August 2, 2016

PCTEL Achieves $24.2 Million in Second Quarter Revenue

 

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.

 

(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.

 

 

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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