PCTEL Reports $23.6 Million in Third Quarter Revenue

PCTEL, Inc. (Nasdaq: PCTI) announced its results for the third quarter ended September 30, 2019.

Highlights

• Revenue of $23.6 million in the quarter, 28% higher compared to the prior year. The third quarter revenue was higher by 104% for the test and measurement product line and higher by 11% for the antenna product line compared to the third quarter 2018.
• Gross profit margin of 45.1% in the quarter, up 8.6% compared to gross profit margin in the prior year. The increase in the third quarter is a result of higher revenues for test and measurement products and improved profitability for antenna products.
• GAAP net income per share of $0.07 in the quarter compared to a GAAP loss of $0.10 per share in the third quarter last year. In the quarter, the Company recorded restructuring expense of $0.3 million related to the transition plan for China manufacturing, which was approximately $0.02 per share.
• 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 GAAP financial statements is provided later in the press release.
  • Non-GAAP net income per share of $0.14 in the quarter compared to a net loss per share of $0.06 in the third quarter last year.
  • Adjusted EBITDA margin as a percent of revenue of 13.1% in the quarter compared to negative 3.4% in the third quarter last year.
• $38.1 million of cash and short-term investments at September 30, 2019 and no debt.
• The Board of Directors approved a share repurchase program pursuant to which the Company may repurchase up to $7.0 million of its common stock, effective immediately through the end of 2020. Such purchases may be made from time to time at prevailing prices in the open market, by block purchases, in private transactions or otherwise. The repurchases will be funded with cash on hand.

“We are pleased with our fourth consecutive quarter of solid performance with significant improvement in revenue and earnings per share compared to a year ago,” said David Neumann, PCTEL’s CEO. “Our 5G scanning receiver business continues to drive revenue growth and gross margins in a market that is in its early stages. We are also encouraged by the number of industrial IoT applications and the need for our antenna solutions which will drive long term growth for PCTEL.”

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 [phone] (U.S. / Canada) or [phone] (International), conference ID: 3691969. 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 [phone] (U.S./Canada), or International [phone], conference ID: 3691969.

About PCTEL

PCTEL is a leading global provider of wireless technology, including purpose-built antenna systems, Industrial IoT devices, and test and measurement solutions. Trusted by our customers for over 25 years, we solve complex wireless challenges to help organizations stay connected, transform, and grow.

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, the impact of our transition plan for manufacturing in China and our 2018 cost reduction actions, the anticipated demand for certain products including those related to public safety, the Industrial IoT and the rollout of 5G, 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 defined market segments, 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 is a registered trademark of PCTEL, Inc. 2019 PCTEL, Inc. All rights reserved.

PCTEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
		(unaudited)
		September 30,				December 31,
		2019				2018
ASSETS
Cash and cash equivalents		$	5,647			$	4,329
Short-term investment securities			32,419				30,870
Accounts receivable, net of allowances of $95 and $63 at September 30, 2019 and  December 31, 2018, respectively			17,117				15,864
Inventories, net			13,577				12,848
Prepaid expenses and other assets			1,087				1,416
Total current assets			69,847				65,327
Property and equipment, net			11,109				12,138
Goodwill			3,332				3,332
Intangible assets, net			359				1,029
Other noncurrent assets			3,220				45
TOTAL ASSETS		$	87,867			$	81,871
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	4,992			$	6,083
Accrued liabilities			8,427				5,801
Total current liabilities			13,419				11,884
Long-term liabilities			2,970				381
Total liabilities			16,389				12,265
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 18,572,493 and 18,271,249  shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively			19				18
Additional paid-in capital			134,034				133,859
Accumulated deficit			(62,103	)			(64,055	)
Accumulated other comprehensive loss			(472	)			(216	)
Total stockholders’ equity			71,478				69,606
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	87,867			$	81,871

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
			Three Months Ended							Nine Months Ended
			September 30,							September 30,
			2019			2018				2019			2018
	REVENUES		$	23,630		$	18,426			$	67,720		$	61,739
	COST OF REVENUES			12,983			11,705				37,720			39,355
	GROSS PROFIT			10,647			6,721				30,000			22,384
	OPERATING EXPENSES:
	Research and development			3,214			3,028				9,223			9,021
	Sales and marketing			2,935			2,957				8,830			9,059
	General and administrative			3,214			3,029				10,381			9,172
	Amortization of intangible assets			48			85				170			333
	Restructuring expenses			295			0				295			0
	Total operating expenses			9,706			9,099				28,899			27,585
	OPERATING INCOME (LOSS)			941			(2,378	)			1,101			(5,201	)
	Other income, net			393			226				874			486
	INCOME (LOSS) BEFORE INCOME TAXES			1,334			(2,152	)			1,975			(4,715	)
	Expense (benefit) for income taxes			6			(482	)			23			(961	)
	NET INCOME (LOSS)		$	1,328		$	(1,670	)		$	1,952		$	(3,754	)
	Net Income (Loss) per Share:
	Basic		$	0.07		$	(0.10	)		$	0.11		$	(0.22	)
	Diluted		$	0.07		$	(0.10	)		$	0.11		$	(0.22	)
	Weighted Average Shares:
	Basic			17,922			17,234				17,792			17,145
	Diluted			18,181			17,234				18,105			17,145
	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,
.		2019				2018
Operating Activities:
Net income (loss)		$	1,952			$	(3,754	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			2,152				2,088
Intangible asset amortization			670				833
Stock-based compensation			3,246				2,572
Loss on disposal of property and equipment			91				11
Restructuring costs			268				(28	)
Bad debt provision			(3	)			248
Deferred tax provision			0				(868	)
Changes in operating assets and liabilities:
Accounts receivable			(1,276	)			4,968
Inventories			(838	)			(173	)
Prepaid expenses and other assets			902				425
Accounts payable			(1,019	)			255
Income taxes payable			(40	)			(39	)
Other accrued liabilities			1,485				(2,395	)
Deferred revenue			5				(43	)
Net cash provided by operating activities			7,595				4,100
Investing Activities:
Capital expenditures			(1,366	)			(2,205	)
Proceeds from disposal of property and equipment			0				14
Purchases of short-term investments			(38,393	)			(33,978	)
Redemptions/maturities of short-term investments			36,844				34,707
Net cash used in investing activities			(2,915	)			(1,462	)
Financing Activities:
Proceeds from issuance of common stock			730				686
Payment of withholding tax on stock-based compensation			(754	)			(301	)
Principle payments on finance leases			(79	)			(91	)
Cash dividends			(3,046	)			(3,007	)
Net cash used in financing activities			(3,149	)			(2,713	)
Net increase (decrease) in cash and cash equivalents			1,530				(75	)
Effect of exchange rate changes on cash			(213	)			(107	)
Cash and cash equivalents, beginning of period			4,329				5,559
Cash and Cash Equivalents, End of Period		$	5,647			$	5,377

PCTEL, INC.
REVENUE AND GROSS PROFIT BY PRODUCT LINE (unaudited)
(in thousands)
		Three Months Ended September 30, 2019													Nine Months Ended September 30, 2019
		Antenna Products			Test & Measurement Products				Corporate			Total			Antenna Products			Test & Measurement Products			Corporate			Total
REVENUES		$16,463			$	7,240			($73	)		$23,630			$47,565			$20,301			($146	)		$67,720
GROSS PROFIT		$5,712			$	4,937			($2	)		$10,647			$16,142			$13,834			$24			$30,000
GROSS PROFIT %		34.7	%			68.2	%					45.1	%		33.9	%		68.1	%					44.3	%
		Three Months Ended September 30, 2019													Nine Months Ended September 30, 2019
		Antenna Products			Test & Measurement Products				Corporate			Total			Antenna Products			Test & Measurement 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	%

Reconciliation of GAAP to non-GAAP Results (unaudited)
(in thousands except per share information)
Reconciliation of GAAP operating loss to non-GAAP operating income (loss)
			Three Months Ended September 30,				Nine Months Ended September 30,
			2019		2018		2019		2018
	Operating Income (Loss)		$941		($2,378)		$1,101		($5,201)
(a)	Add:
	Amortization of intangible assets
	-Cost of revenues		167		167		500		500
	-Operating expenses		48		85		170		333
	Restructuring		295		0		295		0
	Stock Compensation:
	-Cost of revenues		87		(50)		292		131
	-Engineering		157		165		507		462
	-Sales & marketing		158		174		521		462
	-General & administrative		515		496		1,926		1,517
			1,427		1,037		4,211		3,405
	Non-GAAP Operating Income (Loss)		$2,368		($1,341)		$5,312		($1,796)
	% of revenue		10.0%		-7.3%		7.8%		-2.9%
Reconciliation of GAAP net loss to non-GAAP net income (loss)
			Three Months Ended September 30,				Nine Months Ended September 30,
			2019		2018		2019		2018
	Net Income (Loss)		$1,328		($1,670)		$1,952		($3,754)
	Adjustments:
(a)	Non-GAAP adjustment to operating income (loss)		1,427		1,037		4,211		3,405
	Income Taxes		(215)		(393)		(472)		(856)
			1,212		644		3,739		2,549
	Non-GAAP Net Income (Loss)		$2,540		($1,026)		$5,691		($1,205)
	Non-GAAP Income (Loss) per Share:
	Basic		$0.14		($0.06)		$0.32		($0.07)
	Diluted		$0.14		($0.06)		$0.31		($0.07)
	Weighed Average Shares:
	Basic		17,922		17,234		17,792		17,145
	Diluted		18,181		17,234		18,105		17,145

This schedule reconciles the Company's GAAP operating income (loss) 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.

The adjustments to GAAP operating income (loss) (a) consist of stock compensation expense and amortization of intangible assets. The adjustments to GAAP net income (loss) include the non-GAAP adjustments to operating income (loss) as well as adjustments for (b) non-cash income tax expense.

PCTEL, Inc.
Reconciliation of GAAP operating loss to Adjusted EBITDA
(unaudited, in thousands)
					Three Months Ended September 30,				Nine Months Ended September 30,
					2019		2018		2019		2018
	Operating Income (Loss)				$941		($2,378)		$1,101		($5,201)
	Add:
	Depreciation and amortization				727		708		2,151		2,088
	Intangible amortization				215		252		670		833
	Restructuring expenses				295		0		295		0
	Stock compensation expenses				917		785		3,246		2,572
	Adjusted EBITDA				$3,095		($633)		$7,463		$292
	% of revenue				13.1%		-3.4%		11.0%		0.5%

This schedule reconciles the Company's GAAP operating income (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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