Hello, ladies and gentlemen, thank you for standing by for UTStarcom's Third Quarter 2019 Earnings Conference Call. Please note that, we are recording today's conference call. I will now hand over the call to Mr. Gary Dvorchak, Managing Director of The Blueshirt Group Asia. Please go ahead, Mr. Dvorchak.

Thank you, Grace. Hello, everyone, and welcome to UTStarcom's Third Quarter 2019 Earnings Conference Call. Earlier today, we distributed our earnings press release. You can find a copy at our website at www.utstar.com. In addition, we've posted a presentation on our website, which you can download and use to follow along with today's call. On today's call, we have Mr. Tim Ti, Chief Executive Officer; and Mr. Eric Lam, Vice President of Finance. Before we get started, let me refer you to the company's safe harbor statement on Page 2 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 and the current reports on Form 6-K 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. 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 this call are in U.S. dollars. I'll now hand the call over to UtStarcom's CEO, Mr. Tim Ti. Tim?

Thank you, Gary, and thank you, everyone, for joining our call today. We appreciate your interest in UTStarcom. As Gary mentioned, you can download the presentation from the Investors section of our website. Now let me quickly recap our Q3 results, as shown on Page 3. Third quarter results were mixed. Revenue was in line with our expectation. Gross margin was excellent, expense control was great, but we had an AR reserve charge that resulted in bottom line loss. I do want to point out that the reserve, which is related to our major customer in India, was the prudent accounting measure to apply our accounting policies consistently and conservatively. The customer, BSNL, is 100% state-owned enterprise is having financial difficulty. The India government is implementing a revival plan to restore BSNL to financial health. In light of that, we are confident we will eventually collect, although the timing of the payment is uncertain. As such, we prefer to be prudent and account conservatively for this situation, in accordance with our AR reserve policy. Eric will provide more details in his remarks. Looking at operations, we had some encouraging developments in the quarter. First, I want to highlight the product line we consider the future of UTStarcom, our SkyFlux product line. This product bundles our key technologies that address the needs of 5G. They are Segment Routing, FlexE Ethernet, SDN Controllers and the Synchronization. SDN stands for Software Defined Network, an important technology to improve the flexibility and efficiency of network operations. 5G has been brought out around the globe, but the most aggressive network upgrades are here in China. We are marketing our SkyFlux product through a partner that's competing for massive 5G upgrade here in China. The carrier is doing extensive testing on the equipment they intend to…

Thank you, Tim, and thank you, everyone, for joining the call today. As I review our financial performance, please keep in mind that all figures refer to the third quarter of 2019, unless I say otherwise. Also, all comparisons are with the same period last year, unless I specify differently. Turning on Page 11. Revenue was slightly up to $13 million, down 75%, within our guidance range. The comparison is skewed due to a sizable project for BSNL in India last year. In contrast, even though our revenue was down substantially, our gross profit decline was modest, mainly due to favorable product mix and our gross margin was 55%, as shown on Page 12. This was far above last year's 19% gross margin. The product mix included some high margin last-time buy product sales to Taiwan as we exit that market. Our exit is driven by political reasons, not operational. Our Taiwan business was steady and profitable. However, as more Chinese entities invested in our company, our proportion of Chinese shareholders had exceeded a limit established by the Taiwanese government. Consequently, we are no longer permitted to sell telecom equipment there. Now before I go any further, I would like to take the opportunity to elaborate on the status of our long-time and major customer in India, namely BSNL. The BSNL situation not only impacted our expenses due to higher AR reserve, it also disrupted our normal revenue stream. As Tim mentioned, BSNL is 100% state-owned enterprise, characterized as a central public sector enterprise, or CPSE. BSNL has been experiencing financial difficulties, and its future is a subject of debate within the India cabinet ministers. Now prior to Prime Minister Modi's reelection, all new capital projects at BSNL were suspended until the election results were known; this impacted our bookings…

[Operator Instructions] The first question comes from the line of Tim Savageaux from Northland Capital.

I have a number of questions. I guess, with regard to the guidance, let's just maybe take it region by region. I can't imagine, well, what are your expectations for the potential of any new business in India? I assume your guidance for Q4 remains dominated by Japan. Eric, you made a comment on mix. Maybe that refers to the Taiwan last-time buy not reoccurring, but would that be accurate with regard to most of your near-term revenue coming from Japan? And beyond that, I guess, if you could be more specific with regard to the risks to that revenue going into next year? Then I'll follow-up on India.

Tim, for Q4, it looks -- it appears, at this point, the revenue is going to be a very balance from Japan and from India. So that's -- and you're right that we would not have the Taiwan last-time buy benefits in Q4.

Okay. Well, that's interesting then. Well, can you say with regard to India, so are you engaging in new projects with BSNL? Is this another Indian customer as you can work on receivables?

There really is a continuation of some of the existing projects with BSNL that we are finishing up. We are at the installation and commissioning phase. So as we complete those installations and commissioning those products, then we will recognize mostly the service revenue. So that's what we are counting on for Q4 from India.

Got it. And can you talk to the size of the overall receivable with BSNL? I know you're taking $3.6 million on a reserve, and they have -- are the subject of this multibillion-dollar revival plan. But can you give us the magnitude for the overall exposure?

Well, the receivable has been building up because of -- we -- as we complete the project, which we started last year. So the receivable are probably in the magnitude of over $50 million as of Q3. So now we -- as we mentioned, we were very -- of course, we were concerned about the nonpayment of BSNL because of their financial difficulties and the time it took for the government to decide to, I guess, revive this enterprise. So finally, they have made that decision, and that's very good news for us because as far as we know, there's no reason to believe that we won't get paid. So the question for us is really the timing of the payment. Things are not moving the quickest in India. So -- but then things are already in motion. So we do expect payment very soon. So again, the precise timing is a thing that's always been in question. So that's the reason why we decided to continue our reserve practice and policy and reserve a fair amount based on the aging of our receivables.

Okay, got it. Fair enough. And look, obviously, you've got to express some reservations about Japan over time. And -- well, you can tell me whether post resolution of this receivables issue, whether you expect kind of potential new projects with -- in India, but, Tim, you did describe kind of new product, the trial in China as the future of UTStarcom. And I wonder if you can speak to or give us some estimation of the timing of transitions from a trial to deployment for the 5G trials you're engaged in China.

Tim, right now we still have one major test we need to pass, okay? So once we pass the test, so the next year, the forecast is significant, okay? I currently cannot disclose the number, but that was -- the size of China. So that will be a major contributor for our revenue in 2020.

[Operator Instructions] The next question comes from the line of David King from [indiscernible].

Yes, good evening. Why would management allow themselves to not be paid by a major customer? This sounds like management incompetence. I've listened to 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 was just...

[Operator Instructions] This is the end of the question-and-answer session.

Okay. Thank you, operator. We are optimistic about our future. We are confident of our technological direction and our leading-edge product and the service offering. We look forward to updating you on our business progress in a few months. Thank you.

That will conclude today's conference call. Thank you for your participation. You may now disconnect.