PCTI PCTEL Inc

PCTEL, Inc. (Nasdaq: PCTI), a leader in Performance Critical TELecom solutions, announced its results for the third quarter ended September 30, 2018.

Highlights from Continuing Operations

• Revenue of $18.4 million in the quarter and $61.7 million year to date, 22% lower in the quarter and 9% lower year-to-date compared to last year. Revenue was lower in both the antenna and test & measurement product lines in the quarter and year to date.
• Gross profit margin of 36.5% in the quarter and 36.3% year to date, down 6.4% in the quarter and 5.6% year-to-date compared to last year. The two primary reasons for the decrease in both the quarter and year-to-date are lower test & measurement product revenue which has higher margin compared to antenna products, and price erosion in the small cell antenna market.
• Net loss per share of $0.10 in the quarter and $0.22 year to date, compared to net income of $0.04 per share in the quarter and 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 loss per share of $0.06 in the quarter and a net loss of $0.07 year to date compared to net income of $0.09 in the quarter and $0.20 year-to-date last year. The third quarter of this year included $0.04 non-GAAP restructuring charges related to the Company’s recent reorganization.
  • Adjusted EBITDA margin as a percent of revenue of negative 3% in the quarter and positive 1% year to date compared to 11% in the quarter and 9% year-to-date last year.
• $37.1 million of cash and short-term investments at September 30, 2018 and no debt.

“Our small cell revenue has stabilized with wins in China, North American and Europe, and we are encouraged with the early 5G deployment activity,” said David Neumann, PCTEL’s CEO. “However, carrier spending was down on legacy networks and several antenna projects were completed in Q2, which negatively affected the quarter and 2018 year to date results. We believe that improving market conditions and our recent reorganization to improve business development will position PCTEL to take advantage of the long-term growth opportunities in 5G, antennas, and industrial IoT.”

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: 1369318. 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: 1369318.

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 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)   (Unaudited) September 30, December 31, 2018 2017 ASSETS Cash and cash equivalents $ 5,377 $ 5,559 Short-term investment securities 31,770 32,499

Accounts receivable, net of allowances of $278 and $319 at September 30, 2018 andDecember 31, 2017, respectively

13,261 18,624 Inventories, net 12,691 12,756 Prepaid expenses and other assets   1,185     1,605   Total current assets 64,284 71,043   Property and equipment, net 12,491 12,369 Goodwill 3,332 3,332 Intangible assets, net 1,280 2,113 Deferred tax assets, net 8,685 7,734 Other noncurrent assets   52     72   TOTAL ASSETS $ 90,124   $ 96,663   LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable $ 5,392 $ 5,471 Accrued liabilities   5,069     7,481   Total current liabilities 10,461 12,952 Long-term liabilities   383     392   Total liabilities   10,844     13,344   Stockholders’ equity:

Common stock, $0.001 par value, 100,000,000 shares authorized, 18,318,141 and 17,806,792shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively

18 18 Additional paid-in capital 134,455 134,505 Accumulated deficit (54,920 ) (51,258 ) Accumulated other comprehensive (loss) income   (273 )   54   Total stockholders’ equity   79,280     83,319   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 90,124   $ 96,663           PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)     Three Months Ended Nine Months Ended September 30, September 30,   2018     2017   2018     2017     REVENUES $ 18,426 $ 23,665 $ 61,739 $ 68,136 COST OF REVENUES   11,705     13,515   39,355     39,570   GROSS PROFIT   6,721     10,150   22,384     28,566   OPERATING EXPENSES: Research and development 3,028 2,757 9,021 8,141 Sales and marketing 2,957 3,230 9,059 9,394 General and administrative 3,029 3,146 9,172 10,081 Amortization of intangible assets   85     124   333     372   Total operating expenses   9,099     9,257   27,585     27,988   OPERATING (LOSS) INCOME (2,378 ) 893 (5,201 ) 578 Other income, net   226     32   486     74   (LOSS) INCOME BEFORE INCOME TAXES (2,152 ) 925 (4,715 ) 652 (Benefit) expense for income taxes   (482 )   206   (961 )   (68 ) (LOSS) INCOME FROM CONTINUING OPERATIONS (1,670 ) 719 (3,754 ) 720 NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT   0     236   0     (148 ) NET (LOSS) INCOME $ (1,670 ) $ 955 $ (3,754 ) $ 572     Net (Loss) Income per Share from Continuing Operations: Basic $ (0.10 ) $ 0.04 $ (0.22 ) $ 0.04 Diluted $ (0.10 ) $ 0.04 $ (0.22 ) $ 0.04   Net Income (Loss) per Share from Discontinued Operations: Basic $ 0.00 $ 0.01 $ 0.00 $ (0.01 ) Diluted $ 0.00 $ 0.01 $ 0.00 $ (0.01 )   Net (Loss) Income per Share: Basic $ (0.10 ) $ 0.06 $ (0.22 ) $ 0.03 Diluted $ (0.10 ) $ 0.06 $ (0.22 ) $ 0.03   Weighted Average Shares: Basic 17,234 16,757 17,145 16,526 Diluted 17,234 17,065 17,145 16,830   Cash dividend per share $ 0.055 $ 0.055 $ 0.155 $ 0.155     PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)     Nine Months Ended September 30, .   2018     2017     Operating Activities: Net (loss) income from continuing operations $ (3,754 ) $ 720 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 2,088 1,913 Intangible asset amortization 833 872 Stock-based compensation 2,572 2,458 Loss on disposal of property and equipment 11 18 Restructuring costs (28 ) (88 ) Bad debt provision 248 38 Deferred tax provision (868 ) (282 ) Changes in operating assets and liabilities: Accounts receivable 4,968 672 Inventories (173 ) 1,809 Prepaid expenses and other assets 425 509 Accounts payable 255 (1,078 ) Income taxes payable (39 ) (154 ) Other accrued liabilities (2,395 ) (426 ) Deferred revenue   (43 )   95   Net cash provided by operating activities   4,100     7,076   Investing Activities: Capital expenditures (2,205 ) (2,097 ) Proceeds from disposal of property and equipment 14 1 Purchases of investments (33,978 ) (37,579 ) Redemptions/maturities of short-term investments   34,707     26,056   Net cash used in investing activities   (1,462 )   (13,619 ) Financing Activities: Proceeds from issuance of common stock 686 1,375 Payment of withholding tax on stock-based compensation (301 ) (1,190 ) Principle payments on capital leases (91 ) (64 ) Cash dividends   (3,007 )   (2,730 ) Net cash used in financing activities   (2,713 )   (2,609 ) Cash flows from discontinued operations: Net cash used in operating activities 0 (697 ) Net cash provided by investing activities   0     1,434   Net cash flows provided by discontinued operations   0     737     Net decrease in cash and cash equivalents (75 ) (8,415 ) Effect of exchange rate changes on cash (107 ) 87 Cash and cash equivalents, beginning of period   5,559     14,855   Cash and Cash Equivalents, End of Period $ 5,377   $ 6,527                   PCTEL, INC. P&L INFORMATION BY SEGMENT - Continuing Operations (unaudited) (in thousands)     Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Test & Test & Antenna Measurement Antenna Measurement Products Products Corporate Total Products Products Corporate Total REVENUES $ 14,877 $ 3,556 ($7 ) $ 18,426 $ 50,120 $ 11,691 ($72 ) $ 61,739   GROSS PROFIT $ 4,504 $ 2,201 $ 16 $ 6,721 $ 14,734 $ 7,627 $ 23 $ 22,384   GROSS PROFIT % 30.3 % 61.9 % 36.5 % 29.4 % 65.2 % 36.3 %   Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 Test & Test & Antenna Measurement Antenna Measurement Products Products Corporate Total Products Products 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   GROSS PROFIT % 34.2 % 69.8 % 42.9 % 33.2 % 69.8 % 41.9 %  

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 September 30, Nine Months Ended September 30, 2018 2017 2018 2017     Operating (Loss) Income ($2,378 ) $ 893 ($5,201 ) $ 578   (a) Add: Amortization of intangible assets -Cost of revenues 167 167 500 500 -Operating expenses 85 124 333 372 Stock Compensation: -Cost of revenues (50 ) 68 131 200 -Engineering 165 128 462 394 -Sales & marketing 174 116 462 362 -General & administrative 496     349   1,517     1,501   1,037     952   3,405     3,329   Non-GAAP Operating (Loss) Income ($1,341 ) $ 1,845   ($1,796 ) $ 3,907   % of revenue -7.3 % 7.8 % -2.9 % 5.7 %  

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

  Three Months Ended September 30,   Nine Months Ended September 30, 2018 2017 2018 2017   Net (Loss) Income ($1,670 ) $ 719 ($3,754 ) $ 720   Adjustments: (a) Non-GAAP adjustment to operating loss 1,037 952 3,405 3,329 Income Taxes (393 )   (132 ) (856 )   (785 ) 644     820   2,549     2,544   Non-GAAP Net (Loss) Income ($1,026 ) $ 1,539   ($1,205 ) $ 3,264     Non-GAAP (Loss) Income per Share: Basic ($0.06 ) $ 0.09 ($0.07 ) $ 0.20 Diluted ($0.06 ) $ 0.09 ($0.07 ) $ 0.19   Weighed Average Shares: Basic 17,234 16,757 17,145 16,526 Diluted 17,234 17,065 17,145 16,830   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 September 30, Nine Months Ended September 30, 2018     2017     2018     2017     Operating (Loss) Income ($2,378 ) $ 893 ($5,201 ) $ 578   Add: Depreciation and amortization 708 652 2,088 1,913 Intangible amortization 252 291 833 872 Stock compensation expenses 785     661     2,572     2,458   Adjusted EBITDA ($633 ) $ 2,497   $ 292   $ 5,821   % of revenue -3.4 % 10.6 % 0.5 % 8.5 %   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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John SchoenCFOPCTEL, Inc.(630) 372-6800orMichael RosenbergDirector of MarketingPCTEL, Inc.(301) 444-2046public.relations@pctel.com