PCTI PCTEL Inc

$96.7 Million for the Year

PCTEL, Inc. (Nasdaq:PCTI), a leader in Performance Critical TELecom solutions, announced its 2016 fourth quarter and full year results.

Highlights

• Revenue of $26.7 million in the quarter, a 2% increase over the same period last year. $96.7 million in revenue for the year, a decrease of 9% as compared to 2015.
• Gross profit margin of 37.4% in the quarter compared to 35.5% for the same period last year. Gross profit margin of 36.4% for the year, compared to 34.9% in 2015.
• Net loss of $0.33 per share in the quarter, compared to a net loss of $0.05 per share in the same period last year. Net loss of $1.09 per share for the year, compared to a net loss of $0.09 last year. 2016 results include non-cash expenses for intangible asset impairments and the establishment of a deferred tax asset valuation allowance which cost $0.35 per share in the quarter and $1.00 per share for the year.
• Non-GAAP net income and adjusted EBITDA are measures the company uses to reflect the results of its core earnings. A reconciliation of those Non-GAAP measures to our financial statements is provided later in the press release.

• Non-GAAP net income of $0.08 per share in the quarter compared to $0.04 for the same period last year, and $0.20 per share for the year compared to $0.11 in 2015. The non-cash expenses for intangible asset impairments and the establishment of a deferred tax asset valuation allowance are responsible for most of difference between GAAP & non-GAAP results.
• Adjusted EBITDA margin as a percent of revenue in the quarter of 9% compared to 6% for the same period last year, and 7% for the year compared to 5% in 2015.

• $33.3 million of cash and short-term investments at December 31, 2016, an increase of approximately $2.1 million from the preceding quarter. The Company generated free cash flow of approximately $3.0 million for the quarter (11% of revenue) and $8.5 million for the year (9% of revenue).

“Strong small cell antenna demand coupled with scanning receiver sales contributed to improved revenue and gross profit margin for the quarter,” said David Neumann, PCTEL’s CEO. “The densification of wireless networks and expanding applications across IoT will continue to provide opportunities for PCTEL antennas and test and measurement solutions.”

CONFERENCE CALL / WEBCAST

PCTEL’s management team will discuss the Company’s results today at 8:15 a.m. ET. The call can be accessed by dialing (888) 782-2072 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 47845844. The call will also be webcast at http://investor.pctel.com/events.cfm.

REPLAY: A replay will be available for two weeks after the call on either the website listed above or by calling (855) 859-2056 (U.S./Canada), or International (404) 537-3406, conference ID: 47845844.

About PCTEL

PCTEL delivers Performance Critical TELecom technology solutions to the wireless industry. We are the leading global supplier of antennas and wireless network testing solutions. PCTEL Connected Solutions designs and manufactures precision antennas. PCTEL antennas are deployed in small cells, enterprise Wi-Fi access points, fleet management and transit systems, and in equipment and devices for the Industrial Internet of Things (IIoT). PCTEL RF Solutions provides test tools and engineering services that improve the performance of wireless networks globally. Mobile operators, neutral hosts, and equipment manufacturers rely on PCTEL to analyze, design, and optimize next generation wireless networks.

For more information, please visit the following websites.

PCTEL Corporate: http://www.pctel.com/

PCTEL Connected Solutions: http://www.antenna.com/

PCTEL RF Solutions: http://rfsolutions.pctel.com/

PCTEL Safe Harbor Statement

This press release and our related comments in our earnings conference call contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Specifically, the statements regarding our future financial performance, new products and features, growth of our Connected Solutions and RF Solutions businesses, and anticipated demand for our small cell, broadband, and test and measurement solutions are forward-looking statements within the meaning of the safe harbor. These statements are based on management’s current expectations and actual results may differ materially from those projected as a result of certain risks and uncertainties, including the actual growth in the APAC region, impact of IoT on capacity and coverage demand, customer demand for these types of products and services generally, growth and continuity in PCTEL’s vertical markets, and PCTEL’s ability to grow its wireless products business and create, protect and implement new technologies and solutions. These and other risks and uncertainties are detailed in PCTEL's Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and PCTEL disclaims any obligation to update or revise the information contained in any forward-looking statement, whether as a result of new information, future events or otherwise.

PCTEL, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)     December 31, December 31, 2016 2015 ASSETS   Cash and cash equivalents $ 14,855 $ 7,055 Short-term investment securities 18,456 24,728 Accounts receivable, net of allowance for doubtful accounts of $273 and $314 at

December 31, 2016 and December 31, 2015, respectively

19,101 21,001 Inventories, net 14,442 17,596 Prepaid expenses and other assets   1,548     1,586   Total current assets 68,402 71,966   Property and equipment, net 12,609 13,839 Goodwill 3,332 3,332 Intangible assets, net 3,275 11,378 Deferred tax assets, net 4,558 13,155 Other noncurrent assets   36     40   TOTAL ASSETS $ 92,212   $ 113,710     LIABILITIES AND STOCKHOLDERS’ EQUITY   Accounts payable $ 6,073 $ 6,735 Accrued liabilities   7,177     6,190   Total current liabilities 13,250 12,925 Other long-term liabilities   391     388   Total liabilities   13,641     13,313     Stockholders’ equity: Common stock, $0.001 par value, 100,000,000 shares authorized, 17,335,122 and

17,654,236 shares issued and outstanding at December 31, 2016 and December 31, 2015,

respectively

17 18 Additional paid-in capital 134,480 135,714 Accumulated deficit (55,544 ) (35,320 ) Accumulated other comprehensive loss   (382 )   (15 ) Total stockholders’ equity   78,571     100,397   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 92,212   $ 113,710   PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)           Three Months Ended Year Ended December 31, December 31, 2016 2015 2016 2015   REVENUES $ 26,709 $ 26,138 $ 96,713 $ 106,615 COST OF REVENUES   16,728     16,859     61,507     69,354   GROSS PROFIT   9,981     9,279     35,206     37,261   OPERATING EXPENSES: Research and development 2,577 2,699 10,158 11,205 Sales and marketing 3,885 3,639 13,810 14,196 General and administrative 2,893 2,887 12,051 12,399 Amortization of intangible assets 222 889 1,651 3,426 Impairment of goodwill and other intangible assets 1,061 161 5,785 161 Restructuring expenses   10     778     664     1,630   Total operating expenses   10,648     11,053     44,119     43,017   OPERATING LOSS (667 ) (1,774 ) (8,913 ) (5,756 ) Other income, net   63     504     112     3,287   LOSS BEFORE INCOME TAXES (604 ) (1,270 ) (8,801 ) (2,469 ) Expense (benefit) for income taxes   4,677     (450 )   8,834     (901 ) NET LOSS $ (5,281 ) $ (820 ) $ (17,635 ) $ (1,568 )   Net Loss per Share: Basic $ (0.33 ) $ (0.05 ) $ (1.09 ) $ (0.09 ) Diluted $ (0.33 ) $ (0.05 ) $ (1.09 ) $ (0.09 )   Weighted Average Shares: Basic 16,194 16,820 16,151 17,737 Diluted 16,194 16,820 16,151 17,737   Cash dividend per share $ 0.05 $ 0.05 $ 0.20 $ 0.20 PCTEL, INC. P&L INFORMATION BY SEGMENT (unaudited) (in thousands)                 Three Months Ended December 31, 2016 Year Ended December 31, 2016 Connected Connected Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total   REVENUES $ 18,147 $ 8,574 ($12 ) $ 26,709 $ 65,763 $ 31,126 ($176 ) $ 96,713                 GROSS PROFIT 5,671 4,288 22 9,981 20,706 14,485 15 35,206                 OPERATING (LOSS) INCOME $ 2,177   ($509 ) ($2,335 )   ($667 ) $ 7,804   ($6,738 ) ($9,979 )   ($8,913 )     Three Months Ended December 31, 2015 Year Ended December 31, 2015 Connected Connected Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate

Total

  REVENUES $ 16,675 $ 9,506 ($43 ) $ 26,138 $ 69,579 $ 37,255 ($219 ) $ 106,615                 GROSS PROFIT 4,877 4,389 13 9,279 20,426 16,803 32 37,261                 OPERATING (LOSS) INCOME $ 675   ($8 ) ($2,441 )   ($1,774 ) $ 5,040   ($298 ) ($10,498 )   ($5,756 )

Reconciliation of GAAP to non-GAAP Results (unaudited)

(in thousands except per share information)          

Reconciliation of GAAP operating loss to non-GAAP operating income (a)

  Three Months Ended December 31, Year Ended December 31,

2016

2015

2016

2015

  Operating Loss ($667 ) ($1,774 ) ($8,913 ) ($5,756 )   (a) Add: Amortization of intangible assets -Cost of revenues 167 167 666 595 -Operating expenses 222 889 1,651 3,426 Impairment of goodwill and other intangible assets 1,061 161 5,785 161 Restructuring: -Cost of revenues 0 42 0 288 -Operating expenses 10 778 664 1,630 TelWorx investigation: -General & Administrative 0 7 5 107 Stock Compensation: -Cost of revenues 86 125 411 369 -Engineering 125 175 650 419 -Sales & Marketing 142 (132 ) 627 238 -General & Administrative   446     304     2,297     838   2,259 2,516 12,756 8,071         Non-GAAP Operating Income $ 1,592   $ 742   $ 3,843   $ 2,315   % of revenue 6.0 % 2.8 % 4.0 % 2.2 %  

Reconciliation of GAAP net loss to non-GAAP net (loss) income (b)

  Three Months Ended December 31, Year Ended December 31,

2016

2015

2016

2015

  Net Loss ($5,281 ) ($820 ) ($17,635 ) ($1,568 )   Adjustments: (a) Non-GAAP adjustment to operating loss 2,259 2,516 12,756 8,071 (b) Other income related to SEC investigation of TelWorx 0 (1 ) (5 ) (102 ) (b) Legal Settlement - Amendment to Nexgen APA 0 (500 ) 0 (3,160 ) (b) Income Taxes   4,379     (584 )   8,123     (1,322 )   6,638     1,431     20,874     3,487   Non-GAAP Net Income $ 1,357   $ 611   $ 3,239   $ 1,919     Non-GAAP Earning per Share: Basic $ 0.08 $ 0.04 $ 0.20 $ 0.11 Diluted $ 0.08 $ 0.04 $ 0.20 $ 0.11   Weighed Average Shares: Basic 16,194 16,820 16,151 17,737 Diluted 16,439 16,969 16,325 18,257       This schedule reconciles the Company's GAAP operating loss and GAAP net loss to its non-GAAP operating (loss) income and non-GAAP net (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company's GAAP results.   (a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.   (b) These adjustments include the items described in footnote (a) as well as other income for insurance claims related to the SEC investigation of TelWorx, legal settlements, and non-cash income tax expense.                  

Reconciliation of GAAP to non-GAAP SEGMENT INFORMATION (unaudited) (a)

(in thousands)   Three Months Ended December 31, 2016 Year Ended December 31, 2016 Connected RF Connected RF Solutions Solutions Corporate Total Solutions Solutions Corporate Total   Operating (Loss) Income $ 2,177 ($509 ) ($2,335 ) ($667 ) $ 7,804 ($6,738 ) ($9,979 ) ($8,913 )   Add: Amortization of intangible assets: -Cost of revenues 0 167 0 167 0 666 0 666 -Operating expenses 39 183 0 222 191 1,460 0 1,651 Impairment of intangible assets 0 1,061 0 1,061 0 5,785 0 5,785 Restructuring expenses 0 10 0 10 44 547 73 664 TelWorx investigation: -General & Administrative 0 0 0 0 0 0 5 5 Stock Compensation: -Cost of revenues 43 43 0 86 178 233 0 411 -Engineering 48 77 0 125 172 478 0 650 -Sales & Marketing 98 44 0 142 435 192 0 627 -General & Administrative   51     77   318     446     209     339   1,749     2,297   279 1,662 318 2,259 1,229 9,700 1,827 12,756                 Non-GAAP Operating (Loss) Income $ 2,456   $ 1,153   ($2,017 ) $ 1,592   $ 9,033   $ 2,962   ($8,152 ) $ 3,843       Three Months Ended December 31, 2015 Year Ended December 31, 2015 Connected RF Connected RF Solutions Solutions Corporate Total Solutions Solutions Corporate Total   Operating (Loss) Income $ 675 ($8 ) ($2,441 ) ($1,774 ) $ 5,040 ($298 ) ($10,498 ) ($5,756 )   Add: Amortization of intangible assets: -Cost of revenues 0 167 0 167 39 556 0 595 -Operating expenses 195 694 0 889 811 2,615 0 3,426 Impairment of goodwill 161 161 161 161 Restructuring expenses -Cost of revenues 42 0 0 42 288 0 0 288 -Restructuring charges 755 23 0 778 1,293 337 0 1,630 TelWorx investigation: -General & Administrative 0 0 7 7 0 0 107 107 Stock Compensation: -Cost of Goods Sold 28 97 0 125 82 287 0 369 -Engineering 49 126 0 175 104 315 0 419 -Sales & Marketing 88 (220 ) 0 (132 ) 261 (23 ) 0 238 -General & Administrative   (18 )   70   252     304     (12 )   113   737     838   1,139 1,118 259 2,516 2,866 4,361 844 8,071                 Non-GAAP Operating (Loss) Income $ 1,814   $ 1,110   ($2,182 ) $ 742   $ 7,906   $ 4,063   ($9,654 ) $ 2,315     This schedule reconciles the Company's GAAP operating income (loss) by segment to its non-GAAP operating (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company's GAAP results.   (a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

PCTEL, Inc.

Reconciliation of GAAP operating loss to Adjusted EBITDA (a)

(in thousands)           Three Months Ended December 31, Year Ended December 31,

2016

2015

2016

2015

  Operating Loss ($667 ) ($1,774 ) ($8,913 ) ($5,756 )   (a) Add: Depreciation and amortization 1,134 1,844 5,467 7,106 Restructuring - cost of revenues 0 42 0 288 Restructuring - operating expenses 10 778 664 1,630 Stock compensation expenses 799 472 3,986 1,864 Impairment of goodwill and other intangible assets 1,061 161 5,785 161 TelWorx investigation- operating expenses   0     7     5     107   Adjusted EBITDA $ 2,337   $ 1,530   $ 6,994   $ 5,400   % of revenue 8.7 % 5.9 % 7.2 % 5.1 %       This schedule reconciles the Company's GAAP operating loss to Adjusted EBITDA. The Company believes that this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company uses Adjusted EBITDA when evaluating its financial results as well as for internal planning and forecasting purposes. Adjusted EBITDA should not be viewed as a substitute for the Company's GAAP results.   (a) Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization. These adjustments reflect depreciation, amortization of intangible assets, stock compensation expenses, restructuring expenses, and general and administrative expenses associated with the SEC investigation of TelWorx.

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John SchoenCFOPCTEL, Inc.(630) 372-6800orMichael RosenbergDirector of MarketingPCTEL, Inc.(301) 444-2046public.relations@pctel.com