Business Wire | Aug 6, 2020 04:01PM EDT

PCTEL Reports Second Quarter Financial Results

Aug. 06, 2020

BLOOMINGDALE, Ill.--(BUSINESS WIRE)--Aug. 06, 2020--PCTEL, Inc. (Nasdaq: PCTI) announced its results for the second quarter ended June 30, 2020.

Highlights

* Revenue of $19.8 million in the quarter, 16% lower compared to the second quarter 2019. Revenue was lower by 19% for the test and measurement product line, and lower by 13% for the antenna product line compared to the second quarter 2019. * Gross profit margin of 48.0% in the second quarter, up 2.5% compared to the gross profit margin in the second quarter 2019. The percentage increase in the second quarter is a result of higher gross margin percentages for both test & measurement products and antenna products. * GAAP net income per share of $0.07 in the second quarter compared to GAAP net income per share of $0.05 in the second quarter 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 $0.11 in the second quarter compared to Non-GAAP net income per diluted share of $0.13 in the second quarter 2019. * Adjusted EBITDA as a percent of revenue of 14.4% in the second quarter compared to 12.8% in the second quarter 2019. * $39.6 million of cash and investments and no debt at June 30, 2020 compared to $38.3 million and no debt at March 31, 2020.

"We're pleased with the sequential growth in revenue, Non-GAAP earnings per share and in overall gross margins in the second quarter, especially given the challenges presented with the COVID pandemic" said David Neumann, PCTEL's CEO. "We continue to focus on the health and well-being of our employees and to support our customers that rely on us for connectivity solutions. We're confident in our long-term growth prospects with strong 5G test and measurement demand, success with our industrial IoT products, and a strong balance sheet to support inorganic growth."

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 (877) 876-9173 (United States/Canada) or (785) 424-1667 (International). 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 (877) 481-4010 (United States /Canada), or (919) 882-2331 (International), PIN number: 35974.

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; 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 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 for these types of products and services generally including demand from customers in China; growth and continuity in PCTEL's defined market segments; 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 is a registered trademark of PCTEL, Inc. (c) 2020 PCTEL, Inc. All rights reserved.

PCTEL, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)(in thousands, except share data) (unaudited) June 30, December 31,

2020 2019

ASSETSCash and cash equivalents $ 6,458 $ 7,094

Short-term investment securities 29,356 32,556

Accounts receivable, net of allowances of $115 and 15,414 17,380$104 at June 30, 2020 and December 31, 2019,respectivelyInventories, net 11,017 11,935

Prepaid expenses and other assets 1,320 1,842

Total current assets 63,565 70,807

Property and equipment, net 12,488 11,985

Long-term investment securities 3,742 0

Goodwill 3,332 3,332

Intangible assets, net 0 144

Other noncurrent assets 2,579 2,969

TOTAL ASSETS $ 85,706 $ 89,237

LIABILITIES AND STOCKHOLDERS' EQUITYAccounts payable $ 4,242 $ 3,190

Accrued liabilities 6,336 9,382

Total current liabilities 10,578 12,572

Long-term liabilities 4,449 3,315

Total liabilities 15,027 15,887

Stockholders' equity:Common stock, $0.001 par value, 50,000,000 and100,000,000 shares authorized at June 30, 2020 and 19 19December 31, 2019, respectively, and 18,640,295 and18,611,289 shares issued and outstanding at June 30,2020 and December 31, 2019, respectivelyAdditional paid-in capital 130,853 133,954

Accumulated deficit (59,801) (60,305)

Accumulated other comprehensive loss (392) (318)

Total stockholders' equity 70,679 73,350

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 85,706 $ 89,237

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

June 30, June 30,

2020 2019 2020 2019

REVENUES $ 19,842 $ 23,499 $ 37,348 $ 44,090

COST OF REVENUES 10,321 12,805 19,612 24,737

GROSS PROFIT 9,521 10,694 17,736 19,353

OPERATING EXPENSES:Research and development 3,070 3,006 6,099 6,009

Sales and marketing 2,397 3,097 5,539 5,895

General and administrative 2,945 3,914 5,747 7,167

Amortization of intangible assets 0 48 32 122

Restructuring expenses 11 0 99 0

Total operating expenses 8,423 10,065 17,516 19,193

OPERATING INCOME 1,098 629 220 160

Other income, net 102 320 300 481

INCOME BEFORE INCOME TAXES 1,200 949 520 641

Expense for income taxes 8 8 16 17

NET INCOME $ 1,192 $ 941 $ 504 $ 624

Net Income per Share: Basic $ 0.07 $ 0.05 $ 0.03 $ 0.04

Diluted $ 0.07 $ 0.05 $ 0.03 $ 0.03

Weighted Average Shares:Basic 18,159 17,828 18,180 17,725

Diluted 18,214 17,934 18,352 17,916

Cash dividend per share $ 0.055 $ 0.055 $ 0.110 $ 0.110

PCTEL, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(unaudited, in thousands) Six Months Ended June 30,

. 2020 2019

Operating Activities:Net income $ 504 $ 624

Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation and amortization 1,502 1,425

Intangible asset amortization 144 455

Stock-based compensation 1,563 2,328

Loss on disposal of property and equipment 7 30

Restructuring costs (28 ) (14 )

Bad debt (recoveries) provision (110 ) 11

Changes in operating assets and liabilities, net ofacquisitions:Accounts receivable 2,065 (234 )

Inventories 882 (268 )

Prepaid expenses and other assets 871 354

Accounts payable 810 (231 )

Income taxes payable 16 (46 )

Other accrued liabilities (1,167 ) 675

Deferred revenue 19 (40 )

Net cash provided by operating activities 7,078 5,069

Investing Activities:Capital expenditures (2,418 ) (986 )

Purchase of investments (26,323 ) (26,823 )

Redemptions/maturities of short-term investments 25,781 24,999

Net cash used in investing activities (2,960 ) (2,810 )

Financing Activities:Proceeds from issuance of common stock 496 338

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 (1,106 ) (743 )compensationPrinciple payments on finance leases (41 ) (52 )

Purchase of common stock from repurchase program (2,000 ) 0

Cash dividends (2,054 ) (2,029 )

Net cash used in financing activities (4,705 ) (2,486 )

Net decrease in cash and cash equivalents (587 ) (227 )

Effect of exchange rate changes on cash (49 ) (36 )

Cash and cash equivalents, beginning of period 7,094 4,329

Cash and Cash Equivalents, End of Period $ 6,458 $ 4,066

PCTEL, INC.REVENUE AND GROSS PROFIT BY PRODUCT LINE (unaudited)(in thousands) Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Antenna Test & Antenna Test & Products Measurement Corporate Total Products Measurement Corporate Total Products ProductsREVENUES $13,910 $6,118 ($186 ) $19,842 $25,370 $12,201 ($223 ) $37,348

GROSS $4,973 $4,609 ($61 ) $9,521 $8,892 $8,905 ($61 ) $17,736 PROFIT GROSS 35.8 % 75.3 % 48.0 % 35.0 % 73.0 % 47.5 %PROFIT % Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Antenna Test & Antenna Test & Products Measurement Corporate Total Products Measurement Corporate Total Products ProductsREVENUES $16,014 $7,526 ($41 ) $23,499 $31,102 $13,062 ($74 ) $44,090

GROSS $5,569 $5,112 $13 $10,694 $10,430 $8,898 $25 $19,353 PROFIT GROSS 34.8 % 67.9 % 45.5 % 33.5 % 68.1 % 43.9 %PROFIT %

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 Six Months Ended June 30, June 30,

2020 2019 2020 2019

Operating Income $1,098 $629 $220 $160

(a) Add: Amortization of intangible assets -Cost of revenues 0 167 111 333

-Operating expenses 0 48 33 122

Restructuring 11 0 98 0

Stock Compensation: -Cost of revenues 75 102 147 205

-Engineering 145 177 282 350

-Sales & marketing 165 182 314 363

-General & administrative 618 983 821 1,410

1,014 1,659 1,806 2,783

Non-GAAP Operating Income $2,112 $2,288 $2,026 $2,943

% of revenue 10.6 % 9.7 % 5.4 % 6.7 %

Reconciliation of GAAP net income to non-GAAP net income Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

Net Income $1,192 $941 $504 $624

Adjustments:(a) Non-GAAP adjustments to 1,014 1,659 1,806 2,783 operating income (loss) Income Taxes (169 ) (201 ) (170 ) (257 )

845 1,458 1,636 2,526

Non-GAAP Net Income $2,037 $2,399 $2,140 $3,150

Non-GAAP Income per Share: Basic $0.11 $0.13 $0.12 $0.18

Diluted $0.11 $0.13 $0.12 $0.18

Weighted Average Shares: Basic 18,159 17,828 18,180 17,725

Diluted 18,214 17,934 18,352 17,916

This schedule reconciles the Company's GAAP operating income (loss) to its non-GAAP operating income (loss). 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 (loss) (a) consist of stock compensation expense and amortization of intangible assets.

The adjustments to GAAP net income (loss) include the non-GAAP adjustments to operating income (loss) 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 June 30, Six Months Ended June 30,

2020 2019 2020 2019

Operating $1,098 $629 $220 $160 Income Add: Depreciation 713 1,502 1,425 and 754amortizationIntangible 0 215 144 455 amortizationRestructuring 0 98 0 expenses 11

Stock 1,003 1,444 1,564 2,328 compensationexpensesAdjusted $2,866 $3,001 $3,528 $4,368 EBITDA% of revenue 14.4 % 12.8 % 9.4 % 9.9 %

This schedule reconciles the Company's GAAP operating income (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/20200806005886/en/

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

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