PCTEL Reports Fourth Quarter and Full Year Financial Results

PCTEL, Inc. (Nasdaq: PCTI) announced its results for the fourth quarter and full year ended December 31, 2020.

Highlights

• Revenue of $21.2 million in the quarter and $77.5 million for the year, 7.5% lower compared to the fourth quarter 2019 and 14.5% lower in the year compared to 2019. Revenue was higher by 9.5% for the test and measurement product line, and lower by 15.2% for the antenna product line compared to the fourth quarter 2019. For the year, revenue was lower by 2.0% for the test and measurement product line and lower by 19.4% for the antenna product line.

• Gross profit margin of 50.1% in the fourth quarter and 49.0% for the year, down 0.2% compared to the gross profit margin in the fourth quarter 2019 and up 3.2% in the year compared to 2019. The gross profit percentage in the fourth quarter reflects a higher mix of higher margin test and measurement products, offsetting lower gross margin percentages for both test and measurement products and antenna products.

• GAAP net income per diluted share of $0.10 in the fourth quarter and $0.18 in the year compared to GAAP net income per share of $0.10 in the fourth quarter 2019 and $0.21 for the year in 2019.

• Non-GAAP net income and adjusted EBITDA are metrics the Company uses to measure 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 diluted share of $0.12 in the fourth quarter and $0.31 for the year compared to Non-GAAP net income per diluted share of $0.16 in the fourth quarter 2019 and $0.47 for the year in 2019.

  • Adjusted EBITDA as a percent of revenue of 15.1% in the fourth quarter and 11.7% in the year compared to 16.3% in the fourth quarter and 12.4% for the year in 2019.

• $41.0 million of cash and investments (including long-term investments) and no debt at December 31, 2020 compared to $41.3 million and no debt at September 30, 2020.

“We’re pleased with the strong performance for both our antenna and scanning receiver product lines in the fourth quarter. We saw improvements in revenue and earnings in the second half of the year and incoming orders were at the highest level since the second quarter of 2019,” said David Neumann, PCTEL’s CEO. “We expect demand to increase for our antennas, IoT devices and 5G solutions through the year as market conditions improve.”

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] (United States/Canada) or [phone] (International), PIN number: 528059. The call will also be webcast at https://investor.pctel.com/news-events/webcasts-events.

REPLAY: A replay will be available for two weeks after the call on either the website listed above or by calling [phone] (United States /Canada), or [phone] (International), PIN number: 40038.

About PCTEL

PCTEL is a leading global provider of wireless technology, including purpose-built Industrial IoT devices, antenna systems, 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 about the Company’s expectations regarding the impact of the COVID-19 pandemic; our future financial performance; growth of our antenna solutions and test and measurement businesses; the impact of our transition plan for manufacturing inside and outside China; the anticipated demand for certain products including those related to public safety, Industrial IoT, 5G and intelligent transportation; 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 disruptions to the Company’s workforce, operations, supply chain and customer demand caused by the COVID-19 pandemic and impact of the pandemic on the Company’s results of operations, financial condition and stock price; the impact of data densification and IoT on capacity and coverage demand; the impact of 5G; customer demand and growth generally in the Company’s defined market segments, including demand from customers in China; the impact of the uncertainty regarding renewal of our lease of our Tianjin, China manufacturing premises; the impact of tariffs on certain imports from China; and the Company’s ability to grow its 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. 2021 PCTEL, Inc. All rights reserved.

PCTEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except share data)
		(unaudited)
		December 31, 2020				December 31, 2019
ASSETS
Cash and cash equivalents		$	5,761			$	7,094
Short-term investment securities			30,582				32,556
Accounts receivable, net of allowances of $113 and $104 at December 31, 2020 and December 31, 2019, respectively			16,601				17,380
Inventories, net			9,984				11,935
Prepaid expenses and other assets			1,685				1,842
Total current assets			64,613				70,807
Property and equipment, net			12,505				11,985
Long-term investment securities			4,640				0
Goodwill			3,332				3,332
Intangible assets, net			0				144
Other noncurrent assets			2,441				2,969
TOTAL ASSETS		$	87,531			$	89,237
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	4,430			$	3,190
Accrued liabilities			7,316				9,382
Total current liabilities			11,746				12,572
Long-term liabilities			4,387				3,315
Total liabilities			16,133				15,887
Stockholders’ equity:
Common stock, $0.001 par value, 50,000,000 and 100,000,000 shares authorized at
December 31, 2020 and December 31, 2019, respectively, and 18,429,350 and 18,611,289
shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively			18				19
Additional paid-in capital			128,269				133,954
Accumulated deficit			(56,907	)			(60,305	)
Accumulated other comprehensive income (loss)			18				(318	)
Total stockholders’ equity			71,398				73,350
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	87,531			$	89,237

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
			Three Months Ended December 31,							Years Ended December 31,
			2020				2019			2020			2019
	REVENUES		$	21,185			$	22,898		$	77,456		$	90,617
	COST OF REVENUES			10,569				11,385			39,529			49,105
	GROSS PROFIT			10,616				11,513			37,927			41,512
	OPERATING EXPENSES:
	Research and development			3,204				3,048			12,519			12,272
	Sales and marketing			2,924				3,424			11,103			12,254
	General and administrative			2,522				3,072			10,828			13,452
	Amortization of intangible assets			0				49			32			219
	Restructuring expenses			0				213			124			507
	Total operating expenses			8,650				9,806			34,606			38,704
	OPERATING INCOME			1,966				1,707			3,321			2,808
	Other (expense) income, net			(110	)			107			106			982
	INCOME BEFORE INCOME TAXES			1,856				1,814			3,427			3,790
	Expense for income taxes			4				16			29			40
	NET INCOME		$	1,852			$	1,798		$	3,398		$	3,750
	Net Income per Share:
	Basic		$	0.10			$	0.10		$	0.19		$	0.21
	Diluted		$	0.10			$	0.10		$	0.18		$	0.21
	Weighted Average Shares:
	Basic			18,149				18,034			18,207			17,853
	Diluted			18,297				18,461			18,399			18,159
	Cash dividend per share		$	0.055			$	0.055		$	0.220		$	0.220

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(unaudited, in thousands)
		Years Ended December 31,
		2020				2019
Operating Activities:
Net income		$	3,398			$	3,750
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			3,019				2,870
Intangible asset amortization			144				885
Stock-based compensation			2,479				4,133
Loss on disposal of property and equipment			21				97
Restructuring costs			(29	)			(33	)
Bad debt recovery			(151	)			(2	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			960				(1,532	)
Inventories			2,076				873
Prepaid expenses and other assets			638				385
Accounts payable			1,086				(2,841	)
Income taxes payable			(10	)			(22	)
Other accrued liabilities			(231	)			2,263
Deferred revenue			1				92
Net cash provided by operating activities			13,401				10,918
Investing Activities:
Capital expenditures			(4,093	)			(2,263	)
Purchase of investments			(49,701	)			(48,245	)
Redemptions/maturities of short-term investments			47,035				46,559
Net cash used in investing activities			(6,759	)			(3,949	)
Financing Activities:
Proceeds from issuance of common stock			870				1,183
Proceeds from Paycheck Protection Program Loan			3,500				0
Repayment of Paycheck Protection Program Loan			(3,500	)			0
Payment of withholding tax on stock-based compensation			(1,119	)			(1,152	)
Principle payments on finance leases			(78	)			(99	)
Purchase of common stock from repurchase program			(3,808	)			0
Cash dividends			(4,108	)			(4,068	)
Net cash used in financing activities			(8,243	)			(4,136	)
Net (decrease) increase in cash and cash equivalents			(1,601	)			2,833
Effect of exchange rate changes on cash			268				(68	)
Cash and cash equivalents, beginning of period			7,094				4,329
Cash and Cash Equivalents, End of Period		$	5,761			$	7,094

PCTEL, INC.
REVENUE AND GROSS PROFIT BY PRODUCT LINE (unaudited)
(in thousands)
		Three Months Ended December 31, 2020												Year Ended December 31, 2020
		Antenna Products			Test & Measurement Products			Corporate			Total			Antenna Products			Test & Measurement Products			Corporate			Total
REVENUES		$12,844			$8,554			($213	)		$21,185			$50,540			$27,565			($649	)		$77,456
GROSS PROFIT		$4,437			$6,135			$44			$10,616			$17,665			$20,244			$18			$37,927
GROSS PROFIT %		34.5	%		71.7	%					50.1	%		35.0	%		73.4	%					49.0	%
		Three Months Ended December 31, 2019												Year Ended December 31, 2019
		Antenna Products			Test & Measurement Products			Corporate			Total			Antenna Products			Test & Measurement Products			Corporate			Total
REVENUES		$15,144			$7,814			($60	)		$22,898			$62,708			$28,115			($206	)		$90,617
GROSS PROFIT		$5,700			$5,806			$7			$11,513			$21,841			$19,640			$31			$41,512
GROSS PROFIT %		37.6	%		74.3	%					50.3	%		34.8	%		69.9	%					45.8	%

Reconciliation of GAAP to non-GAAP Results (unaudited)
(in thousands except per share information)
Reconciliation of GAAP operating income to non-GAAP operating income
			Three Months Ended December 31,								Year Ended December 31,
			2020				2019				2020				2019
	Operating Income		$	1,966			$	1,707			$	3,321			$	2,808
(a)	Add:
	Amortization of intangible assets
	-Cost of revenues			0				167				111				666
	-Operating expenses			0				49				32				219
	Restructuring			0				213				124				507
	Stock Compensation:
	-Cost of revenues			65				116				272				408
	-Engineering			128				145				530				652
	-Sales & marketing			130				151				559				673
	-General & administrative			161				475				1,119				2,401
				484				1,316				2,747				5,526
	Non-GAAP Operating Income		$	2,450			$	3,023			$	6,068			$	8,334
	% of revenue			11.6	%			13.2	%			7.8	%			9.2	%
Reconciliation of GAAP net income to non-GAAP net income
			Three Months Ended December 31,								Year Ended December 31,
			2020				2019				2020				2019
	Net Income		$	1,852			$	1,798			$	3,398			$	3,750
	Adjustments:
(a)	Non-GAAP adjustments to operating income			484				1,316				2,747				5,526
	Income Taxes			(183	)			(233	)			(465	)			(705	)
				301				1,083				2,282				4,821
	Non-GAAP Net Income		$	2,153			$	2,881			$	5,680			$	8,571
	Non-GAAP Income per Share:
	Basic		$	0.12			$	0.16			$	0.31			$	0.48
	Diluted		$	0.12			$	0.16			$	0.31			$	0.47
	Weighted Average Shares:
	Basic			18,149				18,034				18,207				17,853
	Diluted			18,297				18,461				18,399				18,159

This schedule reconciles the Company's GAAP operating income to its non-GAAP operating 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 income (a) consist of stock compensation expense and amortization of intangible assets. The adjustments to GAAP net income include the non-GAAP adjustments to operating income as well as adjustments for (b) non-cash income tax expense.

PCTEL, Inc.
Reconciliation of GAAP operating income to Adjusted EBITDA
(unaudited, in thousands)
		Three Months Ended December 31,								Year Ended December 31,
			2020				2019				2020				2019
Operating Income		$	1,966			$	1,707			$	3,321			$	2,808
Add:
Depreciation and amortization			759				719				3,019				2,870
Intangible amortization			0				216				143				885
Restructuring expenses			0				213				124				507
Stock compensation expenses			484				887				2,480				4,134
Adjusted EBITDA		$	3,209			$	3,742			$	9,087			$	11,204
% of revenue			15.1	%			16.3	%			11.7	%			12.4	%

This schedule reconciles the Company's GAAP operating income 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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