UTStarcom Holdings Corp.

Q3 2019 revenue was $13 million, down 75% year over year, and gross margin was 55% versus 19% last year. Operating expenses were $9.6 million, up 65% largely because of a noncash $3.6 million AR reserve charge, and operating loss was $2.3 million. Net loss was $2.1 million, or $0.06 per share, compared with net income of $2.1 million, or $0.06 per share, in the prior-year quarter. Cash and equivalents ended at $48 million, down $7 million sequentially, and net cash used in operations was $9.3 million. For Q4 2019, management guided revenue to $12 million to $15 million and said the revenue mix will likely differ from Q3, which may affect profitability.

Tim Ti said the quarter was mixed: revenue was in line, gross margin was strong, and expense control was good, but the BSNL receivable reserve hurt the bottom line. He emphasized that the reserve was a conservative accounting step, not a sign they expect permanent loss, because BSNL is a state-owned customer undergoing a government-backed revival plan. Strategically, he framed SkyFlux, SyncRing, India, and unattended retail as key growth areas, and was notably upbeat about 5G as a multi-year opportunity where UTStarcom believes its R&D investments have positioned it well.

Eric Lam said Q3 revenue was $13 million, down 75% year over year, with the steep comparison tied to a large BSNL project last year. He highlighted gross margin of 55% versus 19% a year ago, aided by favorable mix including high-margin last-time-buy sales to Taiwan as that market is being exited for political reasons. He detailed the BSNL issue, saying receivables were over $50 million as of Q3 and that the company took a $3.6 million reserve based on aging and uncertainty around payment timing. He also noted operating expenses of $9.6 million, up 65% due to the reserve, cash and equivalents of $48 million, and Q4 revenue guidance of $12 million to $15 million.

In Q&A, analysts focused on Q4 revenue mix, India/BSNL exposure, and the timing of China 5G trials turning into deployments. Management said Q4 revenue would be roughly balanced between Japan and India, with Taiwan last-time-buy benefits not recurring, and that India revenue would mainly come from completing existing BSNL installation and commissioning work. Eric said the BSNL receivable was over $50 million and reiterated confidence in eventual payment, while Tim said one major test remains in China and that, if passed, next year’s China forecast would be significant and could be a major 2020 revenue contributor.