PCTEL Reports Fourth Quarter and Full Year Financial Results

February 25, 2021

BLOOMINGDALE, Ill.--(BUSINESS WIRE)--Feb. 25, 2021-- PCTEL, Inc. (Nasdaq: PCTI) announced its results for the fourth quarter and full year ended December 31, 2020.

Highlights

Revenue of $21.2 million in the quarter and $77.5 million for the year, 7.5% lower compared to the fourth quarter 2019 and 14.5% lower in the year compared to 2019. Revenue was higher by 9.5% for the test and measurement product line, and lower by 15.2% for the antenna product line compared to the fourth quarter 2019. For the year, revenue was lower by 2.0% for the test and measurement product line and lower by 19.4% for the antenna product line.

Gross profit margin of 50.1% in the fourth quarter and 49.0% for the year, down 0.2% compared to the gross profit margin in the fourth quarter 2019 and up 3.2% in the year compared to 2019. The gross profit percentage in the fourth quarter reflects a higher mix of higher margin test and measurement products, offsetting lower gross margin percentages for both test and measurement products and antenna products.

GAAP net income per diluted share of $0.10 in the fourth quarter and $0.18 in the year compared to GAAP net income per share of $0.10 in the fourth quarter 2019 and $0.21 for the year in 2019.

Non-GAAP net income and adjusted EBITDA are metrics the Company uses to measure its core earnings. A reconciliation of those non-GAAP measures to our GAAP financial statements is provided later in the press release.
- Non-GAAP net income per diluted share of $0.12 in the fourth quarter and $0.31 for the year compared to Non-GAAP net income per diluted share of $0.16 in the fourth quarter 2019 and $0.47 for the year in 2019.
- Adjusted EBITDA as a percent of revenue of 15.1% in the fourth quarter and 11.7% in the year compared to 16.3% in the fourth quarter and 12.4% for the year in 2019.

$41.0 million of cash and investments (including long-term investments) and no debt at December 31, 2020 compared to $41.3 million and no debt at September 30, 2020.

“We’re pleased with the strong performance for both our antenna and scanning receiver product lines in the fourth quarter. We saw improvements in revenue and earnings in the second half of the year and incoming orders were at the highest level since the second quarter of 2019,” said David Neumann, PCTEL’s CEO. “We expect demand to increase for our antennas, IoT devices and 5G solutions through the year as market conditions improve.”

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) 506-0062 (United States/Canada) or (973) 528-0011 (International), PIN number: 528059. The call will also be webcast at https://investor.pctel.com/news-events/webcasts-events.

REPLAY: A replay will be available for two weeks after the call on either the website listed above or by calling (877) 481-4010 (United States /Canada), or (919) 882-2331 (International), PIN number: 40038.

About PCTEL

PCTEL is a leading global provider of wireless technology, including purpose-built Industrial IoT devices, antenna systems, and test and measurement solutions. Trusted by our customers for over 25 years, we solve complex wireless challenges to help organizations stay connected, transform, and grow.

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 about the Company’s expectations regarding the impact of the COVID-19 pandemic; our future financial performance; growth of our antenna solutions and test and measurement businesses; the impact of our transition plan for manufacturing inside and outside China; the anticipated demand for certain products including those related to public safety, Industrial IoT, 5G and intelligent transportation; 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 disruptions to the Company’s workforce, operations, supply chain and customer demand caused by the COVID-19 pandemic and impact of the pandemic on the Company’s results of operations, financial condition and stock price; the impact of data densification and IoT on capacity and coverage demand; the impact of 5G; customer demand and growth generally in the Company’s defined market segments, including demand from customers in China; the impact of the uncertainty regarding renewal of our lease of our Tianjin, China manufacturing premises; the impact of tariffs on certain imports from China; and the Company’s ability to grow its 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 (unaudited)
(in thousands, except share data)

	(unaudited)
	December 31, 2020			December 31, 2019
ASSETS
Cash and cash equivalents	$	5,761		$	7,094
Short-term investment securities		30,582			32,556
Accounts receivable, net of allowances of $113 and $104 at December 31, 2020 and December 31, 2019, respectively		16,601			17,380
Inventories, net		9,984			11,935
Prepaid expenses and other assets		1,685			1,842
Total current assets		64,613			70,807

Property and equipment, net		12,505			11,985
Long-term investment securities		4,640			0
Goodwill		3,332			3,332
Intangible assets, net		0			144
Other noncurrent assets		2,441			2,969
TOTAL ASSETS	$	87,531		$	89,237
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	4,430		$	3,190
Accrued liabilities		7,316			9,382
Total current liabilities		11,746			12,572
Long-term liabilities		4,387			3,315
Total liabilities		16,133			15,887
Stockholders’ equity:
Common stock, $0.001 par value, 50,000,000 and 100,000,000 shares authorized at
December 31, 2020 and December 31, 2019, respectively, and 18,429,350 and 18,611,289
shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively		18			19
Additional paid-in capital		128,269			133,954
Accumulated deficit		(56,907	)		(60,305	)
Accumulated other comprehensive income (loss)		18			(318	)
Total stockholders’ equity		71,398			73,350
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	87,531		$	89,237

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)


		Three Months Ended December 31,					Years Ended December 31,
		2020			2019		2020		2019

	REVENUES	$	21,185		$	22,898	$	77,456	$	90,617
	COST OF REVENUES		10,569			11,385		39,529		49,105
	GROSS PROFIT		10,616			11,513		37,927		41,512
	OPERATING EXPENSES:
	Research and development		3,204			3,048		12,519		12,272
	Sales and marketing		2,924			3,424		11,103		12,254
	General and administrative		2,522			3,072		10,828		13,452
	Amortization of intangible assets		0			49		32		219
	Restructuring expenses		0			213		124		507
	Total operating expenses		8,650			9,806		34,606		38,704
	OPERATING INCOME		1,966			1,707		3,321		2,808
	Other (expense) income, net		(110	)		107		106		982
	INCOME BEFORE INCOME TAXES		1,856			1,814		3,427		3,790
	Expense for income taxes		4			16		29		40
	NET INCOME	$	1,852		$	1,798	$	3,398	$	3,750

	Net Income per Share:

	Basic	$	0.10		$	0.10	$	0.19	$	0.21
	Diluted	$	0.10		$	0.10	$	0.18	$	0.21

	Weighted Average Shares:
	Basic		18,149			18,034		18,207		17,853
	Diluted		18,297			18,461		18,399		18,159

	Cash dividend per share	$	0.055		$	0.055	$	0.220	$	0.220

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(unaudited, in thousands)


	Years Ended December 31,
	2020			2019

Operating Activities:
Net income	$	3,398		$	3,750
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,019			2,870
Intangible asset amortization		144			885
Stock-based compensation		2,479			4,133
Loss on disposal of property and equipment		21			97
Restructuring costs		(29	)		(33	)
Bad debt recovery		(151	)		(2	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		960			(1,532	)
Inventories		2,076			873
Prepaid expenses and other assets		638			385
Accounts payable		1,086			(2,841	)
Income taxes payable		(10	)		(22	)
Other accrued liabilities		(231	)		2,263
Deferred revenue		1			92
Net cash provided by operating activities		13,401			10,918
Investing Activities:
Capital expenditures		(4,093	)		(2,263	)
Purchase of investments		(49,701	)		(48,245	)
Redemptions/maturities of short-term investments		47,035			46,559
Net cash used in investing activities		(6,759	)		(3,949	)
Financing Activities:
Proceeds from issuance of common stock		870			1,183
Proceeds from Paycheck Protection Program Loan		3,500			0
Repayment of Paycheck Protection Program Loan		(3,500	)		0
Payment of withholding tax on stock-based compensation		(1,119	)		(1,152	)
Principle payments on finance leases		(78	)		(99	)
Purchase of common stock from repurchase program		(3,808	)		0
Cash dividends		(4,108	)		(4,068	)
Net cash used in financing activities		(8,243	)		(4,136	)

Net (decrease) increase in cash and cash equivalents		(1,601	)		2,833
Effect of exchange rate changes on cash		268			(68	)
Cash and cash equivalents, beginning of period		7,094			4,329
Cash and Cash Equivalents, End of Period	$	5,761		$	7,094

PCTEL, INC.
REVENUE AND GROSS PROFIT BY PRODUCT LINE (unaudited)
(in thousands)

	Three Months Ended December 31, 2020								Year Ended December 31, 2020
	Antenna Products		Test & Measurement Products		Corporate		Total		Antenna Products		Test & Measurement Products		Corporate		Total
REVENUES	$12,844		$8,554		($213	)	$21,185		$50,540		$27,565		($649	)	$77,456

GROSS PROFIT	$4,437		$6,135		$44		$10,616		$17,665		$20,244		$18		$37,927

GROSS PROFIT %	34.5	%	71.7	%			50.1	%	35.0	%	73.4	%			49.0	%

	Three Months Ended December 31, 2019								Year Ended December 31, 2019
	Antenna Products		Test & Measurement Products		Corporate		Total		Antenna Products		Test & Measurement Products		Corporate		Total
REVENUES	$15,144		$7,814		($60	)	$22,898		$62,708		$28,115		($206	)	$90,617

GROSS PROFIT	$5,700		$5,806		$7		$11,513		$21,841		$19,640		$31		$41,512

GROSS PROFIT %	37.6	%	74.3	%			50.3	%	34.8	%	69.9	%			45.8	%

Reconciliation of GAAP to non-GAAP Results (unaudited)
(in thousands except per share information)

Reconciliation of GAAP operating income to non-GAAP operating income

		Three Months Ended December 31,						Year Ended December 31,
		2020			2019			2020			2019


	Operating Income	$	1,966		$	1,707		$	3,321		$	2,808

(a)	Add:
	Amortization of intangible assets
	-Cost of revenues		0			167			111			666
	-Operating expenses		0			49			32			219
	Restructuring		0			213			124			507
	Stock Compensation:
	-Cost of revenues		65			116			272			408
	-Engineering		128			145			530			652
	-Sales & marketing		130			151			559			673
	-General & administrative		161			475			1,119			2,401
			484			1,316			2,747			5,526
	Non-GAAP Operating Income	$	2,450		$	3,023		$	6,068		$	8,334
	% of revenue		11.6	%		13.2	%		7.8	%		9.2	%

Reconciliation of GAAP net income to non-GAAP net income

		Three Months Ended December 31,						Year Ended December 31,
		2020			2019			2020			2019
	Net Income	$	1,852		$	1,798		$	3,398		$	3,750

	Adjustments:
(a)	Non-GAAP adjustments to operating income		484			1,316			2,747			5,526
	Income Taxes		(183	)		(233	)		(465	)		(705	)
			301			1,083			2,282			4,821
	Non-GAAP Net Income	$	2,153		$	2,881		$	5,680		$	8,571

	Non-GAAP Income per Share:
	Basic	$	0.12		$	0.16		$	0.31		$	0.48
	Diluted	$	0.12		$	0.16		$	0.31		$	0.47

	Weighted Average Shares:
	Basic		18,149			18,034			18,207			17,853
	Diluted		18,297			18,461			18,399			18,159

This schedule reconciles the Company's GAAP operating income to its non-GAAP operating 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 income (a) consist of stock compensation expense and amortization of intangible assets. The adjustments to GAAP net income include the non-GAAP adjustments to operating income as well as adjustments for (b) non-cash income tax expense.

PCTEL, Inc.
Reconciliation of GAAP operating income to Adjusted EBITDA
(unaudited, in thousands)

	Three Months Ended December 31,						Year Ended December 31,
		2020			2019			2020			2019

Operating Income	$	1,966		$	1,707		$	3,321		$	2,808

Add:
Depreciation and amortization		759			719			3,019			2,870
Intangible amortization		0			216			143			885
Restructuring expenses		0			213			124			507
Stock compensation expenses		484			887			2,480			4,134
Adjusted EBITDA	$	3,209		$	3,742		$	9,087		$	11,204
% of revenue		15.1	%		16.3	%		11.7	%		12.4	%

This schedule reconciles the Company's GAAP operating income 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/20210225006095/en/

Kevin McGowan
CFO
PCTEL, Inc.
(630) 339-2051

Suzanne Cafferty
Vice President, Global Marketing
PCTEL, Inc.
(630) 339-2107
public.relations@pctel.com

Source: PCTEL, Inc.

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