PCTI PCTEL Inc

PCTEL, Inc. (Nasdaq: PCTI) announced its results for the fourth quarter ended December 31, 2018.

Highlights from Continuing Operations

• Revenue of $21.2 million in the quarter and $83.0 million for the year, 9% lower in the quarter and 9% lower for the year compared to the prior year. Revenue was lower in both the antenna and test & measurement product lines in the quarter and for the year compared to the prior year.
• Gross profit margin of 40.9% in the quarter and 37.5% for the year, down 3.1% in the quarter and 4.9% for the year compared to the prior year. The decrease in the quarter is due to lower test & measurement product revenue which has higher gross margin compared to antenna products. The decrease for the year is due to both the lower test & measurement product revenue and price erosion in the small cell antenna market.
• GAAP net loss per share of $0.53 in the quarter and a GAAP net loss of $0.75 for the year, compared to net income of $0.19 per share in the quarter and $0.24 for the year in the prior year. Approximately $0.51 per share of the GAAP net loss in the quarter and $0.54 of the GAAP net loss in the year are attributed to non-cash income tax expense related to the Company’s valuation allowance for deferred tax assets. The income tax adjustment reflects a full valuation allowance on the Company’s deferred tax assets.
• 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 share of $0.03 in the quarter and a net loss of $0.04 for the year compared to net income of $0.08 in the quarter and $0.28 for the year in the prior year.
  • Adjusted EBITDA margin as a percent of revenue of 6% in the quarter and 2% for the year compared to 10% in the quarter and 9% for the year in the prior year.
• $35.2 million of cash and short-term investments at December 31, 2018 and no debt.

“Our combined sales force with a dedicated business development team is having a real impact in public safety, industrial IoT and 5G targeted markets,” said David Neumann, PCTEL’s CEO. “It is encouraging to see all the major U.S. operators, along with leading operators in Europe and Asia, deploying 5G networks. This drives test and measurement sales for deployments today and will drive growth in our small cell, transit and industrial IoT solutions over the long term. After a challenging year, we are pleased to see sequential growth in revenue and earnings in the fourth quarter.”

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: 2979119. 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: 2979119.

About PCTEL

PCTEL, Inc. is a leading global supplier of antennas and wireless network testing solutions. Founded in 1994, we are currently celebrating our 25th anniversary. PCTEL’s 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 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 https://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 antenna solutions and test and measurement businesses, anticipated demand for certain products including those related to antennas, the industrial IoT and the rollout of 5G, our expectations regarding increasing capital expenditures in 2019 by wireless operators, the impact of tariffs on certain imports from China, 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 including demand from customers in China, 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. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)       December 31, December 31, 2018 2017 ASSETS Cash and cash equivalents $ 4,329 $ 5,559 Short-term investment securities 30,870 32,499 Accounts receivable, net of allowances of $63 and $319 at December 31, 2018 and

December 31, 2017, respectively

15,864 18,624 Inventories, net 12,848 12,756 Prepaid expenses and other assets   1,416     1,605   Total current assets 65,327 71,043   Property and equipment, net 12,138 12,369 Goodwill 3,332 3,332 Intangible assets, net 1,029 2,113 Deferred tax assets, net 0 7,734 Other noncurrent assets   45     72   TOTAL ASSETS $ 81,871   $ 96,663   LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable $ 6,083 $ 5,471 Accrued liabilities   5,801     7,481   Total current liabilities 11,884 12,952 Long-term liabilities   381     392   Total liabilities   12,265     13,344   Stockholders’ equity: Common stock, $0.001 par value, 100,000,000 shares authorized, 18,271,249 and 17,806,792

shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively

18 18 Additional paid-in capital 133,859 134,505 Accumulated deficit (64,055 ) (51,258 ) Accumulated other comprehensive (loss) income   (216 )   54   Total stockholders’ equity   69,606     83,319   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 81,871   $ 96,663             PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)     Three Months Ended Year Ended December 31, December 31, 2018 2017 2018 2017   REVENUES $ 21,241 $ 23,301 $ 82,979 $ 91,437 COST OF REVENUES   12,543     13,056     51,898     52,626   GROSS PROFIT   8,698     10,245     31,081     38,811   OPERATING EXPENSES: Research and development 2,830 3,002 11,851 11,142 Sales and marketing 3,024 3,236 12,083 12,630 General and administrative 3,184 3,028 12,355 13,110 Amortization of intangible assets   85     124     418     496   Total operating expenses   9,123     9,390     36,707     37,378   OPERATING (LOSS) INCOME (425 ) 855 (5,626 ) 1,433 Other income, net   78     32     564     105   (LOSS) INCOME BEFORE INCOME TAXES (347 ) 887 (5,062 ) 1,538 Expense (benefit) for income taxes   8,788     (2,402 )   7,827     (2,471 ) (LOSS) INCOME FROM CONTINUING OPERATIONS (9,135 ) 3,289 (12,889 ) 4,009 NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT   0     (39 )   0     (187 ) NET (LOSS) INCOME $ (9,135 ) $ 3,250   $ (12,889 ) $ 3,822     Net (Loss) Income per Share from Continuing Operations: Basic $ (0.53 ) $ 0.19 $ (0.75 ) $ 0.24 Diluted $ (0.53 ) $ 0.19 $ (0.75 ) $ 0.24   Net (Loss) Income per Share from Discontinued Operations: Basic $ 0.00 $ (0.00 ) $ 0.00 $ (0.01 ) Diluted $ 0.00 $ (0.00 ) $ 0.00 $ (0.01 )   Net (Loss) Income per Share: Basic $ (0.53 ) $ 0.19 $ (0.75 ) $ 0.23 Diluted $ (0.53 ) $ 0.19 $ (0.75 ) $ 0.23   Weighted Average Shares: Basic 17,361 16,926 17,186 16,626 Diluted 17,361 17,299 17,186 16,913   Cash dividend per share $ 0.055 $ 0.055 $ 0.220 $ 0.210       PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)     Twelve Months Ended December 31,

 

2018 2017   Operating Activities: Net (loss) income from continuing operations $ (12,889 ) $ 4,009 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 2,806 2,567 Intangible asset amortization 1,084 1,162 Stock-based compensation 3,261 3,005 Loss on disposal of property and equipment 19 18 Restructuring costs (39 ) (78 ) Bad debt provision 265 55 Deferred tax provision 7,817 (2,647 ) Changes in operating assets and liabilities: Accounts receivable 2,362 798 Inventories (336 ) 1,970 Prepaid expenses and other assets 198 (121 ) Accounts payable 1,095 (1,037 ) Income taxes payable (3 ) (199 ) Other accrued liabilities (1,657 ) 182 Deferred revenue   (40 )   85   Net cash provided by operating activities   3,943     9,769   Investing Activities: Capital expenditures (2,754 ) (2,666 ) Proceeds from disposal of property and equipment 15 1 Purchases of investments (44,591 ) (49,009 ) Redemptions/maturities of short-term investments   46,220     34,966   Net cash used in investing activities   (1,110 )   (16,708 ) Financing Activities: Proceeds from issuance of common stock 686 1,975 Payment of withholding tax on stock-based compensation (578 ) (1,298 ) Principle payments on capital leases (125 ) (98 ) Cash dividends   (4,015 )   (3,705 ) Net cash used in financing activities   (4,032 )   (3,126 ) Cash flows from discontinued operations: Net cash used in operating activities 0 (795 ) Net cash provided by investing activities   0     1,434   Net cash flows provided by discontinued operations   0     639     Net decrease in cash and cash equivalents (1,199 ) (9,426 ) Effect of exchange rate changes on cash (31 ) 130 Cash and cash equivalents, beginning of period   5,559     14,855   Cash and Cash Equivalents, End of Period $ 4,329   $ 5,559                         PCTEL, INC. P&L INFORMATION BY PRODUCT LINE - Continuing Operations (unaudited) (in thousands)       Three Months Ended December 31, 2018 Year Ended December 31, 2018 Test & Test & Antenna Measurement Antenna Measurement Products Products Corporate Total Products Products Corporate Total REVENUES $16,209 $5,042 ($10) $21,241 $66,328 $16,733 ($82)

$82,979

  GROSS PROFIT $5,423 $3,257 $18 $8,698 $20,157 $10,883 $41

$31,081

  GROSS PROFIT % 33.5% 64.6% 40.9% 30.4% 65.0%

37.5%

  Three Months Ended December 31, 2017 Year Ended December 31, 2017 Test & Test & Antenna Measurement Antenna Measurement Products Products Corporate Total Products Products Corporate Total REVENUES $16,487 $6,861 ($47) $23,301 $68,612 $23,019 ($194)

$91,437

  GROSS PROFIT $5,157 $5,077 $11 $10,245 $22,439 $16,354 $18

$38,811

  GROSS PROFIT % 31.3% 74.0% 44.0% 32.7% 71.0% 42.4%    

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

(in thousands except per share information)          

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

  Three Months Ended December 31, Year Ended December 31,

2018

2017

2018

2017

  Operating (Loss) Income ($425) $855 ($5,626) $1,433   (a) Add: Amortization of intangible assets -Cost of revenues 167 167 666 666 -Operating expenses 85 124 418 496 Stock Compensation: -Cost of revenues 93 68 224 268 -Engineering 158 123 620 517 -Sales & marketing 114 112 576 474 -General & administrative 324 244 1,841 1,745 941 838 4,345 4,166 Non-GAAP Operating (Loss) Income $516 $1,693 ($1,281) $5,599 % of revenue 2.4% 7.3% -1.5% 6.1%  

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

  Three Months Ended December 31, Year Ended December 31,

2018

2017

2018

2017

  Net (Loss) Income ($9,135) $3,289 ($12,889) $4,009   Adjustments: (a) Non-GAAP adjustment to operating loss 941 838 4,345 4,166 Income Taxes 8,740 (2,713) 7,884 (3,498) 9,681 (1,875) 12,229 668 Non-GAAP Net (Loss) Income $546 $1,414 ($660) $4,677   Non-GAAP (Loss) Income per Share: Basic $0.03 $0.08 ($0.04) $0.28 Diluted $0.03 $0.08 ($0.04) $0.28   Weighed Average Shares: Basic 17,361 16,926 17,186 16,626 Diluted 17,481 17,299 17,186 16,913   This schedule reconciles the Company's GAAP operating loss 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.   The adjustments to GAAP operating loss (a) consist of stock compensation expense and amortization of intangible assets. The adjustments to GAAP net loss include the non-GAAP adjustments to operating loss as well as adjustments for (b) non-cash income tax expense.    

PCTEL, Inc.

Reconciliation of GAAP operating loss to Adjusted EBITDA - Continuing Operations

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

2018

2017

2018

2017

  Operating (Loss) Income ($425) $855 ($5,626) $1,433   Add: Depreciation and amortization 718 653 2,806 2,566 Intangible amortization 252 291 1,084 1,162 Stock compensation expenses 689 547 3,261 3,004 Adjusted EBITDA $1,234 $2,346 $1,525 $8,165 % of revenue 5.8% 10.1% 1.8% 8.9%     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.   Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization. The adjustments on this schedule consist of depreciation, amortization of intangible assets, and stock compensation expenses

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Kevin McGowanCFOPCTEL, Inc.(630) 372-6800Michael RosenbergDirector of MarketingPCTEL, Inc.(301) 444-2046public.relations@pctel.com