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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-27115

 

PCTEL, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

77-0364943

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification Number)

 

 

 

471 Brighton Drive,

 

 

Bloomingdale, IL

 

60108

(Address of Principal Executive Office)

 

(Zip Code)

 

Registrant's Telephone Number, Including Area Code: (630) 372-6800

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

 

Common Stock

 

PCTI

 

Nasdaq Global Select Market

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. Yes No

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). Yes No

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:

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

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 19,083,075 shares of common stock, $0.001 par value per share, outstanding.

2


PCTEL, INC.

Form 10-Q

For the Quarterly Period Ended March 31, 2023

TABLE OF CONTENTS

PART I

 

FINANCIAL INFORMATION

 

Page

Item 1

 

Financial Statements (unaudited)

 

4

 

 

Condensed Consolidated Balance Sheets

 

4

 

 

Condensed Consolidated Statements of Operations

 

5

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

6

 

 

Condensed Consolidated Statements of Stockholders' Equity

 

7

 

 

Condensed Consolidated Statements of Cash Flows

 

8

 

 

Notes to the Condensed Consolidated Financial Statements

 

9

Item 2

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

24

Item 3

 

Quantitative and Qualitative Disclosures about Market Risk

 

29

Item 4

 

Controls and Procedures

 

29

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

31

Item 1

 

Legal Proceedings

 

31

Item 1A

 

Risk Factors

 

31

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

31

Item 3

 

Defaults Upon Senior Securities

 

31

Item 4

 

Mine Safety Disclosure

 

31

Item 5

 

Other Information

 

31

Item 6

 

Exhibits

 

31

 

 

Signatures

 

32

 

 

3


PART I – FINANCIAL INFORMATION

Item 1: Financial Statements (unaudited)

PCTEL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,717

 

 

$

7,736

 

Short-term investment securities

 

 

21,570

 

 

 

22,254

 

Accounts receivable, net of allowances of $135 and $132 at March 31, 2023 and

 

 

 

 

 

 

December 31, 2022, respectively

 

 

15,531

 

 

 

18,853

 

Inventories, net

 

 

17,626

 

 

 

18,918

 

Prepaid expenses and other assets

 

 

1,594

 

 

 

1,861

 

Total current assets

 

 

65,038

 

 

 

69,622

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

9,819

 

 

 

10,004

 

Goodwill

 

 

5,946

 

 

 

5,935

 

Intangible assets, net

 

 

968

 

 

 

1,045

 

Other noncurrent assets

 

 

3,085

 

 

 

3,269

 

TOTAL ASSETS

 

$

84,856

 

 

$

89,875

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Accounts payable

 

$

3,520

 

 

$

4,648

 

Accrued liabilities

 

 

9,002

 

 

 

12,605

 

Total current liabilities

 

 

12,522

 

 

 

17,253

 

Long-term liabilities

 

 

3,431

 

 

 

3,624

 

Total liabilities

 

 

15,953

 

 

 

20,877

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.001 par value, 50,000,000 shares authorized at

 

 

 

 

 

 

March 31, 2023 and December 31, 2022, and 18,982,847 and 18,748,529

 

 

 

 

 

 

shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

 

 

19

 

 

 

19

 

Additional paid-in capital

 

 

127,938

 

 

 

128,370

 

Accumulated deficit

 

 

(57,647

)

 

 

(57,941

)

Accumulated other comprehensive loss

 

 

(1,407

)

 

 

(1,450

)

Total stockholders’ equity

 

 

68,903

 

 

 

68,998

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

84,856

 

 

$

89,875

 

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

REVENUES

 

$

22,973

 

 

$

22,542

 

COST OF REVENUES

 

 

11,441

 

 

 

13,209

 

GROSS PROFIT

 

 

11,532

 

 

 

9,333

 

OPERATING EXPENSES:

 

 

 

 

 

 

Research and development

 

 

2,984

 

 

 

3,250

 

Sales and marketing

 

 

3,562

 

 

 

3,402

 

General and administrative

 

 

3,605

 

 

 

3,242

 

Amortization of intangible assets

 

 

63

 

 

 

71

 

Restructuring expenses

 

 

0

 

 

 

935

 

Total operating expenses

 

 

10,214

 

 

 

10,900

 

OPERATING INCOME (LOSS)

 

 

1,318

 

 

 

(1,567

)

Other income, net

 

 

220

 

 

 

11

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

1,538

 

 

 

(1,556

)

Expense for income taxes

 

 

214

 

 

 

8

 

NET INCOME (LOSS)

 

$

1,324

 

 

$

(1,564

)

 

 

 

 

 

 

 

Net Income (Loss) per Share:

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

(0.09

)

Diluted

 

$

0.07

 

 

$

(0.09

)

 

 

 

 

 

 

 

Weighted Average Shares:

 

 

 

 

 

 

Basic

 

 

18,367

 

 

 

17,972

 

Diluted

 

 

18,428

 

 

 

17,972

 

 

 

 

 

 

 

 

 

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)

 

 

Three Months Ended March 31,

 

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

1,324

 

 

$

(1,564

)

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

43

 

 

 

(226

)

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

$

1,367

 

 

$

(1,790

)

 

 

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Total

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Stockholders'

 

 

 

Common

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Equity of

 

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

PCTEL, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE at DECEMBER 31, 2022

 

$

19

 

 

$

128,370

 

 

$

(57,941

)

 

$

(1,450

)

 

$

68,998

 

Stock-based compensation expense

 

 

0

 

 

 

278

 

 

 

0

 

 

 

0

 

 

 

278

 

Cancellation of shares for payment of withholding tax

 

 

0

 

 

 

(710

)

 

 

0

 

 

 

0

 

 

 

(710

)

Dividends paid ($0.22 per share)

 

 

0

 

 

 

0

 

 

 

(1,030

)

 

 

0

 

 

 

(1,030

)

Net income

 

 

0

 

 

 

0

 

 

 

1,324

 

 

 

0

 

 

 

1,324

 

Change in cumulative translation adjustment, net

 

 

0

 

 

 

0

 

 

 

0

 

 

 

43

 

 

 

43

 

BALANCE at MARCH 31, 2023

 

$

19

 

 

$

127,938

 

 

$

(57,647

)

 

$

(1,407

)

 

$

68,903

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE at DECEMBER 31, 2021

 

$

18

 

 

$

123,998

 

 

$

(56,735

)

 

$

(360

)

 

$

66,921

 

Stock-based compensation expense

 

 

0

 

 

 

774

 

 

 

0

 

 

 

0

 

 

 

774

 

Cancellation of shares for payment of withholding tax

 

 

0

 

 

 

(392

)

 

 

0

 

 

 

0

 

 

 

(392

)

Dividends paid ($0.22 per share)

 

 

0

 

 

 

(1,001

)

 

 

0

 

 

 

0

 

 

 

(1,001

)

Net loss

 

 

0

 

 

 

0

 

 

 

(1,564

)

 

 

0

 

 

 

(1,564

)

Change in cumulative translation adjustment, net

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(226

)

 

 

(226

)

BALANCE at MARCH 31, 2022

 

$

18

 

 

$

123,379

 

 

$

(58,299

)

 

$

(586

)

 

$

64,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

Net income (loss)

 

$

1,324

 

 

$

(1,564

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

548

 

 

 

781

 

Intangible asset amortization

 

 

81

 

 

 

91

 

Stock-based compensation

 

 

278

 

 

 

774

 

Loss on disposal of property and equipment

 

 

26

 

 

 

0

 

Restructuring costs

 

 

0

 

 

 

(368

)

Bad debt provision

 

 

14

 

 

 

(3

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

3,315

 

 

 

1,530

 

Inventories

 

 

1,297

 

 

 

772

 

Prepaid expenses and other assets

 

 

361

 

 

 

(145

)

Deferred tax assets

 

 

80

 

 

 

0

 

Accounts payable

 

 

(1,117

)

 

 

(1,299

)

Income taxes payable

 

 

134

 

 

 

41

 

Other accrued liabilities

 

 

(3,940

)

 

 

(2,027

)

Deferred revenue

 

 

18

 

 

 

87

 

Net cash provided by (used in) operating activities

 

 

2,419

 

 

 

(1,330

)

Investing Activities:

 

 

 

 

 

 

Capital expenditures

 

 

(389

)

 

 

(320

)

Purchase of short-term investments

 

 

(6,660

)

 

 

(8,194

)

Redemptions/maturities of short-term investments

 

 

7,344

 

 

 

8,187

 

Net cash provided by (used in) investing activities

 

 

295

 

 

 

(327

)

Financing Activities:

 

 

 

 

 

 

Payment of withholding tax on stock-based compensation

 

 

(710

)

 

 

(392

)

Principal payments on finance leases

 

 

(14

)

 

 

(19

)

Cash dividends

 

 

(1,030

)

 

 

(1,001

)

Net cash used in financing activities

 

 

(1,754

)

 

 

(1,412

)

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

960

 

 

 

(3,069

)

Effect of exchange rate changes on cash

 

 

21

 

 

 

(16

)

Cash and cash equivalents, beginning of period

 

 

7,736

 

 

 

8,192

 

Cash and Cash Equivalents, End of Period

 

$

8,717

 

 

$

5,107

 

 

 

 

 

 

 

 

 

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 11% of revenues and 10% of expenses were transacted in foreign currencies as compared to 13% and 18% for the three months ended March 31, 2022. Net foreign exchange gains resulting from foreign currency transactions included in other income were $(10) and $(2) for each of the three months ended March 31, 2023 and 2022.

 

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:

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Basic Income Per Share computation:

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$

1,324

 

 

$

(1,564

)

Denominator:

 

 

 

 

 

 

Weighted shares outstanding - basic

 

 

18,366,614

 

 

 

17,971,851

 

 

 

 

 

 

 

 

Net income (loss) per common share - basic

 

$

0.07

 

 

$

(0.09

)

Diluted Income Per Share computation:

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

Weighted shares outstanding - basic

 

 

18,366,614

 

 

 

17,971,851

 

Restricted shares subject to vesting

 

 

61,429

 

 

 

0

 

Common stock option grants

 

 

19

 

 

 

0

 

Weighted shares outstanding - diluted

 

 

18,428,062

 

 

 

17,971,851

 

 

 

 

 

 

 

 

Net income (loss) per common share - diluted

 

$

0.07

 

 

$

(0.09

)

 

 

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

 

$

6,704

 

 

$

5,780

 

Cash equivalents

 

 

2,013

 

 

 

1,956

 

Short-term investments

 

 

21,570

 

 

 

22,254

 

Total

 

$

30,287

 

 

$

29,990

 

 

 

 

 

 

 

 

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 90 days. At March 31, 2023 and December 31, 2022, the Company’s cash equivalents were invested in highly liquid AAA rated money market funds that are required to comply with Rule 2a-7 of the Investment Company Act of 1940. Such funds utilize the amortized cost method of accounting, seek to maintain a constant $1.00 per share price, and are redeemable upon demand. The Company restricts its investments in AAA money market funds to those invested 100% in either short-term U.S. government agency securities or bank repurchase agreements collateralized by these same securities. The fair values of these money market funds are established through quoted prices in active markets for identical assets (Level 1 inputs). The Company’s cash in U.S. banks is insured by the Federal Deposit Insurance Corporation up to the insurable limit of $250.

The cash in foreign accounts was as follows:

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

China

 

$

2,739

 

 

$

2,672

 

Sweden

 

 

1,843

 

 

 

1,868