PCTI PCTEL Inc

PCTEL, Inc. (NASDAQ: PCTI), a leader in Performance Critical TELecom solutions, announced its results for the third quarter and the three quarters ended September 30, 2017.

Highlights From Continuing Operations

• Revenue of $23.7 million in the third quarter and $68.1 million year to date, an 13% increase in the quarter and a 11% increase year to date compared to last year. Connected Solutions revenue was up 5% in the quarter and 9% year to date. RF Solutions was up 50% in the quarter and up 16% year to date.
• Gross profit margin of 42.9% in the third quarter and 41.9% year to date, up 340 basis points in the quarter and up 170 basis points year to date compared to last year.
• Net income per diluted share of $0.04 in the third quarter and $0.04 year to date, compared to net income per diluted share of $0.01 per share in the quarter and a loss of $0.51 year to date last 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 per diluted share of $0.09 in the third quarter and $0.19 year to date, up $0.04 in the quarter and $0.06 year to date compared to last year.
  • Adjusted EBITDA margin as a percent of revenue of 11% in the third quarter and 9% year to date, up 270 basis points in the quarter and 110 basis points year to date compared to last year.
• $36.5 million of cash and short-term investments and no debt at September 30, 2017. The Company generated free cash flow (cash flow from operations less capital spending) from continuing operations of approximately $2.1 million in the quarter and $5.0 million year to date.

“We are pleased to see revenue growth in both segments. Fleet and utilities markets continue to lead the growth in antennas and we closed several large scanning receiver deals through our OEM partners in the quarter.” said David Neumann, PCTEL’s CEO. “PCTEL is well positioned to take advantage of the long-term growth opportunities in Industrial IoT, small cells and 5G, which require both performance critical antenna solutions and RF test equipment.”

CONFERENCE CALL / WEBCAST

PCTEL’s management team will discuss the Company’s results today at 4:30 p.m. ET. The call can be accessed by dialing (888) 782-2072 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 47850702. The call will also be webcast at http://investor.pctel.com/news-events/webcasts-presentations.

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: 47850702.

About PCTEL

PCTEL, Inc. provides Performance Critical TELecom technology solutions. We are a leading global supplier of antennas and wireless network testing solutions. Our precision 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). We offer in-house design, testing, radio integration, and manufacturing capabilities for our antenna customers. PCTEL’s test and measurement tools improve the performance of wireless networks globally, with a focus on LTE, public safety, and emerging 5G technologies. Network operators, neutral hosts, and equipment manufacturers rely on our scanning receivers and testing solutions to analyze, design, and optimize their networks.

For more information, please visit our website at http://www.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, growth of our Connected Solutions and RF Solutions businesses, anticipated demand for certain products (including antennas for small cell, enterprise WiFi, IoT and FirstNet applications), the impact of digital automation and the anticipated growth of public and private wireless systems 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 impact of data densification and IoT on capacity and coverage demand, impact of 5G, 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)         (unaudited) September 30, December 31, 2017 2016 ASSETS   Cash and cash equivalents $ 6,527 $ 14,855 Short-term investment securities 29,979 18,456 Accounts receivable, net of allowance for doubtful accounts of $302 and $273 at September 30, 2017 and December 31, 2016, respectively 18,530 19,101 Inventories, net 12,828 14,442 Prepaid expenses and other assets 966 1,498 Current assets held for sale   0     50   Total current assets 68,830 68,402 Property and equipment, net 12,227 11,833 Goodwill 3,332 3,332 Intangible assets, net 2,403 3,275 Deferred tax assets, net 5,344 4,512 Other noncurrent assets 69 36 Non-current assets held for sale   0     776   TOTAL ASSETS $ 92,205   $ 92,166     LIABILITIES AND STOCKHOLDERS’ EQUITY   Accounts payable $ 5,185 $ 6,073 Accrued liabilities   6,734     7,177   Total current liabilities 11,919 13,250   Other long-term liabilities 430 391     Total liabilities   12,349     13,641     Stockholders’ equity: Common stock, $0.001 par value, 100,000,000 shares authorized, 17,762,694 and 17,335,122 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 18 17 Additional paid-in capital 134,441 134,480 Accumulated deficit (54,508 ) (55,590 ) Accumulated other comprehensive loss   (95 )   (382 ) Total stockholders’ equity   79,856     78,525   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 92,205   $ 92,166     PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)               Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016   REVENUES $ 23,665 $ 20,892 $ 68,136 $ 61,383 COST OF REVENUES   13,515   12,637     39,570     36,735   GROSS PROFIT   10,150   8,255     28,566     24,648   OPERATING EXPENSES: Research and development 2,757 2,451 8,141 7,581 Sales and marketing 3,230 3,116 9,394 9,070 General and administrative 3,146 2,847 10,081 9,031 Amortization of intangible assets 124 124 372 408 Restructuring expenses   0   17     0     233   Total operating expenses   9,257   8,555     27,988     26,323   OPERATING INCOME (LOSS) 893 (300 ) 578 (1,675 ) Other income, net   32   35     74     49   INCOME (LOSS) BEFORE INCOME TAXES 925 (265 ) 652 (1,626 ) (Benefit) expense for income taxes   206   (354 )   (68 )   6,603   NET INCOME (LOSS) FROM CONTINUING OPERATIONS 719 89 720 (8,229 ) NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT (EXPENSE)   236   86     (148 )   (4,125 ) NET INCOME (LOSS) $ 955 $ 175   $ 572   $ (12,354 )   Net Income (Loss) per Share From Continuing Operations: Basic $ 0.04 $ 0.01 $ 0.04 $ (0.51 ) Diluted $ 0.04 $ 0.01 $ 0.04 $ (0.51 )   Net Income (Loss) per Share From Discontinued Operations: Basic $ 0.01 $ 0.01 $ (0.01 ) $ (0.26 ) Diluted $ 0.01 $ 0.01 $ (0.01 ) $ (0.26 )   Net Income (Loss) per Share: Basic $ 0.06 $ 0.01 $ 0.03 $ (0.77 ) Diluted $ 0.06 $ 0.01 $ 0.03 $ (0.77 )   Weighted Average Shares: Basic 16,757 16,106 16,526 16,136 Diluted 17,065 16,245 16,830 16,136   Cash dividend per share $ 0.055 $ 0.05 $ 0.155 $ 0.15   PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)     Nine Months Ended September 30,

 

2017     2016   Operating Activities: Net income (loss) from continuing operations $ 720 $ (8,229 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 1,913 1,994 Intangible asset amortization 872 908 Stock-based compensation 2,458 3,069 Loss on disposal/sale of property and equipment 18 4 Restructuring costs (88 ) 112 Deferred tax provision (282 ) 6,332 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 710 2,946 Inventories 1,809 2,793 Prepaid expenses and other assets 509 306 Accounts payable (1,078 ) (1,360 ) Income taxes payable (154 ) (153 ) Other accrued liabilities (426 ) (857 ) Deferred revenue   95     12   Net cash provided by operating activities   7,076     7,877     Investing Activities: Capital expenditures (2,097 ) (1,550 ) Proceeds from disposal of property and equipment 1 1 Purchases of investments (37,579 ) (47,552 ) Redemptions/maturities of short-term investments   26,056     54,181   Net cash (used in) provided by investing activities   (13,619 )   5,080     Financing Activities: Proceeds from issuance of common stock 1,375 649 Payments for repurchase of common stock 0 (4,095 ) Payment of withholding tax on stock-based compensation (1,190 ) (365 ) Principle payments on capital leases (64 ) (34 ) Cash dividends   (2,730 )   (2,589 ) Net cash used in financing activities   (2,609 )   (6,434 )   Cash flows from discontinued operations: Net cash used in operating activities (697 ) (321 ) Net cash provided by (used in) investing activities 1,434 (149 )   Net (decrease) increase in cash and cash equivalents (8,415 ) 6,053 Effect of exchange rate changes on cash 87 (3 ) Cash and cash equivalents, beginning of year   14,855     7,055   Cash and Cash Equivalents, End of Period $ 6,527   $ 13,105     PCTEL, INC. P&L INFORMATION BY SEGMENT - Continuing Operations (unaudited) (in thousands)                                   Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 Connected Connected Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total   REVENUES $17,988 $5,739 ($62) $23,665 $52,125 $16,157 ($146) $68,136                 GROSS PROFIT 6,148 4,006 (4) 10,150 17,283 11,275 8 28,566                 OPERATING (LOSS) INCOME $2,684 $883 ($2,674) $893 $6,775 $2,319 ($8,516) $578     Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016 Connected Connected Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total   REVENUES $17,136 $3,814 ($58) $20,892 $47,616 $13,931 ($164) $61,383                 GROSS PROFIT 5,771 2,497 (13) 8,255 15,035 9,620 (7) 24,648                 OPERATING (LOSS) INCOME $2,530 ($467) ($2,363) ($300) $5,625 $344 ($7,644) ($1,675)  

Reconciliation of GAAP to non-GAAP Results - Continuing Operations (unaudited)

(in thousands except per share information)            

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

 

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

    Operating Income (Loss) $893 ($300 ) $578 ($1,675 )   (a) Add: Amortization of intangible assets -Cost of revenues 167 167 500 501 -Operating expenses 124 124 372 408 Restructuring 0 17 0 233 TelWorx investigation: -General & Administrative 0 0 0 4 Stock Compensation: -Cost of revenues 68 78 200 219 -Engineering 128 183 394 525 -Sales & Marketing 116 176 362 477 -General & Administrative 349   541   1,501   1,847   952   1,286   3,329   4,214   Non-GAAP Operating Income $1,845   $986   $3,907   $2,539   % of revenue 7.8 % 4.7 % 5.7 % 4.1 %  

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

 

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

  Net Income (Loss) $719 $89 $720 ($8,229 )   Adjustments: (a) Non-GAAP adjustment to operating income (loss) 952 1,286 3,329 4,214 (b) Other income related to SEC investigation of TelWorx 0 0 0 (4 ) (b) Income Taxes (132 ) (538 ) (785 ) 6,138   820   748   2,544   10,348   Non-GAAP Net Income $1,539   $837   $3,264   $2,119     Non-GAAP Earning per Share: Basic $0.09 $0.05 $0.20 $0.13 Diluted $0.09 $0.05 $0.19 $0.13   Weighed Average Shares: Basic 16,757 16,106 16,526 16,136 Diluted 17,065 16,245 16,830 16,276

This schedule reconciles the Company's GAAP operating income (loss) and GAAP net income (loss) to its non-GAAP operating income and non-GAAP net 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, and non-cash income tax expense.

                               

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

(in thousands)     Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017

Connected

RF Connected

RF

Solutions

Solutions Corporate Total Solutions

Solutions

Corporate Total   Operating Income (Loss) $2,684 $883 ($2,674 ) $893 $6,775 $2,319 ($8,516 ) $578 Add: Amortization of intangible assets: -Cost of revenues 0 167 0 167 0 500 0 500 -Operating expenses 39 85 0 124 117 255 0 372 Stock Compensation: -Cost of revenues 40 28 0 68

121

79 0 200 -Engineering 63 65 0 128 180 214 0 394 -Sales & Marketing 77 39 0 116 242 120 0 362 -General & Administrative 46 17   286   349   134 49 1,318   1,501   265 401   286   952   794 1,217 1,318   3,329   Non-GAAP Operating (Loss) Income $2,949 $1,284   ($2,388 ) $1,845   $7,569 $3,536 ($7,198 ) $3,907       Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016 Connected

RF

Connected

RF

Solutions

Solutions

Corporate Total Solutions

Solutions

Corporate Total   Operating (Loss) Income $2,530 ($467 ) ($2,363 ) ($300 ) $5,625 $344 ($7,644 ) ($1,675 ) Add: Amortization of intangible assets: -Cost of revenues 0 167 0 167 0 501 0 501 -Operating expenses 39 85 0 124 153 255 0 408 Restructuring expenses 0 17 0 17 44 116 73 233 TelWorx investigation: -General & Administrative 0 0 0 0 0 0 4 4 Stock Compensation: -Cost of Goods Sold 51 27 0 78 135 84 0 219 -Engineering 52 131 0 183 124 401 0 525 -Sales & Marketing 138 38 0 176 340 137 0 477 -General & Administrative 66 92   383   541   158 258 1,431   1,847   346 557   383   1,286   954 1,752 1,508   4,214   Non-GAAP Operating (Loss) Income $2,876 $90   ($1,980 ) $986   $6,579 $2,096 ($6,136 ) $2,539  

This schedule reconciles the Company's GAAP operating income (loss) by segment to its non-GAAP operating income (loss). 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 income (loss) to Adjusted EBITDA - Continuing Operations (a)

(unaudited, in thousands)              

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

  Operating Income (Loss) 893 ($300 ) $578 ($1,675 )   (a) Add: Depreciation and amortization 652 674 1,914 1,994 Intangible amortization 291 291 872 909 Stock compensation expenses 661 978 2,457 3,068 Restructuring expense 0 17 0 233 TelWorx investigation- operating expenses 0   0   0   4   Adjusted EBITDA $2,497   $1,660   $5,821   $4,533   % of revenue 10.6 % 7.9 % 8.5 % 7.4 %

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171108006357/en/

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