PowerPoint Template

Report
UTStarcom Holdings Corp.
Third Quarter 2012 Results & New
Strategy Discussion
Mr. William Wong, CEO
Mr. Robert Pu, CFO
NASDAQ: UTSI
November 2012
Disclosure & Forward Looking Statements
This investor presentation contains forward-looking statements, including statements regarding the
Company's expectation regarding its operational support services business, the divestiture of its IPTV
equipment business and the Company’s performance in 2012. 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 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, successfully operate and grow its services business, execute its business plan and
manage regulatory matters, as well as 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. 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
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 2011 and
first quarter 2012 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.
2
Agenda
1
Introduction
2
Third Quarter Financial Overview
3
Overview of New Strategy
Agenda
1
Introduction
UTStarcom’s New Vision
UTStarcom Aims to Become a Next Generation Media Company
Higher Growth, More
Higher Margin Broadband
Profitable Business Focused
Equipment Products and
on Deploying Media
Services Targeting a Specific
Operational Support
Set of Customers
Equipment Focused Business
Services
transition into
Next Generation Media Services Provider
5
Agenda
2
Third Quarter Financial Overview
Third Quarter 2012 Financial 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 presentation are quarterly and year-to-date nonGAAP comparisons that exclude financial results from the IPTV business and amortization of
PHS deferred revenue.

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.
7
Non-GAAP Total Revenue

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 $132.0 million for the corresponding period of 2011.
US$(mm)
50
US$(mm)
45.8
135
132.0
45
37.0
40
35
130
125
30
25
120
116.3
20
115
15
10
110
5
105
0
Q3 2011
Q3 2012
9 Mons 2011
9 Mons 2012
8
Non-GAAP Gross Profit

Non-GAAP Q3 2012 gross profit was $12.7 million vs. Q3 2011 gross profit of 20.5 million.

Non-GAAP gross profit in the first nine months of 2012 was $40.7 million vs. first nine months
2011 gross profit of $56.6 million.
US$(mm)
US$(mm)
30
60
25
50
56.60
40.70
20.50
40
20
15
12.80
30
10
20
5
10
-
Q3 2011
Q3 2012
9 Mons 2011
9 Mons 2012
9
Non-GAAP Gross Margin

Non-GAAP Q3 2012 gross margin was 34.4% vs. Q3 2011 gross margin of 44.7%.

Non-GAAP gross margin in the first nine months of 2012 was 35.0% vs. first nine months 2011
gross margin of 42.9%.
45.0%
44.7%
45.0%
42.9%
40.0%
40.0%
34.4%
35.0%
35.0%
35.0%
30.0%
30.0%
25.0%
25.0%
20.0%
20.0%
Q3 2011
Q3 2012
9 Mons 2011
9 Mons 2012
10
Non-GAAP Operating Expense
US$ (mm)
US$ (mm)
70
60
20
50.1
18.1
50
4.2
49.5
10.8
15
40
4.2
One-time
gain on
divestiture
10
30
20
5
10
0
0
Q3 2011
Q3 2012
9 Mons 2011
9 Mons 2012
The one–time gain on divestiture of $4.2 million in the third quarter of 2011 was due to contingent gain realized upon
entering into a three-party assignment agreement.
11
Non-GAAP Operating Result & Net Income/Loss
Non-GAAP Operating Income/Loss
Comparison
Non-GAAP Net Income/Loss
Comparison
US$ (mm)
US$ (mm)
12
10
12
9.6
10
8
8
6
6
4
4
2
3.4
2
0
Q3 2011
Q3 2012
0
Q3 2011
-2
Q3 2012
-2
-0.2
-4
-4
-6
-5.3
12
Q3 2012 Cash Position

Cash balance of $213.1 million in cash, cash equivalents, and short-term
investment

Zero debt
Cash Distribution by Region
India
7.4M
3.5%
Japan
32.8M
15.4%
Other
4.8M
2.3%
Cash Distribution by Currency
INR
7.4M
3.5%
US
107.7M
50.5%
Other
4.3M
2.0%
RMB
82.2M
38.6%
USD
86.5M
40.6%
China
60.4M
28.7%
JPY
32.7M
15.3%
13
Non-GAAP Cash Flow Analysis
 Quarterly non-GAAP net cash used by operating activities for the third
quarter of 2012 was $1.8 million.
 Impact on cash balance due to IPTV divestiture


$30M cash balance deconsolidation
$20M convertible bond
 Share repurchase program update:



The Company repurchased $3.5 million in ordinary shares in the third quarter of 2012
The cumulative total execution under the current program is $13.0 million
Board extended the repurchase program for an additional six month through February
2013
14
Agenda
3
Overview of New Strategy
Guiding Priorities and Objectives
1 Focus on faster-growing, higher margin opportunities

 TV over IP Services for broadband and cable operators
2 Exit from lower-margin equipment business to enhance overall profitability

 Divested the IPTV equipment business as the first step
 Grow existing higher margin broadband business with select strategic
clients
3 Generate a more predictable, subscriber-based recurring revenue stream

4 Identify new business opportunities where UTStarcom has the potential to

become the top one or two service provider
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Market Trends and Opportunities
For Content Providers
For Consumers
Multiple Screens
(Desktop, Mobile,
Tablet, TV, etc.)
Monetization
Multiple Platforms
(Branding, Advertising,
Digital Rights
Management,
Syndication, Subscription
and Internet Based
Content, etc.)
(Content Management,
Content Distribution,
Content Publishing, etc.)
Demand of Video Delivery Solutions
AM
Watch News
on TV
PM
Watch Live Shows
on Mobile
PM
Watch Videos
on iPad
“Pull” Video Anytime/Anywhere
17
The Components of Our Strategy
1
 Build Out Media Operational Support Services Offering by
Creating and Building a TV over IP Services Platform
2
 Build Out New Services through a Combination of Internal
Development and Strategic Acquisitions
3
 Design an Optimal Operating Structure to Maximize the Potential of
Business Units, Maximize Efficiency in Operations, and Minimize
Costs to Keep Underlying Business Strong
18
1
Build Out TV over IP Services Platform
TV over IP Service Market Size
UTStarcom Strategy
 Rich Content with Personalized
Entertainment Experience
IPTV Services Market (US$ billion)
’11 – ’15
CAGR
20%
46
Service
Offering
 Blended Paid-for and Free Programs
 Anytime/Anywhere/Any Device
 Value-added Services (e.g. social TV,
games, education, TVshopping)
22
 High Demand Content in Regional
Markets Across Asia for Main Stream
2011
2015
Content
– Premium Licensed Content
Over-the-Top Services Market (US$ billion)
Platform
32
11
2011
– Internet Content
 Integrated Platform
’11 – ’15
CAGR
32%
– Local Content
Partners
2015
 Support the Entire Workflow of the TV
over IP Operations
 Existing Relationships with Cable
Operators
 Partnerships with Broadband Service
Operators
UTStarcom to Become a Leading TV over IP Service Provider that Delivers
High-in-Demand Digital Content Over a Variety of Platforms
19
Building New Services & Maximizing Potential
2
 Leverage strong technical expertise in UTStarcom launched video service cloud
Build Out New
Services
Through
Internal
Development
and Strategic
Acquisitions
platform and the understanding and knowledge of broadband/IPTV equipment
customers’ needs to develop new services
 Leverage existing relationships to establish partnerships with cable and
broadband service providers to rapidly establish a subscriber base
 Acquire or take significant stakes in companies that have market leading media
technologies which could help add UTStarcom’s services platform
 Structure the business in a way that aggregates and maximizes the potential of
3
Optimize
Business
Structure
very strong business units
 Provide business units the flexibility to pursue opportunities while also aligning
their interests with broader corporate goals and those of shareholders
 Maximize efficiencies and minimize costs to keep underlying business strong
20
UTStarcom Competitive Advantages
Well
Regarded
Brand
 Strong brand recognition as a leading telecom equipment provider
 Widely deployed network system equipment
 Experienced in set top box technologies and product development
Technology
Expertise
 Expertise with mobile terminals through the PHS business and mobile terminal
business
 Expertise and know-how with IPTV and cable services providers’ business
operating support systems (BOSS)
 Expertise in developing and selling broadband equipment and services
 Expertise in content aggregation and licensing through the investment in iTV Media
Existing
Relationship
with
Operators
Strong
Balance
Sheet
 Served a broad base of telecom and cable operators
 Long-standing relationships with leading cable and broadband service providers,
including SoftBank and Chunghwa Telecom
 Strong cash position
 Zero debt
 Well-capitalized for investment
21
Timeline
UTStarcom Strategy Timeline
2012
 Divested IPTV
equipment business
 Reorganized
company structure
 Restructured
broadband business
 Redesigned
management team
and added new
independent
director to Board
2013
 Fully transition to
new business
model
 Invest in new
product
development
 Make strategic
acquisitions and
investments
2014
 Full-scale
commercial
deployment of
value added
services in TV over
IP customer regions
 Grow subscriber
count and increase
ARPU
2015
 Service business to
become majority
revenue contributor
 Overall gross
margin of service
business expected
to reach more than
50%
 Full-scale
commercial
deployment of TV
over IP service
offerings in multiple
countries
22
Agenda
APPENDIX
Appendix – GAAP Financial Statement
UTStarcom Holdings Corp.
Unaudited Condensed Consolidated Balance Sheets
ASSETS
Current assets:
Cash, cash equivalents and short-term investments
Accounts and notes receivable, net
Inventories and deferred costs
Prepaids and other current assets
Total current assets
Long-term assets:
Property, plant and equipment, net
Goodwill
Intangible assets, net
Long-term deferred costs
Other long-term assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Customer advances
Deferred revenue
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term deferred revenue and other liabilities
Total liabilities
Total equity
Total liabilities and equity
September 30,
December 31,
2012
2011
(In thousands, except par value)
$
$
$
213,091
12,348
129,005
52,888
407,332
10,580
24,951
63,072
505,935
22,836
84,763
44,145
40,073
191,817
$
$
$
87,474
279,291
$
226,644
505,935
303,998
20,216
137,484
42,099
503,797
12,199
13,820
3,625
39,741
27,758
600,940
23,530
82,589
64,989
52,679
223,787
106,114
329,901
$
271,039
600,940
24
Appendix – GAAP Financial Statement
UTS tarcom Holdings Corp.
Unaudited Condensed Consolidated S tatements of Operations
Three months ended September 30,
2012
Net sales
Cost of net sales
Gross profit
$
Operating expenses:
Selling, general and administrative
Research and development
Amortization of intangible assets
Impairment of goodwill and other long-lived assets
Restructuring
Net loss (gain) on divestiture
Total operating expenses
Nine months ended September 30,
2011
2012
(in thousands, except per share data)
40,328
26,010
14,318
35.5 %
$
83,297
51,352
31,945
38.4 %
$
143,454
88,998
54,456
38.0 %
2011
$
237,110
151,326
85,784
36.2 %
13,988
8,243
854
(191)
17,297
40,191
14,780
7,327
310
(509)
(4,151)
17,757
39,738
23,850
516
854
358
16,640
81,956
52,528
21,591
929
2,175
(4,185)
73,038
Operating income (loss)
(25,873)
14,188
(27,500)
12,746
Interest income, net
Other income (expense), net
Income (loss) before income taxes
Income taxes benefit(expense)
Net income (loss)
363
5,398
(20,112)
(649)
(20,761)
369
(7,305)
7,252
301
7,553
1,556
811
(25,133)
(2,806)
(27,939)
1,240
(3,214)
10,772
(2,461)
8,311
Net loss attributable to noncontrolling interest
$
(20,761)
$
458
8,011
$
1,195
(26,744)
$
1,006
9,317
$
(0.14)
$
0.05
$
(0.18)
$
0.06
Net income (loss) attributable to UTStarcom Holdings Corp.
Net income (loss) per share attributable to UTStarcom Holdings
Corp.—Basic
Weighted average shares outstanding—Basic
143,688
155,516
148,200
155,106
25
Investor Relations Contacts
UTStarcom
Robert Pu
Tel: + 86-10-8520-5153
Email: [email protected]
Jing Ou-Yang
Tel: + 8610 8520 5153
Email: [email protected]
FTI Consulting
May Shen (China)
Tel: +86-10-8591-1951
Email: [email protected]
Daniel DelRe (Hong Kong)
Tel: +852-3768-4547
Email: [email protected]
Eric Boyriven (U.S.)
Tel: +1-212-850-5671
Email: [email protected]
26

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