Q3 2019 Earnings Call

Ladies and gentlemen, today's call that shifted to begin shortly please continue to stand by we take if which a patient.

Again today's conversation at the beginning shortly please continue to stand by me. Thank you for your patience.

Hello, Ladies and gentlemen, thank you for standing by far UTI stuff comes to quota 10 denied <unk> earnings Conference call. Please note that the every Coty studies.

I would not although difficult to Mr. Gabby.

You can debate the after bullshit Asia Pease go to hitting you said to attract.

Thank you Grace Hello, everyone and welcome you to start comps third quarter 2019 earnings conference call.

Earlier today, we distributed our earnings press release, you can find a copy at our website at Www Dot UTI start dot com.

Additionally, posted a presentation on our website, which you can download and used to follow along with today's call.

On today's call, we have Mr. TMT, Chief Executive Officer, Mr., Eric Lamb, Vice President of Finance.

Before we get started let me refer you to the company's Safe Harbor statement on page two of the slides. This call will include forward looking statements relating to the company's business and strategic initiatives. Those statements are forward looking in nature and are subject to risks and uncertainties that may cause actual results to differ materially and adversely from the company's current expectations.

The risks and uncertainties include factors identified in the company's latest annual report on form 20-F. The current reports on form 6K filed with you with insert Securities Exchange Commission.

All forward looking statements included in this call it based on information available to the company as of the data. This cool and information May change if so the company assumes no obligation to update any such forward looking statements.

Also please note that unless otherwise stated all figures mentioned during his color and U.S. dollar.

I'll now hand, the call over to you she started from CEO Mr. Tim T. Kim.

Thank you, Gary and I think Q.

Well, joining our call today.

We appreciate your interesting you to stock.

As Gary mentioned, you can download the presentation.

That's the section a website.

Now, let me quickly recap how Q3 results.

Sure.

Three.

Third quarter results.

For a mixed.

Revenue what the line was always the patients.

Gross margin what the exit.

Since cultural what's great.

But the we had oh, we do charge.

Got it resulted in bottom line loss.

I do want to point, no doubt that meizu, which is related to our major customer India.

The food and accounting major to apply a call accounting policies consistently and a conservative.

The casino.

Yes, I know.

The <unk> said they.

And the price.

He's a heavy financial difficulty.

The India Kaufman is implementing.

The Bible pain.

We stop you hit the nail through funny [laughter].

In lydall that.

We are confident we what you've actually collect.

Although the timing of for the payment.

I'm system.

As such we prefer to be appointment and Konkol 17 Buddy.

At least situation.

You know accordance with all with eight Oh.

Odyssey.

Eric will provide more detail.

You get three months.

Looking at operation.

We had to some encouraging developments in the quarter.

First.

I want to highlight the products that we consider that future.

Uh huh.

Our sky Frocks caught a lot.

This product bundles, our key technologies that address the need of Fiveg.

They are thinking when they're all team.

Correct Ethernet.

SDN controllers and the synchronization.

The yen stands for software defined network.

An important technology to even.

The threats ability.

And that efficiency.

Network operations.

Hi, GE is being rolled out along the global.

But the most aggressive now will upgrade.

Yes in China.

We are marketing how was the guy from Florida.

True apart enough that the competing well a massive fights yelp gray here in China.

The carries doing extensive testing.

Cleveland, they intend to by next year.

Oh photos and already passed the laboratory and field.

We are very encouraged.

By at least a chip.

But the Kip Oh, a keen on track to compete for Waukesha.

We are cautiously optimistic that optimistic and the excited about this early fyseventeen.

As you can you make an upgrade opened oh.

<unk> <unk>, China is the massive undertaking.

Carriers will spend more people being.

Over the years.

And that we know that will capture a very large revenue stream.

For many years.

We have from made significant investments in R&D to position. The company was the most of the van equipment hospital to capture all the opportunities in China.

Well all the market for years ahead.

That's 10.

Two important adamant about fiveg product package.

Single Ization.

To monetization is critical function for Fiveg network.

Well I'm coming.

By GE.

We continue all still and the shipment.

I think written quota for the Fiveg network. All Fiveg bought a version is being fine and then we'll be ready to support of Fiveg <unk>.

We are optimistic about the contribution the thing bring product line.

Can make overtime.

The market, it's a competitive but we believe.

Our singling taught a lie is the leading solution to address these important technical requirement.

Particularly in the Fiveg Rollouts, we believe.

Singling well be.

Oh from the significant value to our customers.

Not operating highlights.

Our participation add to India mobile conquest 2019.

Oh I N C in October .

Although the BSNL situation is typical.

India remains a huge and the important hockey market for us.

The country has just complete the threeg to Fourg migration.

So it's a bit be high most of the Gulf countries.

Good luck well be great market.

They tried to catch up in Fiveg deployment.

We use the Idmc FOTA the.

Our presence in this important market.

I am see India.

Hey man telecommunications and the mobile Technology conference.

It's all first or profit for major telecom service providers and the technology leaders to ship insight and the showcase the latest products and technologies.

The only in the event.

We showcased a comprehensive suite.

Yes.

Including Fiveg offering based on next generation technology.

This includes a slight seemed base and transform solution of Fiveg indoor coverage solution and just solutions will end to end there will a single ization.

Oh product can be used in optimized solution.

Mobile fickle natural gigabit broadband access.

Now we'll call.

Most cities and the more.

Joining us feel panel discussion.

Entitle you mentioned a collective future.

We should all view.

Org chart inches.

Well its fiveg Trustful network infrastructures.

Additionally.

We believe it so keynote speech.

Hi, its home.

Involving rows of all yen in the digital Revolution.

The kienle highlights.

The evolution of telecom.

Thats ecosystem.

A final highlight in the quarter plus development in the on the tended retail market.

But you we are addressing with our goal small solution.

We are expanding our effort in America and the type one.

And activity pursuing promising opportunities there.

We are targeting the hotel industry with our go coupon lie to be deployed in self service wholesale lobbies inhibition.

We have decimated.

It could see Asian enlarging the married.

To lock in August both mob Kratos.

At that point of sales locations, such as the apartments hotels and the other high Trevi area.

So.

Let me call crude.

And.

Turning over to Eric.

We 40 recognize the challenge we face.

They will and Grace.

Travel impacts and the financial challenges.

At the key customers.

This oh affecting us now.

However.

Jason has never been we lost challenge.

And we have.

Among that Len over the years.

Well, it's a we look forward.

We see opportunities.

The fiveg transition will be a massive opportunity for our industry for several years.

Our investment in R&D has produced a strong lie.

Position us well for the future.

We are seeing odious five offices that.

And the intending to assess and with our effort and capture always share.

Of these great opportunity.

Okay, now I will turn the call over to Eric will come at.

Our financial performance.

[noise]. Thank you Kim and thanks, everyone for joining the call today.

As I review, our financial performance.

Please keep in mind at all figures refer to the third quarter 2019.

Unless I say otherwise.

Also all comparisons with the same period last year.

Unless I specify depicting.

Starting on page 11.

Revenue was slightly up.

To 13 million.

Down 75%.

Within our guidance range.

Comparison, this skew due to a sizable project vs and no in India last year.

In contrast.

Even though revenue was down substantially.

Gross profit decline was modest.

Mainly due to favorable product mix.

And our gross margin was 55% as show a page oil.

This was followed above last she is 19% gross margin.

The positive mix included some high margin last time buy product sales to Taiwan, as we exit that market.

Oh axis is driven by political reasons.

Operationally.

Hi, My business was steady profitable.

However, as more Chinese entity invested enough company.

Portion of Chinese shareholders that exceeded any limit established by the Calvin These government.

Consequently, we are no longer permitted to sale telecom equipment that.

Now before I go any further I would like to take the opportunity can you elaborate on the status of our long time and major customer in India.

Namely the note.

The BSNL situation not only impacted our expenses.

To higher.

Reserve.

It also disruptive.

All more revenue stream.

As Tim mentioned instead now was 100% state owned enterprise categorized as a central public sector Enterprise Cts E.

Yes, and no has been experiencing financial difficulties.

And this features to subject they within that India Cabinet ministers.

The prior to prime and Prime Minister Modi election, or new capital projects that you said no was suspended.

Onto the election was though.

No.

This impact.

Bookings and revenue in 2019.

Furthermore.

Payments to suppliers for capital projects with the late.

As in the nose financial condition to aid.

Now that the election is over.

Indeed Department, India's department of Telecom foot coast.

And the cabinet Ministry approved a $10 billion, we Bible plant.

The plan includes a voluntary retirement king to reduce people costs as far as a capital infusion plan.

Yes, the nails infrastructure support.

Additionally.

The department of Telecom authorized government loan guarantees to raise funds copious note that clear cell extending payment vendors and suppliers.

Also recently that India Finance Minister announced his support for India's five year 1.4 trillion.

All of growth plan.

What specifically guarantees.

Appliance payment for all CGS East.

Obviously, we are concerned about the aging of a receivable from BSNL.

However, we vital plan in place we are confident that eventually we will collect on the low.

However, the precise timing is uncertain.

After careful deliberation the company has the site.

Full by 8.6 million will serve.

Now this is a prudent and consistent application of housing policy based on aging.

Of course, we will monitor and those payments status closely and adjust the I wouldn't so accordingly.

Now back to operating expenses and show on page 13.

Operating expenses were 9.6 million up 65%.

The increase is solely due to the noncash 3.6 million Aaas reserve charge that we spoke about earlier.

With focus our spending on what is important.

That is R&D.

Which was up 29%.

The increased R&D spending demonstrates our continued commitment to new product and technology development.

Which we believe.

Coming to fruition.

Okay.

Overall.

The lower revenue and higher Opex translated to.

Operating loss of 2.3 million.

Turning to page 14.

Net loss for the quarter was 2.1 billion or a loss of six cents per share.

Compared to an income of 2.1 billion.

For a gain of six cents per share last year.

Page 15 summarizes our cash flow.

We ended the quarter with 48 million in cash and equivalents.

Cleans up 7 million last quarter.

Net cash used in operation bust type of 3 million.

With that.

Let's turn to our revenue guidance as shown on page 16.

Now before I discuss number.

Like 2.0 civil risk factors.

First a major customer in Japan.

Transitioning to next generation Fiveg.

Which introduces uncertainty into their ordering Pat.

We didn't ship assuming products to them. This quarter. It will continue into next quarter, but we are taking a conservative stands above the month of revenue. We can expect them to the next two quarters.

Yeah train will restriction and political concerns in Japan.

All potentially impacting Cuban decisions in both in China supplies.

And even China face supplies.

This makes us very cautious on that business in Japan.

Similarly.

We are mindful of that uncertainty surrounding emerging.

Sorry, emerging new technology opportunity like Fiveg.

Which could be slow to develop and highly competitive.

However, we are confident.

Although new technological capability.

And stay of hot product offerings.

Overtime, we do see many growth opportunities in new technology trends, new markets new products and.

A new applications.

Oil and all we are excited about our long term prospects.

Now moving to our specific guidance, we expect fourth quarter 2019 revenue to be the range of.

12 to 15 million.

Please bear in mind that the fourth quarter revenue mix is unlikely to match that up the third quarter and may affect the level of profitability.

With that Tim and I would like to take your questions operator.

Please open the life will kill Nate.

Ladies and gentlemen, you may now be good question answer session. You kindly ask questions. Please press star one onshore pattison as it pertains to be announce it at least 10, so yami class taste Presque Isle key.

Yes.

The first question comes from the line of pain, So buckets from Northland capital. Please ask your question.

Hey, good morning, <unk> have a number question Jim.

Hey regard.

Yes.

I guess with regard to the could the guidance lets just or maybe take your region by region.

I can't imagine.

Well what are your expectations, where the potential liberty do business would be the.

I assume your guidance for Q4.

We made sure dominated by two parents, who are committed carbon garden or mix, maybe that's for sure.

One last time buys about re occurring but would that be accurate.

With regard to.

We must your near term revenue coming from Japan.

And.

And then.

Beyond that I guess, if you could be were.

Specific with regard to the risks to revenue going into next year, a little from wondered beer.

Oh God awful Tim for Q4, it looks it appears at this point revenue going to be.

And the.

Balance from Japan and from India.

So that's that's.

And you're right that we would not have Taiwan.

Last time buy.

Okay.

In Q4.

Okay, well, that's that's interesting that what can you say.

With regard to India. So.

You are you engaging a new projects would be us analysis and brother customer.

ER.

As as you.

No work.

Receivables.

Really the continuation of some the existing projects with fees and know that we're finishing up.

We are we are at the installation and commissioning phase so as we complete those installations and commissioning.

Those products that you recognize mostly the service revenue.

So so thats, what we are counting on Q4 from India.

Got it or.

And.

Can you talk to the size of the overall receivable.

With that would be a smaller there you're taking 3.6 million order reserve it.

They have your or the subject of is reasonable 2 billion dollar Revival plan.

But can you give us the magnitude for the overall exposure.

Well.

Does that receivable has been has been building up because of.

As we complete the project, which we started last year.

So that was.

Both in probably in the magnitude of over 50 50 million.

As of Q3.

So now we as we mentioned.

We will of course, we were concerned about the the.

On payment is now because of that financial difficulties and the timing talk for a couple of than to decide.

To.

Two I guess, we buy.

This enterprise. So finally, Dave made that decision and that's that's very good news for us because as far as we know.

There's no reason to believe believed that we won't get take so the question for US is we need that the timing the payment.

Thanks, a lot.

Moving to quit because in India, So, but then things already motion. So we do expect payment.

Fairly soon.

So.

Again, the precise timing is the thing that's always been question. So that's the reason why we decided to continue we so.

Practice and policy and and we serve a fair amount based on the aging of OVC.

Okay got it fair enough.

And would you be you're obviously, you've got to express or are.

The reservations about.

Your Japan overtime.

Are there.

You know well you can tell me whether post resolution of this or.

Your receivables issue.

Or whether you expect kind of potential new projects with ER.

In India, but to be described.

The new product the trial inside as to future you to store occur, but I wonder if your kid.

Speak to or give us some estimation of the timing.

Oh transitions Ah from from trial to deployment.

For the five G.

Charles you're engaged in China.

Okay.

Right now still have a one major test we need to a past okay. So a once a week once we pass the test.

So a the next year.

The the forecast is significant.

Okay.

I I currently do you cannot disclose that number but I was the knowledge the size of China.

That will be a major major contributed for our revenue 2020.

So.

Okay. Thanks very much.

Thank you.

Thank you Tim.

Thank you.

Once again, if you wish to ask questions. Please press star one lunch at Patterson and that puts you named no.

Once again if you. These costs question. Please press star one onshore Allison.

He needs to be announced.

[noise] [noise].

Hi speaking if you these to ask questions. Please press star 110, Islam unless you need no.

The next question comes from the line of did it came from you piece Dotcom. Please ask your question.

Yes, good evening.

While we're not matters right below them, so who not be paid a major customer.

This sounds like management and confident.

Lifting the prior management conference calls.

I've been a shareholder of this company for some time. This is just another long winded bullshit meaningless presentation.

The company appears.

To be systematically gutted I would just.

Okay.

Once again each of these to ask questions. Please press star one and make for todays announce.

Yes.

This is the end of the question answer session.

Okay. Thank you operator.

We are optimistic about our future.

We are confident of our technology coal direction, and our leading each product and service offerings.

We look forward to updating you.

Our business progress being a few months.

Thank you.

That concludes today's conference call. Thank you for your participation you may now disconnect.