PCTEL Reports $21.6 Million in Second Quarter Revenue

BLOOMINGDALE, Ill.--(BUSINESS WIRE)--Aug. 8, 2018-- PCTEL, Inc. (Nasdaq: PCTI), a leader in Performance Critical TELecom solutions, announced its results for the second quarter ended June 30, 2018.

Highlights from Continuing Operations

• Revenue of $21.6 million in the second quarter and $43.3 million in the first half, unchanged in the quarter and down 3% in the first half compared to last year. Connected Solutions revenue was up 4% in the quarter and 3% in the half. RF Solutions revenue was down 11% in the quarter and 22% in the half.
• Gross profit margin of 36.1% in the second quarter and 36.2% in the first half, down 560 basis points in the quarter and 520 basis points in the half compared to last year. The two primary reasons for the decrease are lower revenue in the RF Solutions segment which has higher margin from its scanner products compared to antenna products, and price erosion in the small cell antenna market.
• Net loss per share of $0.07 in the second quarter and $0.12 in the first half, compared to a net loss of $0.01 per share in the quarter and break even in the half last year.
• Non-GAAP net income and adjusted EBITDA are measures the company uses to reflect the results of its core earnings. A reconciliation of those non-GAAP measures to our financial statements is provided later in the press release.

• Non-GAAP EPS of break-even in the second quarter and a net loss of $0.01 in the first half compared to net income of $0.05 in the quarter and $0.10 in the half last year.
• Adjusted EBITDA margin as a percent of revenue of 2% in the second quarter and the first half compared to 8% in the quarter and the half last year.

• $36.5 million of cash and short-term investments at June 30, 2018 and no debt.

“The Company saw revenue growth for its Connected Solutions products in the enterprise Wi-Fi market during the quarter and the half but fell short of our expectations. RF Solutions revenue was down in the North American market in the quarter and the half, due to capital budget reductions by several U.S. carriers,” said David Neumann, PCTEL’s CEO. “We believe the carriers have reduced capital spending on legacy networks to prepare for more aggressive 5G deployments in 2019. Although this will negatively affect our 2018 results, PCTEL is positioned to take advantage of the long-term growth opportunities in our targeted markets, which require both performance critical testing solutions and antennas.”

CONFERENCE CALL / WEBCAST

PCTEL’s management team will discuss the Company’s results today at 4:30 p.m. ET.The call can be accessed by dialing (888) 782-2072 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 47850740. The call will also be webcast at http://investor.pctel.com/news-events/webcasts-presentations.

REPLAY: A replay will be available for two weeks after the call on either the website listed above or by calling (855) 859-2056 (U.S./Canada), or International (404) 537-3406, conference ID: 47850740.

About PCTEL

PCTEL, Inc. provides Performance Critical TELecom technology solutions. We are a leading global supplier of antennas and wireless network testing solutions. Our precision antennas are deployed in small cells, enterprise Wi-Fi access points, fleet management and transit systems, and in equipment and devices for the Industrial Internet of Things (IIoT). We offer in-house design, testing, radio integration, and manufacturing capabilities for our customers. PCTEL’s test and measurement tools improve the performance of wireless networks globally, with a focus on LTE, public safety, and emerging 5G technologies. Network operators, neutral hosts, and equipment manufacturers rely on our scanning receivers and testing solutions to analyze, design, and optimize their networks.

For more information, please visit our website at https://www.pctel.com/.

PCTEL Safe Harbor Statement

This press release and our related comments in our earnings conference call contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Specifically, the statements regarding our future financial performance, growth of our Connected Solutions and RF Solutions businesses, anticipated demand for certain products, our expectations regarding capital expenditures by wireless operators, the impact of tariffs on certain imports from China, and the anticipated growth of public and private wireless systems are forward-looking statements within the meaning of the safe harbor. These statements are based on management’s current expectations and actual results may differ materially from those projected as a result of certain risks and uncertainties, including the impact of data densification and IoT on capacity and coverage demand, impact of 5G, customer demand for these types of products and services generally including demand from customers in China, growth and continuity in PCTEL’s vertical markets, and PCTEL’s ability to grow its wireless products business and create, protect and implement new technologies and solutions. These and other risks and uncertainties are detailed in PCTEL's Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and PCTEL disclaims any obligation to update or revise the information contained in any forward-looking statement, whether as a result of new information, future events or otherwise.

PCTEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
			(Unaudited)
			June 30,				December 31,
			2018				2017
ASSETS
Cash and cash equivalents			$	7,603			$	5,559
Short-term investment securities				28,904				32,499
Accounts receivable, net of allowances of $164 and $319 at June 30, 2018 and December 31, 2017, respectively				17,929				18,624
Inventories, net				13,470				12,756
Prepaid expenses and other assets				1,285				1,605
Total current assets				69,191				71,043
Property and equipment, net				12,844				12,369
Goodwill				3,332				3,332
Intangible assets, net				1,532				2,113
Deferred tax assets, net				8,213				7,734
Other noncurrent assets				58				72
TOTAL ASSETS			$	95,170			$	96,663
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable			$	8,219			$	5,471
Accrued liabilities				5,413				7,481
Total current liabilities				13,632				12,952
Long-term liabilities				453				392
Total liabilities				14,085				13,344
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 18,318,141 and 17,806,792 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively				18				18
Additional paid-in capital				134,367				134,505
Accumulated deficit				(53,250	)			(51,258	)
Accumulated other comprehensive (loss) income				(50	)			54
Total stockholders’ equity				81,085				83,319
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	95,170			$	96,663

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
			Three Months Ended								Six Months Ended
			June 30,								June 30,
			2018				2017				2018				2017
REVENUES			$	21,582			$	21,501			$	43,313			$	44,471
COST OF REVENUES				13,783				12,539				27,650				26,055
GROSS PROFIT				7,799				8,962				15,663				18,416
OPERATING EXPENSES:
Research and development				3,053				2,667				5,993				5,383
Sales and marketing				3,075				2,912				6,102				6,165
General and administrative				3,149				3,598				6,143				6,937
Amortization of intangible assets				124				124				248				248
Total operating expenses				9,401				9,301				18,486				18,733
OPERATING LOSS				(1,602	)			(339	)			(2,823	)			(317	)
Other income, net				209				14				260				42
LOSS BEFORE INCOME TAXES				(1,393	)			(325	)			(2,563	)			(275	)
Benefit for income taxes				(167	)			(140	)			(479	)			(274	)
LOSS FROM CONTINUING OPERATIONS				(1,226	)			(185	)			(2,084	)			(1	)
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT				0				(168	)			0				(382	)
NET LOSS			$	(1,226	)		$	(353	)		$	(2,084	)		$	(383	)
Net Loss per Share from Continuing Operations:
Basic			$	(0.07	)		$	(0.01	)		$	(0.12	)		$	0.00
Diluted			$	(0.07	)		$	(0.01	)		$	(0.12	)		$	0.00
Net Loss per Share from Discontinued Operations:
Basic			$	0.00			$	(0.01	)		$	0.00			$	(0.02	)
Diluted			$	0.00			$	(0.01	)		$	0.00			$	(0.02	)
Net Loss per Share:
Basic			$	(0.07	)		$	(0.02	)		$	(0.12	)		$	(0.02	)
Diluted			$	(0.07	)		$	(0.02	)		$	(0.12	)		$	(0.02	)
Weighted Average Shares:
Basic				17,142				16,534				17,099				16,437
Diluted				17,142				16,534				17,099				16,437
Cash dividend per share			$	0.055			$	0.05			$	0.11			$	0.10

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
			Six Months Ended June 30,
			2018				2017
Operating Activities:
Net loss from continuing operations			$	(2,084	)		$	(1	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation				1,381				1,262
Intangible asset amortization				581				581
Stock-based compensation				1,786				1,797
(Gain) loss on disposal of property and equipment				(5	)			3
Restructuring costs				(20	)			(58	)
Bad debt provision				124				(7	)
Deferred tax provision				(390	)			(423	)
Changes in operating assets and liabilities:
Accounts receivable				473				1,458
Inventories				(813	)			779
Prepaid expenses and other assets				330				96
Accounts payable				2,743				(232	)
Income taxes payable				(38	)			(186	)
Other accrued liabilities				(2,107	)			(694	)
Deferred revenue				16				20
Net cash provided by operating activities				1,977				4,395
Investing Activities:
Capital expenditures				(1,519	)			(1,544	)
Proceeds from disposal of property and equipment				14				0
Purchases of investments				(22,712	)			(23,071	)
Redemptions/maturities of short-term investments				26,307				19,187
Net cash provided by (used in) investing activities				2,090				(5,428	)
Financing Activities:
Proceeds from issuance of common stock				364				867
Payment of withholding tax on stock-based compensation				(289	)			(692	)
Principle payments on capital leases				(57	)			(41	)
Cash dividends				(1,999	)			(1,752	)
Net cash used in financing activities				(1,981	)			(1,618	)
Cash flows from discontinued operations:
Net cash used in operating activities				0				(349	)
Net cash used in investing activities				0				(16	)
Net cash flows used in discontinued operations				0				(365	)
Net increase (decrease) in cash and cash equivalents				2,086				(3,016	)
Effect of exchange rate changes on cash				(42	)			36
Cash and cash equivalents, beginning of period				5,559				14,855
Cash and Cash Equivalents, End of Period			$	7,603			$	11,875

PCTEL, INC.
P&L INFORMATION BY SEGMENT - Continuing Operations (unaudited)
(in thousands)
		Three Months Ended June 30, 2018														Six Months Ended June 30, 2018
		Connected														Connected
		Solutions			RF Solutions				Corporate			Total				Solutions			RF Solutions				Corporate			Total
REVENUES		$	17,478		$	4,135			($31	)		$	21,582			$	35,243		$	8,134			($64	)		$	43,313
GROSS PROFIT			5,031			2,755			13				7,799				10,229			5,426			8				15,663
OPERATING (LOSS) INCOME		$	1,530			($398	)		($2,734	)			($1,602	)		$	3,134			($724	)		($5,233	)			($2,823	)
		Three Months Ended June 30, 2017														Six Months Ended June 30, 2017
		Connected														Connected
		Solutions			RF Solutions				Corporate			Total				Solutions			RF Solutions				Corporate			Total
REVENUES		$	16,866		$	4,661			($26	)		$	21,501			$	34,137		$	10,418			($84	)		$	44,471
GROSS PROFIT			5,731			3,223			8				8,962				11,135			7,270			11				18,416
OPERATING INCOME (LOSS)		$	2,349		$	411			($3,099	)			($339	)		$	4,095		$	1,432			($5,844	)			($317	)

Reconciliation of GAAP to non-GAAP Results - Continuing Operations (unaudited)
(in thousands except per share information)
Reconciliation of GAAP operating loss to non-GAAP operating (loss) income - Continuing Operations
			Three Months Ended June 30,								Six Months Ended June 30,
			2018				2017				2018			2017
	Operating Loss			($1,602	)			($339	)		($2,823	)			($317	)
(a)	Add:
	Amortization of intangible assets
	-Cost of revenues			167				167			333				333
	-Operating expenses			124				124			248				248
	Stock Compensation:
	-Cost of revenues			93				72			181				133
	-Engineering			159				120			297				266
	-Sales & marketing			157				126			288				246
	-General & administrative			710				770			1,021				1,152
				1,410				1,379			2,368				2,378
	Non-GAAP Operating (Loss) Income			($192	)		$	1,040			($455	)		$	2,061
	% of revenue			-0.9	%			4.8	%		-1.1	%			4.6	%
Reconciliation of GAAP net loss to non-GAAP net (loss) income - Continuing Operations
			Three Months Ended June 30,								Six Months Ended June 30,
			2018				2017				2018			2017
	Net Loss			($1,226	)			($185	)		($2,084	)			($1	)
	Adjustments:
(a)	Non-GAAP adjustment to operating loss			1,410				1,379			2,368				2,378
	Income Taxes			(168	)			(330	)		(463	)			(653	)
				1,242				1,049			1,905				1,725
	Non-GAAP Net (Loss) Income		$	16			$	864			($179	)		$	1,724
	Non-GAAP (Loss) Income per Share:
	Basic		$	0.00			$	0.05			($0.01	)		$	0.10
	Diluted		$	0.00			$	0.05			($0.01	)		$	0.10
	Weighed Average Shares:
	Basic			17,142				16,534			17,099				16,437
	Diluted			17,554				17,015			17,099				16,921

			This schedule reconciles the Company's GAAP operating loss to its non-GAAP operating (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company's GAAP results.
			The adjustments to GAAP operating loss (a) consist of stock compensation expense and amortization of intantigible assets. The adjustments to GAAP net loss include the non-GAAP adjustments to operating loss as well as adjustments for (b) non-cash income tax expense.

Reconciliation of GAAP to non-GAAP SEGMENT INFORMATION - Continuing Operations (unaudited)
(in thousands)
				Three Months Ended June 30, 2018														Six Months Ended June 30, 2018
				Connected														Connected
				Solutions			RF Solutions				Corporate			Total				Solutions			RF Solutions				Corporate			Total
	Operating (Loss) Income			$	1,530			($398	)		($2,734	)			($1,602	)		$	3,134			($724	)		($5,233	)			($2,823	)
	Add:
	Amortization of intangible assets:
	-Cost of revenues				0			167			0				167				0			333			0				333
	-Operating expenses				39			85			0				124				78			170			0				248
	Stock Compensation:
	-Cost of revenues				51			42			0				93				96			85			0				181
	-Engineering				81			78			0				159				155			142			0				297
	-Sales & marketing				85			72			0				157				167			121			0				288
	-General & administrative				45			30			635				710				105			53			863				1,021
					301			474			635				1,410				601			904			863				2,368
	Non-GAAP Operating (Loss) Income			$	1,831		$	76			($2,099	)			($192	)		$	3,735		$	180			($4,370	)			($455	)
				Three Months Ended June 30, 2017														Six Months Ended June 30, 2017
				Connected														Connected
				Solutions			RF Solutions				Corporate			Total				Solutions			RF Solutions				Corporate			Total
	Operating (Loss) Income			$	2,349		$	411			($3,099	)			($339	)		$	4,095		$	1,432			($5,844	)			($317	)
	Add:
	Amortization of intangible assets:
	-Cost of revenues				0			167			0				167				0			333			0				333
	-Operating expenses				39			85			0				124				78			170			0				248
	Stock Compensation:
	-Cost of revenues				43			29			0				72				82			51			0				133
	-Engineering				62			58			0				120				117			149			0				266
	-Sales & marketing				79			47			0				126				165			81			0				246
	-General & administrative				46			17			707				770				89			31			1,032				1,152
					269			403			707				1,379				531			815			1,032				2,378
	Non-GAAP Operating Income (Loss)			$	2,618		$	814			($2,392	)		$	1,040			$	4,626		$	2,247			($4,812	)		$	2,061

	This schedule reconciles the Company's GAAP operating (loss) income by segment to its non-GAAP operating (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company's GAAP results.
	The adjustments to GAAP operating (loss) income consist of stock compensation expense and amortization of intangible assets.

PCTEL, Inc.
Reconciliation of GAAP operating loss to Adjusted EBITDA - Continuing Operations
(unaudited, in thousands)
					Three Months Ended June 30,								Six Months Ended June 30,
					2018				2017				2018				2017
	Operating Loss					($1,602	)			($339	)			($2,823	)			($317	)
	Add:
	Depreciation and amortization					707				634				1,381				1,262
	Intangible amortization					291				291				581				581
	Stock compensation expenses					1,119				1,088				1,787				1,797
	Adjusted EBITDA				$	515			$	1,674			$	926			$	3,323
	% of revenue					2.4	%			7.8	%			2.1	%			7.5	%

	This schedule reconciles the Company's GAAP operating loss to Adjusted EBITDA. The Company believes that this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company uses Adjusted EBITDA when evaluating its financial results as well as for internal planning and forecasting purposes. Adjusted EBITDA should not be viewed as a substitute for the Company's GAAP results.
	Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization. The adjustments on this schedule consist of depreciation, amortization of intangible assets, and stock compensation expenses

View source version on businesswire.com: https://www.businesswire.com/news/home/20180808005572/en/

Source: PCTEL, Inc.

John Schoen
CFO
PCTEL, Inc.
(630) 372-6800
or
Michael Rosenberg
Director of Marketing
PCTEL, Inc.
(301) 444-2046
public.relations@pctel.com