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PCTEL Reports $23.7 Million in Third Quarter Revenue

BLOOMINGDALE, Ill.--(BUSINESS WIRE)-- 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 Schoen
CFO
PCTEL, Inc.
(630) 372-6800
or
Michael Rosenberg
Director of Marketing
PCTEL, Inc.
(301) 444-2046
public.relations@pctel.com

Source: PCTEL, Inc.