 2012 primarily consisted of $6.1 million of foreign exchange gain as a result of appreciation in INR against USD in the quarter. Net other expense for the third quarter of 2011 primarily consisted of a $7.2 million foreign exchange loss attributed to the depreciation of INR against USD in the quarter.

Nine months ended September 30, 2012 and 2011

Net other income for the nine months ended September 30, 2012 was $0.8 million compared to net other expense of $3.2 million for the corresponding period in 2011.  Net other income for the nine months ended September 30, 2012 primarily consisted of income of $1.5 million by release portion of the reserve related to tax liabilities provided to the buyers of our subsidiary in Korea due to expiration of the statute of limitation.  Net other expense for the nine months ended September 30, 2011 primarily consisted of $3.5 million of foreign exchange loss attributed to the depreciation of INR against USD in the first nine months of 2011.

Net Income (Loss)

Net loss attributable to UTStarcom shareholders for the third quarter and the first nine months of 2012 was $20.8 million and $26.7 million, respectively. Net income attributable to UTStarcom shareholders for the third quarter and the first nine months of 2011 was $8.0 million and $9.3 million, respectively.  Basic loss per share for the third quarter and the first nine months of 2012 amounted to $0.14 and $0.18, respectively.  Basic income per share for the third quarter and the first nine months of 2011 was $0.05 and $0.06, respectively.

Non-GAAP net loss attributable to UTStarcom shareholders for the third quarter and the first nine months of 2012 was $0.2 million and $8.1 million, respectively. Non-GAAP net income attributable to UTStarcom shareholders for the third quarter and the first nine months of 2011 was $3.4 million and $3.1 million, respectively. Non-GAAP basic loss per share for the third quarter and the first nine months of 2012 amounted to $0.0 and $0.05, respectively.  Non-GAAP basic and diluted income per share for the third quarter and the first nine months of 2011 was $0.02 and $0.02, respectively.

Cash Flow

  • Net cash used by operating activities for the third quarter of 2012 was $7.5 million. The Company's operating activities were impacted by a change in operating assets and liabilities of $7.0 million.
  • Non-GAAP net cash used by operating activities for the third quarter of 2012 was $1.8 million. The Company's operating activities were impacted by a change in operating assets and liabilities of $4.4 million.
  • Cash used by investing activities for the third quarter of 2012 was $56.0 million, primarily driven by the closing of IPTV divestiture.
  • Non-GAAP cash used by investing activities for the third quarter of 2012 was $2.9 million, primarily driven by the closing of IPTV divestiture.
  • Cash used in financing activities for the third quarter of 2012 was $3.7 million for repurchasing shares of common stock of the Company.

As of September 30, 2012, UTStarcom had cash and cash equivalents and short-term investments of $213.1 million.

Business Outlook

The Company currently believes that fourth quarter trends will follow closely to what was experienced in the third quarter. The Company therefore currently anticipates it will achieve average gross margins of approximately 35% and will be slightly below operating cash flow breakeven in 2012.

Looking further ahead, the new strategic plan announced today is expected to in time result in a more predictable, recurring revenue stream based on an array of sources, including subscription fees, platform licensing fees, and fees on value added services as well as higher margins due to the increased profitability of these revenues. UTStarcom will be focusing its growth efforts in China and across Asia and, based on current plans, the Company expects to invest in and launch its TV over IP services in multiple countries during 2013.  The Company anticipates revenue from the new TV over IP services to become the majority revenue contributor for UTStarcom by 2015, with gross margins in that line of the business exceeding 50% in that same timeframe.

Mr. Wong concluded, "We are very focused on the long-term opportunities that are before us and are looking forward to rolling out our new plan that we believe will deliver a more predictable revenue stream, higher margins, and increased profitability."

About Non-GAAP Financial Measures

To supplement the Company's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company uses certain non-GAAP measures to present those GAAP metrics as if IPTV business and PHS-related deferred revenue amortization had been excluded prior to each time period reflected. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliation of GAAP and non-GAAP Financial Data" set forth at the end of this press release.

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating performance by excluding amortization of PHS net sales and IPTV related business that may not be indicative of its operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its operating performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The Company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.  These non-GAAP measures are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Third Quarter 2012 Conference Call Details

UTStarcom's management will host an earnings conference call at 7:30 a.m. U.S. Eastern Time on Thursday November 15, 2012 (8:30 p.m. Beijing/Hong Kong Time on November 15, 2012).

The conference call dial-in numbers are as follows:

United States: + 1-800-860-2442
International:  + 1-412-858-4600
China: 10-800-712-2304
Hong Kong: 800-962475

The conference ID number is 10021309.

A replay of the call will be available one hour after the end of the conference until 9:00 a.m. U.S. Eastern Time on November 23, 2012.

The conference call replay numbers are as follows:

United States: + 1-877-344-7529
International:  + 1-412-317-0088

The conference ID number for accessing the recording is 10021309.

Investors will also have the opportunity to listen to the live conference call and the replay over the Internet through the investor relations section of UTStarcom's web site at: http://www.utstar.com.

About UTStarcom Holdings Corp

UTStarcom is focused on providing next generation media operational support services in the rapidly growing markets for TV over IP services and broadband equipment products and services.  UTStarcom is committed to meeting the evolving needs of cable and broadband service providers to enable a more personalized entertainment experience. The Company sells its media operational support services and broadband equipment products and services to operators in both emerging and established broadband and cable markets around the world.

UTStarcom was founded in 1991 and listed on the NASDAQ in 2000.  It has operational headquarters in Beijing, China and research and development operations in China and India.  In year 2011, the Company deployed a revamped growth strategy that concentrates on providing media operation support services. For more information about UTStarcom, visit the Company's Web site at http://www.utstar.com.

Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the Company's expectations relating to the deployment and growth of its operational support services business, the sufficiency of its cash balance, the Company's gross margin and cash flow expectations for 2012. 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, 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 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 UTStarcom assumes no obligation to update any such forward-looking statement.

 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Balance Sheets








September 30,


December 31,



2012


2011

ASSETS


(In thousands, except par value)

Current assets:





Cash, cash equivalents and short-term investments

$                    213,091


$                    303,998

Accounts and notes receivable, net


12,348


20,216

Inventories and deferred costs


129,005


137,484

Prepaids and other current assets


52,888


42,099

Total current assets


407,332


503,797

Long-term assets:





Property, plant and equipment, net


10,580


12,199

Goodwill


-


13,820

Intangible assets, net


-


3,625

Long-term deferred costs


24,951


39,741

Other long-term assets


63,072


27,758

Total assets


$                    505,935


$                    600,940






LIABILITIES AND EQUITY





Current liabilities:





Accounts payable


$                      22,836


$                      23,530

Customer advances


84,763


82,589

Deferred revenue


44,145


64,989

Other current liabilities


40,073


52,679

Total current liabilities


191,817


223,787

Long-term liabilities:





Long-term deferred revenue and other liabilities


87,474


106,114

Total liabilities


279,291


329,901






Total equity


226,644


271,039

Total liabilities and equity


$                    505,935


$                    600,940

 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Statements of Operations





    Three months ended September 30,    


         Nine months ended September 30,     



2012


2011


2012


2011



(in thousands, except per share data)










Net sales


$   40,328


$  83,297


$ 143,454


$  237,110

Cost of net sales


26,010


51,352


88,998


151,326

Gross profit 


14,318


31,945


54,456


85,784



35.5 %


38.4 %


38.0 %


36.2 %

Operating expenses:                                                                      









Selling, general and administrative


13,988


14,780


39,738


52,528

Research and development


8,243


7,327


23,850


21,591

Amortization of intangible assets


-


310


516


929

Impairment of goodwill and other long-lived assets 


854


-


854


-

Restructuring 


(191)


(509)


358


2,175

Net loss (gain) on divestiture


17,297


(4,151)


16,640


(4,185)

Total operating expenses


40,191


17,757


81,956


73,038










Operating income (loss)


(25,873)


14,188


(27,500)


12,746










Interest income, net


363


369


1,556


1,240

Other income (expense), net


5,398


(7,305)


811


(3,214)

Income (loss) before income taxes


(20,112)


7,252


(25,133)


10,772

Income taxes benefit(expense)


(649)


301


(2,806)


(2,461)

Net income (loss)


(20,761)


7,553


(27,939)


8,311










Net loss attributable to noncontrolling interest


-


458


1,195


1,006

Net income (loss) attributable to UTStarcom Holdings Corp.


$  (20,761)


$   8,011


$ (26,744)


$      9,317










Net income (loss) per share attributable to UTStarcom Holdings Corp.—Basic


$      (0.14)


$     0.05


$     (0.18)


$        0.06

Weighted average shares outstanding—Basic


143,688


155,516


148,200


155,106

 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Statements of Cash Flows












 Three months ended September 30, 


 Nine months ended September 30, 



2012


2011


2012


2011



(In thousands)

 CASH FLOWS FROM OPERATING ACTIVITIES: 









 Net income (loss) 


(20,761)


$  7,553


$(27,939)


$    8,311

 Adjustments to reconcile net loss to net cash provided by (used in) operating activities: 









 Depreciation and amortization 


796


795


3,078


2,228

 Amortization of deferred gain on sale-leaseback 


-


-


-


(625)

 Provision for (recovery of ) doubtful accounts 


54


(270)


(1,037)


3,479

 Stock-based compensation expense 


1,175


1,285


2,415


2,571

 Net loss (gain) on divestitures 


17,314


(4,151)


16,657


(4,185)

 Other-than-temporary impairment of equity investments 


854


-


854


-

 Deferred income taxes 


100


220


(120)


439

 Other 


52


(229)


(79)


(396)

 Changes in operating assets and liabilities: 









 Accounts receivable 


(4,847)


4,147


3,457


5,362

 Inventories and deferred costs 


2,846


28,998


17,418


67,619

 Other assets 


(3,679)


1,541


(4,672)


10,694

 Accounts payable 


(523)


1,208


3,843


(7,256)

 Income taxes payable 


562


(1,151)


2,294


3,106

 Customer advances 


4,365


(12,706)


5,180


3,319

 Deferred revenue 


(9,335)


(33,058)


(30,996)


(99,224)

 Other liabilities 


3,576


(6,280)


(9,608)


(34,911)










 Net cash used in operating activities 


(7,451)


(12,098)


(19,255)


(39,469)










 CASH FLOWS FROM INVESTING ACTIVITIES: 









 Additions to property, plant and equipment 


(2,217)


(3,627)


(5,165)


(9,708)

 Net proceeds from divestitures 


-


-


135


34

 Change in restricted cash  


(277)


5,863


1,228


4,243

 Purchase of an investment interest 


-


(150)


-


(761)

 Contribution of equity investment through a shareholder loan 


-




-


(7,119)

 Deconsolidation of ITV 


-


-


(6,841)


-

 Payment for IPTV divestiture and convertible bond 


(52,965)


-


(52,965)


-

 Purchase of short-term investments 


(500)


(1,578)


(2,267)


(7,291)

 Proceeds from sale of short-term investments 


44


445


3,878


6,310

 Other 


(51)


216


83


586

 Net cash used in investing activities 


(55,966)


1,169


(61,914)


(13,706)










 CASH FLOWS FROM FINANCING ACTIVITIES:                                                               









 Issuance of ordinary share upon exercise of options 


-


-


-


124

 Repurchase of ordinary share 


(3,659)


(1,500)


(6,879)


(1,500)

 Net cash provided by (used in) financing activities 


(3,659)


(1,500)


(6,879)


(1,376)

 Effect of exchange rate changes on cash and cash equivalents 


2,087


761


(1,176)


4,933

 Net increase (decrease) in cash and cash equivalents 


(64,989)


(11,668)


(89,224)


(49,618)

 Cash and cash equivalents at beginning of period 


277,391


313,557


301,626


351,507

 Cash and cash equivalents at end of period 


$212,402


$301,889


$212,402


$301,889

 

UTSTARCOM HOLDINGS CORP.

November 15, 2012 Conference Call


RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

(In thousands)

(Unaudited)


To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization and IPTV related business had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.














Qtr ended

Nine months ended

Qtr ended

Nine months ended



30/Sep/11

30/Sep/11

30/Sep/12

30/Sep/12


Non-GAAP Revenue

$45,794

$132,033

$37,026

$116,266








Non-GAAP Gross Profit

$20,456

$56,643

$12,734

$40,699


   Non-GAAP Gross Margin %

44.7%

42.9%

34.4%

35.0%








Non-GAAP Operating Income (Loss)

$9,618

$6,573

($5,335)

($8,845)








Non-GAAP Net Income (Loss) attributable to UTStarcom

$3,441

$3,144

($223)

($8,089)








Non-GAAP Net Income (Loss) per Share Attributable to UTStarcom Holdings Corp.—Basic

$0.02

$0.02

($0.00)

($0.05)








Please refer to the preceding reconciliation tables for the adjustments to GAAP Revenue, Gross Profit, Operating Income (Loss), Net Income (Loss) and EPS. 

 

UTSTARCOM HOLDINGS CORP.

November 15, 2012 Conference Call


RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in thousand)

(Unaudited)


To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization and IPTV related business had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.









Qtr ended

Nine months ended

Qtr ended

Nine months ended




30/Sep/11

30/Sep/11

30/Sep/12

30/Sep/12



GAAP Revenue (a)

$83,297

$237,110

$40,328

$143,454










Less: Amortization of PHS Revenue

$24,011

$71,378

-

-










Less: IPTV Revenue

$13,492

$33,699

$3,302

$27,188










Non-GAAP Revenue

$45,794

$132,033

$37,026

$116,266










(a) GAAP Revenue for each period is the consolidated revenue as reported on Form 6-K, as applicable, for such period.

UTSTARCOM HOLDINGS CORP.

November 15, 2012 Conference Call


RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in thousand)

(Unaudited)


To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization and IPTV related business had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.









Qtr ended

Nine months ended

Qtr ended

Nine months ended




30/Sep/11

30/Sep/11

30/Sep/12

30/Sep/12



GAAP Gross Profit (a)

$31,945

$85,784

$14,318

$54,456



   GAAP Gross Margin %

38.4%

36.2%

35.5%

38.0%










Less: Gross Profit from Amortization of PHS Revenue

8,349

24,817

-

-










Less: Gross Profit from IPTV Revenue

3,140

4,324

1,584

13,757










Non-GAAP Gross Profit

$20,456

$56,643

$12,734

$40,699



   Non-GAAP Gross Margin %

44.7%

42.9%

34.4%

35.0%










(a) GAAP Gross Profit and GAAP Gross Margin % for each period is the consolidated gross profit and gross margin % as reported on  Form 6-K, as applicable, for such period.

UTSTARCOM HOLDINGS CORP.

November 15, 2012 Conference Call


RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in thousand)

(Unaudited)


To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization and IPTV related business had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.









Qtr ended

Nine months ended

Qtr ended

Nine months ended




30/Sep/11

30/Sep/11

30/Sep/12

30/Sep/12



GAAP Operating Expenses(a)

$17,757

$73,038

$40,191

$81,956










Less: Operating Expenses directly related to IPTV

$6,919

$22,968

$22,122

$32,412










Non-GAAP Operating Expenses

$10,838

$50,070

$18,069

$49,544

















(a) GAAP Operating Expenses for each period is the consolidated Operating Expenses as reported on Form 6-K, as applicable, for such period.

UTSTARCOM HOLDINGS CORP.

November 15, 2012 Conference Call


RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in thousand)

(Unaudited)


To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization and IPTV related business had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.








Qtr ended

Nine months ended

Qtr ended

Nine months ended



30/Sep/11

30/Sep/11

30/Sep/12

30/Sep/12


GAAP Operating Income (Loss) (a)

$14,188

$12,746

($25,873)

($27,500)








Less:  Profit from Amortization of PHS Revenue

$8,349

$24,817

-

-








Less:  Profit from IPTV Revenue

$3,140

$4,324

$1,584

$13,757








Less: Operating Expenses directly related to IPTV

$6,919

$22,968

$22,122

$32,412








Non-GAAP Operating Income (Loss)

$9,618

$6,573

($5,335)

($8,845)








(a) GAAP Operating Income (Loss) for each period is the consolidated operating loss as reported on Form 6-K, as applicable, for such period.

 

UTSTARCOM HOLDINGS CORP.

November 15, 2012 Conference Call

RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in thousand)

(Unaudited)


To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization and IPTV related business had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.








Qtr ended

Nine months ended

Qtr ended

Nine months ended



30/Sep/11

30/Sep/11

30/Sep/12

30/Sep/12


GAAP Net Income (Loss) attributable to UTStarcom(a)

$8,011

$9,317

($20,761)

($26,744)








Less:  Profit from Amortization of PHS Revenue

$8,349

$24,817

-

-








Less:  Profit from IPTV Revenue

$3,140

$4,324

$1,584

$13,757








Less: Operating Expenses directly related to IPTV

$6,919

$22,968

$22,122

$32,412








Non-GAAP Net Income (Loss) attributable to UTStarcom

$3,441

$3,144

($223)

($8,089)








(a) GAAP Net Income (Loss) for each period is the consolidated net loss as reported on Form 6-K, as applicable, for such period.

 

UTSTARCOM HOLDINGS CORP.

November 15, 2012 Conference Call


RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

(In thousands)

(Unaudited)


To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization and IPTV related business had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.








Qtr ended

Nine months ended

Qtr ended

Nine months ended



30/Sep/11

30/Sep/11

30/Sep/12

30/Sep/12


GAAP Net Income (Loss) attributable to UTStarcom(a)

$8,011

$9,317

($20,761)

($26,744)








Less:  Profit from Amortization of PHS Revenue

$8,349

$24,817

$0

$0








Less:  Profit from IPTV Revenue

$3,140

$4,324

$1,584

$13,757








Less: Operating Expenses from IPTV Related

$6,919

$22,968

$22,122

$32,412








Non-GAAP Net Income (Loss) attributable to UTStarcom

$3,441

$3,144

($223)

($8,089)








Weighted Average Shares Outstanding—Basic

$155,516

$155,106

$143,688

$148,200








GAAP Net Income (Loss) per Share Attributable to UTStarcom Holdings Corp.—Basic

0.05

0.06

(0.14)

(0.18)








Non-GAAP Net Income (Loss) per share attributable to UTStarcom Holdings Corp.—Basic

0.02

0.02

(0.00)

(0.05)








(a) GAAP Net Income (Loss) per share for each period is the consolidated net income (loss) as reported on Form 6-K, as applicable, for such period.

 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Statements of Cash Flows












 Three months ended September 30, 


 Nine months ended September 30, 



2012


2011


2012


2011



(In thousands)

 CASH FLOWS FROM OPERATING ACTIVITIES:                                        


















 GAAP Net cash used in operating activities 


(7,451)


(12,098)


(19,255)


(39,469)

 Less: Net cash provided by (used in)  IPTV operating activities 

(5,602)


1,545


(14,241)


(19,608)

 Non-GAAP Net cash used in operating activities 


(1,849)


(13,643)


(5,014)


(19,861)










 CASH FLOWS FROM INVESTING ACTIVITIES: 


















 GAAP Net cash provided by (used in) investing activities 


(55,966)


1,169


(61,914)


(13,706)

 Less: Net cash used in IPTV investing activities 


(53,062)


(5)


(53,444)


(95)

 Non-GAAP Net cash provided by (used in) investing activities 

(2,904)


1,174


(8,470)


(13,611)










 CASH FLOWS FROM FINANCING ACTIVITIES: 


















 GAAP Net cash used in financing activities 


(3,659)


(1,500)


(6,879)


(1,376)

 Less: Net cash provided by (used in) IPTV financing activities 

-


-


-


-

 Non-GAAP Net cash used in financing activities 


(3,659)


(1,500)


(6,879)


(1,376)










 Effect of exchange rate changes on cash and cash equivalents 


2,087


761


(1,176)


4,933

Non-GAAP Net decrease in cash and cash equivalents in continuing operations


(6,325)


(13,208)


(21,539)


(29,915)

Non-GAAP Net increase (decrease) in cash and cash equivalents in IPTV disposed operation


(58,664)


1,540


(67,685)


(19,703)










 Cash and cash equivalents at beginning of period 


277,391


313,557


301,626


351,507

 Cash and cash equivalents at end of period 


$  212,402


$ 301,889


$ 212,402


$ 301,889

 

SOURCE UTStarcom, Inc.

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