PCTI PCTEL Inc

$91.4 Million for the Full Year

PCTEL, Inc. (Nasdaq: PCTI), a leader in Performance Critical TELecom solutions, announced its results for the fourth quarter and the full year ended December 31, 2017.

Highlights from Continuing Operations

• Revenue of $23.3 million in the quarter and $91.4 million for the year, down 1% in the quarter and up 8% for the year compared to last year. Connected Solutions revenue was down 9% in the quarter and up 4% for the year. RF Solutions was up 25% in the quarter and up 19% for the year.
• Gross profit margin of 44.0% in the quarter and 42.4% for the year, up 265 basis points in the quarter and up 200 basis points for the year compared to last year.
• Net income per diluted share of $0.19 in the fourth quarter and $0.24 for the year, an improvement of $0.47 per share in the quarter and $1.03 per share in the year. Approximately $0.03 per share of the improvement in the quarter and $0.13 per share in the year are attributed to improved operating results. The remainder is a result of non-cash changes in the Company’s deferred tax assets and related valuation allowance.
• 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 $0.08 in the fourth quarter and $0.28 for the year, unchanged in the quarter and up $0.07 for the year compared to last year.
  • Adjusted EBITDA margin as a percent of revenue of 10% in the fourth quarter and 9% for the year, up 55 basis points in the quarter and 95 basis points for the year compared to last year.
• $38.1 million of cash and short-term investments and no debt at December 31, 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 $7.1 million for the year.

“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 and 5G, which require both performance critical antenna solutions across multiple vertical markets 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: 47850719. 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: 47850719.

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 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)           December 31, December 31, 2017 2016 ASSETS   Cash and cash equivalents $ 5,559 $ 14,855 Short-term investment securities 32,499 18,456 Accounts receivable, net of allowance for doubtful accounts of $319 and $273 at December 31, 2017 and December 31, 2016, respectively 18,427 19,101 Inventories, net 12,756 14,442 Prepaid expenses and other assets 1,605 1,498 Current assets held for sale   0     50   Total current assets 70,846 68,402 Property and equipment, net 12,369 11,833 Goodwill 3,332 3,332 Intangible assets, net 2,113 3,275 Deferred tax assets, net 7,734 4,512 Other noncurrent assets 72 36 Non-current assets held for sale   0     776   TOTAL ASSETS $ 96,466   $ 92,166     LIABILITIES AND STOCKHOLDERS’ EQUITY   Accounts payable $ 5,471 $ 6,073 Accrued liabilities   7,284     7,177   Total current liabilities 12,755 13,250   Long-term liabilities 392 391     Total liabilities   13,147     13,641     Stockholders’ equity: Common stock, $0.001 par value, 100,000,000 shares authorized, 17,806,792 and 17,335,122 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively 18 17 Additional paid-in capital 134,505 134,480 Accumulated deficit (51,258 ) (55,590 ) Accumulated other comprehensive loss   54     (382 ) Total stockholders’ equity   83,319     78,525   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 96,466   $ 92,166     PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)               Three Months Ended Year Ended December 31, December 31, 2017 2016 2017 2016   REVENUES $ 23,301 $ 23,623 $ 91,437 $ 85,006 COST OF REVENUES   13,056     13,860     52,626     50,595   GROSS PROFIT   10,245     9,763     38,811     34,411   OPERATING EXPENSES: Research and development 3,002 2,577 11,142 10,158 Sales and marketing 3,236 3,646 12,630 12,716 General and administrative 3,028 2,873 13,110 11,905 Amortization of intangible assets 124 124 496 531 Restructuring expenses   0     0     0     234   Total operating expenses   9,390     9,220     37,378     35,544   OPERATING INCOME (LOSS) 855 543 1,433 (1,133 ) Other income, net   32     63     105     112   INCOME (LOSS) BEFORE INCOME TAXES 887 606 1,538 (1,021 ) (Benefit) expense for income taxes   (2,402 )   5,173     (2,471 )   11,776   NET INCOME (LOSS) FROM CONTINUING OPERATIONS 3,289 (4,567 ) 4,009 (12,797 ) NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT   (39 )   (760 )   (187 )   (4,884 ) NET INCOME (LOSS) $ 3,250   $ (5,327 ) $ 3,822   $ (17,681 )   Net Income (Loss) per Share From Continuing Operations: Basic $ 0.19 $ (0.28 ) $ 0.24 $ (0.79 ) Diluted $ 0.19 $ (0.28 ) $ 0.24 $ (0.79 )   Net Loss per Share From Discontinued Operations: Basic $ (0.00 ) $ (0.05 ) $ (0.01 ) $ (0.30 ) Diluted $ (0.00 ) $ (0.05 ) $ (0.01 ) $ (0.30 )   Net Income (Loss) per Share: Basic $ 0.19 $ (0.33 ) $ 0.23 $ (1.09 ) Diluted $ 0.19 $ (0.33 ) $ 0.23 $ (1.09 )   Weighted Average Shares: Basic 16,926 16,194 16,626 16,151 Diluted 17,299 16,194 16,913 16,151   Cash dividend per share $ 0.055 $ 0.05 $ 0.210 $ 0.20   PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)           Year Ended December 31,

 

2017 2016   Operating Activities: Net income (loss) from continuing operations $ 4,009 $ (12,797 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 2,567 2,629 Intangible asset amortization 1,162 1,198 Stock-based compensation 3,005 3,847 Loss on disposal/sale of property and equipment 18 2 Restructuring costs (78 ) 30 Deferred tax provision (2,647 ) 11,048 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 853 1,695 Inventories 1,970 2,863 Prepaid expenses and other assets (121 ) 44 Accounts payable (1,037 ) (484 ) Income taxes payable (199 ) 81 Other accrued liabilities 182 929 Deferred revenue   85     40   Net cash provided by operating activities   9,769     11,125     Investing Activities: Capital expenditures (2,666 ) (1,739 ) Proceeds from disposal of property and equipment 1 15 Purchases of investments (49,009 ) (74,264 ) Redemptions/maturities of short-term investments   34,966     80,536   Net cash (used in) provided by investing activities   (16,708 )   4,548     Financing Activities: Proceeds from issuance of common stock 1,975 649 Payments for repurchase of common stock 0 (4,095 ) Payment of withholding tax on stock-based compensation (1,298 ) (426 ) Principle payments on capital leases (98 ) (51 ) Cash dividends   (3,705 )   (3,456 ) Net cash used in financing activities   (3,126 )   (7,379 ) . Cash flows from discontinued operations: Net cash used in operating activities (795 ) (242 ) Net cash provided by (used in) investing activities   1,434     (173 ) Net cash provided by (used in) discontinued operations   639     (415 )   Net (decrease) increase in cash and cash equivalents (9,426 ) 7,879 Effect of exchange rate changes on cash 130 (79 ) Cash and cash equivalents, beginning of year   14,855     7,055   Cash and Cash Equivalents, End of Period $ 5,559   $ 14,855     PCTEL, INC. P&L INFORMATION BY SEGMENT - Continuing Operations (unaudited) (in thousands)                     Three Months Ended December 31, 2017 Year Ended December 31, 2017 Connected Connected Solutions RF Solutions Corporate Total Solutions RF Solutions 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                 OPERATING (LOSS) INCOME $1,517 $1,869 ($2,531 ) $855 $8,304 $4,177 ($11,048 ) $1,433       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 $5,488 ($12 ) $23,623 $65,763 $19,419 ($176 ) $85,006                 GROSS PROFIT 5,671 4,070 22 9,763 20,706 13,690 15 34,411                 OPERATING (LOSS) INCOME $2,177 $701 ($2,335 ) $543 $7,804 $1,042 ($9,979 ) ($1,133 )  

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 December 31,

Year Ended December 31,

2017

2016

2017

2016

    Operating Income (Loss) $855 $543 $1,433 ($1,133 )   (a) Add: Amortization of intangible assets -Cost of revenues 167 167 666 668 -Operating expenses 124 124 496 531 Restructuring 0 0 0 234 TelWorx investigation: -General & administrative 0 0 0 4 Stock Compensation: -Cost of revenues 68 63 268 282 -Engineering 123 125 517 650 -Sales & marketing 112 140 474 617 -General & administrative 244   451   1,745   2,298   838   1,070   4,166   5,284   Non-GAAP Operating Income $1,693   $1,613   $5,599   $4,151   % of revenue 7.3 % 6.8 % 6.1 % 4.9 %  

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

 

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

  Net Income (Loss) $3,289 ($4,567 ) $4,009 ($12,797 )   Adjustments: (a) Non-GAAP adjustment to operating income (loss) 838 1,070 4,166 5,284 (b) Other income related to SEC investigation of TelWorx 0 0 0 (4 ) (b) Income Taxes (2,713 ) 4,871   (3,498 ) 11,009   (1,875 ) 5,941   668   16,289   Non-GAAP Net Income $1,414   $1,374   $4,677   $3,492     Non-GAAP Earning per Share: Basic $0.08 $0.08 $0.28 $0.22 Diluted $0.08 $0.08 $0.28 $0.21   Weighed Average Shares: Basic 16,926 16,194 16,626 16,151 Diluted 17,299 16,439 16,913 16,325

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 December 31, 2017     Year Ended December 31, 2017 Connected   RF     Connected   RF     Solutions Solutions Corporate Total Solutions Solutions Corporate Total   Operating Income (Loss) $1,517 $1,869 ($2,531) $855 $8,304 $4,177 ($11,048) $1,433 Add: Amortization of intangible assets: -Cost of revenues 0 167 0 167 0 666 0 666 -Operating expenses 39 85 0 124 156 340 0 496 Stock Compensation: -Cost of revenues 40 28 0 68 161 107 0 268 -Engineering 63 60 0 123 243 274 0 517 -Sales & marketing 72 40 0 112 314 160 0 474 -General & administrative 46 19 179 244 180 68 1,497 1,745 260 399 179 838 1,054 1,615 1,497 4,166 Non-GAAP Operating (Loss) Income $1,777 $2,268 ($2,352) $1,693 $9,358 $5,792 ($9,551) $5,599     Three Months Ended December 31, 2016 Year Ended December 31, 2016 Connected RF

 

 

Connected RF

 

Total Solutions Solutions

Corporate

Total

Solutions Solutions

Corporate

    Operating (Loss) Income $2,177 $701 ($2,335) $543 $7,804 $1,042 ($9,979) ($1,133) Add: Amortization of intangible assets: -Cost of revenues 0 167 0 167 0 668 0 668 -Operating expenses 39 85 0 124 191 340 0 531 Restructuring expenses 0 0 0 0 44 117 73 234 TelWorx investigation: -General & administrative 0 0 0 0 0 0 4 4 Stock Compensation: -Cost of revenues 43 20 0 63 178 104 0 282 -Engineering 48 77 0 125 172 478 0 650 -Sales & marketing 99 41 0 140 438 179 0 617 -General & administrative 51 82 318 451 209 340 1,749 2,298 280 472 318 1,070 1,232 2,226 1,826 5,284 Non-GAAP Operating (Loss) Income $2,457 $1,173 ($2,017) $1,613 $9,036 $3,268 ($8,153) $4,151

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 December 31,

Year Ended December 31,

2017

2016

2017

2016

  Operating Income (Loss) $855 $543 $1,433 ($1,133)   (a) Add: Depreciation and amortization 653 635 2,566 2,629 Intangible amortization 291 291 1,162 1,199 Stock compensation expenses 547 779 3,004 3,847 Restructuring expense 0 0 0 234 TelWorx investigation- operating expenses 0 0 0 4 Adjusted EBITDA $2,346 $2,248 $8,165 $6,780 % of revenue 10.1% 9.5% 8.9% 8.0%

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