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UTStarcom Holdings Corp. Third Quarter 2012 Results & New Strategy Discussion

UTStarcom Holdings Corp. Third Quarter 2012 Results & New Strategy Discussion. NASDAQ : UTSI November 2012. Mr. William Wong, CEO Mr. Robert Pu, CFO. Disclosure & Forward Looking Statements.

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UTStarcom Holdings Corp. Third Quarter 2012 Results & New Strategy Discussion

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  1. UTStarcom Holdings Corp. Third Quarter 2012 Results & New Strategy Discussion NASDAQ: UTSI November 2012 Mr. William Wong, CEO Mr. Robert Pu, CFO
  2. 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
  3. Agenda 1 3 2 Introduction Third Quarter Financial Overview Overview of New Strategy
  4. Agenda 1 Introduction
  5. UTStarcom’s New Vision UTStarcom Aims to Become a Next Generation Media Company Higher Margin Broadband Equipment Products and Services Targeting a Specific Set of Customers Higher Growth, More Profitable Business Focused on Deploying Media Operational Support Services Equipment Focused Business transition into Next Generation Media Services Provider 5
  6. Agenda 2 Third Quarter Financial Overview
  7. 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 non-GAAP 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.
  8. 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) 8
  9. 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$(mm) 9
  10. Non-GAAP Gross Margin Non-GAAP Q3 2012 gross margin was 34.4% vs. Q3 2011 gross margin of 44.7%. Non-GAAP gross margin in the first nine months of 2012 was 35.0% vs. first nine months 2011 gross margin of 42.9%. 10
  11. Non-GAAP Operating Expense US$ (mm) US$ (mm) The one–time gain on divestiture of $4.2 million in the third quarter of 2011 was due to contingent gain realized upon entering into a three-party assignment agreement. 11
  12. Non-GAAP Operating Result & Net Income/Loss Non-GAAP Operating Income/Loss Comparison Non-GAAP Net Income/Loss Comparison US$ (mm) US$ (mm)
  13. Cash balance of $213.1 million in cash, cash equivalents, and short-term investment Zero debt Q3 2012 Cash Position Cash Distribution by Region Cash Distribution by Currency 13
  14. 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 $13.0 million Board extended the repurchase program for an additional six month through February 2013 Non-GAAP Cash Flow Analysis 14
  15. Agenda 3 Overview of New Strategy
  16. Guiding Priorities and Objectives Focus on faster-growing, higher margin opportunities TV over IP Services for broadband and cable operators Exit from lower-margin equipment business to enhance overall profitability Divested the IPTV equipment business as the first step Grow existing higher margin broadband business with select strategic clients Generate a more predictable, subscriber-based recurring revenue stream Identify new business opportunities where UTStarcom has the potential to become the top one or two service provider 1 2 3 4 16
  17. Market Trends and Opportunities For Consumers For Content Providers Multiple Screens (Desktop, Mobile, Tablet, TV, etc.) Watch News on TV AM Monetization (Branding, Advertising, Digital Rights Management, Syndication, Subscription and Internet Based Content, etc.) Multiple Platforms (Content Management, Content Distribution, Content Publishing, etc.) Watch Live Shows on Mobile PM PM Watch Videos on iPad Demand of Video Delivery Solutions “Pull” Video Anytime/Anywhere 17
  18. The Components of Our Strategy 1 Build Out Media Operational Support Services Offering by Creating and Building a TV over IP Services Platform 2 Build Out New Services through a Combination of Internal Development and Strategic Acquisitions 3 Design an Optimal Operating Structure to Maximize the Potential of Business Units, Maximize Efficiency in Operations, and Minimize Costs to Keep Underlying Business Strong 18
  19. Build Out TV over IP Services Platform 1 TV over IP Service Market Size UTStarcom Strategy IPTV Services Market (US$ billion) Service Offering ’11 – ’15CAGR 20% Content Over-the-Top Services Market (US$ billion) Platform ’11 – ’15CAGR 32% Partners UTStarcom to Become a Leading TV over IP Service Provider that Delivers High-in-Demand Digital Content Over a Variety of Platforms 19
  20. Building New Services & Maximizing Potential Build Out New Services Through Internal Development and Strategic Acquisitions 2 Optimize Business Structure 3 20
  21. UTStarcom CompetitiveAdvantages Well Regarded Brand Technology Expertise Existing Relationship with Operators Strong Balance Sheet 21
  22. Timeline UTStarcom Strategy Timeline 2012 2013 2014 2015 Divested IPTV equipment business Reorganized company structure Restructured broadband business Redesigned management team and added new independent director to Board Fully transition to new business model Invest in new product development Make strategic acquisitions and investments Full-scale commercial deployment of TV over IP service offerings in multiple countries Full-scale commercial deployment of value added services in TV over IP customer regions Grow subscriber count and increase ARPU Service business to become majority revenue contributor Overall gross margin of service business expected to reach more than 50% 22
  23. Agenda APPENDIX
  24. Appendix – GAAP Financial Statement
  25. Appendix – GAAP Financial Statement
  26. Investor Relations Contacts UTStarcom Robert Pu Tel: + 86-10-8520-5153 Email: robert.pu@utstar.com Jing Ou-Yang Tel: + 8610 8520 5153 Email: jouyang@utstar.com FTI Consulting May Shen (China) Tel: +86-10-8591-1951 Email: may.shen@fticonsulting.com Daniel DelRe (Hong Kong) Tel: +852-3768-4547 Email: Daniel.DelRe@fticonsulting.com Eric Boyriven (U.S.) Tel: +1-212-850-5671 Email: eric.boyriven@fticonsulting.com 26
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