UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
OR
For the transition period from to
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(Exact Name of Registrant as Specified in Its Charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” "accelerated filer,” “smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of May 4, 2023, the registrant had
2
PCTEL, INC.
Form 10-Q
For the Quarterly Period Ended March 31, 2023
TABLE OF CONTENTS
PART I |
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Item 1 |
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Item 2 |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3 |
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Item 4 |
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PART II |
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31 |
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Item 1 |
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Item 1A |
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Item 2 |
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Item 3 |
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Item 4 |
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Item 5 |
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Item 6 |
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3
PART I – FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited)
PCTEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except share data)
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March 31, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investment securities |
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Accounts receivable, net of allowances of $ |
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December 31, 2022, respectively |
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Inventories, net |
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Prepaid expenses and other assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Other noncurrent assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Total current liabilities |
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Long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $ |
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March 31, 2023 and December 31, 2022, and |
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shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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REVENUES |
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$ |
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$ |
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COST OF REVENUES |
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GROSS PROFIT |
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OPERATING EXPENSES: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Amortization of intangible assets |
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Restructuring expenses |
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Total operating expenses |
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OPERATING INCOME (LOSS) |
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Other income, net |
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INCOME (LOSS) BEFORE INCOME TAXES |
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Expense for income taxes |
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NET INCOME (LOSS) |
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$ |
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$ |
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Net Income (Loss) per Share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted Average Shares: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(in thousands)
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Three Months Ended March 31, |
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2023 |
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2022 |
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NET INCOME (LOSS) |
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$ |
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$ |
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OTHER COMPREHENSIVE INCOME (LOSS): |
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Foreign currency translation adjustments |
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COMPREHENSIVE INCOME (LOSS) |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)
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Accumulated |
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Total |
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Additional |
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Other |
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Stockholders' |
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Common |
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Paid-In |
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Accumulated |
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Comprehensive |
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Equity of |
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Stock |
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Capital |
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Deficit |
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Loss |
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PCTEL, Inc. |
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BALANCE at DECEMBER 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation expense |
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Cancellation of shares for payment of withholding tax |
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Dividends paid ($ |
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Net income |
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Change in cumulative translation adjustment, net |
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BALANCE at MARCH 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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BALANCE at DECEMBER 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation expense |
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Cancellation of shares for payment of withholding tax |
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Dividends paid ($ |
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Net loss |
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Change in cumulative translation adjustment, net |
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BALANCE at MARCH 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements
7
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Operating Activities: |
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Net income (loss) |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
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Intangible asset amortization |
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Stock-based compensation |
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Loss on disposal of property and equipment |
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Restructuring costs |
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Bad debt provision |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other assets |
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Deferred tax assets |
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Accounts payable |
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Income taxes payable |
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Other accrued liabilities |
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Deferred revenue |
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Net cash provided by (used in) operating activities |
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Investing Activities: |
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Capital expenditures |
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Purchase of short-term investments |
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Redemptions/maturities of short-term investments |
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Net cash provided by (used in) investing activities |
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Financing Activities: |
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Payment of withholding tax on stock-based compensation |
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Principal payments on finance leases |
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Cash dividends |
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Net cash used in financing activities |
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Net increase (decrease) in cash and cash equivalents |
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Effect of exchange rate changes on cash |
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Cash and cash equivalents, beginning of period |
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Cash and Cash Equivalents, End of Period |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
8
PCTEL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data and as otherwise noted)
1. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which include only normal, recurring adjustments that are considered necessary for the fair presentation of the Company's financial position as of March 31, 2023. For further information, please refer to the audited consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022 by PCTEL, Inc. (the “2022 Form 10-K”).
Throughout this Quarterly Report on Form 10-Q, including under Part 1, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we disclose certain macroeconomic impacts of the ongoing coronavirus (“COVID-19”) pandemic and the ensuing supply chain disruption. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that remain highly uncertain at this time.
Nature of Operations
PCTEL, Inc. (“PCTEL” or the "Company") was incorporated in California in 1994 and reincorporated in Delaware in 1998. The Company is a leading global provider of wireless technology, including purpose-built Industrial IoT ("Industrial IoT") devices, antenna systems, and test & measurement solutions. PCTEL strives to solve complex wireless challenges to help organizations stay connected, transform, and grow and it has expertise in radio frequency ("RF"), digital, and mechanical engineering. The Company has two product lines (antennas & Industrial IoT devices and test & measurement products).
The Company’s principal executive offices are located at 471 Brighton Drive, Bloomingdale, Illinois 60108. The telephone number at
that address is (630) 372-6800 and the website is www.pctel.com. Additional information about the Company can be obtained on the Company’s website; however, the information within, or that can be assessed through, the Company's website, is not part of this Quarterly Report on Form 10-Q.
Basis of Consolidation
The unaudited interim condensed consolidated financial statements of the Company include the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, and the condensed consolidated statements of cash flows, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss), and the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2023 and 2022. The interim condensed consolidated financial statements are unaudited but reflect all adjustments of a normal recurring nature that are, in the opinion of management, necessary for a fair presentation of the interim period financial statements. The condensed consolidated balance sheet as of December 31, 2022 is derived from the audited financial statements as of December 31, 2022.
The unaudited interim condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The significant accounting policies followed by the Company are set forth in the 2022 Form 10-K. There were no material changes in the Company’s significant accounting policies during the three months ended March 31, 2023. Additionally, the Company reaffirms the use of estimates in the preparation of the financial statements as set forth in the 2022 Form 10-K. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the 2022 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full period or any other interim period.
Foreign Operations
Cross-border transactions, both with external parties and in our internal operations, result in exposure to foreign exchange rate fluctuations. We are exposed to currency risk by having foreign locations, suppliers and employees outside the U.S. Fluctuations could have an adverse effect on our results of operations and cash flows. We manage certain operating activities at the local level with revenues, costs, assets, and liabilities generally being denominated in local currencies. However, our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar.
9
Gains and losses resulting from transactions originally in foreign currencies and then translated into U.S. dollars are included in the condensed consolidated statements of operations. For the three months ended March 31, 2023, approximately
Recent Accounting Pronouncements
In June 2022, FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This update clarifies the guidance in Topic 820 on the fair value measurement of an equity security that is subject to contractual restrictions that prohibit the sale of the equity security. This update also requires specific disclosures related to such equity securities including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. This ASU is effective for all public business entities in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on our consolidated financial statements and related disclosures.
2. Fair Value of Financial Instruments
The Company follows accounting guidance for fair value measurements and disclosures, which establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.
Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Cash equivalents are measured at fair value and investments are recognized at amortized cost in the Company’s financial statements. Accounts receivable is a financial asset with a carrying value that approximates fair value due to the short-term nature of these assets. Accounts payable, accrued employee compensation and certain operating liabilities are financial liabilities with a carrying value that approximates fair value due to the short-term nature of these liabilities.
3. Income (Loss) per Share
The following table is the computation of basic and diluted income per share:
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Three Months Ended March 31, |
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2023 |
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2022 |
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Basic Income Per Share computation: |
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Numerator: |
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Net income (loss) |
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$ |
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$ |
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Denominator: |
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Weighted shares outstanding - basic |
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Net income (loss) per common share - basic |
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$ |
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Diluted Income Per Share computation: |
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Denominator: |
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Weighted shares outstanding - basic |
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Restricted shares subject to vesting |
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Common stock option grants |
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|
|
|
||
Weighted shares outstanding - diluted |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net income (loss) per common share - diluted |
|
$ |
|
|
$ |
( |
) |
|
10
4. Cash, Cash Equivalents and Investments
The Company’s cash, cash equivalents, and investments consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Cash |
|
$ |
|
|
$ |
|
||
Cash equivalents |
|
|
|
|
|
|
||
Short-term investments |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Cash and Cash Equivalents
At March 31, 2023 and December 31, 2022, cash and cash equivalents included bank balances and investments with original maturities of less than
The cash in foreign accounts was as follows:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
China |
|
$ |
|
|
$ |
|
||
Sweden |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
As of March 31, 2023, the Company has no intention of repatriating the cash in its foreign bank accounts. If the Company decides to repatriate the cash in the foreign bank accounts, it may have trouble doing so in a timely manner. The Company may also be exposed to foreign currency fluctuations and taxes if it repatriates these funds.
Investments
At March 31, 2023 and December 31, 2022, the Company’s investments consisted of corporate bonds with ratings at the purchase date of A or higher and certificates of deposit. All the investments at March 31, 2023 and December 31, 2022 were classified as held-to-maturity. The bonds and certificates of deposit classified as short-term investments have original maturities greater than
Under ASU 2016-13, the Company classifies its held-to-maturity investment portfolio by the investment type and further classifies the corporate bonds by the bond ratings. The Company determined that reserves for potential credit losses were not necessary at March 31, 2023 and December 31, 2022. For its review, the Company considered historical loss data, bond ratings, and current and future economic conditions.
11
Cash equivalents and investments were as follows at March 31, 2023 and December 31, 2022:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
||||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total Cash Equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Short-Term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Short-Term Investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Cash equivalents and Investments - book value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Unrealized losses |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
Cash equivalents and Investments - fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
The Company categorizes its financial instruments within a fair value hierarchy according to accounting guidance for fair value. The fair value hierarchy is described under the Fair Value of Financial Instruments in Note 2. For the Level 2 investments, the Company uses quoted prices of similar assets in active markets. The fair values in the table above reflect net realizable losses of $
5. Goodwill and Intangible Assets
Goodwill
The change in the carrying amount of goodwill during the three months ended March 31, 2023 is as follows:
|
|
Amount |
|
|
Balance at December 31, 2022 |
|
$ |
|
|
Foreign currency translation |
|
|
|
|
Balance at March 31, 2023 |
|
$ |
|
|
The Company performs an annual impairment test of goodwill as of the end of the first month of the fourth fiscal quarter (October 31), or at an interim date if an event occurs or circumstances change that indicate that an impairment loss may have been incurred. In performing the annual impairment test, the Company may consider qualitative factors that would indicate possible impairment. A quantitative fair value assessment is also performed at the reporting unit level. If the fair value exceeds the carrying value, then goodwill is not impaired, and no further testing is performed. If the carrying value exceeds the fair value, the implied fair value of goodwill is then compared against the carrying value of goodwill to determine the amount of impairment. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred that would require interim impairment testing. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the reporting units. Further, the Company assessed the current market capitalization and financial forecasts. There were no triggering events during the three months ended March 31, 2023 and March 31, 2022. The Company will continue to monitor goodwill for impairment going forward.
Intangible Assets
The Company amortized intangible assets with finite lives on a straight-line basis over the estimated useful lives, which ranged from to
The summary of amortization expense in the condensed consolidated statements of operations is as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cost of revenues |
|
$ |
|
|
$ |
|
||
Operating expenses |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
12
The summary of other intangible assets, net are as follows:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
||||||
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
||||||
Customer contracts and relationships |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Patents and technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trademarks and trade names |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
During the three months ended March 31, 2023 and March 31, 2022, the Company recorded amortization expense of $
The assigned lives and weighted average amortization periods by intangible asset category are summarized below:
Intangible Assets |
|
Assigned Life |
|
Weighted |
|
|
Customer contracts and relationships |
|
|
|
|
||
Patents and technology |
|
|
|
|
||
Trademarks and trade names |
|
|
|
|
||
Other intangible assets |
|
|
|
|
||
The future amortization expenses are as follows:
Fiscal Year |
|
Amount |
|
|
2023 (remaining nine months) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
6. Balance Sheet Information
Accounts Receivable
Accounts receivable are recorded at invoiced amounts with standard net terms that range between
The allowances for accounts receivable consisted of the following:
|
March 31, 2023 |
|
December 31, 2022 |
|
||
Credit loss provision |
$ |
|
$ |
|
||
Credit allowances |
|
|
|
|
||
Total allowances |
$ |
|
$ |
|
||
|
|
|
|
|
||
The Company is exposed to credit losses primarily through the sale of products. The Company’s expected loss methodology for accounts receivable is developed using historical collection experience, current and future economic market conditions, and a review of the current status of customers’ trade accounts receivable. Due to the short-term nature of accounts receivable, the estimate of amount of accounts receivable that may not be collected is based on aging of the account receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company’s allowance for credit losses was $
13
The following table summarizes the allowance for credit losses activity during the three months ended March 31, 2023:
|
|
|
|
Balance at December 31, 2022 |
$ |
|
|
Current period allowance for credit losses |
|
|
|
Balance at March 31, 2023 |
$ |
|
|
|
|
|
|
Inventories
Inventories are stated at the lower of cost or net realizable value and include material, labor and overhead costs using the first-in, first-out method of costing. Inventories as of March 31, 2023 and December 31, 2022 were composed of raw materials, work-in-process and finished goods. The Company had consigned inventory with customers of $
Inventories, net consisted of the following:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Inventories, net |
|
$ |
|
|
$ |
|
||
Prepaid Expenses and Other Assets
Prepaid assets are stated at cost and are amortized over the useful lives (up to
Property and Equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. The Company depreciates computer equipment and software licenses over to
Property and equipment consisted of the following:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Building |
|
$ |
|
|
$ |
|
||
Computers and office equipment |
|
|
|
|
|
|
||
Manufacturing and test equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Motor vehicles |
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Land |
|
|
|
|
|
|
||
Property and equipment, net |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Depreciation and amortization expense was approximately $
14
Liabilities
Accrued liabilities consisted of the following:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Inventory receipts |
|
$ |
|
|
$ |
|
||
Payroll and other employee benefits |
|
|
|
|
|
|
||
Paid time off |
|
|
|
|
|
|
||
Income and sales taxes |
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
|
|
||
Deferred revenues |
|
|
|
|
|
|
||
Professional fees and contractors |
|
|
|
|
|
|
||
Employee stock purchase plan |
|
|
|
|
|
|
||
Warranties |
|
|
|
|
|
|
||
Real estate taxes |
|
|
|
|
|
|
||
Customer refunds for estimated returns |
|
|
|
|
|
|
||
Finance leases |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Long-term liabilities consisted of the following:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Operating leases |
|
$ |
|
|
$ |
|
||
Deferred revenue |
|
|
|
|
|
|
||
Finance leases |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
7. Stock-Based Compensation
The condensed consolidated statements of operations include $
The stock-based compensation expense by type is as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Service-based awards |
|
$ |
|
|
$ |
|
||
Performance-based awards (short-term incentive plan) |
|
|
|
|
|
|
||
Performance-based awards (long-term incentive plan) |
|
|
( |
) |
|
|
|
|
Employee stock purchase plan |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Total stock-based compensation is reflected in the condensed consolidated statements of operations as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cost of revenues |
|
$ |
|
|
$ |
|
||
Research and development |
|
|
|
|
|
|
||
Sales and marketing |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
15
The following table presents a summary of the remaining unrecognized share-based compensation expense related to outstanding share-based awards as of March 31, 2023:
Award Type |
|
Remaining Unrecognized Compensation Expense |
|
|
Weighted Average Life (Years) |
|
||
Service-based awards |
|
$ |
|
|
|
|
||
Performance-based awards |
|
$ |
|
|
|
|
||
Service-Based Awards
Restricted Stock
The Company grants both service-based and performance-based stock awards to employees pursuant to the PCTEL, Inc. 2019 Stock Incentive Plan. When service-based restricted stock is granted, the Company records deferred stock compensation within additional paid-in capital, representing the fair value of the common stock on the date the restricted shares are granted. The Company records stock compensation expense on a straight-line basis over the vesting period of the applicable service-based restricted shares. During the first quarter 2023, the Company awarded executives long-term incentives comprised one-third of service-based restricted stock and two-thirds of performance-based restricted stock.
The following table summarizes service-based restricted stock activity for the three months ended March 31, 2023:
|
|
Shares |
|
|
Weighted |
|
||
Unvested Restricted Stock Awards - December 31, 2022 |
|
|
|
|
$ |
|
||
Shares awarded |
|
|
|
|
|
|
||
Shares vested |
|
|
( |
) |
|
|
|
|
Shares cancelled |
|
|
( |
) |
|
|
|
|
Unvested Restricted Stock Awards - March 31, 2023 |
|
|
|
|
$ |
|
||
The intrinsic value of service-based restricted shares that vested was $
Restricted Stock Units
The Company grants service-based restricted stock units as employee incentives. Restricted stock units are primarily granted to foreign employees for long-term incentive purposes. Employee restricted stock units are service-based awards and are amortized over the vesting period. At the vesting date, these units are converted to shares of common stock. The Company records expense on a straight-line basis for restricted stock units.
The following table summarizes the restricted stock unit activity during the three months ended March 31, 2023:
|
|
Shares |
|
|
Weighted |
|
||
Unvested Restricted Stock Units - December 31, 2022 |
|
|
|
|
$ |
|
||
Units vested/Shares awarded |
|
|
( |
) |
|
|
|
|
Unvested Restricted Stock Units - March 31, 2023 |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The intrinsic value of service-based restricted stock units that vested and were issued as shares during the three months ended March 31, 2023 and 2022 was $
Stock Options
The Company may grant employees options to purchase the Company’s common stock. The Company issues stock options with exercise prices no less than the fair value of the Company’s stock on the grant date.
16
The following table summarizes information about stock options outstanding under all stock option plans at March 31, 2023:
|
|
Options Outstanding and Exercisable |
|
|||||||||||||
Range of |
|
Number of Shares |
|
|
Weighted |
|
|
Intrinsic Value |
|
|
Weighted- |
|
||||
$ |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
The intrinsic value is based on the share price of $
For outstanding stock options, the Company calculated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models may not necessarily provide a reliable single measure of the fair value of the employee stock options. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility and expected option life.
The dividend yield rate is calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate is based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The expected volatility is based on a
Performance-Based Equity Awards
Short-Term Incentive Plan
The Company granted short-term incentive awards to executives, key managers, and non-sales employees under the Company’s 2022 Short-Term Incentive Plan (“STIP”) based upon achievement of specifically identified corporate annual 2022 adjusted EBITDA and revenue goals. In the first quarter 2023 bonuses were paid
Long-Term Incentive Plan
The Company grants performance-based awards to executives and key managers to encourage sustainable growth, consistent earnings, and management retention. Based on the fair value of the shares on the grant date, the Company records stock compensation expense over the performance period based on the estimated achievement of the award.
The following table summarizes the performance award activity:
|
|
Awards at Target |
|
|
Weighted |
|
||
Unvested Performance Awards - December 31, 2022 |
|
|
|
|
$ |
|
||
Awards granted |
|
|
|
|
|
|
||
Awards vested |
|
|
( |
) |
|
|
|
|
Awards cancelled |
|
|
( |
) |
|
|
|
|
Unvested Performance Awards - March 31, 2023 |
|
|
|
|
$ |
|
||
The Company granted performance awards under its long-term incentive plan to executives in February 2023 (the “2023 LTIP”). The performance period for the 2023 LTIP is from
Under the 2023 LTIP, and under similar plans from 2022 and 2021, shares of the Company’s stock can be earned based on achievement of a three-year revenue growth target with a penalty if a certain adjusted EBITDA level is not maintained. If the Company achieves less than the target growth over the performance period, the participant will receive fewer shares than the target award, determined on a straight-line basis. If the Company achieves greater than the target growth, the participant will receive more shares than the target award on an accelerated basis. Participants are required to be in service at the determination date of the award following the end of the performance period in order to receive the award. Shares earned will be fully vested shares. The Company records stock compensation expense over the performance period based on the Company’s estimate of the aggregate number of shares that will be earned under the incentive plan.
During the first quarter 2023, the Company issued
17
The following table summarizes the active performance-based long-term incentive plans at March 31, 2023:
|
|
|
|
|
Number of Shares |
|
|
|
|||||
|
|
Share Price |
|
|
That Could Be Earned: |
|
|
|
|||||
LTIP award |
|
on Grant Date |
|
|
Target |
|
Maximum |
|
|
Performance Period |
|||
2021 LTIP |
|
$ |
|
|
|
|
|
|
|
January 1, 2021 through December 31, 2023 |
|||
2022 LTIP |
|
$ |
|
|
|
|
|
|
|
January 1, 2022 through December 31, 2024 |
|||
2023 LTIP |
|
$ |
|
|
|
|
|
|
|
January 1, 2023 through December 31, 2025 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Employee Stock Purchase Plan (“ESPP”)
The ESPP enables eligible employees to purchase common stock at the lower of
Based on the
The Company calculated the fair value of each employee stock purchase grant on the date of grant using the Black-Scholes option-pricing model using the following assumptions:
|
|
Employee Stock Purchase Plan |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Dividend yield |
|
|
% |
|
|
% |
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Expected volatility |
|
|
% |
|
|
% |
||
Expected life (in years) |
|
|
|
|
|
|
||
The dividend yield rate was calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate was based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The volatility was based on a five-year historical period of the Company’s stock price. The expected life was based on the offering period.
Board of Director Equity Awards
The Company grants equity awards to members of its Board of Directors as an annual retainer and for committee service. These awards are shares of the Company’s common stock that vest
The number of unvested director awards was as follows at March 31, 2023:
|
|
Shares |
|
|
Weighted |
|
||
Outstanding - December 31, 2022 |
|
|
|
|
$ |
|
||
Shares awarded |
|
|
|
|
|
|
||
Shares vested |
|
|
|
|
|
|
||
Outstanding - March 31, 2023 |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Employee Withholding Taxes on Stock Awards
For ease in administering the issuance of stock awards, the Company holds back shares of vested restricted stock awards, stock option exercises and short-term and long-term incentive plan stock awards for the value of the statutory withholding taxes. For everyone receiving a share award, the Company redeems the shares it computes as the value for the withholding tax and remits this amount to the appropriate tax authority. For withholding taxes related to stock awards, the Company paid $
18
8. Benefit Plans
Employee Benefit Plans
The Company’s 401(k) plan covers all U.S. employees beginning the first day of the month following the first month of their employment. Under this plan, employees may elect to contribute up to
The Company’s contributions to retirement plans during the three months ended March 31, 2023 and 2022, respectively, were as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
PCTEL, Inc. 401(k) profit sharing plan - US employees |
|
$ |
|
|
$ |
|
||
Defined contribution plans - Foreign employees |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
9. Commitments and Contingencies
Warranty Reserve and Sales Returns
The Company allows its major distributors and certain other customers to return unused product under specified terms and conditions. The Company accrues for product returns based on historical sales and return trends. The refund liability related to estimated sales returns was $
The Company offers repair and replacement warranties ranging from to
The following table summarizes the warranty activity during the three months ended March 31, 2023 and 2022:
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Provisions for warranties |
|
|
|
|
|
|
||
Consumption of reserves |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
10. Leases
The Company has operating leases for facilities and finance leases for office equipment. Leases with an initial term of 12 months or less are not recorded in the balance sheet. The Company determines if an arrangement is a lease at inception of a contract.
Right of Use (“ROU”) assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the net present value of fixed lease payments over the lease term. The Company's lease term is deemed to include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. ROU assets also include any advance lease payments made and exclude lease incentives. As most of the Company's operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments on a collateralized basis. Finance lease agreements generally include an interest rate that is used to determine the present value of future lease payments. Operating lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.
The Company's lease cost for the three months ended March 31, 2023 and 2022, respectively, included the following components:
19
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating lease costs |
|
$ |
|
|
$ |
|
||
Short-term lease costs |
|
|
|
|
|
|
||
Variable lease costs |
|
|
|
|
|
|
||
Amortization of finance lease assets |
|
|
|
|
|
|
||
Interest on finance lease liabilities |
|
|
|
|
|
|
||
Total lease cost |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The table below summarizes the Company's scheduled future minimum lease payments under operating and finance leases recorded on the balance sheet as of March 31, 2023:
Year |
|
Operating Leases |
|
|
Finance Leases |
|
||
2023 (remaining nine months) |
|
$ |
|
|
$ |
|
||
2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total minimum payments required |
|
|
|
|
|
|
||
Less: amount representing interest |
|
|
|
|
|
|
||
Present value of net minimum lease payments |
|
|
|
|
|
|
||
Less: current maturities of lease obligations |
|
|
( |
) |
|
|
( |
) |
Long-term lease obligations |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The weighted average remaining lease terms and discount rates for all of the Company’s operating and finance leases were as follows as of March 31, 2023:
|
|
March 31, 2023 |
Weighted-average remaining lease term - finance leases |
|
|
Weighted-average remaining lease term - operating leases |
|
|
Weighted-average discount rate - finance leases |
|
|
Weighted-average discount rate - operating leases |
|
The table below presents supplemental cash flow information related to leases during the three months ended March 31, 2023 and 2022, respectively:
|
|
Three Months Ended March 31, |
|
||||
|
|
2023 |
|
2022 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
||
Operating cash flows for operating leases |
|
$ |
|
$ |
|
||
Operating cash flows for finance leases |
|
$ |
|
$ |
|
||
Financing cash flows for finance leases |
|
$ |
|
$ |
|
||
20
The following table summarizes the classification of ROU assets and lease liabilities as of March 31, 2023 and December 31, 2022:
Leases |
|
Consolidated Balance Sheet Classification |
|
March 31, 2023 |
|
December 31, 2022 |
|
||
Assets: |
|
|
|
|
|
|
|
||
Operating right-of-use assets |
|
|
$ |
|
$ |
|
|||
Finance right-of-use assets |
|
|
|
|
|
|
|||
Total leased assets |
|
|
|
$ |
|
$ |
|
||
Liabilities: |
|
|
|
|
|
|
|
||
Current |
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
$ |
|
$ |
|
|||
Finance lease liabilities |
|
|
|
|
|
|
|||
Noncurrent |
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
|||
Finance lease liabilities |
|
|
|
|
|
|
|||
Total lease liabilities |
|
|
|
$ |
|
$ |
|
||
|
|
|
|
|
|
|
|
||
11. Income Taxes
The Company recorded income tax expense of $
The Company had deferred tax assets net of deferred tax liabilities of $
The Company's valuation allowances are due to uncertainty regarding the utilization of the deferred tax assets. On a regular basis, the Company evaluates the recoverability of deferred tax assets and the need for a valuation allowance. Such evaluations involve the application of significant judgment. The Company considers multiple factors in its evaluation of the need for a valuation allowance. At March 31, 2023, the Company had a full valuation allowance on its U.S. and China deferred tax asset and a partial valuation allowance related to its net deferred tax assets for Sweden.
December 31, 2017 have a finite life primarily based on the
Until an appropriate level of profitability is attained, the Company expects to maintain a full valuation allowance on its net deferred tax assets for the U.S. jurisdiction. Any U.S. or foreign tax benefits or tax expense recorded on its consolidated statements of operations will be offset with a corresponding valuation allowance until such time that the Company changes its determination related to the realization of deferred tax assets. In the event that the Company changes its determination as to the amount of deferred tax assets that can be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such a determination is made.
Since the Company completed the transition of manufacturing from its Tianjin facility to contract manufacturers in 2022, the Company does not expect sufficient profits to utilize its China deferred tax assets. The Company had a full valuation allowance on its China deferred tax at March 31, 2023 and at December 31, 2022. The Company maintained a partial valuation allowance on its Sweden
21
deferred tax assets at March 31, 2023 and at December 31, 2022. Based on positive book and taxable income in 2021 and 2022 and because results exceeded projections, the Company reversed a portion of its valuation allowance related to Sweden deferred tax assets during 2022.
The analysis that the Company prepared to determine the valuation allowance required significant judgment and assumptions regarding future market conditions as well as forecasts for profits, taxable income, and taxable income by jurisdiction. Due to the sensitivity of the analysis, changes to the assumptions in subsequent periods could have a material effect on the valuation allowance.
The Company files a consolidated federal income tax return, income tax returns with various states, and foreign income tax returns in various foreign jurisdictions. The Company’s U.S. federal tax returns remain subject to examination for 2018 and subsequent periods. The Company’s U.S. state tax returns remain subject to examination for 2015 and subsequent periods. The Company’s foreign tax returns remain subject to examination for 2011 and subsequent periods. The Company’s gross unrecognized tax benefit related to income tax uncertainties was $
12. Product Line and Geographic Information
Product Line Information:
The following tables are the product line revenues and gross profits for the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended March 31, 2023 |
|
|||||||||||||
|
|
Antennas & Industrial IoT Devices |
|
|
Test & Measurement Products |
|
|
Corporate |
|
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Gross Profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gross Profit % |
|
|
% |
|
|
% |
|
NA |
|
|
|
% |
||||
|
|
Three Months Ended March 31, 2022 |
|
|||||||||||||
|
|
Antennas & Industrial IoT Devices |
|
|
Test & Measurement Products |
|
|
Corporate |
|
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Gross Profit |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Gross Profit % |
|
|
% |
|
|
% |
|
NA |
|
|
|
% |
||||
Geographic Information:
The Company’s revenue from customers by geographic location, as a percent of total revenues for the three months ended March 31, 2023 and 2022, was as follows:
|
|
Three Months Ended March 31, |
||
Region |
|
2023 |
|
2022 |
Europe, Middle East & Africa |
|
|
||
Asia Pacific |
|
|
||
Other Americas |
|
|
||
Total Foreign sales |
|
|
||
Customer Concentration:
During the three months ended March 31, 2023 and 2022, the customer concentration related to revenues was as follows:
|
|
Three Months Ended March 31, |
||
Revenues |
|
2023 |
|
2022 |
Customer A |
|
|
||
The following table represents the customers that accounted for 10% or more of total trade accounts receivable:
Trade Accounts Receivable |
|
March 31, 2023 |
|
December 31, 2022 |
Customer A |
|
|
22
13. Revenue from Contracts with Customers
Under Topic 606, a contract with a customer is an agreement that both parties have approved, that creates enforceable rights and obligations, has commercial substance, and specified payment terms, and for which collectability is probable. Once the Company has entered into a contract, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized as control of promised goods or services transfers to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The amount of revenue recognized takes into account variable consideration, such as returns and volume rebates.
All of the Company’s revenue relates to contracts with customers. The Company’s accounting contracts are from purchase orders or purchase orders combined with purchase agreements. The majority of the Company’s revenue is recognized on a “point-in-time” basis and a nominal amount of revenue is recognized “over time.” For the sale of antennas and Industrial IoT devices and test & measurement products, the Company satisfies its performance obligations generally at the time of shipment or upon delivery based on the contractual terms with its customers. For products shipped on consignment, the Company recognizes revenue upon delivery from the consignment location. For its test & measurement software tools, the Company has a performance obligation to provide software maintenance and support for
The Company considers the shipping and handling performed by the Company as fulfillment activities. Amounts billed for shipping and handling are included in revenues, while costs incurred for shipping and handling are included in the cost of revenues. The Company excludes taxes from the transaction price. The cost of contracts include sales commissions. The Company expenses the cost of contracts when incurred because the amortization period is one year or less.
The Company allows its major distributors and certain other customers to return unused product under specified terms and conditions. The Company estimates product returns based on historical sales and return trends and records a corresponding refund liability. The refund liability was $
There were
14. Subsequent Events
The Company evaluates subsequent events occurring between the most recent balance sheet date and the date that the financial statements are available to be issued in order to determine whether the subsequent events are to be recorded and/or disclosed in the Company’s financial statements and footnotes. The financial statements are considered to be available to be issued at the time that they are filed with the SEC. There were no subsequent events or transactions that required recognition or disclosure in the unaudited interim condensed consolidated financial statements.
23
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the unaudited interim condensed consolidated financial statements of PCTEL, Inc. ("PCTEL," "the Company", “we,” “our,” and “us”) and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements for the year ended December 31, 2022 contained in 2022 Form 10-K. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify these forward-looking statements by words such as “may,” “will,” “plans,” “seeks,” “expects,” “anticipates,” “intends,” “believes” and words of similar meaning. Investors in our common stock are cautioned not to place undue reliance on these forward-looking statements. Specifically, these statements include, but are not limited to, statements concerning: our growth strategy; our future financial performance; growth of our antenna solutions and Industrial Internet of Things business and our test & measurement business; our ability to continue to innovate new products; our ability to expand product lines in the European market and through distribution channels; the impact of our transition plan for manufacturing inside and outside China; the impact of the COVID-19 pandemic and the ensuing supply chain disruptions; the impact of geopolitical conditions, including the ongoing war in Ukraine and related sanctions and disruption in petroleum and other markets; the impact of economic conditions, including inflation, higher interest rates, economic weakness, and potential recession; the anticipated demand for certain products, including those related to public safety, Industrial IoT, 5G (e.g., the Gflex scanning receiver), agriculture and intelligent transportation; and the anticipated growth of public and private wireless systems. 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. Important factors that could cause such differences include, but are not limited to: the impact of adverse and uncertain economic and political conditions within and outside the U.S., including inflationary pressures, higher interest rates, economic downturn, the potential for a recession, and the ongoing war in Ukraine; inflation and increases in product and material costs; competition within the wireless product industry; disruptions to our workforce, operations, supply chain and customer demand caused by the COVID-19 pandemic and the impact of the pandemic and the ensuing supply chain disruption on our results of operations, financial condition, and stock price; our ability to accurately forecast demand for our products; our ability to continue to successfully integrate Smarteq and any future acquisitions into our existing operations; the impact of uncertainty as a result of doing business in China and Europe; the impact of tariffs on certain imports from China; delays in our sales cycles; the impact of data densification and IoT on capacity and coverage demand; the impact of 5G; customer demand and growth generally in our defined market segments; our ability to access the government market and create demand for our products; to expand our European presence and benefit from additional antenna and Industrial IoT product offerings from Smarteq; and our ability to grow our business and create, protect and implement new technologies and solutions. These and other risks and uncertainties are detailed in our filings with the Securities and Exchange Commission (“SEC”). These forward-looking statements are made only as of the date hereof. We do not undertake, and expressly disclaim, any obligation to update or revise any forward-looking statements whether because of new information, future events or otherwise, except as may be required by applicable law. Investors should carefully review the information contained in Item 1A Risk Factors.
Business Overview
PCTEL is a leading global provider of wireless technology, including purpose-built Industrial IoT devices, antennas, and test & measurement products. We strive to solve complex wireless challenges to help organizations stay connected, transform, and grow. We believe we have a strong brand presence and expertise in RF, digital and mechanical engineering. We have two product lines (antennas/Industrial IoT devices and test & measurement solutions). Our antenna products include antennas deployed in small cells, enterprise Wi-Fi access points, fleet management, IoT applications, and transit systems. Our Industrial IoT devices include ruggedized access points, IoT interface cards and IoT sensor platforms for applications such as logistics, remote monitoring and control. Our test & measurement products are designed to improve the performance of wireless networks globally. Mobile operators, private enterprises, and network equipment manufacturers rely on our products to analyze, design, and optimize next generation wireless networks. We seek out product applications that command a premium for product design and performance, and we avoid commodity markets. Our strength is solving complex wireless challenges for our customers through our products and solutions. To this end, we are constantly seeking to innovate and improve antenna, Industrial IoT, and wireless testing products and capabilities to capture the opportunities of the rapidly evolving wireless industry. We focus on engineering, research, and development to maintain and expand our competitiveness.
Antennas and Industrial IoT Devices
PCTEL designs and manufactures precision antennas and Industrial IoT devices, and we offer in-house wireless product development for our customers, including design, testing, radio integration, and manufacturing capabilities. Revenue growth in these markets is driven by the increased use and complexity of wireless communications.
Our antenna portfolio includes Wi-Fi, Bluetooth, Land Mobile Radio (“LMR”), Tetra, Global Navigation Satellite System (“GNSS”), Cellular, Industrial, Scientific, and Medical (“ISM”), Long Range (“LoRa”), and combination antenna solutions. The market applications for our antennas include public safety communications, military communications, utilities and energy, precision agriculture,
24
smart traffic management, Electric Vehicle (“EV”) charging stations, passenger and cargo vehicles, forestry machinery and off-road vehicles. For smart traffic management, we provide antenna systems for smart roadways and smart rail. Fleet antennas for public safety, including police vehicles, is a key market. We not only manufacture the antennas, but we also provide engineering design services to determine the layout of multi-antenna installations to minimize potential interference between each antenna element. Our customized solutions often result in general purpose products with advanced capabilities, such as multi-element antenna systems in a single radome. These systems can include several LTE bands, Wi-Fi bands, and GPS navigation elements, all in one housing. An antenna designed for one application can be modified to be used for other applications.
Our Industrial IoT device portfolio includes access points, radio modules, sensor communication modules, and wireless communication sensors. The market applications for our Industrial IoT devices include utilities and smart grid, oil and gas, manufacturing, logistics, industrial automation, smart metering, and asset tracking.
Our strategy is to provide a “toolbox” of hardware solutions to our existing OEMs and distributors for Industrial IoT systems. We provide all of the field hardware required for wireless Industrial IoT systems - antennas, ruggedized Wi-Fi access points, radio modules, and integrated cellular sensors for Industrial IoT. Our go-to-market strategy for this growing sector is to sell more RF hardware components to our customers that traditionally purchase antennas from PCTEL.
Consistent with our mission to solve complex network engineering problems and to compete effectively in the antenna market, PCTEL maintains expertise in the following areas: radio frequency engineering, wireless network engineering, mechanical engineering, mobile antenna design, manufacturing, and product quality and testing. Competition among providers of antennas and Industrial IoT devices is fragmented. Competitors include Airgain, Amphenol, Panorama, Taoglas, and TE Connectivity.
Test & Measurement Products
PCTEL provides RF test & measurement products that improve the performance of wireless networks globally, with a focus on LTE, public safety, and 5G technologies. Revenue growth in this market is driven by the implementation and roll out of new wireless technology standards (i.e., 3G to 4G, 4G to 5G) and new market applications for public safety and government. The market applications for our test & measurement equipment includes cellular testing, public safety and private radio network testing, federal government communications testing, and indoor building network testing. Our portfolio includes scanning receivers, scanning receiver software, public safety solutions, automated spectrum monitoring solutions, interference location systems, mmwave transmitters, and a cloud-based reporting platform.
Our scanning receivers are software defined radios used to (1) confirm adequate RF coverage during deployment, (2) identify interfering signals that decrease capacity, (3) troubleshoot system performance issues as networks expand, and (4) benchmark competing networks because our scanning receivers can scan all technologies across all frequencies during one test. They are necessary for initial network deployment and throughout the entire life cycle of the mobile network. Most of our 4G scanners can be upgraded to 5G via firmware. Our new Gflex scanning receiver includes advanced features to address 5G and broader critical communication and government applications such as signal intelligence.
We provide test & measurement equipment to test in-building communication capability, which is important for first responders, to certify that buildings meet certain in-building wireless communication standards and to test public safety networks, including P25, Tetra and digital mobile radio (“DMR”).
Our cloud-based reporting platform for public safety is a subscription-based service for test management, storage and analytics that allows stakeholders, including engineering service companies, building owners and government jurisdictions, to easily manage the data collection process and access final reports through an online map-based interface.
Consistent with our mission to solve complex network engineering problems and to compete effectively in the RF test & measurement market, PCTEL maintains expertise in the following areas: radio frequency engineering, digital signal processing (“DSP”) engineering, wireless network engineering, mechanical engineering, manufacturing, and product quality and testing. Competitors for PCTEL's test & measurement products include OEMs such as Anritsu, Berkley Varitronics, Digital Receiver Technology, Rohde and Schwarz, and Viavi.
Results of Operations
First Quarter Overview
Revenues for the three months ended March 31, 2023 were $23.0 million, an increase of 1.9% compared to $22.5 million for the same period in 2022. By product line, revenues increased by $1.8 million (33.0%) to $7.4 million for test & measurement products and
25
decreased by $1.5 million (8.7%) to $15.6 million for antennas and Industrial IoT devices during the three months ended March 31, 2023. The increase in revenues for test & measurement products was due to higher revenues from 5G scanning receiver sales in the U.S. and to global rental customers. The decrease in revenues for antennas and Industrial IoT devices was due to lower revenues related to enterprise and public safety applications. Gross profits of $11.5 million for the quarter increased by $2.2 million compared to the same period in 2022 due to a higher mix of test & measurement product revenue and higher gross margin percentage for antenna product revenue. Operating expenses of $10.2 million for the three months ended March 31, 2023 were $0.7 million lower than the same period in 2022. There were no restructuring expenses during the first quarter 2023 but the first quarter 2022 included $0.9 million of restructuring expenses related to the transition of our Tianjin manufacturing. The net impact of these changes resulted in income before tax of $1.5 million in the first quarter of 2023 compared to a loss before tax of $1.6 million for the first quarter 2022.
Our cash and investments increased by $0.3 million during the first quarter 2023 primarily because we generated cash from operations. As of March 31, 2023, we had cash and investments of $30.3 million.
Revenues by Product Line
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Antennas & Industrial IoT Devices |
|
$ |
15,614 |
|
|
$ |
17,102 |
|
|
$ |
(1,488 |
) |
|
|
-8.7 |
% |
Test & Measurement Products |
|
|
7,427 |
|
|
$ |
5,583 |
|
|
|
1,844 |
|
|
|
33.0 |
% |
Corporate |
|
|
(68 |
) |
|
$ |
(143 |
) |
|
|
75 |
|
|
not meaningful |
|
|
Total |
|
$ |
22,973 |
|
|
$ |
22,542 |
|
|
$ |
431 |
|
|
|
1.9 |
% |
Revenues increased 1.9% for the three months ended March 31, 2023 compared to the same period in 2022 due to higher revenues for test & measurement products. Revenues for the test & measurement product line increased by 33.0% for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 due to higher revenues from 5G scanning receiver sales in the U.S. and to global rental customers. For the three months ended March 31, 2023, revenues for the antennas and Industrial IoT devices product line decreased by 8.7% compared to the same period in 2022 due to lower antenna revenues for enterprise and public safety applications.
Gross Profit by Product Line
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
2023 |
|
|
% of Revenues |
|
|
2022 |
|
|
% of Revenues |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Antennas & Industrial IoT Devices |
|
$ |
6,120 |
|
|
|
39.2 |
% |
|
$ |
5,247 |
|
|
|
30.7 |
% |
Test & Measurement Products |
|
|
5,383 |
|
|
|
72.5 |
% |
|
$ |
4,162 |
|
|
|
74.5 |
% |
Corporate |
|
|
29 |
|
|
not meaningful |
|
|
|
(76 |
) |
|
not meaningful |
|
||
Total |
|
$ |
11,532 |
|
|
|
50.2 |
% |
|
$ |
9,333 |
|
|
|
41.4 |
% |
The gross profit percentage increased by 8.8% for the three months ended March 31, 2023 compared to the same period in 2022 due to a higher mix of test & measurement products and a higher gross margin percentage for antennas and Industrial IoT devices. The gross profit percentage for the antennas and Industrial IoT devices increased by 8.5% for the three months ended March 31, 2023 compared to the same period in 2022 due to favorable product mix and lower logistics costs. The gross profit percentage for test & measurement products decreased by 2.0% for the three months ended March 31, 2023 compared to the same period in 2022 primarily due to higher component costs.
|
|
Three Months Ended March 31, |
|
|
|
|
|
Three Months Ended March 31, |
|
|
% of Revenues |
|
||||||||
|
|
2023 |
|
|
Change |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Research and development |
|
$ |
2,984 |
|
|
$ |
(266 |
) |
|
$ |
3,250 |
|
|
|
13.0 |
% |
|
|
14.4 |
% |
Sales and marketing |
|
|
3,562 |
|
|
|
160 |
|
|
|
3,402 |
|
|
|
15.5 |
% |
|
|
15.1 |
% |
General and administrative |
|
|
3,605 |
|
|
|
363 |
|
|
|
3,242 |
|
|
|
15.7 |
% |
|
|
14.4 |
% |
Amortization of intangible assets |
|
|
63 |
|
|
|
(8 |
) |
|
|
71 |
|
|
|
0.3 |
% |
|
|
0.3 |
% |
Restructuring expenses |
|
|
0 |
|
|
|
(935 |
) |
|
|
935 |
|
|
|
0.0 |
% |
|
|
4.1 |
% |
Total |
|
$ |
10,214 |
|
|
$ |
(686 |
) |
|
$ |
10,900 |
|
|
|
44.5 |
% |
|
|
48.3 |
% |
Research and development expenses were lower by $0.3 million for the three months ended March 31, 2023 compared to the same period in 2022 due to lower development expenses and lower stock compensation expenses.
26
Sales and marketing expenses include costs associated with the sales and marketing employees, product line management, and trade show expenses.
Sales and marketing expenses increased $0.2 million for the three months ended March 31, 2023 compared to the same period in 2022 as higher expenses for sales commissions, travel, and marketing offset lower stock compensation expenses.
General and administrative expenses include costs associated with general management, finance, human resources, IT, legal, public company costs, and other operating expenses to the extent not otherwise allocated to business segments.
General and administrative expenses increased by $0.4 million for the three months ended March 31, 2023 compared to the same period in 2022 primarily due to higher non-recurring legal expenses and professional fees related to exploring strategic alternatives.
Amortization of intangible assets within operating expenses were approximately the same for the three months ended March 31, 2023 compared to the same period in 2022.
Restructuring expenses in 2022 related to expenses for the transition of manufacturing operations from our Tianjin, China facility to contract manufacturers. Restructuring expenses of $0.9 million for the three months ended March 31, 2022 consisted primarily of employee severance and payroll related costs associated with the termination of 69 employees in Tianjin. We completed the manufacturing transition during the first quarter 2022.
Other Income, Net
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Interest income |
|
$ |
229 |
|
|
$ |
17 |
|
Foreign exchange losses |
|
|
(10 |
) |
|
|
(2 |
) |
Other, net |
|
|
1 |
|
|
|
(4 |
) |
Total |
|
$ |
220 |
|
|
$ |
11 |
|
Percentage of revenues |
|
|
1.0 |
% |
|
|
0.1 |
% |
Other income, net consists of interest income, foreign exchange losses, and interest expense. Interest income from investment securities increased by $212 during the three months ended March 31, 2023 compared to the prior year, due to higher average interest rates.
Expense for Income Taxes
|
|
|
|
|||||
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Expense for income taxes |
|
$ |
214 |
|
|
$ |
8 |
|
Effective tax rate |
|
|
13.9 |
% |
|
|
(0.5 |
)% |
We recorded income tax expense of $0.2 million and $8 for the three months ended March 31, 2023 and 2022, respectively. The expense recorded for the three months ended March 31, 2023 and March 31, 2022 because we have a full valuation allowance on our U.S. deferred tax assets.
The deferred tax assets consist of domestic deferred tax assets of $12.0 million and foreign deferred tax assets of $3.1 million. Our valuation allowances are due to uncertainty regarding the utilization of the deferred tax assets. On a regular basis, we evaluate the recoverability of deferred tax assets and the need for a valuation allowance. Such evaluations involve the application of significant judgment. We considered multiple factors in our evaluation of the need for a valuation allowance. At March 31, 2023 we had a full valuation allowance on our U.S. and China deferred tax assets and a partial valuation allowance related to our net deferred tax assets for Sweden.
We recorded pre-tax book income for the prior three years and we believe our financial outlook remains positive, but we did not meet revenue or earnings expectations for the U.S. jurisdiction. Additionally, the Company recognized revenue for one-time projects in fiscal year 2022 which may not be repeated in 2023 or future years. Because of difficulties with forecasting financial results historically, and due to the uncertainties associated with inflationary and recessionary issues, the Company maintained a full valuation allowance on its U.S. deferred tax assets at March 31, 2023.
The Company maintained a full valuation allowance on its China deferred tax assets. Since the Company completed the transition of manufacturing from its Tianjin facility to contract manufacturers in 2022, the Company does not expect sufficient profits to utilize its China deferred tax assets. The Company maintained a partial valuation allowance on its Sweden deferred tax assets at March 31, 2023.
27
Based on positive book and taxable income in 2021 and 2022 and because results exceeded projections, the Company reversed a portion of its valuation allowance related to Sweden deferred tax assets during 2022.
The analysis that we prepared to determine the valuation allowance required significant judgment and assumptions regarding future market conditions as well as forecasts for profits, taxable income, and taxable income by jurisdiction. Due to the sensitivity of the analysis, changes to the assumptions in subsequent periods could have a material effect on the valuation allowance. See Note 11 to the condensed consolidated financial statements for more information related to income taxes.
Net Income (Loss)
We recorded net income of $1.3 million for the three months ended March 31, 2023 compared to a net loss of $1.6 million for the same period in 2022 due to the favorable impact of higher gross margins and lower operating expenses. Gross margins were higher by $2.2 million for the three months ended March 31, 2023 compared to the same period in 2022 due to an increase in mix of test & measurement products and an increase in the antenna gross margin percentage. Operating expenses were lower by $0.7 million due to lower restructuring expenses being partially offset by higher sales and marketing expenses and general and administrative expenses.
Liquidity and Capital Resources
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net cash flow provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
2,419 |
|
|
$ |
(1,330 |
) |
Investing activities |
|
$ |
295 |
|
|
$ |
(327 |
) |
Financing activities |
|
$ |
(1,754 |
) |
|
$ |
(1,412 |
) |
Net increase (decrease) in cash and cash equivalents |
|
$ |
960 |
|
|
$ |
(3,069 |
) |
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Cash and cash equivalents at the end of period |
|
$ |
8,717 |
|
|
$ |
7,736 |
|
Short-term investments at the end of period |
|
$ |
21,570 |
|
|
$ |
22,254 |
|
Working capital at the end of period |
|
$ |
52,516 |
|
|
$ |
52,369 |
|
Overview
Our primary source of liquidity is cash provided by operations, with short-term swings in liquidity supported by a significant balance of cash and short-term investments. The balance has fluctuated with cash from operations, acquisitions and divestitures, payment of dividends, and the repurchase of our common shares.
Within operating activities, we are historically a net generator of operating funds from our income statement activities and during periods of expansion, we expect to use cash from our balance sheet.
Within investing activities, capital spending historically ranges between 2.0% and 4.0% of our revenues and the primary use of capital is for manufacturing, engineering, and product development. We historically have made significant transfers between investments and cash as we rotate our large cash balances and short-term investment balances between money market funds, which are accounted for as cash equivalents, and other investment vehicles. We have a history of supplementing our organic revenue with acquisitions of product lines or companies, resulting in significant uses of our cash and short-term investment balances from time to time. We expect the historical trend for capital spending and the variability caused by moving money between cash and investments and periodic merger and acquisition activity to continue in the future.
Within financing activities, we have historically generated funds from the exercise of stock options and proceeds from the issuance of common stock through our Employee Stock Purchase Plan (“ESPP”). We have historically used funds to issue dividends and we periodically repurchase shares of our common stock through share repurchase programs.
At March 31, 2023, our cash, cash equivalents, and investments were approximately $30.3 million, and we had working capital of $52.5 million. Management believes our cash and investments provide adequate liquidity and working capital for the next twelve months from the date of this Quarterly Report on Form 10-Q to support our operations given our historic ability to generate free cash flow (cash flow from operations less capital spending).
28
Operating Activities:
Operating activities provided $2.4 million of cash during the three months ended March 31, 2023 primarily because we generated $2.3 million of cash from our statement of operations. The cash impact from changes in the balance sheet was approximately neutral during the three months ended March 31, 2023. Cash as payments for accrued liabilities and accounts payable offset the positive impact of net reductions in accounts receivable and inventories. Accounts receivable decreased by $3.3 million during the first quarter of 2023 due to lower sequential revenues and a decrease in days sales outstanding, and inventories were lower in the first quarter 2023 due to lower antenna-related inventories.
Operating activities used $1.3 million of cash during the three months ended March 31, 2022. We used $0.3 million of cash from our statement of operations and $1.0 million from the balance sheet. The balance sheet was a net use of cash as payments of accrued liabilities and accounts payable offset the positive impact of net reductions in accounts receivable and inventories. Accounts receivable decreased by $1.5 million during the first quarter 2022 due to lower sequential revenues, and inventories were lower in the first quarter 2022 due to the completion of our transition from Tianjin manufacturing to contract manufacturers.
Investing Activities:
Our investing activities provided $0.3 million of cash during the three months ended March 31, 2023. During the three months ended March 31, 2023, redemptions and maturities of our investments provided $7.3 million in funds and we rotated $6.7 million of cash into new investments. We used $0.4 million for capital expenditures during the three months ended March 31, 2023
Our investing activities used $0.3 million of cash during the three months ended March 31, 2022. During the three months ended March 31, 2022, redemptions and maturities of our investments provided $8.2 million in funds and we rotated $8.2 million of cash into new investments. We used $0.3 million for capital expenditures during the three months ended March 31, 2022.
Financing Activities:
We used $1.8 million in cash for financing activities during the three months ended March 31, 2023. We used $1.0 million for quarterly cash dividends and $0.7 million for payroll taxes related to stock-based compensation in this period. The tax payments primarily related to restricted stock awards.
We used $1.4 million in cash for financing activities during the three months ended March 31, 2022. We used $1.0 million for quarterly cash dividends and $0.4 million for payroll taxes related to stock-based compensation in this period. The tax payments related to restricted stock awards.
Material Cash Requirements
Our material cash requirements from known contractual and other obligations primarily relate to non-cancellable purchase obligations.
Expected timing of those payments are as follows:
|
|
|
Payments Due by Period |
|
|||||||||||||||||
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
After |
|
|||||
|
|
|
Total |
|
|
1 year |
|
|
1-3 years |
|
|
4-5 years |
|
|
5 years |
|
|||||
Purchase obligations |
|
|
$ |
18,864 |
|
|
$ |
16,930 |
|
|
$ |
1,933 |
|
|
$ |
1 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Critical Accounting Policies and Estimates
We use certain critical accounting policies and estimates as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” of the 2022 Form 10-K which is incorporated by reference in response to this item. There have been no material changes in any of our critical accounting policies and estimates since December 31, 2022. See Note 1 to the condensed consolidated financial statements for a discussion of recent accounting pronouncements.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
As a "smaller reporting company," we are not required to provide disclosure in this Quarterly Report on Form 10-Q in response to this item.
Item 4: Controls and Procedures
Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and
29
evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act, as amended (the “Exchange Act”) were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized, and reported within time periods specified in the SEC rules and forms.
In connection with the evaluation required by Rule 13a-15(d), management, with the participation of the Chief Executive Officer and Chief Financial Officer, has identified that there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite previously having a remote working environment for all non-production related employees and now having a hybrid work environment. We are continually monitoring and assessing the impact of COVID-19 on our internal controls to minimize the impact to their design and operating effectiveness.
30
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
We may, from time to time, be the subject of various pending or threatened legal actions in the ordinary course of our business. All such matters are subject to many uncertainties and outcomes that are not predictable with assurance. To our knowledge, as of March 31, 2023, there were no claims or litigation pending against the Company that would be reasonably likely to have a material adverse effect on our consolidated financial position, results of operations or liquidity.
Item 1A: Risk Factors
See Item 1A of our 2022 Form 10-K. As of March 31, 2023, there have been no material changes to the Risk Factors set forth in Item 1A of our 2022 Form 19-K.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3: Defaults Upon Senior Securities
None.
Item 4: Mine Safety Disclosure
Not applicable.
Item 5: Other Information
None.
Item 6: Exhibits
Exhibit No. |
|
Description |
|
|
|
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
31.2* |
|
|
|
|
|
|
|
|
|
32.1** |
|
|
|
|
32.2** |
|
|
|
|
101* |
|
The following materials from PCTEL, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 formatted Inline XBRL (eXtensible Business Reporting Language): (i) the Unaudited Condensed Consolidated Statement of Operations, (ii) the Unaudited Condensed Consolidated Balance Sheet, (iii) the Unaudited Condensed Consolidated Statement of Stockholders' Equity, (iv) the Unaudited Condensed Consolidated Statement of Cash Flows, and (v) Notes to the Unaudited Condensed Consolidated Financial Statements. |
|
|
104* |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
* filed herewith ** furnished herewith |
|
|
31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:
PCTEL, Inc., |
a Delaware corporation |
|
/s/ David A. Neumann |
David A. Neumann |
Chief Executive Officer (Principal Executive Officer) |
Date: May 9, 2023
/s/ Kevin J. McGowan |
Kevin J. McGowan |
Chief Financial Officer (Principal Financial Officer) |
Date: May 9, 2023
32
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David A. Neumann, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of PCTEL, Inc.:
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 9, 2023
/s/ David A. Neumann |
David A. Neumann |
[Chief Executive Officer] (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin J. McGowan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of PCTEL, Inc.:
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 9, 2023
/s/ Kevin J. McGowan |
Kevin J. McGowan |
Chief Financial Officer (Principal Executive Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PCTEL, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
|
By: |
|
/s/ David A. Neumann |
DATE: May 9, 2023 |
|
|
|
David A. Neumann |
|
|
|
|
[Chief Executive Officer] (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PCTEL, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
|
By: |
|
/s/ Kevin J. McGowan |
DATE: May 9, 2023 |
|
|
|
Kevin J. McGowan |
|
|
|
|
[Chief Financial Officer] (Principal Executive Officer) |