GlobeNewswire Inc | Mar 25, 2021 07:53AM EDT

March 25, 2021

HANGZHOU, China, March 25, 2021 (GLOBE NEWSWIRE) -- UTStarcom (UT or the Company) (NASDAQ: UTSI), a global telecommunications infrastructure provider, today reported its unaudited financial results for the six months and full year ended December 31, 2020, and provided a business update.

Business Update

-- 5G Transport Solution UTStarcom collaborated with a partner to develop a state-of-the-art 5G transport solution,SkyFlux Converged Packet Transport (CPT) platform and its network management and controller, for one of the major China mobile operators (MNO) 5G migration. UTStarcom and its partner were recognized as qualified vendors but decided not to move forward with commercial deployment due to the small size of awarded business. In September 2020, the Company launched the solution to the global market, which combines Segment Routing/MPLS-TP tunneling, TDM-like Ethernet based on FlexE/G.mtn, highly accurate time synchronization and SDN-based network intelligence into an efficient future-proof architecture of 5G-ready transport network. The new platform includes two products, SkyFlux SPN805S & SPN803S, and a network management and controller SOO Station R3.2. The Company gains the markets interest to the SkyFlux products and core CPT technologies. -- Development of Disaggregated Solutions for 5G Transport NetworksAs announced in two PRs released in Q4 of 2020, UTStarcom secured a win of a RFP for joint development of a disaggregated platform for 5G transport with one of the major telecom operators in China aiming at further mass deployment with this operator, and completed Phase 1 development and integration of the disaggregated network solution with the research institute of another major mobile network operators (MNO) in China. Both operators strategy is to build an open echo-system of solutions based on network disaggregation with white box router/switch and Network Operating System (NOS) for 5G transport network and other applications. The cooperation with UTStarcom is a part of this important strategy. As a sign of recognition of UTStarcoms capability and expertise, and following the positive results achieved in 2020, both operators have decided to extend their partnership with UTStarcom and have entered into frame agreements for long-term cooperation on the development of carrier-grade disaggregated network solutions. Within the scope of these agreements, UTStarcom will focus on the development of carrier-grade white box routers and NOS optimized for telecom applications. The two frame agreements have been signed, and the Company expects field trials and deployments to start soon. -- India Receivable The Company continues to collect amounts due from its major customer in India. This customer in India raised INR8,500 Crore (approximately USD $1.13 billion) through sovereign guaranteed bonds (issued at coupon rate of 6.79 per cent per annum for a 10-year period) and cleared a portion of its payables to vendors, including UTStarcom. The Company has collected over $21 million in 2020, with $51 million outstanding. As of today, the Company has collected more than $13 million in 2021. As the customers operating status has had no significant improvement, as well as ongoing payment processing delays due to the COVID-19 pandemic in India, the timing of future payments remains uncertain despite of recent positive progresses.

UTStarcoms Chief Executive Officer Dr. Zhaochen Huang commented, Our results for the second half and full year 2020 were negatively affected by the COVID-19 pandemic. That being said, our team is focused on developing new products that capitalize on important technology trends and engaging with network operators to address and support their requirements. We are pleased with the launch of our 5G transport solution SkyFlux CPT and the partnership with two major carriers in China to build network disaggregation solutions. Our cooperation with both customers is gaining momentum, and we believe these customers will benefit from UTStarcoms strong expertise in telecom products and solutions, and will utilize our capabilities as a customization design, system integration, high quality manufacture and supply powerhouse in the field of carrier-class disaggregated solutions.

Second Half and Full Year 2020 Financial Results

Summary of 2H 2020 Key Financials

2H 2020 2H 2019 Y/Y ChangeRevenue $10.6 $27.1 -60.8%Gross Profit $0.9 $12.1 -92.5%Operating Expenses $14.9 $15.9 -6.7%Operating Loss ($14.0) ($3.8) -$10.2Net Loss ($11.6) ($6.0) -$5.6Basic EPS ($0.32) ($0.17) -$0.15Cash Balance (including Restricted Cash) $48.4 $48.6 -0.4%

Summary of Full Year 2020 Key Financials

2020 2019 Y/Y ChangeRevenue $24.3 $65.6 -63.0%Gross Profit $3.5 $24.2 -85.4%Operating Expenses $26.8 $30.3 -11.6%Operating Loss ($23.2) ($6.1) -$17.1Net Loss ($23.7) ($3.9) -$19.8Basic EPS ($0.66) ($0.11) -$0.55Cash Balance (including Restricted Cash) $48.4 $48.6 -0.4%

* Dollar comparisons are used where percentage comparisons are not meaningful.* All the numbers in U.S. Dollars are in millions except for Earnings Per Share (EPS)

Total Revenues

Six months ended December 31, 2020

Total revenues for the second half of 2020 were $10.6 million, compared to $27.1 million in the corresponding period in 2019.

-- Net equipment sales for the second half of 2020 were $3.1 million, a decrease of 78.8% from $14.8 million in the corresponding period in 2019. The decline was mainly due to decreased revenue from major customers in Japan and India. -- Net services sales for the second half of 2020 were $7.5 million, a decrease of 39.2% from $12.3 million in the corresponding period in 2019. The decrease was mainly due to the completion of current projects and no new major projects in India.

Twelve months ended December 31, 2020

2020 total revenues were $24.3 million, a decrease of 63% from $65.6 million in 2019.

-- 2020 net equipment sales were $12.4 million, a decrease of 71.7% from $43.7 million in 2019. The decline was mainly due to decreased revenue from major customers in Japan and India. -- 2020 net services sales were $11.9 million, a decrease of 45.5% from $21.9 million in 2019. The decrease was mainly due to theincreased service costs in India.

Gross Profit

Six months ended December 31, 2020

Gross profit was $0.9 million, or 8.6% of net sales, for the second half of 2020, compared to $12.1 million, or 44.9% of net sales, in the corresponding period in 2019.

-- Negative equipment gross profit for the second half of 2020 was $0.5 million, compared to positive $6.6 million in the corresponding period in 2019. Negative equipment gross margin for the second half of 2020 was 16.9%, compared to positive 44.8% for the corresponding period in 2019. The decrease in gross margin was attributed to high fixed cost with lower equipment revenue and one-time inventory reserve. -- Service gross profit for the second half of 2020 was $1.4 million, compared to $5.5 million in the corresponding period in 2019. Service gross margin for the second half of 2020 was 19.3%, compared to 45.0% for the corresponding period in 2019. The decrease in gross margin was mainly due to the increased service costs in India.

Twelve months ended December 31, 2020

2020 gross profit was $3.5 million, or 14.5% of net sales, compared to $24.2 million, or 36.8% of net sales, in 2019.

-- 2020 equipment gross profit was $2.6 million, compared to $15.5 million in 2019. 2020 equipment gross margin was 21.4%, compared to 35.5% in 2019. The decrease in gross margin was attributed to high fixed cost with lower equipment revenue and one-time inventory reserve. -- 2020 service gross profit was $0.9 million, compared to $8.7 million in 2019. 2020 service gross margin was 7.4%, compared to 39.5% in 2019. The decrease in gross margin was mainly due to the increased service costs in India.

Operating Expenses

Six months ended December 31, 2020

Operating expenses for the second half of 2020 were $14.9 million, compared to $15.9 million in the corresponding period in 2019.

-- Selling, general and administrative (SG&A) expenses for the second half of 2020 were $11.1 million, compared to $8.8 million in the corresponding period in 2019. SG&A was higher in the second half of 2020 due to higher allowance for credit loss associated with aged receivables from our India customer, which was partially offset by the decreased expenses from continued tight cost control. -- Research and development (R&D) expenses for the second half of 2020 were $3.7 million, compared to $7.1 million in the corresponding period in 2019. The decrease reflected the Companys different stages in 5G product R&D process.

Twelve months ended December 31, 2020

2020 operating expenses were $26.8 million, compared to $30.3 million in 2019.

-- 2020 SG&A expenses were $18.7 million, compared to $15.8 million in 2019. The increase was mainly attributable to higher allowance for credit loss associated with aged receivables from our India customer, partially offset by decreased expenses from continued tight cost controls. -- 2020 research and development expenses were $8.1 million, compared to $14.5 million in 2019. The decrease reflected the Companys different stages in 5G product R&D process.

Operating Loss

Operating loss for the second half of 2020 was $14.0 million, compared to $3.8 million in the corresponding period in 2019.

Full year 2020 operating loss was $23.2 million, compared to $6.1 million in 2019.

Interest Income, Net

Net interest income for the second half of 2020 was $0.5 million, compared to $0.7 million in the corresponding period in 2019.

Full year 2020 net interest income was $1.0 million, compared to $1.3 million in 2019.

Other Income (Expenses), Net

Net other income for the second half of 2020 was $0.9 million, compared to net other expenses of $3.9 million in the corresponding period in 2019. Other income for the second half of 2020 was mainly due to foreign exchange gain resulting from appreciation of the RMB against USD and INR against USD.

Full year 2020 net other expenses were $2.2 million, compared to net other income of $0.9 million in 2019. Other expenses for 2020 were mainly due to foreign exchange loss resulting from depreciation of INR against USD which was partially offset by a gain from appreciation of the RMB against USD and realized gain from the Aceland investment which was sold in first half of year.

Net Loss

Net loss attributable to shareholders for the second half of 2020 was $11.6 million, compared to $6.0 million in the corresponding period in 2019. Basic net loss per share for the second half of 2020 was $0.32, compared to $0.17 for the corresponding period in 2019.

Full year 2020 net loss attributable to shareholders was $23.7 million, compared to $3.9 million in 2019. 2020 basic net loss per share was $0.66, compared to $0.11 in 2019.

Cash Flow

Cash used in operating activities in the second half of 2020 was $2.6 million, cash used in investing activities was $0.03million, and cash used in financing activities was $0.2 million. As of December 31, 2020, UTStarcom had cash, cash equivalent and restricted cash of $48.4 million.

About UTStarcom Holdings Corp.

UTStarcom is committed to helping network operators offer their customers the most innovative, reliable and cost-effective communication services. UTStarcom offers high performance advanced equipment optimized for the most rapidly growing network functions, such as mobile backhaul, metro aggregation and broadband access. UTStarcom has operations and customers around the world, with a special focus on Japan and India. UTStarcom was founded in 1991 and listed its shares on the Nasdaq Market in 2000 (symbol: UTSI). For more information about UTStarcom, please visit http://www.utstar.com.

Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the Companys strategic initiatives and the Companys business outlook. 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 Companys 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 Companys management and their effect on the Company, the Companys 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 Companys offerings in the market and the Companys ability to execute its business plan and manage regulatory matters.The risks and uncertainties also include the risk factors identified in the Companys latest annual report on Form20-F and current reports on Form6-K as filed with the Securities and Exchange Commission. The Company is in a period of strategic 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 the Company assumes no obligation to update any such forward-looking statements.

For investor and media inquiries, please contact:

UTStarcom Holdings Corp.Tel: +86 571 8192 8888Ms. Ning Jiang, Investor RelationsEmail: utsi-ir@utstar.com/ njiang@utstar.com

Inthe United States:The Blueshirt Group Mr. Ralph FongTel: +1 (415) 489-2195Email: ralph@blueshirtgroup.com

UTStarcom Holdings Corp.Unaudited Condensed Consolidated Balance Sheets

December31, December31, 2020 2019 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 34,221 $ 34,966 Short-term investments 2,100 2,095 Notes receivable, net 58 ? Accounts receivable, net 49,623 77,831 Inventories and deferred costs 6,706 6,655 Short-term restricted cash 12,088 10,007 Prepaid and other current assets 5,109 5,524 Total current assets 109,905 137,078 Long-term assets: Property, plant and equipment, net 620 1,092 Operating lease right-of-use assets, net 1,182 2,860 Long-term restricted cash 2,079 3,634 Other long-term assets 4,938 6,639 Total long-term assets 8,819 14,225 Total assets $ 118,724 $ 151,303 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 25,120 $ 30,875 Customer advances 391 160 Deferred revenue 410 1,320 Income tax payable 5,935 7,480 Operating lease liabilities, current 1,217 1,595 Other current liabilities 6,969 7,603 Total current liabilities 40,042 49,033 Long-term liabilities: Operating Lease liabilities, non-current 256 1,364 Long-term deferred revenue and other 1,025 1,718 liabilitiesTotal liabilities 41,323 52,115 Total equity 77,401 99,188 Total liabilities and equity $ 118,724 $ 151,303

UTStarcom Holdings Corp.Unaudited Condensed Consolidated Statements of Operations

Six months ended Twelve months ended December 31, December 31, 2020 2019 2020 2019 (In thousands, except per share data) Net sales $ 10,602 $ 27,061 $ 24,310 $ 65,623 Cost of net sales 9,687 14,918 20,781 41,466 Gross profit 915 12,143 3,529 24,157 8.6 % 44.9 % 14.5 % 36.8 %Operating expenses: Selling, general and 11,139 8,844 18,689 15,827 administrativeResearch and development 3,730 7,099 8,083 14,467 Total operating expenses 14,869 15,943 26,772 30,294 Operating loss (13,954 ) (3,800 ) (23,243 ) (6,137 ) Interest income, net 488 734 980 1,321 Other income (expense), net 938 (3,882 ) (2,166 ) 872 Investment impairment (1,029 ) ? (1,029 ) ? Loss before income taxes (13,557 ) (6,948 ) (25,458 ) (3,944 )Income tax expense 1,924 911 1,782 31 Net loss attributable to $ (11,633 ) $ (6,037 ) $ (23,676 ) $ (3,913 )UTStarcom Holdings Corp. Net loss per shareattributable to UTStarcom $ (0.32 ) $ (0.17 ) $ (0.66 ) $ (0.11 )Holdings Corp.?BasicWeighted average shares 35,971 35,596 35,881 35,556 outstanding?Basic

UTStarcom Holdings Corp.Unaudited Condensed Consolidated Statements of Cash Flows

Six months ended Twelve months ended December 31, December 31, 2020 2019 2020 2019 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES:Net loss $ (11,633 ) $ (6,037 ) $ (23,676 ) $ (3,913 )Depreciation 277 317 572 644 Allowance for credit 6,964 3,136 9,441 4,396 lossesStock-based compensation 206 642 703 1,399 expenseNet loss on disposal of ? 10 ? 5 assetsInvestments impairment 1,029 ? 1,029 ? Gain on release of taxliability due to ? (54 ) ? (1,182 )expiration of the statuteof limitationsDeferred income taxes (1,615 ) (469 ) (1,499 ) (465 )Gain on write-offlong-term account payable ? ? ? (3,161 )due to expiration of thestatute of limitationsChanges in operating 2,203 (3,562 ) 10,030 (21,870 )assets and liabilitiesNet cash used in operating (2,569 ) (6,017 ) (3,400 ) (24,147 )activities CASH FLOWS FROM INVESTING ACTIVITIES:Additions to property, (30 ) (211 ) (115 ) (507 )plant and equipmentPurchase of short-term ? ? ? (41 )investmentProceeds from short-term ? 41 2,095 41 investmentsNet cash provided by (used (30 ) (170 ) 1,980 (507 )in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of ? ? ? 56 stock optionsRepurchase of ordinary (217 ) (199 ) (374 ) (1,049 )shareShort-term borrowing ? ? ? 4,625 Pay off the short-term ? ? ? (4,625 )borrowingNet cash used in financing (217 ) (199 ) (374 ) (993 )activitiesEffect of exchange ratechanges on cash and cash 2,559 (103 ) 1,575 555 equivalentsNet decrease in cash and (257 ) (6,489 ) (219 ) (25,092 )cash equivalentsCash, cash equivalents andrestricted cash at 48,645 55,096 48,607 73,699 beginning of periodCash, cash equivalents andrestricted cash at end of $ 48,388 $ 48,607 $ 48,388 $ 48,607 period