UTStarcom Holdings' CEO Discusses Q4 2011 Results - Earnings Call Transcript

UTStarcom Holdings Corporation ( UTSI)

Q4 2011 Earnings Call

March 13, 2012 8:00 AM ET

Executives

Jing Ou Yang – Director, IR

Jack Lu – President and CEO

Jin Jiang – CFO

Analysts

Lily Wu – TGRA Capital

Himanshu Shah – Shah Capital

Presentation

Operator

Thank you for standing by for UTStarcom’s Fourth Quarter and Full Year 2011 Earnings Conference Call. (Operator Instructions) A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Jing Ou Yang, Investor Relations Director for UTStarcom. You may begin.

Jing Ou Yang

Hello, everyone, and welcome to UTStarcom’s Fourth Quarter and Full Year 2011 Earnings Conference Call. We distributed our earnings press release earlier today and you can find a copy via Newswire Services and on our website at www.utstar.com. In addition, we have posted a slide presentation on our website, which you can download and use to follow along with today’s call.

On today’s call we have Mr. Jack Lu, our President and CEO; and Ms. Jin Jiang, our CFO.

Before we get started, I will read the company’s advisory on forward-looking statements. This call will include forward-looking statements on topics that include, but may not be limited to the company’s restructuring initiatives, IPTV revenues, profit margins and projected business model.

Forward-looking statements are generally indicated by such words as will, expects, estimate, goals, plans or similar words. These statements are forward-looking in nature and subject to risk and uncertainties that may cause actual result to differ materially.

This include risk and uncertainties regarding the ability of the company to realize anticipated result of operational improvements, the company’s ability to successfully launch its Internet TV platform, continue to integrate recent acquisition, successfully operate its new Service business, execute on its business plan and manage regulatory matters, as well as risk factors identified in its latest Annual Report on Form 10-K, Form 10K/A, quarterly reports on Form 10-Q and current reports on Form 8-K and Form 6-K as filed with the Security and Exchange Commission. The company assumes no obligation to update any forward-looking statements.

I will now turn the call over to our President and CEO, Mr. Jack Lu.

Jack Lu

Thank you, Jing, and hello to everybody on the call. As Jing mentioned, you can follow along with today’s call by downloading the presentation from our website at www.utstar.com. Also, unless otherwise stated, all figures mentioned during this call are in U.S. dollars.

Let’s start with slide four and talk briefly about our fourth-quarter highlights. Net income attributable to UTStarcom’s shareholder was $4.1 million, or basic and the diluted earnings per share of $0.03 in the fourth quarter 2011. Total revenues increased 9.6% year-over-year to $83.5 million in the fourth quarter 2011 from $76.1 million for the same period in year 2010.

Gross margin was 34.2% in the fourth quarter 2011 compared to 10.6% in the fourth quarter 2010. Operating income was $8.5 million in the fourth quarter 2011 compared to an operating loss of $26.6 million in the fourth quarter 2010. Cash, cash equivalents and short-term investments were $304 million as of December 31, 2011.

On slide five, we highlight our 2011 financial achievements. Most notably, we exceeded our revenue targets range of $300 million to $320 million by achieving $320.6 million in total revenue for the full year 2011. Total operating expenses in 2011 were $93.1 million, 6.9% lower than our annual target of $100 million. And lastly, we achieved a healthy full year gross margin of 35.7% and met our annual breakeven target established at the beginning of the year, recording net income of $13.4 million.

Turning to slide six and take a look at year-over-year comparisons of the past three years. 2011 was our first profitable year after six years of consecutive losses. Our operating expenses have experienced a downward trend since 2009 while our operating income and the net income have steadily increased since 2009 and turned positive in 2011.

Now let’s take a look at slide seven to recap our 2011 growth strategy. We’ve successfully executed our Return to China corporate strategy in 2011 after bringing a new management team on board. We made steady progress in adding more talented people to our team, streamlining our corporate structure and efficiently managing our costs. Our strong bottom line performance was mainly driven by improved gross margin and a decrease in operating expenses as a result of these restructuring efforts.

In 2011, we launched a new corporate culture initiative to incentivize our employees. We believe this have improved team morale and contributed to our positive financial performance in 2011. The new initiative underscores UT’s core value of integrity, execution, accountability and a shared team approach, which challenges our employees to go above and beyond. This new corporate culture includes team building activities and focus more on performance-based incentives. We believe this new corporate culture established a solid foundation from which to grow into an even stronger company over the next few years.

Turing to slide eight, we were able to effectively execute our second corporate strategy of serving the telecom and the cable markets in parallel in 2011, setting the stage for continuous growth progress in 2012. Our catalyst for our growth in the cable market will continue to be China’s push forward three network convergence. The first phase has already shown substantial progress which networks already displaying the capability to provide the services to end users.

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