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No. of Recommendations: 1
Update 17 Sep. 06
On Sep 16: 8.63 USD down 0.22
Continue to hold

These are my update notes for my position in UTSI, though after revisting my investment thesis and seeing the turnaround continue I do think UTSI are worth taking a look at. At the bottom I link an excellent post of Sigma8squareds, which is well worth reading for anyone interested in the company.

• UTSI made a new 52 week high this week at 9.25 and has powered past the BlueHawk price target.
• Time to check the last two quarters. They blew away analysts estimates, with -.09 and -.18 instead of the estimated -.68 and -.47.
• This is well ahead of where I was projecting and bodes well for next year, fingers crossed.
• Cash flow dropped in Q2, but cash flow is often lumpy. However, one of the main reasons was an increase in inventory which could be a red flag if that trend continues. I hope it was a one quarter event in anticipation of increased sales. In the conference call the CFO said primarily a reflection of inventory build up in PCD in anticipation of higher revenues in the third quarter.
• Revenue continues to decline; however, management appear to have almost resized the company to lower operating expenses to an appropriate level. From this point if revenues start to increase then good net income should follow. CFO did state that they believe revenue has bottomed and future quarters should be higher.
Earnings History Sep-05 Dec-05 Mar-06 Jun-06
EPS Est -0.70 -0.54 -0.68 -0.47
EPS Actual -3.40 -0.17 -0.09 -0.18
Difference -2.70 0.37 0.59 0.29
Surprise % -385.7% 68.5% 86.8% 61.7%

Earnings Est Current Qtr Next Qtr Current Year Next Year
Sep-06 Dec-06 Dec-06 Dec-07

Avg. Estimate -0.29 -0.19 -0.73 -0.51
No. of Analysts 11 11 12 12
Low Estimate -0.51 -0.41 -1.18 -1.22
High Estimate -0.17 -0.10 -0.59 -0.12
Year Ago EPS -3.40 -0.17 -3.93 -0.73

Revenue Est Current Qtr Next Qtr Current Year Next Year
Sep-06 Dec-06 Dec-06 Dec-07

Avg. Estimate 594.82M 659.61M 2.43B 2.55B
Low Estimate 501.00M 448.00M 2.09B 1.59B
High Estimate 625.00M 746.00M 2.76B 2.85B
Year Ago Sales 635.31M N/A N/A 2.43B

Conference Calls
Q2 2006

• Q2 was the fifth consecutive quarter in which we generated positive cash flow from operations
• encouraged by continuing traction we demonstrate in key target markets such as IPTV, next generation broadband and wireless networks and handsets in the multiple geographies during the quarter
• pleased with our balance sheet performance as we showed continued improvement to such items as cash, accounts receivable and short-term debt.

Forward Looking Statements
• From a quarterly perspective we believe that Q3 and Q4 will show revenue growth, and we continue to work towards returning to profitability, which we expect to happen by the first half of 2007.
• For the third quarter of 2006, revenue should be approximately $590 to $625 million, which is consistent with current Wall Street estimates.
• GAAP EPS guidance for Q3 is a loss of approximately $0.23 to $0.33 per share
• There is a possibility of a one time event that would favorably impact the P& L and cash in either the third or the fourth quarter of this year. We are targeting cash flows from operations, excluding one-time events, to be break even to slightly negative in the third quarter
• We seem to be at the bottom of our revenue curve, and have reasonable expectations for sustained revenue growth from here

Q1 2006

Previous Post of Note excellent post by Sigma8squared. Great background and discussion.

Spreadsheet Nothing much in this at the moment, just the financials and free cash flow. Though I will update it in the future.

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