PCTEL Reports Second Quarter 2022 Financial Results

August 09, 2022 at 16:01 PM EDT

Revenue increased 15% year-over-year and achieved gross profit margin of 45.8%

Strong execution for both product lines through significant orders for test & measurement products and the launch of an innovative new antenna portfolio

PCTEL, Inc. (Nasdaq: PCTI), a leading global provider of wireless technology solutions, announced its results for the second quarter ended June 30, 2022.

Recent Highlights

Revenues increased 15.2% year-over-year to $25.0 million
GAAP gross profit margin of 45.8%
GAAP net income of $0.4 million or $0.02 per diluted share
Non-GAAP net income of $1.8 million or $0.10 per diluted share
Adjusted EBITDA increased 18% year-over-year to $2.6 million
Launched new 5G, 10-in-1 combination antenna portfolio for rail, fleet, and mass transit, supporting the Company’s commitment to innovative product development
Received multimillion dollar orders from two of its largest OEM customers for the Gflex^® and HBflex™ scanning receivers

David Neumann, Chief Executive Officer of PCTEL, Inc., commented, “We are pleased to have delivered strong results in the quarter, driven by double-digit top-line expansion and operational efficiencies, both of which contributed to our solid performance. We expect positive momentum to continue and are keenly focused on executing on our three key growth strategies: launching innovative wireless products, increasing market share by providing more components of the wireless ecosystem, and expanding and leveraging distribution channels.”

Neumann continued, “We recently launched a 10-in-1 combination antenna designed to perform in harsh conditions and therefore useful in numerous end markets. We have also made great progress within our test & measurement product line, securing multimillion dollar OEM orders for our leading products, the Gflex and HBflex, and launching a new product, SeeHawk™ Monitor, that will continuously monitor public safety RF performance. Finally, we have made significant advances in expanding our distribution channels globally, building on our strong foundation in the Americas with the acquisition of Smarteq, that is now contributing products for distribution in both our European and American channels. We have momentum in innovation, market penetration, and distribution channel leverage, and will continue to execute on our growth strategy in the coming quarters.”

Second Quarter Financial Results

Revenue increased 15.2% to $25.0 million, compared to $21.7 million in the second quarter of 2021.
- Antennas and IIoT Devices revenue was $17.6 million, an increase of 12.8% year-over-year due to an increase in revenues related to antennas for fleet applications and a full quarter of revenue recognized from Smarteq, which was acquired at the end of April 2021.
- Test & Measurement products revenue was $7.4 million, an increase of 15.9% year-over-year due to higher revenues for 5G products in the U.S.
GAAP gross margin was 45.8% compared to 45.9% for the second quarter of 2021. Non-GAAP gross margin was 46.0% compared to 47.5% in the second quarter of 2021 due to lower gross margin for antennas and devices.
GAAP operating expenses were $11.1 million compared to $10.1 million in the second quarter of 2021. Non-GAAP operating expenses were $9.7 million compared to $8.8 million in the second quarter of 2021. Operating expenses include a full quarter of expenses related to Smarteq in the second quarter 2022 versus two months of expenses in the second quarter 2021.
GAAP net income was $0.4 million or diluted earnings per share of $0.02 compared to GAAP net loss of $(0.2) million or $(0.01) per share in the second quarter of 2021. Restructuring expenses related to the manufacturing transition in China were $0.02 per share in the second quarter 2022 compared to $0.00 in the second quarter 2021.
Non-GAAP net income was $1.8 million or $0.10 diluted earnings per share compared to $1.3 million or $0.07 in the second quarter of 2021.
Adjusted EBITDA increased by 18% to $2.6 million compared to $2.2 million in the second quarter of 2021.
Cash, cash equivalents and investments were $28.3 million, an increase of approximately $0.6 million as compared to the first quarter of 2022 as free cash flow of $1.6 million offset cash used in financing activities of $0.6 million.

Third Quarter 2022 Outlook

The following ranges represent our current expectations for the third quarter based upon available data and estimates.

Revenue: $25.5 million to $26.5 million
Non-GAAP Gross Margin: 44% to 45%
Non-GAAP EPS: $0.09 to $0.11

Kevin McGowan, Chief Financial Officer of PCTEL, added, “We remain confident in our ability to execute on our strategic growth initiatives despite the impact of macro-environmental and supply chain challenges, which our team continues to mitigate through careful supply chain management. Our third quarter outlook reflects our backlog across both our antenna and test & measurement product lines and solid demand for our wireless products.”

CONFERENCE CALL / WEBCAST

PCTEL’s management team will discuss the Company’s results today at 4:30 p.m. ET. The call will also be webcast at https://investor.pctel.com/news-events/webcasts-events. The call can also be accessed by dialing (877) 545-0523 (United States/Canada) or (973) 528-0016 (International), access code: 556919.

Replay: A replay will be available for two weeks after the call on either the website listed above or by calling (877) 481-4010 (United States/Canada), or (919) 882-2331 (International), access code: 45956.

About PCTEL

PCTEL is a leading global provider of wireless technology solutions, including purpose-built Industrial IoT devices, antenna systems, and test and measurement products. 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 our future financial performance; growth of our antenna and Industrial IoT business and our test & measurement business through execution of our three growth strategies; the ability of the Company to continue to innovate new products for its current product lines; the impact of the Smarteq acquisition on the Company’s ability to offer additional products, expand in the European market and through distribution channels, and generate revenue; the anticipated demand for certain products, including those related to public safety, Industrial IoT, 5G (e.g., the Gflex) and intelligent transportation; and the anticipated growth of public and private wireless systems are forward-looking statements. 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 higher than expected inflation; an economic recession in the Americas or globally; the impact of the ongoing COVID-19 or a subsequent pandemic, the disruptions to the Company’s workforce, operations, supply chain and customer demand caused by the COVID-19 pandemic and the impact of the pandemic and ensuing supply chain disruption 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; the Company’s ability to access the government market and create demand for its products; the Company’s ability to expand its European presence and benefit from additional antenna and Industrial IoT product offerings from Smarteq; 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, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except share data)


	June 30,			December 31,
	2022			2021
ASSETS
Cash and cash equivalents	$	5,797		$	8,192
Short-term investment securities		22,276			22,562
Accounts receivable, net of allowances of $79 and $64 at June 30, 2022 and December 31, 2021, respectively		19,311			18,905
Inventories, net		14,189			13,691
Prepaid expenses and other assets		1,774			1,747
Total current assets		63,347			65,097

Property and equipment, net		10,784			11,949
Long-term investment securities		250			0
Goodwill		5,986			6,334
Intangible assets, net		1,231			1,579
Other noncurrent assets		2,314			2,438
TOTAL ASSETS	$	83,912		$	87,397
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	5,630		$	5,360
Accrued liabilities		9,867			11,117
Total current liabilities		15,497			16,477
Long-term liabilities		3,732			3,999
Total liabilities		19,229			20,476
Stockholders’ equity:
Common stock, $0.001 par value, 50,000,000 shares authorized at
June 30, 2022 and December 31, 2021, respectively, and 18,677,851 and 18,238,030
shares issued and outstanding at June 30, 2022 and December 31, 2021		19			18
Additional paid-in capital		123,844			123,998
Accumulated deficit		(57,888	)		(56,735	)
Accumulated other comprehensive loss		(1,292	)		(360	)
Total stockholders’ equity		64,683			66,921
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	83,912		$	87,397

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2022		2021			2022			2021

REVENUES	$	24,976	$	21,681		$	47,518		$	39,388
COST OF REVENUES		13,549		11,739			26,758			21,108
GROSS PROFIT		11,427		9,942			20,760			18,280
OPERATING EXPENSES:
Research and development		3,356		3,221			6,605			6,416
Sales and marketing		3,908		3,388			7,310			6,151
General and administrative		3,451		3,335			6,694			6,411
Amortization of intangible assets		67		55			138			55
Restructuring expenses		317		60			1,252			60
Total operating expenses		11,099		10,059			21,999			19,093
OPERATING INCOME (LOSS)		328		(117	)		(1,239	)		(813	)
Other income (expense), net		114		(45	)		125			(6	)
INCOME (LOSS) BEFORE INCOME TAXES		442		(162	)		(1,114	)		(819	)
Expense for income taxes		31		7			39			12
NET INCOME (LOSS)	$	411	$	(169	)	$	(1,153	)	$	(831	)

Net Income (Loss) per Share:
Basic	$	0.02	$	(0.01	)	$	(0.06	)	$	(0.05	)
Diluted	$	0.02	$	(0.01	)	$	(0.06	)	$	(0.05	)
Weighted Average Shares:
Basic		18,157		18,241			18,065			18,158
Diluted		18,157		18,241			18,065			18,158

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)

	Six Months Ended June 30,
	2022			2021
Operating Activities:
Net loss	$	(1,153	)	$	(831	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		1,562			1,493
Intangible asset amortization		177			70
Stock-based compensation		1,860			1,657
Loss on disposal of property and equipment		7			3
Restructuring costs		(328	)		45
Bad debt provision		17			(34	)
Changes in operating assets and liabilities:
Accounts receivable		(614	)		1,260
Inventories		(715	)		(1,121	)
Prepaid expenses and other assets		100			532
Accounts payable		435			(630	)
Income taxes payable		(1	)		(18	)
Other accrued liabilities		(900	)		624
Deferred revenue		(126	)		63
Net cash provided by operating activities		321			3,113
Investing Activities:
Capital expenditures		(420	)		(1,266	)
Purchases of investments		(15,587	)		(16,058	)
Redemptions/maturities of short-term investments		15,623			26,278
Cash paid for acquisition, net of cash acquired		0			(6,277	)
Net cash (used in) provided by investing activities		(384	)		2,677
Financing Activities:
Proceeds from issuance of common stock		404			418
Payment of withholding tax on stock-based compensation		(396	)		(782	)
Principal payments on finance leases		(37	)		(35	)
Purchase of common stock from repurchase program		0			(733	)
Cash dividends		(2,021	)		(2,018	)
Net cash used in financing activities		(2,050	)		(3,150	)

Net (decrease) increase in cash and cash equivalents		(2,113	)		2,640
Effect of exchange rate changes on cash		(282	)		24
Cash and cash equivalents, beginning of period		8,192			5,761
Cash and Cash Equivalents, End of Period	$	5,797		$	8,425

Reconciliation of GAAP to Non-GAAP results (unaudited)
(in thousands except per share information)

Reconciliation of GAAP operating income (loss) to Non-GAAP operating income

		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
	Operating Income (Loss)	$328		($117	)	($1,239	)	($813	)

(a)	Add:
	Amortization of inventory step-up to fair value	0		283		0		283
	Amortization of intangible assets
	-Cost of revenues	19		15		39		15
	-Operating expenses	67		55		138		55
	Restructuring expenses	317		60		1,252		60
	Stock compensation expenses:
	-Cost of revenues	31		65		96		134
	-Research and development	172		140		308		282
	-Sales & marketing	255		226		452		386
	-General & administrative	628		608		1,004		855
	Acquisition related expenses	0		121		86		304
		1,489		1,573		3,375		2,374
	Non-GAAP Operating Income	$1,817		$1,456		$2,136		$1,561
	% of revenue	7.3	%	6.7	%	4.5	%	4.0	%

Reconciliation of GAAP net loss to Non-GAAP net income

		Three Months Ended March 31,				Six Months Ended March 31,
		2022		2021		2022		2021
	Net Income (Loss)	$411		($169	)	($1,153	)	($831	)

	Adjustments:
(a)	Non-GAAP adjustments to operating loss	1,489		1,573		3,375		2,374
(b)	Income Taxes	(123	)	(106	)	(142	)	(112	)
		1,366		1,467		3,233		2,262
	Non-GAAP Net Income	$1,777		$1,298		$2,080		$1,431

	Non-GAAP Income per Share:
	Basic	$0.10		$0.07		$0.12		$0.08
	Diluted	$0.10		$0.07		$0.11		$0.08

	Weighed Average Shares:
	Basic	18,157		18,241		18,065		18,158
	Diluted	18,157		18,191		18,122		18,158

	This schedule reconciles the Company's GAAP operating income (loss) 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 (loss) (a) consist of stock compensation expense, amortization of intangible assets, restructuring expenses, and acquisition related expenses. 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.
REVENUE AND GROSS PROFIT BY PRODUCT LINE (unaudited)
Reconciliation of GAAP Gross Profit percentage to Non-GAAP Gross Profit percentage
(in thousands)

	Three Months Ended June 30, 2022								Six Months Ended June 30, 2022
	Antennas and Industrial IoT Devices		Test & Measurement Products		Corporate		Total		Antennas and Industrial IoT Devices		Test & Measurement Products		Corporate		Total
REVENUES	$17,555		$7,431		($10	)	$24,976		$34,657		$13,014		($153	)	$47,518

GROSS PROFIT	$5,626		$5,759		$42		$11,427		$10,873		$9,921		($34	)	$20,760

GAAP GROSS PROFIT %	32.0	%	77.5	%			45.8	%	31.4	%	76.2	%			43.7	%

Non-GAAP adjustments:
Amortization of inventory step-up	0.0	%	0.0	%			0.0	%	0.0	%	0.0	%			0.0	%
Amortization of intangible assets	0.1	%	0.0	%			0.1	%	0.1	%	0.0	%			0.1	%
Stock compensation expenses	0.3	%	-0.2	%			0.1	%	0.2	%	0.2	%			0.2	%
Non-GAAP GROSS PROFIT %	32.4	%	77.3	%			46.0	%	31.7	%	76.4	%			44.0	%

	Three Months Ended June 30, 2021								Six Months Ended June 30, 2021

	Antennas and Industrial IoT Devices		Test & Measurement Products		Corporate		Total		Antennas and Industrial IoT Devices		Test & Measurement Products		Corporate		Total
REVENUES	$15,562		$6,414		($295	)	$21,681		$27,285		$12,619		($516	)	$39,388

GROSS PROFIT	$5,175		$4,834		($67	)	$9,942		$8,922		$9,422		($64	)	$18,280

GROSS PROFIT %	33.3	%	75.4	%			45.9	%	32.7	%	74.7	%			46.4	%

Non-GAAP adjustments:
Amortization of inventory step-up	1.8	%	0.0	%			1.2	%	1.0	%	0.0	%			0.7	%
Amortization of intangible assets	0.1	%	0.0	%			0.1	%	0.1	%	0.0	%			0.0	%
Stock compensation expenses	0.2	%	0.5	%			0.3	%	0.2	%	0.5	%			0.4	%
Non-GAAP GROSS PROFIT %	35.4	%	75.9	%			47.5	%	34.0	%	75.2	%			47.5	%

The Corporate column includes the elimination of intercompany revenues between Antennas and Industrial IoT Devices and Test & Measurement Products and other licensing revenues.

This schedule reconciles the Company's GAAP gross profit percentage to its Non-GAAP gross profit percentage. 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 adjustments on this schedule consist of amortization of intangible assets and stock compensation expenses.

PCTEL, Inc.
Reconciliation of GAAP operating loss to adjusted EBITDA (unaudited)
(in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Operating income (loss)	$328		($117	)	($1,239	)	($813	)

Add:
Amortization of inventory step-up to fair value	0		283		0		283
Depreciation and amortization	781		751		1,562		1,493
Intangible amortization	86		70		177		70
Restructuring expenses	317		60		1,252		60
Stock compensation expenses	1,086		1,039		1,860		1,657
Acquisition related expenses	0		121		86		304
Adjusted EBITDA	$2,598		$2,207		$3,698		$3,054
% of revenue	10.4	%	10.2	%	7.8	%	7.8	%

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 and extraordinary expenses. The adjustments on this schedule consist of depreciation, amortization of intangible assets, stock compensation expenses, restructuring expenses, and acquisition related expenses.

PCTEL, INC.
Reconciliation of GAAP operating expenses to Non-GAAP operating expenses (unaudited)
(in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
GAAP operating expenses	$11,099		$10,059		$21,999		$19,093
Stock compensation expenses	(1,055	)	(974	)	(1,764	)	(1,523	)
Amortization of intangible assets	(67	)	(55	)	(138	)	(55	)
Restructuring expenses	(317	)	(60	)	(1,252	)	(60	)
Acquisition related expenses	0		(121	)	(86	)	(304	)
Non-GAAP Operating expenses	$9,660		$8,849		$18,759		$17,151

This schedule reconciles the Company's GAAP operating expenses to its Non-GAAP operating expenses. 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 adjustments on this schedule consist of amortization of intangible assets, stock compensation expenses, restructuring expenses, and acquisition related expenses.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220809005896/en/

Contacts

PCTEL Company Contacts

Kevin McGowan

CFO

PCTEL, Inc.

(630) 339-2051

Suzanne Cafferty

Vice President, Product Management & Global Marketing

PCTEL, Inc.

(630) 339-2107

public.relations@pctel.com

PCTEL Investor Relations Contact

Lisa Fortuna or Ashley Gruenberg

Alpha IR Group

312-445-2870

PCTI@alpha-ir.com