Q2 2019 Earnings Call
Hi, gentlemen, thank you for standing by if you take stock homes second quarter 2019 earnings Conference call.
At this time, all participants are not listen.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you all need to press star one on that.
Please be advised that todays conference is being recorded.
I'll now turn over the call to Mr., Gary Dvorchak, managing director of the Blueshirt group.
Please go ahead mr. double check.
Thank you Christian Hello, everyone and welcome to UGI Stark on second quarter 2019 earnings Conference call.
We distributed our earnings press release earlier, you can find a copy at our website at Www Dot you can start dot Com. In addition, we have posted a presentation on the website, which you can download use to follow along with today's call Ive todays call. We have Mr., Tim Ti Chief Executive Officer, and Mr. heard Lamb, Vice President of Finance before we get started let me refer you to the Companys Safe Harbor statement on page two of the slides for 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, and the current reports on form 6K that are filed with the Securities and Exchange Commission.
All forward looking statements included in this call are based on information available to the company as of the date of this call.
That information May change so the company assumes no obligation to update any such forward looking statements.
Also please note that unless otherwise stated all figures mentioned the call are in us dollars.
I will now hand, the call over to you to Sarcom CEO Mr., Tim Ti chip.
Thank you Gary thank everyone for joining our call today.
We appreciate your interest and your stock.
That's good information.
You can download the presentation from <unk> on the Investor section of our website.
Oh, let me quickly recap our Q2 results show up in the Street.
The second quarter came in largely as expected.
Revenue of 17.9 million was within our guidance range.
Gross margin increased 10 percentage points from a year ago.
And we achieved 1.7 million in net income.
What's usually present, our second consecutive profitable quarter.
Eric would get into the details financials in his remarks Sean.
The first half also played out as expected.
We continue to fall more product development.
And extend our marketing efforts.
What you should pay off in recent growth in the years ahead.
No.
Then me walk you through key operating highlights.
First.
We are actively engaged in a large fiveg opportunity in China.
We are pleased with the accident initial reads out.
We are collaborating with a partner on lease.
We are leveraging our expertise in optical transport technology to the real estate over the all Fiveg quotas.
We achieved excellent that evaluation results with these major China Kim.
Why we cannot offer a lot of detail yet.
We anticipate receiving initial Fiveg, Florida orders.
In the fourth quarter 2019.
We view this cool, although they shouldn't the team game changing event.
With the significant potential revenue opportunities for us.
In the years to come.
Oh, jeez driving significant new investment by <unk> operators.
These are the Ventas, then, though not quite as greater than that won't capacity.
Badges that's from efficiency.
And the highest there that's rooted in the network architecture.
Well, it's a result of a dense most field deployment and heavy truck.
A fiveg baffled and it was nice to see the pool hungry as often you got me so perhaps.
On the coal network.
With <unk> expertise in optical depth.
We have that.
Ability to meet this isn't challenges.
The global transition to Fiveg wireless is racing ahead.
And it represents a tremendous opportunity for which we are well position.
This is my wishing is gaining momentum.
Leading marquees such as the U.S.
Korea and Japan.
In China.
One of the major carriers aggressively pursuing five geography.
[noise] Oh second operating highlight Watson the introduction of a new products at something.
2019.
So think war is one of the largest corporate events in Japan.
And then he focuses on the latest trends in 18th technology.
This is our eighth consecutive years.
Okay 18 insulting.
You bet, we introduced the scenery.
If species three for the oil industry for what.
The latest addition.
To the family open network civilization equipment.
Oh the show on page 10.
Well some of this is Ethan its features.
All designed to help ensure high end to end.
Im civilization.
Accuracy for inviting food I'm hesitant deploying with the thing he and the PDP.
Similar to all the offerings.
Our thing Dream family.
It's a new product Heaven. After then civilization conveniences.
Additionally.
Most new products some pool.
Power over Ethernet Alton.
For like 3.80 to 318, <unk> Yep, that's seen occasions.
Also let you know that should assets pools.
This mix then perfect choices for fishing Fourg fiveg.
Small cell deployment.
We can offer all in one solution to support multiple functions.
Including.
Seasonalization.
Eat up already and the PC OEM functions.
We also showcased Allah taught us.
Including Skype for us.
And next generation is our Vsix based routing platform.
We also demonstrated how fiveg ready timings solution thing ring X gene three zero P.P. clean master.
As well as the presenting.
If you then praful sole station and I O T products.
In addition.
We de lever a keynote speech about picky network evolution strategies for the fight she era.
We discussed the growing size and complexity on the trends full network.
Driven by the Fiveg migration and the other two occasions.
We show view, a major strategies to address the evolutionary challenges telecom networks.
Based on the emerging technologies.
In summary.
We were praised by our strong presence at least one major events.
We believe.
We were exceptionally well positioned to further develop innovative solutions to meet the challenges of the increased network traffic.
Our product portfolio enables carriers to manage the high capacity and the complex architectures that fiveg is driving.
By providing high scalability.
For Vileness, Andy Fisher.
Oh taught us fully aligned with our additional driving that won't Evans.
Young girls, new products, we introduced and sold and 2019.
Our engineering team is.
Working closely with our customers to other events, our technology and broaden.
Our product roadmap.
To meet their requirements.
Importantly, we continue to drive our growth through innovation.
That results from the Nipigon investment on <unk>.
We increased <unk> investment by recruiting and hiring the top 10.
The industry.
Well, it's all pipeline of opportunities for growth.
Literally men collagen that our strong engineering team is capable of developing the new products that will enable us to capture new business.
Assuming you highlight is gold box.
Which continues to live.
In Q1.
We released our first the Fiveg cold box small vending machines in China.
As we show on page 12.
This is a model of print occasion.
Utilizing fiveg mobile data networks and <unk>.
To create a compelling reason to retail experience for consumers.
The coal Edelman, often the goldbach small vending machine.
The margin.
It is a central processing union that integrates with our cloud platform and the usage image recognition.
Sensors into big data for streamline all domain and shopping experience.
Our long term strategy is to walk to the module for multiple occasions.
In small retail.
Oh cool boss product family is penetrating the I don't know.
<unk> retail monkey in China as a show.
17.
In Q2.
Yeah, the China mobile.
Hi, I'm joking jointly launched the gold box by Jean powered.
Small commercial refrigerator.
This demonstrates how fiveg.
Mobile data and AI.
Can be integrated to create a compelling retail experiences for consumers.
We are very excited to work with Lisa recognized industry leader to promote new gold Bucks a couple of occasions.
Yeah on the China market, we are actively pursuing gold box deals internationally.
We are seeing strong interest.
In the Americas and Asia.
In addition.
We are in the process of establishing support teams team.
Other key marquee.
In summary.
We are gaining traction and optimistic about the long term revenue potential.
[noise] to calm cool I am excited about the opportunity.
Hello.
In particular, the Fiveg will all is at an inflection point that can drive significant revenue.
Wonderful.
Small retail is a promising girls opportunity for UTI.
With that I will now turn the call over to the area for comments on our financial performance.
Thank you.
Thank you everyone for joining the call today.
As I review, our financial performance.
Please keep in mind that already exists.
To the second quarter of 2019.
Awesome.
All comparisons with the SEC.
Unless I specify different.
[noise] funding on page 15.
Nobody would.
He knew.
The people in the sense of within guidance.
Indeed.
The majority of the revenue.
As shown on page 16.
Gross profit was five and the gross margin was 36%.
This is well above the 26% gross margin.
I mean last year.
[noise] margin was higher due to the product.
Right.
Page 17 shows operating expenses.
Which were.
Hi, Evan.
This is flat versus last year and down 2% sequentially.
Well as you need expenses wind down 27% R&D was up.
40 fives.
<unk> increased R&D spending demonstrates our commitment.
No as Ginny spending.
Range in Austin.
Overhead functions.
We had an operating loss of 2 million as compared to last through the income.
On slide.
And last year.
Oh, the fluctuation in lumps of revenue stream.
Like revenue recognition based on project.
Yes.
Turning to page 18.
Net income for the quarter was $1.7 million or five cents per share compared to the small net loss of 87000.
Well essentially breakeven last year.
Net other income was $3.7 million compared to net other expense of 0.3 million a year ago.
In this quarter, we benefited from a large write off of an age accounts payable item as well as the tax reserve adjustment.
That's a statute of limitation there no.
The net other income was partially offset by foreign exchange loss as the Chinese yen depreciate against the U.S. dollar.
Page 19 summarizes our cash flow.
We ended the quarter with 55 million in cash and equivalents.
The decrease of 9 million from last quarter.
Net cash used in operations was $10 million.
Cash used in financing activities was 0.6 million representing a stock repurchases.
With that.
Let's turn to revenue guidance as shown on page 20.
Now before I discuss the numbers I like to porno several risk factors.
Kosovo.
There was uncertainty regarding a major customer in Japan.
Due to the transition to the next.
Just two quick.
We remain optimistic but cautious about a month of revenue we can expect from them to go big spring orders.
Second.
India is a growth market, but it is highly competitive and price sensitive.
Additionally.
A major customer in a number of telecom operators.
Experiencing financial difficulties.
And in the midst of streamlining the operation.
As a result.
Cash collections of delayed.
But the problem in the telecom in India is actively working this opportunity this infected by the situation.
We are monitoring monitoring their progress very closely.
Furthermore, the India will be.
<unk> volatile.
So all these factors contribute to a higher level of uncertainty.
The Lane collection.
Margin pressure and currency risk in this region.
Finally.
We are mindful of the uncertainties surrounding the emergent emerging new markets like Fiveg, which may take a long time to develop.
Now, having said that we see many growth opportunities in new technology trends new markets new product.
New applications.
We are excited and confident.
Above our long term prospects.
So what specific guidance, we expect third quarter 2019.
Revenue to be in the range of 13 to 17, they'll do it again.
Quarterly fluctuations primarily reflect.
The normal and even there's no business as we recognize revenue based on project documents.
We are confident you know fairly to capture new customers and grow over time.
However, we were just a few large customer and sizable projects of quality revenue patent was likely to be on mute.
With that team and I would like to take your questions.
Operator.
Please open the line for human nature.
Certainly ladies and gentlemen, we will now begin the question and answer session.
If you wish to ask questions today. Please press star one on your telephone and wait for it to be announced if you wish to cancel your question any time. Please press the pound all hashed Kay.
Oh.
Just a reminder, ladies and gentlemen, if you wish to ask a question today. Please press star one thank you.
There are no questions at this time I would now attend the conference back to today's presenters. Please continue.
Thank you operator.
We are optimistic about our future we are very confident.
Our the logical direction, and our leading age product and the service offerings.
We look forward to updating you on our business progress in a few months.
Thank you.
[noise]. Thank you ladies and gentlemen, this concludes today's conference call.
Thank you for participating you may now disconnect.