October 27, 2016

PCTEL Achieves $24.7 Million in Third Quarter Revenue

Continued Sequential Growth

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

Quarter Highlights

$24.7 million in revenue for the quarter, a decrease of seven percent from the same period last year. The Company saw a two percent sequential quarterly increase in revenue from the second quarter.

GAAP gross profit margin of 36 percent in the quarter compared to 32 percent for the same period last year.

GAAP operating margin of negative one percent for the quarter compared to operating margin of negative eight percent for the same period last year.

GAAP net income of $0.01 per diluted share compared to a net loss of $(0.06) per diluted share for the same period last year.

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 37 percent in the quarter, compared to 33 percent for the same period last year.

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

Non-GAAP net income of $1.1 million, or $0.07 per diluted share in the quarter, compared to $108,000 or $0.01 per diluted share in the same period last year.

$31.2 million of cash and short-term investments at September 30, 2016, an increase of approximately $1.9 million from the preceding quarter. During the quarter the Company generated free cash flow of approximately $2.5 million.

"We made great progress this past quarter in our Connected Solutions business. Small cell, indoor and outdoor broadband, and the Internet of Things (IoT) continue to drive our engineering and sales investments," said Marty Singer, PCTEL's Chairman and CEO. "We saw growing strength in our China and APAC markets and we anticipate continued interest in our IBflex® and test and measurement solutions as the IoT demands greater capacity and coverage," 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) 782-2072 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 96080850. 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: 96080850.

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 small cell, broadband, and test and measurement solutions 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 actual growth in the APAC region, impact of IoT on capacity and coverage demand, customer demand for these types of products and services generally, growth and continuity in PCTEL's vertical markets, PCTEL's ability to successfully grow its network analytics and network engineering services and its wireless products business generally, and its ability to 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
(in thousands, except share data)
   
(unaudited)
September 30, December 31,
2016 2015
ASSETS
 
Cash and cash equivalents $ 13,105 $ 7,055
Short-term investment securities 18,099 24,728
Accounts receivable, net of allowance for doubtful accounts of $252 and $314 at

September 30, 2016 and December 31, 2015, respectively

17,997 21,001
Inventories, net 14,705 17,596
Prepaid expenses and other assets   1,300     1,586  
Total current assets 65,206 71,966
 
Property and equipment, net 13,123 13,839
Goodwill 3,332 3,332
Intangible assets, net 4,724 11,378
Deferred tax assets, net 9,264 13,155
Other noncurrent assets   38     40  
TOTAL ASSETS $ 95,687   $ 113,710  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Accounts payable $ 5,307 $ 6,735
Accrued liabilities   5,542     6,190  
Total current liabilities 10,849 12,925
 
Other long-term liabilities 447 388
   
Total liabilities   11,296     13,313  
 
Stockholders' equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 17,350,796 and

17,654,236 shares issued and outstanding at September 30, 2016 and December 31, 2015,

respectively

17 18
Additional paid-in capital 134,778 135,714
Accumulated deficit (50,263 ) (35,320 )
Accumulated other comprehensive loss   (141 )   (15 )
Total stockholders' equity   84,391     100,397  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 95,687   $ 113,710  
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
       
 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
 
REVENUES $ 24,687 $ 26,526 $ 70,004 $ 80,477
COST OF REVENUES   15,750     18,063     44,779     52,495  
GROSS PROFIT   8,937     8,463     25,225     27,982  
OPERATING EXPENSES:
Research and development 2,451 2,863 7,581 8,506
Sales and marketing 3,396 3,603 9,925 10,558
General and administrative 2,890 2,847 9,157 9,513
Amortization of intangible assets 250 958 1,430 2,535
Impairment of intangible assets 0 0 4,724 0
Restructuring expenses   113     413     654     852  
Total operating expenses   9,100     10,684     33,471     31,964  
OPERATING LOSS (163 ) (2,221 ) (8,246 ) (3,982 )
Other income, net   35     534     49     2,783  
LOSS BEFORE INCOME TAXES (128 ) (1,687 ) (8,197 ) (1,199 )
(Benefit) expense for income taxes   (303 )   (625 )   4,157     (451 )
NET INCOME (LOSS) $ 175   $ (1,062 ) $ (12,354 ) $ (748 )
 
Net Income (Loss) per Share:
Basic $ 0.01 $ (0.06 ) $ (0.77 ) $ (0.04 )
Diluted $ 0.01 $ (0.06 ) $ (0.77 ) $ (0.04 )
 
Weighted Average Shares:
Basic 16,106 17,626 16,136 18,059
Diluted 16,245 17,626 16,136 18,059
 
Cash dividend per share $ 0.05 $ 0.05 $ 0.15 $ 0.15
               
PCTEL, INC.
P&L INFORMATION BY SEGMENT (unaudited)
(in thousands)
 
Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
 
REVENUES $ 17,136 $ 7,609 ($58 ) $ 24,687 $ 47,616 $ 22,552 ($164 ) $ 70,004
               
GROSS PROFIT 5,771 3,179 (13 ) 8,937 15,035 10,197 (7 ) 25,225
               
OPERATING (LOSS) INCOME $ 2,530   ($330 ) ($2,363 )   ($163 ) $ 5,625   ($6,227 ) ($7,644 )   ($8,246 )
 
 
Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015
Connected Connected
Solutions   RF Solutions   Corporate Total Solutions   RF Solutions   Corporate   Total
 
REVENUES $ 17,450 $ 9,115 ($39 ) $ 26,526 $ 52,903 $ 27,749 ($175 ) $ 80,477
               
GROSS PROFIT 4,729 3,727 7 8,463 15,549 12,413 20 27,982
               
OPERATING (LOSS) INCOME $ 1,160   ($1,058 ) ($2,323 )   ($2,221 ) $ 4,255   ($181 ) ($8,056 )   ($3,982 )

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 September 30, Nine Months Ended September 30,

2016

2015

2016

2015

 
Operating Loss ($163 ) ($2,221 ) ($8,246 ) ($3,982 )
 
(a) Add:
Amortization of intangible assets
-Cost of revenues 167 167 500 428
-Operating expenses 250 958 1,430 2,535
Impairment of intangible assets 0 0 4,724 0
Restructuring:
-Cost of revenues 0 132 0 246
-Operating expenses 113 413 654 852
TelWorx investigation:
-General & Administrative 0 9 5 100
Stock Compensation:
-Cost of revenues 61 115 325 244
-Engineering 183 99 525 244
-Sales & Marketing 158 230 486 370
-General & Administrative   542     206     1,851     534  
1,474 2,329 10,500 5,553
       
Non-GAAP Operating Income $ 1,311   $ 108   $ 2,254   $ 1,571  
% of revenue 5.3 % 0.4 % 3.2 % 2.0 %
 

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

 
Three Months Ended September 30, Nine Months Ended September 30,

2016

2015

2016

2015

 
Net Loss (Income) $ 175 ($1,062 ) ($12,354 ) ($748 )
 
Adjustments:
(a) Non-GAAP adjustment to operating (loss) income 1,474 2,329 10,500 5,553
(b) Other income related to SEC investigation of TelWorx 0 (10 ) (5 ) (99 )
(b) Legal Settlement - Amendment to Nexgen APA 0 (500 ) 0 (2,660 )
(b) Income Taxes   (545 )   (649 )   3,743     (738 )
  929     1,170     14,238     2,056  
Non-GAAP Net Income $ 1,104   $ 108   $ 1,884   $ 1,308  
 
Non-GAAP Earning per Share:
Basic $ 0.07 $ 0.01 $ 0.12 $ 0.07
Diluted $ 0.07 $ 0.01 $ 0.12 $ 0.07
 
Weighed Average Shares:
Basic 16,106 17,626 16,136 18,059
Diluted 16,245 17,809 16,276 18,428
 
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)
 
 
Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
Connected RF Connected RF
Solutions Solutions Corporate Total Solutions Solutions Corporate Total
 
Operating (Loss) Income $ 2,530 ($330 ) ($2,363 ) ($163 ) $ 5,625 ($6,227 ) ($7,644 ) ($8,246 )
 
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 500 0 500
-Operating expenses 39 211 0 250 153 1,277 0 1,430
Impairment of intangible assets 0 0 0 0 0 4,724 0 4,724
Restructuring expenses 0 113 0 113 44 537 73 654
TelWorx investigation:
-General & Administrative 0 0 0 0 0 0 5 5
Stock Compensation:
-Cost of revenues 51 10 0 61 135 190 0 325
-Engineering 52 131 0 183 124 401 0 525
-Sales & Marketing 137 21 0 158 338 148 0 486
-General & Administrative   66       93     383       542     158     262     1,431       1,851  
345 746 383 1,474 952 8,039 1,509 10,500
               
Non-GAAP Operating (Loss) Income $ 2,875   $ 416   ($1,980 ) $ 1,311   $ 6,577 $ 1,812   ($6,135 ) $ 2,254  
 
 
Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015
Connected RF Connected RF
Solutions Solutions Corporate   Total Solutions Solutions Corporate Total
 
Operating (Loss) Income $ 1,160 ($1,058 ) ($2,323 ) ($2,221 ) $ 4,255 ($181 ) ($8,056 ) ($3,982 )
 
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 39 389 0 428
-Operating expenses 195 763 0 958 616 1,919 0 2,535
Restructuring expenses
-Cost of revenues 132 0 0 132 246 0 0 246
-Restructuring charges 113 300 0 413 538 314 0 852
TelWorx investigation:
-General & Administrative 0 0 9 9 0 0 100 100
Stock Compensation:
-Cost of Goods Sold 40 75 0 115 54 190 0 244
-Engineering (5 ) 104 0 99 55 189 0 244
-Sales & Marketing 88 142 0 230 173 197 0 370
-General & Administrative   16     44   146     206     6   43   485     534  
579 1,595 155 2,329 1,727 3,241 585 5,553
               
Non-GAAP Operating (Loss) Income $ 1,739   $ 537   ($2,168 ) $ 108   $ 5,982 $ 3,060   ($7,471 ) $ 1,571  
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.

Reconciliation of GAAP operating loss to EBITDA (a)

(in thousands)
       
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
 
Operating Loss ($163 ) ($2,221 ) ($8,246 ) ($3,982 )
 
(a) Add:
Depreciation and amortization 1,231 1,907 4,335 5,261
Restructuring - cost of revenues 0 132 0 246
Restructuring - operating expenses 113 413 654 852
Stock compensation expenses 944 650 3,187 1,392
Impairment of intangible assets 0 0 4,724 0
TelWorx investigation- operating expenses   0     9     5     100  
EBITDA $ 2,125   $ 890   $ 4,659   $ 3,869  
% of revenue 8.6 % 3.4 % 6.7 % 4.8 %
 

This schedule reconciles the Company's GAAP operating loss to 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 EBITDA when evaluating
its financial results as well as for internal planning and forecasting purposes. EBITDA should not be viewed as a substitute for
the Company's GAAP results.
 
(a) EBITDA is defined as net income before interest, income taxes, depreciation and amortization. These adjustments reflect
depreciation, amortization of intangible assets, stock compensation expenses, restructuring expenses, and general and administrative
expenses associated with the SEC investigation of TelWorx.

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

Source: PCTEL, Inc.

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