corporate presentation nasdaq: utsi march 2012. disclosure & forward looking statements 2 this...
TRANSCRIPT
Corporate Presentation
NASDAQ: UTSIMarch 2012
Disclosure & Forward Looking Statements
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This investor presentation contains forward-looking statements, including statements regarding the Company's strategy to reduce operating expenses, ability to achieve profitability, investment in selective products and certain geographic regions, diversification of business and customer base, transition to a new business model and anticipated or assumed future financial results. 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 related to, among other things, the ability of the Company to realize anticipated results of operational improvements, increase bookings, successfully transition to a new management team and headquarters location and execute on its business plan, as well as risk factors identified in its latest Annual Report on Form 10-K, as amended, Quarterly Reports on Form 6K and 10-Q and Current Reports on Form 8-K, as filed with the Securities and Exchange Commission. Therefore, actual results could differ materially and adversely from the Company's current expectations. 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 in 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 2009, 2010 and 2011 earnings conference calls, restructuring announcements on December 18, 2008 and November 9, 2009 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.
Agenda
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Corporate Overview1
Financial Overview and Outlook
Market Dynamics & Growth Strategy2
3
CORPORATE OVERVIEW
Company Introduction
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A leading provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and broadband for cable and telecom operators
Technology and services expand and help modernize communications networks
Provide operators with increased revenue opportunities and subscribers with enhanced interactive communications experiences
Share Price: $1.58 (as of March 13, 2012)Shares Outstanding: 151 millionLegal Counsel: Covington & Burling LLPAuditor: PricewaterhouseCoopers
Investment Highlights
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Achieved profitability in 2011
Strong existing relationships with leading telecom, cable and media players in China and across the rest of Asia
Well positioned to benefit from China’s Three Network Convergence policy and development
Diversifying business model into high-margin new service business (“Operation Support Business”) with recurring revenues
Diversifying customer base to broaden profit opportunities
Strong cash position and no debt
Our Positioning and Growth Strategy
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• Concentrate on China and Asian markets
• Leverage Three Network Convergence (TNC) policy in China
• Senior management closer to client decision-makers
• Successfully improved internal communication & lowered costs
• Core IP technology applied across different networks
• Strong competitive edge and opportunity with both telecom and cable operator
Strategy 1: Return to China
• Demand for interactive services creates the opportunity for equipment AND services revenue with higher margin earnings
• New service business model moves UTStarcom up the value chain and closer to interactive TV operators
Existing telecommunication products, RollingStream technology and sales channels
serve as the foundation for UTSI’s new service business
Strategy 2: Telecom and Cable in Parallel
Strategy 3: Equipment AND Service
A leading provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and Broadband to cable and telecom operators
RollingStream Technology
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SOLUTION AND VALUE TO CUSTOMER
PRODUCTS OR SERVICE PROVIDED TARGET CUSTOMERS
RollingStream® Technology: provides customers market -leading interactive TV solutions
RollingStream enables operators to provide IPTV, iDTV, Internet TV, mobileTV, video information and other industrial applications. Hardware includes:
InfrastructureComponents:
Terminals:
1.Telecom operators
2. Cable operators
3. TV stations and content license holders who, in China, run broadcast control platforms
Video Storage and Streaming Servers OSS
IP STB Dual-mode STB
Broadband and NGN Solutions
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SOLUTION AND VALUE TO CUSTOMER
PRODUCTS OR SERVICE PROVIDED
TARGET CUSTOMER
Broadband Solution: provides high bandwidth network infrastructure for communications networks
• PTN
• MSTP
• G/E-PON
1.Telecom operators
2. Cable operators
NGN Solution:Provides a multi-service IP-based soft switch system for voice, data, mobile and multimedia operations
1.Telecom operators
2. Cable operators
Call server Media Gateway
BBS 4000 ONU
NetRing 4K
TN725
NetRing2500
TN705
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Leading Market Position in China
Focus Area UTStarcom’s Achievements
Interactive Television (including IPTV, iDTV & Internet TV)
Currently hold a leading IPTV market share in China Contracts won from both cable and telecom operators to expand IPTV
system - Zhejiang, Fujian, Anhui and Shenzhen Built 7 IPTV Broadcast Control Platforms in China Target Video Service Cloud Platform launch in Q1 2012
Smart Grid Approved as a qualified EPON supplier for China State Grid Company
The first EPON supplier to China’s electricity grid companies EPON product supplier to the Ningxia provincial electricity grid
company
Leading Market Position in APAC Market
UTStarcom Confidential
Market & Focus Area
UTStarcom’s Achievements
Japan:
Focused on Broadband
Supply 50% of SoftBank Broadband (“SBB”)’s MSTP transmissions. SBB is currently Japan’s 3rd largest telecom operator
Preferred PTN supplier of next generation IP transmission equipment for SBB
Cumulative booking of higher-margin PTN products hit $100 million
Other APAC Market:
Focused on Broadband
Won sizable MSTP and PTN contracts from Chunghwa Telecom
RollingStream® infrastructure product sales increased in India
Market Dynamics & Growth Strategy
China’s Three Network Convergence: a growth catalyst for UTStarcom
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Focused on cable / teleco two-way entrance
Pilots concluded and expansion drives ahead
Policy LaunchedPilots Conducted
National Implementation
2010 2010—2012 2013—2015
Equipment Spending & Network Buildout
Media Platform
Spending16%
Set Top Box Sales
28%
Telecom Network Buildout
42%
Cable Network Buildout
14%
Three Network Convergence (TNC) is the Chinese government policy dedicated to integration of telecom, broadband and cable TV networks
Three Network Convergence related market will reach RMB 688B over the next three years, including RMB 249B on equipment and network buildout and RMB 439B from interactive media user demand
Source: iChina Research Center, 2010.4, “Analysis of Market Size, Industry and Region for Three-Network Convergence” and policy directives issued by China’s State Council.
UTStarcom Wins in TNC
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1
D
2
Sichuan broadcast control platform
In 2010, UTStarcom built 6 IPTV broadcast control platform projects in Sichuan, Shenzhen, Beijing, Hubei, Hunan, Shandong which were all successfully connected with the central-level platform
In 2012, UTStarcom won the first of the 42 new trial cities in China and built IPTV broadcasting control platform in the city of Chongqing
CTV 重庆
Strategy 2: Parallel Growth Opportunities
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none
4million(iDTV)
<5million
>1 billion
6.7million(IPTV)
>100million
187 million88 million
none
Interactive video services
Interactive video services
Broadband serviceBroadband service
TV and Digital TV service
TV and Digital TV service
Voice servicesVoice services
<25% 100%
Bi-directional network percentage
Bi-directional network percentage
Service Cable Telco• TNC will increase
opportunities with cable and telecom operators because of infrastructure investment
• Our Broadband, RollingStream video platform and mSwitch NGN solutions help meet the TNC needs of both sectors
Source: SARFT Report January 2011 and UTStarcom
Corporate Strategy 3: Equipment and Services
Traditional Business: Equipment Provider
Media Operational Support Service
Network Infrastructure
ApplicationProducts
Video Service Cloud (VSC) Platform enables video operators to rapidly launch IP video service and provide customers with interactive video experience
Revenue Sharing
Video Service Cloud
Equipment Provider
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Video Distribution Network
Cloud-Based Video Services
Video Content Exchange
Rollingstream technology
Network Infrastructure technology
Strategic partnership on
broadband resource
Video Service Cloud Platform
Services include: video conferencing, online education, online office, online theater …….
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Video Communication
technology
Financial Overview and Outlook
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Total Revenue
$83.5 million in Q4 2011, 9.6% or $7.3 million increase year over year
$320.6 million in FY2011, 10.0% or $29.0 million increase year over year
Without PAS deferred revenue, book-to-bill ratio for the fourth quarter was 0.70.
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Gross Margin Improvement
Q4 2011 gross margin was 34.2% vs. Q4 2010 gross margin of 10.6%
FY2011 gross margin was 35.7% vs. FY2010 gross margin of 24.1%
US$ (mm)
Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 20110
5
10
15
20
25
30
35
34.7
30.2
25.1
17.8
20.0
4.2One-time gain on divestiture
OPEX
20.0%
30.0%
40.0%
50.0%
45.5%
49.3%
27.1%
21.3%
24.0%
OPEX/sales
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Continued Progress in Cost Cutting
US$ (mm)
Total OPEX of Q3 2011 included $4.2 million one-time net gain on divestitures
Achieved target of operating expenses below $100 million in 2011
Operating Income and Net Income
US$ (mm)
Q4 2011 operating income of $8.5 million and Q4 2011 net income of $4.1million
Operating Income
Net Income
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Cash balance of $304.0 million in cash, cash equivalents, and short-term investment
Zero debt
Balance Sheet & Deposits
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2012 Company Priorities
Accelerating growth of media operational support service business
Launch VSC platform and associated services in Q1 2012
Focus on profitability improvement for equipment business
Increase enterprise value and enhance shareholder communication
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Investor Relations Contacts
UTStarcom, Investor Relations
Jing Ou-Yang T: + 8610 8520 5153E: [email protected]
Ogilvy Financial
In China:Agustin BautistaTel: +86-10-8520-6166Email: [email protected] In the U.S.:Jessica Barist CohenTel: +1-646-460-9989Email: [email protected]