PCTEL Achieves $24.2 Million in Second Quarter Revenue

August 2, 2016

PCTEL Achieves $24.2 Million in Second Quarter Revenue 75.9 KB

Increases to $0.08 Non-GAAP Earnings Per Share -->

BLOOMINGDALE, Ill.--(BUSINESS WIRE)-- PCTEL, Inc. (NASDAQ:PCTI), a leader in Performance Critical Telecom solutions, announced its 2016 second quarter results.

Quarter Highlights

$24.2 million in revenue for the quarter, a decrease of 12 percent from the same period last year. The Company saw a 15 percent sequential quarterly increase in revenue from the first quarter.

GAAP gross profit margin of 38 percent in the quarter compared to 34 percent for the same period last year.

GAAP operating margin of negative 22 percent for the quarter compared to operating margin of negative six percent for the same period last year. During the quarter the company recorded a non-cash impairment of its acquired intangible assets related to its engineering services of $4.7 million, or 19 percent of revenue.

GAAP net loss of $11.1 million for the quarter, or $(0.69) per diluted share compared to net income of $347,000, or $0.02 per diluted share for the same period last year. In addition to the $4.7 million impairment of intangible assets, the Company recorded expense for the establishment of a $7.6 million valuation allowance on the Company's U.S. based deferred tax assets to address a growing shift in the Company's income outside of the United States that began this quarter. The after tax impact of the charges aggregate to $0.66 per diluted share.

Non-GAAP operating profit and net income are measures the company uses to reflect the results of its core earnings. The Company's reporting of Non-GAAP net income excludes expenses for restructuring, gain or loss on sale of assets, stock based compensation, amortization and impairment of intangible assets and goodwill related to the Company's acquisitions, and non-cash related income tax expense.

Non-GAAP gross margin of 39 percent in the quarter, compared to 34 percent for the same period last year.

Non-GAAP operating margin of six percent in the quarter, compared to one percent for the same period last year.

Non-GAAP net income of $1.3 million, or $0.08 per diluted share in the quarter, compared to $295,000 or $0.02 per diluted share in the same period last year.

$29.3 million of cash and short-term investments at June 30, 2016, an increase of approximately $1.4 million from the preceding quarter. During the quarter the Company generated free cash flow of approximately $2.4 million and paid a dividend of $853,000.

"Scanning receiver sales, engineering and staffing services, and core antenna products all posted sequential quarterly gains this past quarter," said Marty Singer, PCTEL's Chairman and CEO. "This growth, combined with our success in reducing operating expenses to 2013 levels, resulted in an eleven cent improvement in non-GAAP earnings compared to our first quarter. We also made strong progress in reducing our inventory across both businesses and launching new products, including our new SeeHawk Engage™ product. We look forward to a strong second half," added Singer.

CONFERENCE CALL / WEBCAST

PCTEL's management team will discuss the Company's results today at 5:15 PM ET. The call can be accessed by dialing (888) 782-7027 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 47815074. The call will also be webcast at http://investor.pctel.com/events.cfm.

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: 47815074.

About PCTEL

PCTEL, a global provider of RF expertise, delivers Performance Critical Telecom solutions to the wireless industry. PCTEL benchmarks and optimizes wireless networks with its data tools, engineering services, and RF products. PCTEL's antennas and site solutions are vital elements for networks serving SCADA, fleet management, health care, public safety, and education.

PCTEL's RF Solutions products and services improve the performance of wireless networks globally. PCTEL's performance critical products include its SeeGull MXflex®, IBflex®, and EXflex® scanning receivers. PCTEL tools also include CW transmitters, signal analyzers, and the SeeWave® interference locating system. PCTEL's SeeHawk® software portfolio includes SeeHawk® Touch, SeeHawk® Collect, SeeHawk Engage™, SeeHawk Engage+™, SeeHawk Engage™ Lite, SeeHawk™ Studio, and SeeHawk™ Analytics. PCTEL provides specialized staffing, interference management and performance critical RF engineering services for wireless networks.

PCTEL Connected Solutions designs and delivers performance critical antennas and site solutions for public and private wireless networks globally. PCTEL's performance critical antenna solutions include high rejection and high performance GNSS products and innovative broadband LTE and Wi-Fi solutions for fixed and mobile applications, including transit, in-building, and small cell networks. In addition, PCTEL provides a broad portfolio of LMR and Yagi antennas. We leverage our design, logistics, and support capabilities to deliver performance critical antenna and site solutions into carrier, railroad, utility applications, oil and gas, and other vertical markets.

PCTEL's products are sold worldwide through direct and indirect channels. For more information, please visit the company's web sites: pctel.com, antenna.com, or rfsolutions.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, new products and features, growth of our Connected Solutions and RF Solutions businesses, and anticipated demand for our network analytics, subject matter expert staffing and in-building engineering services 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 customer demand for these types of products and services generally, growth and continuity in the utilities, fleet, and public safety markets and small cell deployments, PCTEL's ability to successfully grow Engage and its wireless products business generally, and its ability to implement new technologies and obtain protection for the related intellectual property. 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,
	2016			2015
ASSETS

Cash and cash equivalents	$	7,305		$	7,055
Short-term investment securities		21,973			24,728
Accounts receivable, net of allowance for doubtful accounts of $264 and $314 at June 30, 2016 and December 31, 2015, respectively		18,191			21,001
Inventories, net		15,190			17,596
Prepaid expenses and other assets		1,448			1,586
Total current assets		64,107			71,966

Property and equipment, net		13,615			13,839
Goodwill		3,332			3,332
Intangible assets, net		5,141			11,378
Deferred tax assets, net		8,949			13,155
Other noncurrent assets		38			40
TOTAL ASSETS	$	95,182		$	113,710

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable	$	4,719		$	6,735
Accrued liabilities		5,792			6,190
Total current liabilities		10,511			12,925

Other long-term liabilities		473			388

Total liabilities		10,984			13,313

Stockholders' equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 17,324,506 and 17,654,236 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively		17			18
Additional paid-in capital		133,880			135,714
Accumulated deficit		(49,572	)		(35,320	)
Accumulated other comprehensive loss		(127	)		(15	)
Total stockholders' equity		84,198			100,397

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	95,182		$	113,710

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015

REVENUES	$	24,243		$	27,625		$	45,317		$	53,951
COST OF REVENUES		15,006			18,276			29,029			34,432
GROSS PROFIT		9,237			9,349			16,288			19,519
OPERATING EXPENSES:
Research and development		2,523			2,904			5,130			5,642
Sales and marketing		3,414			3,425			6,529			6,955
General and administrative		3,305			3,302			6,267			6,665
Amortization of intangible assets		577			943			1,180			1,578
Impairment of intangible assets		4,724			0			4,724			0
Restructuring expenses		24			440			541			440
Total operating expenses		14,567			11,014			24,371			21,280
OPERATING LOSS		(5,330	)		(1,665	)		(8,083	)		(1,761	)
Other income, net		8			2,205			14			2,249
(LOSS) INCOME BEFORE INCOME TAXES		(5,322	)		540			(8,069	)		488
Expense for income taxes		5,751			193			4,460			174
NET (LOSS) INCOME	$	(11,073	)	$	347		$	(12,529	)	$	314

Net (Loss) Income per Share:
Basic	$	(0.69	)	$	0.02		$	(0.78	)	$	0.02
Diluted	$	(0.69	)	$	0.02		$	(0.78	)	$	0.02

Weighted Average Shares:
Basic		15,979			18,257			16,149			18,284
Diluted		15,979			18,408			16,149			18,498

Cash dividend per share	$	0.05		$	0.05		$	0.10		$	0.10

PCTEL, INC.
P&L INFORMATION BY SEGMENT (unaudited)
(in thousands)


	Three Months Ended June 30, 2016										Six Months Ended June 30, 2016
	Connected										Connected
	Solutions		RF Solutions			Corporate		Total			Solutions		RF Solutions			Corporate		Total

REVENUES	$	15,781	$	8,507		($45	)	$	24,243		$	30,480	$	14,942		($105	)	$	45,317

GROSS PROFIT		4,941		4,286		10			9,237			9,265		7,016		7			16,288

OPERATING (LOSS) INCOME	$	1,792		($4,372	)	($2,750	)		($5,330	)	$	3,099		($5,901	)	($5,281	)		($8,083	)


	Three Months Ended June 30, 2015										Six Months Ended June 30, 2015
	Connected										Connected
	Solutions		RF Solutions			Corporate		Total			Solutions		RF Solutions			Corporate		Total

REVENUES	$	18,100	$	9,583		($58	)	$	27,625		$	35,454	$	18,634		($137	)	$	53,951

GROSS PROFIT		5,417		3,931		1			9,349			10,861		8,647		11			19,519

OPERATING (LOSS) INCOME	$	1,498		($347	)	($2,816	)		($1,665	)	$	3,187	$	786		($5,734	)		($1,761	)

Reconciliation of GAAP to non-GAAP Results (unaudited)
(in thousands except per share information)

Reconciliation of GAAP operating loss to non-GAAP operating income (a)

		Three Months Ended June 30,						Six Months Ended June 30,
		2016			2015			2016			2015

	Operating Loss		($5,330	)		($1,665	)		($8,083	)		($1,761	)

(a)	Add:
	Amortization of intangible assets
	-Cost of revenues		167			242			333			261
	-Operating expenses		577			943			1,180			1,578
	Impairment of intangible assets		4,724			0			4,724			0
	Restructuring:
	-Cost of revenues		0			114			0			114
	-Operating expenses		24			440			541			440
	TelWorx investigation:
	-General & Administrative		(1	)		54			5			91
	Stock Compensation:
	-Cost of revenues		133			56			264			129
	-Engineering		175			30			342			145
	-Sales & Marketing		183			(18	)		328			140
	-General & Administrative		893			173			1,309			328
			6,875			2,034			9,026			3,226

	Non-GAAP Operating Income	$	1,545		$	369		$	943		$	1,465
	% of revenue		6.4	%		1.3	%		2.1	%		2.7	%

Reconciliation of GAAP net loss to non-GAAP net (loss) income (b)

		Three Months Ended June 30,						Six Months Ended June 30,
		2016			2015			2016			2015

	Net Loss (Income)		($11,073	)	$	347			($12,529	)	$	314

	Adjustments:
(a)	Non-GAAP adjustment to operating (loss) income		6,875			2,034			9,026			3,226
(b)	Other income related to SEC investigation of TelWorx		1			(54	)		(5	)		(90	)
(b)	Legal Settlement - Amendment to Nexgen APA		0			(2,160	)		0			(2,160	)
(b)	Income Taxes		5,471			128			4,289			(90	)
			12,347			(52	)		13,310			886
	Non-GAAP Net Income	$	1,274		$	295		$	781		$	1,200

	Non-GAAP Earning per Share:
	Basic	$	0.08		$	0.02		$	0.05		$	0.07
	Diluted	$	0.08		$	0.02		$	0.05		$	0.06

	Weighed Average Shares:
	Basic		15,979			18,257			16,149			18,284
	Diluted		15,979			18,408			16,312			18,498

This schedule reconciles the Company's GAAP operating loss and GAAP net loss to its non-GAAP operating (loss) income and non-GAAP net (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.

(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, legal settlements, and non-cash income tax expense.

Reconciliation of GAAP to non-GAAP SEGMENT INFORMATION (unaudited) (a)
(in thousands except per share information)


	Three Months Ended June 30, 2016											Six Months Ended June 30, 2016
	Connected			RF								Connected			RF
	Solutions			Solutions			Corporate		Total			Solutions			Solutions			Corporate		Total

Operating (Loss) Income	$	1,792			($4,372	)	($2,750	)		($5,330	)	$	3,099			($5,901	)	($5,281	)		($8,083	)

Add:
Amortization of intangible assets:
-Cost of revenues		0			167		0			167			0			333		0			333
-Operating expenses		44			533		0			577			114			1,066		0			1,180
Impairment of intangible assets		0			4,724		0			4,724			0			4,724		0			4,724
Restructuring expenses		0			7		17			24			44			424		73			541
TelWorx investigation:
-General & Administrative		0			0		(1	)		(1	)		0			0		5			5
Stock Compensation:
-Cost of revenues		43			90		0			133			84			180		0			264
-Engineering		30			145		0			175			72			270		0			342
-Sales & Marketing		113			70		0			183			200			128		0			328
-General & Administrative		52			96		745			893			92			168		1,049			1,309
		282			5,832		761			6,875			606			7,293		1,127			9,026

Non-GAAP Operating (Loss) Income	$	2,074		$	1,460		($1,989	)	$	1,545		$	3,705		$	1,392		($4,154	)	$	943


	Three Months Ended June 30, 2015											Six Months Ended June 30, 2015
	Connected			RF								Connected			RF
	Solutions			Solutions			Corporate		Total			Solutions			Solutions			Corporate		Total

Operating (Loss) Income	$	1,498			($347	)	($2,816	)		($1,665	)	$	3,187		$	786		($5,734	)		($1,761	)

Add:
Amortization of intangible assets:
-Cost of revenues		20			222		0			242			39			222		0			261
-Operating expenses		230			713		0			943			460			1,118		0			1,578
Restructuring expenses
-Cost of revenues		114			0		0			114			114			0		0			114
-Restructuring charges		426			14		0			440			426			14		0			440
TelWorx investigation:
-General & Administrative		0			0		54			54			0			0		91			91
Stock Compensation:
-Cost of Goods Sold		(22	)		78		0			56			14			115		0			129
-Engineering		14			16		0			30			60			85		0			145
-Sales & Marketing		(18	)		0		0			(18	)		85			55		0			140
-General & Administrative		(35	)		(21	)	229			173			(10	)		(1	)	339			328
		729			1,022		283			2,034			1,188			1,608		430			3,226

Non-GAAP Operating (Loss) Income	$	2,227		$	675		($2,533	)	$	369		$	4,375		$	2,394		($5,304	)	$	1,465

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

View source version on businesswire.com: http://www.businesswire.com/news/home/20160802006908/en/

PCTEL, Inc.
John Schoen
CFO
(630) 372-6800
or
Jack Seller
Public Relations
(630)372-6800
Jack.seller@pctel.com

Source: PCTEL, Inc.

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