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PCTEL Reports $21.6 Million in Second Quarter Revenue
[August 08, 2018]

PCTEL Reports $21.6 Million in Second Quarter Revenue


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

Highlights from Continuing Operations

  • Revenue of $21.6 million in the second quarter and $43.3 million in the first half, unchanged in the quarter and down 3% in the first half compared to last year. Connected Solutions revenue was up 4% in the quarter and 3% in the half. RF Solutions revenue was down 11% in the quarter and 22% in the half.
  • Gross profit margin of 36.1% in the second quarter and 36.2% in the first half, down 560 basis points in the quarter and 520 basis points in the half compared to last year. The two primary reasons for the decrease are lower revenue in the RF Solutions segment which has higher margin from its scanner products compared to antenna products, and price erosion in the small cell antenna market.
  • Net loss per share of $0.07 in the second quarter and $0.12 in the first half, compared to a net loss of $0.01 per share in the quarter and break even in the half 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 EPS of break-even in the second quarter and a net loss of $0.01 in the first half compared to net income of $0.05 in the quarter and $0.10 in the half last year.
  • Adjusted EBITDA margin as a percent of revenue of 2% in the second quarter and the first half compared to 8% in the quarter and the half last year.
  • $36.5 million of cash and short-term investments at June 30, 2018 and no debt.

"The Company saw revenue growth for its Connected Solutions products in the enterprise Wi-Fi market during the quarter and the half but fell short of our expectations. RF Solutions revenue was down in the North American market in the quarter and the half, due to capital budget reductions by several U.S. carriers," said David Neumann, PCTEL's CEO. "We believe the carriers have reduced capital spending on legacy networks to prepare for more aggressive 5G deployments in 2019. Although this will negatively affect our 2018 results, PCTEL is positioned to take advantage of the long-term growth opportunities in our targeted markets, which require both performance critical testing solutions and antennas."

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: 47850740. 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: 47850740.

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 Connected Solutions and RF Solutions businesses, anticipated demand for certain products, our expectations regarding capital expenditures 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)

June 30, December 31,
2018 2017
ASSETS
Cash and cash equivalents $ 7,603 $ 5,559
Short-term investment securities 28,904 32,499
Accounts receivable, net of allowances of $164 and $319 at June 30, 2018 and

December 31, 2017, respectively

17,929 18,624
Inventories, net 13,470 12,756
Prepaid expenses and other assets   1,285     1,605  
Total current assets 69,191 71,043
 
Property and equipment, net 12,844 12,369
Goodwill 3,332 3,332
Intangible assets, net 1,532 2,113
Deferred tax assets, net 8,213 7,734
Other noncurrent assets   58     72  
TOTAL ASSETS $ 95,170   $ 96,663  
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 8,219 $ 5,471
Accrued liabilities   5,413     7,481  
Total current liabilities 13,632 12,952
Long-term liabilities   453     392  
Total liabilities   14,085     13,344  
Stockholders' equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 18,318,141 and 17,806,792

shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively

18 18
Additional paid-in capital 134,367 134,505
Accumulated deficit (53,250 ) (51,258 )
Accumulated other comprehensive (loss) income   (50 )   54  
Total stockholders' equity   81,085     83,319  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 95,170   $ 96,663  

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
       
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
 
REVENUES $ 21,582 $ 21,501 $ 43,313 $ 44,471
COST OF REVENUES   13,783     12,539     27,650     26,055  
GROSS PROFIT   7,799     8,962     15,663     18,416  
OPERATING EXPENSES:
Research and development 3,053 2,667 5,993 5,383
Sales and marketing 3,075 2,912 6,102 6,165
General and administrative 3,149 3,598 6,143 6,937
Amortization of intangible assets   124     124     248     248  
Total operating expenses   9,401     9,301     18,486     18,733  
OPERATING LOSS (1,602 ) (339 ) (2,823 ) (317 )
Other income, net   209     14     260     42  
LOSS BEFORE INCOME TAXES (1,393 ) (325 ) (2,563 ) (275 )
Benefit for income taxes   (167 )   (140 )   (479 )   (274 )
LOSS FROM CONTINUING OPERATIONS (1,226 ) (185 ) (2,084 ) (1 )
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT   0     (168 )   0     (382 )
NET LOSS $ (1,226 ) $ (353 ) $ (2,084 ) $ (383 )
 
Net Loss per Share from Continuing Operations:
Basic $ (0.07 ) $ (0.01 ) $ (0.12 ) $ 0.00
Diluted $ (0.07 ) $ (0.01 ) $ (0.12 ) $ 0.00
 
Net Loss per Share from Discontinued Operations:
Basic $ 0.00 $ (0.01 ) $ 0.00 $ (0.02 )
Diluted $ 0.00 $ (0.01 ) $ 0.00 $ (0.02 )
 
Net Loss per Share:
Basic $ (0.07 ) $ (0.02 ) $ (0.12 ) $ (0.02 )
Diluted $ (0.07 ) $ (0.02 ) $ (0.12 ) $ (0.02 )
 
Weighted Average Shares:
Basic 17,142 16,534 17,099 16,437
Diluted 17,142 16,534 17,099 16,437
 
Cash dividend per share $ 0.055 $ 0.05 $ 0.11 $ 0.10
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
   
Six Months Ended June 30,

 

2018 2017
Operating Activities:
Net loss from continuing operations $ (2,084 ) $ (1 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 1,381 1,262
Intangible asset amortization 581 581
Stock-based compensation 1,786 1,797
(Gain) loss on disposal of property and equipment (5 ) 3
Restructuring costs (20 ) (58 )
Bad debt provision 124 (7 )
Deferred tax provision (390 ) (423 )
Changes in operating assets and liabilities:
Accounts receivable 473 1,458
Inventories (813 ) 779
Prepaid expenses and other assets 330 96
Accounts payable 2,743 (232 )
Income taxes payable (38 ) (186 )
Other accrued liabilities (2,107 ) (694 )
Deferred revenue   16     20  
Net cash provided by operating activities   1,977     4,395  
Investing Activities:
Capital expenditures (1,519 ) (1,544 )
Proceeds from disposal of property and equipment 14 0
Purchases of investments (22,712 ) (23,071 )
Redemptions/maturities of short-term investments   26,307     19,187  
Net cash provided by (used in) investing activities   2,090     (5,428 )
Financing Activities:
Proceeds from issuance of common stock 364 867
Payment of withholding tax on stock-based compensation (289 ) (692 )
Principle payments on capital leases (57 ) (41 )
Cash dividends   (1,999 )   (1,752 )
Net cash used in financing activities   (1,981 )   (1,618 )
Cash flows from discontinued operations:
Net cash used in operating activities 0 (349 )
Net cash used in investing activities   0     (16 )
Net cash flows used in discontinued operations   0     (365 )
 
Net increase (decrease) in cash and cash equivalents 2,086 (3,016 )
Effect of exchange rate changes on cash (42 ) 36
Cash and cash equivalents, beginning of period   5,559     14,855  
Cash and Cash Equivalents, End of Period $ 7,603   $ 11,875  
PCTEL, INC.
P&L INFORMATION BY SEGMENT - Continuing Operations (unaudited)
(in thousands)
               
Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
 
REVENUES $ 17,478 $ 4,135 ($31 ) $ 21,582 $ 35,243 $ 8,134 ($64 ) $ 43,313
               
GROSS PROFIT 5,031 2,755 13 7,799 10,229 5,426 8 15,663
               
OPERATING (LOSS) INCOME $ 1,530   ($398 ) ($2,734 )   ($1,602 ) $ 3,134   ($724 ) ($5,233 )   ($2,823 )
 
 
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
 
REVENUES $ 16,866 $ 4,661 ($26 ) $ 21,501 $ 34,137 $ 10,418 ($84 ) $ 44,471
               
GROSS PROFIT 5,731 3,223 8 8,962 11,135 7,270 11 18,416
               
OPERATING INCOME (LOSS) $ 2,349 $ 411   ($3,099 )   ($339 ) $ 4,095 $ 1,432   ($5,844 )   ($317 )

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 June 30, Six Months Ended June 30,

2018

2017

2018

2017

 
Operating Loss ($1,602 ) ($339 ) ($2,823 ) ($317 )
 
(a) Add:
Amortization of intangible assets
-Cost of revenues 167 167 333 333
-Operating expenses 124 124 248 248
Stock Compensation:
-Cost of revenues 93 72 181 133
-Engineering 159 120 297 266
-Sales & marketing 157 126 288 246
-General & administrative   710     770   1,021     1,152  
  1,410     1,379   2,368     2,378  
Non-GAAP Operating (Loss) Income   ($192 ) $ 1,040   ($455 ) $ 2,061  
% of revenue -0.9 % 4.8 % -1.1 % 4.6 %
 

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

 
Three Months Ended June 30, Six Months Ended June 30,

2018

2017

2018

2017

 
Net Loss ($1,226 ) ($185 ) ($2,084 ) ($1 )
 
Adjustments:
(a) Non-GAAP adjustment to operating loss 1,410 1,379 2,368 2,378
Income Taxes   (168 )   (330 ) (463 )   (653 )
  1,242     1,049   1,905     1,725  
Non-GAAP Net (Loss) Income $ 16   $ 864   ($179 ) $ 1,724  
 
Non-GAAP (Loss) Income per Share:
Basic $ 0.00 $ 0.05 ($0.01 ) $ 0.10
Diluted $ 0.00 $ 0.05 ($0.01 ) $ 0.10
 
Weighed Average Shares:
Basic 17,142 16,534 17,099 16,437
Diluted 17,554 17,015 17,099 16,921
      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 intantigible 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.

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

(in thousands)
                 
Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
 
Operating (Loss) Income $ 1,530 ($398 ) ($2,734 ) ($1,602 ) $ 3,134 ($724 ) ($5,233 ) ($2,823 )
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 333 0 333
-Operating expenses 39 85 0 124 78 170 0 248
Stock Compensation:
-Cost of revenues 51 42 0 93 96 85 0 181
-Engineering 81 78 0 159 155 142 0 297
-Sales & marketing 85 72 0 157 167 121 0 288
-General & administrative   45   30   635     710     105   53   863     1,021  
  301   474   635     1,410     601   904   863     2,368  
Non-GAAP Operating (Loss) Income $ 1,831 $ 76   ($2,099 )   ($192 ) $ 3,735 $ 180   ($4,370 )   ($455 )
 
 
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
 
Operating (Loss) Income $ 2,349 $ 411 ($3,099 ) ($339 ) $ 4,095 $ 1,432 ($5,844 ) ($317 )
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 333 0 333
-Operating expenses 39 85 0 124 78 170 0 248
Stock Compensation:
-Cost of revenues 43 29 0 72 82 51 0 133
-Engineering 62 58 0 120 117 149 0 266
-Sales & marketing 79 47 0 126 165 81 0 246
-General & administrative   46   17   707     770     89   31   1,032     1,152  
  269   403   707     1,379     531   815   1,032     2,378  
Non-GAAP Operating Income (Loss) $ 2,618 $ 814   ($2,392 ) $ 1,040   $ 4,626 $ 2,247   ($4,812 ) $ 2,061  
  This schedule reconciles the Company's GAAP operating (loss) income by segment 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) income consist of stock compensation expense and amortization of intangible assets.

PCTEL, Inc.

Reconciliation of GAAP operating loss to Adjusted EBITDA - Continuing Operations

(unaudited, in thousands)
             
Three Months Ended June 30, Six Months Ended June 30,

2018

2017

2018

2017

 
Operating Loss ($1,602 ) ($339 ) ($2,823 ) ($317 )
 
Add:
Depreciation and amortization 707 634 1,381 1,262
Intangible amortization 291 291 581 581
Stock compensation expenses   1,119     1,088     1,787     1,797  
Adjusted EBITDA $ 515   $ 1,674   $ 926   $ 3,323  
% of revenue 2.4 % 7.8 % 2.1 % 7.5 %
  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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